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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): September 2, 1998
SOURCE ONE MORTGAGE SERVICES CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-12898 38-2011419
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
27555 Farmington Road, Farmington Hills, Michigan 48334-3357
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (248) 488-7000
Not Applicable
(Former Name or former Address, if Changed since Last Report)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired. Not applicable.
(b) Pro Forma Financial Information. Not applicable.
(c) Exhibits.
Item 601
Regulation S-K
Exhibit Reference
Number Exhibit Description
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10 (a) Fourth Amended and Restated Revolving Credit Agreement
dated as of July 10, 1998 by and among Source One Mortgage
Services Corporation and the First National Bank of
Chicago, individually and as Administrative Agent and
Certain Other Lenders.
(b) Revolving Credit Agreement dated as of July 10, 1998 by and
among Source One Mortgage Services Corporation and The
First National Bank of Chicago, individually and as
Administrative Agent and certain other lenders.
(c) Pledge and Security Agreement dated as of July 10, 1998
between Source One Mortgage Services Corporation and the
First National Bank of Chicago, as collateral agent for the
Lenders.
(d) Fourth Amended and Restated Security and Collateral Agency
Agreement dated as of July 10, 1998 by and among Source One
Mortgage Services Corporation and The First National Bank
of Chicago (in its capacity as administrative agent for the
lenders) and National City Bank, Kentucky, as collateral
agent.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereto duly authorized.
SOURCE ONE MORTGAGE
SERVICES CORPORATION
Date: September 2, 1998 By: /s/ Michael C. Allemang
-----------------------
Michael C. Allemang
Executive Vice President
(Chief Financial Officer)
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INDEX TO EXHIBITS
Item 601
Regulation S-K
Exhibit Reference
Number Exhibit Description
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10 (a) Fourth Amended and Restated Revolving Credit Agreement
dated as of July 10, 1998 by and among Source One Mortgage
Services Corporation and the First National Bank of
Chicago, individually and as Administrative Agent and
Certain Other Lenders.
(b) Revolving Credit Agreement dated as of July 10, 1998 by and
among Source One Mortgage Services Corporation and The
First National Bank of Chicago, individually and as
Administrative Agent and certain other lenders.
(c) Pledge and Security Agreement dated as of July 10, 1998
between Source One Mortgage Services Corporation and the
First National Bank of Chicago, as collateral agent for the
Lenders.
(d) Fourth Amended and Restated Security and Collateral Agency
Agreement dated as of July 10, 1998 by and among Source One
Mortgage Services Corporation and The First National Bank
of Chicago (in its capacity as administrative agent for the
lenders) and National City Bank, Kentucky, as collateral
agent.
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EXHIBIT 10(a)
FOURTH AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
dated as of July 10, 1998
by and among
SOURCE ONE MORTGAGE SERVICES CORPORATION
and
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Administrative Agent
and
CERTAIN OTHER LENDERS
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TABLE OF CONTENTS
PAGE
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RECITALS.................................................................... 1
ARTICLE I DEFINITIONS...................................................... 1
1.1 Definitions................................................... 1
1.2 Interpretation................................................ 26
1.3 Accounting Terms and Determinations........................... 26
ARTICLE II BORROWINGS...................................................... 26
2.1 Availability and Adjustments.................................. 26
2.2 Fees.......................................................... 28
2.3 Advances...................................................... 29
2.4 Discount Advances............................................. 30
2.5 Swingline Advances............................................ 32
2.6 Bid Loans, Approved GNMA Letters of Credit, and
Approved Rate Hedging Agreements.............................. 33
2.7 Rate after Maturity........................................... 35
2.8 Interest Payment Dates........................................ 35
2.9 Method of Selecting Rate Options and Interest
Periods....................................................... 36
2.10 Maximum Number of Eurodollar Loans............................ 37
2.11 Funding Procedures............................................ 37
2.12 Conversion and Continuation................................... 38
2.13 Optional Principal Payments................................... 39
2.14 Required Principal Payments................................... 40
2.15 Method of Payment............................................. 40
2.16 Notes; Telephonic Notices..................................... 40
2.17 General Provisions as to Payments............................. 41
2.18 Notification of Advances, Interest Rates and
Prepayments................................................... 41
2.19 Lending Installations......................................... 42
2.20 Non-Receipt of Funds by Agent................................. 42
ARTICLE III CHANGE IN CIRCUMSTANCES........................................ 43
3.1 Yield Protection............................................... 43
3.2 Availability of Rate Options................................... 45
3.3 Funding Indemnification........................................ 45
3.4 Lender Statements; Survival of Indemnity....................... 45
3.5 Lender Tax Agreement........................................... 46
ARTICLE IV COLLATERAL AND BORROWING BASE................................... 47
4.1 Eligible Collateral - Pledged Mortgages........................ 47
4.2 Eligible Collateral - Repurchased Agency Loans and
Receivables.................................................... 50
4.3 Eligible Collateral - Securities............................... 51
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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4.4 Eligible Collateral - Servicing Sale Receivables.............. 51
4.5 Borrowing Base................................................ 52
4.6 Special Representations as to Pledged Warehouse
Collateral.................................................... 55
4.7 Special Covenants............................................. 57
4.8 Release of Collateral......................................... 60
4.9 Settlement Account............................................ 60
4.10 Termination................................................... 61
4.11 Transition from Existing Facility............................. 61
ARTICLE V CONDITIONS PRECEDENT............................................. 61
5.1 Initial Advance (Company)..................................... 61
5.2 Initial Advance (Lenders)..................................... 63
5.3 All Advances.................................................. 63
ARTICLE VI REPRESENTATIONS AND WARRANTIES.................................. 63
6.1 Organization, Corporate Powers, Etc........................... 63
6.2 Corporate Authority, Etc...................................... 64
6.3 Compliance with Laws.......................................... 64
6.4 Government Approvals.......................................... 65
6.5 Valid and Binding Obligations................................. 65
6.6 Financial Statements.......................................... 65
6.7 Litigation.................................................... 66
6.8 Use of Proceeds............................................... 66
6.9 Accuracy of Information....................................... 66
6.10 Accuracy of Representations and Warranties.................... 66
6.11 Investment Company............................................ 67
6.12 ERISA......................................................... 67
6.13 Tax Returns................................................... 67
6.14 Full Disclosure............................................... 67
6.15 GNMA, FHA, VA, FNMA, AND FHLMC Eligibility.................... 67
6.16 No Defaults................................................... 68
6.17 Year 2000 Compliance.......................................... 68
ARTICLE VII AFFIRMATIVE COVENANTS.......................................... 68
7.1 Payment of Debts, Taxes, Etc.; Maintenance of
Insurance...................................................... 68
7.2 Preservation of Corporate Existence............................ 69
7.3 Compliance with Laws, Etc...................................... 69
7.4 Requested Information.......................................... 69
7.5 Keeping of Records and Books of Account........................ 70
7.6 Maintenance of Approvals, Filings and Registrations............ 70
7.7 Reporting Requirements......................................... 70
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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7.8 Indemnification............................................... 74
7.9 Maintenance of Net Worth...................................... 75
7.10 Federal Agency Approvals...................................... 75
7.11 Approved Investor Commitments................................. 75
7.12 Borrowing Base Certificate.................................... 76
7.13 Further Assurance............................................. 76
7.14 Maintenance of Properties..................................... 77
7.15 Payment of Taxes.............................................. 77
7.16 Year 2000 Compliance.......................................... 77
ARTICLE VIII NEGATIVE COVENANTS............................................ 77
8.1 Use of Proceeds............................................... 77
8.2 Compliance with Security Agreement............................ 78
8.3 Mergers; Subsidiaries......................................... 78
8.4 Sales......................................................... 78
8.5 Debt.......................................................... 79
8.6 Ratably Secured Debt.......................................... 80
8.7 Guarantees.................................................... 80
8.8 Investments................................................... 80
8.9 Leverage Ratios............................................... 82
8.10 Recourse Servicing............................................ 82
8.11 Liens......................................................... 82
8.12 Credit Requirement............................................ 85
8.13 Affiliate Transactions........................................ 85
8.14 Conduct of Business........................................... 85
8.15 FHA and other Approvals....................................... 85
8.16 Restricted Payments........................................... 85
8.17 Maintenance of Restricted FSA Securities...................... 87
8.18 Subordinated Debt Indenture................................... 87
ARTICLE IX THE AGENT....................................................... 88
9.1 Appointment and Authorization................................. 88
9.2 Agent and Affiliates.......................................... 88
9.3 Action by Agent............................................... 88
9.4 Consultation with Experts..................................... 89
9.5 Liability of Agent............................................ 89
9.6 Indemnification............................................... 89
9.7 Credit Decision............................................... 90
9.8 Resignation or Removal and Appointment of Successor
Agent......................................................... 90
9.9 Compensation.................................................. 91
9.10 Release of Collateral Documents............................... 91
9.11 Knowledge of Defaults......................................... 91
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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ARTICLE X DEFAULTS......................................................... 92
10.1 Defaults..................................................... 92
10.2 Remedies..................................................... 94
10.3 Notice of Default............................................ 96
10.4 Application of Proceeds...................................... 96
10.5 Letter of Credit Cash Collateral Accounts.................... 97
ARTICLE XI BENEFIT OF AGREEMENT; ASSIGNMENTS;
PARTICIPATIONS.................................................. 98
11.1 Successors and Assigns....................................... 98
11.2 Participations............................................... 99
11.3 Assignments..................................................100
11.4 Dissemination of Information.................................101
11.5 Tax Treatment................................................101
ARTICLE XII MISCELLANEOUS..................................................102
12.1 Immediately Available Funds..................................102
12.2 Notices......................................................102
12.3 Survival and Termination of Agreement........................102
12.4 Fees and Expenses of the Lenders.............................103
12.5 Applicable Law...............................................103
12.6 Modification of Agreement....................................103
12.7 Non-Waiver of Rights by the Lenders..........................104
12.8 Dealings with the Company and its Affiliates.................105
12.9 Changes in GAAP..............................................105
12.10 Set-Off......................................................105
12.11 Counterparts.................................................106
12.12 Severability.................................................106
12.13 Headings.....................................................106
12.14 Entire Agreement.............................................106
12.15 Consent of Jurisdiction......................................107
12.16 Waiver of Jury Trial.........................................107
SCHEDULE 1 APPLICABLE MARGIN
SCHEDULE 2 FACILITY FEE RATE
EXHIBIT A LIST OF APPROVED INVESTORS
EXHIBIT B BORROWING BASE CERTIFICATE
EXHIBIT C COMMITMENTS AND COMMITMENT PERCENTAGES
EXHIBIT D FORM OF SECURITY AGREEMENT
EXHIBIT E-1 FORM OF NOTE
EXHIBIT E-2 FORM OF DISCOUNT NOTE
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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EXHIBIT F METHOD OF DETERMINING WEIGHTED AVERAGE PURCHASE
PRICES
EXHIBIT G FORM OF BID LOAN NOTICE
EXHIBIT H FORM OF NEW/MODIFIED COMMITMENT SUPPLEMENT
EXHIBIT I FORM OF NON-LENDER BALANCE BANK SUPPLEMENT
EXHIBIT J FORM OF AP NOTICE
EXHIBIT K FORM OF OPINION LETTER
EXHIBIT L MATERIAL LITIGATION NOT REFERENCED IN
ANNUAL/QUARTERLY REPORTS
EXHIBIT M FORM OF TRANSITION MEMORANDUM
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FOURTH AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This FOURTH AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is dated as
of July 10, 1998 by and among SOURCE ONE MORTGAGE SERVICES CORPORATION, a
Delaware corporation (the "Company"), the lenders identified on the signature
pages hereof, and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association ("First Chicago"), individually as a Lender and as administrative
agent for the Lenders.
RECITALS
This Fourth Amended and Restated Revolving Credit Agreement amends and
restates in its entirety that certain Third Amended and Restated Revolving
Credit Agreement dated as of July 25, 1997 by and among the Company, certain
wholly-owned Subsidiaries of the Company, First Chicago, and certain other
lenders, as amended and supplemented from time to time (as so amended and
supplemented, the "Existing Facility").
The revolving credit facility made available to the Company pursuant to
this Agreement shall be used (i) for originating, acquiring, and/or holding
residential mortgage loans, mortgage backed securities, and mortgage servicing
rights, (ii) as liquidity backup for the Company's commercial paper program, and
(iii) for general working capital and corporate purposes.
In consideration of the foregoing and for other good and valuable
consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
Capitalized terms used in this Agreement shall have the
following meanings:
Additional Required Mortgage Documents: means the
instruments and documents described in Schedule B to the Security
Agreement.
Adjusted Consolidated Tangible Net Worth: means, as of any date of
determination thereof, the net worth of the Company and its consolidated
Subsidiaries on a consolidated basis as determined in accordance with GAAP ("Net
Worth"); less the sum (without duplication) of (a) any assets of the Company and
its consolidated Subsidiaries which would be treated as intangibles under GAAP
including, without limitation, any write-up of assets, good-will, research and
development costs, trade-marks, trade names, copyrights, patents and unamortized
debt discount and expenses, and (b) loans or other extensions of credit to
officers
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of the Company or of any of its consolidated Subsidiaries other than Mortgage
Loans made to such Persons in the ordinary course of business and (c) the amount
of the Net Worth attributable to the book value of all Restricted FSA
Securities, determined in accordance with GAAP; plus one percent (1%) of the
then-current aggregate outstanding principal balance of all Mortgage Loans then
being serviced by the Company either for its own account with respect to Pledged
Items or for others under Servicing Agreements (excluding Subservicing
Agreements) to the extent the servicing rights relating to such Mortgage Loans
have not been capitalized and are thus not accounted for in the Company's net
worth as computed in accordance with GAAP.
Adjusted Commitment Percentage: means, for each Lender as of any date,
the quotient of (i) such Lender's General Commitment divided by (ii) the
Aggregate Commitment minus the Swingline Commitment, which Adjusted Commitment
Percentage shall initially be as set forth on Exhibit C for each Lender.
Advance: means a borrowing hereunder consisting of the aggregate amount
of Loans made to the Company by one or more of the Lenders hereunder pursuant to
Article II on any given Advance Date.
Advance Date: means a date on which an Advance is made
hereunder.
Advance Notice: is defined in Section 2.9.
Affiliate: means, as to any Person, any other Person
directly or indirectly Controlling, Controlled by or under direct
or indirect common Control with such Person.
Agent: means The First National Bank of Chicago in its
capacity as administrative agent for the Lenders hereunder, and
any successor Agent appointed pursuant to Article IX.
Aggregate Commitment: means, as of any date, the aggregate
of the Lenders' then-current General Commitments and Swingline
Commitments.
Agreement: means this Fourth Amended and Restated Revolving
Credit Agreement, as the same from time to time may be extended,
amended, supplemented, waived or modified.
Alternate Base Rate: means, on any day, a fluctuating rate of interest
per annum equal to the higher of (a) the Published Federal Funds Effective Rate
for such day plus the Applicable Margin, and (b) the Corporate Base Rate for
such day.
Alternate Base Rate Advance: means an Advance which bears
interest at the Alternate Base Rate.
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Alternate Base Rate Loan: means a Loan which bears interest
at the Alternate Base Rate.
AP Mortgage: means, on any date, any Pledged Mortgage which has been
identified in an AP Notice and for which the Collateral Agent has not received
the Required Mortgage Documents by such date.
AP Notice: means a written pledge substantially in the form of Exhibit J
to this Agreement executed by the Company and delivered by facsimile to the
Collateral Agent, specifically identifying all Mortgage Loans with respect to
which the Required Mortgage Documents are not being delivered on or before the
Pledge Date of such Mortgage Loan.
Applicable Margin: means, with respect to each Rate Option as of any
date, the applicable percentage per annum as set forth on Schedule 1 attached
hereto which is in effect on such date, changing as and when the Company's
then-current unsecured long-term debt rating by either S & P or Moody's changes
as described therein.
Approved Equity Securities: means readily marketable securities owned
by the Company and approved by the Agent for purposes of inclusion in the
calculation of the Debt Threshold.
Approved GNMA Letter of Credit: means a letter of credit issued by an
Issuing Lender in favor of GNMA as a result of the failure by the Company to
satisfy all document submission requirements of GNMA in connection with the
certification or re-certification by GNMA of a pool of Mortgage Loans, which
letter of credit (and related reimbursement agreement and other documentation)
has been approved by the Agent pursuant to Section 2.6(b).
Approved GNMA Letter of Credit Obligations: means, as of any date, all
liabilities, whether actual or contingent, as of such date of the Company with
respect to Approved GNMA Letters of Credit, including, without limitation, the
undrawn face amount of the then outstanding Approved GNMA Letters of Credit and
the sum of all drawn amounts for which the Issuing Lenders have not yet been
reimbursed.
Approved Investor: means, as of any time, any of the institutions listed
on Exhibit A attached hereto and any other institution approved by the Agent,
provided that any such institutions listed on Exhibit A or previously approved
by the Agent may be eliminated as an Approved Investor by notice to the Company
from the Agent.
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Approved Investor Commitment: means a commitment issued by an Approved
Investor to purchase Mortgage Loans, to exchange Securities for Mortgage Loans
or to purchase Securities.
Approved MBS Custodian: is defined in Paragraph 7(b)(2)(iii) of the
Security Agreement.
Approved Rate Hedging Agreement: means a Rate Hedging Agreement
between the Company and a Lender which has been approved by the Agent pursuant
to Section 2.6(c).
Approved Secured Rate Hedging Obligations: means all obligations under
an Approved Rate Hedging Agreement that by the terms of such Approved Rate
Hedging Agreement are secured by the Collateral, subject to the terms set forth
in Section 2.6(c).
Assignment: means a duly executed assignment for the benefit of the
Secured Parties of a Mortgage, of the indebtedness secured thereby, and of all
documents and rights related to the related Mortgage Loan secured by such
Mortgage in accordance with the requirements of the Security Agreement.
Authorized Officer: means, with respect to the Company, the president,
chairman, chief financial officer, or other officer of the Company authorized
in writing to execute any particular statement, certificate or agreement on
behalf of the Company.
Bailee Letter: means a Bailee Letter substantially in the form of
Exhibit 4 to the Security Agreement.
Balance Bank: means any Lender or Non-Lender Balance Bank which makes a
Discount Advance.
Balance Bank Agreement: means (i) an agreement between each Balance Bank
and the Company which sets forth the fees, charges and other matters governing
Discount Loans requested from such Balance Bank in accordance with Section 2.4
herein, or (ii) an agreement between the Company and the Swingline Lender which
sets forth the fees, charges and other matters governing Swingline Buydown
Advances requested from the Swingline Lender in accordance with Section 2.5(b).
Bid Lender: is defined in Section 2.6(a).
Bid Loan: is defined in Section 2.6(a).
Bid Loan Notice: means, with respect to each Bid Loan, a notice
executed by the Company and the Bid Lender for such Bid Loan and delivered to
the Agent in the form of Exhibit G hereto.
Bid Rate: means the interest rate applicable to a Bid Loan which is to
be agreed upon by the Company and a Bid Lender and
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communicated to the Agent in the Bid Loan Notice for such Bid Loan.
Borrowing Base: is defined in Section 4.5.
Borrowing Base Certificate: means a certificate executed by the Chief
Financial Officer or Treasurer of the Company or other employees of the Company
so authorized in writing, an original of which shall be delivered to the Agent,
by such Chief Financial Officer or Treasurer in substantially the form attached
hereto as Exhibit B.
Borrowing Base Sublimits: is defined in Section 4.5.
Business Day: means (i) with respect to any borrowing, payment or rate
selection regarding a Eurodollar Advance or a Discount Advance, a day (other
than a Saturday or Sunday) on which banks are open for business in Chicago, Los
Angeles and New York and on which dealings in United States dollars are carried
on in the London interbank market and (ii) for all other purposes, a day (other
than a Saturday or Sunday) on which banks are open for business in Chicago, Los
Angeles, New York and Louisville, Kentucky.
Calculation Period: means, as of any date of determination, the fiscal
quarters of the Company elapsed since March 31, 1998, not to exceed the
immediately preceding four (4) full fiscal quarters.
Cash Equivalents: means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof, (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either S&P or Moody's, (iii) commercial paper maturing no more than 90 days
from the date of creation thereof and, at the time of acquisition, having the
highest rating obtainable from either S&P or Moody's, (iv) certificates of
deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof issued by commercial banks organized under the laws of the
United States or any state thereof or the District of Columbia, each having
combined capital and surplus of not less than $500,000,000, and (v) reverse
repurchase obligations having terms not exceeding seven days entered into with
any financial institution meeting the qualifications specified in clause (iv)
above or with any securities dealer approved by the Agent, provided that there
is an investment agreement in effect pursuant
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to which the underlying securities are held by a sub-agent for the Collateral
Agent and all cash proceeds are payable directly to the Settlement Account.
Change in Control: means the acquisition by any Person, or two or more
Persons (other than Fund American Enterprises Holdings, Inc. or a wholly-owned
Subsidiary thereof) acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934) of
outstanding shares of voting stock of the Company at any time if after giving
effect to such acquisition (i) such Person or Persons owns twenty percent (20%)
or more of such outstanding voting stock, and (ii) Fund American Enterprises
Holdings, Inc. or a wholly-owned Subsidiary thereof does not own more than fifty
percent (50%) of such outstanding shares of voting stock.
Code: means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
Collateral: means all right, title and interest of the Company of every
kind and nature, in and to all of the following property, assets and rights of
the Company wherever located, whether now existing or hereafter arising, and
whether now or hereafter owned, acquired by or accruing or owing to the Company
and all proceeds and products thereof:
(i) all Pledged Mortgages;
(ii) all Pledged Securities;
(iii) any commitments or other agreements issued by any
private mortgage insurer or by the FHA or VA to insure or guarantee any
Pledged Mortgage;
(iv) all commitments of FNMA, FHLMC or other Persons to
purchase Pledged Items from the Company or exchange Securities with the
Company for Pledged Items;
(v) any options to sell or purchase Securities, future
contracts, or any other interest rate protection products which directly
or indirectly protect the Company against reductions in value of such
Pledged Items due to changes in mortgage interest rates;
(vi) the Settlement Account and any Custodian Settlement
Accounts and any amounts standing to the credit of the Settlement
Account and any Custodian Settlement Accounts then in existence with
Approved MBS Custodians, as described in Paragraph 7(c) of the Security
Agreement;
(vii) all VA Mortgage Loans or FHA Mortgage Loans (plus any
REO or accounts receivable from FHA or VA resulting
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therefrom, including guaranty claims against VA and insurance claims
against FHA or HUD) which are repurchased by the Company from Security
holders and pledged to the Collateral Agent as security for the Secured
Debt;
(viii) Pledged Servicing Sale Receivables;
(ix) cash and Cash Equivalents held by the Agent or
Collateral Agent as security for the Secured Debt; and
(x) all property and proceeds related to the foregoing,
including without limitation, the right to service Pledged Mortgages
while owned by the Company, all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, disks, cards,
accounting records and other records and data of the Company related to
the Pledged Mortgages, all accounts and general intangibles of
whatsoever kind so related and all documents or instruments delivered to
the Agent or the Collateral Agent in respect of any Pledged Item,
including, without limitation, the right to receive all insurance
proceeds and condemnation awards which may be payable in respect of the
premises encumbered by any Pledged Mortgage.
Collateral Agent: means National City Bank of Kentucky or its
successor, as Collateral Agent under the Security Agreement.
Collateral Agent Review Procedure: means the required review steps set
forth in Exhibit 1 to the Security Agreement.
Collateral Transmittal: means a transmittal from the Pledgor to the
Collateral Agent in electronic form and, if required by the Collateral Agent,
written form of the following information for the following submissions or
special treatment of different types of Collateral: (i) the information
described on Exhibit 7 to the Security Agreement for each AP Mortgage covered by
any AP Notice, (ii) the information described on Exhibit 7 to the Security
Agreement (other than the "AP Code") for each Pledged Mortgage not covered by an
AP Notice, or (iii) such information as may be required from time to time by the
Collateral Agent for the different types of Securities for any Pledged Security.
Commitment: means either a General Commitment or a Swingline
Commitment.
Commitment Percentage: means, for each Lender as of any date, the
quotient of (i) the sum of such Lender's General Commitment and its Swingline
Commitment (if any), divided by (ii) the Aggregate Commitment, which Commitment
Percentage shall initially be as set forth on Exhibit C for each Lender.
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Company: means Source One Mortgage Services Corporation, a Delaware
corporation.
Company Trust Receipt: means a trust receipt substantially in the form
of Exhibit 2 to the Security Agreement.
Conforming Mortgage Loan: means a Residential Mortgage Loan that meets
all applicable requirements for sale to FNMA or FHLMC or for guaranty by GNMA.
Control: means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of another entity,
whether through the ownership of voting securities, by contract or otherwise.
Controlled Group: means all members of a controlled group of
corporations and all trades or business (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Code.
Conversion/Continuation Notice: is defined in Section 2.12(iii).
Corporate Base Rate: means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as such corporate base rate changes.
Credit Documents: means this Agreement, the Security Agreement, the
Notes, the Balance Bank Agreements, any Approved GNMA Letters of Credit and any
related reimbursement agreements, and all other documents and instruments now or
hereafter delivered to the Agent or the Lenders pursuant to or in connection
with the transactions contemplated hereby, and any amendments, supplements,
modifications, renewals, replacements, consolidations, substitutions and
extensions of any of the foregoing.
Credit Indebtedness: means, as of any date, the sum of (i) all amounts
owing under any of the Credit Documents (other than the Balance Bank Agreements)
to any of the Lenders, the Agent, or the Collateral Agent, plus (ii) to the
extent such fees have accrued within the three calendar months immediately
preceding such date, all deficiency fees owing to the Balance Banks under the
Balance Bank Agreements due to the Company's failure to maintain sufficient
deposits with such Balance Banks, plus (iii) the amount of all Approved Secured
Rate Hedging Obligations.
Credit Requirement: means, as of any date, the sum of (A) the
aggregate unpaid principal balance of all Loans then
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outstanding hereunder plus (B) the then current amount of Approved Secured Rate
Hedging Obligations, plus (C) the aggregate face amount of all Outstanding CPNs,
plus (D) the then current amount of Approved GNMA Letter of Credit Obligations.
Custodian Settlement Accounts: is defined in Paragraph 7(c) of the
Security Agreement.
Debt: means, with respect to any Person, as of any date of determination
thereof, without duplication, (i) all obligations of such Person for borrowed
money, including but not limited to money borrowed from any parent, subsidiary
or affiliate of such Person, whether or not evidenced by a promissory note, (ii)
all obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, including without limitation the
obligation of such Person to pay any deferred purchase price for Servicing
Agreements acquired, (iv) all obligations of such Person as lessee under capital
leases, (v) all Debt of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person, (vi) all Debt of others
Guaranteed by such Person, (vii) all on-balance-sheet obligations of such Person
under repurchase agreements covering Securities or pools of Mortgage Loans,
(viii) the Approved Secured Rate Hedging Obligations, and (ix) all obligations
of such Person to fund the origination or acquisition of Mortgage Loans
represented by uncleared loan funding checks or drafts payable to the mortgagor
or seller of such Mortgage Loans, as the case may be; provided that Debt shall
not include Mortgage-Related Indebtedness.
Debt Threshold: is defined in Section 8.5.
Default: means an Event of Default or any event or condition that with
the giving of notice or the passage of time or both would constitute an Event
of Default.
Discount Advance: means an Advance made on a discounted basis by a
Balance Bank, a portion of which (or all of which, in the case of Discount
Advances made by Non-Lender Balance Banks) shall be simultaneously sold to the
other Lenders, all pursuant to Section 2.4 hereof, and to be repaid at the end
of the applicable Discount Loan Period.
Discount Loan: means any Loan constituting a portion of a Discount
Advance.
Discount Loan Period: means, with respect to a Discount Loan, a period
of one month commencing on the Advance Date for such Discount Loan and ending
on the corresponding day in the next month. If a Discount Loan Period would
otherwise end on a day which is not a Business Day, such Discount Loan Period
shall
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end on the next succeeding Business Day, provided, however, (i) if said next
succeeding Business Day falls in a new calendar month, such Discount Loan Period
shall end on the immediately preceding Business Day, and (ii) no Discount Loan
Period shall extend beyond the Termination Date.
Discount Note: means, a Note executed and delivered by the Company to
each Lender in the form of Exhibit E-2 hereof which shall evidence the Discount
Loans described in Section 2.4 hereof.
Discount Rate: means, with respect to any Discount Loan Period, a fixed
rate of interest equal to the Applicable Margin for Eurodollar Advances in
effect at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Discount Loan Period.
Eligible AP Mortgage: is defined in Section 4.1(c).
Eligible Collateral: means, as of any date without duplication, (i)
Eligible Delivered Mortgages, (ii) Eligible AP Mortgages, (iii) Eligible Pledged
Securities, (iv) Eligible Servicing Sale Receivables, (v) Eligible Repurchased
Agency Loans and Receivables, (vi) the balance to the credit of the Company in
the Settlement Account, and (vii) cash and Cash Equivalents held by the Agent or
Collateral Agent as security for the Secured Debt.
Eligible Delivered Mortgage: is defined in Section 4.1(b).
Eligible Mortgage Loan: is defined in Section 4.1(a).
Eligible Pledged Security: is defined in Section 4.3.
Eligible Repurchased Agency Loans and Receivables: is defined in
Section 4.2.
Eligible Servicing Sale Receivables: is defined in Section 4.4.
ERISA: means the Employment Retirement Income Security Act of 1974, as
amended from time to time.
ERISA Affiliate: means any corporation or trade or business which is a
member of the same Controlled Group as the Company.
Eurodollar Advance: means an Advance which bears interest at the
Eurodollar Rate.
Eurodollar Base Rate: means, with respect to a Eurodollar Interest
Period or a Discount Loan Period, the rate determined by the Agent to be the
rate at which deposits in U.S. dollars are
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offered by First Chicago to first-class banks in the London interbank market at
approximately 11 a.m. (London time) two Business Days prior to the first day of
such Eurodollar Interest Period or Discount Loan Period, in the approximate
amount of (i) the amount of the Eurodollar Advance or Discount Advance divided
by (ii) the number of Lenders making Loans in connection with such Advance, and
having a maturity approximately equal to such Eurodollar Interest Period or
Discount Loan Period.
Eurodollar Interest Period: means, with respect to a Eurodollar Advance,
a period of one, two or three months, as selected by the Company, commencing on
a Business Day selected by the Company pursuant to this Agreement. Such
Eurodollar Interest Period shall end on (but exclude) the day which corresponds
numerically to such date one, two or three months thereafter, as applicable;
provided, however, that if there is no such numerically corresponding day in
such next month, such Eurodollar Interest Period shall end on the last Business
Day of such next month. If a Eurodollar Interest Period would otherwise end on a
day which is not a Business Day, such Eurodollar Interest Period shall end on
the next succeeding Business Day, provided, however, that (i) if said next
succeeding Business Day falls in a new calendar month, such Eurodollar Interest
Period shall end on the immediately preceding Business Day, and (ii) no
Eurodollar Interest Period shall extend beyond the Termination Date.
Eurodollar Loan: means a Loan which bears interest at a
Eurodollar Rate.
Eurodollar Rate: means, with respect to a Eurodollar Advance and
Eurodollar Loan for the relevant Eurodollar Interest Period, and with respect to
the calculation of the Purchase Price with respect to any Discount Loan Period,
the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such
Eurodollar Interest Period or Discount Loan Period, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to that Eurodollar
Interest Period or Discount Loan Period, plus (ii) the Applicable Margin (A) in
effect two Business Days prior to the first day of a Discount Loan Period with
respect to the calculation of the applicable Purchase Price or (B) in effect
from time to time during the Eurodollar Interest Period with respect to a
Eurodollar Advance and Eurodollar Loan.
Event of Default: means any of the events described in Section 10.1.
Existing Facility: is defined in the first recital of this Agreement.
Facility: means the facility comprised of the Commitments made
available to the Company pursuant to this Agreement, which
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facility has an original term of 364 days and an initial Aggregate Commitment
of $800,000,000.
Facility Fee Rate: means, as of any date, the percentage per annum set
forth on Schedule 2 attached hereto which is in effect on such date, changing as
and when the Company's long-term unsecured debt rating by either S&P or Moody's
changes as described therein.
Federal Agency: means FHLMC, FNMA, GNMA, FHA or VA.
Federal Funds Advance: means an Advance bearing interest at the
Federal Funds Rate.
Federal Funds Funding Rate: means, with respect to any Federal Funds
Loan for any day, the rate per annum equal to the consensus (or if no consensus
exists, the arithmetic average) of the rates at which reserves are offered by
first-class banks to other first-class banks (at approximately the time at which
the applicable Advance Notice or Conversion/Continuation Notice is received or
the time at which an automatic continuation is deemed to have occurred) on such
day (or if such day is not a Business Day, on the immediately preceding Business
Day) on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, based on quotes received by the Agent
from three federal funds brokers of recognized standing selected by the Agent in
its sole discretion; provided, however, that in lieu of determining the rate in
the foregoing manner, the Agent may substitute therefor the consensus (or if no
consensus exists, the arithmetic average) of the rates at which reserves are
offered by first-class banks to other first-class banks at 10:00 a.m. (Chicago
time) on such day (or if such day is not a Business Day, on the immediately
preceding Business Day) on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, received by the
Agent from three federal funds brokers of recognized standing selected by the
Agent in its sole discretion.
Federal Funds Loan: means any Loan constituting a portion of a Federal
Funds Advance.
Federal Funds Rate: means, for any day, an interest rate per annum
equal to (i) the Federal Funds Funding Rate for such day, plus (ii) 0.125% per
annum, plus (iii) the Applicable Margin.
Fees: is defined in Section 2.2.
FHA: means the Federal Housing Administration or other agency,
corporation or instrumentality of the United States to which the powers and
duties of the Federal Housing Administration have been transferred.
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FHA-Approved Mortgagee: means an institution that is approved by the FHA
to act as a servicer and mortgagee of record with respect to a Mortgage Loan
insured by the FHA.
FHA Mortgage Loan: means a Mortgage Loan that is secured by a first
lien on land and the Single Family Residence constructed thereon and is insured
by FHA.
FHLMC: means the Federal Home Loan Mortgage Corporation or other agency,
corporation or instrumentality of the United States to which the powers and
duties of the Federal Home Loan Mortgage Corporation have been transferred.
FHLMC-Approved Lender: means an institution that is approved by the
FHLMC to act as a lender in connection with the origination of any Mortgage Loan
purchased by the FHLMC.
FHLMC Security: means a security representing an undivided fractional
interest in a pool of Mortgage Loans, which security is issued and guaranteed as
to full and timely payment of interest and full collection of principal by
FHLMC.
First Chicago: means The First National Bank of Chicago, in its
corporate capacity and not as Agent, and its successors and assigns.
FNMA: means the Federal National Mortgage Association or other agency,
corporation or instrumentality of the United States to which the powers and
duties of the Federal National Mortgage Association have been transferred.
FNMA-Approved Lender: means an institution that is approved by the FNMA
to act as a lender in connection with the origination of any Mortgage Loan
purchased by the FNMA.
FNMA Security: means a security representing an undivided fractional
interest in a pool of Mortgage Loans, which security is issued and guaranteed as
to full and timely payment of principal and interest by FNMA.
FSA: means Financial Security Assurance Holdings Ltd., a New York
corporation.
Fundamental Change: is defined in Section 8.4.
Fundamental Change/Investment Calculation Period: means, in respect of
any Fundamental Change or Investment, the period ending on the date of
consummation of such Fundamental Change or Investment and including the four
most recent consecutive fiscal quarters ending on or prior to the date of
consummation of such Fundamental Change or Investment.
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Funded Debt: means as of any date of determination thereof, all Debt of
the Company and its consolidated Subsidiaries (including without limitation all
amounts payable by the Company in connection with the acquisition of any
Servicing Agreements and the amount of all checks, drafts or other items issued
by the Company or any of its consolidated Subsidiaries to fund Mortgage Loans to
the extent such checks, drafts or other items have not been collected upon and
paid), minus (i) all Debt of others Guaranteed by the Company or any of its
consolidated Subsidiaries and (ii) all Debt of others secured by a Lien on any
asset of the Company or any of its consolidated Subsidiaries, unless such Debt
is assumed by the Company or any of its consolidated Subsidiaries.
GAAP: means generally accepted accounting principles as in effect from
time to time.
General Commitment: means, for each Lender as of any date, the
obligation of such Lender to make Loans not exceeding the amount set forth as
its total commitment (excluding any Swingline Commitment) on Exhibit C attached
hereto, as such amount may be modified from time to time pursuant to the terms
hereof, or the amount established in any assignment to a new Lender pursuant to
the terms hereof.
GNMA: means the Government National Mortgage Association or other
agency, corporation or instrumentality of the United States as to which the
powers and duties of the Governmental National Mortgage Association have been
transferred.
GNMA Security: means a security representing an undivided fractional
interest in a pool of Mortgage Loans, which security is issued by the Company
and guaranteed as to full and timely payment of principal and interest by GNMA
without regard as to whether the Company collects any payments on such Mortgage
Loans.
Guaranty: means, with respect to any Person, any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person (a "primary obligor") or in any manner providing for the payment of
any Debt of any primary obligor or otherwise protecting the holder of such Debt
against loss (whether by agreement to keep-well, to purchase assets, goods,
securities or services, to advance or supply funds to the primary obligor to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, to take-or-pay or
otherwise), provided that the term "Guarantee" shall not include (i)
endorsements for collection or deposit in the ordinary course of business, (ii)
obligations of the Company pursuant to Recourse Servicing, (iii) commitments by
the Company to purchase Mortgage Loans in the ordinary course of business, and
(iv) obligations in
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the Company's capacity as servicer of Mortgage Loans. The term "Guarantee"
used as a verb has a correlative meaning.
Hazardous Substance: means any hazardous, toxic or dangerous waste,
substance or material subject to regulation under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and federal,
state or local so-called "Superfund" or "Superlien" laws, or any other federal,
state or local laws, ordinances, rules or regulations governing or regulating
hazardous materials, pollution, the environment or public health, as now or at
any time hereafter in effect.
HLTV Loan: means a Residential Mortgage Loan (which may be a Qualified
Second Loan) that meets all the requirements for a Nonconforming Mortgage Loan
except that it has an original principal balance (or, in the case of a Qualified
Second Loan, the sum of such original principal balance plus the principal
balance, as of the origination of such Qualified Second Loan, of the related
first priority Residential Mortgage Loan) which is greater than 95% of the
appraised value of the real estate and the improvements securing such Mortgage
Loan, in which case such Mortgage Loan must meet all requirements for sale to an
Approved Investor pursuant to a commitment specifically covering such Mortgage
Loan.
HUD: means the United States Department of Housing and Urban Development
or other agency, corporation or instrumentality of the United States to which
the powers and duties of the United States Department of Housing and Urban
Development have been transferred.
Investment: means, as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of, or a beneficial interest in,
stock or other securities of any other Person or any option, contract,
certificate or other financial product (including, but not limited to, interest
rate swaps and other hedging instruments), or any direct or indirect loan,
advance or capital contribution by that Person to any other Person, including
all indebtedness and accounts receivable from that other Person which are not
current assets or did not arise from sales to that other Person in the ordinary
course of business. The amount of any Investment shall be determined in
accordance with GAAP.
Issuing Lender: is defined in Section 2.6(b).
Jumbo Mortgage Loan: means a Residential Mortgage Loan that (i) meets
all applicable requirements for sale to FNMA or FHLMC except that the amount of
such Mortgage Loan exceeds the amounts permitted by such requirements, (ii) at
the time of origination had a principal balance that did not exceed 80% of the
appraised value of the real estate and improvements securing such Mortgage
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Loan, unless private mortgage insurance was obtained covering such Mortgage
Loan, in which case it may have an original principal balance in excess of 80%
but not in excess of 95% of such appraised value, (iii) has a term of not more
than 30 years, (iv) meets all of the then-current requirements for sale to an
Approved Investor purchasing such type of Mortgage Loan from the Company, and
(v) has an outstanding principal balance on the Pledge Date thereof of less than
$1,000,000 in any event.
Lender: means, at any time, any party having a Commitment hereunder
and its successors and permitted assigns.
Lending Installation: means, with respect to a Lender, any office,
branch, subsidiary or affiliate of such Lender.
Lending Sublimits: is defined in Section 2.1(a).
Lien: means, with respect to any asset of any Person, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, such Person shall be deemed to
hold subject to a Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sales agreement, capital
lease or other title retention agreement relating to such asset.
Loan: means a loan of money in any amount to the Company by a Lender
pursuant to this Agreement.
Maximum Special Dividend Amount: is defined in Section 8.16.
MBS Value: means, with respect to any Security, the lowest of (a) the
face amount of such Security, (b) the weighted average purchase price committed
to under those Approved Investor Commitments which could cover such Security,
determined in the manner set forth in Exhibit F, and (c) if so required from
time to time by the Agent, the then-current market value of such Security as
conclusively determined by a third party broker of nationally recognized
standing selected by the Collateral Agent.
Moody's: means Moody's Investors Service, Inc. or any successor to its
business.
Mortgage: means a mortgage, deed of trust, security deed or
similar instrument purporting to create a first or second lien or
similar interest in real estate and improvements thereon.
Mortgage Collateral Value: means, with respect to any Mortgage Loan, the
lowest of (A) the unpaid principal balance of such Mortgage Loan on the Pledge
Date therefor, (B) the net acquisition cost of such Mortgage Loan, if acquired
by the Pledgor, (C) the weighted average purchase price (determined on a
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weekly basis and expressed as a percentage of par) committed to under those
Approved Investor Commitments which could cover such Mortgage Loan applied to
the unpaid principal balance (as of the Pledge Date) of such Mortgage Loan
determined in the manner set forth in Exhibit F, and (D) if so required from
time to time by the Agent, the then-current market value of such Mortgage Loan
as conclusively determined by a third party broker of nationally recognized
standing selected by the Collateral Agent.
Mortgage Loan: means a loan of money evidenced by a Mortgage
Note and secured by a Mortgage.
Mortgage Note: means a note evidencing the indebtedness
secured by a Mortgage.
Mortgage-Related Indebtedness: means, with respect to the Company and
its Subsidiaries, any amount arising out of the issuance in the ordinary course
of the mortgage banking business of the Company and its Subsidiaries of (i)
mortgage pools, pass-throughs, participation certificates and other
mortgage-related securities to the extent that such amount would not, in
accordance with GAAP, be shown as indebtedness on a consolidated balance sheet
of the Company and its Subsidiaries as at such date and (ii) collateralized
mortgage obligations and other mortgage-related securities issued by a
Subsidiary of the Company, the payment of principal and interest in respect of
which is secured by a Lien on mortgage loans or other mortgage-related
securities (or other securities in which the Company invests in the ordinary
course of its mortgage banking business) conveyed to such Subsidiary in an
amount reasonably anticipated by the Company to approximate the amount required
to pay the principal and interest in respect of such collateralized mortgage
obligations or other mortgage-related securities (whether or not such amount
would, in accordance with GAAP, be shown as indebtedness on a consolidated
balance sheet of the Company and its Subsidiaries as at such date).
New York Consolidation Loan: means a Residential Mortgage Loan that
encumbers property in the State of New York and is being made in the form of a
consolidation with, and modification to, an existing Residential Mortgage Loan
which requires the delivery to the holder thereof of the original Mortgage and
Mortgage Note securing and evidencing such existing Residential Mortgage Loan.
Nonconforming Mortgage Loan: means a Residential Mortgage Loan that (i)
is not a Conforming Mortgage Loan, a Jumbo Mortgage Loan or a New York
Consolidation Loan, (ii) at the time of origination had a principal balance that
did not exceed 80% of the appraised value of the real estate and improvements
securing such Mortgage Loan, unless private mortgage insurance was obtained
covering such Mortgage Loan, in which case it may have
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an original principal balance in excess of 80% but not in excess of 95% of such
appraised value, or such Mortgage Loan is an HLTV Loan or a Qualified Second
Loan, (iii) has a term of not more than 30 years, (iv) meets all of the
then-current requirements for sale to an Approved Investor purchasing such type
of Mortgage Loan from the Company, and (v) has an original principal balance of
less than $400,000 in any event.
Non-Lender Balance Bank: means any bank or other financial institution
approved in advance by the Agent and the Company which is not a Lender hereunder
but which is an Affiliate of a Lender and which has executed a Balance Bank
Agreement pursuant to which it has agreed to make Discount Advances hereunder
and sell such Discount Advances to the Lenders pursuant to Section 2.4.
Note: means promissory notes evidencing amounts that may be advanced
from time to time under this Agreement, (i) in substantially the form of Exhibit
E-1 attached hereto with respect to Loans other than Discount Loans and Bid
Loans, (ii) in substantially the form of Exhibit E-2 attached hereto with
respect to Discount Loans, and (iii) in a form mutually agreed to between the
Company and each Bid Lender with respect to Bid Loans, each duly executed by the
Company and payable to the order of a Lender, including any amendment,
modification, renewal or replacement of such promissory notes.
Notice Address: means, as to any Person, the address of such Person
specified in or pursuant to Section 12.2.
Obligations: means any and all amounts due from the Company to any of
the Lenders, the Agent or the Collateral Agent hereunder or under the Notes,
the Security Agreement or any other Credit Document.
Other Facility: means that certain Revolving Credit Agreement dated as
of July 10, 1998 by and among the Company, First Chicago and certain of the
Lenders, as amended and supplemented from time to time.
Outstanding CPN: means, as of any date, each commercial paper note
issued by the Company which has not been presented for payment or for which
payment has not been made in full; provided, however, that as long as there has
not occurred an Event of Default, which Event of Default has not been waived by
the Required Lenders, "Outstanding CPN" shall not include on any date any such
commercial paper note which matures on such date but shall include all such
commercial paper notes to be issued on such date.
Overnight Transaction Advance: means a Swingline Advance which bears
interest at the Overnight Transaction Rate.
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Overnight Transaction Effective Rate: means, as of any day for any
Overnight Transaction Advance, a rate of interest per annum determined by First
Chicago in its sole discretion as its overnight transaction loan rate (at
approximately the time at which the applicable Advance Notice or
Conversion/Continuation Notice is received or the time at which an automatic
continuation is deemed to have occurred) for such day (or if such day is not a
Business Day, on the immediately preceding Business Day) for advances in such
amount.
Overnight Transaction Rate: means, with respect to an Overnight
Transaction Advance, a per annum interest rate equal to the sum of the Overnight
Transaction Effective Rate plus the Applicable Margin plus one quarter of one
percent (0.25%).
Parent: means collectively, White Mountains Holdings, Inc., which
holds 97% of the stock of the Company and Fund American Enterprises Holdings,
Inc., which in turn holds all of the stock of White Mountains Holdings, Inc.
and the remaining 3% of the stock of the Company.
Participants: is defined in Section 11.2(a).
PBGC: means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
Person: means an individual, corporation, limited liability company,
partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
Plan: means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of
the Code as to which the Company or any member of the Controlled Group may have
any liability.
Pledge Date: means the date on which a Mortgage Loan or a Security is
first delivered in pledge to the Collateral Agent, provided that (i) the date of
delivery of a Mortgage Loan covered by an AP Notice shall be deemed to be the
date of delivery of such AP Notice even after subsequent delivery of the related
Required Mortgage Documents, and (ii) the "Pledge Date" for all Collateral
previously held by the Collateral Agent under the Existing Facility shall be
deemed to be the date on which such Collateral was first delivered to the
Collateral Agent under the Existing Facility even though such date is prior to
the date of this Agreement.
Pledged Item: means any Pledged Mortgage or Pledged Security.
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Pledged Mortgages: means Mortgage Loans that are from time to time
designated by the Company and the Required Mortgage Documents in respect of
which are required to be delivered to the Collateral Agent pursuant to any of
this Agreement or the Security Agreement, including all Required Mortgage
Documents related thereto.
Pledged Securities: means Securities that are from time to time
designated by the Company and required to be delivered to the Collateral Agent
pursuant to either this Agreement or the Security Agreement, whether or not such
Pledged Securities are Eligible Pledged Securities.
Pledged Servicing Sale Receivables: means Servicing Sale Receivables
which are from time to time designated by the Company and pledged to the
Collateral Agent in accordance with this Agreement and the Security Agreement.
Pledgor: is defined in Section 4.6.
Published Federal Funds Effective Rate: means, for any day, an interest
rate per annum equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published for such day (or, if such day is
not a Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations at approximately 10:00 a.m.
(Chicago time) on such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by the Agent in its sole
discretion.
Purchase Price: is defined in Section 2.4(d).
Qualified Second Loan: means a Residential Mortgage Loan that (i) is
secured by a second lien on the premises described therein, and (ii) is subject
to and complies with all delivery requirements for sale to an Approved Investor
pursuant to a commitment specifically covering such Mortgage Loan.
Rate Hedging Agreement: means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate floor, cap or collar protection
agreements, forward rate currency or interest rate options, puts and warrants.
Rate Option: means the Eurodollar Rate, the Overnight Transaction
Rate, the Federal Funds Rate, the Discount Rate, the
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Alternate Base Rate, the Swingline Buydown Rate, or, if available, any Bid Rate.
Recourse Servicing: means any servicing rights under a Servicing
Agreement (other than any Servicing Agreement with GNMA) which obligates the
Company to repurchase Mortgage Loans upon default by the borrower thereunder or
indemnify any party having an interest in such Mortgage Loans against any
principal loss arising from such a default, unless (i) the Company has obtained
and maintains in effect insurance with coverages satisfactory to Agent from an
insurance company having a AAA rating covering the risk of being required to so
indemnify any such party, or (ii) the Company's obligation to indemnify any
party against any principal loss is limited to 10% or less of any such loss.
Regulation D: means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
Regulation U: means Regulation U of the Board of Governors of the
Federal Reserve System from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
Reinstated Repurchased Agency Loans and Receivables: means Eligible
Repurchased Agency Loans and Receivables which have been reinstated and as to
which (i) the Company shall have delivered to the Collateral Agent the Required
Mortgage Documents and a copy of the insurance or guaranty certificate (and, if
requested by the Agent or Collateral Agent, an original of such certificate and
any other Additional Required Mortgage Documents) related thereto and (ii) no
more than two installments of principal or interest are past due since the
reinstatement of the Mortgage Loan.
REO: means any interest in real property and the improvements thereon
owned by the Company as a result of the foreclosure or transfer in lieu of
foreclosure of a Mortgage Loan.
Reportable Event: means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified of the occurrence of
such event, provided, however, that a failure to meet the minimum funding
standard of Section 412 of the Code and of Section 302 of
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ERISA shall be a Reportable Event regardless of the issuance of any such waiver
of the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
Repurchased Agency Loans and Receivables: means all VA Mortgage Loans or
FHA Mortgage Loans (plus any REO or accounts receivable from FHA or VA resulting
therefrom, including guaranty claims against VA and insurance claims against FHA
or HUD) which were originally repurchased by the Company from Security holders.
In each case such Mortgage Loans (and the REO or accounts receivable resulting
therefrom) shall be valued based solely on (i) the amount of principal last due
under such Mortgage Loan, even after conversion of such Mortgage Loan to REO,
plus (ii) the amount of past-due interest advanced by the Company on account of
such Loan which is guaranteed by VA or insured by FHA; provided, however, that
90 days after written notice to the Company that the Required Lenders have
elected to exclude past-due interest from such valuation, such valuation shall
cease to include the past-due interest described under clause (ii).
Required Lenders: means (i) Lenders having two-thirds of the Aggregate
Commitment then in effect, or (ii) if the Commitments have been terminated,
Lenders having at least two-thirds of the aggregate Loans then outstanding.
Required Mortgage Documents: means the instruments and documents
described in Schedule A to the Security Agreement, as applicable to the
particular Mortgage Loan, which are required to be delivered to the Collateral
Agent and such other instruments and documents described therein as the Agent or
Collateral Agent may request.
Reserve Requirement: means, with respect to the Eurodollar Rate
applicable to a Discount Loan Period or a Eurodollar Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
eurocurrency liabilities on the date of determination of such Eurodollar Rate.
Residential Mortgage Loan: means a Mortgage Loan secured by a Mortgage
on a Single Family Residence.
Restricted FSA Securities: means any securities or contractual rights
now or hereafter owned by the Company which are convertible into, are
exercisable for or represent a right to acquire, without regard to any
contractual restrictions thereon, shares of capital stock of FSA, together with
all capital stock of FSA which is acquired by the Company pursuant to such a
conversion or any exercise of such right.
Restricted Payment: means: (i) with respect to the Company, any
payment of any dividends upon any shares of the Company's
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stock now or hereafter outstanding, except dividends payable in the stock of the
Company, and any other distribution or other transfer of assets to its
stockholders, as such, (including any repurchase of the Company's stock) whether
in cash, property, or securities, other than the exchange of Subordinated Debt
for Series A Preferred Stock or the purchase at market value from an Affiliate
of a readily marketable security traded on the New York Stock Exchange, American
Stock Exchange or NASDAQ as approved by the Agent; and (ii) any payment of
principal of or interest on the Subordinated Debt, and any amounts deposited
with the trustee under the Subordinated Debt Indenture or otherwise irrevocably
set aside for the benefit of the holders of the Subordinated Debt for the
purpose of defeasance of the Subordinated Debt.
Resulting Entity: means the Company and its consolidated Subsidiaries
after giving effect to any Fundamental Change or Investment.
S&P: means Standard & Poor's Ratings Group or any successor to its
business.
SEC: means the Securities and Exchange Commission (or any successor
entity).
Secured Debt: means the Credit Indebtedness.
Secured Parties: means, collectively, the Lenders, the Non-Lender
Balance Banks (to the extent of any Credit Indebtedness owed to such Non-Lender
Balance Banks), the Agent and the Collateral Agent.
Security: means any FHLMC Security, FNMA Security or GNMA Security.
Security Agreement: means the Fourth Amended and Restated Security and
Collateral Agency Agreement as of even date herewith, substantially in the form
of Exhibit D attached hereto, by and among the Company, the Agent and the
Collateral Agent, pursuant to which a security interest is created in favor of
the Collateral Agent for the Secured Parties in certain Collateral to be pledged
pursuant to this Agreement, as the same may, from time to time, be further
supplemented, modified or amended.
Series A Preferred Stock: means the Company's 8.42% Cumulative
Preferred Stock, Series A.
Servicing Agreement: means a written contract of the Company with
another Person to act on behalf of such other Person to, among other things,
receive payments in respect of Mortgage Loans and to service Mortgage Loans, but
shall not include the servicing rights related to (i) any Residential Mortgage
Loans while they constitute Collateral, (ii) any commercial Mortgage
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Loans, or (iii) any other Mortgage Loans held for investment by the Company,
Parent or any of their respective Subsidiaries.
Servicing Purchaser: means a Person which has purchased Servicing
Agreements from the Company.
Servicing Sale Receivables: means funds due to the Company from a
Servicing Purchaser in connection with a sale of Servicing Agreements from the
Company to such Servicing Purchaser.
Settlement Account: means the account established pursuant to Section
4.9.
Single Family Residence: means a one to four family dwelling unit, which
may be a condominium unit but which shall not be a mobile home (unless qualified
under a Federal Agency program) or a dwelling unit in a cooperative apartment
building.
Special Dividend: means any Restricted Payment made pursuant to
Section 8.16(b)(ii).
Subordinated Debt: means the principal amount of (but not any interest
on) the unsecured subordinated Debt of the Company outstanding from time to time
(which amount shall not exceed $100,000,000) evidenced by the Quarterly Income
Capital Securities (Subordinated Interest Deferrable Debentures, Due 2025) of
the Company issued in exchange for certain of the Series A Preferred Stock, the
terms of which unsecured subordinated Debt are set forth in the Subordinated
Debt Indenture; but shall not include any such unsecured subordinated Debt with
respect to which any amounts shall have been deposited with the trustee under
the Subordinated Debt Indenture or otherwise irrevocably set aside for the
benefit of the holders of such Debt for the purpose of defeasance of such Debt.
Subordinated Debt Indenture: means that certain Subordinated Indenture,
dated as of December 1, 1995, as amended or supplemented from time to time, by
and between the Company and IBJ Schroeder, as trustee, pursuant to which the
Company has issued or will issue the Subordinated Debt.
Subservicing Agreement: means a Servicing Agreement between the
Company and a Person which does not own the Mortgage Loans being serviced
thereunder but only has servicing or other non-ownership rights with respect
thereto.
Subsidiary: of a Person means (i) any corporation more than 50% of the
outstanding voting securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, association, joint venture
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or similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Company.
Swingline Advances: means all Advances made by the Swingline Lender
which are designated by the Company as Swingline Advances in the applicable
Advance Notice, which Advances may be Overnight Transaction Advances, Alternate
Base Rate Advances or Swingline Buydown Advances.
Swingline Buydown Advance: means a Loan made pursuant to Section 2.5(b)
by the Swingline Lender at the Swingline Buydown Rate.
Swingline Buydown Rate: means a rate to be agreed upon by the Company
and the Swingline Lender to apply to Swingline Buydown Advances pursuant to a
Balance Bank Agreement between the Swingline Lender and the Company.
Swingline Commitment: means, the obligation of the Swingline Lender to
make Swingline Advances hereunder not exceeding $40,000,000.
Swingline Lender: means First Chicago.
Termination Date: means July 9, 1999, or if any such day is not a
Business Day, the next preceding Business Day.
Transferee: is defined in Section 11.4.
Unsecured Leverage Ratio: means the maximum leverage ratio set forth
in Section 8.9.
VA: means the Veterans Administration or other agency, corporation or
instrumentality of the United States as to which the powers and duties of the
Veterans Administration have been transferred.
VA-Approved Lender: means an institution that is approved by the VA to
act as a lender in connection with the origination of any Mortgage Loan
guaranteed by the VA.
VA Mortgage Loan: means a Mortgage Loan that is secured by a first
lien on land and the Single Family Residence constructed thereon and is
guaranteed by the VA.
Year 2000 Issues: means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications to effectively
handle data including dates on and after January 1, 2000, as such inability
materially affects the
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business, operations and financial condition of the Company and its
Subsidiaries and of the Company's and its Subsidiaries' material customers,
suppliers and vendors.
Year 2000 Program: is defined in Section 6.17.
1.2 Interpretation.
(a) Words of the masculine gender include correlative words of
the feminine and neuter genders.
(b) Unless the context shall otherwise indicate, words importing
the singular include the plural and vice versa.
(c) Articles and Sections referred to by number mean the
corresponding Articles and Sections of this Agreement.
(d) The terms "hereby," "hereof," "hereto," "herein,"
"hereunder" and any similar terms as used in this Agreement, refer to
this Agreement as a whole unless otherwise expressly stated.
1.3 Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to be delivered hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent (except for
changes concurred in by the Company's independent public accountants) with the
most recent audited consolidated financial statements of the Company delivered
to the Lenders. To enable the ready and consistent determination of compliance
with the covenants set forth herein, the Company will not change its fiscal year
from a calendar year without (i) advance written notice to the Lenders, (ii)
providing interim financial reports certified by the Company, by the dates that
such reports would have been required prior to such change, and (iii) providing
an interim audited financial statement if more than fifteen (15) months will
have elapsed between annual audited financial statements as a result of such
change.
ARTICLE II
BORROWINGS
2.1 Availability and Adjustments.
(a) Agreement to Lend. Subject to subparagraphs (1) through (4)
below (the "Lending Sublimits"), each Lender severally agrees to make
Loans to the Company and participate in purchases of Discount Advances
on the terms and conditions set forth in this Agreement from time to
time through the
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Business Day immediately preceding the Termination Date, provided that,
on any date, after giving effect to such Loans and all other Loans that
the Company has requested be made on such date:
(1) the aggregate principal balance then outstanding
under all Loans made by any Lender under this Agreement
(excluding the aggregate principal balance then outstanding of
any Bid Loans made by such Lender and any portion of Discount
Advances made by such Lender which have been sold or, will on
such date be simultaneously sold, to the other Lenders under
Section 2.4) shall not at any time exceed the sum of (i) such
Lender's then-current General Commitment, and (ii) such Lender's
then-current Swingline Commitment, if any;
(2) the aggregate principal balance of all Loans
outstanding under this Agreement plus the aggregate face amount
of all Outstanding CPNs shall not at any time exceed the
then-current Aggregate Commitment;
(3) the Credit Requirement shall not exceed the
Borrowing Base;
(4) except as otherwise set forth in Section 2.5(c),
the aggregate principal balance of all Swingline Advances
outstanding under this Agreement at any time shall not exceed
the Swingline Commitment.
Subject to the terms hereof, the Company may borrow, repay and reborrow
amounts hereunder.
(b) Optional Increases in Aggregate Commitments. The
Company shall have the right to increase the Aggregate Commitment, but
not to an amount in excess of $900,000,000, by obtaining additional
Commitments, either from one or more of the Lenders or another lending
institution provided that (A) the Agent has approved the identity of any
such new Lender, (B) any such new Lender assumes all of the rights and
obligations of a "Lender" hereunder, and (C) the Agent has received a
"New/Modified Commitment Supplement" in the form of Exhibit H attached
hereto, which supplement shall be executed by the Company, the Agent
and any Lender modifying its Commitment thereby. Each New/Modified
Commitment Supplement shall be deemed to amend Exhibit C to the extent
necessary to reflect any changes in the Commitments hereunder, and the
Agent shall promptly deliver a copy of such supplement to each Lender
whose Commitment Percentage is affected thereby and to the Collateral
Agent.
(c) Optional Reductions in Aggregate Commitments. The
Company shall have the right to reduce the Aggregate
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Commitment upon ten Business Days' prior written notice to the Agent
(which shall promptly notify the Lenders), provided that such voluntary
reductions shall be made only in multiples of $10,000,000. Upon a
reduction of the Aggregate Commitment pursuant to the preceding
sentence, each Lender's General Commitment shall be decreased pro rata
in accordance with such Lender's Adjusted Commitment Percentage. On or
before the effective date of any such reduction, the Company shall, if
necessary, repay sufficient Loans to prevent the remaining outstanding
Loans hereunder, after giving effect to such permanent reduction, from
exceeding the Lending Sublimits.
2.2 Fees.
The Company shall pay the following fees (the "Fees"):
(a) Facility Fee. A facility fee based on the Aggregate
Commitment from time to time, calculated at the Facility Fee Rate,
changing when and as such rate changes, expressed as a per diem rate on
the actual Aggregate Commitment for each day during the preceding full
or partial calendar quarter, payable in arrears, on or before the fifth
Business Day of each calendar quarter and on the Termination Date. This
fee shall be allocated among the Lenders on a pro rata basis in
accordance with their respective Commitments (including any Swingline
Commitment) on each day during such quarter.
(b) Up-Front Fees. An up-front fee to each Lender based on such
Lender's initial total Commitment hereunder payable when this Agreement
becomes effective, equal to (i) 0.05% of the total Commitment of any
Lender which is not a lender under the Existing Facility or (ii) with
respect to any Lender which is a lender under the Existing Facility the
sum of (A) 0.025% of such Lender's Commitment to the extent it is not in
excess of such Lender's Commitment under the Existing Facility plus
either (B) 0.025% of the increase, if any, in such Lender's total
Commitment hereunder over such Lender's commitment under the Existing
Facility, if such increase is less than $5,000,000, or (C) 0.05% of such
increase, if any, if such increase is $5,000,000 or more.
(c) Other Fees Payable to Agent. Any fees payable to
the Agent pursuant to any applicable letter agreements
between the Agent and the Company.
(d) Collateral Agent Fees. Collateral Agent fees payable to
Collateral Agent for its services rendered pursuant to the Security
Agreement as agreed to by the Company and the Collateral Agent from time
to time.
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(e) Fees Payable in Connection with Discount Loans or Swingline
Buydown Advances. Any deficiency fees owing to the Balance Banks or the
Swingline Lender under the Balance Bank Agreements due to the Company's
failure to maintain sufficient deposits with such Balance Banks or the
Swingline Lender and any other fees owing under the Balance Bank
Agreements.
2.3 Advances.
(a) Types of Advances. Each Advance hereunder shall consist of
Loans made from one or more of the Lenders and requested by the Company in
accordance with Section 2.9. Subject to the terms and conditions herein,
Eurodollar Advances, Alternate Base Rate Advances and Federal Funds Advances
shall be generally available as permitted by the Lending Sublimits. Discount
Advances shall be available only as provided in Section 2.4. Swingline Advances
shall be available as provided in Section 2.5. Bid Loans shall be available as
provided in Section 2.6. Notwithstanding anything to the contrary contained in
this Agreement, at any time during the continuance of a Default the Agent may
(and at the direction of the Required Lenders shall) declare by notice to the
Company that no Advance may be made as, converted into or continued as a
Eurodollar Advance or a Discount Advance, and each such Advance shall
automatically be converted into a Federal Funds Advance at the expiration of the
interest period applicable thereto.
(b) Rate Options. Eurodollar Advances, Alternate Base Rate
Advances, Federal Funds Advances, Swingline Buydown Advances and Overnight
Transaction Advances shall accrue interest at the Eurodollar Rate, the Alternate
Base Rate, the Federal Funds Rate, the Swingline Buydown Rate and the Overnight
Transaction Rate, respectively. Discount Advances shall not bear interest but
shall be made on a discounted basis by one or more Balance Banks and shall be
sold to the other Lenders in accordance with Section 2.4.
(c) Funding of Advances. Discount Advances, Swingline Advances
and Bid Loans shall be funded by the Lenders as provided in Section 2.4, 2.5 and
2.6, respectively. All other Advances shall be funded on a pro rata basis among
all Lenders in accordance with each Lender's Adjusted Commitment Percentage.
(d) Reallocation of Swingline Advances. Upon the election of the
Swingline Lender at any time, all outstanding Swingline Advances (including
Swingline Advances made pursuant to Section 2.5(c) below) designated by the
Swingline Lender shall be reallocated among all Lenders in accordance with each
Lender's Adjusted Commitment Percentage, and each such Swingline Advance shall
thereafter be deemed for all purposes a Federal Funds Advance. Notwithstanding
the preceding sentence or any other
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provision of this Agreement, no portion of any Swingline Advance shall be
reallocated to any Lender to the extent such reallocation would cause such
Lender's share of the aggregate unpaid principal amount of all Loans (other than
Bid Loans) then outstanding under this Agreement to exceed its General
Commitment hereunder.
(e) Reallocation Upon Default. Automatically after the
occurrence of an Event of Default described in Section 10.1(k) and upon the
request of any Lender during the continuance of any other Event of Default, (i)
all Swingline Advances made in accordance with this Agreement, Federal Funds
Advances and Alternate Base Rate Advances (excluding Bid Loans) shall be
immediately reallocated among all Lenders in accordance with each Lender's
Commitment Percentage, and each Swingline Advance shall thereafter be deemed for
all purposes a Federal Funds Advance, and (ii) each Eurodollar Advance and
Discount Advance shall, upon the expiration of the interest period applicable
thereto, automatically be converted into a Federal Funds Advance and reallocated
among all Lenders in accordance with each Lender's Commitment Percentage. Each
Lender holding less than its Commitment Percentage of all Advances (excluding
Bid Loans) shall at the times set forth for reallocations in the preceding
sentence immediately purchase for cash and at face value such participations in
the Notes held by other Lenders, and make such other adjustments, as may be
needed to cause each Lender to hold its Commitment Percentage of the Advances
hereunder (other than Bid Loans made by such Lender). Notwithstanding the
preceding provisions of this Section 2.3(e) or any other provision of this
Agreement, no Lender shall be required to so purchase such participations to the
extent that such purchase would cause such Lender's share of the aggregate
unpaid principal amount of all Loans (other than Bid Loans) then outstanding
under this Agreement to exceed its Commitment hereunder.
2.4 Discount Advances.
(a) Funding of Discount Loans. Subject to the terms and
conditions herein (including the Lending Sublimits) and the terms and conditions
of any Balance Bank Agreement, the Company may request a Discount Advance from
any Balance Bank; provided that Discount Advances shall be made only on the
tenth day of each calendar month or, if such tenth day is not a Business Day, on
the next succeeding Business Day thereafter.
(b) Discounted Advance. Each Discount Loan made available
hereunder shall not bear interest but shall instead be funded to the Company at
a discount ("Balance Bank Discount") from the principal amount repayable by the
Company at the end of the applicable Discount Loan Period (the "Face Amount")
calculated to yield to the Balance Bank, when the Face Amount is repaid in full
at the end of the applicable Discount Loan Period,
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a per annum return on the amount advanced equal to the Discount Rate for the
applicable Discount Loan Period. The full Face Amount of each Discount Advance
shall then be repaid by the Company at the expiration of the applicable Discount
Loan Period. Accordingly, each Discount Advance shall bear no interest prior to
the expiration of the applicable Discount Loan Period. The amount of the
Discount Advance actually disbursed to the Company on the Advance Date therefor
(which amount shall necessarily be less than the Face Amount) shall be equal to
the amount requested by the Company in the Advance Notice requesting such
Discount Advance, and the Face Amount shall be determined by the Agent based on
the Balance Bank Discount. From and after the expiration of such Discount Loan
Period, each Discount Loan constituting a portion of such Discount Advance not
repaid shall bear interest on its Face Amount at the rate set forth in Section
2.7.
(c) Balance Bank Agreement. Discount Advances are based upon the
expectation that the Company will maintain average daily qualifying balances
with the applicable Balance Bank during the applicable Discount Loan Period. The
Agent will collect and disburse the Discount Advances, but shall not be
obligated to confirm any matters with respect to balances maintained with
Balance Banks or to collect any fees or amounts charged by Balance Banks with
regard to such balances. Each Balance Bank shall with the Company's agreement
impose its own requirements upon the Company in dealing with deviations in
actual balances from projected balances. All such matters shall be governed by
separate Balance Bank Agreements between each such Balance Bank and the Company,
and the Agent shall have no responsibility therefor. No Discount Advance shall
be available from a particular Balance Bank until (i) the Company and such
Balance Bank have executed and delivered a Balance Bank Agreement and so advised
the Agent in writing, and (ii) in the case of a Non- Lender Balance Bank, such
Non-Lender Balance Bank shall have executed either this Agreement or a
Non-Lender Balance Bank Supplement in the form of Exhibit I hereto agreeing to
be bound by the terms of this Section 2.4.
(d) Ratable Purchase by All Lenders. A portion of each Discount
Advance (or, in the case of Non-Lender Balance Banks, the entire Discount
Advance made in accordance with the terms of this Agreement), shall be sold
simultaneously with the funding by the Balance Bank to the other Lenders (each a
"Purchasing Lender") on a pro rata basis in accordance with each such Lender's
Adjusted Commitment Percentage. Each Purchasing Lender hereby agrees to purchase
and acquire, prior to funding, for cash at the Purchase Price and without
recourse to the Balance Bank, its Adjusted Commitment Percentage share of such
Discount Advance (as to each Purchasing Lender, such amount shall be a Discount
Loan by such Lender). The purchase price ("Purchase Price") payable by each
Purchasing Lender shall be calculated to yield
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such Lender upon payment at the end of the applicable Discount Loan Period of
its Discount Loan a per annum return on the Purchase Price equal to the
Eurodollar Rate which would have been applicable for a one month Eurodollar
Interest Period ending on the same date as such Discount Loan Period. Each
Balance Bank hereby irrevocably agrees to sell and assign, without recourse,
such portion of every Discount Advance made by such Balance Bank (or, in the
case of Non-Lender Balance Banks, the entire amount of each such Discount
Advance) to each Purchasing Lender at the applicable Purchase Price. Each
Balance Bank (other than Non-Lender Balance Banks) shall retain its Adjusted
Commitment Percentage share of the Face Amount of each Discount Advance, which
shall constitute a Discount Loan owing to the Balance Bank.
(e) Minimum Amounts; Funding. Each Discount Advance shall be
requested by the Company in accordance with Section 2.9. On the Advance Date for
each such Discount Advance, subject to the other provisions hereof and upon
receipt by the Agent for the account of the Balance Bank from each of the
Purchasing Lenders of the aggregate Purchase Price required to be made available
by such Lenders, the Balance Bank will make the full Discount Advance available
to the Agent for the account of the Company in the manner specified in Section
2.11. On the Advance Date for each such Discount Advance, each Purchasing Lender
will make available to the Agent for the account of the Balance Bank in
immediately available funds an amount equal to the Purchase Price for the share
of such Discount Advance being purchased by such Lender from the Balance Bank.
(f) Consent to Assignment. The Company hereby acknowledges and
consents to the assignment of Discount Loans by each Balance Bank to the other
Lenders, as contemplated by this Section 2.4. The Company and the Agent shall
treat each Purchasing Lender with respect to its share of each Discount Advance
as if such share of such Discount Advance had originally been made by such
Purchasing Lender directly to the Company as a Discount Loan.
(g) Discount Notes. The Discount Loans owing to each Lender
shall be evidenced by a single master promissory note of the Company in the full
amount of such Lender's Commitment, substantially in the form of Exhibit E-2 (a
"Discount Note") executed and delivered prior to the initial Discount Advance,
payable to the order of such Lender and representing from time to time the
obligation of the Company to pay the aggregate Face Amount of all Discount Loans
then owed to such Lender.
2.5 Swingline Advances.
(a) In General. Subject to the terms and conditions herein,
the Company may request Swingline Advances from the Swingline Lender on a
non-pro rata basis, and such Swingline
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Advance shall be funded to the Company by the Swingline Lender on the Advance
Date therefor. As set forth in, but subject to the provisions of, Section 2.3(d)
and (e), Swingline Advances shall be reallocated among the Lenders (i)
automatically after the occurrence of an Event of Default described in Section
10.1(k), (ii) upon the request of any Lender during the continuance of any other
Event of Default, and (iii) upon the election of the Swingline Lender made at
any time.
(b) Swingline Buydown Advances. Swingline Buydown Advances are
based upon the expectation that the Company will maintain average daily
qualifying balances with the Swingline Lender while any Swingline Buydown
Advance is outstanding. The Swingline Lender shall with the Company's agreement
impose its own requirements upon the Company in dealing with deviations in
actual balances from projected balances. All such matters shall be governed by a
Balance Bank Agreement between the Swingline Lender and the Company.
(c) Swingline Advances to Pay Amounts Due to Swingline Lender.
If any amounts are advanced by the Swingline Lender to cover checks or wire
transfers from Company accounts maintained with the Swingline Lender when there
are insufficient funds in such accounts to cover the applicable check or wire
transfer and sufficient funds are not deposited in the applicable account before
the close of business on the day on which the applicable check or wire transfer
request is honored, then the Company shall be deemed to have requested, and the
Swingline Lender may (but shall not be obligated to) elect to make, a Swingline
Advance at the Alternate Base Rate to pay such overdraft amount (even if such a
Swingline Advance would cause the aggregate amount of all outstanding Swingline
Advances to exceed the Swingline Commitment); provided however, that (i) the
Swingline Lender shall not make any such Swingline Advance to the extent such
Advance would cause the Credit Requirement to exceed the Borrowing Base, and
(ii) the reallocations of any such Swingline Advances among the Lenders shall be
as set forth in, but subject to the provisions of, Sections 2.3(d) and (e).
2.6 Bid Loans, Approved GNMA Letters of Credit, and Approved
Rate Hedging Agreements.
(a) Special Bids. The Company may, at any time, solicit a bid
from any Lender on a non-pro rata basis for a loan (a "Bid Loan") in such amount
and accruing interest at such rate as may be bid to the Company by such Lender
for interest periods of 1 to 45 days. Such Lender, in its sole discretion, may
make such a bid for a Bid Loan. The Company will be under no obligation to
accept any such bid, but may accept any one, or more than one, of such bids. A
Lender whose bid has been accepted by the Company shall be referred to as a "Bid
Lender". The Company and each Bid Lender shall execute and submit a Bid
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Loan Notice in the form of Exhibit G hereto to the Agent concurrently with the
Advance Notice for such Bid Loan.
(b) Approved GNMA Letters of Credit. The Company may, at any
time, request that any Lender issue a letter of credit in favor of GNMA as a
result of the failure by the Company to satisfy all document submission
requirements of GNMA in connection with the certification or re-certification by
GNMA of a pool of Mortgage Loans. If a Lender agrees to issue such a letter of
credit and desires that such letter of credit be ratably secured (along with the
other Credit Indebtedness) by the Collateral, such Lender shall submit to the
Agent a copy of the proposed letter of credit and copies of any related
reimbursement agreement or other related documentation. If (i) the Agent
approves such letter of credit and other documentation (which approval shall not
be unreasonably withheld), and (ii) the letter of credit expires by its terms on
a date which is prior to the Termination Date, then such letter of credit shall
constitute an Approved GNMA Letter of Credit and such Lender shall constitute an
"Issuing Lender". No such letter of credit shall be considered an Approved GNMA
Letter of Credit if its inclusion as an Approved GNMA Letter of Credit would, at
the time of issuance, cause any Lending Sublimit to be exceeded. The Company and
the applicable Issuing Lender shall promptly notify the Agent upon (i) the
expiration, cancellation or honoring of any Approved GNMA Letter of Credit, and
(ii) the payment by the Company of any amounts due to the Issuing Lender in
respect of any Approved GNMA Letter of Credit Obligations. No Issuing Lender nor
the Company shall amend or renew any Approved GNMA Letter of Credit or any
related reimbursement agreement or other related document without the prior
written consent of the Agent (which consent shall not be unreasonably withheld).
(c) Approved Rate Hedging Agreements. The Company may, from time
to time, request that one or more Lenders enter into Rate Hedging Agreements
with the Company. If a Lender agrees to enter into such an agreement and desires
all or a portion of the Company's obligations thereunder to be ratably secured
by the Collateral, such Lender shall submit to the Agent a copy of the proposed
Rate Hedging Agreement and copies of any related documentation. If (i) the Agent
approves such Rate Hedging Agreement, (ii) such Rate Hedging Agreement
terminates automatically on or before the Termination Date or provides for the
release of the Collateral (or the transfer or liquidation of Collateral in the
amount of the Approved Secured Rate Hedging Obligations) at such time, and (iii)
such Rate Hedging Agreement specifies the maximum amount of obligations
thereunder that will be secured by the Collateral, then such Rate Hedging
Agreement shall be an Approved Rate Hedging Agreement and the obligations
thereunder, up to the stated maximum, shall be Approved Secured Rate Hedging
Obligations hereunder, subject to the limitation
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that the maximum aggregate Approved Secured Rate Hedging Obligations at any time
shall not exceed $25,000,000.
(d) Additional Commitment. Each Bid Lender's commitment under an
accepted special bid, each Issuing Lender's issuance of an Approved GNMA Letter
of Credit and each Rate Hedging Agreement entered into by a Lender shall be in
addition to such Lender's Commitment and shall not reduce such Lender's
obligation to continue to fund its Adjusted Commitment Percentage of any other
Advance.
(e) Notes. Each Bid Loan owing to each Bid Lender shall not be
evidenced by the Notes executed and delivered in the form of Exhibit E-1 and
E-2, but shall instead be evidenced by an additional promissory note or notes in
a form mutually agreed to by the Company and such Bid Lender. The Agent shall
have no responsibility to confirm the existence or substance of such additional
promissory notes.
2.7 Rate after Maturity.
Any Advance not paid at maturity, whether by acceleration or
otherwise, and any other amount not paid when due hereunder shall bear interest
until paid in full at a rate per annum equal to the Alternate Base Rate plus two
percent (2.0%) per annum; provided, however, that such interest rate after
maturity shall in no event be less than the interest rate that was in effect
with respect to such Advance prior to maturity.
2.8 Interest Payment Dates.
Interest shall accrue at the relevant rate for each day from the
day on which the proceeds of such Advance are made available to the Company.
Interest accrued on each Advance other than a Eurodollar Advance, a Discount
Loan (which does not accrue interest prior to maturity), or a Bid Loan shall be
payable on the first to occur of (i) the first Business Day of the immediately
following calendar month, commencing with the first such date to occur after the
date hereof, or (ii) at maturity of the Facility, whether due to acceleration or
otherwise. Interest accrued on each Eurodollar Advance shall be payable on the
first to occur of (i) the last day of each Eurodollar Interest Period, or (ii)
any date on which any such Eurodollar Advance is prepaid, whether due to
acceleration or otherwise, or (iii) the Termination Date. Interest on Bid Loans
shall be payable on the first to occur of (i) the last day of the applicable
interest period for such Bid Loan as set forth in the Bid Loan Notice, (ii) any
date on which such Bid Loan is prepaid whether due to acceleration or otherwise
or (iii) the Termination Date. Interest and Fees shall be calculated for actual
days elapsed on the basis of a 360-day year. Interest shall be payable for the
day an Advance is made. Interest shall not be payable for the
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day of any payment on the amount paid if payment is received prior to noon
(Chicago time) at the place of payment. If any payment of principal of or
interest on an Advance shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and, in the case
of a principal payment, such extension of time shall be included in computing
interest in connection with such payment.
2.9 Method of Selecting Rate Options and Interest Periods.
Subject to the terms hereof, for each Advance hereunder the
Company shall give the Agent irrevocable notice (an "Advance Notice") not later
than (i) 10:00 a.m. (Chicago time) on the proposed Advance Date for each Bid
Loan or Federal Funds Advance, (ii) noon (Chicago time) on the proposed Advance
Date for each Alternate Base Rate Advance (other than Swingline Advances), (iii)
3:00 p.m. (Chicago time) on the proposed Advance Date for each Overnight
Transaction Advance, (iv) 4:00 p.m. (Chicago time) on the proposed Advance Date
for each Swingline Advance which is an Alternate Base Rate Advance or a
Swingline Buydown Advance, and (v) 11:00 a.m. (Chicago time) three (3) Business
Days before the Advance Date for each Eurodollar Advance and each Discount
Advance, specifying:
(a) the Advance Date, which shall be a Business Day, of
such Advance,
(b) the aggregate amount of such Advance, which shall be in an
amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess
thereof, except that (i) Swingline Advances other than Overnight
Transaction Advances shall have no minimum amount and need not be in
multiples of $1,000,000, and (ii) Overnight Transaction Advances shall
be in a minimum amount equal to $100,000 but need not be in multiples of
$1,000,000.
(c) the type of such Advance,
(d) the interest period applicable to such Advance, if
applicable,
(e) if such Advance is a Discount Advance, the Balance Bank or
Balance Banks for such Advance and, if applicable, the portion of such
Discount Advance allocated to each such Balance Bank,
(f) if such Advance is a Bid Loan, the Bid Lender for such Bid
Loan, and
(g) what portion, if any, of such Advance is to be used solely
for the purpose of repaying maturing commercial paper.
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Notwithstanding the foregoing, the Agent may also agree, in its sole discretion,
to accept (A) an Advance Notice requesting a Swingline Advance which is an
Alternate Base Rate Advance or Swingline Buydown Advance or (B) a Bid Loan
Notice at any time up until the close of the Agent's business day. Delivery of
an Advance Notice, whether by telephone or in writing, shall constitute a
representation and warranty that, after giving effect to the amount of the
Advance being requested, (i) the then-current Borrowing Base is equal to or
greater than the Credit Requirement, and (ii) no Lending Sublimit shall be
exceeded. Changes in the rate of interest on that portion of any Advance
maintained as an Alternate Base Rate Advance will take effect simultaneously
with each change in the Alternate Base Rate. The interest rate on each Overnight
Transaction Advance or Federal Funds Advance shall be recalculated daily for
each day that such Overnight Transaction Advance or Federal Funds Advance is
continued under Section 2.12(ii). Each Eurodollar Advance shall bear interest
for each day from and including the first day of the Eurodollar Interest Period
applicable thereto to (but not including) the last day of such Eurodollar
Interest Period at the interest rate determined as applicable to such Advance.
The Company shall select Eurodollar Interest Periods and Discount Loan Periods
with respect to Eurodollar Advances and Discount Loans so that it is not
necessary to pay a Eurodollar Advance or Discount Loan prior to the last day of
the applicable Eurodollar Interest Period or Discount Loan Period, as the case
may be, in order to make the mandatory repayment on the Termination Date. Any
change in the Applicable Margin shall be effective immediately with respect to
the interest rates on any Loans outstanding other than Discount Loans. Changes
in the Applicable Margin relating to Discount Loans shall not affect Discount
Loans outstanding at the time of any such change but shall be effective with
respect to any Discount Loans made after the date of any such change.
2.10 Maximum Number of Eurodollar Loans.
The Company may not request an additional Eurodollar Advance if
the making of such Advance would result in any Lender holding Eurodollar Loans
having more than six (6) different Eurodollar Interest Periods at any given
time.
2.11 Funding Procedures.
Not later than 2:00 p.m. (Chicago time) on each Advance Date,
each Lender shall make available its Loan or Loans (including Bid Loans), in
funds immediately available in Chicago to the Agent at its address specified
pursuant to Article XII, provided that Swingline Advances may be funded at any
time up to (i) the close of the Swingline Lender's business day so long as First
Chicago is both the Agent and the sole Swingline Lender, or (ii) 4:00 p.m.
(Chicago time) if First Chicago is not both the
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Agent and the sole Swingline Lender. The Agent will make the funds so received
from the Lenders available to the Company at the Agent's aforesaid address,
subject to the provisions of Article V. Notwithstanding the foregoing, the Agent
may also agree, in its sole discretion, to accept delivery of Bid Loan funds and
to make such funds available to the Company at any time up to the close of the
Agent's business day.
2.12 Conversion and Continuation.
(i) The Company may elect from time to time, subject to the
provisions of Sections 2.3(a), 2.9 and 2.10 and the Lending Sublimits
to convert all or any part of any Advance (other than a Bid Loan or
Discount Advance) into a different type of Advance, provided that any
conversion of any such Eurodollar Advance shall be made on, and only
on, the last day of the applicable Eurodollar Interest Period. Discount
Advances and Bid Loans are payable on the last day of the applicable
Discount Loan Period or Bid Loan period and may be repaid out of new
Advances hereunder but may not be converted directly to a different
type of Advance.
(ii) Alternate Base Rate Advances shall continue as the same
type of Advances unless and until such Advances are converted into a
different form of Advance in accordance with the terms hereof. Federal
Funds Advances shall continue as Federal Funds Advances unless and
until (a) such Advances are converted into a different form of
Advance in accordance with the terms hereof or (b) the Company has paid
any such Federal Funds Advance prior to 10:00 a.m. (Chicago time) on
any Business Day or given the Agent written notice before 10:00 a.m.
(Chicago time) on any Business Day that such Federal Funds Advance will
be repaid on such Business Day. Overnight Transaction Advances and
Swingline Buydown Advances shall continue as Overnight Transaction
Advances and Swingline Buydown Advances, respectively, unless and until
(a) such Advances are converted into a different form of Advance in
accordance with the terms hereof or (b) the Company has paid any such
Overnight Transaction Advance or Swingline Buydown Advance prior to
3:00 p.m. (Chicago time) on any Business Day or given the Agent written
notice before 3:00 p.m. (Chicago time) on any Business Day that such
Overnight Transaction Advance or Swingline Buydown Advance will be
repaid on such Business Day. If the Company so notifies the Agent that
it will be paying a Federal Funds Advance, Overnight Transaction
Advance or Swingline Buydown Advance on any Business Day and fails to
do so, such Advance shall be converted into an Alternate Base Rate
Advance. Eurodollar Advances shall continue until the end of the
then-applicable Eurodollar Interest Period therefor, at which time each
such Advance shall be automatically converted to a Federal Funds
Advance, unless the Company shall have given the Agent notice in
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accordance with Section 2.12(iii) requesting that, at the end of such
Eurodollar Interest Period, such Advance continue as a Eurodollar
Advance for a specified Eurodollar Interest Period or be converted to a
different type of Advance.
(iii) The Company shall give the Agent irrevocable notice (a
"Conversion/Continuation Notice") of each conversion of an Alternate
Base Rate Advance, a Federal Funds Advance, a Swingline Buydown Advance
or an Overnight Transaction Advance or conversion or continuation of a
Eurodollar Advance not later than (i) 10:00 a.m. (Chicago time) on the
date of the requested conversion or continuation, in the case of a
conversion into a Federal Funds Advance, Alternate Base Rate Advance,
Overnight Transaction Advance or Swingline Buydown Advance, or (ii)
11:00 a.m. (Chicago time) at least three Business Days prior to the
date of the requested conversion into or continuation of a Eurodollar
Loan, specifying: (1) the requested date (which shall be a Business
Day) of such conversion or continuation; (2) the amount and type of the
Advance to be converted or continued; (3) the amount and type(s) of
Advance(s) into which such Advance is to be converted or continued; and
(4) in the case of a conversion into or continuation of a Eurodollar
Advance, the duration of the Eurodollar Interest Period applicable
thereto.
2.13 Optional Principal Payments.
All or any portion of Alternate Base Rate Advances, Overnight
Transaction Advances, Swingline Buydown Advances and Federal Funds Advances may
be paid without penalty or premium on any Business Day provided that such
repayments are made by (i) 10:00 a.m. (Chicago time) with respect to Federal
Funds Advances, (ii) noon (Chicago time) with respect to Alternate Base Rate
Advances, or (iii) 3:00 p.m. (Chicago time) with respect to Overnight
Transaction Advances and Swingline Buydown Advances. A Eurodollar Advance or
Discount Loan may not be paid prior to the last day of the applicable Eurodollar
Interest Period or Discount Loan Period, as the case may be; provided, however,
that the Company shall compensate the Lenders for any funding losses and/or loss
of profits incurred as a result of any voluntary prepayment (if accepted) or
involuntary prepayment of any such Advance prior to the last day of the
applicable Eurodollar Interest Period or Discount Loan Period. Bid Loans may not
be prepaid unless the applicable Bid Lender has agreed otherwise and notified
the Agent of such agreement. All optional principal payments shall be applied to
the type of Advance designated by the Company when making such payment, provided
that any payments received during the continuance of an Event of Default shall
be applied on a pro rata basis to all Advances then outstanding (with the
portion applicable to Eurodollar Loans or Discount Loans to be applied to such
Loans either immediately or at the
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end of the relevant Eurodollar Interest Period or Discount Loan Period at the
option of the Company).
2.14 Required Principal Payments.
(a) Payments Related to Borrowing Base. On any date that the
Credit Requirement is in excess of the then-current Borrowing Base, the Company
shall make a mandatory payment to the Agent for the benefit of the Lenders in
the amount of such excess. Such payment shall be allocated pro rata among the
Lenders in accordance with the amounts of their outstanding Loans hereunder.
(b) Final Payment on Termination Date. The outstanding principal
balance of all Advances not repaid earlier, together with any accrued and unpaid
interest and Fees, unless required to be paid earlier pursuant to the terms
hereof, shall be due and payable on the Termination Date.
2.15 Method of Payment.
All payments of principal, interest, and Fees hereunder
(including any payments related to Bid Loans) shall be made in immediately
available funds to the Agent at the Agent's address specified pursuant to
Article XII, or at any other Lending Installation of the Agent specified in
writing by the Agent to the Company on the date due by 1:00 p.m. (Chicago time)
with respect to all Advances other than Swingline Advances and by 3:00 p.m.
(Chicago time) with respect to Swingline Advances. Notwithstanding the
foregoing, if the Company fails to repay or give the Agent notice of repayment
of a Federal Funds Advance before 10:00 a.m. (Chicago time) or an Overnight
Transaction Advance before 3:00 p.m. (Chicago time) on the Business Day that the
Company intends to repay such Advance, any payment of such Advance received by
the Agent on such Business Day after the time required for payment or notice
shall be deemed to have been received by the Agent at the opening of business on
the following Business Day. Each payment delivered to the Agent for the account
of any Lender shall be delivered promptly by the Agent to such Lender in the
same type of funds which the Agent received at its address specified pursuant to
Article XII or at any Lending Installation specified in a notice received by the
Agent from such Lender. The Agent is hereby authorized to charge the account of
the Company maintained with First Chicago for each payment of principal,
interest and fees as it becomes due hereunder.
2.16 Notes; Telephonic Notices.
Each Lender is hereby authorized to record the principal amount
of each of its Loans and each repayment on the schedules attached to its Notes
provided, however, that the failure to so
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record or any error in such recording shall not affect the Company's obligations
hereunder or under such Notes. The Company hereby authorizes the Lenders and the
Agent to extend, continue or convert Advances, effect Rate Option selections and
to transfer funds to or for the account of the Company based on telephonic
notices (confirmed promptly thereafter by facsimile) made by any person or
persons the Agent or any Lender in good faith believes to be acting on behalf of
the Company. The Company agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any Lender, of
each telephonic notice signed by an officer of the Company authorized in writing
to do so. If the written confirmation differs in any material respect from the
action taken by the Agent and the Lenders, the records of the Agent and the
Lenders shall govern absent manifest error.
2.17 General Provisions as to Payments.
(a) The Company shall make each payment of principal or interest
on the Loans and shall pay all Fees not later than the times stated in
Section 2.15. The Agent shall promptly distribute to each Lender its
share of each payment of principal or interest or fees received by the
Agent for the account of such Lender.
(b) Amounts paid to or held by the Agent for the payment of
Loans shall not be deemed paid to a Lender until received by such Lender
by the later of 3:00 p.m. (Chicago time) or the close of business on
such date. If amounts are received by the Agent from the Company prior
to the applicable times stated in Section 2.15 and the Agent fails to
make a Lender's portion of such amount available to such Lender by close
of business on such date, the Company shall have no obligation to pay
any further interest on such payment and the Agent shall pay to such
Lender interest on such payment to the date paid to such Lender by the
Agent at a rate per annum equal to the then-current Published Federal
Funds Effective Rate.
2.18 Notification of Advances, Interest Rates and Prepayments.
Promptly after receipt thereof, the Agent will notify each
Lender by facsimile of the contents of each Advance Notice,
Conversion/Continuation Notice, and repayment notice received by it hereunder.
Not later than one Business Day prior to the Advance Date for each Eurodollar
Advance or Discount Loan, the Agent will notify by facsimile each Lender and the
Company of the interest rate applicable to each Eurodollar Advance, the Face
Amount of each Discount Advance and the Purchase Price to be paid by each Lender
for its share of such Discount Advance promptly upon determination of such
interest rate, Face Amount and
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Purchase Price. When any Advances are outstanding or have been requested at the
Federal Funds Rate or the Alternate Base Rate the Agent will give each Lender
and the Company prompt notice by facsimile of each change in such rate.
2.19 Lending Installations.
Each Lender may book its Loans at any Lending Installation
selected by such Lender and may change its Lending Installation from time to
time. All terms of this Agreement shall apply to any such Lending Installation
and the Notes shall be deemed held by each Lender for the benefit of such
Lending Installation. Each Lender may, by facsimile or written notice to the
Agent and the Company, designate a Lending Installation through which Loans will
be made by it and for whose account Loan payments are to be made.
Notwithstanding the foregoing, no Lender may transfer its Loans to another
Lending Installation if such transfer would cause the Company to incur
additional indemnification costs under Section 3.1 hereof, and if after a Lender
transfers its Loans to another Lending Installation the Company incurs
additional indemnification costs under Section 3.1 hereof as a result of such
transfer, such Loans shall be transferred back to the original Lending
Installation.
2.20 Non-Receipt of Funds by Agent.
(a) Unless the Company or a Lender, as the case may be, notifies
the Agent prior to the close of business on the Business Day immediately
preceding the date on which it is required to make payment to the Agent of (i)
in the case of a Lender, the proceeds of a Loan or (ii) in the case of the
Company, a payment of principal, interest or fees to the Agent for the account
of the Lenders, that it does not intend to make such payment, the Agent may
assume that such payment has been made or will be made on the date required. The
Agent may, but shall not be obligated to, make the amount of such payment
available to the intended recipient in reliance upon such assumption. If such
Lender or the Company, as the case may be, has not in fact made or does not make
when due such payment to the Agent, the recipient of such payment shall, on
demand by the Agent, repay to the Agent the amount so made available together
with interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to (i) in the case of repayment
by a Lender, the Published Federal Funds Effective Rate for such day or (ii) in
the case of repayment by the Company, the interest rate applicable to the
relevant Loan. If a Lender fails to pay the Agent as provided in the preceding
sentence, the Company shall pay such amount to the Agent upon demand plus
interest (at the rate applicable to the applicable Advance) to the date of
repayment (but not including such date if
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payment is received prior to the deadlines established in Section 2.15).
(b) Neither the Agent nor any Lender shall incur any liability
to the Company in acting upon any telephonic notice referred to in this
Agreement which the Agent or such Lender believes in good faith to have been
given by a duly authorized officer or other person authorized to borrow on
behalf of Company or for otherwise acting in good faith under this Section 2.20.
Upon the funding of Loans by the Lenders in accordance with this Agreement
(including satisfaction of all conditions thereto) pursuant to any telephonic
notice (with confirmation promptly thereafter by facsimile), the Company shall
have effected a borrowing hereunder. An Advance Notice (or telephonic notice in
lieu thereof) shall be irrevocable and the Company shall be bound to effect a
borrowing in accordance therewith.
(c) If the Agent fails to make any Loan funds received from a
Lender available to the Company for any reason and does not return such Loan
funds to such Lender on the same Business Day such funds were received by the
Agent, the Agent shall pay to such Lender, upon demand, interest from the date
such funds are received by the Agent from such Lender, provided such funds were
received prior to the deadlines for receipt set forth in Section 2.11 until the
date such corresponding amount is either made available by the Agent to the
Company within the time limits of Section 2.11 or so returned to such Lender, at
the rate per annum equal to the then-current Published Federal Funds Effective
Rate and the Company shall have no responsibility to such Lender with respect to
such funds until they are so made available to the Company by the Agent.
(d) Nothing in this Section 2.20 shall relieve any Lender from
its obligation to fund its share of any Advance, prejudice any rights the
Company may have against any Lender as a result of such Lender's failure to make
the amount of its Loan available to the Company or obligate any Lender to fund
any other Lender's share of any Advance.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1 Yield Protection.
If, after the date of this Agreement, the adoption of any law or
any governmental or quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law), or any change in any
existing or future law, rule, regulation, policy, guideline or directive or the
interpretation or administration thereof, or the compliance of any Lender
therewith,
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(i) subjects any Lender or any applicable Lending
Installation to any tax, duty, charge or withholding on or from payments
due from the Company, or changes the basis of taxation of payments to
any Lender in respect of its Loans or other amounts due it hereunder
(excluding any tax imposed with respect to the overall net income of any
Lender or its Lending Installation and any franchise taxes imposed on
any such Lender or Lending Installation to the extent such franchise
taxes are in lieu of net income taxes), or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation (other
than reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Advances or Discount Loans), or
(iii) affects the amount of capital required or expected to
be maintained by any Lender or Lending Installation or any corporation
controlling any Lender or Lending Installation and such Lender
determines the amount of capital required is increased by or based upon
the existence of this Agreement or its obligation to make or maintain
Loans hereunder or of commitments of this type, or
(iv) imposes any other condition which requires any Lender
or any applicable Lending Installation to make any payment calculated by
reference to the amount of loans held or interest received by it in an
amount deemed material by such Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
Lending Installation of making, renewing or maintaining its Commitment or 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 Lending Installation or any Person
controlling such Lender or Lending Installation as it relates to credit
facilities in the nature of that evidenced by this Agreement, then the Company
shall pay such Lender that portion of such increased expense incurred
(including, in the case of Section 3.1(iii), any reduction in the rate of return
on capital to an amount below that which it could have achieved but for such
law, rule, regulation, policy, guideline or directive and after taking into
account such Lender's policies as to capital adequacy) or reduction in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans and its Commitment to the extent such expenses or
reductions arise from and after the date which is 90 days before receipt by the
Company of demand for payment by such Lender. Notwithstanding the foregoing, if
any of the foregoing circumstances otherwise giving rise to the yield protection
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provisions of this Section are imposed solely against a single Lender as a
result of circumstances or conditions which apply solely to that Lender and not
generally to lenders domiciled in the jurisdiction of such Lender's domicile,
then the yield protection provisions of this Section shall not apply with
respect to such circumstances.
3.2 Availability of Rate Options.
If any Lender determines that maintenance of any of its Eurodollar
Loans or Discount Loans at a suitable Lending Installation would violate any
applicable law, rule, regulation or directive, whether or not having the force
of law, the Agent shall suspend the availability of the affected Rate Option and
require any Eurodollar Advances or Discount Loans outstanding at the affected
Rate Option to be repaid immediately upon demand; or if the Required Lenders
determine that deposits of a type or maturity appropriate to match fund
Eurodollar Advances or Discount Loans are not available, the Agent shall suspend
the availability of the affected Rate Option with respect to any such Loans or
Advances made after the date of any such determination. If the Required Lenders
determine that the Eurodollar Rate or the Discount Rate does not accurately
reflect the cost of making a Eurodollar Advance or Discount Loan at such Rate
Option, then, if for any reason whatsoever the provisions of Section 3.1 are
inapplicable, the Agent shall suspend the availability of the affected Rate
Option with respect to any Eurodollar Advance or Discount Loan made after the
date of any such determination.
3.3 Funding Indemnification.
If any payment of a Eurodollar Advance or Discount Loan occurs on a
date which is not the last day of the applicable Eurodollar Interest Period or
Discount Loan Period, whether because of acceleration, prepayment or otherwise,
or if a Eurodollar Advance, Overnight Transaction Advance, Federal Funds
Advance, Swingline Buydown Advance or Discount Loan is not made, continued or
established by conversion on the date specified by the Company for any reason
other than default by the Lenders, the Company will indemnify each Lender for
any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain such Eurodollar Advance or Discount Loan.
3.4 Lender Statements; Survival of Indemnity.
To the extent reasonably possible, each Lender shall designate an
alternate Lending Installation with respect to its Eurodollar Advances and
Discount Loans to reduce any liability of the Company to such Lender under
Section 3.1 or to avoid the unavailability of a Rate Option under Section 3.2,
so long as such designation is not to the economic detriment of such Lender
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and does not impose any increased regulatory burdens on such Lender. Each Lender
shall deliver to the Agent and the Company a written statement of such Lender as
to the amount due, if any, under Section 3.1 or 3.3. Such written statement
shall set forth in reasonable detail the calculations upon which such Lender
determined such amount and shall be final, conclusive and binding on the Company
in the absence of manifest error. Determination of amounts payable under such
Sections in connection with a Eurodollar Advance or Discount Loan shall be
calculated as though each Lender funded its related Loan through the purchase of
a deposit of the type and maturity corresponding to the deposit used as a
reference in determining the Eurodollar Rate or Discount Rate applicable to such
Loan, whether in fact that is the case or not. The amount specified in the
written statement shall be payable within 15 days after receipt by the Company
of the written statement. The obligations of the Company under Sections 3.1 and
3.3 shall survive payment of the Obligations and termination of this Agreement.
In the event any Lender is affected by any of the events described in Section
3.1 or 3.2 the Company shall have the right, if no Default then exists, to repay
in full all Credit Indebtedness owed to such Lender provided that the Company
has, with the approval of the Agent (not to be unreasonably withheld), arranged
to substitute a replacement lender for the full amount of such Lender's
Commitment.
3.5 Lender Tax Agreement.
Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Company and the Agent (A) two duly
completed copies of the United States Internal Revenue Service Form 1001
or 4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be;
(ii) deliver to the Company and the Agent two further copies of
any such form or certification on or before the date that any such form
or certification expires or becomes obsolete and after the occurrence of
any event requiring a change in the most recent form previously
delivered by it to the Company; and
(iii) obtain such extension of time for filing and complete such
forms or certifications as may reasonably be requested by the Company or
the 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 or any
certifications required hereby inapplicable or which would prevent such Lender
from duly
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completing and delivering any such form or making such certification with
respect to it and such Lender so advises the Company and the Agent. Such Lender
shall certify (i) in the case of Form 1001 or 4224 delivered in accordance with
this Section 3.5, 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. Each Person that shall become a Lender or
a Participant pursuant to Article XI shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this Section, provided that in the case of a Participant
such Participant shall also furnish all such required forms and statements to
the Lender from which the related participation shall have been purchased as
well as to the Company and the Agent.
ARTICLE IV
COLLATERAL AND BORROWING BASE
4.1 Eligible Collateral - Pledged Mortgages.
(a) "Eligible Mortgage Loan" means a Pledged Mortgage
which:
(i) has been originated less than 360 days prior
to inclusion in the Borrowing Base;
(ii) is a Conforming Mortgage Loan, a Jumbo
Mortgage Loan, a New York Consolidation Loan or a
Nonconforming Mortgage Loan;
(iii) has been included in the Borrowing Base for 180 days
or less after the Pledge Date thereof;
(iv) is not financed under an agreement to repurchase or
otherwise pledged to secure any Debt other than the Credit Indebtedness
pursuant to the Security Agreement;
(v) has been duly executed and delivered by the
parties thereto at a closing;
(vi) is valid and enforceable in accordance with its
terms, without defense or offset;
(vii) has not been modified or amended and has not
had any requirements thereof waived except as permitted by
Federal Agency requirements;
(viii) is subject to and complies with the delivery
requirements of an Approved Investor Commitment to purchase
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such Pledged Mortgage, unless such Pledged Mortgage is a
Nonconforming Mortgage Loan which is not a Qualified Second
Loan;
(ix) has been correctly described in the Collateral
Transmittal submitted to the Collateral Agent in respect of such Pledged
Mortgage; and
(x) has been fully funded to the mortgagor or to an
escrow or closing agent by wire transfer, transmittal through the
"Automated Clearing House" or any similar private clearing house for
interbank transfers of funds, cashier's check or a cleared check or
draft;
and as to which the representations and warranties contained in Section 4.6
relating thereto are true and correct as of the Pledge Date of such Mortgage
Loan and as of each day thereafter as if made on each such date.
(b) "Eligible Delivered Mortgage" means an Eligible Mortgage
Loan as to which:
(i) the Collateral Agent has received and continues to
hold the Required Mortgage Documents and, if requested by the Agent or
the Collateral Agent, the Additional Required Mortgage Documents for
such Pledged Mortgage, other than those documents and instruments which
are in the possession of a Person to whom delivery was made pursuant to
a Bailee Letter or a Company Trust Receipt;
(ii) not more than 45 days have passed after the day on
which the Mortgage Note for such Pledged Mortgage was delivered,
pursuant to a Bailee Letter, to an Approved Investor other than one
created under a government housing program which is not a Federal Agency
for examination and purchase without such Mortgage Note being returned
to the Collateral Agent; and not more than 75 days have passed after the
day on which the Mortgage Note for such Pledged Mortgage was delivered,
pursuant to a Bailee Letter, to an Approved Investor created under a
government housing program which is not a Federal Agency for examination
and purchase without such Mortgage Note being returned to the Collateral
Agent;
(iii) no Approved Investor has paid the purchase price or
delivered the Securities due to the Company on account of such Pledged
Mortgage;
(iv) not more than 15 days have passed after the date on
which any document relating to such Pledged Mortgage was sent, pursuant
to a Company Trust Receipt, to the Company for correction of clerical or
other non-substantial documentation problems in preparation of such
document
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without such documentation being returned to the Collateral Agent
properly corrected;
(v) no installment of principal or interest on such
Pledged Mortgage is more than one payment past due; and
(vi) such Mortgage Loan constitutes a first lien (or a
second lien, with respect only to Qualified Second Loans) on the
premises described therein.
(c) "Eligible AP Mortgage" means an AP Mortgage which is an
Eligible Mortgage Loan and as to which:
(i) the information described on Exhibit 7 to the
Security Agreement regarding such AP Mortgage was contained in a
Collateral Transmittal submitted to the Collateral Agent on the same
date as the applicable AP Notice;
(ii) the proceeds thereof have been funded (or, on the
date of the Advance supported by the applicable AP Notice, are being
funded) by wire transfer or cashier's check, cleared check or draft or
other form of immediately available funds to the escrow or closing agent
for such AP Mortgage;
(iii) the Pledgor expects such AP Mortgage to close and
become a valid lien securing actual indebtedness by funding to the order
of the mortgagor thereunder;
(iv) (a) with respect to all AP Mortgages other than New
York Consolidation Loans, not more than twelve (12) Business Days have
passed since the delivery of the AP Notice therefor (and if more than
seven (7) Business Days have passed since the delivery of such AP
Notice, the Borrowing Base Sublimit set forth in Section 4.5(x) has been
satisfied) or (b) with respect to AP Mortgages that are New York
Consolidation Loans, not more than twenty-one (21) calendar days have
passed since delivery of the AP Notice therefor;
(v) the Company has not delivered to the Collateral Agent
any documents which purport to be Required Mortgage Documents for such
AP Mortgage;
(vi) the proceeds thereof have not been returned to the
Company from the escrow or closing agent for such Pledged Mortgage;
(vii) the Company has not learned that such AP Mortgage
will not be closed and funded to the order of the mortgagor; and
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(viii) upon recordation such Mortgage Loan will constitute a
first lien (or second lien, with respect only to Qualified Second Loans)
on the premises described therein.
4.2 Eligible Collateral - Repurchased Agency Loans and
Receivables.
"Eligible Repurchased Agency Loans and Receivables" means
Repurchased Agency Loans and Receivables as to which:
(i) the Company's purchase was in compliance with all
regulations of the Federal Agency which issued or guaranteed the
Security relating to the mortgage pool from which the Repurchased Agency
Loans and Receivables were repurchased;
(ii) no notice or other indication has been given by FHA
or VA challenging the obligation of FHA or VA to pay the full amount due
on any insurance or guaranty certificate in connection with such
Mortgage Loans (and in the good-faith estimation of the Company, no such
challenge is forthcoming);
(iii) the repurchased Mortgage Loan does not have any
payments more than 720 days past due (unless the borrower of such
repurchased Mortgage Loan filed a voluntary bankruptcy petition or had
an involuntary bankruptcy petition filed against it while the payments
on such Mortgage Loan were past due, in which case such 720 day period
shall be extended to 1080 days);
(iv) not more than 120 days have passed since the
foreclosure sale or transfer in lieu of foreclosure with respect to the
repurchased Mortgage Loan;
(v) not more than 180 days have passed since the
reinstatement of the repurchased Mortgage Loan; and
(vi) the repurchased Mortgage Loan shall not be a Mortgage
Loan which in the good faith estimation of the Company is deemed to be a
"no bid" candidate under the current VA practice, provided that such
estimation by the Company may take into account the amount of any buy
down of the principal balance of such Mortgage Loan which (i) has
actually been made by the Company, or (ii) is anticipated to be made by
the Company, provided that the amount of any such anticipated buy down
shall be deducted from the Mortgage Collateral Value of such Repurchased
Agency Loan and Receivable for determining the portion of the Borrowing
Base attributable to such Repurchased Agency Loans and Receivables.
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4.3 Eligible Collateral - Securities.
"Eligible Pledged Security" means a Pledged Security:
(i) which is covered by an Approved Investor
Commitment;
(ii) as to which the Collateral Agent has received such
evidence as may be required under the Security Agreement to confirm the
existence of the security interest in favor of the Collateral Agent for
the benefit of the Lenders in such Pledged Security; and
(iii) which has been included in Collateral for 90 days or
less after the Pledge Date therefor.
4.4 Eligible Collateral - Servicing Sale Receivables.
"Eligible Servicing Sale Receivables" means Pledged
Servicing Sale Receivables as to which:
(i) the Agent and Collateral Agent have received a
complete executed copy of the related purchase agreement and written
confirmation from the Servicing Purchaser as to the amount of such
Servicing Sale Receivable;
(ii) the Servicing Purchaser of the applicable sold
Servicing Agreements either (A) has a long term unsecured debt rating of
at least A- from S&P or A3 from Moody's, or (B) has been approved by the
Agent;
(iii) the Agent has reasonably determined that the
counterparties to the sold Servicing Agreements have or will consent to
the sale of such Servicing Agreements to the Servicing Purchaser, if
such consent is required;
(iv) the Company has assigned its rights to such Servicing
Sale Receivables to the Collateral Agent for the benefit of the Secured
Parties pursuant to an assignment in form and content satisfactory to
the Agent;
(v) the Servicing Purchaser of the applicable sold
Servicing Agreements has executed an agreement in form and content
satisfactory to the Agent pursuant to which the Servicing Purchaser has
agreed to (A) pay such Servicing Sale Receivables directly to the
Collateral Agent for the benefit of the Secured Parties, and (B) provide
simultaneous written notice to the Agent and the Collateral Agent of any
claims made against or notices given to the Company which would
constitute an offset to or reduction in the amount of such Servicing
Sale Receivable; and
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(vi) the Servicing Sale Receivables have been included in
Eligible Collateral for 180 days or less;
provided, however, that (1) Eligible Servicing Sale Receivables shall not
include any "holdback" amounts or deferred installments of the purchase price
payable by such Servicing Purchaser which are not payable to the Company within
180 days after the initial payment to the Company for the sale of such Servicing
Agreements to such Servicing Purchaser, (2) Eligible Servicing Sale Receivables
shall not include any "holdback" amounts or deferred installments of the
purchase price payable by such Servicing Purchaser which are subject to
withholding or offset on account of the performance of the servicing being sold
or any failure, breach or other deficiency in the performance of the Company
after the date of such sale other than any such deferred payments which are
conditioned only on (x) the Company obtaining consents from the counterparty to
the sold Servicing Agreements approving the sale of such Servicing Agreements to
the Servicing Purchaser or (y) the Company's continuing to take customary
ordinary-course actions relating to origination and servicing of Mortgage Loans
(e.g. obtaining pool certifications, refraining from defaulting under Servicing
Agreements, etc.), and (3) any offset to or reduction in the amount of such
Servicing Sale Receivable claimed by the Servicing Purchaser (to the extent not
already deducted from Eligible Servicing Sale Receivables pursuant to the
preceding provisions) shall, at the election of the Agent, the Collateral Agent
or the Required Lenders, reduce the amount of such Servicing Sale Receivable
which qualifies as an Eligible Servicing Sale Receivable, with such reduction to
be effective immediately unless the Company in good faith contests the amount or
validity of such offset or reduction, and with such reduction to be effective 30
days after the claim of offset or reduction with respect to any amount which is
contested in good faith by the Company.
4.5 Borrowing Base.
The term "Borrowing Base" means, as of any date, the sum of the
amounts determined by applying the percentages set forth below to the respective
values of the categories of Collateral described in subparagraphs (a) - (g)
below (without duplication as any asset is converted from one category to
another):
(a) one hundred percent (100%) of the balance to the credit of
the Company in the Settlement Account;
(b) one hundred percent (100%) of the value of the cash and Cash
Equivalents held by the Collateral Agent (or a sub-agent of the
Collateral Agent) and in which the Collateral Agent has a perfected
first priority security interest as security for the Secured Debt, as
conclusively determined by the Collateral Agent and reported to the
Agent
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daily based on the value of such cash and Cash Equivalents as
of the close of trading on the preceding Business Day;
(c) ninety-eight percent (98%) of the Mortgage Collateral Value
of each Eligible Delivered Mortgage;
(d) ninety-eight percent (98%) of the Mortgage Collateral Value
of each Eligible AP Mortgage;
(e) ninety-nine percent (99%) of the MBS Value of each Eligible
Pledged Security;
(f) ninety percent (90%) of the value of Eligible Repurchased
Agency Loans and Receivables (as determined in accordance with the
definition of Repurchased Agency Loans and Receivables) as determined
pursuant to information provided by the Company to the Collateral Agent
on the first Business Day of each week based on the value of such
Eligible Repurchased Agency Loans and Receivables as of the preceding
Thursday; and
(g) seventy-five percent (75%) of the amount of Eligible
Servicing Sale Receivables.
The maximum amount that can be credited toward the Borrowing
Base from certain categories of assets shall be limited as follows
(collectively, the "Borrowing Base Sublimits") so that the portion of the
Borrowing Base:
(i) attributable to Jumbo Mortgage Loans shall not
exceed twenty-five percent (25%) of the Aggregate Commitment;
(ii) attributable to (A) all Nonconforming Mortgage Loans
shall not exceed ten percent (10%) of the Aggregate Commitment, (B)
those Nonconforming Mortgage Loans which are also HLTV Loans shall not
exceed two and one half percent (2.5%) of the Aggregate Commitment, and
(C) those Nonconforming Mortgage Loans which have an original principal
balance of $200,000 or more shall not exceed one percent (1%) of the
Aggregate Commitment;
(iii) attributable to Jumbo Mortgage Loans with Mortgage
Collateral Values on the Pledge Date therefor in excess of $600,000
shall not exceed two percent (2%) of the Aggregate Commitment;
(iv) attributable to Repurchased Agency Loans and
Receivables other than Reinstated Repurchased Agency Loans and
Receivables shall not exceed at any time the lesser of (A) $200,000,000,
and (B) forty percent (40%) of the Aggregate Commitment;
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(v) attributable to Reinstated Repurchased Agency Loans
and Receivables shall not exceed at any time five percent (5%) of the
Aggregate Commitment;
(vi) attributable to REO and accounts receivable
(including proceeds of FHA insurance or VA guaranties) acquired in
connection with a foreclosure sale or a transfer in lieu of foreclosure
of Repurchased Agency Loans and Receivables shall not exceed seven and
one-half percent (7.5%) of the Aggregate Commitment;
(vii) for the first five and last five Business Days in any
calendar month, attributable to AP Mortgages shall not exceed
thirty-five percent (35%) of the Aggregate Commitment;
(viii) for any day other than the first five and last five
Business Days of any calendar month, attributable to AP Mortgages shall
not exceed twenty-five percent (25%) of the Aggregate Commitment;
(ix) attributable to Eligible Delivered Mortgages which
were sent, pursuant to a Company Trust Receipt, to the Company for
correction of clerical or other non-substantial documentation problems
in preparation of such document without such documentation being
returned to the Collateral Agent properly corrected shall not exceed two
percent (2%) of the Aggregate Commitment;
(x) attributable to AP Mortgages (other than New York
Consolidation Loans) as to which the Collateral Agent has not received
the Required Mortgage Documents within seven (7) Business Days of the
Pledge Date therefor shall not exceed one percent (1%) of the Aggregate
Commitment;
(xi) attributable to Eligible Mortgage Loans which have
been included in the Borrowing Base for more than 90 days shall not
exceed five percent (5%) of the Aggregate Commitment;
(xii) attributable to Eligible Mortgage Loans which were
originated more than 180 days prior to the Pledge Date therefor shall
not exceed five percent (5%) of the Aggregate Commitment;
(xiii) attributable to Eligible Servicing Sale Receivables
shall not exceed ten percent (10%) of the Aggregate Commitment; and
(xiv) attributable to New York Consolidation Loans shall
not exceed one percent (1%) of the Aggregate Commitment.
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4.6 Special Representations as to Pledged Warehouse
Collateral.
By delivering or causing the delivery of any Mortgage Loan,
Security or AP Notice to the Collateral Agent in pledge under the Security
Agreement the Company (the "Pledgor") shall be deemed to have represented and
warranted with respect to such Pledged Item, that:
(1) Such Pledged Item constitutes Eligible Collateral;
(2) The Pledgor is the legal and equitable owner and holder of
such Pledged Item and has full power and authority to pledge such
Pledged Item. Such Pledged Item constitutes Eligible Collateral, has
been duly and validly pledged to the Collateral Agent, is subject to no
contractual restriction on the creation of a Lien thereon, and is
subject to no Lien other than the lien of the Security Agreement in
favor of the Secured Parties. Each commitment of a Person to purchase
Pledged Items from the Pledgor (including Approved Investor Commitments)
has been duly and validly issued to the Pledgor, has been duly and
validly pledged to the Collateral Agent and is subject to no Lien other
than the lien of the Security Agreement in favor of the Secured Parties.
(3) Each Pledged Mortgage has been or will be promptly duly
recorded where necessary and complies with all applicable state or local
recording, registration and filing laws and regulations.
(4) There are no defenses, counterclaims or offsets of any
nature whatsoever with respect to such Pledged Mortgage or the
indebtedness evidenced and secured thereby or with respect to any
Required Mortgage Document and, other than the related Required Mortgage
Documents and Additional Required Mortgage Documents, there are no
instruments or documents evidencing, securing or guaranteeing payment of
the indebtedness constituting such Pledged Mortgage.
(5) Each requirement of any federal, state or local law
including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws (including environmental disclosure laws
imposing obligations on mortgagees) applicable to such Pledged Item has
been complied with in all material respects.
(6) The Company is the servicer for each such Pledged Mortgage
(unless the Agent has been advised to the contrary in writing and the
Agent approved such other arrangement).
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(7) The representation set forth in Section 6.15 is reaffirmed
as of the Pledge Date.
(8) Each Assignment (i) has been duly authorized by all
necessary corporate action by the Pledgor, duly executed and delivered
by the Pledgor and is the legal, valid and binding obligation of the
Pledgor enforceable in accordance with its terms and (ii) complies with
all applicable laws including all applicable recording, filing and
registration laws and regulations and is adequate and legally sufficient
for the purpose intended to be accomplished thereby, including, without
limitation, the assignment of all of the rights, powers and benefits of
the Pledgor as mortgagee.
(9) So long as the Collateral Agent complies with the procedures
set forth in the Security Agreement relating to possession of Collateral
(and assuming recordation of Assignments in states in which such
recordation is necessary for the perfection of the Collateral Agent's
security interest in the applicable Mortgage Loans) and, in the case of
book-entry Securities, notations of ownership related thereto, the
Collateral Agent, for the benefit of the Secured Parties, will have a
valid and perfected first priority security interest in such Pledged
Item and all proceeds, products and profits derived therefrom,
including, without limitation, all moneys, goods, insurance proceeds and
other tangible or intangible property received upon liquidation thereof.
(10) The Pledgor has complied with all laws, rules and
regulations in respect of such Pledged Mortgage if it is insured by FHA
or guaranteed by VA and the related insurance or guarantee is in full
force and effect. All such Mortgage Loans comply in all respects with
all applicable requirements for purchase under the FNMA standard form of
selling contract for FHA insured and VA guaranteed loans and any
supplement thereto then in effect.
(11) To the extent that any applicable requirements of any law
or any governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law), or any interpretation thereof,
including, without limitation, the provisions of Title XI of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, as
amended, reformed or otherwise modified from time to time, and any rules
promulgated to implement such provisions (collectively, "Appraisal
Regulations") require Pledgor to have received (or require that the
Lenders require Pledgor to receive) an appraisal on the property
underlying such Pledged Mortgage, such an appraisal has been be obtained
and such appraisal meets the requirements of all such Appraisal
Regulations.
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(12) All fire and casualty policies covering the premises
encumbered by each Pledged Mortgage (i) name the Pledgor as the insured
under a standard mortgagee clause not less favorable in coverage to the
mortgagee than is customarily used in the state where such premises is
located, (ii) are in full force and effect, and (iii) afford insurance
against fire and such other risks as are usually insured against in the
broad form of extended coverage insurance from time to time available,
as well as insurance against flood hazards as required by FHA or VA.
(13) To the best of the Pledgor's knowledge without
investigation, no Person has transported, released, emitted, discharged,
leached, dumped or disposed of any Hazardous Substance onto or into any
portion of the premises encumbered by a Pledged Mortgage except in
material compliance with all applicable federal, state, foreign and
local laws, rules, regulations and orders.
By pledging any Repurchased Agency Loans and Receivables to the
Collateral Agent under the Security Agreement the Company shall be deemed to
have represented and warranted that such Repurchased Agency Loans and
Receivables were purchased by the Company in compliance with all regulations of
the Federal Agency which issued or guaranteed the Security relating to the pool
from which the Repurchased Agency Loans and Receivables were repurchased.
If any representation or warranty contained in this Section is
inaccurate or shall cease to be true with respect to any Pledged Item to which
such representation and warranty applies, such Pledged Item shall not constitute
an Eligible Mortgage Loan or an Eligible Pledged Security, but the breach of
such representation and warranty shall not constitute an Event of Default.
4.7 Special Covenants.
(a) The Pledgor warrants and will defend the right, title and
interest of the Agent and the Collateral Agent in and to all Pledged
Items and all other items of Collateral against the claims and demands
of all other Persons.
(b) The Pledgor shall not materially amend or modify, or waive
any of the material terms and conditions of, or settle or compromise any
material claim in respect of, any Collateral or any rights related to
any of the foregoing.
(c) The Pledgor shall not sell, assign, transfer or otherwise
dispose of, or grant any option with respect to, or pledge or otherwise
encumber (except pursuant to this Agreement or the Security Agreement),
any of the Collateral
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or any interest therein, except as provided in Section 4.8 with respect
to releases of Collateral.
(d) The Pledgor shall service all Pledged Mortgages which are
the subject of Approved Investor Commitments in accordance with the
standard requirements of the issuers of such Approved Investor
Commitments and all applicable FHA and VA requirements. The Pledgor
shall service all Mortgage Loans which are the subject of Pledged
Securities in accordance with the standard requirements of the Federal
Agency issuing or guaranteeing such Securities and all applicable FHA
and VA requirements. The Company shall service all Mortgage Loans which
are the subject of any Servicing Agreements in accordance with the
standard requirements of the other party to such Servicing Agreements
and all applicable FHA and VA requirements.
(e) The Company shall promptly notify the Agent and the
Collateral Agent of any material default under any Servicing Agreement,
and in its normal daily reporting to the Collateral Agent, the Company
will include information identifying to the best knowledge of the
Company defaults under any Pledged Mortgages.
(f) The Pledgor shall hold all escrow funds collected in respect
of Pledged Mortgages and Mortgage Loans which are the subject of Pledged
Securities in trust, in accordance with all Federal Agency requirements
and standards relating thereto, and apply the same for the purposes for
which such funds were collected.
(g) The Pledgor shall observe and perform all of its obligations
in connection with each Approved Investor Commitment related to any
Pledged Item. Within forty-eight (48) hours after a request therefor by
the Collateral Agent or Agent, a copy of each Approved Investor
Commitment certified by the Pledgor, or if requested by the Collateral
Agent or Agent at any time after an Event of Default has occurred, the
originals of such Approved Investor Commitments shall be delivered to
the Collateral Agent or Agent.
(h) The Company shall promptly notify the Agent and the
Collateral Agent if and when the Company receives any prepayment arising
from or relating to any Pledged Mortgage and hold the same in trust, as
security for the Secured Parties, until such Mortgage Loan is removed
from the Borrowing Base in accordance with this Agreement or, if an
Event of Default has occurred and is continuing under this Agreement,
then immediately remit to the Collateral Agent such prepayments (and all
interest and earnings thereon or with respect thereto).
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(i) The Pledgor shall not withdraw or seek to withdraw or
substitute or seek to substitute any Pledged Item except as provided
herein and in the Security Agreement.
(j) The Pledgor shall cooperate with the Agent, the Lenders and
the Collateral Agent and any of their respective representatives in any
review or inspection of the Pledged Mortgages, the property subject to
any Pledged Mortgage, and make available to such person any books and
records relating to such Collateral as well as the appropriate employees
of the Pledgor for the purpose of discussing the same, all at such time
during business hours as may be reasonably requested by the Agent, any
Lender or the Collateral Agent.
(k) The Pledgor shall not cease to have the approval of any
Federal Agency or any private mortgage insurer (unless, in the case of a
private mortgage insurer, such failure to maintain such approval shall
not cause any Eligible Collateral which is required for the Company to
be in compliance with Section 8.12 to cease to qualify as Eligible
Collateral) which it has on the date hereof or become ineligible as a
FHA-Approved Mortgagee, FHLMC-Approved Lender, FNMA-Approved Lender or
VA-Approved Lender.
(l) The Pledgor shall not waive or otherwise modify any material
term of, or fail to perform its material obligations under, any Required
Mortgage Document or Pledged Mortgage or release any security or
obligor, or, through any activity or inactivity, cause any Pledged
Mortgage which shall have been eligible for FHA insurance to become
ineligible for FHA insurance or for purchase in accordance with an
Approved Investor Commitment related to such Pledge Mortgage.
(m) The Pledgor shall do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged and delivered, all such other
acts, instruments and transfers (including, without limitation,
Assignments) as the Agent or the Collateral Agent may reasonably request
from time to time in order to create and maintain a perfected first
priority security interest in the Collateral in favor of the Secured
Parties and to create, maintain and preserve the security and benefits
intended to be afforded by this Agreement and the Security Agreement,
subject to no prior or equal security interest, lien, charge or
encumbrance, or agreement purporting to grant to any Person a security
interest in the Collateral (provided, however, that unless an Event of
Default is continuing or the Required Lenders have requested otherwise,
consents to assignments of options, futures contracts or other interest
rate protection products in favor of the Lenders from the counterparties
thereto shall not be required to be obtained).
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(n) With respect to Repurchased Agency Loans and Receivables,
upon the request of the Collateral Agent or Agent the Company shall have
executed and provided any and all documentation required by the
Collateral Agent or Agent (including, but not limited to, all Required
Mortgage Documents, the insurance or guaranty certificate applicable to
such Mortgage Loan, and evidence satisfactory to the Collateral Agent
and Agent of the amounts advanced by the Company in connection with such
Mortgage Loan) to perfect the Lenders' security interest in such
Repurchased Agency Loans and Receivables.
(o) Upon the request of the Required Lenders, the Company agrees
that the Company shall require the closing agents for AP Mortgages to
enter into escrow or other agreements regarding the monies used to fund
such AP Mortgages.
4.8 Release of Collateral.
In addition to the releases of Collateral provided for in Sections
7(a)-(e) of the Security Agreement, upon the request of the Company delivered
from time to time to the Agent and the Collateral Agent, the Agent shall
authorize the Collateral Agent to release Collateral specified in such notice
from the lien of the Security Agreement, if, but only if, (i) at the time of
such release no Event of Default exists and no notice of a Default has been
issued that has not been cured, and (ii) any payment under Section 2.14(a) which
may be required (based on information relating to the Borrowing Base supplied to
the Agent by the Collateral Agent) as a result of such release has been made (or
contemporaneously with such release shall be made) so that the release of such
Collateral will not create a violation of any Lending Sublimit or Borrowing Base
Sublimit. Notwithstanding the foregoing, following an Event of Default pledged
Cash Equivalents which are the subject of reverse repurchase obligations can be
released in connection with the terms of the applicable reverse repurchase
agreement, and Pledged Items can be released in connection with the sale of such
Pledged Items pursuant to an Approved Investor Commitment existing at the time
of occurrence of the Event of Default if, in either case, the proceeds of such
sale are deposited into the Settlement Account.
4.9 Settlement Account.
There has been established with the Agent, for the benefit of the
Secured Parties, a "cash collateral" account of the Company #19-19210
("Settlement Account") into which shall be deposited all cash proceeds from the
sale of any Pledged Item and any payments made by a Servicing Purchaser in
connection with Pledged Servicing Sale Receivables. Only the Agent shall have
access to the Settlement Account. Prior to the occurrence of a
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Default, to the extent that, as determined by the Agent, the amounts in the
Settlement Account are not needed to keep the Borrowing Base equal to or greater
than the Credit Requirement, the Company may request that the Agent release
funds from the Settlement Account, which funds shall be applied by the Agent as
directed by the Company. Upon the occurrence of an Event of Default (and during
the continuance thereof) all amounts then on deposit in the Settlement Account,
and any deposits made in the Settlement Account during the continuance of such
Event of Default, shall be withdrawn by the Agent from the Settlement Account
and shall be applied to the Credit Indebtedness in accordance with the
provisions of Paragraph 18 of the Security Agreement and Section 10.4 of this
Agreement.
4.10 Termination.
If all Commitments shall have expired or been terminated pursuant
to the express terms hereof and no Credit Indebtedness shall be outstanding, the
Agent shall promptly deliver or cause to be delivered all cash in the Settlement
Account and all other Collateral to the Company. The receipt by the Company of
any cash in the Settlement Account and of all Pledged Items returned or
delivered to the Company pursuant to any provision of this Agreement shall be a
complete and full acquittance for the Pledged Items so delivered, and the Agent,
Collateral Agent and the Lenders shall thereafter be discharged from any
liability or responsibility therefor.
4.11 Transition from Existing Facility.
The Pledge Date and all other relevant delivery dates and time
periods with respect to the determination of Eligible Collateral shall be
calculated to include any delivery dates or holding periods prior to the date
hereof during which Collateral was being held by the Collateral Agent (or was
the subject of an AP Notice), had been delivered to an Approved Investor or had
been redelivered to the Company under the Existing Facility.
ARTICLE V
CONDITIONS PRECEDENT
Each Advance may be made only if the following conditions
precedent are met:
5.1 Initial Advance (Company).
Prior to the initial Advance hereunder, the Company shall have
delivered, or caused to be delivered, to the Agent:
(a) Copies of this Agreement duly executed by the Company for each
Lender and the Agent.
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(b) A Security Agreement duly executed by the Company in the
form attached hereto as Exhibit D.
(c) Notes payable to the order of each Lender duly executed by
the Company in the form attached hereto as Exhibits E-1 and E-2,
respectively plus, in the case of a Bid Lender, in the form approved by
such Lender.
(d) Certificates of the Secretaries of the Company dated such
date, (i) accompanied by and certifying true and correct copies of the
Articles of Incorporation and By-laws of the Company and resolutions of
its Board of Directors authorizing the Company to execute, deliver and
perform this Agreement, the Security Agreement and all other documents
executed by the Company in connection herewith and (ii) confirming the
incumbency and signatures of those officers of the Company authorized to
execute this Agreement, the Security Agreement and the Notes and
otherwise act on behalf of the Company hereunder or under the Security
Agreement.
(e) The opinion of counsel to the Company in substantially the
same form and substance as the opinion letter attached hereto as Exhibit
K attached hereto and covering such other matters as the Agent may
reasonable request, together with appropriate good standing certificates
for the Company.
(f) Executed UCC-1 and UCC-3 Financing Statements as the Agent
may reasonably request.
(g) A letter from the Company to each lender under the Existing
Facility which is not a Lender hereunder providing for the terms of
payment of the loans outstanding under the Existing Facility payable to
such lenders.
(h) An agreement in substantially the form of Exhibit M hereto
between the Company and the Agent on behalf of the lenders under the
Existing Facility that remain as Lenders under this Agreement, and the
Lenders under the Existing Facility who are not Lenders under this
Agreement as to the repayment or conversion of loans outstanding to the
Company under the Existing Facility, the treatment of any interest and
fees accrued thereon, and the cancellation of all commitments under the
Existing Facility.
(i) Evidence that the Company has paid all fees required to be
paid hereunder and under the Security Agreement on or before the date of
the first Advance.
(j) Information satisfactory to the Agent regarding the
Company's Year 2000 Program.
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(k) Such other documents as the Agent may reasonably request.
5.2 Initial Advance (Lenders).
On or before the date of the initial Advance hereunder, the Lenders
shall have delivered, or caused to be delivered, to the Agent and the Agent
shall in turn, have delivered, or caused to be delivered, to the Company one or
more counterparts of this Agreement executed by the Lenders.
5.3 All Advances.
On the date of each Advance, the Company shall be in compliance
with all the terms and provisions set forth herein and in the Security Agreement
on its part to be observed or performed; the representations and warranties of
the Company set forth in Articles IV and VI shall be true and correct in all
material respects on such date as if made on and as of such date (provided,
however that the representation and warranty contained in Section 6.6(c) shall
not apply to (i) conversions or continuations of Advances pursuant to Section
2.12, or (ii) Advances requested by the Company solely for the purpose of
repaying maturing commercial paper); and no Default shall have occurred and be
continuing on such date. On each Advance Date the Company shall be deemed to
have represented and warranted to the Lenders that no violation of the
requirements set forth in the preceding sentence exists on such date after
giving effect to the requested Advance. Prior to making an Advance (including
any Bid Loan) available to the Company under Section 2.11 on any day, the Agent
shall have (i) received notice from the Collateral Agent of the amount of the
Borrowing Base for such day, (ii) received notice from the issuing and paying
agent for the Outstanding CPNs as described in Section 7.7(o) confirming the
aggregate face amount of Outstanding CPNs for such day, and (iii) confirmed,
based solely upon the information contained in such notices, the amount of
Advances then-outstanding, and the Company's certifications contained in the
preceding sentence as to all other facts, that the Borrowing Base will be
greater than or equal to the Credit Requirement on such date after giving effect
to such Advance.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders that:
6.1 Organization, Corporate Powers, Etc.
The Company is a corporation duly incorporated, validly existing,
in good standing and authorized to exercise its
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corporate powers, rights and privileges under the laws of the jurisdiction in
which it is incorporated, is qualified to do business and is in good standing in
all jurisdictions where failure to be so qualified and in good standing would
have a material adverse effect upon its business, operations or financial
condition, and has all requisite corporate power and authority, to conduct its
business, to own its properties and to execute and deliver, and to perform all
of its obligations under, this Agreement, the Security Agreement and the Notes.
6.2 Corporate Authority, Etc.
The execution, delivery and performance by the Company of this
Agreement, the Security Agreement and the Notes have been duly authorized by all
necessary corporate action and do not and will not (i) violate any existing
provision of any law, rule, regulation (including, without limitation,
Regulation U or X of the Board of Governors of the Federal Reserve System or the
rules and regulations of the SEC or any regulatory commission of any
jurisdiction), order, writ, judgment, injunction, decree, determination or award
currently in effect having applicability to the Company or any of its Affiliates
or of the charter or by-laws of the Company or of any of its Affiliates, (ii)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Company or any of its Affiliates is a party or by which the Company or any of
its Affiliates or any of their respective properties may be bound or affected,
or (iii) result in, or require, the creation or imposition of any mortgage, deed
of trust, assignment, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the respective
properties of the Company or any of its Affiliates (other than that arising
hereunder or under the Security Agreement with respect to the Collateral); and
neither the Company nor any of its Affiliates is in material default under any
such law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, agreement, lease or instrument.
6.3 Compliance with Laws.
The Company and each of its Affiliates are in compliance with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, non-compliance with which would, singly or in the
aggregate, materially and adversely affect their respective business or credits
including but not limited to financial condition and operations.
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6.4 Government Approvals.
No authorization, consent, approval, license, exemption of or
filing or registration with any existing court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary for the valid execution, delivery and performance by the
Company of, or the validity or enforceability of, this Agreement, the Security
Agreement and the Notes.
6.5 Valid and Binding Obligations.
This Agreement, the Security Agreement and the Notes constitute
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, subject to bankruptcy and
similar laws and other general restrictions on creditor's rights and equitable
principles (whether applied in an action at law or a suit in equity).
6.6 Financial Statements.
(a) The balance sheet of the Company and its Subsidiaries as of
December 31, 1997 (which is presented in the Company's annual report)
and the related statements of income and changes in financial position
for the fiscal year then ended, copies of which have been heretofore
furnished to each of the Lenders, fairly present, in conformity with
GAAP, the financial condition of the Company and its Subsidiaries as of
such date and the results of the operations and changes in financial
position of the Company and its Subsidiaries for such fiscal year.
(b) The quarterly financial statements of the Company and its
Subsidiaries submitted to the SEC or the Agent since the date of the
December 31, 1997 annual financial statements referred to in clause (a)
above fairly present, in conformity with GAAP, the financial condition
of the Company and its Subsidiaries as of the applicable dates of such
statements and the results of the operations and changes in financial
position of the Company and its Subsidiaries for the periods to which
such statements relate.
(c) Since the date of the December 31, 1997 statements there has
been no material adverse change, taken as a whole, in the business,
financial position, or operations of either the Company or any
Subsidiary.
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6.7 Litigation.
Except as disclosed on Exhibit L attached hereto and as otherwise
set forth in the Company's annual report referred to in Section 6.6(a), there
are no actions, suits or proceedings pending or, to the knowledge of the Company
after reasonable investigation, threatened against or affecting the Company or
any of its Affiliates or any of their respective properties before any court,
arbitrator or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (including, without limitation, the SEC or
any regulatory commission of any jurisdiction), which, if determined adversely
to the Company or any Affiliate, as the case may be, would be reasonably likely
to, singly or in the aggregate, have a material adverse effect on the financial
condition, or on the respective properties or operations, of the Company and its
Affiliates or the transactions contemplated by this Agreement, the Security
Agreement and the Notes.
6.8 Use of Proceeds.
The Company will use the proceeds of the Loans solely for (i) the
purposes described in the recitals hereto, (ii) the funding or purchasing of
Mortgage Loans, (iii) the payment of principal, interest, fees, expenses, and
other obligations described in or contemplated by this Agreement, (iv) payment
of Debt of the Company existing on the date hereof, and (v) such other purposes
as may be permitted under this Agreement. No part of the proceeds of any Loan
will be used to purchase or carry, or to reduce or retire, any indebtedness
incurred to purchase or carry, any margin stock (within the meaning of
Regulations U and X of the Board of Governors of the Federal Reserve System) or
to extend credit to others for the purpose of purchasing or carrying any margin
stock and the Company is not engaged in purchasing or carrying margin stock.
6.9 Accuracy of Information.
All written information supplied by the Company to the Lenders
relating to the Company and its Affiliates was true, complete and accurate in
all material respects when made, and there has been no material adverse change
in the financial condition of the Company and its Affiliates from the time such
information was provided to the Lenders.
6.10 Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in each
other document delivered in connection with this Agreement are, or when such
document is delivered will be, true and correct in all material respects when
made.
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6.11 Investment Company.
The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or an "investment adviser" within the meaning
of the Investment Advisers' Act of 1940, as amended.
6.12 ERISA.
Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and any other applicable Federal or
state law; and to the best of its knowledge no event or condition is occurring
or exists with respect to any Plan concerning which the Company would be under
an obligation to furnish a report to the Lenders in accordance with Section
7.7(h).
6.13 Tax Returns.
The Company and each of its Affiliates has filed or caused to be
filed all material federal, state and local tax returns which, to its knowledge,
are required to be filed and has paid or caused to be paid all material taxes as
shown on such returns or on any assessment received by it, to the extent that
such taxes have become due, except taxes the validity of which is being
contested in good faith by appropriate proceedings and for which adequate
reserves shall have been set aside on its books in conformity with GAAP.
6.14 Full Disclosure.
No event has occurred and no circumstance exists as a result of
which any information, statement, or representation concerning the Company that
has been provided to any Lender by the Company in connection herewith would
include an untrue statement of a material fact or omit to state any material
fact or any fact necessary to make the information, statements or
representations contained therein, in the light of the circumstances under which
they were made, not misleading.
6.15 GNMA, FHA, VA, FNMA, AND FHLMC Eligibility.
The Company is: (i) an FHA-Approved Mortgagee in good standing, a
VA-Approved Lender, a FHLMC-Approved Lender and a FNMA-Approved Lender and meets
all eligible requirements of law and governmental regulation so as to be
eligible to originate, purchase, hold and service Mortgage Loans insured by FHA
and to issue any Security; (ii) an approved seller and servicer in good standing
of Mortgage Loans to each Federal Agency; and (iii) an approved issuer and
servicer in good standing of FHLMC, FNMA and GNMA Securities and meets all
FHLMC, FNMA and GNMA requirements,
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requirements of law and governmental regulations so as to be able to issue
FHLMC, FNMA and GNMA Securities and to service the Mortgage Loans that secure
such Securities.
6.16 No Defaults.
No Default has occurred and is continuing.
6.17 Year 2000 Compliance.
The Company has made a full and complete assessment of the Year
2000 Issues and has a realistic and achievable program for remediating the Year
2000 Issues on a timely basis (the "Year 2000 Program"). Based on such
assessment and on the Year 2000 Program the Company does not reasonably
anticipate that Year 2000 Issues will have a material adverse effect on the
Company's operations or financial condition.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Company covenants and agrees with the Lenders that, so long
as this Agreement shall remain in effect and so long as any amounts are
outstanding under the Notes or this Agreement, unless the Required Lenders shall
otherwise consent in writing, the Company will:
7.1 Payment of Debts, Taxes, Etc.; Maintenance of Insurance.
(a) Pay all debts and perform all obligations, and cause each of
its Subsidiaries to pay all debts and perform all obligations, promptly
and in accordance with the terms thereof and pay and discharge, and
cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, prior to
the date on which penalties attach thereto, and all lawful claims,
which, if unpaid, might become a lien or charge upon any properties of
the Company or of such other Subsidiary, provided that none of the
Company or any other Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith
and by appropriate proceedings and such contest shall operate to stay
any material adverse effect of such lien or charge;
(b) Use its best efforts to adhere to customary practices and
standards in the industry insofar as adherence to such practices and
standards would require the Company to cause obligors whose indebtedness
is secured by Pledged Mortgages to comply with the provisions of such
Pledged Mortgages with respect to the payment of real estate taxes
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and insurance premiums in connection with the real estate
securing such indebtedness; and
(c) Maintain, and cause each of its Subsidiaries to maintain,
insurance on its properties and other insurance in amounts and types and
with provisions and insurers as shall be satisfactory to the Required
Lenders, and at all times furnish to any Lender (upon written request by
such Lender) copies of its, and each of its Subsidiaries', current
Mortgage Bankers Blanket Bond and of its, and each of its Subsidiaries',
insurance policy containing errors and omissions coverage or mortgage
impairment coverage, and providing, in the case of Mortgage Bankers
Blanket Bonds, to the extent possible, that they are not cancelable
without thirty days' prior written notice to the Agent.
7.2 Preservation of Corporate Existence.
Preserve and maintain, and cause each of its Subsidiaries which
is a material part of the Company's overall business operations to preserve and
maintain, its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
necessary in view of its business operations or the ownership of its
properties.
7.3 Compliance with Laws, Etc.
Comply, and cause each of its Subsidiaries to comply, with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, non-compliance with which would be reasonably likely to,
singly or in the aggregate, materially adversely affect its business or credit,
unless the same shall be contested by the Company or such other Subsidiary, as
the case may be, in good faith and by appropriate proceedings and such contest
shall operate to stay the material adverse effect of any such non-compliance.
7.4 Requested Information.
At any reasonable time and from time to time, on reasonable
prior notice furnish to the Agent, any requesting Lender or any agents or
representatives thereof, or permit such agents or representatives to examine and
make copies of, the records and books of account of, and visit the properties
of, the Company or any of its Subsidiaries and, so long as representatives of
the Company (as chosen by senior management of the Company) accompany the Agent
or any such other Lender, the Company's Affiliates, and to discuss the affairs,
finances and accounts of the Company, its Subsidiaries and such Affiliates with
any of its officers.
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7.5 Keeping of Records and Books of Account.
Keep or cause to be kept adequate records and books of account
in which complete entries will be made in accordance with generally accepted
accounting principles, consistently applied (except for changes concurred in by
the Company's independent auditors) reflecting all financial transactions of the
Company and its Subsidiaries.
7.6 Maintenance of Approvals, Filings and Registrations.
At all times maintain in effect, renew and comply with, and cause
each of its Subsidiaries to effect, renew and comply with all the terms and
conditions of all consents, licenses, approvals and authorizations as may be
necessary under any applicable law or regulation for the execution, delivery and
performance of this Agreement, the Security Agreement and the Notes and to make
this Agreement and such other documents legal, valid, binding and enforceable.
7.7 Reporting Requirements.
Furnish to the Agent for distribution to each Lender:
(a) As soon as possible after becoming aware (i) of the
occurrence of any Default, or (ii) that any of the representations and
warranties contained in Article IV or Article VI has ceased to be true
and correct at any time since the last Advance hereunder (or, if no
Advance has taken place, the execution and delivery of this Agreement),
telephone advice confirmed in writing within three (3) Business Days by
a statement of the president or other Authorized Officer of the Company
setting forth the details thereof and the action which the Company
proposes to take with respect thereto.
(b) As soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Company, a consolidating
and consolidated balance sheet of the Company and its Subsidiaries as of
the end of such fiscal year and the related statements of income and
changes in financial position of the Company and its Subsidiaries
including cash flow statements for such fiscal year on a consolidating
and consolidated basis, setting forth in each case in comparative form
the figures as of the end of and for the previous fiscal year, all
reported in accordance with GAAP and audited and unqualified by KPMG
Peat Marwick or other independent public accountants of nationally
recognized standing.
(c) As soon as available and in any event within forty-five (45)
days after the end of each fiscal quarter of the Company, a
consolidating and consolidated balance sheet
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of the Company and its Subsidiaries as of the end of such quarter and
the related statements of income for such quarter and for the portion of
the Company's fiscal year ended at the end of such quarter, all
certified (subject to normal quarter-end adjustments) as to fairness of
presentation, generally accepted accounting principles and consistency
by the chief financial officer of the Company.
(d) Simultaneously with the delivery of each set of financial
statements referred to in clauses (b) and (c) above, a certificate of
the chief financial officer of the Company (A) setting forth in
reasonable detail the calculations required to establish whether the
Company was in compliance with the requirements of Sections 7.9, 8.5,
8.6, 8.9, 8.10, 8.16, and 8.17 and (B) stating whether there exists on
the date of such certificate any Default and, if any Default then
exists, setting forth the details thereof and the action which the
Company is taking or proposes to take with respect thereto.
(e) Promptly after the commencement thereof, notice of (i) any
action or proceeding which has more than a remote possibility of a
determination adverse to the Company or its Subsidiaries (a
"Non-Frivolous Action") instituted by or against the Company or any of
its Subsidiaries in any Federal or state court or before any commission
or other regulatory body (Federal, state or local, domestic or foreign),
or any such Non-Frivolous Action threatened against the Company or any
of its Subsidiaries in writing, which, if adversely determined, would
have a material adverse effect upon the business, assets or financial
condition of the Company or any mortgage banking affiliate of the
Company, and (ii) any other action, event or condition of any nature
which may lead to or result in a material adverse effect upon the
business, assets or financial condition of the Company or which, with or
without notice or lapse of time or both, would constitute a default
under any other material contract, instrument or agreement to which the
Company is a party or by which the Company or its properties or assets
may be bound or subject.
(f) As soon as possible after becoming aware of any change in
the Company's long-term unsecured debt ratings as rated by S&P or
Moody's, a copy of the S&P or Moody's publication of such ratings or
other written confirmation of such ratings.
(g) Such other information, financial or otherwise, respecting
the Collateral and the Company's financial statements and condition as
the Agent or any Lender may from time to time reasonably request.
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(h) As soon as possible, and in any event within thirty (30)
days after the Company knows or has reason to know that any of the
events or conditions enumerated below with respect to any Plan have
occurred or exist, a statement signed by an Authorized Officer of the
Company setting forth details respecting such event or condition and the
action, if any, which the Company or, to the best knowledge of the
Company, any ERISA Affiliate proposes to take with respect thereto;
provided, however, that if such event or condition is required to be
reported or notice thereof given to PBGC, such statement, together with
a copy of the relevant report or notice to PBGC, shall be furnished to
the Agent within ten (10) days after it is reported or notice thereof
given to PBGC:
(i) the occurrence of any Reportable Event;
(ii) the filing under Section 4041 of ERISA of a
notice of intent to terminate any Plan or the termination of any
Plan;
(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan; or
(iv) the complete or partial withdrawal by the Company,
any Subsidiary or any ERISA Affiliate from a Plan, or the
receipt by the Company, any Subsidiary or any ERISA Affiliate
of notice from a Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A of
ERISA, if such withdrawal, reorganization, insolvency or
termination has resulted or may reasonably be expected to
result in any liability of the Company, any Subsidiary or any
ERISA Affiliate to the PBGC in connection with such Plan or to
such Plan.
(i) Promptly after the request of the Agent, copies of each
annual report filed pursuant to Section 104 of ERISA with respect to
each Plan (including, to the extent required by Section 104 of ERISA,
the related financial and actuarial statements and opinions and other
supporting statements, certifications, schedules and information
referred to in Section 103 of ERISA) and each annual report filed with
respect to each Plan under Section 4065 of ERISA.
(j) As soon as available but in any event within thirty (30)
days after the end of each calendar quarter, a servicing report and
analysis which shall show the status of all mortgages serviced by the
Company including those which are delinquent, all in such form and
detail and including such
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additional information as the Agent may reasonably request. Such
servicing report shall show separately information concerning any
mortgages or securities with respect to which there is recourse to the
Company.
(k) As soon as available but in any event within thirty (30)
days after the end of each calendar quarter, a production information
report and a secondary marketing report for such quarter satisfactory to
the Agent.
(l) Promptly upon receipt, a copy of any notice from any Federal
Agency or any private mortgage insurer to the effect that it is or is
contemplating withdrawing its approval of the Company as a FHA-Approved
Mortgagee, FHLMC-Approved Lender, FNMA-Approved Lender or VA-Approved
Lender or as an approved seller and servicer for FNMA, FHLMC and GNMA.
(m) Promptly after the Company's or any Subsidiary's acquisition
or creation of a new Subsidiary, written notice of such event, which
notice shall set forth the details of such event, the percentage of
capital stock owned by the Company or any other Subsidiary, and the
jurisdiction of incorporation of such new Subsidiary.
(n) Promptly after the sending or filing thereof, copies of all
such proxy statements, financial statements and reports which the
Company sends to its stockholders, and copies of all regular, periodic
and special reports (other than Form 8-K reports containing only the
distribution reports relating to the Fireman's Fund Mortgage Corporation
Agency MBS Multi-Class Pass-Through Certificates, which the Company need
send to the Agent only and which the Agent shall make available to the
other Lenders upon request) and all final prospectuses which the Company
files with the SEC (if applicable), or any governmental authority which
may be substituted therefor, any Federal Agency, or any other
governmental agency.
(o) On each Business Day, a statement from the issuing and
paying agent for the Outstanding CPNs setting forth the aggregate face
amount of the Outstanding CPNs being issued on such Business Day, being
repaid on such Business Day and remaining outstanding at the end of such
Business Day, all in a form satisfactory to the Agent, which statement
need be transmitted to the Agent only.
(p) As soon as available and in any event within forty-five (45)
days after the end of each fiscal quarter of the Company, a list showing
(i) each individual Guaranty of the Company then in effect for which the
maximum potential liability is in excess of $1,000,000 (and the amounts
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thereof) and (ii) the aggregate amount of all other Guarantees of the
Company then in effect, certified as true and correct by an Authorized
Officer of the Company. Individual Guaranties shall be reported under
clause (i) if the potential liability could exceed $1,000,000 even
though the then current outstanding Indebtedness which is guaranteed is
less than $1,000,000. Such report shall include the maximum amount
guaranteed and the then current outstandings (showing "none" if there
are no current outstandings). If there are no Guaranties to be reported,
a report shall still be furnished indicating no such Guaranties exist.
(q) Such other information respecting the business, properties
or the condition or operation of the Company or its Subsidiaries,
financial or otherwise, as the Agent or any Lender may from time to time
reasonably request.
(r) Notice of the occurrence of any of the following events,
immediately upon the Company's acquisition of knowledge thereof: (i) the
occurrence of an "Event of Default" (as defined in Article Five of the
Subordinated Debt Indenture), (ii) the deferral by the Company of any
quarterly installment of interest on the Subordinated Debt, (iii) the
acceleration of the entire principal amount of any series of securities
issued under the Subordinated Debt Indenture, (iv) the execution of any
amendment or supplement to the Subordinated Debt Indenture, (v) the
resignation or removal of the trustee under the Subordinated Debt
Indenture, or any change in the notice address of such trustee, or (vi)
any developments with respect to Year 2000 Issues that are reasonably
anticipated to have a material adverse effect on the Company's
operations or financial condition.
7.8 Indemnification.
Pay, and protect, indemnify and save harmless, the Agent, the
Collateral Agent, each of the Lenders and the Affiliates of each of the
foregoing and, in their capacity as such, their respective officers, directors,
shareholders, controlling persons, employees, agents and servants from and
against all liabilities, losses, claims, damages, penalties, causes of action,
suits, costs and expenses (including, without limitation, attorneys' fees and
expenses) or judgments of any nature arising from the default of the Company in
the performance of its agreements, rights or obligations contained in this
Agreement, the Security Agreement, the Notes or any other instrument or
agreement entered into by the Company in connection herewith or therewith or
arising out of this Agreement or the transactions contemplated herein; provided,
that the Company shall not have any obligation hereunder to the Agent, the
Collateral Agent or any Lender or any other Person indemnified pursuant to this
Section 7.8 with respect to indemnified
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liabilities arising from (1) the gross negligence or willful misconduct of such
Person indemnified pursuant to this Section 7.8, or (2) legal proceedings
commenced against the Agent, the Collateral Agent or any Lender by any other
Lender or any Participant. If any action, suit or proceeding arising from any of
the foregoing is brought against the Agent, the Collateral Agent or any Lender
or any other person indemnified pursuant to this Section 7.8, the Company will,
if within a reasonable time requested in writing to do so and at its expense,
resist and defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated by the Company (which counsel shall
be satisfactory to the party being indemnified). Notwithstanding anything to the
contrary in this Agreement, the obligations of the Company under this Section
7.8 shall survive any termination of this Agreement.
7.9 Maintenance of Net Worth.
At all times, maintain the sum of (x) Adjusted Consolidated
Tangible Net Worth plus (y) Subordinated Debt in an amount at least equal to the
sum of:
(i) $367,400,000, plus
(ii) fifty percent (50%) of the sum of (A) the positive
cumulative quarterly increases, if any, in Adjusted Consolidated
Tangible Net Worth of the Company after March 31, 1998 (computed without
regard to any increase or decrease resulting from (1) the contribution
or distribution of Restricted FSA Securities, (2) cash equity
contributions to the Company, (3) the receipt of proceeds of issuances
of stock of the Company, (4) the exchange of Subordinated Debt for
Series A Preferred Stock, (5) the payment of Restricted Payments) for
each calendar quarter beginning with the calendar quarter beginning
April 1, 1998 plus (B) the cumulative after-tax cost to the Company of
all interest payments on the Subordinated Debt made by the Company after
March 31, 1998, less
(iii) the amount of Special Dividends paid.
7.10 Federal Agency Approvals.
Maintain its status as a FHA-Approved Mortgagee, remain eligible
to obtain VA guaranties of Mortgage Loans and remain approved by each Federal
Agency as a seller/servicer.
7.11 Approved Investor Commitments.
Maintain all of its Mortgage Loans included in Collateral and all
other Mortgage Loans owned by the Company which satisfy the delivery
requirements of any then-current
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Approved Investor Commitments to purchase Mortgage Loans or to exchange
Securities for Mortgage Loans held by the Company (other than any Mortgage Loans
held by the Company solely for investment) in compliance with such Approved
Investor Commitments and perform all of its obligations in connection with such
commitments.
7.12 Borrowing Base Certificate.
Within the first ten (10) days of each month, and within three
Business Days after any request therefor by the Agent, deliver to the Agent a
Borrowing Base Certificate (which shall include the Company's reconciliation of
any discrepancies from the Collateral Agent's reports on the status of Eligible
Collateral at the end of the preceding month), together with a certificate of
the chief financial officer or other Authorized Officer of the Company
confirming compliance with Sections 7.9, 8.5, 8.9, and 8.12. Each regular
monthly Borrowing Base Certificate shall contain information as of the close of
business on the final Business Day of the preceding month. Any Borrowing Base
Certificate delivered pursuant to the request of the Agent shall contain
information as of the close of business on the day on which the Agent requested
such Borrowing Base Certificate. Notwithstanding the two preceding sentences,
information contained in such Borrowing Base Certificates relating to Eligible
Repurchased Agency Loans and Receivables may be as of the latest dates on which
the Company calculated the value of Eligible Repurchased Agency Loans and
Receivables; provided that such calculations shall be made at least once per
week.
7.13 Further Assurance.
As from time to time requested by the Agent and agreed upon by the
Required Lenders, at the cost and expense of the Company, execute and deliver to
the Agent all such documents and instruments and do all such other acts and
things as may be reasonably required to enable the Lenders to exercise and
enforce their rights under this Agreement and to realize thereon, and as may be
necessary to validate, preserve and protect the position of the Lenders under
this Agreement. With respect to those elements of Collateral as to which the
Lenders' security interest may not be perfected by delivery to the Collateral
Agent with the Security Agreement or the filing of a UCC-1 financing statement,
including but not limited to the Approved Investor Commitments and any options,
futures contracts or other interest rate protection products, the Company as
requested by the Agent at the direction of the Required Lenders, shall execute
and deliver possession of such elements of the Collateral to the Agent, have the
interest of the Lenders therein recorded on the books of any institution holding
such assets for the Company, obtain consents to assignment in favor of the
Lenders from the counterparties thereto or take such other actions as may be
necessary to perfect
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the security interest of the Lenders therein (provided, however, that unless an
Event of Default is continuing or the Required Lenders have requested otherwise,
consents to assignments of options, futures contracts or other interest rate
protection products in favor of the Lenders from the counterparties thereto
shall not be required).
7.14 Maintenance of Properties.
Do all things necessary to maintain, preserve, protect and keep its
properties in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times.
7.15 Payment of Taxes.
On demand pay, or reimburse the Agent and Lenders for, all
stamp, documentation, intangible, or similar taxes, and all penalties or
interest that may be due with respect thereto, that may be imposed or asserted
by the State of Florida or any other jurisdiction in connection with the
execution and delivery of the Credit Documents or the making of the Loans
contemplated by this Agreement.
7.16 Year 2000 Compliance.
Take and will cause each of its Subsidiaries to take all such
actions as are reasonably necessary to successfully implement the Year 2000
Program and to assure that Year 2000 Issues will not have a material adverse
effect on the Company's operations or financial condition. At the request of the
Agent, the Company will provide a description of the Year 2000 Program, together
with any updates or progress reports with respect thereto.
ARTICLE VIII
NEGATIVE COVENANTS
The Company covenants and agrees with the Lenders that so long
as this Agreement shall remain in effect or any amounts are outstanding under
the Notes or this Agreement, unless the Required Lenders (or all Lenders, if
expressly required) shall otherwise consent in writing, the Company (on a
consolidated basis with its Subsidiaries) shall not, directly or indirectly:
8.1 Use of Proceeds.
Use the amounts obtained under this Agreement for any purposes
other than (i) the purposes described in the recitals hereto, (ii) the funding
or purchasing of Mortgage Loans,
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(iii) the payment of principal, interest, fees, expenses and other obligations
described in or contemplated by this Agreement, (iv) payment of Debt of the
Company existing on the date hereof, and (v) such other purposes permitted under
this Agreement. The Company is not engaged, nor will it engage, principally or
materially in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" (within the meanings of each of the quoted
terms under Regulation U). If requested by a Lender, the Company shall each
furnish to the Agent for the benefit of the Lenders a statement in conformity
with the requirements of Federal Reserve Form U-1 referred to in Regulation U.
No part of the proceeds of any Loan will be used 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 as now and from time to time
hereafter in effect.
8.2 Compliance with Security Agreement.
Enter into any collateral custodial agreement similar to the
Security Agreement for Mortgage Loans not included in Collateral with any entity
other than the Collateral Agent or fail to duly perform any of its obligations
under the Security Agreement; provided, however, that this Section shall not
prohibit the Company from entering into other custodial agreements relating to
the possession of Mortgage Loans not included in Collateral so long as such
agreements are not made for the purpose of or in connection with the granting of
a security interest in such Mortgage Loans. Security interests in Mortgage Loans
given for confirmatory purposes in connection with the sale of such Mortgage
Loans by the Company to investors shall not be considered agreements "made for
the purpose of or in connection with the granting of a security interest in such
Mortgage Loans" within the meaning of the preceding sentence.
8.3 Mergers; Subsidiaries.
Merge or consolidate with any Person, or sell or otherwise dispose
of (whether in one transaction or in a series of transactions) the shares of any
of its Subsidiaries to any Person, provided that the Company may, after prior
written notice to the Agent and Lenders, (i) undertake such a merger or
consolidation so long as the Company shall be the surviving or resulting company
and (ii) take such action with respect to any Subsidiary which is not a material
part of the Company's overall business operations.
8.4 Sales.
Sell, assign, lease or otherwise dispose of (collectively,
"Transfer"), whether in one transaction or a series of transactions, all or
substantially all of its assets
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(whether now owned or hereafter acquired) to any Person, or allow any Subsidiary
to Transfer substantially all of its assets to any Person (other than another
Subsidiary or a Parent), provided that the Company may after prior written
notice to the Agent and Lenders allow such action with respect to any Subsidiary
which is not a material part of the Company's overall business operations.
Transfers described in this Section 8.4 and the mergers, consolidations and
dispositions described in Section 8.3 (whether or not permitted by the
provisions of such Sections) are referred to herein as "Fundamental Changes."
8.5 Debt.
Allow the total Debt (excluding Subordinated Debt) of the
Company and its Subsidiaries (on a consolidated basis) to exceed the sum of the
following (the "Debt Threshold"):
(a) one hundred percent (100%) of the value of the
Company's cash and "short-term investments";
(b) ninety-eight percent (98%) of the value of the
Company's "mortgage loans receivable";
(c) ninety percent (90%) of the value of the Company's "pool
loan purchases" and "mortgage claims receivable", to the extent such
assets represent VA Mortgage Loans and FHA Mortgage Loans repurchased by
the Company from GNMA Security holders including the amount of past-due
interest advanced by the Company on account of such Mortgage Loans which
is guaranteed by VA or insured by FHA, provided however, the Required
Lenders can elect upon 90 days prior notice to the Company not to
include such interest amount in the calculation of this component of the
Debt Threshold;
(d) seventy-five percent (75%) of the amount of Servicing Sale
Receivables which would qualify as Eligible Pledged Servicing Sale
Receivables if such Servicing Sale Receivables were pledged as
Collateral;
(e) sixty percent (60%) of the amount of the Company's servicing
rights and hedging rights related thereto, as determined in accordance
with GAAP on a monthly basis (or more frequently if requested by the
Agent); and
(f) fifty percent (50%) of the value of Approved Equity
Securities, as shown on the most recent quarterly financial statements
(or as reported on a more frequent basis if required by Agent) provided
that the maximum amount that can be included in this component of the
Debt Threshold shall be $200,000,000, as such amount may be reduced in
accordance with Section 8.16.
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Terms set forth in quotes in this Section shall have the meanings given such
terms in the Company's consolidated financial statements.
8.6 Ratably Secured Debt.
Incur any Debt which may be entitled to a security interest in any
of the Collateral which would be equal or superior to the security interest of
Collateral Agent as agent for the Secured Parties.
8.7 Guarantees.
Create, incur, assume or suffer to exist any Guarantee of the
Company except Guarantees in an aggregate combined amount for the Company not to
exceed $25,000,000 at any one time outstanding.
8.8 Investments.
Make or own any Investment in any Person, except:
(a) Investments in the ordinary course of its mortgage banking
business in connection with mortgage loans, collateralized mortgage
obligations and other mortgage-related securities;
(b) Investments in the ordinary course of its mortgage banking
business in connection with puts, calls, swaps and other interest rate
hedging products, options and futures contracts to provide protection
from interest rate fluctuation;
(c) Investments in the ordinary course of its mortgage banking
business in connection with real estate acquired by foreclosure;
(d) Investments in the ordinary course of the Company's mortgage
banking business in connection with servicing rights;
(e) Investments in the ordinary course of its mortgage banking
business in connection with commitments from investors to purchase
Mortgage Loans or mortgage-related securities;
(f) the acquisition of Mortgage Loans, Securities and mortgage
servicing contracts of another Person engaged in mortgage-related
businesses;
(g) Investments in Cash Equivalents;
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(h) those Investments in existence on the date hereof
and disclosed in the financial statements referred to in
Section 6.6;
(i) loans to officers of the Company in an aggregate
principal amount at any time outstanding not to exceed
$5,000,000;
(j) loans and advances to employees of the Company, or its
Subsidiaries for (i) travel and entertainment in the ordinary course of
business in an aggregate amount for the Company and its Subsidiaries not
to exceed $100,000 at any one time outstanding and (ii) relocation
expenses in the ordinary course of business in an aggregate amount for
the Company and its Subsidiaries not to exceed $1,000,000 at any one
time outstanding;
(k) Investments of up to 10% of the Company's net worth (as
determined in accordance with GAAP) by the Company in its Subsidiaries
and investments by such Subsidiaries in the Company and in other
Subsidiaries;
(l) Investments made by any Subsidiary in the ordinary
course of its business;
(m) Investments in equity securities which (1) are traded on the
New York Stock Exchange, the American Stock Exchange or NASDAQ, (2) are
subject to no transfer restrictions, and (3) have a readily determinable
market value, in an aggregate market value amount not to exceed
$25,000,000 (which market value shall be determined by the Company and
reported to the Agent on a monthly basis, or more frequently at the
request of the Agent);
(n) repurchase and reverse repurchase contracts incidental to
the mortgage-related businesses of the Company and its Subsidiaries in
an aggregate dollar amount not to exceed $250,000,000 and $25,000,000
respectively;
(o) capital stock in FSA and Restricted FSA Securities;
and
(p) other Investments which are the result of a merger or
consolidation permitted under Section 8.3 if, after giving effect to any
such Investment, the consolidated net revenues (determined in accordance
with GAAP) of all business segments that constitute mortgage-related
businesses of the Resulting Entity for the Fundamental Change/Investment
Calculation Period are at least 75 percent of the total net revenues
(determined in accordance with GAAP) of the Resulting Entity for the
Fundamental Change/Investment Calculation Period.
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8.9 Leverage Ratios.
Permit the ratio of (1) Funded Debt less Subordinated Debt to (2)
Adjusted Consolidated Tangible Net Worth plus Subordinated Debt to exceed 4.0 to
1.
8.10 Recourse Servicing.
Permit the aggregate principal balance of Mortgage Loans covered by
Recourse Servicing at any time after the date hereof to exceed (i)
$2,350,000,000 less (ii) all reductions in the aggregate principal balance of
such Mortgage Loans covered by Recourse Servicing as of March 31, 1998, whether
by reason of prepayment or amortization from and after April 1, 1998.
8.11 Liens.
Permit, or permit any Subsidiary to permit, any Lien to exist on
any of its property or assets (including, without limitation, the Company's
rights under any contracts relating to mortgage sales and under any Servicing
Agreements) other than:
(a) Liens for taxes, assessments and other governmental
impositions not yet due or which are being contested in good faith by
appropriate proceedings, provided, that adequate reserves with respect
thereto are maintained on the books of the Company or its Subsidiaries,
as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business and securing obligations which are not overdue for a period of
more than 60 days or which are being contested in good faith by
appropriate proceedings, provided, that adequate reserves with respect
thereto are maintained on the books of the Company or its Subsidiaries,
as the case may be, in accordance with GAAP;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from
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the value of the property subject thereto or interfere with
the ordinary conduct of the business of the Company or such
Subsidiary;
(f) Liens of landlords, arising solely by operation of law and
which are not avoidable as a matter of law, on fixtures and moveable
property located on premises leased in the ordinary course of business,
provided, that the rental payments secured thereby are not yet due;
(g) Liens arising out of judgments or awards against the Company
or any Subsidiary with respect to which the Company or such Subsidiary
is prosecuting an appeal or proceeding for review and the Company or
such Subsidiary is maintaining adequate reserves in accordance with
GAAP;
(h) Liens which were in existence on December 31, 1997 and which
secured obligations reflected in the financial statements referred to in
Section 6.6;
(i) Liens upon real and/or tangible personal property, which
property was acquired after December 31, 1997 (by purchase, construction
or otherwise) by the Company or its Subsidiaries, each of which Liens
either (A) existed on such property before the time of its acquisition
and was not created in anticipation thereof at the request or direction
of the Company, or (B) was created solely for the purpose of securing
Debt representing, or incurred to finance, refinance or refund, the cost
(including the cost of construction) of the respective property;
provided, that no such Lien shall extend to or cover any property of the
Company or such Subsidiary other than the respective property so
acquired and improvements thereon;
(j) Liens incidental to the conduct of the Company's
mortgage-related businesses or the ownership of its property or arising
out of transactions entered in the ordinary course of the Company's
mortgage-related businesses which do not secure Debt and do not, in the
aggregate, materially detract from the value of its properties in the
aggregate or materially impair the use thereof in the ordinary course of
the Company's business;
(k) Liens arising from repurchase agreements relating to pools
of Mortgage Loans or Securities that constitute Debt of the Company or
relating to Servicing Agreements securing Debt of the Company, provided
that the aggregate principal amount of Debt secured by such Liens shall
not exceed $200,000,000 at any time and shall not cause any violation of
the restriction on Debt imposed by Section 8.5;
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(l) Liens on assets of corporations which become Subsidiaries
after the date of this Agreement; provided, that (i) such Liens existed
at the time such corporation became a Subsidiary and were not created in
anticipation thereof, (ii) any such Lien is not spread to cover any
property or assets of such corporation after the time such corporation
becomes a Subsidiary (other than any such spreading resulting from
"after-acquired property" clauses in existence on the date such
corporation became a Subsidiary) and (iii) the amount of Debt secured
thereby is not increased;
(m) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any Lien
referred to in the foregoing clauses; provided, that the principal
amount of Debt secured thereby shall not exceed the principal amount of
Debt so secured immediately prior to the time of such extension, renewal
or replacement, and that such extension, renewal, or replacement Lien
shall be limited to all or a part of the property which secured the Lien
so extended, renewed or replaced (plus improvements on such property);
(n) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to the Company and all Subsidiaries)
$30,000,000 in an aggregate principal amount at any one time
outstanding;
(o) Liens (not otherwise permitted hereunder) which secure
obligations (as to the Company and all Subsidiaries) (1) incidental to
forward delivery contracts in the ordinary course of the Company's
mortgage-related businesses or (2) incidental to Investments by the
Company in the ordinary course of its mortgage banking business in
connection with puts, calls, swaps and other interest rate hedging
products, options and futures contracts to provide protection from
interest rate fluctuation; and
(p) the Liens arising under the Other Facility or under the
Security Agreement or any other Credit Document;
provided, however, that so long as no Event of Default has occurred and is
continuing, the Company may also permit Liens on Securities and Mortgage Loans
owned by the Company (other than Securities or Mortgage Loans constituting
Collateral) to secure Debt incurred from sources other than the Secured Parties
for the purpose of originating or purchasing such Securities or Mortgage Loans.
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8.12 Credit Requirement.
Permit the Borrowing Base to be less than the Credit
Requirement.
8.13 Affiliate Transactions.
Enter, or permit any Subsidiary to enter, into any transactions
with the Company's Parent or Affiliates that is not an arm's-length transaction
or that in any material respect is less advantageous to the Company or such
Subsidiary than a similar typical transaction with an unrelated third-party;
make any loans or advances to the Parent or any Affiliates with financial terms
more advantageous to the Parent or Affiliate than the terms of loans and
advances made to the Company from any such Parent or Affiliate; or make any net
loans or advances to the Parent or any Affiliates which would cause any
violation of Sections 7.9 or 8.9.
8.14 Conduct of Business.
Except as permitted under Section 8.8:
(a) enter into any material line of new business other than
businesses related to its current businesses, materially change the
nature of its business, cease to carry on its business as now conducted,
or
(b) fail to maintain its corporate existence, licenses,
franchises and privileges.
8.15 FHA and other Approvals.
Cause any Federal Agency which insures any material portion of the
Mortgage Loans owned or serviced by the Company to withdraw its approval of the
Company, or become ineligible as a lender under the VA loan guaranty program.
8.16 Restricted Payments.
Make any Restricted Payments; provided, however, so long as no
Default arising from the Company's failure to comply with Section 7.9 has
occurred and is continuing (or would result from any such payment) and no Event
of Default has occurred and is continuing (or would result from any such
payment), the Company may make Restricted Payments as expressly permitted by
subparagraphs (a) and (b) below:
(a) The Company may make Restricted Payments during any
Calculation Period in an amount which, when added to all other Restricted
Payments (including Restricted Payments made pursuant to Section 8.16(b)(i))
made during such Calculation Period, does
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not exceed the sum of (i) fifty percent (50%) of the increase, if any, in
Adjusted Consolidated Tangible Net Worth during such Calculation Period plus
(ii) 100% of all dividends received by the Company during such Calculation
Period from preferred and common stock in FSA and from redeemable preferred
stock in U.S. West, Inc. plus (iii) 50% of interest payable by the Company with
respect to such Calculation Period on the Subordinated Debt.
The increase in Adjusted Consolidated Tangible Net Worth
referenced in this Subsection (a) shall be computed without regard to
any increase or decrease resulting from the following activities: (1)
the contribution or distribution of Restricted FSA Securities, (2) cash
equity contributions to the Company, (3) the receipt of proceeds of
issuances of stock of the Company, (4) increases or decreases in the
amount of Subordinated Debt, or (5) the payment of permitted Restricted
Payments.
(b) The Company may, without regard to the maximum limit on
Restricted Payments established by Subsection (a) above:
(i) pay dividends required to be paid on its Series A
Preferred Stock and pay interest that is due and payable on the
Subordinated Debt, provided that all payments made pursuant to this
clause (i) shall still be included for purposes of determining the
maximum amount of dividends and distributions payable under Subsection
(a);
(ii) make additional Restricted Payments not to exceed the
Maximum Special Dividend Amount in the aggregate, which additional
Restricted Payments made pursuant to this clause (ii) shall not be
included in determining the maximum amount of Restricted Payments made
under Subsection (a); and
(iii) distribute the proceeds of issuances of stock to an
Affiliate (but not any proceeds received in connection with any public
or secondary offering of stock).
At the time the Company pays or makes any such Restricted Payment, it
shall notify the Agent in writing of the amount of such payment, which notice
shall (1) specify under which subparagraph and clause above the Restricted
Payment is being made and (2) contain such information as is necessary to
demonstrate that such dividend is permissible under the applicable subparagraph
and clause.
As used herein, "Maximum Special Dividend Amount" shall mean $64,100,000
plus one-half of the liquidation proceeds of U.S. West, Inc. redeemable
preferred stock owned by the Company, up to a maximum of $25,000,000, provided
that such liquidation proceeds shall be included in the Maximum Special Dividend
Amount only if
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the other half of such liquidation proceeds is used to repay Credit Indebtedness
and the maximum amount that can be included in the component of the Debt
Threshold set forth in Section 8.5(f) relating to Approved Equity Securities is
permanently reduced by the amount of any Special Dividend attributable to such
liquidation proceeds.
8.17 Maintenance of Restricted FSA Securities.
Sell or otherwise dispose of any of the Restricted FSA Securities
for less than the fair market value thereof at the time of sale or disposition.
8.18 Subordinated Debt Indenture.
(a) Enter into, without the prior written consent of the
Required Lenders, any amendment or modification of the Subordinated Debt
Indenture or other documents evidencing or governing the terms of the
Subordinated Debt if such amendment or modification would change (i) the
principal amount of or rate of interest on the Subordinated Debt, (ii)
the terms of repayment of the Subordinated Debt, (iii) the provisions
relating to the deferral of interest on the Subordinated Debt, (iv) any
terms or provisions of Article 12 (Subordination) of the Subordinated
Debt Indenture, (v) the definition of "Event of Default" in the
Subordinated Debt Indenture, or (vi) the provision of the Subordinated
Debt Indenture which requires the trustee to give certain holders of
senior indebtedness notices of defaults, accelerations and certain other
events; provided, however, that the Lenders hereby consent to that
certain First Supplemental Indenture dated December 1, 1995; or
(b) Enter into, without the prior written consent of the Agent,
any material amendment or modification of the Subordinated Debt
Indenture or other documents evidencing or governing the terms of the
Subordinated Debt other than the amendments or modifications requiring
the consent of the Required Lenders pursuant to clause (a) above; or
(c) Consent, without prior written notice to the Agent, to any
change in the trustee under the Subordinated Debt Indenture.
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ARTICLE IX
THE AGENT
---------
9.1 Appointment and Authorization.
(a) Each Lender irrevocably appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms hereof
together with all such powers as are reasonably incidental thereto.
(b) The Agent is hereby authorized to enter into the Security
Agreement on behalf of the Lenders and all obligations of the Lenders
thereunder shall be binding upon each Lender as if such Lender had
executed the Security Agreement. Each Lender hereby appoints and
authorizes the Collateral Agent to act on its behalf in the capacity
described in the Security Agreement and authorizes the Collateral Agent
to act on such Lender's behalf in all respects with regard to
performance under the Security Agreement.
(c) Unless and until the Agent shall have received the
directions of the Required Lenders as provided in Section 10.2(1) or (2)
or of all Lenders, if expressly required hereunder, the Agent may (but
shall not be obligated to) take or refrain from taking such action, or
direct the Collateral Agent to take or refrain from taking such action
with respect to an Event of Default as it shall deem advisable in the
best interests of the Lenders.
(d) The Agent shall not be required to take any action hereunder
if it shall reasonably determine that by so doing it may incur criminal
or civil liability.
9.2 Agent and Affiliates.
The Agent shall have the same rights and powers under this
Agreement as any other Lender and may exercise or refrain from exercising the
same as though it were not the Agent, and the Agent and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with, the Company, any Subsidiary or Affiliate of the Company as if it
were not the Agent hereunder.
9.3 Action by Agent.
The obligations of the Agent hereunder are only those expressly set
forth herein. Without limiting the generality of the foregoing, the Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in this Article IX or in Article X.
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9.4 Consultation with Experts.
The Agent may consult with legal counsel (who may be counsel for
the Company), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
9.5 Liability of Agent.
(a) Neither the Agent nor any of its directors, officers,
agents, or employees shall be liable for any action taken or not taken
by it in connection herewith (i) with the consent or at the request of
the Required Lenders or of all Lenders, if required or (ii) in the
absence of its own gross negligence or willful misconduct.
(b) Neither the Agent (except as otherwise provided in this
Agreement) nor any of its directors, officers, agents or employees shall
be responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in
connection with this Agreement or any Advance hereunder;
(ii) the performance or observance of any of the
covenants or agreements of the Company;
(iii) the satisfaction of any condition specified in
Article V, except receipt of items required to be delivered to the
Agent and the determination of the amount of the Credit
Requirement; or
(iv) the validity, effectiveness or genuineness of this
Agreement, the Notes or any other instrument or writing furnished
in connection herewith.
(c) The Agent shall not incur any liability by acting in reliance
upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex or similar writing) or
telephone communication believed by it to be genuine or, in the case of
a writing, to be signed by the proper party or parties.
9.6 Indemnification.
(a) Each Lender shall, ratably in accordance with its share of
the Aggregate Commitment (or, if the Commitments have been terminated,
then in accordance with its share of aggregate Loans then outstanding)
at the time the Agent or
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the Collateral Agent incurred such liability, indemnify the Agent and
the Collateral Agent (to the extent not reimbursed by the Company)
against any cost, expense (including reasonable counsel fees and
disbursements), claim, demand, action, loss or liability (except such as
result from the indemnified party's gross negligence or willful
misconduct) that the Agent or the Collateral Agent may suffer or incur
in connection with this Agreement or the Security Agreement or any
action taken or omitted by the Agent or the Collateral Agent hereunder
or thereunder.
(b) For the purposes of this Section, the amount of any
Commitment of any Lender shall be the highest amount of such Commitment
of such Lender during the course of any event for which indemnity is
sought.
(c) The provisions of this Section shall survive the termination
of this Agreement.
9.7 Credit Decision.
Each Lender acknowledges that it has itself been and will continue
to be, independently and without reliance upon the Agent or any other Lender,
solely responsible for making its own independent appraisal of and
investigations into the financial condition, creditworthiness, condition,
affairs, status and nature of the Company. Accordingly, each Lender confirms to
the Agent that it has not relied, and will not hereafter rely, on the Agent or
any other Lender (i) except as otherwise provided in this Agreement, to check or
inquire on such Lender's behalf into the adequacy, accuracy or completeness of
any information provided by the Company under or in connection with this
Agreement or the transactions herein contemplated (whether or not such
information has been or is hereafter distributed to such Lender by the Agent) or
(ii) to assess or keep under review on such Lender's behalf the financial
condition, creditworthiness, condition, affairs, status or nature of the Company
or any Approved Investor.
9.8 Resignation or Removal and Appointment of Successor
Agent.
The Agent may resign at any time by giving 90 days prior written
notice thereof to the Lenders and the Company. The Agent may be removed at any
time upon ninety (90) days prior written notice from the Required Lenders. Upon
any such resignation or removal notice the Required Lenders shall have the right
to appoint a successor Agent; provided that such appointment, unless made after
the occurrence of a Default and during the continuance thereof, shall be subject
to the consent of the Company, which consent shall not be unreasonably withheld.
If the Company and/or Required Lenders, as applicable, are unable to agree on
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the appointment of a successor agent within such 90 day period, the retiring
agent shall appoint one of the Lenders as a successor agent for the Lenders.
Upon the appointment of a successor Agent, that successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement; provided, however, that the
resigning Agent shall not be discharged from any liability as a result of its or
its directors', officers', agents' or employees' gross negligence or willful
misconduct in connection with the performance of its duties and obligations
under this Agreement prior to the effective date of its resignation. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
IX shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
9.9 Compensation.
Compensation of the Agent for its services hereunder and
reimbursement for any expenses incurred by it in the performance of its duties
hereunder shall be paid by the Company pursuant to a separate written agreement
between the Agent and the Company.
9.10 Release of Collateral Documents.
The Collateral Agent shall not release any Pledged Items except as
provided herein or in connection with the enforcement of any remedies hereunder.
9.11 Knowledge of Defaults.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Event of Default unless the Agent has received notice from a
Lender or the Company referring to this Agreement, describing such Event of
Default and stating that such notice is a "Notice of Default." The Agent shall
notify the Lenders within a reasonable time after the Agent has notice of the
occurrence of an Event of Default, which notice shall describe the Event of
Default.
9.12 Reports.
The Agent may, at its option with the approval of the Company,
alter the format of any report required hereunder, provided such modified report
contains the same information previously furnished in the unmodified report.
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ARTICLE X
DEFAULTS
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10.1 Defaults.
In case of the happening of any of the following events (herein
called "Events of Default"):
(a) Any principal amount of any Loan made under this Agreement
(other than principal payments required to be made pursuant to Section
2.14(a)) shall not be paid when due and payable; or
(b) Any principal payment required to be made pursuant to
Section 2.14(a) shall not be paid when due and payable, and shall remain
unpaid for one Business Day;
(c) Any interest or Fees due under this Agreement shall not be
paid when due and payable, and shall remain unpaid for five (5) days; or
(d) Any amount, other than principal or interest or Fees,
payable under this Agreement shall not be paid when due and payable and
shall remain unpaid for five (5) days after written notice to the
Company of such nonpayment; or
(e) Any representation or warranty made or deemed made by the
Company (or any of its officers) herein (other than the representations
and warranties contained in Sections 4.6 and 4.7, the inaccuracies of
which shall only cause the Collateral affected thereby to cease to
qualify as Eligible Collateral) in the Security Agreement or in any
certificate, agreement, instrument or statement contemplated by or made
or delivered pursuant to or in connection herewith or therewith shall
prove to have been incorrect when made or deemed made in any material
respect; provided however that if the facts resulting in the breach of
any such representation or warranty are susceptible of correction, such
breach shall not constitute an Event of Default if such facts are
corrected within 30 days after such inaccurate representation or
warranty was made or deemed made; or
(f) The Company shall fail to perform or observe any term,
covenant or agreement contained in Sections 7.10, 8.1, 8.3, 8.4, 8.6,
8.7, 8.9, 8.14(a), 8.15, 8.17 or 8.18; or
(g) The Company shall (i) fail to comply with the covenant
contained in Section 8.12 and such failure remains unremedied for one
Business Day, or (ii) fail to perform any term, covenant or agreement
contained in Sections 7.7(a), 7.9, 8.5, 8.8 or 8.16, and such failure
shall remain unremedied for more than 30 days;
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(h) The Company shall fail to perform or observe any other term,
covenant or agreement contained herein or in the Security Agreement on
its part to be performed or observed and any such failure remains
unremedied for thirty (30) days after written notice thereof shall have
been given to the Company by the Agent or the Collateral Agent; or
(i) An "Event of Default" (as defined in the Other
Facility or any other Credit Document) shall exist; or
(j) Either this Agreement, the Notes or the Security Agreement
shall, at any time after its execution and delivery, for any reason
cease to be in full force and effect (unless such occurrence is in
accordance with its terms or after payment thereof) or shall be declared
to be null and void, or the validity or enforceability thereof shall be
contested by the Company or the Collateral Agent, or the Company or the
Collateral Agent shall deny that it has any further liability or
obligation thereunder; or
(k) The Company, its Parent, Fund American Enterprises Holdings,
Inc. or any of the Company's material Subsidiaries shall (i) be
adjudicated bankrupt or insolvent, (ii) admit in writing its inability
to pay its debts as they mature, (iii) make an assignment for the
benefit of creditors, (iv) fail generally to pay its debts as such debts
become due and payable, (v) apply for or consent to the appointment of
any receiver, trustee, custodian or similar officer for it or for all or
any substantial part of its property; or such receiver, trustee,
custodian or similar officer shall be appointed without the application
or consent of the Company or of such Subsidiary, as the case may be, and
such appointment shall continue undischarged for a period of 60 days,
(vi) institute (by petition, application, answer, consent or otherwise)
any bankruptcy, insolvency, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or similar proceeding relating to it
under the laws of any jurisdiction, (vii) have any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding (by petition, application
or otherwise) instituted against it and remain undismissed for a period
of 60 days, or (viii) have any judgment, writ, warrant of attachment or
execution or similar process issued or levied in respect of any of its
obligations (alleged or otherwise) against any of its property involving
any amount in excess of $5,000,000 and such judgment, writ or similar
process shall not be released, vacated, stayed or fully bonded within 30
days after its issue or levy; or
(l) The Company or any of the Company's material Subsidiaries
shall (i) default in the payment when due (after
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giving effect to any available cure period) of any principal of or
interest on any of its Debt other than the Credit Indebtedness in excess
of $25,000,000 in the aggregate or (ii) any event specified in any note,
agreement, indenture or other document evidencing or relating to any
such Debt in excess of $25,000,000 shall occur if the effect of such
event is to cause, or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause, such
Debt to become due, or to be prepaid in full, prior to its stated
maturity, and in either case any notice or cure period has expired and
such default has not been waived in writing by the holder of such Debt;
or
(m) An event or condition occurs or exists with respect to any
Plan concerning which the Company is under an obligation to furnish a
report to the Lenders in accordance with Section 7.7(h) and as a result
of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate has incurred a liability
to a Plan or the PBGC (or any combination of the foregoing) which is
material in relation to the financial position of the Company; or
(n) A Change in Control shall occur with respect to the
Company; or
(o) The lien against the Collateral created under the Security
Agreement for the benefit of the Secured Parties shall cease to be a
perfected, first priority security interest; provided, however, that if
the Secured Parties shall cease to have a perfected, first priority
interest in a portion of the Collateral, such cessation shall not
constitute an Event of Default so long as the Collateral in which the
Secured Parties have a perfected, first priority security interest is
sufficient to cause the Borrowing Base to exceed the Credit Requirement;
then, and in every such event and at any time thereafter during the continuance
of such event, the Agent and the Lenders shall have the rights described in the
following Sections of this Article X.
10.2 Remedies.
(1) Upon the occurrence of any Event of Default the Agent may,
and at the direction of the Required Lenders shall, at the same or
different times, take one or more of the following actions: (i) by
notice to the Company terminate the Commitments and they shall thereupon
terminate, (ii) by notice to the Company declare the Obligations to be,
and the Obligations shall thereupon become, immediately due and payable
without presentment, demand, protest or other
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notice of any kind, all of which are hereby waived by the Company,
provided that in the case of any of the Events of Default specified in
subparagraph (k) of Section 10.1, without any notice to the Company or
any other act by the Agent or the Lenders, the Commitments shall
thereupon terminate and the Obligations shall become immediately due and
payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Company. Following the
occurrence and during the continuance of a Default, no Lender shall be
obligated to fund any Loan hereunder.
(2) Following the occurrence and during the continuance of an
Event of Default, the Company agrees that the Company and the Agent
shall, at the request of the Required Lenders, implement certain
procedures with respect to the Company's funding of AP Mortgages, all at
the Company's sole expense. Such procedures may include, but are not
limited to: (i) reducing the advance rate against AP Mortgages for
purposes of determining the Mortgage Collateral Value component of the
Borrowing Base, (ii) requiring that if (A) AP Mortgages are funded with
wire transfers, such wire transfers originate from accounts located at a
lending office of a Lender, (B) AP Mortgages are funded from accounts
which are not located at a lending office of a Lender, the financial
institution which holds such account enter into an agreement with the
Company and the Agent which shall provide that the Agent shall have
exclusive dominion and control over the funds in such account, and (iii)
requiring the Company to provide the Agent and the Lenders with such
information regarding the funding of such AP Mortgages as the Required
Lenders may reasonably request. The Company, at its expense, shall from
time to time execute and deliver to the Agent or the Collateral Agent
all such assignments, certificates, supplemental documents, and
financing statements, and shall do all other acts or things, as the
Agent may reasonably request in order to more fully implement such
procedures.
(3) Upon the occurrence of any Event of Default, the Agent and
the Collateral Agent, on behalf of the Secured Parties, shall be
entitled to all rights and remedies hereunder and under the Security
Agreement and all other rights and remedies at law or in equity existing
in or conferred upon the Secured Parties by other jurisdictions or other
applicable law.
(4) The Company waives any right to require the Agent, the
Collateral Agent or any Lender to (i) proceed against or exhaust any of
its remedies against the Company or any other Person in any particular
order, (ii) proceed against or exhaust any of the Collateral or pursue
its rights and
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remedies as against the Collateral in any particular order or (iii)
pursue any other remedy in its power.
(5) The Agent on behalf of the Lenders may, but shall not be
obligated to, advance any sums or do any act or thing necessary to
uphold and enforce the lien and priority of, or the security intended to
be afforded by, any Pledged Mortgage, including, without limitation,
payment of delinquent taxes or assessments and insurance premiums. The
Company shall provide any and all information required by the Agent or
the Collateral Agent to administer this Agreement or collect on the
Collateral. All advances, charges, costs and expenses, including
reasonable attorneys fees, incurred or paid by the Agent in exercising
any right, power or remedy conferred by this Agreement, or in the
enforcement hereof (or by any Lender acting on instruction of the
Required Lenders in the enforcement hereof), together with interest
thereon at the rate per annum of two percent (2%) plus the Alternate
Base Rate from the time of payment until repaid, shall become a part of
the Credit Indebtedness.
(6) No failure on the part of the Agent or any Lender to
exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Agent or any Lender of any right, power or
remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein
provided are cumulative and are not exclusive of any remedies provided
by law.
10.3 Notice of Default.
The Agent may, and at the direction of the Required Lenders shall,
give notice to the Company under Section 10.1(d), 10.1(h) or 10.2 and shall
thereupon notify all Lenders thereof.
10.4 Application of Proceeds.
(a) After the occurrence of an Event of Default, the portion of the
proceeds of any sale or enforcement of all or any part of the Collateral which
is delivered to the Agent by the Collateral Agent pursuant to the provisions of
the Security Agreement shall be applied by the Agent, after taking into account
any adjustments made pursuant to Section 2.3(e):
First, to the extent not already paid from the Collateral
proceeds by the Collateral Agent, to payment of all costs and expenses
of such sale or enforcement, including reasonable compensation to the
Agent's agents and counsel, and all expenses, liabilities and advances
made or incurred by the Agent or any Lender acting on instructions of
the Required Lenders in connection therewith;
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Second, to the extent not already paid from the Collateral
proceeds by the Collateral Agent, to the payment of all costs and
expenses incurred by the Collateral Agent under the Security Agreement;
Third, to the payment of accrued and unpaid interest on the
Credit Indebtedness (including the accrued and unpaid interest portion,
if any, of the Approved GNMA Letter of Credit Obligations), fees due
hereunder and all other unpaid Credit Indebtedness other than the
principal amount of Loans, the face amount (whether drawn or undrawn) of
Approved GNMA Letters of Credit, and the Approved Secured Rate Hedging
Obligations, ratably according to the respective amounts owing or due
each Lender or Non-Lender Balance Bank until such amounts are paid in
full;
Fourth, to the total unpaid principal amount of all Loans and to
the unpaid face amount (whether drawn or undrawn) of Approved GNMA
Letters of Credit, and to all Approved Secured Rate Hedging Obligations
then due and payable, ratably according to the amount due each Lender
(provided, however, that proceeds applicable to the undrawn face amount
of Approved GNMA Letters of Credit shall be distributed in accordance
with Section 10.5 below) until such amounts are paid in full; and
Fifth, to the payment to the Company, or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
(b) The Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with
this Agreement.
(c) If the proceeds of any such sale are insufficient to cover
the costs and expenses of such sale, as aforesaid, and the payment in
full of the Credit Indebtedness, the Company shall remain liable for any
deficiency.
10.5 Letter of Credit Cash Collateral Accounts.
(a) Upon the Agent's receipt of any Collateral proceeds to be
applied to the undrawn face amount of any Approved GNMA Letters of
Credit pursuant to Section 10.4(a), a separate cash collateral account
(each a "Letter of Credit Account") shall be established with the Agent
for each outstanding Approved GNMA Letter of Credit. Each Letter of
Credit Account shall be established in the name of the Company but shall
be under the sole dominion and control of the Agent, for the benefit of
the Lenders, and the Company shall have no interest therein. All funds
deposited into the Letter of
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Credit Accounts from time to time shall be invested by the Agent at its
discretion in certificates of deposit of First Chicago having a maturity
not exceeding 30 days, and all amounts earned thereon shall also be held
in the Letter of Credit Account to be disbursed in accordance with
Section 10.5(b). In addition to the foregoing, the Company hereby grants
to the Agent, for the benefit of the Lenders, a properly perfected
security interest in and to each Letter of Credit Account and any funds
that may hereafter be on deposit in such account and the proceeds
thereof.
(b) Upon the Agent's receipt of any Collateral proceeds to be
applied to the undrawn face amount of any particular Approved GNMA
Letter of Credit pursuant to Section 10.4, such proceeds shall be
deposited by the Agent into the Letter of Credit Account applicable to
that particular Approved GNMA Letter of Credit. Such funds shall be
promptly disbursed from the applicable Letter of Credit Account to
reimburse the applicable Issuing Bank for drafts drawn from time to time
under the applicable Approved GNMA Letter of Credit. If an Approved GNMA
Letter of Credit is drawn upon and the funds held in the Letter of
Credit Account applicable to that Approved GNMA Letter of Credit are
insufficient to reimburse the Issuing Bank in full for all Approved GNMA
Letter of Credit Obligations applicable thereto, such unreimbursed
obligations shall, for purposes of Section 10.4, thereafter be
considered unpaid Loan principal due and owing to the Issuing Lender. If
(i) an Approved GNMA Letter of Credit is fully drawn upon and all
Approved GNMA Letter of Credit Obligations relating thereto are paid in
full or (ii) an Approved GNMA Letter of Credit expires or is otherwise
terminated (and thus no further Approved GNMA Letter of Credit
Obligations exist with respect to such Approved GNMA Letter of Credit),
then any funds then held in the Letter of Credit Account relating to
such Approved GNMA Letter of Credit shall be considered Collateral
proceeds which shall again be distributed to the Agent to be disbursed
in accordance with Section 10.4.
ARTICLE XI
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
11.1 Successors and Assigns.
The terms and provisions of the Credit Documents shall be binding
upon and inure to the benefit of the Company and the Lenders and their
respective successors and assigns, except that the Company shall not have the
right to assign its rights or obligations under the Credit Documents without the
consent of all the Lenders and any assignment by any Lender must be made in
compliance with Section 11.3. The Agent may treat the payee of
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any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 11.3 in the case of an assignment thereof or, in the
case of any other transfer, a written notice of the transfer is filed with the
Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Credit Documents. Any request,
authority or consent of any person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
11.2 Participations.
(a) Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held
by such Lender, any Commitment of such Lender or any other interest of
such Lender under the Credit Documents. In the event of any such sale by
a Lender of participating interests to a Participant, such Lender's
obligations under the Credit Documents shall remain unchanged, such
Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, such Lender shall remain the holder
of any such Note for all purposes under the Credit Documents, all
amounts payable by the Company under this Agreement shall be determined
as if such Lender had not sold such participating interests, and the
Company and the Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under the Credit Documents.
(b) Voting Rights. Except as otherwise expressly provided in the
Credit Documents, each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or
waiver of any provision of the Credit Documents other than any
amendment, modification or waiver with respect to any Loan or Commitment
in which such Participant has an interest which (i) forgives principal,
interest or Fees or reduces the interest rate or Fees payable with
respect to any such Loan or Commitment, (ii) postpones any date fixed
for any regularly-scheduled payment of principal of, or interest on, any
such Loan or Fees on any such Commitment, (iii) releases Collateral
beyond the releases expressly provided for herein, or (iv) extends the
Termination Date.
(c) Benefit of Set-Off. The Company agrees that each Participant
shall be deemed to have the right of set-off provided pursuant to
Section 12.10(a) in respect of its
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participating interest in amounts owing under the Credit Documents to
the same extent as if the amount of its participating interest were
owing directly to it as a Lender under the Credit Documents, provided
that each Lender shall retain the right of set-off provided in Section
12.10(a) with respect to the amount of participating interests sold to
each Participant. The Lenders agree to share with each Participant, and
each Participant, by exercising the right of set-off provided in Section
12.10(a), agrees to share with each Lender, any amount received pursuant
to the exercise of its right of set-off, such amounts to be shared in
accordance with Section 12.10(b) as if each Participant were a Lender.
The Company is not a party to the agreement among the Lenders and
Participants set forth in the immediately preceding sentence, and such
sentence may be amended without the consent of the Company.
11.3 Assignments.
(a) Permitted Assignments. Any Lender may, with the prior
written consent of Agent (which consent shall not be unreasonably
withheld or delayed), in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more banks
or other entities ("Purchasers") all or any part of its rights and
obligations under the Credit Documents, provided that, unless an Event
of Default has occurred and is then continuing, the prior written
consent of the Company to the identity of any such Purchaser shall be
required, and the Company agrees that such consent shall not be
unreasonably withheld or delayed, except that no consent of the Agent or
the Company shall ever be required for (i) any assignment to a Person
directly or indirectly controlling, controlled by or under direct or
indirect common control with the assigning Lender or (ii) the pledge or
assignment by a Lender of such Lender's Note and other rights under the
Loan Documents to any Federal Reserve Bank in accordance with applicable
law. Notwithstanding the foregoing, no assignment of Loans or
Commitments which requires the consent of the Agent or the Company may
be made if the assignment would result in either the assigning Lender or
the Purchaser (which may be an existing Lender) holding a Commitment of
less than $10,000,000; provided, however, that if (due to reductions in
the Aggregate Commitment) a Lender's Commitment is less than
$10,000,000, such Lender may assign all (but not less than all) of its
Commitment in accordance with the terms of this Section notwithstanding
the fact that such Commitment is less than $10,000,000.
(b) Effect; Effective Date. Upon delivery to the Agent of a
New/Modified Commitment Supplement in the form of Exhibit H hereto
executed by the assigning Lender and the Purchaser and payment to the
Agent of an assignment fee of
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$3,500, such assignment shall become effective on the effective date
specified in such notice of assignment. On and after the effective date
of such assignment, such Purchaser shall for all purposes be a Lender
party to this Agreement and any other Credit Document executed by the
Lenders and shall have all the rights and obligations of a Lender under
the Credit Documents, to the same extent as if it were an original party
hereto, and no further consent or action by the Company, the Lenders or
the Agent shall be required to release the transferor Lender with
respect to the percentage of the Commitments and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section, the transferor Lender, the Agent and the
Company shall make appropriate arrangements so that replacement Notes
are issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their respective Commitments, as adjusted
pursuant to such assignment.
11.4 Dissemination of Information.
The Company authorizes each Lender to disclose to any Participant
or any other Person acquiring an interest in the Credit Documents by operation
of law (each a "Transferee") and any prospective Transferee any and all
information in such Lender's possession concerning the creditworthiness of the
Company and its Subsidiaries, provided that the transferor shall obtain from any
such Transferee or prospective Transferee, prior to disclosing any such
information, a confidentiality agreement executed by the Transferee or
prospective Transferee agreeing to be bound by any confidentiality requirements
with respect to such information which are imposed upon the Lenders under the
terms of the Credit Documents.
11.5 Tax Treatment.
If any interest in any Credit Document is transferred to any
Transferee which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
all applicable provisions of the Code with respect to withholding and other tax
matters.
-101-
<PAGE> 108
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Immediately Available Funds.
All payments and other transfers of funds under this Agreement
shall be made in funds immediately available at the place of payment unless the
recipient thereof shall otherwise agree.
12.2 Notices.
Except where instructions or notices are expressly authorized
elsewhere in this Agreement to be given by telephone or by other means of
transmission, all instructions, notices and other communications to be given to
any party hereto shall be in writing and shall be personally delivered or sent
by certified mail, postage prepaid, private delivery service or by facsimile,
and shall be deemed to be given for purposes of this Agreement on the day (or at
the time of day, if applicable) when actually received by the intended party at
its address or facsimile or telephone number as set forth below (or as such
party may specify to the other parties in writing). Any requirement that notice
be given to any person under this Agreement shall be deemed to require notice to
the Agent, the Company and each Lender, unless otherwise expressly provided
herein. Whenever the giving of notice by telephone is permitted by this
Agreement, such notice shall be confirmed in writing within three days.
The addresses for notices to the parties are as set forth below
their signatures on the signature pages hereto or on any assignment.
12.3 Survival and Termination of Agreement.
All covenants, agreements, representations and warranties made
herein and in the certificates and other documents delivered pursuant hereto
shall survive the funding of the Loans and shall continue in full force and
effect to the Termination Date or so long as any amount payable to the Lenders
in connection with this Agreement is unpaid, whichever is later, at which time
this Agreement shall terminate, it being expressly understood that the
obligations of the Company under Sections 3.1, 3.3, 7.8 and 7.15 shall
(notwithstanding anything in this Agreement to the contrary) survive any
termination of this Agreement. Whenever in this Agreement any party is referred
to, such reference shall be deemed to include the successors and assigns of such
party, but no assignment or transfer (by operation of law or otherwise) of this
Agreement by the Company or any of its rights or duties hereunder may be made
without the prior written consent of all of the Lenders; and all covenants,
promises and agreements by or on behalf of the Company which are
-102-
<PAGE> 109
contained in this Agreement shall inure to the benefit of the
successors and assigns of the Lenders.
12.4 Fees and Expenses of the Lenders.
The Company will pay (a) all reasonable out-of-pocket costs and
expenses incurred by the Agent or by the Collateral Agent (including the fees,
out-of-pocket expenses and other reasonable expenses of counsel to the Agent or
the Collateral Agent) in connection with the preparation, execution and delivery
of this Agreement, the Notes, the Security Agreement and any other agreements or
documents referred to herein or therein and any amendments thereto, and (b) all
reasonable out-of-pocket costs and expenses incurred by the Agent, the
Collateral Agent and the Lenders (including the fees, out-of-pocket expenses and
other reasonable expenses of counsel to the Lenders) in connection with the
enforcement and protection of the rights of the Lenders under this Agreement,
the Notes, the Security Agreement or any other agreement or document referred to
herein or therein.
12.5 Applicable Law.
This Agreement shall be construed in accordance with and governed
by the law of the State of Illinois.
12.6 Modification of Agreement.
Except for certain changes in a Lender's Commitment or admission of
a new Lender which (pursuant to Section 2.1) do not require any consents or
approvals from the other Lenders but which require a New/Modified Commitment
Supplement executed by the Agent, the Company and the Lender(s) being added or
modifying their Commitment, no provisions of this Agreement may be amended or
waived unless such amendment or waiver is in writing and is signed by the
Company, and the Agent if the rights or duties of the Agent are affected
thereby, and
(1) each Lender if such amendment or waiver
(i) reduces or forgives any principal of any
unpaid Loan or any interest thereon or any Fees due to
such Lender hereunder; or
(ii) postpones the date fixed for any payment of
principal of or interest on any unpaid Loan or any Fees payable
to such Lenders; or
(iii) changes the amount of payment of principal
of or interest on any unpaid Loan or any Fees payable to the
Lenders hereunder; or
-103-
<PAGE> 110
(iv) changes or waives any of the conditions precedent
to the initial Advance hereunder or any subsequent Advance; or
(v) changes the amount of any such Lender's
Commitment, except as expressly provided for herein; or
(vi) would amend or waive the method of calculating
the Borrowing Base; or
(vii) would amend or waive the provisions of Section
2.14; or
(viii) extends the Termination Date; or
(ix) releases any Collateral beyond the releases
expressly provided for herein or in the Security Agreement; or
(x) changes or waives any restriction on the
Company's ability to assign its rights or obligations
under any of the Credit Documents; or
(xi) changes or waives any funding
requirement, including, without limitation, any Lending
Sublimits; or
(xii) changes or waives any yield protection;
or
(xiii) changes or waives any provision herein
regarding the indemnification of the Agent, the Collateral Agent
or such Lender; or
(xiv) changes the definition of Required Lenders
or modifies any requirement for consent by all of the Lenders;
or
(xv) changes or waives any provision herein
regarding the allocation among the Lenders of any payments or
proceeds received by the Agent hereunder; or
(2) the Required Lenders in the case of all other waivers or
amendments.
12.7 Non-Waiver of Rights by the Lenders.
Neither any failure nor any delay on the part of the Agent or
the Lenders in exercising any right, power or privilege hereunder or under the
Security Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof
-104-
<PAGE> 111
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
12.8 Dealings with the Company and its Affiliates.
The Lenders and their Affiliates may accept deposits from, extend
credit to and generally engage in any kind of banking, trust or other business
with the Company and any of its Affiliates regardless of the capacity of the
Lenders hereunder.
12.9 Changes in GAAP.
The parties agree that if there are any changes in GAAP in the
future which result in material changes to the presentation of the Company's
financial condition in accordance with GAAP in such a way as to alter the
material intent of this Agreement, then the parties will negotiate in good faith
to attempt to agree on such modifications to this Agreement as may be necessary
to preserve the original intent of this Agreement in light of such revised GAAP
rules, provided that unless and until a written agreement is entered into by all
parties hereto, no changes to this Agreement shall be effective and all
calculations required to be made in accordance with GAAP hereunder shall
continue to be made as if GAAP had not changed.
12.10 Set-Off.
(a) If an Event of Default shall have occurred, each Lender
shall have the right, at any time and from time to time without notice
to the Company, any such notice being hereby expressly waived, to
set-off and to appropriate or apply any and all deposits of money or
property or any other indebtedness at any time held or owing by such
Lender to or for the credit or the account of the Company against and on
account of all outstanding Credit Indebtedness and all Credit
Indebtedness which from time to time may become due hereunder and all
other obligations and liabilities of the Company under this Agreement,
regardless of the adequacy of any Collateral and irrespective of whether
or not such Lender shall have made any demand hereunder and whether or
not said obligations and liabilities shall have matured.
(b) Each Lender agrees that if it shall, by exercising any right
of set-off or counterclaim or otherwise, receive payment of a proportion
of the aggregate amount of principal, interest or Fees due with respect
to this Agreement and the Notes held by it which is greater than the
proportion received by any other Lender in respect of the aggregate
amount of principal, interest or Fees due with respect to this Agreement
and the Notes held by such other Lender, the Lender receiving such
proportionately greater payment shall purchase such participations in
the Notes held by the other
-105-
<PAGE> 112
Lenders and such other adjustments shall be made, as may be required so
that all such payments of principal, interest or Fees shall be shared by
the Lenders hereunder pro rata according to their respective shares of
the Credit Indebtedness. Each Lender agrees to exercise any and all
rights of set-off, counterclaim or bankers' lien relating to the Credit
Indebtedness first fully against the Credit Indebtedness and only then
to any other Debt of the Company to such Lender; provided that any
Lender which is also a lender under the Other Facility may exercise any
and all rights of set-off, counterclaim or bankers' lien relating to the
Credit Indebtedness or the indebtedness under the Other Facility against
either the Credit Indebtedness or the indebtedness under the Other
Facility (or a combination thereof) in such proportions and priorities
as such Lender may elect. The Company is not a party to the agreement
among the Lenders set forth in this Section 12.10(b), and such Section
may be amended without the consent of the Company.
(c) The Company agrees that funds received and held by the
Company as custodian for FNMA, GNMA or other mortgage pools which are
deposited into accounts with any Lender shall be clearly identified as
custodial accounts, and each Lender agrees that each provision of the
foregoing paragraphs of this Section 12.10 shall not apply to such
custodial accounts. The Company shall not deposit any of its general
funds in any custodial accounts or otherwise commingle funds in any
custodial accounts.
12.11 Counterparts.
This Agreement may be executed in counterparts which, taken
together, shall constitute a single document.
12.12 Severability.
In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12.13 Headings.
Section headings in the Credit Documents are for convenience of
reference only and shall not govern the interpretation of any of the provisions
of the Credit Documents.
-106-
<PAGE> 113
12.14 Entire Agreement.
The Credit Documents embody the entire agreement and understanding
among the Company, the Agent and the Lenders and supersede all prior agreements
and understandings among the Company, the Agent and the Lenders relating to the
subject matter thereof.
12.15 Consent of Jurisdiction.
THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY CREDIT
DOCUMENTS AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR
ANY LENDER TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE COMPANY AGAINST THE AGENT OR ANY
LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY CREDIT DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
12.16 Waiver of Jury Trial.
THE COMPANY, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY CREDIT DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
-107-
<PAGE> 114
IN WITNESS WHEREOF, the Company and the Lenders have caused this
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written:
SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
----------------------------------
Larry N. Ciofu
Vice President
Address for Notices:
27555 Farmington Road
Farmington Hills, MI 48334-3357
Attn: Chief Financial Officer
Telephone No.: (248) 488-8639
Facsimile No.: (248) 488-7300
and
Attn: Vice President/Treasury
Telephone No.: (248) 488-7338
Facsimile No.: (248) 488-7812
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
----------------------------------
Andrew H. Heinecke
First Vice President
Address for Notices Regarding
Fundings:
One First National Plaza
Chicago, Illinois 60670
Attn: Denise Lee
Telephone No.: (312) 732-6455
Facsimile No.: (312) 732-3852
Address for Other Notices:
One First National Plaza
Chicago, Illinois 60670
Attn: Patrick J. Power
Telephone No.: (312) 732-1188
Facsimile No.: (312) 732-6222
-108-
<PAGE> 115
THE FIRST NATIONAL BANK OF CHICAGO
By:
----------------------------------
Andrew H. Heinecke
First Vice President
Address for Notices:
One First National Plaza
Chicago, Illinois 60670
Attn: Patrick J. Power
Telephone No.: (312) 732-1188
Facsimile No.: (312) 732-6222
BANK OF AMERICA NT & SA
By:
----------------------------------
Thomas A. Pizurie
Vice President
Address for Notices:
275 S. Valencia Avenue, #6739
Brea, California 92823
Attn: Thomas A. Pizurie
Vice President
Telephone No.: (714) 792-6706
Facsimile No.: (714) 792-6715/6716
THE BANK OF NEW YORK
By:
----------------------------------
Patricia M. Dominus
Vice President
Address for Notices:
One Wall Street, 17th Floor
New York, New York 10286
Attn: Patricia M. Dominus
Vice President
Telephone No.: (212) 635-6467
Facsimile No.: (212) 635-6468
-109-
<PAGE> 116
BANKERS TRUST COMPANY
By:
----------------------------------
John O'Rourke
Managing Director
Address for Notices:
130 Liberty Street, 25th Floor
Mail Stop 2252
New York, New York 10006
Attn: John O'Rourke
Managing Director
Telephone No.: (212) 250-4179
Facsimile No.: (212) 669-0738
BANQUE PARIBAS
By:
----------------------------------
Victor S. Brown
Assistant Vice President
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Address for Notices:
The Equitable Tower
787 Seventh Avenue
New York, New York 10019
Attn: Victor S. Brown
Assistant Vice President
Telephone No.: (212) 841-2117
Facsimile No.: (212) 841-2689
-110-
<PAGE> 117
CIBC OPPENHEIMER CORP., as agent for
CIBC, INC.
By:
----------------------------------
Gerald Girardi
Executive Director
Address for Notices:
425 Lexington Avenue, 8th Floor
New York, New York 10017
Attn: Gerald Girardi
Managing Director
Telephone No.: (212) 856-3649
Facsimile No.: (212) 856-3558
with a copy to:
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attn: Kim Perrone
Telephone No.: (770) 319-4829
Facsimile No.: (770) 319-4950
COMERICA BANK
By:
----------------------------------
Dan Roman
Vice President
Address for Notices:
One Detroit Center
500 Woodward Avenue, MC3280
Detroit, Michigan 48226
Attn: Dan Roman
Vice President
Telephone No.: (313) 222-3803
Facsimile No.: (313) 222-3330
-111-
<PAGE> 118
FIRST UNION NATIONAL BANK
By:
----------------------------------
John P. White
Vice President
Address for Notices:
1339 Chestnut Street, FC 1-8-12-7
Philadelphia, PA 19107-3579
Attn: John P. White
Vice President
Telephone No.: (215) 786-3191
Facsimile No.: (215) 786-8304
CREDIT LYONNAIS NEW YORK BRANCH
By:
----------------------------------
W. Jay Buckley
Vice President
Address for Notices:
1301 Avenue of the Americas
New York, New York 10019
Attn: W. Jay Buckley
Vice President
Telephone No.: (212) 261-7340
Facsimile No.: (212) 261-3401
FLEET BANK N.A.
By:
----------------------------------
Gerard Painter
Vice President
Address for Notices:
1185 Avenue of the Americas
2nd Floor
New York, New York 10036
Attn: Gerard Painter
Vice President
Telephone No.: (212) 819-6081
Facsimile No.: (212) 819-6207
-112-
<PAGE> 119
GUARANTY FEDERAL BANK, F.S.B.
By:
-----------------------------------
Gregory Jackson
Title:
--------------------------------
Address for Notices:
8333 Douglas Avenue
Suite 1100
Dallas, Texas 75225
Attn: Mike Barber
Telephone No.: (214) 360-2872
Facsimile No.: (214) 360-1660
HARRIS TRUST AND SAVINGS BANK
By:
-----------------------------------
Michael A. Houlihan
Vice President
Address for Notices:
111 West Monroe Street
Chicago, Illinois 60603
Attn: Michael A. Houlihan
Vice President
Telephone No.: (312) 461-4514
Facsimile No.: (312) 765-8382
MARINE MIDLAND BANK
By:
-----------------------------------
Paul A. Narduzzo
Administrative Vice President
Address for Notices:
One Marine Midland Center
27th Floor
Buffalo, New York 14203
Attn: Paul A. Narduzzo
Administrative Vice President
Telephone No.: (716) 841-4525
Facsimile No.: (716) 841-4199
-113-
<PAGE> 120
NATIONAL CITY BANK OF KENTUCKY
By:
----------------------------------
Mary Jo Reiss
Banking Officer
Address for Notices:
421 W. Market Street
Louisville, Kentucky 40202
Attn: Mary Jo Reiss
Banking Officer
Telephone No.: (502) 581-4179
Facsimile No.: (502) 581-4154
NATIONSBANK, N.A.
By:
----------------------------------
Chad Patton
Assistant Vice President
Address for Notices:
901 Main Street, 51st Floor
Dallas, Texas 75283-3748
Attn: Chad Patton
Assistant Vice President
Telephone No.: (214) 508-0505
Facsimile No.: (214) 508-0338
PNC BANK, KENTUCKY, INC.
By:
----------------------------------
Sloane Graff
Vice President
Address for Notices:
500 West Jefferson, Suite 1200
Louisville, Kentucky 40202
Attn: Sloane Graff
Vice President
Telephone No.: (502) 581-4607
Facsimile No.: (502) 581-3844
-114-
<PAGE> 121
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By:
----------------------------------
Kenneth R. Crespo
Vice President
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Address for Notices:
1211 Avenue of the Americas
New York, New York 10036
Attn: Kenneth R. Crespo
Vice President
Telephone No.: (212) 852-6044
Facsimile No.: (212) 852-6148
with a copy to:
233 West Wacker Drive
Suite 5210
Chicago, Illinois 60606
Attn: David Pfeiffer
Telephone No.: (312) 930-9200
Facsimile No.: (312) 930-9281
CHASE BANK OF TEXAS
By:
----------------------------------
Cynthia Crites
Vice President
Address for Notices:
717 Travis, 6th Floor South
Houston, Texas 77002
Attn: Cynthia Crites
Vice President
Telephone No.: (713) 216-4425
Facsimile No.: (713) 216-2082
-115-
<PAGE> 122
UNION BANK OF CALIFORNIA, N.A.
By:
----------------------------------
Donald H. Rubin
Vice President
Address for Notices:
350 California Street, 6th Floor
San Francisco, California 94104
Attn: Donald H. Rubin
Vice President
Telephone No.: (415) 705-7060
Facsimile No.: (415) 705-7037
BANK HAPOALIM
By:
----------------------------------
Michael J. Byrne
Vice President
By:
----------------------------------
Thomas J. Hepperle
Vice President
Address for Notices:
225 North Michigan Avenue
Suite 900
Chicago, Illinois 60601
Attn: Mike Kearney
Vice President
Telephone No.: (312) 228-6425
Facsimile No.: (312) 228-6490
-116-
<PAGE> 123
MICHIGAN NATIONAL BANK
By:
----------------------------------
Eric Haege
Vice President
Address for Notices:
27777 Inkster Road
Farmington Hills, Michigan 48334
Attn: Eric Haege, Mail Code 10-36
Vice President
Telephone No.: (248) 473-4374
Facsimile No.: (248) 473-4345
HIBERNIA BANK
By:
----------------------------------
Stephanie Freeman
Title:
-------------------------------
Address for Notices:
313 Carondelet Street, 12th Floor
New Orleans, Louisiana 70130
Attn: Stephanie Freeman
Telephone No.: (504) 533-3345
Facsimile No.: (504) 533-5344
-117-
<PAGE> 124
SCHEDULE 1
----------
APPLICABLE MARGIN
-----------------
<TABLE>
<CAPTION>
=============================================================================================================================
Ratings: S&P and Moody's At Least BBB- and At Least BBB- If Neither of the Preceding
Baa3 or Baa3* Classifications Applies
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Applicable Margin 0.50% 0.75% 0.85%
=============================================================================================================================
</TABLE>
The Applicable Margin for each Rate Option shall be the applicable percentage
per annum set forth above, which is based on the Company's long term unsecured
debt ratings, changing on the first Business Day following the date on which
such ratings change is announced by S&P or Moody's, as the case may be, for all
Eurodollar Interest Periods, whether then-outstanding or commencing thereafter,
and for all Discount Periods commencing more than two (2) Business Days after
the date of such change. Each rating classification sets forth the S&P rating
and the Moody's rating, respectively. For the column noted with an asterisk (*),
if on any day the ratings of S&P and Moody's are not both at the required level,
the higher rating will be the applicable rating for purposes of determining the
classification unless the lower rating is more than one rating category below
the minimum rating for such rating agency under such column, in which event the
higher rating will be disregarded, the lower rating will be deemed to have been
one rating category higher than the actual reported lower rating, and the column
applicable using such deemed lower rating shall apply. If for any reason the
Company's unsecured long term debt is not rated by both S&P and Moody's, the
column headed "If Neither of the Preceding Classifications Applies" shall be
used.
-118-
<PAGE> 125
SCHEDULE 2
FACILITY FEE RATE
<TABLE>
<CAPTION>
=============================================================================================================================
Ratings: S&P and Moody's At Least BBB- and At Least BBB- If Neither of the Preceding
Baa3 or Baa3* Classifications Applies
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Facility Fee Rate .15% .20% .25%
=============================================================================================================================
</TABLE>
The Facility Fee Rate for this Facility shall be the applicable percentage per
annum set forth above, which is based on the Company's long term unsecured debt
ratings, changing on the first Business Day following the date on which such
ratings change is announced by S&P or Moody's, as the case may be. Each rating
classification sets forth the S&P rating and the Moody's rating, respectively.
For the column noted with an asterisk (*), if on any day the ratings of S&P and
Moody's are not both at the required level, the higher rating will be the
applicable rating for purposes of determining the classification unless the
lower rating is more than one rating category below the minimum rating for such
rating agency under such column, in which event the higher rating will be
disregarded, the lower rating will be deemed to have been one rating category
higher than the actual reported lower rating, and another column will be
applicable using such deemed lower rating. If for any reason the Company's
unsecured long term debt is not rated by both S&P and Moody's, the column headed
"If Neither of the Preceding Classifications Applies" shall be used.
-119-
<PAGE> 126
EXHIBIT A
LIST OF APPROVED INVESTORS
-120-
<PAGE> 127
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
Dated as of:
---------------
Reference is made to that certain Fourth Amended and Restated Revolving
Credit Agreement among the Company, The First National Bank of Chicago,
individually and as administrative agent, and the lenders named therein, dated
as of July ___, 1998 (the "Credit Agreement"). Capitalized terms not otherwise
defined herein are used with the same meanings as in the Credit Agreement.
1. BORROWING BASE:
Eligible Mortgage Loans
(Mortgage Collateral Value):
Eligible Delivered Mortgages $
--------------------
Eligible AP Mortgages $
--------------------
Total Pledged Items $
--------------------
Percentage Factor 98%
Eligible Pledged Securities
(MBS Value) $
--------------------
Percentage Factor 99%
(i) Borrowing Base from
Mortgage Loans $
--------------------
(ii) Borrowing Base from
Pledged Securities $
--------------------
(A) BORROWING BASE FROM
ALL PLEDGED ITEMS $
--------------------
Eligible Repurchased Agency
Loans and Receivables $
--------------------
Percentage Factor 90%
-121-
<PAGE> 128
(B) BORROWING BASE FROM
REPURCHASED AGENCY LOANS
AND RECEIVABLES $
--------------------
Eligible Servicing Sale Receivables $
--------------------
Percentage Factor 75%
(C) BORROWING BASE FROM
ELIGIBLE SERVICING SALE RECEIVABLES $
--------------------
(D) BALANCE IN SETTLEMENT ACCOUNT $
--------------------
(E) CASH AND CASH EQUIVALENTS $
--------------------
SUM OF (A) - (E) ABOVE $
--------------------
Reconciling Items:
Timing Difference $
--------------------
Loan Detail Difference $
--------------------
BORROWING BASE $
--------------------
Credit Requirement:
Facility Advances $
--------------------
Approved Secured Rate Hedging Obligations $
--------------------
Outstanding CPNs $
--------------------
Approved GNMA Letter of Credit Obligations $
--------------------
SUM OF CREDIT REQUIREMENT $
--------------------
EXCESS OF AGGREGATE BORROWING
BASE OVER CREDIT REQUIREMENT $
--------------------
2. CERTIFICATION: To the best of the knowledge and belief
(after reasonable investigation) of the officer of the Company executing
this Certificate, the Company hereby certifies to The First National
Bank of Chicago for the benefit of lenders under the Credit Agreement
that: (a) the above information is, and the computations are accurate
and complete and in accordance with the requirements of the Credit
Agreement, and (b) as of the date hereof, (1) all representations and
warranties of the Company set forth in the Credit Agreement are accurate
and complete, (2) there does not exist an Event of Default under the
Credit Agreement, and (3) the Company has given written notice to The
First National Bank of Chicago of any Default which now exists under the
Credit Agreement.
-122-
<PAGE> 129
IN WITNESS WHEREOF, the Company has caused this Borrowing Base
Certificate to be executed and delivered by its duly authorized officer
this ___ day of __________, 199_.
SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
-123-
<PAGE> 130
EXHIBIT C0
COMMITMENTS AND COMMITMENT PERCENTAGES
<TABLE>
<CAPTION>
=============================================================================================================================
Commitment Commitment Adj. Commit.
Bank Name Amount Percentage Percentage
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
First Chicago SWING $40,000,000 5.0000000000%
- -----------------------------------------------------------------------------------------------------------------------------
1. First Chicago $17,000,000 2.1250000000% 2.2368421053%
- -----------------------------------------------------------------------------------------------------------------------------
2. Bank of America $48,000,000 6.0000000000% 6.3157894737%
- -----------------------------------------------------------------------------------------------------------------------------
3. Bank of New York $48,000,000 6.0000000000% 6.3157894737%
- -----------------------------------------------------------------------------------------------------------------------------
4. Chase Bank of Texas $48,000,000 6.0000000000% 6.3157894737%
- -----------------------------------------------------------------------------------------------------------------------------
5. Comerica $48,000,000 6.0000000000% 6.3157894737%
- -----------------------------------------------------------------------------------------------------------------------------
6. Guaranty Federal $48,000,000 6.0000000000% 6.3157894737%
- -----------------------------------------------------------------------------------------------------------------------------
7. National City $48,000,000 6.0000000000% 6.3157894737%
- -----------------------------------------------------------------------------------------------------------------------------
8. NationsBank $48,000,000 6.0000000000% 6.3157894737%
- -----------------------------------------------------------------------------------------------------------------------------
9. PNC Bank $48,000,000 6.0000000000% 6.3157894737%
- -----------------------------------------------------------------------------------------------------------------------------
10. Credit Lyonnais $45,000,000 5.6250000000% 5.9210528316%
- -----------------------------------------------------------------------------------------------------------------------------
11. Fleet Bank $45,000,000 5.6250000000% 5.9210528316%
- -----------------------------------------------------------------------------------------------------------------------------
12. West LB $40,000,000 5.0000000000% 5.2631578947%
- -----------------------------------------------------------------------------------------------------------------------------
13. First Union $34,000,000 4.2500000000% 4.4736842105%
- -----------------------------------------------------------------------------------------------------------------------------
14. Harris Trust $30,000,000 3.7500000000% 3.9473684211%
- -----------------------------------------------------------------------------------------------------------------------------
15. Bank Hapoalim $25,000,000 3.1250000000% 3.2894736842%
- -----------------------------------------------------------------------------------------------------------------------------
16. Bankers Trust $25,000,000 3.1250000000% 3.2894736842%
- -----------------------------------------------------------------------------------------------------------------------------
17. Marine Midland $25,000,000 3.1250000000% 3.2894736842%
- -----------------------------------------------------------------------------------------------------------------------------
18. CIBC $20,000,000 2.5000000000% 2.6315789474%
- -----------------------------------------------------------------------------------------------------------------------------
19. Hibernia National $20,000,000 2.5000000000% 2.6315789474%
- -----------------------------------------------------------------------------------------------------------------------------
20. Union Bank of CA $20,000,000 2.5000000000% 2.6315789474%
- -----------------------------------------------------------------------------------------------------------------------------
21. Banque Paribas $15,000,000 1.8750000000% 1.9736842105%
- -----------------------------------------------------------------------------------------------------------------------------
22. Michigan National $15,000,000 1.8750000000% 1.9736842105%
- -----------------------------------------------------------------------------------------------------------------------------
Total $800,000,000 100.0000000000% 100.0000000000%
=============================================================================================================================
</TABLE>
-124-
<PAGE> 131
EXHIBIT D
SECURITY AGREEMENT
-125-
<PAGE> 132
EXHIBIT E-1
FORM OF AMENDED AND RESTATED NOTE
(FOR LOANS OTHER THAN DISCOUNT LOANS AND BID LOANS)
Date of Note: July ___, 1998
FOR VALUE RECEIVED, the undersigned (the "Maker") does hereby covenant
and promise to pay to the order of ____________________ (the "Lender") or its
successors or assigns (collectively, the "Payee"), on the Termination Date, the
aggregate unpaid principal amount of all Loans made by Lender pursuant to the
Credit Agreement other than Discount Loans and Bid Loans held from time to time
by the Lender (the "Principal Amount") and to pay interest on the unpaid
Principal Amount at the applicable interest rate or rates per annum determined
in accordance with the terms of the Credit Agreement. All payments of principal
of and interest on this Note shall be made in legal tender of the United States.
All payments of principal of and interest on this Note shall be made in
immediately available funds at the principal office of The First National Bank
of Chicago (the "Agent"), One First National Plaza, Chicago, Illinois.
Interest on this Note shall be computed on the basis of actual number of
days elapsed in a 360 day year.
This Note is one of the Notes referred to in the Fourth Amended and
Restated Revolving Credit Agreement, bearing even date herewith, among the
Company, the Lender and the other lenders listed on the signature pages thereof
and the Agent (as the same may be amended and supplemented from time to time,
the "Credit Agreement") and is entitled to the benefits thereof. Reference is
made to the Credit Agreement for (i) provisions for the prepayment hereof, (ii)
acceleration of the maturity hereof, (iii) the obligation of the Maker to pay
certain expenses (including attorney's fees) incurred in the enforcement thereof
and hereof and (iv) a description of the security for this Note. Capitalized
terms used herein without definition have the respective meanings ascribed to
them in the Credit Agreement.
All Loans made by the Lender and all repayments of the principal thereof
shall be recorded by the Lender in its books and records; provided, however,
that the Lender's failure to so record or any error in such recording shall not
affect the Maker's liability hereunder or under the Credit Agreement. Upon any
transfer hereof, the Lender shall endorse on the schedule attached hereto or on
a schedule accompanying the transfer of this Note, the unpaid principal balance
of this Note.
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<PAGE> 133
If an Event of Default shall occur under the Credit Agreement, the
unpaid Principal Amount hereunder shall become due and payable (i) automatically
in the case of any of the Events of Default specified in Paragraph (k) of
Section 10.1 of the Credit Agreement, or (ii) at the option of the Required
Lenders with respect to all other Events of Default and shall bear interest at
the rate provided for in Section 2.7 of the Credit Agreement from and after such
date. The foregoing provision shall not be construed as a waiver by the Payee of
its right to pursue any other remedies available to it under this Note, the
Credit Agreement or any other instrument evidencing or securing the Principal
Amount.
This Note may not be changed orally but only by an agreement in writing,
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought. Written notices required to be given hereunder shall be
given as provided in the Credit Agreement to the Payee and Maker at the
respective addresses specified or provided for therein.
Should the indebtedness evidenced by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceeding (whether at the trial or appellate level), or should this Note be
placed in the hands of attorneys for collection upon default, the Maker agrees
to pay, in addition to the principal, interest and other sums due and payable
hereon, all costs of collecting or attempting to collect on this Note, including
reasonable attorneys' fees and expenses.
Anything herein to the contrary notwithstanding, the obligations of the
Maker under this Note shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of any such payment by
the Payee would be contrary to provisions of law applicable to Payee which limit
the maximum rate of interest that may be charged or collected by Payee.
The undersigned and all endorsers, guarantors and sureties of this Note
and all other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
notice of acceleration of the maturity of this Note, protest and notice of
protest, diligence in collecting, and the bringing of suit against any other
party, and agree to all renewals, extensions, modifications, partial payments,
releases or substitutions of security, in whole or in part, with or without
notice, before or after maturity.
Notwithstanding the foregoing paragraphs and all other provisions of
this Note and the Credit Agreement, none of the
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<PAGE> 134
terms and provisions of this Note or the Credit Agreement shall ever be
construed to create a contract to pay to the Payee, for the use, forbearance or
detention of money, interest in excess of the maximum amount of interest
permitted to be charged by the Payee to the undersigned under applicable state
or federal law from time to time in effect, and the undersigned shall never be
required to pay interest in excess of such maximum amount. If, for any reason
interest is paid hereon in excess of such maximum amount, then promptly upon any
determination that such excess has been paid the Payee will, at its option,
either refund such excess to the undersigned or apply such excess to the
principal owing hereunder.
This Note is to be construed and enforced in accordance with the laws of
the State of Illinois.
IN WITNESS WHEREOF, Maker has executed and delivered this Note on the
day and year first above written.
SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
----------------------------
Name: Larry N. Ciofu
Title: Vice President
Address:
27555 Farmington Road
Farmington Hills, MI 48334-3357
Attn: Chief Financial Officer
Telephone No.: (248) 488-8639
Facsimile No.: (248) 488-7300
and
Attn: Vice President/Treasury
Telephone No.: (248) 488-7338
Facsimile No.: (248) 488-7812
-128-
<PAGE> 135
PAYMENTS OF PRINCIPAL
Unpaid
Principal Notation
Date Balance Made by
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-129-
<PAGE> 136
EXHIBIT E-2
FORM OF AMENDED AND RESTATED DISCOUNT NOTE
Date of Note: July ___, 1998
FOR VALUE RECEIVED, the undersigned (the "Maker") does hereby covenant
and promise to pay to the order of ____________________ (the "Lender") or its
successors or assigns (collectively, the "Payee") the unpaid principal amount of
each Discount Loan made and retained by the Lender (if the holder hereof is the
Balance Bank initially making such discount Loan) or, in all other cases, made
by a Balance Bank and purchased by the holder hereof (or its predecessor in
interest) under the Credit Agreement (the "Principal Amount"), on the last day
of the Discount Loan Period applicable to each such Discount Loan with a final
payment of any such amounts not previously due on the Termination Date.
Each Discount Loan evidenced by this Note was funded to the Company at a
discount as provided in the Credit Agreement; accordingly, the unpaid principal
amount of each Discount Loan evidenced by this Note will bear no interest
hereunder until the last day of the Discount Loan Period applicable thereto, and
if such unpaid principal amount of such Discount Loan is not paid in full on
such day, such unpaid principal amount shall from and after such day bear
interest at the rate of interest set forth in Section 2.7 of the Credit
Agreement. All payments of principal of and interest, if any, on this Note shall
be made in legal tender of the United States. All payments of principal of and
interest on this Note shall be made in immediately available funds at the
principal office of The First National Bank of Chicago (the "Agent"), One First
National Plaza, Chicago, Illinois.
Interest on this Note, if any, shall accrue, shall be computed on the
basis of actual number of days elapsed in a 360 day year.
This Note is one of the Discount Notes referred to in the Fourth Amended
and Restated Revolving Credit Agreement, bearing even date herewith, among the
Company, the Lender and the other lenders listed on the signature pages thereof
and the Agent (as the same may be amended and supplemented from time to time,
the "Credit Agreement") and is entitled to the benefits thereof. Reference is
made to the Credit Agreement for (i) provisions for the prepayment hereof, (ii)
acceleration of the maturity hereof, (iii) the obligation of the Maker to pay
certain expenses (including attorney's fees) incurred in the enforcement thereof
and hereof and (iv) a description of the security for this Note. Capitalized
terms used herein without definition have the respective meanings ascribed to
them in the Credit Agreement.
-130-
<PAGE> 137
All Discount Loans made by the Lender and all repayments of the
principal thereof shall be recorded by the Lender in its books and records;
provided, however, that the Lender's failure to so record or any error in such
recording shall not affect the Maker's liability hereunder or under the Credit
Agreement. Upon any transfer hereof, the Lender shall endorse on the schedule
attached hereto or on a schedule accompanying the transfer of this Note, the
unpaid principal balance of this Note.
If an Event of Default shall occur under the Credit Agreement, the
unpaid Principal Amount hereunder shall become due and payable (i) automatically
in the case of any of the Events of Default specified in Paragraph (k) of
Section 10.1 of the Credit Agreement, or (ii) at the option of the Required
Lenders with respect to all other Events of Default and shall bear interest at
the rate provided for in Section 2.7 of the Credit Agreement from and after such
date. The foregoing provision shall not be construed as a waiver by the Payee of
its right to pursue any other remedies available to it under this Note, the
Credit Agreement or any other instrument evidencing or securing the Principal
Amount.
This Note may not be changed orally but only by an agreement in writing,
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought. Written notices required to be given hereunder shall be
given as provided in the Credit Agreement to the Payee and Maker at the
respective addresses specified or provided for therein.
Should the indebtedness evidenced by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceeding (whether at the trial or appellate level), or should this Note be
placed in the hands of attorneys for collection upon default, the Maker agrees
to pay, in addition to the principal, interest and other sums due and payable
hereon, all costs of collecting or attempting to collect on this Note, including
reasonable attorneys' fees and expenses.
Anything herein to the contrary notwithstanding, the obligations of the
Maker under this Note shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of any such payment by
the Payee would be contrary to provisions of law applicable to Payee which limit
the maximum rate of interest that may be charged or collected by Payee.
The undersigned and all endorsers, guarantors and sureties of this Note
and all other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
notice of
-131-
<PAGE> 138
acceleration of the maturity of this Note, protest and notice of protest,
diligence in collecting, and the bringing of suit against any other party, and
agree to all renewals, extensions, modifications, partial payments, releases or
substitutions of security, in whole or in part, with or without notice, before
or after maturity.
Notwithstanding the foregoing paragraphs and all other provisions of
this Note and the Credit Agreement, none of the terms and provisions of this
Note or the Credit Agreement shall ever be construed to create a contract to pay
to the Payee, for the use, forbearance or detention of money, interest in excess
of the maximum amount of interest permitted to be charged by the Payee to the
undersigned under applicable state or federal law from time to time in effect,
and the undersigned shall never be required to pay interest in excess of such
maximum amount. If, for any reason interest is paid hereon in excess of such
maximum amount, then promptly upon any determination that such excess has been
paid the Payee will, at its option, either refund such excess to the undersigned
or apply such excess to the principal owing hereunder.
This Note is to be construed and enforced in accordance with the laws of
the State of Illinois.
IN WITNESS WHEREOF, Maker has executed and delivered this Note on the
day and year first above written.
SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
----------------------------
Name: Larry N. Ciofu
Title: Vice President
Address:
27555 Farmington Road
Farmington Hills, MI 48334-3357
Attn: Chief Financial Officer
Telephone No.: (248) 488-8639
Facsimile No.: (248) 488-7300
and
Attn: Vice President/Treasury
Telephone No.: (248) 488-7338
Facsimile No.: (248) 488-7812
-132-
<PAGE> 139
PAYMENTS OF PRINCIPAL
Unpaid
Principal Notation
Date Balance Made by
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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-133-
<PAGE> 140
EXHIBIT F
METHOD OF DETERMINING WEIGHTED AVERAGE PURCHASE PRICES
STEP ONE
Group Mortgage Loans or Securities into the following categories (or such other
categories as are agreed upon among the Company, the Agent and the Collateral
Agent):
GNMA 15 FNMA/FHLMC 15 Private
GNMA 30 FNMA/FHLMC 30 Investors
GNMA ARM FNMA/FHLMC ARM
FNMA/FHLMC Balloon
Non-Conforming
Jumbo
STEP TWO - WEEKLY
Allocate Approved Investor Commitments (other than those allocated to repos)
under which the applicable Mortgage Loans or Securities could be settled to each
mortgage-type category on a FIFO basis. The dollar amount of Approved Investor
Commitments allocated should cover the maximum amount of Mortgage Loans or
Securities for which the Company expects to borrow in the following week. If the
mortgage balances exceed the allocated Approved Investor Commitments on any day,
a re-allocation should be calculated.
After allocating Approved Investor Commitments, compute the weighted average
price of the Approved Investor Commitments. This is the price to be allocated to
Securities or the unpaid principal balance of Mortgage Loans, as applicable, in
each category for any borrowing in the next week. Approved Investor Commitments
may not be allocated to Mortgage Loans unless the related coupons net of
servicing and guaranty fees equal or exceed the contract coupon requirement.
AT THE REQUEST OF THE CREDIT AGENT, THE FOLLOWING FURTHER STEPS SHALL BE TAKEN
WHEN COMPUTING THE WEIGHTED AVERAGE PURCHASE PRICES.
STEP THREE - MARK TO MARKET FORWARD PURCHASE CONTRACTS
Calculate the value of all unallocated mandatory delivery forward purchase
contracts. Compute a net negative or positive amount to be added to or
subtracted from the aggregate market value of all collateral. Use the following
method:
-134-
<PAGE> 141
AGENCY SECURiTY CONTRACT
Find the Telerate (or other recognized electronic service) purchase (offer)
price for same coupon, type, and delivery date as stated on the Company's
forward purchase contract. Subtract the Company's contract price from the
Telerate price and multiply by the dollar amount of the contract. A positive
number is a deduction, and a negative number is an addition to aggregate market
value.
OTHER CONTRACTS
Unallocated Whole Loan Contracts:
Use the above method but use the weighted average posted prices of two
nationally recognized private mortgage conduits mutually acceptable to the
Collateral Agent and the Company for similar mortgages, coupon (net of servicing
fees) and delivery date.
Private Label Securities Forward Purchase Contracts:
Use the same method but the current contract price should be based on quotes of
two nationally recognized dealers in private label mortgage-backed securities
for the same forward delivery date as the contract.
If no Telerate price is posted for a particular agency or whole loan coupon, the
posted price associated with the nearest lower coupon should be used. If the
contract coupon is below the lowest Telerate coupon then the price should be
based on quotes of two nationally recognized dealers in mortgage-backed
securities for the same forward delivery date as the contract.
-135-
<PAGE> 142
EXHIBIT G
FORM OF BID LOAN NOTICE
TO: The First National Bank of Chicago, as Agent
FROM: Source One Mortgage Services Corporation, and
, as a Bid Lender
---------------
Reference is made to that certain Fourth Amended and Restated Revolving
Credit Agreement (the "Agreement") dated July ___, 1998 by and among Source One
Mortgage Services Corporation (the "Company"), the Agent and certain other
lenders. All capitalized terms not otherwise defined in this notice shall have
the meaning given to them in the Agreement.
The Company and the Bid Lender hereby inform you that the Company has
accepted a bid from the Bid Lender for one or more Bid Loans having the
following terms:
Principal Amount of Loan: $
---------------
Rate of Interest: %
---------------
Advance Date: , 199
--------------- -
Interest Period (1 to 45 days):
---------------
Proposed Due Date*: ,
--------------- ----
[BID LENDER] SOURCE ONE MORTGAGE SERVICES
CORPORATION
By: By:
----------------------- -----------------------
Its: Its:
---------------------- ----------------------
* If other than Termination Date.
-136-
<PAGE> 143
EXHIBIT H
FORM OF NEW/MODIFIED COMMITMENT SUPPLEMENT
This New/Modified Commitment Supplement ("Supplement") is made as of
_________________, 199_ (the "Effective Date") by and among Source One Mortgage
Services Corporation (the "Company"), The First National Bank of Chicago, in its
capacity as agent ("Agent"), and _______________________ ("New Lender"), [and
____________________________ ("Assignor")][BRACKETED LANGUAGE IS APPLICABLE IF
AN EXISTING LENDER IS ASSIGNING A PORTION OF ITS COMMITMENT].
The Company, [Assignor] and Agent are parties to a certain Fourth
Amended and Restated Revolving Credit Agreement dated as of July ___, 1998 (the
"Credit Agreement") pursuant to which Agent and certain other Lenders agreed to
provide a revolving credit facility to the Company on the terms and conditions
set forth in the Credit Agreement. Any capitalized term not expressly defined
herein shall have the meaning ascribed to such term in the Credit Agreement.
The New Lender has agreed to become a Lender under the Credit Agreement
with a Commitment in the amount of ______________________ Dollars
($______________). [The Company and Assignor have agreed to reduce Assignor's
Commitment under the Credit Agreement to ____________________ Dollars
($_____________).]
The parties hereto desire to amend the Credit Agreement pursuant to
Section 2.1(b) thereof to reflect the New Lender's Commitment [and Assignor's
reduced Commitment].
NOW, THEREFORE, the parties hereto agree as follows:
1. From and after the Effective Date, the New Lender shall be considered
a "Lender" under the Credit Agreement and the Company and Agent hereby consent
to the addition of the New Lender.
2. From and after the Effective Date, the New Lender's Commitment under
the Credit Agreement shall be ________________________ Dollars ($______________)
or such other amount as may be stated in any subsequent modification to the
Credit Agreement. The Company shall execute and deliver to the New Lender
simultaneously herewith Notes in the form attached as Exhibits E-1 and E-2 to
the Credit Agreement. The Aggregate Commitment of the Lenders under the Credit
Agreement, after giving effect to such Commitment by the New Lender [and the
reduced Commitment of Assignor described in the following Section] shall be
$_________________.
-137-
<PAGE> 144
[3. From and after the Effective Date, Assignor's Commitment
under the Credit Agreement shall be
_________________________________ Dollars ($______________) or
such other amount as may be stated in any subsequent modification
to the Credit Agreement.]
[4. The New Lender, promptly after receipt of its Notes, agrees to
purchase from Assignor, and Assignor hereby agrees to sell to the New Lender,
without recourse, a portion of the outstanding Loans made by Assignor equal to
_________ percent (__%) of the outstanding principal balance of each such Loan.
Such purchase shall be effected by wire transfer of immediately available funds
to Assignor on the Effective Date. The Company each irrevocably and
unconditionally agrees that from and after the Effective Date the portion of
Loans so funded by Assignor shall be evidenced by and shall be deemed to be
Loans made by the New Lender under the New Lender's Note as of the Effective
Date and shall be treated as such for purposes of calculating interest and fees
accruing from and after the Effective Date under the Credit Agreement. All
interest and fees accruing on such portion of the Loans prior to the Effective
Date shall be paid when due to Assignor.]
5. For purposes of Section 12.2 of the Credit Agreement (Notices), the
New Lender's address and telecopy number shall be as specified below its
signature in this Supplement.
6. All references in the Credit Agreement and the other Credit Documents
shall be deemed to refer to the Credit Agreement as modified by this Supplement.
Pursuant to Section 2.1(b) of the Credit Agreement, Exhibit C to the Credit
Agreement is hereby replaced by Exhibit C to this Supplement.
7. In all other respects, the Credit Agreement is and remains unmodified
and in full force and effect and is hereby ratified and confirmed.
8. This Supplement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Supplement by signing any such counterpart.
IN WITNESS WHEREOF, the Company, the New Lender, [Assignor] and Agent
have executed this Supplement as of the date first above written.
COMPANY: SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
-----------------------------
Name:
---------------------------
-138-
<PAGE> 145
Title:
-------------------------------------
NEW LENDER:
-------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address for Notices:
-------------------------------------------
-------------------------------------------
Attn:
--------------------------------------
Telephone No.:
-----------------------------
Facsimile No.:
-----------------------------
AGENT: THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
[ASSIGNOR: -------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
-139-
<PAGE> 146
EXHIBIT I
FORM OF NON-LENDER BALANCE BANK SUPPLEMENT
THIS NON-LENDER BALANCE SUPPLEMENT (the "Supplement") is entered into as
of _________________, 199_, by and among SOURCE ONE MORTGAGE SERVICES
CORPORATION, a Delaware corporation (the "Company"), THE FIRST NATIONAL BANK OF
CHICAGO, a national banking association, as administrative agent for the Lenders
("Agent"), and ____________________________, a _____________________ (the
"Bank"), an Affiliate of one of the Lenders.
A. The Company and Agent are parties to that certain Fourth Amended and
Restated Revolving Credit Agreement dated as of July ___, 1998 (the "Credit
Agreement") pursuant to which Agent and certain other Lenders agreed to provide
a revolving credit facility to the Company on the terms and conditions set forth
in the Credit Agreement. Any capitalized term not expressly defined herein shall
have the meaning ascribed to such term in the Credit Agreement.
B. The Bank has agreed to become a Non-Lender Balance Bank under the
Credit Agreement and to make Discount Advances and to sell its interest in such
Discount Advances to the Lenders in accordance with Section 2.4 of the Credit
Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Bank hereby agrees to become and is hereby designated as a
"Non-Lender Balance Bank" under the Credit Agreement, but is not and shall not
be considered a "Lender" under the Credit Agreement. The Bank hereby agrees to
(i) enter into a Balance Bank Agreement with the Company, (ii) make Discount
Advances to the Company, (ii) sell its interest in such Discount Advances to the
Lenders, and (iii) otherwise accede to all obligations of a Non-Lender Balance
Bank under Section 2.4 of the Credit Agreement. The Bank shall be entitled to
all rights of a Non-Lender Balance Bank under the Credit Agreement.
2. Neither the Company nor the Agent shall consent to any amendment of
the provisions of Section 2.4 of the Credit Agreement affecting the Bank without
the prior written consent of the Bank.
3. The Bank's address for any notices to be sent in connection with the
Credit Agreement shall be as specified below its signature in this Supplement.
4. This Supplement may be executed in any number of counterparts, all of
which taken together shall constitute one
-140-
<PAGE> 147
agreement, and any of the parties hereto may execute this
Supplement by signing any such counterpart.
IN WITNESS WHEREOF, the Company, Agent and the Bank have executed this
Supplement as of the date first above written.
COMPANY: SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
AGENT: THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
BANK: -------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Address for Notices:
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Attn:
--------------------------------------
Telephone No.:
-----------------------------
Facsimile No.:
-----------------------------
-141-
<PAGE> 148
EXHIBIT J
FORM OF AP NOTICE
SOURCE ONE MORTGAGE SERVICES CORPORATION (the "Company") pursuant to
that certain Fourth Amended and Restated Revolving Credit Agreement, dated as of
July ___, 1998 (as amended, extended and replaced from time to time,
collectively, the "Credit Agreement") among the Company, The First National Bank
of Chicago, individually and as agent (the "Credit Agent"), and certain other
lenders, and (ii) that certain Fourth Amended and Restated Security and
Collateral Agency Agreement dated as of July ___, 1998 by and among the Company,
the Credit Agent and National City Bank of Kentucky (the "Collateral Agent") as
collateral agent for the Secured Parties (as defined in the Credit Agreement),
for new value this day received, and as security for the payment of any and all
indebtedness and obligations of the Company under the Credit Agreement, hereby
creates and grants to the Collateral Agent for the benefit of the Secured
Parties a security interest in and to the mortgage loans identified as "AP
Mortgages" on the Company's "Collateral Transmittals" (as such term is defined
in the Credit Agreement) on the date indicated below which provide the
information concerning the AP Mortgages required by the Credit Agreement.
SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
----------------------------------------
Dated: , 199 .
------------------ -
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<PAGE> 149
EXHIBIT K
FORM OF OPINION LETTER
-143-
<PAGE> 150
EXHIBIT L
MATERIAL LITIGATION NOT REFERENCED IN ANNUAL/QUARTERLY REPORTS
NONE.
-144-
<PAGE> 151
EXHIBIT M
FORM OF TRANSITION MEMORANDUM
This TRANSITION MEMORANDUM is dated as of July 10, 1998, by and between
Source One Mortgage Services Corporation, a Delaware corporation (the "Company")
and The First National Bank of Chicago, as agent ("Agent") for the Existing
Lenders and for the Continuing Lenders (as such terms are hereinafter defined).
The Company has entered into a certain Fourth Amended and Restated
Revolving Credit Agreement dated as of July 10, 1998 (the "Credit Agreement")
with the lenders named therein and the Agent. The lenders under the Credit
Agreement are hereinafter referred to collectively as the "Continuing Lenders".
Pursuant to the Credit Agreement the Continuing Lenders will agree to extend
credit to the Company through a revolving credit facility (the "New Facility")
on the terms and subject to the conditions set forth therein. Capitalized terms
not otherwise defined herein are used with the same meanings as in the Credit
Agreement.
The New Facility amends and restates the existing revolving credit
facility provided to the Company and certain Subsidiaries of the Company (the
"Existing Facility") made available pursuant to that certain Third Amended and
Restated Revolving Credit Agreement dated as of July 25, 1997 (as amended, the
"Existing Agreement"), by and among the Company, such Subsidiaries, the Agent
and the lenders participating therein (each an "Existing Lender").
Certain of the Existing Lenders are not Continuing Lenders under the New
Facility (the "Exiting Lenders"). In addition, pursuant to the Credit Agreement
(i) certain of the Existing Lenders will have a percentage of the Aggregate
Commitment under the New Facility that differs from their percentage under the
Existing Facility, and (ii) certain Continuing Lenders joining the New Facility
are not Existing Lenders.
The purpose of this Transition Memorandum is to set forth an
understanding of certain matters concerning the transition by the Company from
the Existing Facility to the New Facility, such matters including, without
limitation, (i) the payment of all the outstanding Loans (as defined in the
Existing Agreement and hereinafter referred to as the "Existing Loans") to the
Exiting Lenders, (ii) the changes necessary in the percentage of the Advances
under the Credit Agreement held by the Continuing Lenders, and (iii) the initial
fundings of Advances by the Continuing Lenders which are not Existing Lenders.
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<PAGE> 152
1. Summary of Existing Loans. The initial Advance under the New Facility
shall be used to pay any Existing Loans held by the Exiting Lenders. Prior to
the date the conditions precedent set forth in Article V of the Credit Agreement
are satisfied (such date being the "Effective Date"), the Agent shall identify
the Existing Loans payable by the Company under the Existing Agreements to each
Exiting Lender and advise the Continuing Lenders of such amount. The aggregate
outstanding balance of the Existing Loans held by the Exiting Lenders on the
Effective Date shall be hereinafter referred to as the "Exiting Lender Pay-Off
Amount".
2. Initial Advance. Subject to the terms and conditions set forth in the
Credit Agreement, including, without limitation, satisfaction of the conditions
precedent set forth in Article V therein, the Continuing Lenders will make an
initial Advance to the Company on the Effective Date in an amount equal to the
Exiting Lender Pay-Off Amount. The initial Advance shall be based upon an
Advance Notice and shall consist of such types of Advances specified in such
Advance Notice. Each Continuing Lender will agree to make its share of such
Advance available to the Agent at such time and in such amount as provided in
the Credit Agreement as modified by Paragraphs 3 and 4 below.
3. Conversion of Loans. With respect to each Continuing Lender, to the
extent that such lender has an Existing Loan outstanding on the date of the
initial Advance, such Continuing Lender shall only be required to fund to the
Agent an amount (the "Net Funding Amount") equal to the excess, if any, of that
amount by which the aggregate amount of its Loans to be outstanding under the
New Facility on the Effective Date exceeds the aggregate amount of its Existing
Loans (excluding any accrued and unpaid interest, Fees and other charges or
expenses thereon). After making its Net Funding Amount available to the Agent,
such Continuing Lender shall be deemed to have made available all of its Loans
under the New Facility and shall be deemed to have converted its Existing Loans
(excluding any accrued and unpaid interest and other charges or expenses
thereon). To the extent that a Continuing Lender has Existing Loans in an amount
which exceeds the amount of its Loans to be outstanding under the New Facility
on the Effective Date, such Lender shall be deemed to have made available all of
its Loans under the New Facility required to be made on the Effective Date and
shall be repaid a portion of its Existing Loans equal to such excess amount, if
any, as provided in Paragraph 4. All Existing Loans held by Continuing Lenders
which are outstanding on the Effective Date and not repaid shall continue as the
same type of Loan under the New Facility until repaid or converted in accordance
with the terms of the Credit Agreement; provided that from and after the
Effective Date such Existing Loans shall bear interest at the interest rates
applicable under the Credit Agreement rather than the rates applicable under the
Existing Agreement.
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<PAGE> 153
4. Percentage Reconciliation. If any Continuing Lender holds Existing
Loans (other than Bid Loans) on the Effective Date which are in excess of such
Continuing Lender's Adjusted Commitment Percentage of the Loans (other than Bid
Loans and Swingline Loans) to be outstanding under the New Facility (an
"Overfunded Lender") on the Effective Date, such Overfunded Lender shall be
repaid from the additional funding under the following sentence an amount of
Existing Loans sufficient to eliminate such excess. Each Continuing Lender
(including any Continuing Lender which is not an Existing Lender) that holds
Existing Loans in an amount less than such Continuing Lender's Adjusted
Commitment Percentage of the Loans (other than Bid Loans and Swingline Loans) to
be outstanding under the New Facility on the Effective Date (an "Underfunded
Lender") shall make an additional funding as a Federal Funds Loan in connection
with the initial Advance in an amount sufficient to eliminate such shortfall
(such additional funding being collectively referred to as "Percentage
Reconciliation Funding Amount").
5. Distribution of Initial Advance. After each Continuing Lender has
funded its Loan (or so much of such Loan as may be required pursuant to
Paragraphs 3 and 4 above), the Agent shall (i) distribute to each Exiting Lender
its Exiting Lender Pay-Off Amount in accordance with the Existing Agreement and
(ii) distribute to each Overfunded Lender its share of the aggregate Percentage
Reconciliation Funding Amount.
6. Payment of Accrued Interest and Fees; Indemnification. On the
Effective Date the Company shall pay to the Agent for distribution to each
Exiting Lender all accrued interest and Fees owing to such Lender for its
Existing Loans. To the extent of its obligations under the Existing Agreement,
the Company shall pay each Exiting Lender for all reasonable losses, costs and
expenses incurred by such Exiting Lender in connection with any prepayment of
its Existing Loans in accordance with the terms of the Existing Agreement.
7. Termination of Commitments under Existing Facility. On the Effective
Date the commitments of the Lenders (as defined in the Existing Agreement) under
the Existing Facility shall terminate and the Lenders therein shall have no
further obligation to make any further Loans (as defined in the Existing
Agreement) under the Existing Facility.
8. No Modification. It is understood and agreed to by the parties hereto
that, except as expressly set forth above, nothing in this memorandum shall
modify or amend the covenants, terms and agreements set forth in the Existing
Agreement or the documents related thereto or in the Credit Agreement and the
other Credit Documents, or discharge the obligations of (a) the Company, the
Existing Lenders and the Agent under the Existing Agreement, and
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<PAGE> 154
(b) the Company, the Continuing Lenders and the Agent under the Credit
Agreement.
BORROWERS: SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
AGENT ON BEHALF OF THE FIRST NATIONAL BANK OF CHICAGO,
CONTINUING LENDERS: as Agent for the Continuing Lenders
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
EXITING LENDERS: -------------------------------------------
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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<PAGE> 1
EXHIBIT 10(b)
REVOLVING CREDIT AGREEMENT
dated as of July 10, 1998
by and among
SOURCE ONE MORTGAGE SERVICES CORPORATION
and
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Administrative Agent
and
CERTAIN OTHER LENDERS
<PAGE> 2
TABLE OF CONTENTS
PAGE
RECITALS.................................................................... 1
ARTICLE I DEFINITIONS...................................................... 1
1.1 Definitions................................................... 1
1.2 Interpretation................................................ 17
1.3 Accounting Terms and Determinations........................... 18
ARTICLE II BORROWINGS...................................................... 18
2.1 Availability and Adjustments.................................. 18
2.2 Fees.......................................................... 19
2.3 Advances...................................................... 19
2.4 [Intentionally Omitted]....................................... 20
2.5 [Intentionally Omitted]....................................... 20
2.6 [Intentionally Omitted]....................................... 20
2.7 Rate after Maturity........................................... 20
2.8 Interest Payment Dates........................................ 20
2.9 Method of Selecting Rate Options and Interest
Periods....................................................... 21
2.10 Maximum Number of Eurodollar Loans............................ 22
2.11 Funding Procedures............................................ 22
2.12 Conversion and Continuation................................... 22
2.13 Optional Principal Payments................................... 23
2.14 Required Principal Payments................................... 23
2.15 Method of Payment............................................. 24
2.16 Notes; Telephonic Notices..................................... 24
2.17 General Provisions as to Payments............................. 25
2.18 Notification of Advances, Interest Rates and
Prepayments................................................... 25
2.19 Lending Installations......................................... 25
2.20 Non-Receipt of Funds by Agent................................. 26
ARTICLE III CHANGE IN CIRCUMSTANCES......................................... 27
3.1 Yield Protection.............................................. 27
3.2 Availability of Rate Options.................................. 29
3.3 Funding Indemnification....................................... 29
3.4 Lender Statements; Survival of Indemnity...................... 29
3.5 Lender Tax Agreement.......................................... 30
ARTICLE IV COLLATERAL AND BORROWING BASE................................... 31
4.1 Eligible Collateral - FSA Common Stock........................ 31
4.2 Borrowing Base................................................ 31
4.3 Special Representations as to Collateral...................... 31
4.4 Special Covenants............................................. 32
4.5 Release of Collateral......................................... 33
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
PAGE
4.6 Settlement Account............................................ 33
4.7 Termination................................................... 33
ARTICLE V CONDITIONS PRECEDENT............................................. 34
5.1 Initial Advance (Company)..................................... 34
5.2 Initial Advance (Lenders)..................................... 35
5.3 All Advances.................................................. 35
ARTICLE VI REPRESENTATIONS AND WARRANTIES.................................. 36
6.1 Organization, Corporate Powers, Etc........................... 36
6.2 Corporate Authority, Etc...................................... 36
6.3 Compliance with Laws.......................................... 37
6.4 Government Approvals.......................................... 37
6.5 Valid and Binding Obligations................................. 37
6.6 Financial Statements.......................................... 37
6.7 Litigation.................................................... 38
6.8 Use of Proceeds............................................... 38
6.9 Accuracy of Information....................................... 38
6.10 Accuracy of Representations and Warranties.................... 39
6.11 Investment Company............................................ 39
6.12 ERISA......................................................... 39
6.13 Tax Returns................................................... 39
6.14 Full Disclosure............................................... 39
6.15 GNMA, FHA, VA, FNMA, AND FHLMC Eligibility.................... 40
6.16 No Defaults................................................... 40
6.17 Year 2000 Compliance.......................................... 40
ARTICLE VII AFFIRMATIVE COVENANTS.......................................... 40
7.1 Payment of Debts, Taxes, Etc.; Maintenance of
Insurance..................................................... 40
7.2 Preservation of Corporate Existence........................... 41
7.3 Compliance with Laws, Etc..................................... 41
7.4 Requested Information......................................... 42
7.5 Keeping of Records and Books of Account....................... 42
7.6 Maintenance of Approvals, Filings and
Registrations................................................. 42
7.7 Reporting Requirements........................................ 42
7.8 Indemnification............................................... 47
7.9 Maintenance of Net Worth...................................... 47
7.10 Federal Agency Approvals...................................... 48
7.11 [Intentionally Omitted]....................................... 48
7.12 Borrowing Base Certificate. .................................. 48
7.13 Further Assurance........... ................................. 48
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
PAGE
7.14 Maintenance of Properties..................................... 49
7.15 Payment of Taxes.............................................. 49
7.16 Year 2000 Compliance.......................................... 49
ARTICLE VIII NEGATIVE COVENANTS............................................ 50
8.1 Use of Proceeds............................................... 50
8.2 [Intentionally Omitted]....................................... 50
8.3 Mergers; Subsidiaries......................................... 50
8.4 Sales......................................................... 50
8.5 Debt.......................................................... 51
8.6 Ratably Secured Debt.......................................... 52
8.7 Guarantees.................................................... 52
8.8 Investments................................................... 52
8.9 Leverage Ratios............................................... 54
8.10 Recourse Servicing............................................ 54
8.11 Liens......................................................... 54
8.12 Credit Requirement............................................ 57
8.13 Affiliate Transactions........................................ 57
8.14 Conduct of Business........................................... 57
8.15 FHA and other Approvals....................................... 57
8.16 Restricted Payments........................................... 58
8.17 Maintenance of Restricted FSA Securities...................... 59
8.18 Subordinated Debt Indenture................................... 59
8.19 Collateral Coverage Ratio..................................... 60
ARTICLE IX THE AGENT....................................................... 60
9.1 Appointment and Authorization................................. 60
9.2 Agent and Affiliates.......................................... 61
9.3 Action by Agent............................................... 61
9.4 Consultation with Experts..................................... 61
9.5 Liability of Agent............................................ 61
9.6 Indemnification............................................... 62
9.7 Credit Decision............................................... 62
9.8 Resignation or Removal and Appointment of
Successor Agent............................................... 63
9.9 Compensation.................................................. 63
9.10 Release of Collateral Documents............................... 64
9.11 Knowledge of Defaults......................................... 64
ARTICLE X DEFAULTS......................................................... 64
10.1 Defaults...................................................... 64
10.2 Remedies...................................................... 67
10.3 Notice of Default............................................. 68
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<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
PAGE
10.4 Application of Proceeds...................................... 69
ARTICLE XI BENEFIT OF AGREEMENT; ASSIGNMENTS;
PARTICIPATIONS.................................................. 70
11.1 Successors and Assigns....................................... 70
11.2 Participations............................................... 70
11.3 Assignments.................................................. 71
11.4 Dissemination of Information................................. 72
11.5 Tax Treatment................................................ 73
ARTICLE XII MISCELLANEOUS.................................................. 73
12.1 Immediately Available Funds.................................. 73
12.2 Notices...................................................... 73
12.3 Survival and Termination of Agreement........................ 73
12.4 Fees and Expenses of the Lenders............................. 74
12.5 Applicable Law............................................... 74
12.6 Modification of Agreement.................................... 74
12.7 Non-Waiver of Rights by the Lenders.......................... 76
12.8 Dealings with the Company and its Affiliates................. 76
12.9 Changes in GAAP.............................................. 76
12.10 Set-Off...................................................... 76
12.11 Counterparts................................................. 77
12.12 Severability................................................. 78
12.13 Headings..................................................... 78
12.14 Entire Agreement............................................. 78
12.15 Consent of Jurisdiction...................................... 78
12.16 Waiver of Jury Trial......................................... 78
EXHIBIT A [INTENTIONALLY OMITTED]
EXHIBIT B BORROWING BASE CERTIFICATE
EXHIBIT C COMMITMENTS AND COMMITMENT PERCENTAGES
EXHIBIT D FORM OF SECURITY AGREEMENT
EXHIBIT E FORM OF NOTE
EXHIBIT F FORM OF OPINION LETTER
EXHIBIT G MATERIAL LITIGATION NOT REFERENCED IN ANNUAL/QUARTERLY
REPORTS
EXHIBIT H FORM OF MODIFIED COMMITMENT SUPPLEMENT
-iv-
<PAGE> 6
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT dated as of July 10, 1998 by and among
SOURCE ONE MORTGAGE SERVICES CORPORATION, a Delaware corporation (the
"Company"), the lenders identified on the signature pages hereof, and THE FIRST
NATIONAL BANK OF CHICAGO, a national banking association ("First Chicago"),
individually as a Lender and as administrative agent for the Lenders.
RECITALS
The revolving credit facility made available to the Company pursuant to
this Agreement shall be used for general working capital and corporate purposes,
including the funding of mortgage loans.
In consideration of the foregoing and for other good and valuable
consideration, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
Capitalized terms used in this Agreement shall have the
following meanings:
Adjusted Consolidated Tangible Net Worth: means, as of any date of
determination thereof, the net worth of the Company and its consolidated
Subsidiaries on a consolidated basis as determined in accordance with GAAP ("Net
Worth"); less the sum (without duplication) of (a) any assets of the Company and
its consolidated Subsidiaries which would be treated as intangibles under GAAP
including, without limitation, any write-up of assets, goodwill, research and
development costs, trademarks, tradenames, copyrights, patents and unamortized
debt discount and expenses, and (b) loans or other extensions of credit to
officers of the Company or of any of its consolidated Subsidiaries other than
Mortgage Loans made to such Persons in the ordinary course of business and (c)
the amount of the Net Worth attributable to the book value of all Restricted FSA
Securities, determined in accordance with GAAP; plus one percent (1%) of the
then-current aggregate outstanding principal balance of all Mortgage Loans then
being serviced by the Company either for its own account or for others under
Servicing Agreements (excluding Subservicing Agreements) to the extent the
servicing rights relating to such Mortgage Loans have not been capitalized and
are thus not accounted for in the Company's net worth as computed in accordance
with GAAP.
<PAGE> 7
Advance: means a borrowing hereunder consisting of the aggregate
amount of Loans made to the Company by one or more of the Lenders hereunder
pursuant to Article II on any given Advance Date.
Advance Date: means a date on which an Advance is made hereunder.
Advance Notice: is defined in Section 2.9.
Affiliate: means, as to any Person, any other Person directly or
indirectly Controlling, Controlled by or under direct or indirect common Control
with such Person.
Agent: means The First National Bank of Chicago in its capacity as
administrative agent for the Lenders hereunder, and any successor Agent
appointed pursuant to Article IX.
Aggregate Commitment: means, as of any date, the aggregate of the
Lenders' then-current Commitments.
Agreement: means this Revolving Credit Agreement, as the same from
time to time may be extended, amended, supplemented, waived or modified.
Alternate Base Rate: means, on any day, a fluctuating rate of interest
per annum equal to the higher of (a) the Published Federal Funds Effective Rate
for such day plus the Applicable Margin, and (b) the Corporate Base Rate for
such day.
Alternate Base Rate Advance: means an Advance which bears interest at
the Alternate Base Rate.
Alternate Base Rate Loan: means a Loan which bears interest at the
Alternate Base Rate.
Applicable Margin: means one and one-eighth of one percent (1.125%)
per annum.
Approved Equity Securities: means readily marketable securities owned
by the Company and approved by the Agent for purposes of inclusion in the
calculation of the Debt Threshold.
Approved Rate Hedging Agreement: means a Rate Hedging Agreement
between the Company and a Lender, which has been approved by the Agent pursuant
to the Other Facility.
Approved Secured Rate Hedging Obligations: means all obligations under
an Approved Rate Hedging Agreement that by the terms of such Approved Rate
Hedging Agreement are secured by the collateral under the Other Facility.
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<PAGE> 8
Authorized Officer: means, with respect to the Company, the
president, chairman, chief financial officer, or other officer of the Company
authorized in writing to execute any particular statement, certificate or
agreement on behalf of the Company.
Board of Governors: means the Board of Governors of the Federal
Reserve System.
Borrowing Base: is defined in Section 4.2.
Borrowing Base Certificate: means a certificate executed by the Chief
Financial Officer or Treasurer of the Company or other employees of the Company
so authorized in writing, an original of which shall be delivered to the Agent,
by such Chief Financial Officer or Treasurer in substantially the form attached
hereto as Exhibit B.
Business Day: means (i) with respect to any borrowing, payment or rate
selection regarding a Eurodollar Advance, a day (other than a Saturday or
Sunday) on which banks are open for business in Chicago, Los Angeles and New
York and on which dealings in United States dollars are carried on in the London
interbank market and (ii) for all other purposes, a day (other than a Saturday
or Sunday) on which banks are open for business in Chicago, Los Angeles and New
York.
Calculation Period: means, as of any date of determination, the
fiscal quarters of the Company elapsed since March 31, 1998, not to exceed the
immediately preceding four (4) full fiscal quarters.
Cash Equivalents: means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof, (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having the highest rating obtainable
from either S&P or Moody's, (iii) commercial paper maturing no more than 90 days
from the date of creation thereof and, at the time of acquisition, having the
highest rating obtainable from either S&P or Moody's, (iv) certificates of
deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof issued by commercial banks organized under the laws of the
United States or any state thereof or the District of Columbia, each having
combined capital and surplus of not less than $500,000,000, and (v) reverse
repurchase obligations having terms not exceeding seven days entered into with
any financial institution meeting the qualifications specified in clause (iv)
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<PAGE> 9
above or with any securities dealer approved by the Agent, provided that there
is an investment agreement in effect pursuant to which the underlying securities
are held by a sub-agent for the Collateral Agent and all cash proceeds are
payable directly to the Settlement Account.
Change in Control: means the acquisition by any Person or group (within
the meaning of Rule 13d-5 of the SEC under the Exchange Act) of Persons (other
than Fund American Enterprises Holdings, Inc. or a wholly-owned Subsidiary
thereof), of beneficial ownership (within the meaning of Rule 13d-3 of the SEC
under the Exchange Act) of outstanding shares of voting stock of the Company at
any time if, after giving effect to such acquisition, such Person or Persons
beneficially owns twenty percent (20%) or more of such outstanding voting stock,
and Fund American Enterprises Holdings, Inc. or a wholly-owned Subsidiary
thereof does not beneficially own more than fifty percent (50%) of such
outstanding shares of voting stock.
Code: means the Internal Revenue Code of 1986, as amended
from time to time.
Collateral: means all right, title and interest of the Company of every
kind and nature, in and to all of the following property, assets and rights of
the Company wherever located, whether now existing or hereafter arising, and
whether now or hereafter owned, acquired by or accruing or owing to the Company
and all proceeds and products thereof:
(i) all FSA Common Stock, together with all cash,
securities or other property which become payable or attributable to
the Company on account of the FSA Common Stock, including any cash,
securities or other property payable or distributable on account of any
cash dividend, stock redemption, stock split, stock dividend or other
dividend payable in property other than cash;
(ii) cash and Cash Equivalents held by the Agent or
Collateral Agent as security for the Secured Debt;
(iii) the Custody Account; and
(iv) the Settlement Account and all monies deposited
therein.
Collateral Agent: means First Chicago or its successor or
affiliate, as Collateral Agent under the Security Agreement.
Commitment: means, for each Lender as of any date, the obligation
of such Lender to make Loans not exceeding the amount set forth as its
commitment on Exhibit C attached hereto, as such amount may be modified from
time to time pursuant to the terms
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<PAGE> 10
hereof, or the amount established in any assignment to a new Lender pursuant to
the terms hereof.
Commitment Percentage: means, for each Lender as of any date, the
quotient of (i) such Lender's Commitment, divided by (ii) the Aggregate
Commitment, which Commitment Percentage shall initially be as set forth on
Exhibit C for each Lender.
Company: means Source One Mortgage Services Corporation, a Delaware
corporation.
Control: means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of another
entity, whether through the ownership of voting securities, by contract or
otherwise.
Control Agreement: means that certain Control Agreement of even date
herewith among the Company, the Collateral Agent and the Custodian pursuant to
which the Custodian, having custody of the FSA Common Stock owned by the
Company, agrees to the Collateral Agent's control over such stock and the
Custody Account to perfect the security interest created under the Security
Agreement.
Controlled Group: means all members of a controlled group of
corporations and all trades or business (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Code.
Conversion/Continuation Notice: is defined in Section 2.12(iii).
Corporate Base Rate: means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as such corporate base rate changes.
Credit Documents: means this Agreement, the Security Agreement, the
Notes, the Control Agreement and all other documents and instruments now or
hereafter delivered to the Agent or the Lenders pursuant to or in connection
with the transactions contemplated hereby, and any amendments, supplements,
modifications, renewals, replacements, consolidations, substitutions and
extensions of any of the foregoing.
Credit Indebtedness: means, as of any date, all amounts
owing under any of the Credit Documents to any of the Lenders,
the Agent, or the Collateral Agent.
Credit Requirement: means, as of any date, the aggregate unpaid
principal balance of all Loans then outstanding hereunder.
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<PAGE> 11
Custodian: means Roney & Co., a member firm in good standing of the
Depository Trust Company.
Custody Account: means the account established with the Custodian
in which the Eligible FSA Common Stock has been deposited.
Debt: means, with respect to any Person, as of any date of
determination thereof, without duplication, (i) all obligations of such Person
for borrowed money, including but not limited to money borrowed from any parent,
subsidiary or affiliate of such Person, whether or not evidenced by a promissory
note, (ii) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all obligations of such Person to pay the
deferred purchase price of property or services, including without limitation
the obligation of such Person to pay any deferred purchase price for Servicing
Agreements acquired, (iv) all obligations of such Person as lessee under capital
leases, (v) all Debt of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person, (vi) all Debt of others
Guaranteed by such Person, (vii) all on-balance-sheet obligations of such Person
under repurchase agreements covering mortgage-backed securities or pools of
Mortgage Loans, (viii) the Approved Secured Rate Hedging Obligations, and (ix)
all obligations of such Person to fund the origination or acquisition of
Mortgage Loans represented by uncleared loan funding checks or drafts payable to
the mortgagor or seller of such Mortgage Loans, as the case may be; provided
that Debt shall not include Mortgage-Related Indebtedness.
Debt Threshold: is defined in Section 8.5.
Default: means an Event of Default or any event or condition that
with the giving of notice or the passage of time or both would constitute an
Event of Default.
Eligible Collateral: means, as of any date without duplication, (i)
Eligible FSA Common Stock, (ii) the balance to the credit of the Company in the
Settlement Account, and (iii) cash and Cash Equivalents held by the Agent or
Collateral Agent as security for the Secured Debt.
Eligible FSA Common Stock: is defined in Section 4.1.
ERISA: means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA Affiliate: means any corporation or trade or business which
is a member of the same Controlled Group as the Company.
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<PAGE> 12
Eurodollar Advance: means an Advance which bears interest at the
Eurodollar Rate.
Eurodollar Base Rate: means, with respect to a Eurodollar Interest
Period, the rate determined by the Agent to be the rate at which deposits in
U.S. dollars are offered by First Chicago to first-class banks in the London
interbank market at approximately 11 a.m. (London time) two Business Days prior
to the first day of such Eurodollar Interest Period, in the approximate amount
of (i) the amount of the Eurodollar Advance divided by (ii) the number of
Lenders making Loans in connection with such Advance, and having a maturity
approximately equal to such Eurodollar Interest Period.
Eurodollar Interest Period: means, with respect to a Eurodollar
Advance, a period of one, two or three months, as selected by the Company,
commencing on a Business Day selected by the Company pursuant to this Agreement.
Such Eurodollar Interest Period shall end on (but exclude) the day which
corresponds numerically to such date one, two or three months thereafter, as
applicable; provided, however, that if there is no such numerically
corresponding day in such next month, such Eurodollar Interest Period shall end
on the last Business Day of such next month. If a Eurodollar Interest Period
would otherwise end on a day which is not a Business Day, such Eurodollar
Interest Period shall end on the next succeeding Business Day, provided,
however, that (i) if said next succeeding Business Day falls in a new calendar
month, such Eurodollar Interest Period shall end on the immediately preceding
Business Day, and (ii) no Eurodollar Interest Period shall extend beyond the
Termination Date.
Eurodollar Loan: means a Loan which bears interest at a
Eurodollar Rate.
Eurodollar Rate: means, with respect to a Eurodollar Advance and
Eurodollar Loan for the relevant Eurodollar Interest Period, the sum of (i) the
quotient of (a) the Eurodollar Base Rate applicable to such Eurodollar Interest
Period, divided by (b) one minus the Reserve Requirement (expressed as a
decimal) applicable to that Eurodollar Interest Period, plus (ii) the Applicable
Margin in effect two Business Days prior to the first day of such Eurodollar
Interest Period.
Event of Default: means any of the events described in
Section 10.1.
Exchange Act: means the Securities Exchange Act of 1934, as
amended.
Facility: means the facility comprised of the Commitments made
available to the Company pursuant to this Agreement, which
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facility has an original term of 364 days and an initial Aggregate Commitment of
$35,000,000.
Facility Fee Rate: means, as of any date, twenty one-hundredths of
one percent (0.20%) per annum.
Federal Agency: means FHLMC, FNMA, GNMA, FHA or VA.
Federal Funds Advance: means an Advance bearing interest at the
Federal Funds Rate.
Federal Funds Funding Rate: means, with respect to any Federal Funds
Loan for any day, the rate per annum equal to the consensus (or if no consensus
exists, the arithmetic average) of the rates at which reserves are offered by
first-class banks to other first-class banks (at approximately the time at which
the applicable Advance Notice or Conversion/Continuation Notice is received or
the time at which an automatic continuation is deemed to have occurred) on such
day (or if such day is not a Business Day, on the immediately preceding Business
Day) on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, based on quotes received by the Agent
from three federal funds brokers of recognized standing selected by the Agent in
its sole discretion; provided, however, that in lieu of determining the rate in
the foregoing manner, the Agent may substitute therefor the consensus (or if no
consensus exists, the arithmetic average) of the rates at which reserves are
offered by first-class banks to other first-class banks at 10:00 a.m. (Chicago
time) on such day (or if such day is not a Business Day, on the immediately
preceding Business Day) on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, received by the
Agent from three federal funds brokers of recognized standing selected by the
Agent in its sole discretion.
Federal Funds Loan: means any Loan constituting a portion of a
Federal Funds Advance.
Federal Funds Rate: means, for any day, an interest rate
per annum equal to (i) the Federal Funds Funding Rate for such day, plus (ii)
0.125% per annum, plus (iii) the Applicable Margin.
Fees: is defined in Section 2.2.
FHA: means the Federal Housing Administration or other agency,
corporation or instrumentality of the United States to which the powers and
duties of the Federal Housing Administration have been transferred.
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FHA-Approved Mortgagee: means an institution that is approved by the
FHA to act as a servicer and mortgagee of record with respect to a Mortgage Loan
insured by the FHA.
FHLMC: means the Federal Home Loan Mortgage Corporation or other
agency, corporation or instrumentality of the United States to which the powers
and duties of the Federal Home Loan Mortgage Corporation have been transferred.
FHLMC-Approved Lender: means an institution that is approved by the
FHLMC to act as a lender in connection with the origination of any Mortgage Loan
purchased by the FHLMC.
First Chicago: means The First National Bank of Chicago, in its
corporate capacity and not as Agent, and its successors and assigns.
FNMA: means the Federal National Mortgage Association or other
agency, corporation or instrumentality of the United States to which the powers
and duties of the Federal National Mortgage Association have been transferred.
FNMA-Approved Lender: means an institution that is approved by the FNMA
to act as a lender in connection with the origination of any Mortgage Loan
purchased by the FNMA.
FSA: means Financial Security Assurance Holdings Ltd., a New York
corporation.
FSA Common Stock: means 3,460,200 shares of common stock of FSA, having
a par value of $0.01 per share, together with any additional shares in FSA or
any portions or other rights with respect to FSA to which the holder of such
shares becomes entitled hereafter, subject to possible releases thereof in
accordance with Section 4.5.
Fundamental Change: is defined in Section 8.4.
Fundamental Change/Investment Calculation Period: means, in respect of
any Fundamental Change or Investment, the period ending on the date of
consummation of such Fundamental Change or Investment and including the four
most recent consecutive fiscal quarters ending on or prior to the date of
consummation of such Fundamental Change or Investment.
Funded Debt: means as of any date of determination thereof, all Debt
of the Company and its consolidated Subsidiaries (including without limitation
all amounts payable by the Company in connection with the acquisition of any
Servicing Agreements and the amount of all checks, drafts or other items issued
by the Company or any of its consolidated Subsidiaries to fund Mortgage Loans to
the extent such checks, drafts or other items have not
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been collected upon and paid), minus (i) all Debt of others Guaranteed by the
Company or any of its consolidated Subsidiaries and (ii) all Debt of others
secured by a Lien on any asset of the Company or any of its consolidated
Subsidiaries, unless such Debt is assumed by the Company or any of its
consolidated Subsidiaries.
GAAP: means generally accepted accounting principles as in effect
from time to time.
GNMA: means the Government National Mortgage Association or other
agency, corporation or instrumentality of the United States as to which the
powers and duties of the Governmental National Mortgage Association have been
transferred.
Guaranty: means, with respect to any Person, any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person (a "primary obligor") or in any manner providing for the payment of
any Debt of any primary obligor or otherwise protecting the holder of such Debt
against loss (whether by agreement to keep-well, to purchase assets, goods,
securities or services, to advance or supply funds to the primary obligor to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, to take-or-pay or
otherwise), provided that the term "Guaranty" shall not include (i) endorsements
for collection or deposit in the ordinary course of business, (ii) obligations
of the Company pursuant to Recourse Servicing, (iii) commitments by the Company
to purchase Mortgage Loans in the ordinary course of business, and (iv)
obligations in the Company's capacity as servicer of Mortgage Loans. The term
"Guarantee" used as a verb has a correlative meaning.
Hazardous Substance: means any hazardous, toxic or dangerous waste,
substance or material subject to regulation under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, and federal,
state or local so-called "Superfund" or "Superlien" laws, or any other federal,
state or local laws, ordinances, rules or regulations governing or regulating
hazardous materials, pollution, the environment or public health, as now or at
any time hereafter in effect.
HUD: means the United States Department of Housing and Urban
Development or other agency, corporation or instrumentality of the United States
to which the powers and duties of the United States Department of Housing and
Urban Development have been transferred.
Investment: means, as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of, or a beneficial interest in,
stock or other securities of any other Person or any option, contract,
certificate or other financial
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product (including, but not limited to, interest rate swaps and other hedging
instruments), or any direct or indirect loan, advance or capital contribution by
that Person to any other Person, including all indebtedness and accounts
receivable from that other Person which are not current assets or did not arise
from sales to that other Person in the ordinary course of business. The amount
of any Investment shall be determined in accordance with GAAP.
Lender: means, at any time, any party having a Commitment hereunder
and its successors and permitted assigns.
Lending Installation: means, with respect to a Lender, any office,
branch, subsidiary or affiliate of such Lender.
Lending Sublimits: is defined in Section 2.1(a).
Lien: means, with respect to any asset of any Person, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For the purposes of this Agreement, such Person shall be deemed to
hold subject to a Lien any asset that it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sales agreement, capital
lease or other title retention agreement relating to such asset.
Loan: means a loan of money in any amount to the Company by a Lender
pursuant to this Agreement.
Market Value: means, with respect to the FSA Common Stock, on a monthly
basis, or more often if so required from time to time by the Agent, the
then-current market value of such FSA Common Stock as conclusively determined by
the bid price published in The Wall Street Journal (or other financial
publication selected by the Agent if such price is not published therein for any
reason).
Maximum Special Dividend Amount: is defined in Section 8.16.
Moody's: means Moody's Investors Service, Inc. or any successor to
its business.
Mortgage: means a mortgage, deed of trust, security deed or similar
instrument purporting to create a first or second lien or similar interest in
real estate and improvements thereon.
Mortgage Loan: means a loan of money evidenced by a Mortgage Note and
secured by a Mortgage.
Mortgage Note: means a note evidencing the indebtedness secured by a
Mortgage.
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Mortgage-Related Indebtedness: means, with respect to the Company and
its Subsidiaries, any amount arising out of the issuance in the ordinary course
of the mortgage banking business of the Company and its Subsidiaries of (i)
mortgage pools, pass-throughs, participation certificates and other
mortgage-related securities to the extent that such amount would not, in
accordance with GAAP, be shown as indebtedness on a consolidated balance sheet
of the Company and its Subsidiaries as at such date and (ii) collateralized
mortgage obligations and other mortgage-related securities issued by a
Subsidiary of the Company, the payment of principal and interest in respect of
which is secured by a Lien on Mortgage Loans or other mortgage-related
securities (or other securities in which the Company invests in the ordinary
course of its mortgage banking business) conveyed to such Subsidiary in an
amount reasonably anticipated by the Company to approximate the amount required
to pay the principal and interest in respect of such collateralized mortgage
obligations or other mortgage-related securities (whether or not such amount
would, in accordance with GAAP, be shown as indebtedness on a consolidated
balance sheet of the Company and its Subsidiaries as at such date).
Note: means promissory notes evidencing amounts that may be advanced
from time to time under this Agreement, in substantially the form of Exhibit E
attached hereto, each duly executed by the Company and payable to the order of a
Lender, including any amendment, modification, renewal or replacement of such
promissory notes.
Notice Address: means, as to any Person, the address of such Person
specified in or pursuant to Section 12.2.
Obligations: means any and all amounts due from the Company to any of
the Lenders, the Agent or the Collateral Agent hereunder or under the Notes,
the Security Agreement or any other Credit Document.
Other Facility: means that certain Fourth Amended and Restated
Revolving Credit Agreement dated as of July 10, 1998 by and among the Company,
First Chicago, the Lenders and certain other banks, as amended and supplemented
from time to time.
Parent: means collectively, White Mountains Holdings, Inc., which
holds 97% of the stock of the Company, and Fund American Enterprises Holdings,
Inc., which in turn holds all of the stock in White Mountains Holdings, Inc. and
the remaining 3% of the stock of the Company.
Participants: is defined in Section 11.2(a).
PBGC: means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
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Person: means an individual, corporation, limited liability
company, partnership, joint venture, trust or unincorporated organization,
or a government or any agency or political subdivision thereof.
Plan: means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Company or any member of the Controlled Group may have any
liability.
Pledged Item: means any FSA Common Stock or Cash Equivalent that is
from time to time designated as Collateral by the Company and the Collateral
Agent or the Custodian pursuant to this Agreement, the Security Agreement or the
Control Agreement.
Pledgor: is defined in Section 4.3.
Published Federal Funds Effective Rate: means, for any day, an interest
rate per annum equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published for such day (or, if such day is
not a Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations at approximately 10:00 a.m.
(Chicago time) on such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by the Agent in its sole
discretion.
Rate Hedging Agreement: means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate floor, cap or collar protection
agreements, forward rate currency or interest rate options, puts and warrants.
Rate Option: means the Eurodollar Rate, the Federal Funds Rate or
the Alternate Base Rate.
Recourse Servicing: means any servicing rights under a Servicing
Agreement (other than any Servicing Agreement with GNMA) which obligates the
Company to repurchase Mortgage Loans upon default by the borrower thereunder or
indemnify any party having an interest in such Mortgage Loans against any
principal loss arising from such a default, unless (i) the Company has obtained
and maintains in effect insurance with coverages satisfactory to Agent from an
insurance company having a "AAA" rating covering the risk of being required to
so indemnify any such party, or (ii) the Company's obligation to indemnify any
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party against any principal loss is limited to 10% or less of any such loss.
Regulation D: means Regulation D of the Board of Governors as from time
to time in effect and any successor or other regulation or official
interpretation of the Board of Governors relating to reserve requirements
applicable to member banks of the Federal Reserve System.
Regulation U: means Regulation U of the Board of Governors from time to
time in effect and any successor or other regulation or official interpretation
of the Board of Governors relating to the extension of credit by banks for the
purpose of purchasing or carrying margin stocks applicable to member banks of
the Federal Reserve System.
Reportable Event: means a reportable event as described in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified of the
occurrence of such event, provided, however, that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be
a Reportable Event regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or Section 412(d)
of the Code.
Required Lenders: means (i) Lenders having two-thirds of the
Aggregate Commitment then in effect, or (ii) if the Commitments have been
terminated, Lenders having at least two-thirds of the aggregate Loans then
outstanding.
Reserve Requirement: means, with respect to the Eurodollar Rate
applicable to a Eurodollar Interest Period, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves)
which is imposed under Regulation D on eurocurrency liabilities on the date of
determination of such Eurodollar Rate.
Residential Mortgage Loan: means a Mortgage Loan secured by a
Mortgage on a Single Family Residence.
Restricted FSA Securities: means any securities or contractual rights
now or hereafter owned by the Company which are convertible into, are
exercisable for or represent a right to acquire, without regard to any
contractual restrictions thereon, shares of capital stock of FSA, together with
all capital stock of FSA which is acquired by the Company pursuant to such a
conversion or any exercise of such right.
Restricted Payment: means: (i) with respect to the Company, any payment
of any dividends upon any shares of the Company's
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stock now or hereafter outstanding, except dividends payable in the stock of the
Company, and any other distribution or other transfer of assets to its
stockholders, as such, (including any repurchase of the Company's stock) whether
in cash, property, or securities, other than the exchange of Subordinated Debt
for Series A Preferred Stock or the purchase at market value from an Affiliate
of a readily-marketable security traded on the New York Stock Exchange, American
Stock Exchange or The NASDAQ Stock Market as approved by the Agent; and (ii) any
payment of principal of or interest on the Subordinated Debt, and any amounts
deposited with the trustee under the Subordinated Debt Indenture or otherwise
irrevocably set aside for the benefit of the holders of the Subordinated Debt
for the purpose of defeasance of the Subordinated Debt.
Resulting Entity: means the Company and its consolidated Subsidiaries
after giving effect to any Fundamental Change or Investment.
S&P: means Standard & Poor's Ratings Group or any successor to its
business.
SEC: means the Securities and Exchange Commission (or any successor
entity).
Secured Debt: means the Credit Indebtedness.
Secured Parties: means, collectively, the Lenders, the Agent and the
Collateral Agent.
Security Agreement: means the Pledge and Security Agreement as of even
date herewith, substantially in the form of Exhibit D attached hereto, by and
among the Company, the Agent and the Collateral Agent, pursuant to which a
security interest is created in favor of the Collateral Agent for the Secured
Parties in certain Collateral to be pledged pursuant to this Agreement, as the
same may, from time to time, be further supplemented, modified or amended.
Series A Preferred Stock: means the Company's 8.42% Cumulative
Preferred Stock, Series A.
Servicing Agreement: means a written contract of the Company with
another Person to act on behalf of such other Person to, among other things,
receive payments in respect of Mortgage Loans and to service Mortgage Loans, but
shall not include the servicing rights related to (i) any Residential Mortgage
Loans while they constitute collateral under the Other Facility, (ii) any
commercial Mortgage Loans, or (iii) any other Mortgage Loans held for
investment by the Company, Parent or any of their respective Subsidiaries.
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Servicing Purchaser: means a Person which has purchased Servicing
Agreements from the Company.
Settlement Account: means the account established pursuant to
Section 4.6.
Single Family Residence: means a one- to four-family dwelling unit,
which may be a condominium unit but which shall not be a mobile home (unless
qualified under a Federal Agency program) or a dwelling unit in a cooperative
apartment building.
Special Dividend: means any Restricted Payment made pursuant to
Section 8.16(b)(ii).
Subordinated Debt: means the principal amount of (but not any interest
on) the unsecured subordinated Debt of the Company outstanding from time to time
(which amount shall not exceed $100,000,000) evidenced by the Quarterly Income
Capital Securities (Subordinated Interest Deferrable Debentures, Due 2025) of
the Company issued in exchange for certain of the Series A Preferred Stock, the
terms of which unsecured subordinated Debt are set forth in the Subordinated
Debt Indenture; but shall not include any such unsecured subordinated Debt with
respect to which any amounts shall have been deposited with the trustee under
the Subordinated Debt Indenture or otherwise irrevocably set aside for the
benefit of the holders of such Debt for the purpose of defeasance of such Debt.
Subordinated Debt Indenture: means that certain Subordinated Indenture,
dated as of December 1, 1995, as amended or supplemented from time to time, by
and between the Company and IBJ Schroeder, as trustee, pursuant to which the
Company has issued or will issue the Subordinated Debt.
Subservicing Agreement: means a Servicing Agreement between the Company
and a Person which does not own the Mortgage Loans being serviced thereunder but
only has servicing or other non-ownership rights with respect thereto.
Subsidiary: of a Person means (i) any corporation more than 50% of the
outstanding voting securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Company.
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Termination Date: means July 9, 1999, or if any such day is not a
Business Day, the next preceding Business Day.
Transferee: is defined in Section 11.4.
Unsecured Leverage Ratio: means the maximum leverage ratio set forth
in Section 8.9.
VA: means the Veterans Administration or other agency, corporation
or instrumentality of the United States as to which the powers and duties of
the Veterans Administration have been transferred.
VA-Approved Lender: means an institution that is approved by the VA to
act as a lender in connection with the origination of any Mortgage Loan
guaranteed by the VA.
VA Mortgage Loan: means a Mortgage Loan that is secured by a first
lien on land and the Single Family Residence constructed thereon and is
guaranteed by the VA.
Year 2000 Issues: means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications to effectively
handle data including dates on and after January 1, 2000, as such inability
materially affects the business, operations and financial condition of the
Company and its Subsidiaries and of the Company's and its Subsidiaries' material
customers, suppliers and vendors.
Year 2000 Program: is defined in Section 6.17.
1.2 Interpretation.
(a) Words of the masculine gender include correlative words of
the feminine and neuter genders.
(b) Unless the context shall otherwise indicate, words
importing the singular include the plural and vice versa.
(c) Articles and Sections referred to by number mean the
corresponding Articles and Sections of this Agreement.
(d) The terms "hereby," "hereof," "hereto," "herein," "hereunder"
and any similar terms as used in this Agreement, refer to this
Agreement as a whole unless otherwise expressly stated.
1.3 Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations hereunder shall be
made, and all financial statements required to
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be delivered hereunder shall be prepared, in accordance with GAAP, applied on a
basis consistent (except for changes concurred in by the Company's independent
public accountants) with the most recent audited consolidated financial
statements of the Company delivered to the Lenders. To enable the ready and
consistent determination of compliance with the covenants set forth herein, the
Company will not change its fiscal year from a calendar year without (i) advance
written notice to the Lenders, (ii) providing interim financial reports
certified by the Company, by the dates that such reports would have been
required prior to such change, and (iii) providing an interim audited financial
statement if more than fifteen (15) months will have elapsed between annual
audited financial statements as a result of such change.
ARTICLE II
BORROWINGS
2.1 Availability and Adjustments.
(a) Agreement to Lend. Subject to subparagraphs (1) and
(2) below (the "Lending Sublimits"), each Lender severally agrees to
make Loans to the Company on the terms and subject to the conditions
set forth in this Agreement from time to time through the Business Day
immediately preceding the Termination Date, provided that, on any date,
after giving effect to such Loans and all other Loans that the Company
has requested be made on such date:
(1) the aggregate principal balance then outstanding
under all Loans made by any Lender under this Agreement shall
not at any time exceed such Lender's then-current Commitment;
and
(2) the Credit Requirement shall not exceed the
Borrowing Base.
Subject to the terms and conditions hereof, the Company may borrow,
repay and reborrow amounts hereunder.
(b) Optional Reductions in Aggregate Commitments. The
Company shall have the right to reduce the Aggregate Commitment upon
ten Business Days' prior written notice to the Agent (which shall
promptly notify the Lenders), provided that such voluntary reductions
shall be made only in multiples of $5,000,000. Upon a reduction of the
Aggregate Commitment pursuant to the preceding sentence, each Lender's
Commitment shall be decreased pro rata in accordance with such Lender's
Commitment Percentage. On or before the effective date of any such
reduction, the Company shall, if necessary, repay sufficient Loans to
prevent the remaining outstanding Loans hereunder, after giving effect
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to such permanent reduction, from exceeding the Lending Sublimits.
2.2 Fees.
The Company shall pay the following fees (the "Fees"):
(a) Facility Fee. A facility fee based on the Aggregate
Commitment from time to time, calculated at the Facility Fee Rate,
expressed as a per diem rate on the actual Aggregate Commitment for
each day during the preceding full or partial calendar quarter, payable
in arrears, on or before the fifth Business Day of each calendar
quarter and on the Termination Date. This fee shall be allocated among
the Lenders on a pro rata basis in accordance with their respective
Commitments on each day during such quarter.
(b) Up-Front Fees. An up-front fee to each Lender based on
such Lender's initial total Commitment hereunder payable when this
Agreement becomes effective, equal to 0.075% of the Commitment of such
Lender.
(c) Other Fees Payable to Agent. Any fees payable to the Agent
pursuant to any applicable letter agreements between the Agent and the
Company.
(d) Collateral Agent Fees. Collateral Agent fees payable to
Collateral Agent for its services rendered pursuant to the Security
Agreement as agreed to by the Company and the Collateral Agent from
time to time.
2.3 Advances.
(a) Types of Advances. Each Advance hereunder shall consist of
Loans made from one or more of the Lenders and requested by the Company in
accordance with Section 2.9. Subject to the terms and conditions herein,
Eurodollar Advances, Alternate Base Rate Advances and Federal Funds Advances
shall be generally available as permitted by the Lending Sublimits.
Notwithstanding anything to the contrary contained in this Agreement, at any
time during the continuance of a Default the Agent may (and at the direction of
the Required Lenders shall) declare by notice to the Company that no Advance
may be made as, converted into or continued as a Eurodollar Advance and each
such Advance shall automatically be converted into a Federal Funds Advance at
the expiration of the Eurodollar Interest Period applicable thereto.
(b) Rate Options. Eurodollar Advances, Alternate Base Rate
Advances and Federal Funds Advances shall accrue interest at
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the Eurodollar Rate, the Alternate Base Rate or the Federal Funds Rate,
respectively.
(c) Funding of Advances. All Advances shall be funded on a pro
rata basis among all Lenders in accordance with each Lender's Commitment
Percentage.
2.4 [Intentionally Omitted].
2.5 [Intentionally Omitted].
2.6 [Intentionally Omitted].
2.7 Rate after Maturity.
Any Advance not paid at maturity, whether by acceleration or
otherwise, and any other amount not paid when due hereunder shall bear interest
until paid in full at a rate per annum equal to the Alternate Base Rate plus two
percent (2.0%) per annum; provided, however, that such interest rate after
maturity shall in no event be less than the interest rate that was in effect
with respect to such Advance prior to maturity.
2.8 Interest Payment Dates.
Interest shall accrue at the relevant rate for each day from
the day on which the proceeds of such Advance are made available to the Company.
Interest accrued on each Advance other than a Eurodollar Advance shall be
payable on the first to occur of (i) the first Business Day of the immediately
following calendar month, commencing with the first such date to occur after the
date hereof, or (ii) at maturity of the Facility, whether due to acceleration or
otherwise. Interest accrued on each Eurodollar Advance shall be payable on the
first to occur of (i) the last day of each Eurodollar Interest Period, or (ii)
any date on which any such Eurodollar Advance is prepaid, whether due to
acceleration or otherwise, or (iii) the Termination Date. Interest and Fees
shall be calculated for actual days elapsed on the basis of a 360-day year.
Interest shall be payable for the day an Advance is made. Interest shall not
be payable for the day of any payment on the amount paid if payment is received
prior to noon (Chicago time) at the place of payment. If any payment of
principal of or interest on an Advance shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
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2.9 Method of Selecting Rate Options and Interest Periods.
Subject to the terms hereof, for each Advance hereunder the
Company shall give the Agent irrevocable notice (an "Advance Notice") not later
than (i) 10:00 a.m. (Chicago time) on the proposed Advance Date for each Federal
Funds Advance, (ii) noon (Chicago time) on the proposed Advance Date for each
Alternate Base Rate Advance, and (iii) 11:00 a.m. (Chicago time) three (3)
Business Days before the Advance Date for each Eurodollar Advance specifying:
(a) the Advance Date, which shall be a Business Day, of such
Advance,
(b) the aggregate amount of such Advance, which shall be in an
amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess
thereof,
(c) the type of such Advance, and
(d) in the case of a Eurodollar Advance, the Eurodollar
Interest Period applicable thereto.
Delivery of an Advance Notice, whether by telephone or in writing, shall
constitute a representation and warranty that, after giving effect to the amount
of the Advance being requested, (i) the then-current Borrowing Base is equal to
or greater than the Credit Requirement, and (ii) no Lending Sublimit shall be
exceeded. Changes in the rate of interest on that portion of any Advance
maintained as an Alternate Base Rate Advance will take effect simultaneously
with each change in the Alternate Base Rate. The interest rate on each Federal
Funds Advance shall be recalculated daily for each day that such Federal Funds
Advance is continued under Section 2.12(ii). Each Eurodollar Advance shall bear
interest for each day from and including the first day of the Eurodollar
Interest Period applicable thereto to (but not including) the last day of such
Eurodollar Interest Period at the interest rate determined as applicable to such
Advance. The Company shall select Eurodollar Interest Periods with respect to
Eurodollar Advances so that it is not necessary to pay a Eurodollar Advance
prior to the last day of the applicable Eurodollar Interest Period in order to
make the mandatory repayment on the Termination Date.
2.10 Maximum Number of Eurodollar Loans.
The Company may not request an additional Eurodollar Advance
if the making of such Advance would result in any Lender holding Eurodollar
Loans having more than three (3) different Eurodollar Interest Periods at any
given time.
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2.11 Funding Procedures.
Not later than 2:00 p.m. (Chicago time) on each Advance Date,
each Lender shall make available its Loan or Loans, in funds immediately
available in Chicago to the Agent at its address specified pursuant to Article
XII. The Agent will make the funds so received from the Lenders available to the
Company at the Agent's aforesaid address, subject to the provisions of Article
V.
2.12 Conversion and Continuation.
(i) The Company may elect from time to time, subject to
the provisions of Sections 2.3(a), 2.9 and 2.10 and the Lending
Sublimits to convert all or any part of any Advance into a different
type of Advance, provided that any conversion of any Eurodollar Advance
shall be made on, and only on, the last day of the applicable
Eurodollar Interest Period.
(ii) Alternate Base Rate Advances shall continue as the
same type of Advances unless and until such Advances are converted into
a different form of Advance in accordance with the terms hereof.
Federal Funds Advances shall continue as Federal Funds Advances unless
and until (a) such Advances are converted into a different form of
Advance in accordance with the terms hereof or (b) the Company has paid
any such Federal Funds Advance prior to 10:00 a.m. (Chicago time) on
any Business Day or given the Agent written notice before 10:00 a.m.
(Chicago time) on any Business Day that such Federal Funds Advance will
be repaid on such Business Day. If the Company so notifies the Agent
that it will be paying a Federal Funds Advance on any Business Day and
fails to do so, such Advance shall be converted into an Alternate Base
Rate Advance. Eurodollar Advances shall continue until the end of the
then-applicable Eurodollar Interest Period therefor, at which time each
such Advance shall be automatically converted to a Federal Funds
Advance, unless the Company shall have given the Agent notice in
accordance with Section 2.12(iii) requesting that, at the end of such
Eurodollar Interest Period, such Advance continue as a Eurodollar
Advance for a specified Eurodollar Interest Period or be converted to a
different type of Advance.
(iii) The Company shall give the Agent irrevocable notice
(a "Conversion/Continuation Notice") of each conversion of an Alternate
Base Rate Advance or a Federal Funds Advance, or conversion or
continuation of a Eurodollar Advance, not later than (i) 10:00 a.m.
(Chicago time) on the date of the requested conversion or continuation,
in the case of a conversion into a Federal Funds Advance or Alternate
Base Rate Advance, or (ii) 11:00 a.m. (Chicago
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time) at least three Business Days prior to the date of the requested
conversion into or continuation of a Eurodollar Loan, specifying: (1)
the requested date (which shall be a Business Day) of such conversion
or continuation; (2) the amount and type of the Advance to be converted
or continued; (3) the amount and type(s) of Advance(s) into which such
Advance is to be converted or continued; and (4) in the case of a
conversion into or continuation of a Eurodollar Advance, the duration
of the Eurodollar Interest Period applicable thereto.
2.13 Optional Principal Payments.
All or any portion of Alternate Base Rate Advances and Federal
Funds Advances may be paid without penalty or premium on any Business Day
provided that such repayments are made by (i) 10:00 a.m. (Chicago time) with
respect to Federal Funds Advances, or (ii) noon (Chicago time) with respect to
Alternate Base Rate Advances. A Eurodollar Advance may not be paid prior to the
last day of the applicable Eurodollar Interest Period provided, however, that
the Company shall compensate the Lenders for any funding losses and/or loss of
profits incurred as a result of any voluntary prepayment (if accepted) or
involuntary prepayment of any such Advance prior to the last day of the
applicable Eurodollar Interest Period. All optional principal payments shall be
applied to the type of Advance designated by the Company when making such
payment, provided that any payments received during the continuance of an Event
of Default shall be applied on a pro rata basis to all Advances then outstanding
(with the portion applicable to Eurodollar Loans to be applied to such Loans
either immediately or at the end of the relevant Eurodollar Interest Period at
the option of the Company).
2.14 Required Principal Payments.
(a) Payments Related to Borrowing Base. On any date that the
Credit Requirement is in excess of the then-current Borrowing Base, the Company
shall make a mandatory payment to the Agent for the benefit of the Lenders in
the amount of such excess. Such payment shall be allocated pro rata among the
Lenders in accordance with the amounts of their outstanding Loans hereunder.
(b) Final Payment on Termination Date. The outstanding
principal balance of all Advances not repaid earlier, together with any accrued
and unpaid interest and Fees, unless required to be paid earlier pursuant to the
terms hereof, shall be due and payable on the Termination Date.
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2.15 Method of Payment.
All payments of principal, interest, and Fees hereunder shall
be made in immediately available funds to the Agent at the Agent's address
specified pursuant to Article XII, or at any other Lending Installation of the
Agent specified in writing by the Agent to the Company on the date due by 1:00
p.m. (Chicago time). Notwithstanding the foregoing, if the Company fails to
repay or give the Agent notice of repayment of a Federal Funds Advance before
10:00 a.m. (Chicago time) on the Business Day that the Company intends to repay
such Advance, any payment of such Advance received by the Agent on such Business
Day after the time required for payment or notice shall be deemed to have been
received by the Agent at the opening of business on the following Business Day.
Each payment delivered to the Agent for the account of any Lender shall be
delivered promptly by the Agent to such Lender in the same type of funds which
the Agent received at its address specified pursuant to Article XII or at any
Lending Installation specified in a notice received by the Agent from such
Lender. The Agent is hereby authorized to charge the account of the Company
maintained with First Chicago for each payment of principal, interest and fees
as it becomes due hereunder.
2.16 Notes; Telephonic Notices.
Each Lender is hereby authorized to record the principal
amount of each of its Loans and each repayment on the schedules attached to its
Note provided, however, that the failure to so record or any error in such
recording shall not affect the Company's obligations hereunder or under such
Note. The Company hereby authorizes the Lenders and the Agent to extend,
continue or convert Advances, effect Rate Option selections and transfer funds
to or for the account of the Company based on telephonic notices (confirmed
promptly thereafter by facsimile) made by any person or persons the Agent or any
Lender in good faith believes to be acting on behalf of the Company. The Company
agrees to deliver promptly to the Agent a written confirmation, if such
confirmation is requested by the Agent or any Lender, of each telephonic notice
signed by an officer of the Company authorized in writing to do so. If the
written confirmation differs in any material respect from the action taken
by the Agent and the Lenders, the records of the Agent and the Lenders shall
govern absent manifest error.
2.17 General Provisions as to Payments.
(a) The Company shall make each payment of principal or
interest on the Loans and shall pay all Fees not later than the times
stated in Section 2.15. The Agent shall promptly distribute to each
Lender its share of each payment
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of principal or interest or fees received by the Agent for the account
of such Lender.
(b) Amounts paid to or held by the Agent for the payment of
Loans shall not be deemed paid to a Lender until received by such
Lender by the later of 3:00 p.m. (Chicago time) or the close of
business on such date. If amounts are received by the Agent from the
Company prior to the applicable times stated in Section 2.15 and the
Agent fails to make a Lender's portion of such amount available to such
Lender by close of business on such date, the Company shall have no
obligation to pay any further interest on such payment and the Agent
shall pay to such Lender interest on such payment to the date paid to
such Lender by the Agent at a rate per annum equal to the then-current
Published Federal Funds Effective Rate.
2.18 Notification of Advances, Interest Rates and Prepayments.
Promptly after receipt thereof, the Agent will notify each
Lender by facsimile of the contents of each Advance Notice, Conversion/
Continuation Notice, and repayment notice received by it hereunder. Not later
than one Business Day prior to the Advance Date for each Eurodollar Advance, the
Agent will notify by facsimile each Lender and the Company of the interest rate
applicable to each Eurodollar Advance promptly upon determination of such
interest rate. When any Advances are outstanding or have been requested at the
Federal Funds Rate or the Alternate Base Rate the Agent will give each Lender
and the Company prompt notice by facsimile of each change in such rate.
2.19 Lending Installations.
Each Lender may book its Loans at any Lending Installation
selected by such Lender and may change its Lending Installation from time to
time. All terms of this Agreement shall apply to any such Lending Installation
and the Notes shall be deemed held by each Lender for the benefit of such
Lending Installation. Each Lender may, by facsimile or written notice to the
Agent and the Company, designate a Lending Installation through which Loans will
be made by it and for whose account Loan payments are to be made.
Notwithstanding the foregoing, no Lender may transfer its Loans to another
Lending Installation if such transfer would cause the Company to incur
additional indemnification costs under Section 3.1 hereof, and if after a Lender
transfers its Loans to another Lending Installation the Company incurs
additional indemnification costs under Section 3.1 hereof as a result of such
transfer, such Loans shall be transferred back to the original Lending
Installation.
2.20 Non-Receipt of Funds by Agent.
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(a) Unless the Company or a Lender, as the case may be,
notifies the Agent prior to the close of business on the Business Day
immediately preceding the date on which it is required to make payment to the
Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case
of the Company, a payment of principal, interest or fees to the Agent for the
account of the Lenders, that it does not intend to make such payment, the Agent
may assume that such payment has been made or will be made on the date required.
The Agent may, but shall not be obligated to, make the amount of such payment
available to the intended recipient in reliance upon such assumption. If such
Lender or the Company, as the case may be, has not in fact made or does not make
when due such payment to the Agent, the recipient of such payment shall, on
demand by the Agent, repay to the Agent the amount so made available together
with interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to (i) in the case of repayment
by a Lender, the Published Federal Funds Effective Rate for such day or (ii) in
the case of repayment by the Company, the interest rate applicable to the
relevant Loan. If a Lender fails to pay the Agent as provided in the preceding
sentence, the Company shall pay such amount to the Agent upon demand plus
interest (at the rate applicable to the applicable Advance) to the date of
repayment (but not including such date if payment is received prior to the
deadlines established in Section 2.15).
(b) Neither the Agent nor any Lender shall incur any liability
to the Company in acting upon any telephonic notice referred to in this
Agreement which the Agent or such Lender believes in good faith to have been
given by a duly authorized officer or other person authorized to borrow on
behalf of Company or for otherwise acting in good faith under this Section 2.20.
Upon the funding of Loans by the Lenders in accordance with this Agreement
(including satisfaction of all conditions thereto) pursuant to any telephonic
notice (with confirmation promptly thereafter by facsimile), the Company shall
have effected a borrowing hereunder. An Advance Notice (or telephonic notice in
lieu thereof) shall be irrevocable and the Company shall be bound to effect a
borrowing in accordance therewith.
(c) If the Agent fails to make any Loan funds received from a
Lender available to the Company for any reason and does not return such Loan
funds to such Lender on the same Business Day such funds were received by the
Agent, the Agent shall pay to such Lender, upon demand, interest from the date
such funds are received by the Agent from such Lender, provided such funds were
received prior to the deadlines for receipt set forth in Section 2.11 until the
date such corresponding amount is either made available by the Agent to the
Company within the time limits of Section 2.11 or so returned to such Lender, at
the rate per
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annum equal to the then-current Published Federal Funds Effective Rate
and the Company shall have no responsibility to such Lender with respect to
such funds until they are so made available to the Company by the Agent.
(d) Nothing in this Section 2.20 shall relieve any Lender from
its obligation to fund its share of any Advance, prejudice any rights the
Company may have against any Lender as a result of such Lender's failure to make
the amount of its Loan available to the Company or obligate any Lender to fund
any other Lender's share of any Advance.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1 Yield Protection.
If, after the date of this Agreement, the adoption of any law
or any governmental or quasi-governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law), or any change in any
existing or future law, rule, regulation, policy, guideline or directive or the
interpretation or administration thereof, or the compliance of any Lender
therewith,
(i) subjects any Lender or any applicable Lending
Installation to any tax, duty, charge or withholding on or from
payments due from the Company, or changes the basis of taxation of
payments to any Lender in respect of its Loans or other amounts due it
hereunder (excluding any tax imposed with respect to the overall net
income of any Lender or its Lending Installation and any franchise
taxes imposed on any such Lender or Lending Installation to the extent
such franchise taxes are in lieu of net income taxes), or
(ii) imposes or increases or deems applicable any
reserve, assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender or any applicable Lending
Installation (other than reserves and assessments taken into account in
determining the interest rate applicable to Eurodollar Advances), or
(iii) affects the amount of capital required or expected
to be maintained by any Lender or Lending Installation or any
corporation controlling any Lender or Lending Installation and such
Lender determines the amount of capital required is increased by or
based upon the existence of this Agreement or its obligation to make or
maintain Loans hereunder or of commitments of this type, or
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(iv) imposes any other condition which requires any
Lender or any applicable Lending Installation to make any payment
calculated by reference to the amount of loans held or interest
received by it in an amount deemed material by such Lender,
and the result of any of the foregoing is to increase the cost to such Lender or
Lending Installation of making, renewing or maintaining its Commitment or 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 Lending Installation or any Person
controlling such Lender or Lending Installation as it relates to credit
facilities in the nature of that evidenced by this Agreement, then the Company
shall pay such Lender that portion of such increased expense incurred
(including, in the case of Section 3.1(iii), any reduction in the rate of return
on capital to an amount below that which it could have achieved but for such
law, rule, regulation, policy, guideline or directive and after taking into
account such Lender's policies as to capital adequacy) or reduction in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans and its Commitment to the extent such expenses or
reductions arise from and after the date which is 90 days before receipt by the
Company of demand for payment by such Lender. Notwithstanding the foregoing, if
any of the foregoing circumstances otherwise giving rise to the yield protection
provisions of this Section are imposed solely against a single Lender as a
result of circumstances or conditions which apply solely to that Lender and not
generally to lenders domiciled in the jurisdiction of such Lender's domicile,
then the yield protection provisions of this Section shall not apply with
respect to such circumstances.
3.2 Availability of Rate Options.
If any Lender determines that maintenance of any of its
Eurodollar Loans at a suitable Lending Installation would violate any applicable
law, rule, regulation or directive, whether or not having the force of law, the
Agent shall suspend the availability of the affected Rate Option and require any
Eurodollar Advances outstanding at the affected Rate Option to be repaid
immediately upon demand; or if the Required Lenders determine that deposits of a
type or maturity appropriate to match fund Eurodollar Advances are not
available, the Agent shall suspend the availability of the affected Rate Option
with respect to any such Loans or Advances made after the date of any such
determination. If the Required Lenders determine that the Eurodollar Rate does
not accurately reflect the cost of making a Eurodollar Advance at such Rate
Option, then, if for any reason whatsoever the provisions of Section 3.1 are
inapplicable, the Agent shall suspend the availability of the affected Rate
Option with respect
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to any Eurodollar Advance made after the date of any such determination.
3.3 Funding Indemnification.
If any payment of a Eurodollar Advance occurs on a date which
is not the last day of the applicable Eurodollar Interest Period, whether
because of acceleration, prepayment or otherwise, or if a Eurodollar Advance or
Federal Funds Advance is not made, continued or established by conversion on the
date specified by the Company for any reason other than default by the Lenders,
the Company will indemnify each Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain such Eurodollar
Advance.
3.4 Lender Statements; Survival of Indemnity.
To the extent reasonably possible, each Lender shall designate
an alternate Lending Installation with respect to its Eurodollar Advances to
reduce any liability of the Company to such Lender under Section 3.1 or to avoid
the unavailability of a Rate Option under Section 3.2, so long as such
designation is not to the economic detriment of such Lender and does not impose
any increased regulatory burdens on such Lender. Each Lender shall deliver to
the Agent and the Company a written statement of such Lender as to the amount
due, if any, under Section 3.1 or 3.3. Such written statement shall set forth in
reasonable detail the calculations upon which such Lender determined such amount
and shall be final, conclusive and binding on the Company in the absence of
manifest error. Determination of amounts payable under such Sections in
connection with a Eurodollar Advance shall be calculated as though each Lender
funded its related Loan through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
Eurodollar Rate applicable to such Loan, whether in fact that is the case or
not. The amount specified in the written statement shall be payable within 15
days after receipt by the Company of the written statement. The obligations of
the Company under Sections 3.1 and 3.3 shall survive payment of the Obligations
and termination of this Agreement. In the event any Lender is affected by any of
the events described in Section 3.1 or 3.2 the Company shall have the right, if
no Default then exists, to repay in full all Credit Indebtedness owed to such
Lender provided that the Company has, with the approval of the Agent (not to be
unreasonably withheld), arranged to substitute a replacement lender for the full
amount of such Lender's Commitment.
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3.5 Lender Tax Agreement.
Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) deliver to the Company and the Agent (A) two duly
completed copies of the United States Internal Revenue Service Form
1001 or 4224, or successor applicable form, as the case may be, and (B)
an Internal Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be;
(ii) deliver to the Company and the Agent two further copies
of any such form or certification on or before the date that any such
form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Company; and
(iii) obtain such extension of time for filing and complete
such forms or certifications as may reasonably be requested by the
Company or the 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 or any
certifications required hereby inapplicable or which would prevent such Lender
from duly completing and delivering any such form or making such certification
with respect to it and such Lender so advises the Company and the Agent. Such
Lender shall certify (i) in the case of Form 1001 or 4224 delivered in
accordance with this Section 3.5, 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. Each Person that shall
become a Lender or a Participant pursuant to Article XI shall, upon the
effectiveness of the related transfer, be required to provide all of the forms
and statements required pursuant to this Section, provided that in the case of a
Participant such Participant shall also furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased as well as to the Company and the Agent.
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ARTICLE IV
COLLATERAL AND BORROWING BASE
4.1 Eligible Collateral - FSA Common Stock.
FSA Common Stock shall constitute "Eligible FSA Common Stock"
owned by the Company as to which the Collateral Agent has received such evidence
as may be required under the Security Agreement and Control Agreement to confirm
the existence and perfection of the security interest in favor of the Collateral
Agent for the benefit of the Lenders in such FSA Common Stock.
4.2 Borrowing Base.
The term "Borrowing Base" means, as of any date, twenty-five
percent (25%) of the then-current Market Value of all Eligible FSA Common Stock.
4.3 Special Representations as to Collateral.
By delivering or causing the delivery of any Pledged Item to
the Collateral Agent or the Custodian under the control of the Collateral Agent
in pledge hereunder or under the Security Agreement the Company (the "Pledgor")
shall be deemed to have represented and warranted with respect to such Pledged
Item, that:
(1) Such Pledged Item constitutes Eligible Collateral;
(2) The Pledgor is the legal and equitable owner and holder of
such Pledged Item and has full power and authority to pledge such
Pledged Item. Such Pledged Item has been duly and validly pledged to
the Collateral Agent, is subject to no contractual restriction on the
creation of a Lien thereon, and is subject to no Lien other than the
lien of the Security Agreement in favor of the Secured Parties.
(3) So long as the Collateral Agent complies with the
procedures set forth in the Security Agreement and the Control
Agreement relating to control of Collateral the Collateral Agent, for
the benefit of the Secured Parties, will have a valid and perfected
first priority security interest in such Pledged Item and all proceeds,
products and profits derived therefrom.
4.4 Special Covenants.
(a) The Pledgor warrants and will defend the right, title and
interest of the Agent and the Collateral Agent for the benefit of the
Secured Parties in and to all Pledged Items and all other items of
Collateral against the claims and demands of all other Persons.
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(b) The Pledgor shall not materially amend or modify, or waive
any of the material terms and conditions of, or settle or compromise
any material claim in respect of, any Collateral or any rights related
to any of the foregoing.
(c) The Pledgor shall not sell, assign, transfer or otherwise
dispose of, or grant any option with respect to, or pledge or otherwise
encumber (except pursuant to this Agreement or the Security Agreement),
any of the Collateral or any interest therein, except as provided in
Section 4.5 with respect to releases of Collateral.
(d) If an Event of Default has occurred and is continuing, the
Company shall immediately remit to the Collateral Agent any
distributions or dividends received by the Company, whether in cash or
stock or in kind, arising from any Collateral (and all interest and
earnings thereon or with respect thereto).
(e) The Pledgor shall not withdraw or seek to withdraw or
substitute or seek to substitute any Pledged Item except as provided
herein and in the Security Agreement.
(f) The Pledgor shall do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged and delivered, all such other
acts, instruments and transfers as the Agent or the Collateral Agent
may reasonably request from time to time in order to create and
maintain a perfected first priority security interest in the Collateral
in favor of the Secured Parties and to create, maintain and preserve
the security and benefits intended to be afforded by this Agreement and
the Security Agreement, subject to no prior or equal security interest,
lien, charge or encumbrance, or agreement purporting to grant to any
Person a security interest in the Collateral.
4.5 Release of Collateral.
Upon the request of the Company delivered from time to time to
the Agent and the Collateral Agent, the Agent shall authorize the Collateral
Agent and the Custodian to release Collateral specified in such notice from the
lien of the Security Agreement, if, but only if, (i) at the time of such release
no Event of Default exists and no notice of a Default has been issued that has
not been cured, and (ii) any payment under Section 2.14(a) which may be required
(based on information relating to the Borrowing Base supplied to the Agent by
the Collateral Agent) as a result of such release has been made (or
contemporaneously with such release shall be made) so that the release of such
Collateral will not create a violation of any Lending Sublimit.
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4.6 Settlement Account.
There has been established with the Agent, for the ratable
benefit of the Secured Parties, a "cash collateral" account of the Company
#19-16688 ("Settlement Account") into which shall be deposited all cash proceeds
from the sale of any Pledged Item. Only the Agent shall have access to the
Settlement Account. Prior to the occurrence of a Default, to the extent that, as
determined by the Agent, the amounts in the Settlement Account are not needed to
keep the Borrowing Base equal to or greater than the Credit Requirement, the
Company may request that the Agent release funds from the Settlement Account,
which funds shall be applied by the Agent as directed by the Company. Upon the
occurrence of an Event of Default (and during the continuance thereof) all
amounts then on deposit in the Settlement Account, and any deposits made in the
Settlement Account during the continuance of such Event of Default, shall be
withdrawn by the Agent from the Settlement Account and shall be applied to the
Credit Indebtedness in accordance with the provisions of the Security Agreement
and Section 10.4 of this Agreement.
4.7 Termination.
If all Commitments shall have expired or been terminated
pursuant to the express terms hereof and no Credit Indebtedness shall be
outstanding, the Agent shall promptly deliver or cause to be delivered all cash
in the Settlement Account and all other Collateral to the Company. The receipt
by the Company of any cash in the Settlement Account and of all Pledged Items
returned or delivered to the Company pursuant to any provision of this Agreement
shall be a complete and full acquittance for the Pledged Items so delivered, and
the Agent, Collateral Agent and the Lenders shall thereafter be discharged from
any liability or responsibility therefor.
ARTICLE V
CONDITIONS PRECEDENT
Each Advance may be made only if the following conditions
precedent are met:
5.1 Initial Advance (Company).
Prior to the initial Advance hereunder, the Company shall have
delivered, or caused to be delivered, to the Agent:
(a) Copies of this Agreement duly executed by the Company for
each Lender and the Agent.
(b) A Security Agreement duly executed by the Company in the form
attached hereto as Exhibit D, together with a
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Control Agreement executed by the Company, the Collateral Agent and the
Custodian in a form satisfactory to the Agent and a confirmation from
FSA in a form satisfactory to the Agent.
(c) Notes payable to the order of each Lender duly executed by
the Company in the form attached hereto as Exhibit E.
(d) Certificates of the Secretary of the Company dated such
date, (i) accompanied by and certifying true and correct copies of the
Articles of Incorporation and By-laws of the Company and resolutions of
its Board of Directors authorizing the Company to execute, deliver and
perform this Agreement, the Security Agreement, the Control Agreement,
the Notes and all other documents executed by the Company in connection
herewith and (ii) confirming the incumbency and signatures of those
officers of the Company authorized to execute this Agreement, the
Security Agreement, the Control Agreement, and the Notes and otherwise
act on behalf of the Company hereunder or under the Security Agreement.
(e) The opinion of counsel to the Company in substantially the
same form and substance as the opinion letter attached hereto as
Exhibit F attached hereto and covering such other matters as the Agent
may reasonable request, together with appropriate good standing
certificates for the Company.
(f) Executed UCC-1 and UCC-3 Financing Statements as the Agent
may reasonably request.
(g) Evidence that the Company has paid all fees required to be
paid hereunder and under the Security Agreement on or before the date
of the first Advance.
(h) Information satisfactory to the Agent regarding the
Company's Year 2000 Program.
(i) A Borrowing Base Certificate.
(j) Such other documents as the Agent may reasonably
request.
5.2 Initial Advance (Lenders).
On or before the date of the initial Advance hereunder, the
Lenders shall have delivered, or caused to be delivered, to the Agent and the
Agent shall in turn, have delivered, or caused to be delivered, to the Company
one or more counterparts of this Agreement executed by the Lenders.
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5.3 All Advances.
On the date of each Advance, the Company shall be in compliance
with all the terms and provisions set forth herein and in the Security Agreement
on its part to be observed or performed; the representations and warranties of
the Company set forth in Articles IV and VI shall be true and correct in all
material respects on such date as if made on and as of such date (provided,
however that the representation and warranty contained in Section 6.6(c) shall
not apply to (i) conversions or continuations of Advances pursuant to Section
2.12, or (ii) Advances requested by the Company solely for the purpose of
repaying maturing commercial paper); and no Default or Event of Default shall
have occurred and be continuing on such date. On each Advance Date the Company
shall be deemed to have represented and warranted to the Lenders that no
violation of the requirements set forth in the preceding sentence exists on such
date after giving effect to the requested Advance. Prior to making an Advance
available to the Company under Section 2.11 on any day, the Agent shall have (i)
received notice from the Collateral Agent of the amount of the Borrowing Base
for such day, and (ii) confirmed, based solely upon the information contained in
such notices, the amount of Advances then-outstanding, and the Company's
certifications contained in the preceding sentence as to all other facts, that
the Borrowing Base will be greater than or equal to the Credit Requirement on
such date after giving effect to such Advance.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Lenders that:
6.1 Organization, Corporate Powers, Etc.
The Company is a corporation duly incorporated, validly
existing, in good standing and authorized to exercise its corporate powers,
rights and privileges under the laws of the jurisdiction in which it is
incorporated, is qualified to do business and is in good standing in all
jurisdictions where failure to be so qualified and in good standing would have a
material adverse effect upon its business, operations or financial condition,
and has all requisite corporate power and authority, to conduct its business, to
own its properties and to execute and deliver, and to perform all of its
obligations under, this Agreement, the Security Agreement, the Control Agreement
and the Notes.
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6.2 Corporate Authority, Etc.
The execution, delivery and performance by the Company of this
Agreement, the Security Agreement, the Control Agreement and the Notes have been
duly authorized by all necessary corporate action and do not and will not (i)
violate any existing provision of any law, rule, regulation (including, without
limitation, Regulation U or X of the Board of Governors or the rules and
regulations of the SEC or any regulatory commission of any jurisdiction), order,
writ, judgment, injunction, decree, determination or award currently in effect
having applicability to the Company or any of its Affiliates or of the charter
or by-laws of the Company or of any of its Affiliates, (ii) result in a breach
of or constitute a default under any indenture or loan or credit agreement or
any other agreement, lease or instrument to which the Company or any of its
Affiliates is a party or by which the Company or any of its Affiliates or any of
their respective properties may be bound or affected, or (iii) result in, or
require, the creation or imposition of any mortgage, deed of trust, assignment,
pledge, lien, security interest or other charge or encumbrance of any nature
upon or with respect to any of the respective properties of the Company or any
of its Affiliates (other than that arising hereunder or under the Security
Agreement with respect to the Collateral); and neither the Company nor any of
its Affiliates is in material default under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument.
6.3 Compliance with Laws.
The Company and each of its Affiliates are in compliance with
the requirements of all applicable laws, rules, regulations and orders of any
governmental authority, non-compliance with which would, singly or in the
aggregate, materially and adversely affect their respective business or credits
including but not limited to financial condition and operations.
6.4 Government Approvals.
No authorization, consent, approval, license, exemption of or
filing or registration with any existing court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary for the valid execution, delivery and performance by the
Company of, or the validity or enforceability of, this Agreement, the Security
Agreement, the Control Agreement and the Notes.
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6.5 Valid and Binding Obligations.
This Agreement, the Security Agreement, the Control Agreement
and the Notes constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to bankruptcy and similar laws and other general restrictions on
creditor's rights and equitable principles (whether applied in an action at law
or a suit in equity).
6.6 Financial Statements.
(a) The balance sheet of the Company and its Subsidiaries as
of December 31, 1997 (which is presented in the Company's annual
report) and the related statements of income and changes in financial
position for the fiscal year then ended, copies of which have been
heretofore furnished to each of the Lenders, fairly present, in
conformity with GAAP, the financial condition of the Company and its
Subsidiaries as of such date and the results of the operations and
changes in financial position of the Company and its Subsidiaries for
such fiscal year.
(b) The quarterly financial statements of the Company and its
Subsidiaries submitted to the SEC or the Agent since the date of the
December 31, 1997 annual financial statements referred to in clause (a)
above fairly present, in conformity with GAAP, the financial condition
of the Company and its Subsidiaries as of the applicable dates of such
statements and the results of the operations and changes in financial
position of the Company and its Subsidiaries for the periods to which
such statements relate.
(c) Since the date of the December 31, 1997 statements there
has been no material adverse change, taken as a whole, in the business,
financial position, or operations of either the Company or any
Subsidiary.
6.7 Litigation.
Except as disclosed on Exhibit G attached hereto and as
otherwise set forth in the Company's annual report referred to in Section
6.6(a), there are no actions, suits or proceedings pending or, to the knowledge
of the Company after reasonable investigation, threatened against or affecting
the Company or any of its Affiliates or any of their respective properties
before any court, arbitrator or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign (including, without
limitation, the SEC or any regulatory commission of any jurisdiction), which, if
determined adversely to the Company or any Affiliate, as the case may be, would
be
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reasonably likely to, singly or in the aggregate, have a material adverse
effect on the financial condition, or on the respective properties or
operations, of the Company and its Affiliates or the transactions contemplated
by this Agreement, the Security Agreement and the Notes.
6.8 Use of Proceeds.
The Company will use the proceeds of the Loans solely for (i)
the purposes described in the recitals hereto, (ii) the funding or purchasing of
Mortgage Loans, (iii) the payment of principal, interest, fees, expenses, and
other obligations described in or contemplated by this Agreement, (iv) payment
of Debt of the Company existing on the date hereof, and (v) such other purposes
as may be permitted under this Agreement. No part of the proceeds of any Loan
will be used to purchase or carry, or to reduce or retire, any indebtedness
incurred to purchase or carry, any margin stock (within the meaning of
Regulations U and X of the Board of Governors) or to extend credit to others for
the purpose of purchasing or carrying any margin stock and the Company is not
engaged in purchasing or carrying margin stock.
6.9 Accuracy of Information.
All written information supplied by the Company to the Lenders
relating to the Company and its Affiliates was true, complete and accurate in
all material respects when made, and there has been no material adverse change
in the financial condition of the Company and its Affiliates from the time such
information was provided to the Lenders.
6.10 Accuracy of Representations and Warranties.
The representations and warranties of the Company contained in
each other document delivered in connection with this Agreement are, or when
such document is delivered will be, true and correct in all material respects
when made.
6.11 Investment Company.
The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940 or an "investment adviser" within the meaning of the
Investment Advisers' Act of 1940.
6.12 ERISA.
Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and any other applicable Federal or
state law; and to the best of its knowledge no event or condition is occurring
or exists with respect to any Plan concerning which the Company would be under
an obligation to
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furnish a report to the Lenders in accordance with Section 7.7(h).
6.13 Tax Returns.
The Company and each of its Affiliates has filed or caused to
be filed all material federal, state and local tax returns which, to its
knowledge, are required to be filed and has paid or caused to be paid all
material taxes as shown on such returns or on any assessment received by it, to
the extent that such taxes have become due, except taxes the validity of which
is being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books in conformity with
GAAP.
6.14 Full Disclosure.
No event has occurred and no circumstance exists as a result
of which any information, statement, or representation concerning the Company
that has been provided to any Lender by the Company in connection herewith would
include an untrue statement of a material fact or omit to state any material
fact or any fact necessary to make the information, statements or
representations contained therein, in the light of the circumstances under which
they were made, not misleading.
6.15 GNMA, FHA, VA, FNMA, AND FHLMC Eligibility.
The Company is: (i) an FHA-Approved Mortgagee in good standing,
a VA-Approved Lender, a FHLMC-Approved Lender and a FNMA-Approved Lender and
meets all eligible requirements of law and governmental regulation so as to be
eligible to originate, purchase, hold and service Mortgage Loans insured by
FHA and to issue any FHLMC, FNMA or GNMA security; (ii) an approved seller and
servicer in good standing of Mortgage Loans to each Federal Agency; and (iii)
an approved issuer and servicer in good standing of FHLMC, FNMA and GNMA
securities and meets all FHLMC, FNMA and GNMA requirements, requirements of law
and governmental regulations so as to be able to issue FHLMC, FNMA and GNMA
securities and to service the Mortgage Loans that secure such securities.
6.16 No Defaults.
No Default has occurred and is continuing.
6.17 Year 2000 Compliance.
The Company has made a full and complete assessment of the
Year 2000 Issues and has a realistic and achievable program for remediating the
Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on such
assessment and on the Year 2000
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Program the Company does not reasonably anticipate that Year 2000 Issues will
have a material adverse effect on the Company's operations or financial
condition.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Company covenants and agrees with the Lenders that, so
long as this Agreement shall remain in effect and so long as any amounts are
outstanding under the Notes or this Agreement, unless the Required Lenders shall
otherwise consent in writing, the Company will:
7.1 Payment of Debts, Taxes, Etc.; Maintenance of Insurance.
(a) Pay all debts and perform all obligations, and cause each
of its Subsidiaries to pay all debts and perform all obligations,
promptly and in accordance with the terms thereof and pay and
discharge, and cause each of its Subsidiaries to pay and discharge, all
taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits, or upon any properties belonging to it,
prior to the date on which penalties attach thereto, and all lawful
claims, which, if unpaid, might become a lien or charge upon any
properties of the Company or of such other Subsidiary, provided that
none of the Company or any other Subsidiary shall be required to pay
any such tax, assessment, charge, levy or claim which is being
contested in good faith and by appropriate proceedings and such contest
shall operate to stay any material adverse effect of such lien or
charge;
(b) Use its best efforts to adhere to customary practices and
standards in the industry insofar as adherence to such practices and
standards would require the Company to cause obligors whose
indebtedness is secured by Mortgages for which the Company is the
mortgagee to comply with the provisions of such Mortgages with respect
to the payment of real estate taxes and insurance premiums in
connection with the real estate securing such indebtedness; and
(c) Maintain, and cause each of its Subsidiaries to maintain,
insurance on its properties and other insurance in amounts and types
and with provisions and insurers as shall be satisfactory to the
Required Lenders, and at all times furnish to any Lender (upon written
request by such Lender) copies of its, and each of its Subsidiaries',
current Mortgage Bankers Blanket Bond and of its, and each of its
Subsidiaries', insurance policy containing errors and omissions
coverage or mortgage impairment coverage, and
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providing, in the case of Mortgage Bankers Blanket Bonds, to the extent
possible, that they are not cancelable without thirty days' prior
written notice to the Agent.
7.2 Preservation of Corporate Existence.
Preserve and maintain, and cause each of its Subsidiaries
which is a material part of the Company's overall business operations to
preserve and maintain, its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified as a foreign corporation in each jurisdiction in which such
qualification is necessary in view of its business operations or the ownership
of its properties.
7.3 Compliance with Laws, Etc.
Comply, and cause each of its Subsidiaries to comply, with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, non-compliance with which would be reasonably likely to,
singly or in the aggregate, materially adversely affect its business or credit,
unless the same shall be contested by the Company or such other Subsidiary, as
the case may be, in good faith and by appropriate proceedings and such contest
shall operate to stay the material adverse effect of any such non-compliance.
7.4 Requested Information.
At any reasonable time and from time to time, on reasonable
prior notice furnish to the Agent, any requesting Lender or any agents or
representatives thereof, or permit such agents or representatives to examine and
make copies of, the records and books of account of, and visit the properties
of, the Company or any of its Subsidiaries and, so long as representatives of
the Company (as chosen by senior management of the Company) accompany the Agent
or any such other Lender, the Company's Affiliates, and to discuss the affairs,
finances and accounts of the Company, its Subsidiaries and such Affiliates with
any of its officers.
7.5 Keeping of Records and Books of Account.
Keep or cause to be kept adequate records and books of account
in which complete entries will be made in accordance with GAAP, consistently
applied (except for changes concurred in by the Company's independent auditors)
reflecting all financial transactions of the Company and its Subsidiaries.
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7.6 Maintenance of Approvals, Filings and Registrations.
At all times maintain in effect, renew and comply with, and
cause each of its Subsidiaries to effect, renew and comply with all the terms
and conditions of all consents, licenses, approvals and authorizations as may be
necessary under any applicable law or regulation for the execution, delivery and
performance of this Agreement, the Security Agreement, the Control Agreement,
and the Notes and to make this Agreement and such other documents legal, valid,
binding and enforceable.
7.7 Reporting Requirements.
Furnish to the Agent for distribution to each Lender:
(a) As soon as possible after becoming aware (i) of the
occurrence of any Default, or (ii) that any of the representations and
warranties contained in Article IV or Article VI has ceased to be true
and correct at any time since the last Advance hereunder (or, if no
Advance has taken place, the execution and delivery of this Agreement),
telephone advice confirmed in writing within three (3) Business Days by
a statement of the president or other Authorized Officer of the Company
setting forth the details thereof and the action which the Company
proposes to take with respect thereto.
(b) As soon as available and in any event within ninety (90)
days after the end of each fiscal year of (i) the Company, a
consolidating and consolidated balance sheet of the Company and its
Subsidiaries and (ii) FSA, a consolidated balance sheet of FSA, each as
of the end of such fiscal year and the related statements of income and
changes in financial position of the Company and its Subsidiaries,
including cash flow statements for such fiscal year on a consolidating
and consolidated basis, and the related statements of income and
changes in financial position of FSA and its Subsidiares, including
cash flow statements for such fisal year on a consolidated basis,
setting forth in each case in comparative form the figures as of the
end of and for the previous fiscal year, all reported in accordance
with GAAP and audited and unqualified by KMPG Peat Marwick, Coopers &
Lybrand or other independent public accountants of nationally
recognized standing.
(c) As soon as available and in any event within forty-five
(45) days after the end of each fiscal quarter of the Company, a
consolidating and consolidated balance sheet of the Company and its
Subsidiaries as of the end of such quarter and the related statements
of income for such quarter and for the portion of the Company's fiscal
year ended at the end of such quarter, all certified (subject to
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normal quarter-end adjustments) as to fairness of presentation,
generally accepted accounting principles and consistency by the chief
financial officer of the Company, together with the most recent
quarterly financial reports filed by FSA with the SEC.
(d) Simultaneously with the delivery of each set of financial
statements referred to in clauses (b) and (c) above, a certificate of
the chief financial officer of the Company (A) setting forth in
reasonable detail the calculations required to establish whether the
Company was in compliance with the requirements of Sections 7.9, 8.5,
8.9, 8.10, 8.16, and 8.17 and (B) stating whether there exists on the
date of such certificate any Default and, if any Default then exists,
setting forth the details thereof and the action which the Company is
taking or proposes to take with respect thereto.
(e) Promptly after the commencement thereof, notice of (i) any
action or proceeding which has more than a remote possibility of a
determination adverse to the Company or its Subsidiaries (a
"Non-Frivolous Action") instituted by or against the Company or any of
its Subsidiaries in any Federal or state court or before any commission
or other regulatory body (Federal, state or local, domestic or
foreign), or any such Non-Frivolous Action threatened against the
Company or any of its Subsidiaries in writing, which, if adversely
determined, would have a material adverse effect upon the business,
assets or financial condition of the Company or any mortgage banking
affiliate of the Company, and (ii) any other action, event or condition
of any nature which may lead to or result in a material adverse effect
upon the business, assets or financial condition of the Company or
which, with or without notice or lapse of time or both, would
constitute a default under any other material contract, instrument or
agreement to which the Company is a party or by which the Company or
its properties or assets may be bound or subject.
(f) As soon as possible after becoming aware of any change in
the Company's long-term unsecured debt ratings as rated by S&P or
Moody's, a copy of the S&P or Moody's publication of such ratings or
other written confirmation of such ratings.
(g) Such other information, financial or otherwise, respecting
the Collateral and the Company's financial statements and condition as
the Agent or any Lender may from time to time reasonably request.
(h) As soon as possible, and in any event within thirty (30)
days after the Company knows or has reason to
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know that any of the events or conditions enumerated below with respect
to any Plan have occurred or exist, a statement signed by an Authorized
Officer of the Company setting forth details respecting such event or
condition and the action, if any, which the Company or, to the best
knowledge of the Company, any ERISA Affiliate proposes to take with
respect thereto; provided, however, that if such event or condition is
required to be reported or notice thereof given to PBGC, such
statement, together with a copy of the relevant report or notice to
PBGC, shall be furnished to the Agent within ten (10) days after it is
reported or notice thereof given to PBGC:
(i) the occurrence of any Reportable Event;
(ii) the filing under Section 4041 of ERISA of
a notice of intent to terminate any Plan or the termination of
any Plan;
(iii) the institution by PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; or
(iv) the complete or partial withdrawal by the
Company, any Subsidiary or any ERISA Affiliate from a Plan, or
the receipt by the Company, any Subsidiary or any ERISA
Affiliate of notice from a Plan that it is in reorganization
or insolvency pursuant to Section 4241 or 4245 of ERISA or
that it intends to terminate or has terminated under Section
4041A of ERISA, if such withdrawal, reorganization, insolvency
or termination has resulted or may reasonably be expected to
result in any liability of the Company, any Subsidiary or any
ERISA Affiliate to the PBGC in connection with such Plan or to
such Plan.
(i) Promptly after the request of the Agent, copies of each
annual report filed pursuant to Section 104 of ERISA with respect to
each Plan (including, to the extent required by Section 104 of ERISA,
the related financial and actuarial statements and opinions and other
supporting statements, certifications, schedules and information
referred to in Section 103 of ERISA) and each annual report filed with
respect to each Plan under Section 4065 of ERISA.
(j) As soon as available but in any event within thirty (30)
days after the end of each calendar quarter, a servicing report and
analysis which shall show the status of all Mortgages serviced by the
Company including those which are delinquent, all in such form and
detail and including such additional information as the Agent may
reasonably
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request. Such servicing report shall show separately information
concerning any Mortgages or securities with respect to which there is
recourse to the Company.
(k) As soon as available but in any event within thirty (30)
days after the end of each calendar quarter, a production information
report and a secondary marketing report for such quarter satisfactory
to the Agent.
(l) Promptly upon receipt, a copy of any notice from any
Federal Agency or any private mortgage insurer to the effect that it is
or is contemplating withdrawing its approval of the Company as a
FHA-Approved Mortgagee, FHLMC-Approved Lender, FNMA-Approved Lender or
VA-Approved Lender or as an approved seller and servicer for FNMA,
FHLMC and GNMA.
(m) Promptly after the Company's or any Subsidiary's
acquisition or creation of a new Subsidiary, written notice of such
event, which notice shall set forth the details of such event, the
percentage of capital stock owned by the Company or any other
Subsidiary, and the jurisdiction of incorporation of such new
Subsidiary.
(n) Promptly after the sending or filing thereof, copies of
all such proxy statements, financial statements and reports which the
Company sends to its stockholders, and copies of all regular, periodic
and special reports (other than Form 8-K reports containing only the
distribution reports relating to the Fireman's Fund Mortgage
Corporation Agency MBS Multi-Class Pass-Through Certificates, which the
Company need send to the Agent only and which the Agent shall make
available to the other Lenders upon request) and all final prospectuses
which the Company files with the SEC (if applicable), or any
governmental authority which may be substituted therefor, any Federal
Agency, or any other governmental agency.
(o) [Intentionally Omitted].
(p) As soon as available and in any event within forty-five
(45) days after the end of each fiscal quarter of the Company, a list
showing (i) each individual Guaranty of the Company then in effect for
which the maximum potential liability is in excess of $1,000,000 (and
the amounts thereof) and (ii) the aggregate amount of all other
Guarantees of the Company then in effect, certified as true and correct
by an Authorized Officer of the Company. Individual Guaranties shall be
reported under clause (i) if the potential liability could exceed
$1,000,000 even though the then current outstanding Indebtedness which
is guaranteed is less than $1,000,000. Such report shall
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include the maximum amount guaranteed and the then current outstandings
(showing "none" if there are no current outstandings). If there are no
Guaranties to be reported, a report shall still be furnished indicating
no such Guaranties exist.
(q) Such other information respecting the business, properties
or the condition or operation of the Company or its Subsidiaries,
financial or otherwise, as the Agent or any Lender may from time to
time reasonably request.
(r) Notice of the occurrence of any of the following events,
immediately upon the Company's acquisition of knowledge thereof: (i)
the occurrence of an "Event of Default" (as defined in Article Five of
the Subordinated Debt Indenture), (ii) the deferral by the Company of
any quarterly installment of interest on the Subordinated Debt, (iii)
the acceleration of the entire principal amount of any series of
securities issued under the Subordinated Debt Indenture, (iv) the
execution of any amendment or supplement to the Subordinated Debt
Indenture, (v) the resignation or removal of the trustee under the
Subordinated Debt Indenture, or any change in the notice address of
such trustee, or (vi) any developments with respect to Year 2000 Issues
that are reasonably anticipated to have a material adverse effect on
the Company's operations or financial condition.
7.8 Indemnification.
Pay, and protect, indemnify and save harmless, the Agent, the
Collateral Agent, each of the Lenders and the Affiliates of each of the
foregoing and, in their capacity as such, their respective officers, directors,
shareholders, controlling persons, employees, agents and servants from and
against all liabilities, losses, claims, damages, penalties, causes of action,
suits, costs and expenses (including, without limitation, attorneys' fees and
expenses) or judgments of any nature arising from the default of the Company in
the performance of its agreements, rights or obligations contained in this
Agreement, the Security Agreement, the Control Agreement, the Notes or any other
instrument or agreement entered into by the Company in connection herewith or
therewith or arising out of this Agreement or the transactions contemplated
herein; provided, that the Company shall not have any obligation hereunder to
the Agent, the Collateral Agent or any Lender or any other Person indemnified
pursuant to this Section 7.8 with respect to indemnified liabilities arising
from (1) the gross negligence or willful misconduct of such Person indemnified
pursuant to this Section 7.8, or (2) legal proceedings commenced against the
Agent, the Collateral Agent or any Lender by any other Lender or any
Participant. If any action, suit or proceeding arising from
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any of the foregoing is brought against the Agent, the Collateral Agent or any
Lender or any other person indemnified pursuant to this Section 7.8, the Company
will, if within a reasonable time requested in writing to do so and at its
expense, resist and defend such action, suit or proceeding or cause the same to
be resisted and defended by counsel designated by the Company (which counsel
shall be satisfactory to the party being indemnified). Notwithstanding anything
to the contrary in this Agreement, the obligations of the Company under this
Section 7.8 shall survive any termination of this Agreement.
7.9 Maintenance of Net Worth.
At all times, maintain the sum of (x) Adjusted Consolidated
Tangible Net Worth plus (y) Subordinated Debt in an amount at least equal to the
sum of:
(i) $367,400,000, plus
(ii) fifty percent (50%) of the sum of (A) the positive
cumulative quarterly increases, if any, in Adjusted Consolidated
Tangible Net Worth of the Company after March 31, 1998 (computed
without regard to any increase or decrease resulting from (1) the
contribution or distribution of Restricted FSA Securities, (2) cash
equity contributions to the Company, (3) the receipt of proceeds of
issuances of stock of the Company, (4) the exchange of Subordinated
Debt for Series A Preferred Stock, (5) the payment of Restricted
Payments) for each calendar quarter beginning with calendar quarter
beginning April 1, 1998 plus (B) the cumulative after-tax cost to the
Company of all interest payments on the Subordinated Debt made by the
Company after March 31, 1998, less
(iii) the amount of Special Dividends paid.
7.10 Federal Agency Approvals.
Maintain its status as a FHA-Approved Mortgagee, remain
eligible to obtain VA guaranties of Mortgage Loans and remain approved by each
Federal Agency as a seller/servicer.
7.11 [Intentionally Omitted].
7.12 Borrowing Base Certificate.
Within the first ten (10) days of each month, and within three
Business Days after any request therefor by the Agent, deliver to the Agent a
Borrowing Base Certificate (which shall include the Company's reconciliation of
any discrepancies from the Collateral Agent's reports on the status of Eligible
Collateral at the end of the preceding month), together with a
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certificate of the chief financial officer or other Authorized Officer of the
Company confirming compliance with Sections 7.9, 8.5, 8.9, and 8.12. Each
regular monthly Borrowing Base Certificate shall contain information as of the
close of business on the final Business Day of the preceding month. Any
Borrowing Base Certificate delivered pursuant to the request of the Agent shall
contain information as of the close of business on the day on which the Agent
requested such Borrowing Base Certificate. The Agent shall deliver to the
Lenders copies of all Borrowing Base Certificates received by the Agent.
7.13 Further Assurance.
As from time to time requested by the Agent and agreed upon by
the Required Lenders, at the cost and expense of the Company, execute and
deliver to the Agent all such documents and instruments and do all such other
acts and things as may be reasonably required to enable the Lenders to exercise
and enforce their rights under this Agreement and to realize thereon, and as may
be necessary to validate, preserve and protect the position of the Lenders under
this Agreement. With respect to those elements of Collateral as to which the
Lenders' security interest may not be perfected by delivery to the Collateral
Agent with the Security Agreement or the filing of a UCC-1 financing statement,
the Company as requested by the Agent at the direction of the Required Lenders,
shall execute and deliver possession of such elements of the Collateral to the
Agent, have the interest of the Lenders therein recorded on the books of any
institution holding such assets for the Company, obtain consents to assignment
in favor of the Lenders from the counterparties thereto or take such other
actions as may be necessary to perfect the security interest of the Lenders
therein (provided, however, that unless an Event of Default is continuing or the
Required Lenders have requested otherwise, consents to assignments of options,
futures contracts or other interest rate protection products in favor of the
Lenders from the counterparties thereto shall not be required).
7.14 Maintenance of Properties.
Do all things necessary to maintain, preserve, protect and
keep its properties in good repair, working order and condition, and make all
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times.
7.15 Payment of Taxes.
On demand pay, or reimburse the Agent and Lenders for, all
stamp, documentation, intangible, or similar taxes, and all penalties or
interest that may be due with respect thereto, that may be imposed or asserted
by the State of Florida or any other
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jurisdiction in connection with the execution and delivery of the Credit
Documents or the making of the Loans contemplated by this Agreement.
7.16 Year 2000 Compliance.
Take and will cause each of its Subsidiaries to take all such
actions as are reasonably necessary to successfully implement the Year 2000
Program and to assure that Year 2000 Issues will not have a material adverse
effect on the Company's operations or financial condition. At the request of the
Agent, the Company will provide a description of the Year 2000 Program, together
with any updates or progress reports with respect thereto.
ARTICLE VIII
NEGATIVE COVENANTS
The Company covenants and agrees with the Lenders that so long
as this Agreement shall remain in effect or any amounts are outstanding under
the Notes or this Agreement, unless the Required Lenders (or all Lenders, if
expressly required) shall otherwise consent in writing, the Company (on a
consolidated basis with its Subsidiaries) shall not, directly or indirectly:
8.1 Use of Proceeds.
Use the amounts obtained under this Agreement for any purposes
other than (i) the purposes described in the recitals hereto, (ii) the funding
or purchasing of Mortgage Loans, (iii) the payment of principal, interest, fees,
expenses and other obligations described in or contemplated by this Agreement,
(iv) payment of Debt of the Company existing on the date hereof, and (v) such
other purposes permitted under this Agreement. The Company is not engaged, nor
will it engage, principally or materially in the business of extending credit
for the purpose of "purchasing" or "carrying" any "margin stock" (within the
meanings of each of the quoted terms under Regulation U). If requested by a
Lender, the Company shall each furnish to the Agent for the benefit of the
Lenders a statement in conformity with the requirements of Federal Reserve Form
U-1 referred to in Regulation U. No part of the proceeds of any Loan will be
used for any purpose which violates, or which would be inconsistent with, the
provisions of the regulations of the Board of Governors as now and from time to
time hereafter in effect.
8.2 [Intentionally Omitted].
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8.3 Mergers; Subsidiaries.
Merge or consolidate with any Person, or sell or otherwise
dispose of (whether in one transaction or in a series of transactions) the
shares of any of its Subsidiaries to any Person, provided that the Company may,
after prior written notice to the Agent and Lenders, (i) undertake such a merger
or consolidation so long as the Company shall be the surviving or resulting
company and (ii) take such action with respect to any Subsidiary which is not a
material part of the Company's overall business operations.
8.4 Sales.
Sell, assign, lease or otherwise dispose of (collectively,
"Transfer"), whether in one transaction or a series of transactions, all or
substantially all of its assets (whether now owned or hereafter acquired) to any
Person, or allow any Subsidiary to Transfer substantially all of its assets to
any Person (other than another Subsidiary or a Parent), provided that the
Company may after prior written notice to the Agent and Lenders allow such
action with respect to any Subsidiary which is not a material part of the
Company's overall business operations. Transfers described in this Section 8.4
and the mergers, consolidations and dispositions described in Section 8.3
(whether or not permitted by the provisions of such Sections) are referred to
herein as "Fundamental Changes."
8.5 Debt.
Allow the total Debt (excluding Subordinated Debt) of the
Company and its Subsidiaries (on a consolidated basis) to exceed the sum of the
following (the "Debt Threshold"):
(a) one hundred percent (100%) of the value of the Company's cash
and "short-term investments";
(b) ninety-eight percent (98%) of the value of the Company's
"mortgage loans receivable";
(c) ninety percent (90%) of the value of the Company's "pool
loan purchases" and "mortgage claims receivable", to the extent such
assets represent VA Mortgage Loans and FHA Mortgage Loans repurchased
by the Company from GNMA security holders including the amount of
past-due interest advanced by the Company on account of such Mortgage
Loans which is guaranteed by VA or insured by FHA, provided however,
the Required Lenders can elect upon 90 days prior notice to the Company
not to include such interest amount in the calculation of this
component of the Debt Threshold;
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(d) seventy-five percent (75%) of the amount of "Servicing Sale
Receivables" which would qualify as "Eligible Pledged Servicing Sale
Receivables" if such "Servicing Sale Receivables" (as such terms are
defined under the Other Facility) were pledged as Collateral under the
Other Facility;
(e) sixty percent (60%) of the amount of the Company's servicing
and hedging rights related thereto, as determined in accordance with
GAAP on a monthly basis (or more frequently if requested by the
Agent); and
(f) fifty percent (50%) of the value of Approved Equity
Securities, as shown on the most recent quarterly financial statements
(or as reported on a more frequent basis if required by Agent) provided
that the maximum amount that can be included in this component of the
Debt Threshold shall be $200,000,000, as such amount may be reduced in
accordance with Section 8.16.
Terms set forth in quotes in this Section shall have the meanings given such
terms in the Company's consolidated financial statements.
8.6 Ratably Secured Debt.
Incur any Debt which may be entitled to a security interest in
any of the Collateral which would be equal or superior to the security interest
of Collateral Agent as agent for the Secured Parties.
8.7 Guarantees.
Create, incur, assume or suffer to exist any Guarantee of the
Company except Guarantees in an aggregate combined amount for the Company not to
exceed $25,000,000 at any one time outstanding.
8.8 Investments.
Make or own any Investment in any Person, except:
(a) Investments in the ordinary course of its mortgage banking
business in connection with Mortgage Loans, collateralized mortgage
obligations and other mortgage-related securities;
(b) Investments in the ordinary course of its mortgage banking
business in connection with puts, calls, swaps and other interest rate
hedging products, options and futures contracts to provide protection
from interest rate fluctuation;
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(c) Investments in the ordinary course of its mortgage banking
business in connection with real estate acquired by foreclosure;
(d) Investments in the ordinary course of the Company's
mortgage banking business in connection with servicing rights;
(e) Investments in the ordinary course of its mortgage banking
business in connection with commitments from investors to purchase
Mortgage Loans or mortgage-related securities;
(f) the acquisition of Mortgage Loans, FHLMC, FNMA or GNMA
securities and mortgage servicing contracts of another Person engaged
in mortgage-related businesses;
(g) Investments in Cash Equivalents;
(h) those Investments in existence on the date hereof
and disclosed in the financial statements referred to in
Section 6.6;
(i) loans to officers of the Company in an aggregate
principal amount at any time outstanding not to exceed
$5,000,000;
(j) loans and advances to employees of the Company, or its
Subsidiaries for (i) travel and entertainment in the ordinary course of
business in an aggregate amount for the Company and its Subsidiaries
not to exceed $100,000 at any one time outstanding and (ii) relocation
expenses in the ordinary course of business in an aggregate amount for
the Company and its Subsidiaries not to exceed $1,000,000 at any one
time outstanding;
(k) Investments of up to 10% of the Company's net worth (as
determined in accordance with GAAP) by the Company in its Subsidiaries
and investments by such Subsidiaries in the Company and in other
Subsidiaries;
(l) Investments made by any Subsidiary in the ordinary course
of its business;
(m) Investments in equity securities which (1) are traded on
the New York Stock Exchange, the American Stock Exchange or The NASDAQ
Stock Market, (2) are subject to no transfer restrictions, and (3) have
a readily determinable market value, in an aggregate market value
amount not to exceed $25,000,000 (which market value shall be
determined by the Company and reported to the Agent on a monthly basis,
or more frequently at the request of the Agent);
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(n) repurchase and reverse repurchase contracts incidental to the
mortgage-related businesses of the Company and its Subsidiaries in an
aggregate dollar amount not to exceed $250,000,000 and $25,000,000,
respectively;
(o) the FSA Common Stock and Restricted FSA Securities; and
(p) other Investments which are the result of a merger or
consolidation permitted under Section 8.3 if, after giving effect to
any such Investment, the consolidated net revenues (determined in
accordance with GAAP) of all business segments that constitute
mortgage-related businesses of the Resulting Entity for the Fundamental
Change/Investment Calculation Period are at least seventy-five percent
(75%) of the total net revenues (determined in accordance with GAAP) of
the Resulting Entity for the Fundamental Change/Investment Calculation
Period.
8.9 Leverage Ratios.
Permit the ratio of (1) Funded Debt less Subordinated Debt to (2)
Adjusted Consolidated Tangible Net Worth plus Subordinated Debt to exceed 4.0 to
1.
8.10 Recourse Servicing.
Permit the aggregate principal balance of Mortgage Loans
covered by Recourse Servicing at any time after the date hereof to exceed (i)
$2,350,000,000 less (ii) all reductions in the aggregate principal balance of
such Mortgage Loans covered by Recourse Servicing as of March 31, 1998, whether
by reason of prepayment or amortization from and after April 1, 1998.
8.11 Liens.
Permit, or permit any Subsidiary to permit, any Lien to exist
on any of its property or assets (including, without limitation, the Company's
rights under any contracts relating to mortgage sales and under any Servicing
Agreements) other than:
(a) Liens for taxes, assessments and other governmental
impositions not yet due or which are being contested in good faith by
appropriate proceedings, provided, that adequate reserves with respect
thereto are maintained on the books of the Company or its Subsidiaries,
as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business and securing obligations which are not overdue for a period of
more than 60 days or
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which are being contested in good faith by appropriate proceedings,
provided, that adequate reserves with respect thereto are maintained on
the books of the Company or its Subsidiaries, as the case may be, in
accordance with GAAP;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation;
(d) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business of the Company or
such Subsidiary;
(f) Liens of landlords, arising solely by operation of law and
which are not avoidable as a matter of law, on fixtures and moveable
property located on premises leased in the ordinary course of business,
provided, that the rental payments secured thereby are not yet due;
(g) Liens arising out of judgments or awards against the
Company or any Subsidiary with respect to which the Company or such
Subsidiary is prosecuting an appeal or proceeding for review and the
Company or such Subsidiary is maintaining adequate reserves in
accordance with GAAP;
(h) Liens which were in existence on December 31, 1997 and
which secured obligations reflected in the financial statements
referred to in Section 6.6;
(i) Liens upon real and/or tangible personal property, which
property was acquired after December 31, 1997 (by purchase,
construction or otherwise) by the Company or its Subsidiaries, each of
which Liens either (A) existed on such property before the time of its
acquisition and was not created in anticipation thereof at the request
or direction of the Company, or (B) was created solely for the purpose
of securing Debt representing, or incurred to finance, refinance or
refund, the cost (including the cost of construction) of the respective
property; provided, that no such Lien shall extend to or cover any
property of the Company or such Subsidiary other than the respective
property so acquired and improvements thereon;
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(j) Liens incidental to the conduct of the Company's
mortgage-related businesses or the ownership of its property or arising
out of transactions entered in the ordinary course of the Company's
mortgage-related businesses which do not secure Debt and do not, in the
aggregate, materially detract from the value of its properties in the
aggregate or materially impair the use thereof in the ordinary course
of the Company's business;
(k) Liens arising from repurchase agreements relating to pools
of Mortgage Loans or FHLMC, FNMA or GNMA securities that constitute
Debt of the Company or relating to servicing agreements securing Debt
of the Company, provided that the aggregate principal amount of Debt
secured by such Liens shall not exceed $200,000,000 at any time and
shall not cause any violation of the restriction on Debt imposed by
Section 8.5;
(l) Liens on assets of corporations which become Subsidiaries
after the date of this Agreement; provided, that (i) such Liens existed
at the time such corporation became a Subsidiary and were not created
in anticipation thereof, (ii) any such Lien is not spread to cover any
property or assets of such corporation after the time such corporation
becomes a Subsidiary (other than any such spreading resulting from
"after-acquired property" clauses in existence on the date such
corporation became a Subsidiary) and (iii) the amount of Debt secured
thereby is not increased;
(m) any extension, renewal or replacement (or successive
extensions, renewals or replacements), in whole or in part, of any Lien
referred to in the foregoing clauses; provided, that the principal
amount of Debt secured thereby shall not exceed the principal amount of
Debt so secured immediately prior to the time of such extension,
renewal or replacement, and that such extension, renewal, or
replacement Lien shall be limited to all or a part of the property
which secured the Lien so extended, renewed or replaced (plus
improvements on such property);
(n) Liens (not otherwise permitted hereunder) which secure
obligations not exceeding (as to the Company and all Subsidiaries)
$30,000,000 in an aggregate principal amount at any one time
outstanding;
(o) Liens (not otherwise permitted hereunder) which secure
obligations (as to the Company and all Subsidiaries) (1) incidental to
forward delivery contracts in the ordinary course of the Company's
mortgage-related businesses or (2) incidental to Investments by the
Company in the ordinary course of its mortgage banking business in
connection with
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puts, calls, swaps and other interest rate hedging products, options
and futures contracts to provide protection from interest rate
fluctuation; and
(p) the Liens arising under the Other Facility or under the
Security Agreement or any other Credit Document;
provided, however, that so long as no Event of Default has occurred and is
continuing, the Company may also permit Liens on FHLMC, FNMA or GNMA securities
and Mortgage Loans owned by the Company (other than FHLMC, FNMA or GNMA
securities or Mortgage Loans constituting Collateral under the Other Facility)
to secure Debt incurred from sources other than the Secured Parties for the
purpose of originating or purchasing such securities or Mortgage Loans.
8.12 Credit Requirement.
Permit the Borrowing Base to be less than the Credit
Requirement.
8.13 Affiliate Transactions.
Enter, or permit any Subsidiary to enter, into any
transactions with the Company's Parent or Affiliates that is not an arm's-length
transaction or that in any material respect is less advantageous to the Company
or such Subsidiary than a similar typical transaction with an unrelated
third-party; make any loans or advances to the Parent or any Affiliates with
financial terms more advantageous to the Parent or Affiliate than the terms of
loans and advances made to the Company from any such Parent or Affiliate; or
make any net loans or advances to the Parent or any Affiliates which would cause
any violation of Sections 7.9 or 8.9.
8.14 Conduct of Business.
Except as permitted under Section 8.8:
(a) enter into any material line of new business other than
businesses related to its current businesses, materially change the
nature of its business, cease to carry on its business as now
conducted, or
(b) fail to maintain its corporate existence, licenses,
franchises and privileges.
8.15 FHA and other Approvals.
Cause any Federal Agency which insures any material portion of
the Mortgage Loans owned or serviced by the Company to
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withdraw its approval of the Company, or become ineligible as a lender under the
VA loan guaranty program.
8.16 Restricted Payments.
Make any Restricted Payments; provided, however, so long as no
Default arising from the Company's failure to comply with Section 7.9 has
occurred and is continuing (or would result from any such payment) and no Event
of Default has occurred and is continuing (or would result from any such
payment), the Company may make Restricted Payments as expressly permitted by
subparagraphs (a) and (b) below:
(a) The Company may make Restricted Payments during any
Calculation Period in an amount which, when added to all other Restricted
Payments (including Restricted Payments made pursuant to Section 8.16(b)(i))
made during such Calculation Period, does not exceed the sum of (i) fifty
percent (50%) of the increase, if any, in Adjusted Consolidated Tangible Net
Worth during such Calculation Period plus (ii) 100% of all dividends received by
the Company during such Calculation Period from preferred and common stock in
FSA and from redeemable preferred stock in U S WEST, Inc. plus (iii) 50% of
interest payable by the Company with respect to such Calculation Period on the
Subordinated Debt.
The increase in Adjusted Consolidated Tangible Net Worth
referenced in this Subsection (a) shall be computed without regard to
any increase or decrease resulting from the following activities: (1)
the contribution or distribution of Restricted FSA Securities, (2) cash
equity contributions to the Company, (3) the receipt of proceeds of
issuances of stock of the Company, (4) increases or decreases in the
amount of Subordinated Debt, or (5) the payment of permitted Restricted
Payments.
(b) The Company may, without regard to the maximum limit on
Restricted Payments established by Subsection (a) above:
(i) pay dividends required to be paid on its Series A
Preferred Stock and pay interest that is due and payable on the
Subordinated Debt, provided that all payments made pursuant to this
clause (i) shall still be included for purposes of determining the
maximum amount of dividends and distributions payable under Subsection
(a);
(ii) make additional Restricted Payments not to exceed
the Maximum Special Dividend Amount in the aggregate, which additional
Restricted Payments made pursuant to this clause (ii) shall not be
included in determining the maximum amount of Restricted Payments made
under Subsection (a); and
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(iii) distribute the proceeds of issuances of stock to an
Affiliate (but not any proceeds received in connection with any public
or secondary offering of stock).
At the time the Company pays or makes any such Restricted Payment, it
shall notify the Agent in writing of the amount of such payment, which notice
shall (1) specify under which subparagraph and clause above the Restricted
Payment is being made and (2) contain such information as is necessary to
demonstrate that such dividend is permissible under the applicable subparagraph
and clause.
As used herein, "Maximum Special Dividend Amount" shall mean
$64,100,000 plus one-half of the liquidation proceeds of U S WEST, Inc.
redeemable preferred stock owned by the Company, up to a maximum of $25,000,000,
provided that such liquidation proceeds shall be included in the Maximum Special
Dividend Amount only if the other half of such liquidation proceeds is used to
repay Credit Indebtedness and the maximum amount that can be included in the
component of the Debt Threshold set forth in Section 8.5(f) relating to Approved
Equity Securities is permanently reduced by the amount of any Special Dividend
attributable to such liquidation proceeds.
8.17 Maintenance of Restricted FSA Securities.
Sell or otherwise dispose of any of the Restricted FSA
Securities for less than the fair market value thereof at the time of sale or
disposition.
8.18 Subordinated Debt Indenture.
(a) Enter into, without the prior written consent of the
Required Lenders, any amendment or modification of the Subordinated
Debt Indenture or other documents evidencing or governing the terms of
the Subordinated Debt if such amendment or modification would change
(i) the principal amount of or rate of interest on the Subordinated
Debt, (ii) the terms of repayment of the Subordinated Debt, (iii) the
provisions relating to the deferral of interest on the Subordinated
Debt, (iv) any terms or provisions of Article 12 (Subordination) of the
Subordinated Debt Indenture, (v) the definition of "Event of Default"
in the Subordinated Debt Indenture, or (vi) the provision of the
Subordinated Debt Indenture which requires the trustee to give certain
holders of senior indebtedness notices of defaults, accelerations and
certain other events; provided, however, that the Lenders hereby
consent to that certain First Supplemental Indenture dated December 1,
1995; or
(b) Enter into, without the prior written consent of the Agent,
any material amendment or modification of the
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Subordinated Debt Indenture or other documents evidencing or governing
the terms of the Subordinated Debt other than the amendments or
modifications requiring the consent of the Required Lenders pursuant to
clause (a) above; or
(c) Consent, without prior written notice to the Agent, to any
change in the trustee under the Subordinated Debt Indenture.
8.19 Collateral Coverage Ratio.
Permit, as of any date, the ratio of (A) the then-current
Market Value of the Eligible FSA Common Stock to (B) the Aggregate Commitment to
be less than (i) 2.5 to 1.0 as of the date hereof or (ii) 2.0 to 1.0 as of any
date hereafter.
ARTICLE IX
THE AGENT
9.1 Appointment and Authorization.
(a) Each Lender irrevocably appoints and authorizes the Agent
to take such action as agent on its behalf and to exercise such powers
under this Agreement as are delegated to the Agent by the terms hereof
together with all such powers as are reasonably incidental thereto.
(b) The Agent is hereby authorized to enter into the Security
Agreement on behalf of the Lenders and all obligations of the Lenders
thereunder shall be binding upon each Lender as if such Lender had
executed the Security Agreement. Each Lender hereby appoints and
authorizes the Collateral Agent to act on its behalf in the capacity
described in the Security Agreement and authorizes the Collateral Agent
to act on such Lender's behalf in all respects with regard to
performance under the Security Agreement.
(c) Unless and until the Agent shall have received the
directions of the Required Lenders as provided in Section 10.2(1) or
(2) or of all Lenders, if expressly required hereunder, the Agent may
(but shall not be obligated to) take or refrain from taking such
action, or direct the Collateral Agent to take or refrain from taking
such action with respect to an Event of Default as it shall deem
advisable in the best interests of the Lenders.
(d) The Agent shall not be required to take any action
hereunder if it shall reasonably determine that by so doing it may
incur criminal or civil liability.
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9.2 Agent and Affiliates.
The Agent shall have the same rights and powers under this
Agreement as any other Lender and may exercise or refrain from exercising the
same as though it were not the Agent, and the Agent and its Affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with, the Company, any Subsidiary or Affiliate of the Company as if it
were not the Agent hereunder.
9.3 Action by Agent.
The obligations of the Agent hereunder are only those expressly
set forth herein. Without limiting the generality of the foregoing, the Agent
shall not be required to take any action with respect to any Default, except as
expressly provided in this Article IX or in Article X.
9.4 Consultation with Experts.
The Agent may consult with legal counsel (who may be counsel
for the Company), independent public accountants and other experts selected by
it and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
9.5 Liability of Agent.
(a) Neither the Agent nor any of its directors, officers, agents,
or employees shall be liable for any action taken or not taken by it
in connection herewith (i) with the consent or at the request of the
Required Lenders or of all Lenders, if required or (ii) in the absence
of its own gross negligence or willful misconduct.
(b) Neither the Agent (except as otherwise provided in this
Agreement) nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or
verify
(i) any statement, warranty or representation made in
connection with this Agreement or any Advance hereunder;
(ii) the performance or observance of any of the
covenants or agreements of the Company;
(iii) the satisfaction of any condition specified in
Article V, except receipt of items required to be delivered
to the Agent and the determination of the amount of the
Credit Requirement; or
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(iv) the validity, effectiveness or genuineness
of this Agreement, the Notes or any other instrument or
writing furnished in connection herewith.
(c) The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or other
writing (which may be a bank wire, telex or similar writing) or
telephone communication believed by it to be genuine or, in the case of
a writing, to be signed by the proper party or parties.
9.6 Indemnification.
(a) Each Lender shall, ratably in accordance with its share of
the Aggregate Commitment (or, if the Commitments have been terminated,
then in accordance with its share of aggregate Loans then outstanding)
at the time the Agent or the Collateral Agent incurred such liability,
indemnify the Agent and the Collateral Agent (to the extent not
reimbursed by the Company) against any cost, expense (including
reasonable counsel fees and disbursements), claim, demand, action, loss
or liability (except such as result from the indemnified party's gross
negligence or willful misconduct) that the Agent or the Collateral
Agent may suffer or incur in connection with this Agreement or the
Security Agreement or any action taken or omitted by the Agent or the
Collateral Agent hereunder or thereunder.
(b) For the purposes of this Section, the amount of any
Commitment of any Lender shall be the highest amount of such Commitment
of such Lender during the course of any event for which indemnity is
sought.
(c) The provisions of this Section shall survive the
termination of this Agreement.
9.7 Credit Decision.
Each Lender acknowledges that it has itself been and will
continue to be, independently and without reliance upon the Agent or any other
Lender, solely responsible for making its own independent appraisal of and
investigations into the financial condition, creditworthiness, condition,
affairs, status and nature of the Company. Accordingly, each Lender confirms to
the Agent that it has not relied, and will not hereafter rely, on the Agent or
any other Lender (i) except as otherwise provided in this Agreement, to check or
inquire on such Lender's behalf into the adequacy, accuracy or completeness of
any information provided by the Company under or in connection with this
Agreement or the transactions herein contemplated (whether or not such
information has been or is hereafter distributed to such Lender by the Agent) or
(ii) to assess or keep under review on
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such Lender's behalf the financial condition, creditworthiness, condition,
affairs, status or nature of the Company.
9.8 Resignation or Removal and Appointment of Successor
Agent.
The Agent may resign at any time by giving 90 days prior
written notice thereof to the Lenders and the Company. The Agent may be removed
at any time upon ninety (90) days prior written notice from the Required
Lenders. Upon any such resignation or removal notice the Required Lenders shall
have the right to appoint a successor Agent; provided that such appointment,
unless made after the occurrence of a Default and during the continuance
thereof, shall be subject to the consent of the Company, which consent shall not
be unreasonably withheld. If the Company and/or Required Lenders, as applicable,
are unable to agree on the appointment of a successor agent within such 90 day
period, the retiring agent shall appoint one of the Lenders as a successor agent
for the Lenders. Upon the appointment of a successor Agent, that successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement; provided,
however, that the resigning Agent shall not be discharged from any liability as
a result of its or its directors', officers', agents' or employees' gross
negligence or willful misconduct in connection with the performance of its
duties and obligations under this Agreement prior to the effective date of its
resignation. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
9.9 Compensation.
Compensation of the Agent for its services hereunder and
reimbursement for any expenses incurred by it in the performance of its duties
hereunder shall be paid by the Company pursuant to a separate written agreement
between the Agent and the Company.
9.10 Release of Collateral Documents.
The Collateral Agent shall not release any Pledged Items
except as provided herein or in connection with the enforcement of any remedies
hereunder.
9.11 Knowledge of Defaults.
The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Event of Default unless the Agent has received notice from
a Lender or the Company referring to
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this Agreement, describing such Event of Default and stating that such notice is
a "Notice of Default." The Agent shall notify the Lenders within a reasonable
time after the Agent has notice of the occurrence of an Event of Default, which
notice shall describe the Event of Default.
9.12 Reports.
The Agent may, at its option with the approval of the Company,
alter the format of any report required hereunder, provided such modified report
contains the same information previously furnished in the unmodified report.
ARTICLE X
DEFAULTS
10.1 Defaults.
In case of the happening of any of the following events
(herein called "Events of Default"):
(a) Any principal amount of any Loan made under this Agreement
(other than principal payments required to be made pursuant to Section
2.14(a)) shall not be paid when due and payable; or
(b) Any principal payment required to be made pursuant to
Section 2.14(a) shall not be paid when due and payable, and shall
remain unpaid for one Business Day;
(c) Any interest or Fees due under this Agreement shall not be
paid when due and payable, and shall remain unpaid for five (5) days;
or
(d) Any amount, other than principal or interest or Fees,
payable under this Agreement shall not be paid when due and payable and
shall remain unpaid for five (5) days after written notice to the
Company of such nonpayment; or
(e) Any representation or warranty made or deemed made by the
Company (or any of its officers) herein (other than the representations
and warranties contained in Sections 4.6 and 4.7, the inaccuracies of
which shall only cause the Collateral affected thereby to cease to
qualify as Eligible Collateral) in the Security Agreement or in any
certificate, agreement, instrument or statement contemplated by or made
or delivered pursuant to or in connection herewith or therewith shall
prove to have been incorrect when made or deemed made in any material
respect; provided however that if the facts resulting in the breach of
any such representation or warranty are susceptible of correction,
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such breach shall not constitute an Event of Default if such facts are
corrected within 30 days after such inaccurate representation or
warranty was made or deemed made; or
(f) The Company shall fail to perform or observe any term,
covenant or agreement contained in Sections 7.10, 8.1, 8.3, 8.4, 8.6,
8.7, 8.9, 8.14(a), 8.15, 8.17, 8.18, or 8.19; or
(g) The Company shall (i) fail to comply with the covenant
contained in Section 8.12 and such failure remains unremedied for one
Business Day, or (ii) fail to perform any term, covenant or agreement
contained in Sections 7.7(a), 7.9, 8.5, 8.8 or 8.16, and such failure
shall remain unremedied for more than 30 days;
(h) The Company shall fail to perform or observe any other
term, covenant or agreement contained herein or in the Security
Agreement on its part to be performed or observed and any such failure
remains unremedied for thirty (30) days after written notice thereof
shall have been given to the Company by the Agent or the Collateral
Agent; or
(i) An "Event of Default" (as defined in the Other Facility or
any other Credit Document) shall exist; or
(j) Either this Agreement, the Notes, the Control Agreement or
the Security Agreement shall, at any time after its execution and
delivery, for any reason cease to be in full force and effect (unless
such occurrence is in accordance with its terms or after payment
thereof) or shall be declared to be null and void, or the validity or
enforceability thereof shall be contested by the Company or the
Collateral Agent, or the Company or the Collateral Agent shall deny
that it has any further liability or obligation thereunder; or
(k) The Company, its Parent, Fund American Enterprises Holdings,
Inc. or any of the Company's material Subsidiaries shall (i) be
adjudicated bankrupt or insolvent, (ii) admit in writing its inability
to pay its debts as they mature, (iii) make an assignment for the
benefit of creditors, (iv) fail generally to pay its debts as such
debts become due and payable, (v) apply for or consent to the
appointment of any receiver, trustee, custodian or similar officer for
it or for all or any substantial part of its property; or such
receiver, trustee, custodian or similar officer shall be appointed
without the application or consent of the Company or of such
Subsidiary, as the case may be, and such appointment shall continue
undischarged for a period of 60 days, (vi) institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
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reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar proceeding relating to it under the laws of any
jurisdiction, (vii) have any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, dissolution, liquidation or similar
proceeding (by petition, application or otherwise) instituted against
it and remain undismissed for a period of 60 days, or (viii) have any
judgment, writ, warrant of attachment or execution or similar process
issued or levied in respect of any of its obligations (alleged or
otherwise) against any of its property involving any amount in excess
of $5,000,000 and such judgment, writ or similar process shall not be
released, vacated, stayed or fully bonded within 30 days after its
issue or levy; or
(l) The Company or any of the Company's material Subsidiaries
shall (i) default in the payment when due (after giving effect to any
available cure period) of any principal of or interest on any of its
Debt other than the Credit Indebtedness in excess of $25,000,000 in the
aggregate or (ii) any event specified in any note, agreement, indenture
or other document evidencing or relating to any such Debt in excess of
$25,000,000 shall occur if the effect of such event is to cause, or to
permit the holder or holders of such Debt (or a trustee or agent on
behalf of such holder or holders) to cause, such Debt to become due, or
to be prepaid in full, prior to its stated maturity, and in either case
any notice or cure period has expired and such default has not been
waived in writing by the holder of such Debt; or
(m) An event or condition occurs or exists with respect to any
Plan concerning which the Company is under an obligation to furnish a
report to the Lenders in accordance with Section 7.7(h) and as a result
of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate has incurred a liability
to a Plan or the PBGC (or any combination of the foregoing) which is
material in relation to the financial position of the Company; or
(n) A Change in Control shall occur with respect to
the Company; or
(o) Unless approved in advance by the Required Lenders (such
approval not to be unreasonably withheld), the acquisition by any
Person, or two or more Persons (other than Fund American Enterprises
Holdings, Inc. or US West or any wholly-owned Subsidiary of such
entities) acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the SEC under the Exchange Act) of outstanding
shares of voting stock of FSA at any time if after giving
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effect to such acquisition such Person or Persons own twenty percent
(20%) or more of such outstanding voting stock; or
(p) The lien against the Collateral created under the Security
Agreement for the benefit of the Secured Parties shall cease to be a
perfected, first priority security interest; provided, however, that if
the Secured Parties shall cease to have a perfected, first priority
interest in a portion of the Collateral, such cessation shall not
constitute an Event of Default so long as the Collateral in which the
Secured Parties have a perfected, first priority security interest is
sufficient to cause the Borrowing Base to exceed the Credit
Requirement;
then, and in every such event and at any time thereafter during the continuance
of such event, the Agent and the Lenders shall have the rights described in the
following Sections of this Article X.
10.2 Remedies.
(1) Upon the occurrence of any Event of Default the Agent may,
and at the direction of the Required Lenders shall, at the same or
different times, take one or more of the following actions: (i) by
notice to the Company terminate the Commitments and they shall
thereupon terminate, (ii) by notice to the Company declare the
Obligations to be, and the Obligations shall thereupon become,
immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the
Company, provided that in the case of any of the Events of Default
specified in subparagraph (k) of Section 10.1, without any notice to
the Company or any other act by the Agent or the Lenders, the
Commitments shall thereupon terminate and the Obligations shall become
immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the
Company. Following the occurrence and during the continuance of a
Default, no Lender shall be obligated to fund any Loan hereunder.
(2) Upon the occurrence of any Event of Default, the Agent and
the Collateral Agent, on behalf of the Secured Parties, shall be
entitled to all rights and remedies under this Agreement, the Control
Agreement and the Security Agreement and all other rights and remedies
at law or in equity existing in or conferred upon the Secured Parties
by other jurisdictions or other applicable law.
(3) The Company waives any right to require the Agent, the
Collateral Agent or any Lender to (i) proceed against or exhaust any of
its remedies against the Company or any other
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Person in any particular order, (ii) proceed against or exhaust any of
the Collateral or pursue its rights and remedies as against the
Collateral in any particular order or (iii) pursue any other remedy in
its power.
(4) The Company shall provide any and all information required
by the Agent or the Collateral Agent to administer this Agreement or
collect on the Collateral. All advances, charges, costs and expenses,
including reasonable attorneys fees, incurred or paid by the Agent in
exercising any right, power or remedy conferred by this Agreement, or
in the enforcement hereof (or by any Lender acting on instruction of
the Required Lenders in the enforcement hereof), together with interest
thereon at the rate per annum of two percent (2%) plus the Alternate
Base Rate from the time of payment until repaid, shall become a part of
the Credit Indebtedness.
(5) No failure on the part of the Agent or any Lender to
exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise by the Agent or any Lender of any right, power or
remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies herein
provided are cumulative and are not exclusive of any remedies provided
by law.
10.3 Notice of Default.
The Agent may, and at the direction of the Required Lenders
shall, give notice to the Company under Section 10.1(d), 10.1(h) or 10.2 and
shall thereupon notify all Lenders thereof.
10.4 Application of Proceeds.
(a) After the occurrence of an Event of Default, the portion
of the proceeds of any sale or enforcement of all or any part of the Collateral
which is delivered to the Agent by the Collateral Agent pursuant to the
provisions of the Security Agreement shall be applied by the Agent:
First, to the extent not already paid from the Collateral
proceeds by the Collateral Agent, to payment of all costs and expenses
of such sale or enforcement, including reasonable compensation to the
Agent's agents and counsel, and all expenses, liabilities and advances
made or incurred by the Agent or any Lender acting on instructions of
the Required Lenders in connection therewith;
Second, to the extent not already paid from the Collateral
proceeds by the Collateral Agent, to the payment
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of all costs and expenses incurred by the Collateral Agent under the
Security Agreement;
Third, to the payment of accrued and unpaid interest on the
Credit Indebtedness, fees due hereunder and all other unpaid Credit
Indebtedness other than the principal amount of Loans, ratably
according to the respective amounts owing or due each Lender until such
amounts are paid in full;
Fourth, to the total unpaid principal amount of all Loans,
ratably according to the amount due each Lender until such amounts are
paid in full; and
Fifth, to the payment to the Company, or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
(b) The Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with
this Agreement.
(c) If the proceeds of any such sale are insufficient to cover
the costs and expenses of such sale, as aforesaid, and the payment in
full of the Credit Indebtedness, the Company shall remain liable for
any deficiency.
ARTICLE XI
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
11.1 Successors and Assigns.
The terms and provisions of the Credit Documents shall be
binding upon and inure to the benefit of the Company and the Lenders and their
respective successors and assigns, except that the Company shall not have the
right to assign its rights or obligations under the Credit Documents without the
consent of all the Lenders and any assignment by any Lender must be made in
compliance with Section 11.3. The Agent may treat the payee of any Note as the
owner thereof for all purposes hereof unless and until such payee complies with
Section 11.3 in the case of an assignment thereof or, in the case of any other
transfer, a written notice of the transfer is filed with the Agent. Any assignee
or transferee of a Note agrees by acceptance thereof to be bound by all the
terms and provisions of the Credit Documents. Any request, authority or consent
of any person, who at the time of making such request or giving such authority
or consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
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11.2 Participations.
(a) Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Credit Documents. In the
event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Credit Documents shall
remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such
Lender shall remain the holder of any such Note for all purposes under
the Credit Documents, all amounts payable by the Company under this
Agreement shall be determined as if such Lender had not sold such
participating interests, and the Company and the Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Credit Documents.
(b) Voting Rights. Except as otherwise expressly provided in
the Credit Documents, each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Credit Documents other
than any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which (i) forgives
principal, interest or Fees or reduces the interest rate or Fees
payable with respect to any such Loan or Commitment, (ii) postpones any
date fixed for any regularly-scheduled payment of principal of, or
interest on, any such Loan or Fees on any such Commitment, (iii)
releases Collateral beyond the releases expressly provided for herein,
or (iv) extends the Termination Date.
(c) Benefit of Set-Off. The Company agrees that each
Participant shall be deemed to have the right of set-off provided
pursuant to Section 12.10(a) in respect of its participating interest
in amounts owing under the Credit Documents to the same extent as if
the amount of its participating interest were owing directly to it as a
Lender under the Credit Documents, provided that each Lender shall
retain the right of set-off provided in Section 12.10(a) with respect
to the amount of participating interests sold to each Participant. The
Lenders agree to share with each Participant, and each Participant, by
exercising the right of set-off provided in Section 12.10(a), agrees to
share with each Lender, any amount received pursuant to the exercise of
its right of set-off, such amounts to be shared in accordance with
Section 12.10(b) as if each Participant
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were a Lender. The Company is not a party to the agreement among the
Lenders and Participants set forth in the immediately preceding
sentence, and such sentence may be amended without the consent of the
Company.
11.3 Assignments.
(a) Permitted Assignments. Any Lender may, with the prior
written consent of Agent (which consent shall not be unreasonably
withheld or delayed), in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more banks
or other entities ("Purchasers") all or any part of its rights and
obligations under the Credit Documents, provided that, unless an Event
of Default has occurred and is then continuing, the prior written
consent of the Company to the identity of any such Purchaser shall be
required, and the Company agrees that such consent shall not be
unreasonably withheld or delayed, except that no consent of the Agent
or the Company shall ever be required for (i) any assignment to a
Person directly or indirectly controlling, controlled by or under
direct or indirect common control with the assigning Lender or (ii) the
pledge or assignment by a Lender of such Lender's Note and other rights
under the Loan Documents to any Federal Reserve Bank in accordance with
applicable law. Notwithstanding the foregoing, no assignment of Loans
or Commitments which requires the consent of the Agent or the Company
may be made if the assignment would result in either the assigning
Lender or the Purchaser (which may be an existing Lender) holding a
Commitment of less than $5,000,000; provided, however, that if (due to
reductions in the Aggregate Commitment) a Lender's Commitment is less
than $5,000,000, such Lender may assign all (but not less than all) of
its Commitment in accordance with the terms of this Section
notwithstanding the fact that such Commitment is less than $5,000,000.
(b) Effect; Effective Date. Upon delivery to the Agent of a
New/Modified Commitment Supplement in the form of Exhibit H hereto
executed by the assigning Lender and the Purchaser and payment to the
Agent of an assignment fee of $3,500, such assignment shall become
effective on the effective date specified in such notice of assignment.
On and after the effective date of such assignment, such Purchaser
shall for all purposes be a Lender party to this Agreement and any
other Credit Document executed by the Lenders and shall have all the
rights and obligations of a Lender under the Credit Documents, to the
same extent as if it were an original party hereto, and no further
consent or action by the Company, the Lenders or the Agent shall be
required to release the transferor Lender with respect to the
percentage of the Commitments and Loans assigned to such
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Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section, the transferor Lender, the Agent and the
Company shall make appropriate arrangements so that replacement Notes
are issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their respective Commitments, as adjusted
pursuant to such assignment.
11.4 Dissemination of Information.
The Company authorizes each Lender to disclose to any
Participant or any other Person acquiring an interest in the Credit Documents by
operation of law (each a "Transferee") and any prospective Transferee any and
all information in such Lender's possession concerning the creditworthiness of
the Company and its Subsidiaries, provided that the transferor shall obtain from
any such Transferee or prospective Transferee, prior to disclosing any such
information, a confidentiality agreement executed by the Transferee or
prospective Transferee agreeing to be bound by any confidentiality requirements
with respect to such information which are imposed upon the Lenders under the
terms of the Credit Documents.
11.5 Tax Treatment.
If any interest in any Credit Document is transferred to any
Transferee which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
all applicable provisions of the Code with respect to withholding and other tax
matters.
ARTICLE XII
MISCELLANEOUS
12.1 Immediately Available Funds.
All payments and other transfers of funds under this Agreement
shall be made in funds immediately available at the place of payment unless the
recipient thereof shall otherwise agree.
12.2 Notices.
Except where instructions or notices are expressly authorized
elsewhere in this Agreement to be given by telephone or by other means of
transmission, all instructions, notices and other communications to be given to
any party hereto shall be in writing and shall be personally delivered or sent
by certified
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mail, postage prepaid, private delivery service or by facsimile, and shall be
deemed to be given for purposes of this Agreement on the day (or at the time of
day, if applicable) when actually received by the intended party at its address
or facsimile or telephone number as set forth below (or as such party may
specify to the other parties in writing). Any requirement that notice be given
to any person under this Agreement shall be deemed to require notice to the
Agent, the Company and each Lender, unless otherwise expressly provided herein.
Whenever the giving of notice by telephone is permitted by this Agreement, such
notice shall be confirmed in writing within three days.
The addresses for notices to the parties are as set forth
below their signatures on the signature pages hereto or on any assignment.
12.3 Survival and Termination of Agreement.
All covenants, agreements, representations and warranties made
herein and in the certificates and other documents delivered pursuant hereto
shall survive the funding of the Loans and shall continue in full force and
effect to the Termination Date or so long as any amount payable to the Lenders
in connection with this Agreement is unpaid, whichever is later, at which time
this Agreement shall terminate, it being expressly understood that the
obligations of the Company under Sections 3.1, 3.3, 7.8 and 7.15 shall
(notwithstanding anything in this Agreement to the contrary) survive any
termination of this Agreement. Whenever in this Agreement any party is referred
to, such reference shall be deemed to include the successors and assigns of such
party, but no assignment or transfer (by operation of law or otherwise) of this
Agreement by the Company or any of its rights or duties hereunder may be made
without the prior written consent of all of the Lenders; and all covenants,
promises and agreements by or on behalf of the Company which are contained in
this Agreement shall inure to the benefit of the successors and assigns of the
Lenders.
12.4 Fees and Expenses of the Lenders.
The Company will pay (a) all reasonable out-of-pocket costs
and expenses incurred by the Agent or by the Collateral Agent (including the
fees, out-of-pocket expenses and other reasonable expenses of counsel to the
Agent or the Collateral Agent) in connection with the preparation, execution and
delivery of this Agreement, the Notes, the Security Agreement and any other
agreements or documents referred to herein or therein and any amendments
thereto, and (b) all reasonable out-of-pocket costs and expenses incurred by the
Agent, the Collateral Agent and the Lenders (including the fees, out-of-pocket
expenses and other reasonable expenses of counsel to the Lenders) in connection
with the enforcement and protection of the rights of the
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Lenders under this Agreement, the Notes, the Control Agreement, the Security
Agreement or any other agreement or document referred to herein or therein.
12.5 APPLICABLE LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF ILLINOIS.
12.6 Modification of Agreement.
Except for certain changes in a Lender's Commitment or
admission of a new Lender which do not require any consents or approvals from
the other Lenders but which require a New/Modified Commitment Supplement
executed by the Agent, the Company and the Lender(s) being added or modifying
their Commitment, no provisions of this Agreement may be amended or waived
unless such amendment or waiver is in writing and is signed by the Company, and
the Agent if the rights or duties of the Agent are affected thereby, and
(1) each Lender if such amendment or waiver
(i) reduces or forgives any principal of any unpaid
Loan or any interest thereon or any Fees due to such Lender
hereunder; or
(ii) postpones the date fixed for any payment of
principal of or interest on any unpaid Loan or any Fees payable
to such Lenders; or
(iii) changes the amount of payment of principal of or
interest on any unpaid Loan or any Fees payable to the Lenders
hereunder; or
(iv) changes or waives any of the conditions precedent
to the initial Advance hereunder or any subsequent Advance; or
(v) changes the amount of any such Lender's
Commitment, except as expressly provided for herein; or
(vi) would amend or waive the method of calculating the
Borrowing Base; or
(vii) would amend or waive the provisions of
Section 2.14; or
(viii) extends the Termination Date; or
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(ix) releases any Collateral beyond the
releases expressly provided for herein or in the Security
Agreement; or
(x) changes or waives any restriction on the
Company's ability to assign its rights or obligations
under any of the Credit Documents; or
(xi) changes or waives any funding
requirement, including, without limitation, any Lending
Sublimits; or
(xii) changes or waives any yield protection;
or
(xiii) changes or waives any provision herein
regarding the indemnification of the Agent, the Collateral
Agent or such Lender; or
(xiv) changes the definition of Required Lenders
or modifies any requirement for consent by all of the Lenders;
or
(xv) changes or waives any provision herein
regarding the allocation among the Lenders of any payments or
proceeds received by the Agent hereunder; or
(2) the Required Lenders in the case of all other waivers or
amendments.
12.7 Non-Waiver of Rights by the Lenders.
Neither any failure nor any delay on the part of the Agent or
the Lenders in exercising any right, power or privilege hereunder or under the
Control Agreement or the Security Agreement shall operate as a waiver thereof,
nor shall a single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
12.8 Dealings with the Company and its Affiliates.
The Lenders and their Affiliates may accept deposits from,
extend credit to and generally engage in any kind of banking, trust or other
business with the Company and any of its Affiliates regardless of the capacity
of the Lenders hereunder.
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12.9 Changes in GAAP.
The parties agree that if there are any changes in GAAP in the
future which result in material changes to the presentation of the Company's
financial condition in accordance with GAAP in such a way as to alter the
material intent of this Agreement, then the parties will negotiate in good faith
to attempt to agree on such modifications to this Agreement as may be necessary
to preserve the original intent of this Agreement in light of such revised GAAP
rules, provided that unless and until a written agreement is entered into by all
parties hereto, no changes to this Agreement shall be effective and all
calculations required to be made in accordance with GAAP hereunder shall
continue to be made as if GAAP had not changed.
12.10 Set-Off.
(a) If an Event of Default shall have occurred, each Lender
shall have the right, at any time and from time to time without notice
to the Company, any such notice being hereby expressly waived, to
set-off and to appropriate or apply any and all deposits of money or
property or any other indebtedness at any time held or owing by such
Lender to or for the credit or the account of the Company against and
on account of all outstanding Credit Indebtedness and all Credit
Indebtedness which from time to time may become due hereunder and all
other obligations and liabilities of the Company under this Agreement,
regardless of the adequacy of any Collateral and irrespective of
whether or not such Lender shall have made any demand hereunder and
whether or not said obligations and liabilities shall have matured.
(b) Each Lender agrees that if it shall, by exercising any
right of set-off or counterclaim or otherwise, receive payment of a
proportion of the aggregate amount of principal, interest or Fees due
with respect to this Agreement and the Notes held by it which is
greater than the proportion received by any other Lender in respect of
the aggregate amount of principal, interest or Fees due with respect to
this Agreement and the Notes held by such other Lender, the Lender
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Lenders and such other
adjustments shall be made, as may be required so that all such payments
of principal, interest or Fees shall be shared by the Lenders hereunder
pro rata according to their respective shares of the Credit
Indebtedness. Each Lender agrees to exercise any and all rights of
set-off, counterclaim or bankers' lien relating to the Credit
Indebtedness first fully against the Credit Indebtedness and only then
to any other Debt of the Company to such Lender; provided that any
Lender which is also a lender under the Other Facility may exercise any
and
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all rights of set-off, counterclaim or bankers' lien relating to the
Credit Indebtedness or the indebtedness under the Other Facility
against either the Credit Indebtedness or the indebtedness under the
Other Facility (or a combination thereof) in such proportions and
priorities as such Lender may elect. The Company is not a party to the
agreement among the Lenders set forth in this Section 12.10(b), and
such Section may be amended without the consent of the Company.
(c) The Company agrees that funds received and held by the
Company as custodian for FNMA, GNMA or other mortgage pools which are
deposited into accounts with any Lender shall be clearly identified as
custodial accounts, and each Lender agrees that each provision of the
foregoing paragraphs of this Section 12.10 shall not apply to such
custodial accounts. The Company shall not deposit any of its general
funds in any custodial accounts or otherwise commingle funds in any
custodial accounts.
12.11 Counterparts.
This Agreement may be executed in counterparts which, taken
together, shall constitute a single document.
12.12 Severability.
In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12.13 Headings.
Section headings in the Credit Documents are for convenience
of reference only and shall not govern the interpretation of any of the
provisions of the Credit Documents.
12.14 Entire Agreement.
The Credit Documents embody the entire agreement and
understanding among the Company, the Agent and the Lenders and supersede all
prior agreements and understandings among the Company, the Agent and the Lenders
relating to the subject matter thereof.
12.15 Consent of Jurisdiction.
THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO IN ANY ACTION OR PROCEEDING
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<PAGE> 82
ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENTS AND THE COMPANY HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY THE COMPANY AGAINST THE AGENT OR ANY LENDER OR ANY
AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY CREDIT
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
12.16 Waiver of Jury Trial.
THE COMPANY, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY CREDIT DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
IN WITNESS WHEREOF, the Company and the Lenders have caused this
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written:
SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
----------------------------------------
Michael C. Allemang
Executive Vice President and
Chief Financial Officer
Address for Notices:
27555 Farmington Road
Farmington Hills, MI 48334-3357
Attn: Chief Financial Officer
Telephone No.: (248) 488-8639
Facsimile No.: (248) 488-7300
and
Attn: Vice President/Treasury
Telephone No.: (248) 488-7338
Facsimile No.: (248) 488-7812
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<PAGE> 83
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Address for Notices Regarding
Fundings:
One First National Plaza
Chicago, Illinois 60670
Attn: Denise Lee
Telephone No.: (312) 732-6455
Facsimile No.: (312) 732-3852
Address for Other Notices:
One First National Plaza
Chicago, Illinois 60670
Attn: Patrick J. Power
Telephone No.: (312) 732-1188
Facsimile No.: (312) 732-6222
THE FIRST NATIONAL BANK OF CHICAGO
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Address for Notices:
One First National Plaza
Chicago, Illinois 60670
Attn: Patrick J. Power
Telephone No.: (312) 732-1188
Facsimile No.: (312) 732-6222
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<PAGE> 84
BANK OF AMERICA NT & SA
By:
---------------------------------------
Thomas A. Pizurie
Vice President
Address for Notices:
275 S. Valencia Avenue, #6739
Brea, California 92823
Attn: Thomas A. Pizurie
Vice President
Telephone No.: (714) 792-6706
Facsimile No.: (714) 792-6715/6716
THE BANK OF NEW YORK
By:
---------------------------------------
Patricia M. Dominus
Vice President
Address for Notices:
One Wall Street, 17th Floor
New York, New York 10286
Attn: Patricia M. Dominus
Vice President
Telephone No.: (212) 635-6467
Facsimile No.: (212) 635-6468
COMERICA BANK
By:
---------------------------------------
Dan Roman
Vice President
Address for Notices:
One Detroit Center
500 Woodward Avenue, MC3280
Detroit, Michigan 48226
Attn: Dan Roman
Vice President
Telephone No.: (313) 222-3803
Facsimile No.: (313) 222-3330
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<PAGE> 85
CREDIT LYONNAIS NEW YORK BRANCH
By:
-------------------------------------
W. Jay Buckley
Vice President
Address for Notices:
1301 Avenue of the Americas
New York, New York 10019
Attn: W. Jay Buckley
Vice President
Telephone No.: (212) 261-7340
Facsimile No.: (212) 261-3401
GUARANTY FEDERAL BANK, F.S.B.
By:
-----------------------------------------
Gregory Jackson
Title:
--------------------------------------
Address for Notices:
8333 Douglas Avenue
Suite 1100
Dallas, Texas 75225
Attn: Mike Barber
Telephone No.: (214) 360-2872
Facsimile No.: (214) 360-1660
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
By:
----------------------------------------
Cynthia Crites
Title: Vice President
Address for Notices:
512 Main Street
Houston, Texas 77002
Attn: Cynthia Crites
Telephone No.: (713) 216-4425
Facsimile No.: (713) 216-2082
-80-
<PAGE> 86
EXHIBIT A
[INTENTIONALLY OMITTED]
-81-
<PAGE> 87
EXHIBIT B
FORM OF BORROWING BASE CERTIFICATE
Dated as of: _______________
Reference is made to that certain Revolving Credit Agreement among the
Company, The First National Bank of Chicago, individually and as administrative
agent, and the lenders named therein, dated as of July ___, 1998 (as amended or
supplemented from time to time, the "Credit Agreement"). Capitalized terms not
otherwise defined herein are used with the same meanings as in the Credit
Agreement.
1. BORROWING BASE:
Eligible FSA Common Stock
(Market Value) $________________
Percentage Factor 25%
Borrowing Base $________________
Facility Advances/Credit Requirement $________________
EXCESS OF BORROWING BASE
OVER CREDIT REQUIREMENT $________________
2. CERTIFICATION: To the best of the knowledge and belief
(after reasonable investigation) of the officer of the
Company executing this Certificate, the Company hereby
certifies to The First National Bank of Chicago for the
benefit of Lenders under the Credit Agreement that: (a) the
above information is, and the computations are accurate and
complete and in accordance with the requirements of the
Credit Agreement, and (b) as of the date hereof, (1) all
representations and warranties of the Company set forth in
the Credit Agreement are accurate and complete, (2) there
does not exist an Event of Default under the Credit
Agreement, and (3) the Company has given written notice to
The First National Bank of Chicago of any Default which now
exists under the Credit Agreement.
IN WITNESS WHEREOF, the Company has caused this Borrowing Base
Certificate to be executed and delivered by its duly authorized officer
this ___ day of __________, 199_.
SOURCE ONE MORTGAGE SERVICES CORPORATION
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<PAGE> 88
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
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<PAGE> 89
EXHIBIT C
COMMITMENTS AND COMMITMENT PERCENTAGES
Commitment Commitment
Bank Name Amount Percentage
- --------------------------------------------------------------------------------
1. First Chicago $ 5,000,000 14.2857142857%
2. Bank of America $ 5,000,000 14.2857142857%
3. Bank of New York $ 5,000,000 14.2857142857%
4. Chase Bank of Texas $ 5,000,000 14.2857142857%
5. Comerica $ 5,000,000 14.2857142857%
6. Guaranty Federal $ 5,000,000 14.2857142857%
7. Credit Lyonnais $ 5,000,000 14.2857142857%
Total $35,000,000 100.0000000000%
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<PAGE> 90
EXHIBIT D
FORM OF SECURITY AGREEMENT
-85-
<PAGE> 91
EXHIBIT E
FORM OF NOTE
Date of Note: July ___, 1998
FOR VALUE RECEIVED, the undersigned (the "Maker") does hereby covenant
and promise to pay to the order of ____________________ (the "Lender") or its
successors or assigns (collectively, the "Payee"), on the Termination Date, the
aggregate unpaid principal amount of all Loans made by Lender pursuant to the
Credit Agreement (the "Principal Amount") and to pay interest on the unpaid
Principal Amount at the applicable interest rate or rates per annum and on the
dates determined in accordance with the terms of the Credit Agreement. All
payments of principal of and interest on this Note shall be made in legal tender
of the United States. All payments of principal of and interest on this Note
shall be made in immediately available funds at the principal office of The
First National Bank of Chicago (the "Agent"), One First National Plaza, Chicago,
Illinois.
Interest on this Note shall be computed on the basis of actual number
of days elapsed in a 360 day year.
This Note is one of the Notes referred to in the Revolving Credit
Agreement, bearing even date herewith, among the Company, the Lender and the
other lenders listed on the signature pages thereof and the Agent (as the same
may be amended and supplemented from time to time, the "Credit Agreement") and
is entitled to the benefits thereof. Reference is made to the Credit Agreement
for (i) provisions for the prepayment hereof, (ii) acceleration of the maturity
hereof, (iii) the obligation of the Maker to pay certain expenses (including
attorney's fees) incurred in the enforcement thereof and hereof and (iv) a
description of the security for this Note. Capitalized terms used herein without
definition have the respective meanings ascribed to them in the Credit
Agreement.
All Loans made by the Lender and all repayments of the principal
thereof shall be recorded by the Lender in its books and records; provided,
however, that the Lender's failure to so record or any error in such recording
shall not affect the Maker's liability hereunder or under the Credit Agreement.
Upon any transfer hereof, the Lender shall endorse on the schedule attached
hereto or on a schedule accompanying the transfer of this Note, the unpaid
principal balance of this Note.
If an Event of Default shall occur under the Credit Agreement, the
unpaid Principal Amount hereunder shall become due
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<PAGE> 92
and payable (i) automatically in the case of any of the Events of Default
specified in Paragraph (k) of Section 10.1 of the Credit Agreement, or (ii) at
the option of the Required Lenders with respect to all other Events of Default
and shall bear interest at the rate provided for in Section 2.7 of the Credit
Agreement from and after such date. The foregoing provision shall not be
construed as a waiver by the Payee of its right to pursue any other remedies
available to it under this Note, the Credit Agreement or any other instrument
evidencing or securing the Principal Amount.
This Note may not be changed orally but only by an agreement in
writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought. Written notices required to be given
hereunder shall be given as provided in the Credit Agreement to the Payee and
Maker at the respective addresses specified or provided for therein.
Should the indebtedness evidenced by this Note or any part thereof be
collected at law or in equity, or in bankruptcy, receivership or any other court
proceeding (whether at the trial or appellate level), or should this Note be
placed in the hands of attorneys for collection upon default, the Maker agrees
to pay, in addition to the principal, interest and other sums due and payable
hereon, all costs of collecting or attempting to collect on this Note, including
reasonable attorneys' fees and expenses.
Anything herein to the contrary notwithstanding, the obligations of the
Maker under this Note shall be subject to the limitation that payments of
interest shall not be required to the extent that receipt of any such payment by
the Payee would be contrary to provisions of law applicable to Payee which limit
the maximum rate of interest that may be charged or collected by Payee.
The undersigned and all endorsers, guarantors and sureties of this Note
and all other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and nonpayment
of this Note, notice of intention to accelerate the maturity of this Note,
notice of acceleration of the maturity of this Note, protest and notice of
protest, diligence in collecting, and the bringing of suit against any other
party, and agree to all renewals, extensions, modifications, partial payments,
releases or substitutions of security, in whole or in part, with or without
notice, before or after maturity.
Notwithstanding the foregoing paragraphs and all other provisions of
this Note and the Credit Agreement, none of the terms and provisions of this
Note or the Credit Agreement shall ever be construed to create a contract to pay
to the Payee, for
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<PAGE> 93
the use, forbearance or detention of money, interest in excess of the maximum
amount of interest permitted to be charged by the Payee to the undersigned under
applicable state or federal law from time to time in effect, and the undersigned
shall never be required to pay interest in excess of such maximum amount. If,
for any reason interest is paid hereon in excess of such maximum amount, then
promptly upon any determination that such excess has been paid the Payee will,
at its option, either refund such excess to the undersigned or apply such excess
to the principal owing hereunder.
This Note is to be construed and enforced in accordance with the laws
of the State of Illinois.
IN WITNESS WHEREOF, Maker has executed and delivered this Note on the
day and year first above written.
SOURCE ONE MORTGAGE SERVICES CORPORATION
By:
-------------------------------------
Name: Michael C. Allemang
Title: Executive Vice President and
Chief Financial Officer
Address:
27555 Farmington Road
Farmington Hills, MI 48334-3357
Attn: Chief Financial Officer
Telephone No.: (248) 488-8639
Facsimile No.: (248) 488-7300
and
Attn: Vice President/Treasury
Telephone No.: (248) 488-7338
Facsimile No.: (248) 488-7812
-88-
<PAGE> 94
PAYMENTS OF PRINCIPAL
Unpaid
Principal Notation
Date Balance Made by
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE> 95
EXHIBIT F
FORM OF OPINION LETTER
-90-
<PAGE> 96
EXHIBIT G
MATERIAL LITIGATION NOT REFERENCED IN ANNUAL/QUARTERLY REPORTS
NONE
-91-
<PAGE> 97
EXHIBIT H
FORM OF MODIFIED COMMITMENT SUPPLEMENT
This Modified Commitment Supplement ("Supplement") is made as of
_________________, 199_ (the "Effective Date") by and among Source One Mortgage
Services Corporation (the "Company"), The First National Bank of Chicago, in its
capacity as agent ("Agent"), and _______________________ ("New Lender"), and
____________________________ ("Assignor").
The Company, Assignor and Agent are parties to a certain Revolving
Credit Agreement dated as of July ___, 1998 (as amended or supplemented from
time to time, the "Credit Agreement") pursuant to which Agent and certain other
Lenders agreed to provide a revolving credit facility to the Company on the
terms and conditions set forth in the Credit Agreement. Any capitalized term not
expressly defined herein shall have the meaning ascribed to such term in the
Credit Agreement.
The New Lender has agreed to become a Lender under the Credit Agreement
with a Commitment in the amount of ______________________ Dollars
($______________). The Company and Assignor have agreed to reduce Assignor's
Commitment under the Credit Agreement to ____________________ Dollars
($_______________).
NOW, THEREFORE, the parties hereto agree as follows:
1. From and after the Effective Date, the New Lender shall be
considered a "Lender" under the Credit Agreement and the Company and Agent
hereby consent to the addition of the New Lender.
2. From and after the Effective Date, the New Lender's Commitment under
the Credit Agreement shall be ________________________ Dollars ($______________)
or such other amount as may be stated in any subsequent modification to the
Credit Agreement. The Company shall execute and deliver to the New Lender
simultaneously herewith a Note in the form attached as Exhibit E to the Credit
Agreement.
3. From and after the Effective Date, Assignor's Commitment under the
Credit Agreement shall be _________________________________ Dollars
($______________) or such other amount as may be stated in any subsequent
modification to the Credit Agreement.
4. The New Lender, promptly after receipt of its Note,
agrees to purchase from Assignor, and Assignor hereby agrees to sell to the New
Lender, without recourse, a portion of the
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<PAGE> 98
outstanding Loans made by Assignor equal to _________ percent (__%) of the
outstanding principal balance of each such Loan. Such purchase shall be
effected by wire transfer of immediately available funds to Assignor on the
Effective Date. The Company irrevocably and unconditionally agrees that from
and after the Effective Date the portion of Loans so funded by Assignor shall
be evidenced by and shall be deemed to be Loans made by the New Lender under
the New Lender's Note as of the Effective Date and shall be treated as such for
purposes of calculating interest and fees accruing from and after the Effective
Date under the Credit Agreement. All interest and fees accruing on such portion
of the Loans prior to the Effective Date shall be paid when due to Assignor.
5. For purposes of Section 12.2 of the Credit Agreement (Notices), the
New Lender's address and telecopy number shall be as specified below its
signature in this Supplement.
6. All references in the Credit Agreement and the other Credit
Documents shall be deemed to refer to the Credit Agreement as modified by this
Supplement. Exhibit C to the Credit Agreement is hereby replaced by Exhibit C to
this Supplement.
7. In all other respects, the Credit Agreement is and remains
unmodified and in full force and effect and is hereby ratified and confirmed.
8. This Supplement may be executed in any number of counterparts, all
of which taken together shall constitute one agreement, and any of the parties
hereto may execute this Supplement by signing any such counterpart.
IN WITNESS WHEREOF, the Company, the New Lender, Assignor and Agent
have executed this Supplement as of the date first above written.
COMPANY: SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
NEW LENDER:
-------------------------------------
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
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<PAGE> 99
Address for Notices:
Attn:
---------------------------------
Telephone No.:
-------------------------
Facsimile No.:
-------------------------
AGENT: THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
ASSIGNOR: ---------------------------------------
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
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<PAGE> 1
EXHIBIT 10(c)
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT dated as of July 10, 1998
(as amended, supplemented or modified from time to time, this "Agreement")
between Source One Mortgage Services Corporation (the "Company") and The First
National Bank of Chicago, as collateral agent for the benefit of the Lenders
(the "Agent"). The Company is sometimes referred to herein as the "Assignor" and
the Agent is sometimes referred to herein as the "Assignee".
BACKGROUND
A. The Company is concurrently entering into that certain Revolving
Credit Agreement dated as of the date hereof with the financial institutions
named therein (the "Lenders") and the Agent, as administrative agent and
collateral agent (as amended, supplemented or modified from time to time, the
"Revolving Credit Agreement"), pursuant to which the Lenders shall make loans to
the Company.
B. In order to induce the Lenders to make loans under the Credit
Agreement, the Assignor has agreed to grant to the Assignee a security interest
for the benefit of the Lenders in and lien on a specified collateral account and
all of its contents to secure the payment and performance by the Company of the
"Secured Debt", as defined in the Credit Agreement (the "Secured Debt").
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Security.
(a) The Assignor agrees to establish and maintain the
collateral account described below (the "Collateral Account") with Roney & Co.
(the "Custodian", which term shall include any successors approved by the Agent
as the "Custodian" hereunder) in order to hold the property to serve as
collateral. As of the date of this Agreement, the FSA Common Stock (as defined
in the Credit Agreement) listed on Exhibit A has been deposited in the
Collateral Account. The Collateral Account shall be administered by the
Custodian subject to that certain Control Agreement of even date herewith (as
amended, supplemented, modified, restated or replaced, the "Control Agreement")
among the Assignor, the Assignee and the Custodian.
Name and Address
of Custodian Account No.
---------------- -----------
Roney & Co. 32708669
One Griswold
Detroit, Michigan 48226
<PAGE> 2
(b) As security for the repayment of the Secured Debt, the
Assignor hereby assigns, pledges, transfers and sets over to the Assignee for
the benefit of the Lenders all of the Assignor's right, title and interest in
and to: (i) the Collateral Account; (ii) all collateral in the Collateral
Account and other amounts from time to time on deposit therein, including
without limitation all financial assets, funds, items, instruments, investments,
securities and other things of value at any time paid, deposited, credited to or
held in or in transit to the Collateral Account and all securities entitlements
arising with respect thereto; (iii) all cash and noncash proceeds thereof,
including without limitation dividends paid on the Collateral and all
investments made with the proceeds thereof; (iv) all cash, securities or other
property which may be or become payable or attributable to the Assignor on
account of any such Collateral, including any cash, securities or other property
payable or distributable on account of any cash dividend, stock redemption,
stock split, stock dividend or other dividend payable in property other than
cash and any cash payable upon the maturity of any debt security; (v) cash and
Cash Equivalents (as defined in the Credit Agreement) held by the Agent for the
benefit of the Lenders as security for the Secured Debt; and (vi) the Settlement
Account (as defined in the Credit Agreement) and all monies deposited therein
(collectively, the "Collateral"); provided, that the Custodian shall pay all
dividend payments received by it in respect of the Eligible Collateral deposited
in the Collateral Account to or at the direction of the Assignor upon the
Custodian's receipt thereof so long as the Agent shall not have given (and if
given, not have withdrawn) written notice to the Custodian that a Default (as
defined in the Credit Agreement) has occurred and is continuing or would occur
after giving effect to such dividend payment. Upon a release of Collateral at
the request of the Company in accordance with Section 4.5 of the Credit
Agreement the Agent shall direct the Custodian to release the applicable
Collateral to the Company. The Assignor will deliver to the Assignee any
certificates which the Assignor may receive representing any securities which
are subject to the Assignee's security interest, together with appropriate
"stock powers" or "bond powers" or other appropriate instruments of assignment.
2. Maintenance of Collateral Account. The Assignor will maintain the
Collateral Account and pay all fees and expenses related thereto, including fees
and expenses incurred by the Custodian in connection with its duties and
obligations related to the Collateral Account.
3. Perfection; Power of Attorney. The Assignor agrees (i) that it shall
have caused Financial Security Assurance Holdings, Ltd. ("FSA") to reissue the
FSA Common Stock which has been deposited into the Collateral Account in
uncertificated form through the Depositary Trust Company in the "street name" of
the Custodian prior to the effective date hereof, (ii) immediately to
-2-
<PAGE> 3
deliver to the Agent, or the Agent's nominee, all certificates, instruments or
other documents, if any, evidencing any of the Collateral which may at any time
come into the possession of the Assignor, (iii) to execute and deliver to the
Agent such financing statements as the Agent may reasonably request with respect
to the Collateral, (iv) to cause the Control Agreement to be executed and
delivered, (v) to cause the Custodian to make a notation on its records
indicating the security interest granted hereby, and (vi) to take such other
steps as the Agent may from time to time reasonably request to perfect the
Agent's security interest for the benefit of the Lenders in the Collateral under
applicable law. The Assignor further agrees to execute and deliver to the Agent
(i) undated stock powers in form and substance satisfactory to the Agent,
appropriately endorsed in blank, with respect to the Collateral and (ii) such
other documents of transfer as the Agent may from time to time request to enable
the Agent to transfer the Collateral into its name, the name of any other
Lender, or the name of their respective nominees (all of the foregoing are
hereinafter collectively referred to as the "Powers"). The Assignor further
agrees, at the request of the Agent, to use its best efforts to cause FSA to
issue, in substitution for existing certificates evidencing any of the
Collateral, one or more new certificates ("Substitute Certificates") intended to
evidence the Collateral evidenced by the certificates which are exchanged for
the Substitute Certificates, and the Assignor shall immediately thereafter
deliver such Substitute Certificates to the Agent, together with appropriate
Powers.
The Assignor hereby constitutes and appoints the Assignee as the
true and lawful attorney of the Assignor with full power of substitution, (a)
after the occurrence and continuation of a Default, to ask, demand, collect,
receive, receipt for, sue for, and give acquittance for any and all amounts
which may be or become due and payable on the Collateral; (b) after the
occurrence and continuation of a Default, to execute any and all withdrawal
requests, receipts or other orders for the payment of money drawn on the
Collateral or the Collateral Account; (c) to endorse the name of the Assignor on
all instruments given in payment or in partial payment therefor and, after the
occurrence and continuation of a Default, to set-off or transfer the Collateral
or any portion thereof into the Assignee's own name or the name of its nominee;
(d) to execute instruments of assignment of any item of Collateral which is a
certificated security, including "stock powers" and "bond powers"; (e) to issue
any instruction or take any other action necessary to cause the Assignee's
security interest for the benefit of the Lenders in the Collateral to be
perfected; and (f) to file any claim or take any other action, either in its own
name or that of the Assignor, which the Assignee deems reasonably necessary to
protect and preserve its interest hereunder. All authorizations and agencies
herein contained or granted to the
-3-
<PAGE> 4
Assignee with respect to the Collateral are irrevocable and constitute powers
coupled with an interest.
4. Representations, Warranties and Covenants. The Assignor hereby
represents, warrants and covenants to the Assignee and the Lenders that: (a) it
owns and shall maintain the Collateral free and clear of any and all pledges,
liens, adverse claims, security interests or other encumbrances (referred to
herein collectively as "Encumbrances") except the security interest created
herein and shall neither transfer, sell, encumber or otherwise dispose of any of
the Collateral nor create, assume or permit to exist any Encumbrance upon the
Collateral except in accordance with the provisions of this Agreement; (b) the
execution, delivery and performance of this Agreement are within the Assignor's
corporate powers, are permitted in accordance with the terms of Assignor's
articles of incorporation and by-laws, have been duly authorized by all
necessary corporate action and will not violate any law, judgment or
governmental regulations, or violate, conflict with or constitute a breach or
default under any registration agreement, shareholder agreement or other
agreement (including without limitation any agreement with or relating to FSA)
which is binding upon or affects the Assignor or any of its property; (c) this
Agreement constitutes the legal, valid and binding obligation of the Assignor,
enforceable in accordance with its terms subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and to general principles of equity; (d) the
Collateral which has been delivered to the Custodian and the Collateral and
other documentation delivered to the Assignee or the Custodian in connection
with this Agreement and the Control Agreement are genuine and in all respects
what they purport to be; (e) the FSA Common Stock which has been deposited in
the Collateral Account is genuine, free from transfer restrictions, duly and
validly authorized and issued, fully paid and non-assessable, (f) this Agreement
is effective to create a valid and continuing lien on and perfected, first
priority security interest in favor of the Assignee for the benefit of the
Lenders in all Collateral, which lien and security interest is prior to all
other Encumbrances; (g) the Collateral was continuously owned by either the
Assignor or Assignor's indirect parent, Fund American Holdings Enterprises, Inc.
or its subsidiaries, for the two (2) year period immediately prior to the date
hereof, such period having been computed in compliance with the requirements of
Rule 144(d) as promulgated by the SEC; (h) at the time the Collateral was
contributed to Assignor, Fund American Holdings Enterprises, Inc. or its
subsidiaries was not insolvent and had adequate capital to satisfy all of its
obligations, (i) the Collateral is freely transferable by the Assignee as
pledgee pursuant to the terms hereof free of any restrictions or conditions,
including without limitation any Federal or state securities laws or
regulations, the articles of incorporation or by-laws of FSA or any agreement
with FSA or any
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<PAGE> 5
other shareholder of FSA; and (j) FSA is in compliance with all current public
information requirements of Rule 144(c) as promulgated by the SEC.
5. Remedies Upon a Default. Upon the occurrence and continuance of a
Default, the Assignee shall be entitled to deliver a "Notice of Exclusive
Control" pursuant to the Control Agreement and to exercise any or all of the
following remedies, and the Assignor shall observe and perform the following
provisions and obligations:
(a) The Assignee shall be entitled to receive the Collateral and any
interest, investment income or payments in respect of the Collateral, which
amounts may be applied by the Assignee to, and set off by the Assignee against,
the Secured Debt in such manner as the Assignee, in its sole discretion, may
determine, but subject to the terms of Section 10.4 of the Credit Agreement.
(b) The Assignee shall have all of the rights and remedies of a
secured creditor under the Uniform Commercial Code, as now and hereafter in
effect in the State of Illinois and in any other state whose laws may be
applicable with respect to the Collateral (the "Uniform Commercial Code"),
including, without limitation, the right to enforce or foreclose on its lien on
the Collateral, the right to withdraw and apply any or all amounts held in the
Collateral Account constituting Collateral to the Secured Debt, the right to
transfer any or all of the Collateral into the name of the Assignee or any
nominee of the Assignee and the right to sell, assign or otherwise dispose of
any or all of the Collateral at one or more private or public sales at which the
Assignee may bid and purchase any or all of the Collateral in its own name or
that of a nominee, free and clear of any equity of redemption which is hereby
waived and released. The Collateral may be sold for cash or other value in any
manner without demand, advertisement or notice, other than ten (10) days' prior
written notice of the time and place of any public sale or the time after which
any private sale may take place, given to the Assignor in the manner provided
herein, which notice is agreed to be reasonable. In view of the fact that
federal and state securities and insurance laws may impose certain restrictions
on the method by which a sale of the Collateral may be affected, the Assignor
agrees that the Agent may at any time permitted hereunder, attempt to sell all
or any part of the Collateral by means of a private placement, restricting the
bidders and prospective purchasers to those who are qualified and will represent
and agree that they are purchasing for investment only and not for distribution.
In so doing, the Agent may solicit offers to buy the Collateral, or any part
thereof, from a limited number of investors deemed by the Agent, in its
reasonable judgment, to be financially responsible parties who might be
interested in purchasing the Collateral, or any part
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<PAGE> 6
thereof. If the Agent solicits such offers from not less than four such
investors, then the acceptance by the Agent of the highest offer obtained
therefrom shall be deemed to be a commercially reasonable method of disposing of
such Collateral. Agent shall be under no obligation to delay the sale of any of
the Collateral for the period of time necessary to permit Assignor to cause the
registration of securities for public sale under the Securities Act of 1933, as
amended, or under applicable state securities laws, even if Assignor would agree
to cause FSA to do so. Agent shall have the right upon any such public sale or
sales and, to the extent permitted by law, upon any such private sale or sales,
to purchase severally for the individual accounts of each of the Lenders the
whole or any part of said Collateral so sold (any such shares purchased from
time to time, the "Purchased Shares"), free of any right or equity of
redemption, which equity of redemption Assignor hereby waives and releases to
the extent permitted by applicable law. Any sale may be conducted by an
auctioneer or by an officer, attorney or agent of the Agent. The Assignee shall
apply the amounts withdrawn from or held in the Collateral Account including or
the net proceeds of any such sale, upon receipt, in the following order of
priorities:
(i) first, to the Agent in an amount sufficient to pay
in full the out-of-pocket expenses of the Agent in connection with such
sale, disposition or other realization, including all expenses,
liabilities and advances incurred or made by the Agent in connection
therewith, including reasonable attorneys' fees and expenses;
(ii) second, to the Assignee and the Lenders to payment
of the Secured Debt in accordance with the terms of the Credit
Agreement (including amounts which may be deposited in the Settlement
Account (as defined in the Credit Agreement)); and
(iii) finally, upon payment in full of all of the Secured
Debt, to Assignor or its representatives or to whomsoever may be
lawfully entitled to receive the same, or as a court of competent
jurisdiction may direct.
The Company shall remain liable to the Assignee and the Lenders for any
deficiency in payment of the Secured Debt remaining after any such application.
(c) Without limiting the generality of Section 5(b) or the
availability of any remedy, Assignor acknowledges that regulatory or other
concerns may require (or render it advisable for) Agent not to foreclose on all
of the Collateral at the same time. Agent shall have the right to foreclose on
any portion of the Collateral without limiting Agent's right to foreclose on all
or a part of the remaining Collateral at any time or from time to
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<PAGE> 7
time in the future. To the extent permitted by applicable law, Assignor waives
the benefit of any statute or common law principle or decision which would
preclude or limit Agent's right to foreclose sequentially. Until the Secured
Debt has been repaid in full and all commitments under the Credit Agreement have
been terminated, this Agreement shall remain in full force and effect with
respect to any Collateral as to which Agent has not foreclosed.
(d) To the extent permitted by applicable law, the Assignor
hereby knowingly, voluntarily and intentionally waives or covenants not to
assert against the Assignee or any Lender any valuation, stay, appraisement,
extension or redemption laws which are now or hereafter may be in effect and
which, but for this Agreement, might be applicable to any application of amounts
of Collateral held in the Collateral Account or sale made under the judgment,
order or decree of any court, or privately under the power of sale conferred by
this Agreement or in respect of the Collateral.
(e) The Assignee and any person acting as its agent hereunder
shall not, under any circumstance or in any event whatsoever, be liable to the
Assignor for any acts or omissions or for any error of judgment or mistake of
fact or law, except for gross negligence or willful misconduct. Notwithstanding
the foregoing, it is understood that the Assignee is under no duty to take any
of the foregoing actions and that the Assignee shall have no duty as to the
collection or protection of the Collateral or any income therefrom or to
mitigate damages relating thereto and no further duty to preserve any rights
pertaining thereto.
(f) The Assignor shall, at the Assignee's request, assemble
all records related to the Collateral and make them available to the Assignee at
places which the Assignee may reasonably select, whether at the Assignee's
offices or elsewhere, and will make available to the Assignee all premises and
facilities of the Assignor for the purpose of inspecting all records related to
the Collateral.
(g) The Assignor shall indemnify and hold harmless the Agent,
the Lenders and each director, officer, employee, attorney and agent thereof (an
"Indemnitee") against any loss, cost, expense or damage resulting from any
claim, suit, action or proceeding against an Indemnitee arising out of the
liquidation of any of the Collateral, including the settlement, collection or
payment of any of the Collateral, or any instrument received in payment thereof,
except for any of the foregoing which results from the gross negligence or
willful misconduct of the Indemnitee. The terms of this Section 5(g) shall
survive termination of this Agreement and repayment of the Secured Debt.
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<PAGE> 8
6. Limitation on Duties Regarding Collateral. The Assignee's sole duty
with respect to the Collateral, safekeeping and physical preservation of
documentation evidencing the Collateral in its possession shall be to deal with
it in the same manner as it deals with similar property for its own account.
Neither the Assignee nor any of its directors, officers, employees, attorneys or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so.
7. Further Actions. The Assignor hereby further agrees, at its own
expense, to execute and deliver, or cause to be executed and delivered, to the
Assignee all further documents and instruments, including without limitation,
Uniform Commercial Code financing statements and continuation statements, "stock
powers", "bond powers", other instruments of assignment and instructions and
perform all other acts which the Assignee may reasonably require in order to
protect the Collateral, perfect or further evidence the security interest herein
granted to the Assignee for the benefit of the Lenders or give effect to the
exercise of any of the Assignee's remedies hereunder. The Assignee may file any
financing statement to perfect its security interest for the benefit of the
Lenders signed by the Assignor or the Assignee alone.
8. Notices. All notices, consents and other communications required by
or given under this Agreement (other than notices to the Custodian, which shall
be given as provided in the Control Agreement) shall be in writing (transmitted
by telecopy or otherwise) and shall be given and shall be effective in the
manner provided in the Credit Agreement.
9. Direction to FSA. The Assignor hereby irrevocably directs and
authorizes FSA to remit all dividends and other distributions payable with
respect to the Collateral to the Assignee or the Custodian upon written
direction to such effect from the Assignee or the Custodian. Such dividends
and/or distributions remitted to the Assignee shall be applied to the Secured
Debt in accordance with the Credit Agreement. If Assignor shall receive any of
the foregoing Collateral, Assignor shall accept the same as agent for the
Lenders and hold the same in trust for the Lenders and deliver the same
forthwith to Assignee in the exact form received, with the endorsement of
Assignor when requested by Assignee and/or appropriate undated stock powers duly
executed in blank (all in form and substance satisfactory to the Assignee), to
be applied in accordance with the Credit Agreement. Any cash received upon or in
respect of the Collateral under this Section upon the reorganization,
liquidation or dissolution of FSA shall immediately be paid over to Assignee to
be held by the Assignee as Collateral for the Secured Debt or to be applied in
accordance with the Credit Agreement. All sums of money so paid or distributed
in respect of the Collateral that are received by Assignor shall, until paid or
delivered to the Assignee, be
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<PAGE> 9
segregated from the other property or funds of Assignor and held by Assignor in
trust as additional collateral security for the Secured Debt. Assignor shall
give Assignee immediate notice of any such payment or distribution. The Assignor
shall not send to FSA or the Custodian, and FSA and the Custodian shall not
honor, any instructions contrary to those contained herein without the prior
written consent of the Required Lenders. Assignor will advise Assignee promptly,
in reasonable detail (including copies of any documents in question), of (i) any
lien, security interest, encumbrance or claim made or asserted against any of
the Collateral, (ii) any material change in the composition of the Collateral,
including information regarding the issuance or creation of new rights that
relate to the Collateral or FSA, (iii) the amendment or restatement in any
material respect of the Articles of Incorporation of FSA, the by-laws of FSA or
any registration agreement or other shareholders agreement regarding the
Collateral, including, to the fullest extent consistent with applicable Federal
and state securities laws, any proposed amendment of any such documents and (iv)
to the fullest extent consistent with applicable Federal and state securities
laws, the occurrence of any other event which might have a material adverse
effect on the value of the Collateral or on the security interests created
hereunder.
10. Miscellaneous.
(a) This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against the Assignor
for liquidation or reorganization, should the Assignor become insolvent or make
an assignment for the benefit of any creditor or creditors or should a receiver
or trustee be appointed for all or any significant part of the Assignor's
assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Secured Debt, or any part thereof,
is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Debt, whether as
a "voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Secured Debt
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. This Agreement is to be read,
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<PAGE> 10
construed and applied together with the other documents and instruments executed
in connection herewith which, taken together, set forth the complete
understanding and agreement of the Assignor and the Assignee with respect to the
matters referred to herein and therein.
(c) The representations, warranties and covenants set forth in
this Agreement (whether directly or by reference to another document) shall
survive the execution, delivery and termination of this Agreement.
(d) The Assignee shall not by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder, and
no waiver shall be valid unless in writing, signed by the Assignee and then only
to the extent therein set forth. A waiver by the Assignee of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Assignee would otherwise have had on any future occasion. No
failure to exercise or delay in exercising, on the part of the Assignee, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Agreement may be waived, altered, modified or amended except by an instrument in
writing, duly executed by the Assignee (acting with the requisite consent of the
Lenders to the extent required by the Credit Agreement) and the Assignor.
(e) All rights, remedies and powers provided in this Agreement
may be exercised only to the extent that the exercise thereof does not violate
any applicable provision of law, and all the provisions of this Agreement are
intended to be subject to all applicable mandatory provisions of law that may be
controlling and to be limited to the extent necessary so that they shall not
render this Agreement invalid, unenforceable, in whole or in part, or not
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<PAGE> 11
entitled to be recorded, registered or filed under the provisions of any
applicable law.
(f) This Agreement shall continue in effect (notwithstanding
the fact that from time to time there may be no Secured Debt of the Assignor or
commitments therefor outstanding) until the payment in full of the Secured Debt
of the Assignor, the termination of all outstanding Advances and the termination
of all commitments of the Lenders under the Credit Agreement, at which time the
security interests granted hereby shall terminate and any and all rights to the
Collateral shall revert to the Assignor. Upon such termination, the Assignee
shall promptly return to the Assignor, at the Assignor's expense, such of the
Collateral held by the Assignee as shall not have been sold or otherwise applied
pursuant to the terms hereof. The Assignee will promptly execute and deliver to
the Assignor such other documents as the Assignor shall reasonably request to
evidence such termination.
(g) This Agreement and all obligations of the Assignor
hereunder shall be binding upon the successors and assigns of the Assignor and
shall, together with the rights and remedies of the Assignee hereunder, inure to
the benefit of the Assignee, all future holders of any instrument or agreement
evidencing any of the Secured Debt and its successors and assigns. No sales of
participations, other sales, agreements, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Debt or any portion
thereof or interest therein shall in any manner affect the security interest
granted to the Assignee hereunder. The Assignor may not assign, sell or
otherwise transfer any interest in or obligation under this Agreement.
(h) This Agreement may be executed in any number of separate
counterparts, each of which shall collectively and separately constitute one and
the same agreement.
(i) IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
MICHIGAN APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT
REGARD TO CONFLICTS OF LAWS PROVISIONS THEREOF), AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. THE ASSIGNOR HEREBY CONSENTS AND AGREES THAT THE STATE
OR FEDERAL COURTS LOCATED IN THE STATE OF MICHIGAN SHALL HAVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE ASSIGNOR AND THE ASSIGNEE
PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION
HEREWITH; PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE THE ASSIGNEE FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY
OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
SECURED DEBT, OR TO
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<PAGE> 12
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE ASSIGNEE. THE ASSIGNOR
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND THE ASSIGNOR HEREBY WAIVES ANY OBJECTION
WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
(j) EACH PARTY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED IN CONNECTION WITH, THIS AGREEMENT OR
THE TRANSACTIONS RELATED HERETO. THE ASSIGNOR WAIVES ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO, ACTUAL DAMAGES.
(k) The Assignor agrees to pay or reimburse the Assignee,
immediately upon demand at any time or times, for all reasonable expenses
incurred to perfect, protect and maintain continuously perfected the Assignee's
security interest for the benefit of the Lenders, and the priority thereof, in
the Collateral, or to preserve, protect, care for or insure any Collateral, or
in the taking, holding, preparing for sale, or other disposition, selling or
otherwise disposing of the Collateral, or any other action taken by the Assignee
to enforce or exercise its rights or remedies under this Agreement, including
without limitation, reasonable attorneys' fees, filing fees, documentary
recordation taxes, appraisal charges and storage costs.
(l) Assignee agrees that it will not originate any entitlement
orders concerning the Collateral Account unless a Default shall have occurred
and be continuing, in which event it will provide a copy of any such entitlement
orders to the Assignor as well.
IN WITNESS WHEREOF, the Assignor and the Assignee, intending
to be legally bound, have executed this Agreement as of the date and year first
written above.
SOURCE ONE MORTGAGE SERVICES
CORPORATION
By:
------------------------------
Name:
----------------------------
Title:
----------------------------
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<PAGE> 13
THE FIRST NATIONAL BANK OF CHICAGO,
as Collateral Agent
By:
-------------------------------
Name:
-----------------------------
Title:
-----------------------------
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<PAGE> 14
EXHIBIT A
DESCRIPTION OF COLLATERAL
3,460,200 shares of Common Stock of Financial Security Assurance
Holdings, Ltd., a New York corporation, having a par value of $0.01 per share,
together with any additional shares in FSA and any options or other rights with
respect to FSA to which the holder of such shares becomes entitled hereafter.
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<PAGE> 1
EXHIBIT 10(d)
FOURTH AMENDED AND RESTATED
SECURITY AND COLLATERAL AGENCY AGREEMENT
THIS FOURTH AMENDED AND RESTATED SECURITY AND COLLATERAL AGENCY
AGREEMENT (the "Security Agreement") is made and dated as of July 10, 1998, by
and among SOURCE ONE MORTGAGE SERVICES CORPORATION, a Delaware corporation (the
"Company"), THE FIRST NATIONAL BANK OF CHICAGO, a national banking association,
acting in its capacity as administrative agent for the lenders from time to time
participating in the Credit Agreement (as defined below) (in such capacity, the
"Credit Agent"), and NATIONAL CITY BANK OF KENTUCKY, a national banking
association, as collateral agent for the Secured Parties (as defined below) (in
such capacity, the "Collateral Agent").
RECITALS
A. This Fourth Amended and Restated Security and Collateral Agency
Agreement amends and restates in its entirety that certain Third Amended and
Restated Security and Collateral Agency Agreement dated as of July 25, 1997 (the
"Third Amended Agreement"), by and among the parties hereto and certain
subsidiaries of the Company.
B. Pursuant to that certain Fourth Amended and Restated Revolving
Credit Agreement of even date herewith (the "Credit Agreement"), the Lenders
have agreed to extend credit to the Company on the terms and subject to the
conditions set forth therein. The Credit Agreement amends and restates in its
entirety that certain Third Amended and Restated Revolving Credit Agreement
dated as of July 25, 1997 by and among the Company, certain subsidiaries of the
Company, First Chicago and certain of the Lenders. Capitalized terms not
otherwise defined herein are used with the same meanings as in the Credit
Agreement.
C. Under the Credit Agreement, from and after the date hereof, no
further Advances will be made available to the Company's subsidiaries and no
Mortgage Loans owned by such subsidiaries shall constitute Collateral.
D. As a condition precedent to the effectiveness of the Credit
Agreement, the Credit Agent has required the execution and delivery of this
Security Agreement in order to, among other things, create a first priority
perfected security interest in the Collateral in favor of the Lenders, the
Non-Lender Balance Banks (to the extent of any Credit Indebtedness owed to such
Non-Lender Balance Banks), the Credit Agent and the Collateral Agent,
(collectively, the "Secured Parties") to secure payment of the Credit
Indebtedness (the "Secured Debt").
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 agree as follows:
<PAGE> 2
AGREEMENTS
1. Appointment of Collateral Agent. Each Lender and Non-Lender Balance
Bank has, pursuant to the terms of the Credit Agreement, appointed the
Collateral Agent to act as secured party, agent, bailee and custodian for the
exclusive benefit of the Secured Parties with respect to the Collateral. The
Collateral Agent hereby accepts such appointment and agrees to maintain and
hold, or cause to be maintained and held, all Collateral at any time delivered
to it or any of its subagents as secured party, agent, bailee and custodian for
the exclusive benefit of the Secured Parties. The Collateral Agent and the
Company agree that the Collateral Agent is acting and will act with respect to
the Collateral for the exclusive benefit of the Secured Parties 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 Company
except as expressly permitted hereunder and under the other Credit Documents.
The Collateral Agent agrees to act in accordance with this Security Agreement
and in accordance with any written instructions properly delivered pursuant
hereto. Under no circumstances shall the Collateral Agent deliver, or cause to
be delivered, possession of Collateral to the Company except in accordance with
the express terms of this Security Agreement or the other Credit Documents.
2. Delivery and Categorization of Collateral.
(a) Mortgage Loans. The Company (the "Pledgor") shall deliver
Collateral Transmittals to the Collateral Agent from time to time identifying
Mortgage Loans that the Pledgor intends to include in Collateral by delivering
to the Collateral Agent the Required Mortgage Documents (as described on
Schedule A attached hereto) for such Mortgage Loans. Such delivery shall be made
prior to inclusion of such Mortgage Loans in Collateral, other than for AP
Mortgages identified in the Collateral Transmittal and covered by an AP Notice.
The Collateral Agent shall review the Required Mortgage Documents in accordance
with the review steps described on Exhibit 1 hereto.
(b) AP Notices. The Collateral Agent, upon receipt of a
Collateral Transmittal describing the AP Mortgages to be covered by an AP Notice
and an AP Notice as of that date, shall (subject to the eligibility requirements
set forth in the Credit Agreement) include such AP Mortgages as Eligible
Collateral in the Collateral Value Determination (as defined Paragraph 6(a)
below). The Pledgor shall deliver the Required Mortgage Documents for each such
AP Mortgage not later than the twelfth (12th) Business Day after the date such
AP Mortgage is first so included as an Eligible AP Mortgage, except that, with
respect to New York Consolidation Loans, the outside date shall be the
twenty-first (21st) calendar day thereafter. If the Required Mortgage Documents
for any AP
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<PAGE> 3
Mortgage are not delivered by such applicable outside date, the Credit Agent or
the Collateral Agent may request that the Pledgor advise the Collateral Agent
and the Credit Agent in writing of the specific reason that such Required
Mortgage Documents were not delivered, and the Pledgor shall so advise the
Collateral Agent and the Credit Agent within 30 days after such request.
(c) Securities. The Pledgor may, from time to time, deliver
Securities to the Collateral Agent or an Approved MBS Custodian and shall
provide such evidence that such Securities are either (a) in a certificated
form, with the certificates evidencing such Securities being delivered to the
Collateral Agent or such Approved MBS Custodian, or (b) in book entry or
uncertificated form with evidence that the Collateral Agent or such Approved MBS
Custodian has been identified as the nominal owner of such Securities in the
records of a Federal Reserve Bank or other institution authorized by the
applicable Federal Agency to maintain ownership records in respect of such
Securities.
(d) Repurchased Agency Loans and Receivables. The Company
shall identify Repurchased Agency Loans and Receivables from time to time by
providing a list of such items to the Collateral Agent. Such list shall include
statements indicating (i) the identification number of each such Mortgage Loan,
(ii) its unpaid principal balance, (iii) the "paid-to" date for such Mortgage
Loan, (iv) the date on which such Mortgage Loan was purchased by the Company out
of the applicable pool, (v) whether or not such Mortgage Loan has been
reinstated and the payment defaults thereunder cured by the mortgagor, (vi) the
date on which any foreclosure sale with respect to such Mortgage Loan has
occurred, (vii) the status of the related claim against the VA or FHA or HUD,
and (viii) whether the borrower of the Mortgage Loan filed a voluntary
bankruptcy petition or had an involuntary bankruptcy petition filed against it
while the payments on such Mortgage Loan were past due. The Company shall
provide a weekly update of such information to the Collateral Agent by 5:00 p.m.
(Chicago time) on the first Business Day of each week with regard to any
Repurchased Agency Loans and Receivables previously identified as being included
in Collateral, which update shall be as of the close of business on Thursday of
the preceding week, and which information shall be used for Collateral Value
Determinations during the following week. The Collateral Agent shall have the
right at any time at the direction of the Aggregate Required Lenders, to require
the Company to submit all Required Mortgage Documents and item number 4 from the
Additional Required Mortgage Documents for any Repurchased Agency Loan and
Receivable then being included in Collateral, and the Collateral Agent shall
request the submission of such documents at the direction of the Credit Agent.
In addition, the Company shall provide, at the request of the Collateral Agent
or the Credit Agent, claim forms to FHA or VA or HUD for each such Repurchased
Agency Loan and Receivable,
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<PAGE> 4
identifying the Collateral Agent as the "investor" thereunder so that any
payments made by FHA or VA or HUD with respect to such Mortgage Loan shall be
paid to the Collateral Agent rather than the Company. In addition, with respect
to those Repurchased Agency Loans and Receivables for which there has been a
foreclosure sale of the underlying property, the Credit Agent shall have the
right to require the Company to provide a new mortgage in favor of the
Collateral Agent on the real estate and improvements that previously secured
such Repurchased Agency Loan and Receivable, all in form satisfactory to the
Credit Agent and Collateral Agent and at the Company's sole cost and expense,
including the cost of recording such mortgage if required by the Credit Agent.
(e) Servicing Sale Receivables. The Company may, in connection
with a sale of Servicing Agreements from the Company to a Servicing Purchaser,
pledge the Servicing Sale Receivables due in connection with such sale to the
Collateral Agent as Collateral. If the Company so pledges Servicing Sale
Receivables to the Collateral Agent, the Company shall (i) deliver to the Credit
Agent and the Collateral Agent a complete executed copy of the related purchase
agreement and written confirmation from the Servicing Purchaser as to the amount
of such Pledged Servicing Sale Receivables, (ii) assign its rights to such
Pledged Servicing Sale Receivables to the Collateral Agent for the benefit of
the Secured Parties pursuant to an assignment in form and content satisfactory
to the Required Lenders, and (iii) cause the Servicing Purchaser of the
applicable sold Servicing Agreements to execute an agreement in form and content
satisfactory to the Required Lenders pursuant to which the Servicing Purchaser
shall agree to (A) pay such Pledged Servicing Sale Receivables directly to the
Collateral Agent for the benefit of the Secured Parties, and (B) provide
simultaneous written notice to the Credit Agent and the Collateral Agent of any
claims made against or notices given to the Company which would constitute an
offset to or reduction in the amount of such Pledged Servicing Sale Receivables.
(f) Identification of Collateral. All Mortgage Loans and
Securities at any time delivered to the Collateral Agent hereunder shall be held
by the Collateral Agent in a fire resistant vault, drawer or other suitable
depositary maintained in accordance with Federal Agency standards and controlled
solely by the Collateral Agent, conspicuously marked to show the respective
interests of the Secured Parties therein and not commingled with any other
assets or property of, or held by, the Collateral Agent. Accordingly, if
(pursuant to Paragraph 7(b) below) the Collateral Agent receives a shipping
request pursuant to which National City Bank of Kentucky is to retain physical
possession of the applicable Mortgage Loans or Securities as an agent for any
Person other than the Secured Parties, the Collateral Agent shall physically
separate such Mortgage Loans or Securities from the remainder of the
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Collateral and shall execute any transmittal letters required under Paragraph
7(b) below.
3. Grant of Security Interest. The Company hereby pledges, assigns and
grants to the Collateral Agent for the benefit of the Secured Parties, a first
priority security interest in the property described in Paragraph 4 below
(collectively and severally, the "Collateral"), to secure payment of the Secured
Debt. Furthermore, each AP Notice shall create a security interest in favor of
the Collateral Agent for the benefit of the Secured Parties in the AP Mortgages
identified therein. By delivering an AP Notice, the Company represents and
warrants that each AP Mortgage identified therein constitutes an Eligible AP
Mortgage. The Company agrees that while it is in possession of any Required
Mortgage Documents for an AP Mortgage, it will hold same in trust and as agent
and bailee for the Collateral Agent for the benefit of the Secured Parties,
without authority to make any other disposition thereof, or of the proceeds
thereof. The Company assumes the responsibility for loss or destruction of any
such Required Mortgage Documents until the same are delivered to the Collateral
Agent.
Unless so directed by the Credit Agent when an Event of Default has
occurred and is continuing, the Collateral Agent shall not record the assignment
of mortgage or deed of trust delivered in connection with any Pledged Mortgage.
4. Collateral. The Collateral shall consist of all right, title and
interest of the Company of every kind and nature, in and to all of the following
property, assets and rights of the Company wherever located, whether now
existing or hereafter arising, and whether now or hereafter owned or acquired by
or accruing or owing to the Company, and all proceeds and products thereof
(including all proceeds in the Settlement Account and Custodian Settlement
Accounts from time to time):
(a) all Pledged Mortgages;
(b) all Pledged Securities;
(c) any commitments or other agreements issued by any private
mortgage insurer or by the FHA or VA to insure or guarantee any Pledged
Mortgage;
(d) all commitments of FNMA, FHLMC or other Persons to purchase
Pledged Items from the Company or exchange Securities with the Company for
Pledged Items;
(e) any options to sell or purchase Securities, future contracts, or
any other interest rate protection products which directly or indirectly protect
the Company against reductions in
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value of such Pledged Items due to changes in mortgage interest
rates;
(f) the Settlement Account and any Custodian Settlement Accounts and
any amounts standing to the credit of the Settlement Account and any Custodian
Settlement Accounts then in existence with Approved MBS Custodians, as described
in Paragraph 7(c) of this Security Agreement;
(g) all VA Mortgage Loans or FHA Mortgage Loans (plus any REO or
accounts receivable from FHA or VA resulting therefrom, including guaranty
claims against VA and insurance claims against FHA or HUD) which are repurchased
by the Company from Security holders and pledged to the Collateral Agent as
security for the Secured Debt;
(h) all cash and Cash Equivalents held by the Credit Agent or
Collateral Agent as security for the Secured Debt;
(i) all Pledged Servicing Sale Receivables; and
(j) all property and proceeds related to the foregoing, including
without limitation, the right to service Pledged Mortgages while owned by the
Company, all files, surveys, certificates, correspondence, appraisals, computer
programs, tapes, disks, cards, accounting records and other records and data of
the Company related to the Pledged Mortgages, all accounts and general
intangibles of whatsoever kind so related and all documents or instruments
delivered to the Credit Agent or the Collateral Agent in respect of any Pledged
Item, including, without limitation, the right to receive all insurance proceeds
and condemnation awards which may be payable in respect of the premises
encumbered by any Pledged Mortgage.
5. Collateral Agent's Review of Collateral. Upon any receipt of Required
Mortgage Documents for any Mortgage Loan, the Collateral Agent shall review the
same and verify that:
(a) All Required Mortgage Documents relating to such Mortgage Loan
appear regular on their face (as determined by the Collateral Agent in its
reasonable discretion) and are in the Collateral Agent's possession; and
(b) The statements set forth on Exhibit 1 hereto are accurate and
complete in all material respects.
If the Collateral Agent notes any exception in the review described in
subparagraph (a) or (b) above or questions, in its reasonable discretion, the
genuineness, regularity, propriety, or accuracy of any item of Collateral, the
Collateral Agent shall not include such item as Eligible Collateral in its next
Collateral Value
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Determination (as defined in Paragraph 6(a) below) delivered to the Credit
Agent. In the event that the Pledgor has been requested by the Credit Agent or
the Collateral Agent to deliver the "Additional Required Mortgage Documents" (as
described on Schedule B attached hereto) with respect to any Mortgage Loan, the
Collateral Agent shall review and verify such Additional Required Mortgage
Documents consistent with the obligations of the Collateral Agent above.
6. Collateral Value Determination; Determination Assumptions.
(a) On each Business Day the Collateral Agent shall compute
the value of the Borrowing Base and notify the Credit Agent thereof (a
"Collateral Value Determination") by sending a facsimile copy or electronic
transmission of a report ("Borrowing Base Report") in the form of Schedule C
hereto (or such other form as may be mutually agreed to by the Collateral Agent
and the Credit Agent) prior to 11:00 a.m. (Chicago time). With respect to any
Required Mortgage Documents delivered to the Collateral Agent by 10:00 a.m.
(Chicago time) on any Business Day, the Collateral Agent shall review such
Required Mortgage Documents in the manner set forth in Paragraph 5 above in time
to include the related Mortgage Loans (to the extent they constitute Eligible
Collateral) in the Borrowing Base Report delivered at 11:00 a.m. (Chicago time)
on such Business Day. If the Company or the Credit Agent reasonably believes
that the value of the Borrowing Base has changed since the 11:00 Borrowing Base
Report, the Collateral Agent shall, at the request of the Company or the Credit
Agent made by facsimile prior to 2:00 p.m. (Chicago time) on any Business Day,
recompute the Borrowing Base and notify the Credit Agent thereof by telephone
and by a facsimile transmission of a Borrowing Base Report. Notwithstanding the
foregoing, so long as the security interest in the Collateral is abated as
described in Paragraph 8, the Company shall perform all of the obligations of
the Collateral Agent with respect to determining the Borrowing Base, and the
Collateral Agent shall have no duty to compute the Borrowing Base or submit
Borrowing Base Reports.
(b) In making any Collateral Value Determination or other
calculation involving a determination of the value of the Borrowing Base, the
Collateral Agent shall be permitted to rely, without independent investigation
of the correctness thereof, on:
(1) The information supplied by the Pledgor to the
Collateral Agent on the related Collateral Transmittal, with respect to
the net acquisition cost (including any discounts and excluding any
servicing released premium) of any Mortgage Loan, the unpaid principal
balance of any Mortgage Loan as of the Pledge Date therefor, and the
weighted average purchase price (expressed as a percentage of par)
committed to under
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those Approved Investor Commitments which could cover such
Mortgage Loan;
(2) The most recent information supplied by the
Company to the Collateral Agent with respect to (i) the number of days
by which payments on any Mortgage Loan constituting Collateral are past
due, (ii) the date of any foreclosure sale or transfer in lieu of
foreclosure with respect to a repurchased Mortgage Loan constituting a
Repurchased Agency Loan and Receivable, (iii) the date of any
reinstatement of any Repurchased Agency Loans and Receivables, (iv) the
value of any REO and accounts receivable (including proceeds of FHA
insurance or VA guaranties) acquired in connection with a foreclosure
sale or a transfer in lieu of foreclosure of Eligible Repurchased
Agency Loans and Receivables, and (v) whether the borrower of any
Mortgage Loan which is included in Repurchased Agency Loans and
Receivables filed a voluntary bankruptcy petition or had an involuntary
bankruptcy petition filed against it while the payments on such
Mortgage Loan were past due;
(3) The information supplied by the Company to the
Collateral Agent, whether written or in any other form acceptable to
the Collateral Agent, with respect to a determination as to whether
amounts received in the Settlement Account represent the purchase price
paid for a specific Mortgage Loan or Security and, consequently,
whether the Mortgage Collateral Value of such Mortgage Loan or MBS
Value of such Security should be removed from such calculation;
(4) The most recent information supplied by the
Credit Agent to the Collateral Agent with respect to (i) the amount of
the then current Aggregate Commitment, and (ii) the current balance in
the Settlement Account;
(5) The most recent information supplied by the
Company and the Servicing Purchaser(s) to the Collateral Agent with
respect to the amount of Servicing Sale Receivables; and
(6) Any information supplied by the Credit Agent, the
Company, or any other custodian of any of the Collateral, to the
Collateral Agent unless the Collateral Agent has actual knowledge that
such information is untrue or unreliable.
Furthermore, the Collateral Agent may rely on information
supplied by the Company with respect to the effect of the Borrowing Base
Sublimits on the value of the Borrowing Base attributable to Repurchased Agency
Loans and Receivables, which information shall be supplied by the Company on the
last Business Day of each week with respect to the value of the Borrowing Base
attributable to Repurchased Agency Loans and Receivables as of the close of the
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<PAGE> 9
second to last Business Day of such week which information shall be used by
Collateral Agent beginning with the first Collateral Value Determination made
during the following week; provided, however, that the Collateral Agent shall
(on the last Business Day of each month) verify the accuracy of the information
supplied by the Company in the most recent report of such information and report
to the Credit Agent any discrepancies between such information as supplied by
the Company and such information as calculated by the Collateral Agent. The
information as calculated by the Collateral Agent shall be included in each
daily Borrowing Base Report until the Company again provides its next weekly
report of the value of the Borrowing Base attributable to Repurchased Agency
Loans and Receivables.
(c) The Collateral Agent is hereby authorized by the Credit
Agent to grant temporary waivers of strict compliance by the Company with the
eligibility requirements regarding qualification of any item of Collateral as
Eligible Collateral or with the Borrowing Base Sublimits when the Collateral
Agent deems it appropriate, in its sole discretion, (i) up to any amount for up
to three (3) Business Days, if the satisfaction of such eligibility requirements
or sublimits cannot be independently determined because of events beyond the
reasonable control of the Company (e.g. natural disasters, transmission
failures, etc.), provided that, if such determination cannot be made for more
than one (1) Business Day, the Company certifies in writing that all such
eligibility requirements and sublimits are in fact satisfied, or (ii) if the
aggregate amount of the portion of the Borrowing Base attributable thereto does
not exceed the lesser of (A) $25,000,000 or (B) five percent (5%) of the
Aggregate Commitment at any time; provided that the waivers permitted under this
clause (ii) shall be limited to waivers of Borrowing Base Sublimits and time
limitations set forth in the eligibility requirements (e.g. number of days
eligible in the Aggregate Borrowing Base, number of days out on Company Trust
Receipts, etc.); and further provided that in no event shall any Pledged
Mortgage be included as Eligible Collateral while such Pledged Mortgage is held
by the Company under a Company Trust Receipt if the Company has held such
Pledged Mortgage under a Company Trust Receipt for more than 21 days.
7. Handling of Collateral; Settlement Account.
(a) From time to time until otherwise notified in writing by
the Required Lenders, the Collateral Agent is hereby authorized to release
documentation relating to Mortgage Loans to the Company against a trust receipt
executed by the Company in the form of Exhibit 2 hereto. The Collateral Agent
will maintain all original trust receipts in a vault, drawer or other suitable
depositary with a one hour fire rating maintained in accordance with Federal
Agency requirements and controlled solely by Collateral Agent. The Company
hereby represents and warrants that
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<PAGE> 10
any request by the Company for release of Collateral under this subparagraph (a)
shall be solely for the purposes of correcting clerical or other non-substantial
documentation problems in preparation of returning such Collateral to the
Collateral Agent for ultimate sale or exchange and that the Company has
requested such release in compliance with all terms and conditions of such
release set forth herein and in the Credit Agreement, including, without
limitation, Section 4.1(b)(iv) thereof.
(b) Prior to the occurrence of an Event of Default, upon
delivery by the Company to the Collateral Agent of a shipping request
substantially in the form of that attached hereto as Exhibit 3, the Collateral
Agent will transmit, or cause to be transmitted, Mortgage Loans and Securities
held by it or any Approved MBS Custodian as directed by the Company as follows:
(1) If the transmittal is of documentation for
Mortgage Loans or Securities in the possession of the Collateral Agent
or an Approved MBS Custodian in connection with the sale thereof to an
Approved Investor, such transmittal will be under cover of a
transmittal letter substantially in the form of that attached hereto as
Exhibit 4 (or such other form as may be approved by the Credit Agent or
required under any Federal Agency program pursuant to which the
relevant Mortgage Loans or Securities are being shipped), subject to
modification of such Exhibit 4 pursuant to Paragraph 7(g) hereof at the
request of the Agent.
(2) If the transmittal is of documentation for
Mortgage Loans or Securities in connection with the shipment to a
custodian or trustee in connection with the formation of a mortgage
pool supporting a Security (any such Security secured or otherwise
supported by any such Mortgage Loan or Security being referred to
herein as a "Warehouse-Related Security"), such transmittal will be
under cover of a transmittal letter substantially in the form of that
attached hereto as Exhibit 5 (or such other form as may be approved by
the Credit Agent or required if the Security is being issued under any
Federal Agency program), subject to modification of such Exhibit 5
pursuant to Paragraph 7(g) hereof at the request of the Agent, and, in
addition, will be conditioned upon the facts that:
(i) If the Warehouse-Related Security is
being issued under a Federal Agency program, there has been
delivered for the Warehouse-Related Security such form as may
be required under the Federal Agency program pursuant to which
such Warehouse-Related Security is being issued (which form
shall name the Collateral Agent or an Approved MBS Custodian
(as defined below) as the
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<PAGE> 11
subscriber and the Person to whom the Warehouse-Related
Security is to be delivered);
(ii) If the Warehouse-Related Security is
being issued pursuant to a program other than a Federal Agency
program, there has been delivered to and acknowledged by the
trustee and collateral agent or custodian for the underlying
mortgage pool a letter in form acceptable to the Collateral
Agent;
(iii) The Person to whom such Warehouse-
Related Security is to be delivered upon issuance in
exchange for the Mortgage Loans or Securities being shipped
is either (a) a Person approved by the Collateral Agent and
the Credit Agent which has agreed to hold such
Warehouse-Related Security and the proceeds of any sale or
other disposition thereof as custodian, agent and bailee for
the benefit of the Secured Parties pursuant to a custodial
agreement substantially in the form of that attached hereto
as Exhibit 6 (a "Custodial Agreement"), (b) the Collateral
Agent or an Affiliate thereof or (c) such other Person as is
approved by the Collateral Agent and the Credit Agent (any
Person acting in such capacity being referred to herein as an
"Approved MBS Custodian");
(iv) There has been delivered to the
Approved MBS Custodian a letter in the form attached to the
Custodial Agreement (Exhibit A to Exhibit 6 hereto); and
(v) At the request of the Agent pursuant to
Paragraph 7(g) hereof, any Warehouse Related Security
delivered to the Collateral Agent or an Approved MBS Custodian
pursuant to subparagraphs (i) through (iv) shall be in a face
amount of not less than the amount of the Aggregate Borrowing
Base which is attributable to the Mortgage Loans so delivered
in exchange for such Warehouse Related Security.
In no event shall the Collateral Agent have any obligation to obtain written
acknowledgement of receipt from the addressee of any transmittal letter or other
communication sent by the Collateral Agent hereunder.
(c) All amounts payable on account of the sale of Pledged
Items (including, but not limited to, a sale pursuant to a repurchase agreement)
will be instructed to be paid directly by the purchaser to the Settlement
Account or, in the case of Pledged Securities delivered to an Approved MBS
Custodian, to a demand deposit account maintained with such Approved MBS
Custodian (a "Custodian Settlement Account") and, thereafter, to the Settlement
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Account as provided in the applicable Custodial Agreement. Pursuant to Paragraph
3 above the Company has granted a security interest in and lien upon the
Settlement Account and in all Custodian Settlement Accounts and in any and all
amounts at any time held therein as collateral security for the benefit of the
Secured Parties. This Paragraph 7(c) shall constitute notice to the Collateral
Agent and any Approved MBS Custodian of such security interest pursuant to the
Uniform Commercial Code of all relevant jurisdictions and any other law or
regulation requiring such notice. This Paragraph 7(c) shall further constitute
irrevocable notice to the Collateral Agent and any Approved MBS Custodian that
the accounts referred to in Paragraph 4(f) above are "no access" accounts to the
Company and the Collateral Agent except to the extent expressly permitted
hereunder. The Collateral Agent shall hold such security interest in and lien
upon the accounts referred to in Paragraph 4(f) above and all funds at any time
held therein for the benefit of the Secured Parties with all rights of a secured
party under the Uniform Commercial Code of all relevant jurisdictions.
(d) Prior to the occurrence of an Event of Default, the
Collateral Agent and any Approved MBS Custodian shall take such steps as they
may be reasonably directed from time to time by the Company in writing which are
not inconsistent with the provisions of this Security Agreement and the other
Credit Documents and which the Company deems necessary to enable the Company to
perform and comply with Approved Investor Commitments and with other agreements
for the sale or other disposition in whole or in part of Mortgage Loans and
Securities.
(e) The Collateral Agent may deliver any item of Collateral to
the Company or any other Person in accordance with the provisions of the Credit
Documents; provided, however, that the Collateral Agent shall not deliver and
shall incur no liability to the Company or any other Person for refusing to
deliver any item of Collateral to the Company or any other Person (other than
under existing Approved Investor Commitments) while an Event of Default exists
if the Collateral Agent has been directed to refrain from so delivering
Collateral by the Required Lenders.
(f) In addition to the releases of Collateral provided for in
subparagraphs (a)-(e) of this Paragraph 7, upon the request of the Company
delivered from time to time to the Credit Agent and the Collateral Agent, the
Collateral Agent shall, with the prior written approval of the Credit Agent,
release Collateral specified in such notice from the lien of this Security
Agreement. The Credit Agent shall give its approval of such release if, but only
if, (i) at the time of such release no Event of Default exists and no notice of
a Default has been issued that has not been cured, and (ii) any payment under
Section 2.14(a) of the Credit Agreement which may be required as a result of
such release has been made (or
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contemporaneously with such release shall be made) so that the release of such
Collateral will not create a violation of any Lending Sublimit or Borrowing Base
Sublimit, provided, however that, while an Event of Default exists or while a
notice of Default has been issued but not cured, the Collateral Agent may (A)
release pledged Cash Equivalents which are the subject of reverse repurchase
obligations in connection with the applicable reverse repurchase agreement, and
(B) release Pledged Items in connection with the sale of Pledged Items pursuant
to an existing Approved Investor Commitment if, in either case, the proceeds of
such repurchase or sale are deposited in the Settlement Account. The Collateral
Agent is authorized to execute and deliver to the Company, on behalf of the
Secured Parties, such UCC-3 partial release forms or other evidence as may be
required of any release permitted hereunder.
(g) Notwithstanding the provisions of Paragraph 7(b) above, at
the request of the Agent:
(i) The second sentence of the second full paragraph
of the form of whole loan sale transmittal letter attached
hereto as Exhibit 4 shall be deleted and replaced with the
following sentence:
"Each of the Mortgage Loans is subject to a security
interest in favor of National City Bank of Kentucky
(the "Collateral Agent") on behalf of the Secured
Parties, which security interest shall be
automatically released upon your remittance of an
amount equal to the greater of (1) the purchase price
for such Mortgage Loan (as set forth on the schedule
attached hereto), and (2) $__________, which is the
mortgage collateral value assigned by the Collateral
Agent to such Mortgage Loan. Such amount shall be
remitted by wire transfer to the following account:",
in which case the amount to be inserted in the blank in clause
two of such revised provision shall be an amount equal to the
amount of the Borrowing Base which is attributable to the
Mortgage Loans being delivered pursuant to the transmittal
letter;
(ii) The second sentence of the second full paragraph
of the form of warehouse related security transmittal letter
attached hereto as Exhibit 5 shall be deleted and replaced
with the following sentence:
"Each of the Mortgage Loans is subject to a security
interest in favor of National City Bank of Kentucky
(the "Collateral Agent") for the benefit
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of the Secured Parties, which security interest shall
be automatically released upon the issuance of the
Warehouse-Related Security in accordance with the
terms of the prescribed GNMA, FNMA or FHLMC form
enclosed herewith, which form shall name either the
Collateral Agent or another person designated by the
Collateral Agent as the person to whom the
Warehouse-Related Security is to be delivered and
require that the principal amount of the Warehouse
Related Security be in an amount not less than
$__________, which is the mortgage collateral value
assigned by the Collateral Agent to such Mortgage
Loan.",
in which case the amount to be inserted in the blank in such
revised provision shall be an amount equal to the amount of
the Borrowing Base which is attributable to the Mortgage Loans
being delivered pursuant to the transmittal letter.
The Agent may require that the above described modifications be made to all such
transmittal letters or only to transmittal letters to certain Approved Investors
designated by the Agent.
8. [Intentionally Omitted].
9. Reports. The Collateral Agent shall (a) deliver the Borrowing Base
Report at the times and in the manner set forth in Paragraph 6(a) above and (b)
deliver to the Credit Agent, the Company and any Lender which makes a written
request therefor, such other reports and information as any Lender 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 on Exhibit 1 hereto), on information supplied to the
Collateral Agent by the Company.
10. No Reliance. The Collateral Agent shall not be responsible to any
Secured Party for any recitals, statements, representations or warranties
contained herein or in any other Credit Document; or for the execution,
effectiveness, genuineness, validity, enforceability, collectability, accuracy,
completeness or sufficiency of this Security Agreement or any other Credit
Document or instruments executed and delivered, or which could have been
executed or delivered, in connection with this Security 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.
11. Costs and Expenses. The Collateral Agent shall notify the Company of
all extraordinary costs and expenses of the
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<PAGE> 15
Collateral Agent directly relating to the Collateral Agent's performance of this
Security Agreement, and such extraordinary costs and expenses shall be paid
promptly by the Company or, if already paid by the Collateral Agent, the Company
promptly shall reimburse the Collateral Agent therefor. For the purposes of this
provision, extraordinary costs and expenses shall include all costs and expenses
incurred by the Collateral Agent in performance of this Security Agreement which
have not been factored into the computation of the Collateral Agent's fee (as
agreed upon between the Company and the Collateral Agent pursuant to a separate
agreement), including, without limitation, reasonable expenses of legal counsel
to the Collateral Agent to enforce the rights of the Collateral Agent hereunder.
12. Availability of Documents. The Secured Parties and their agents,
accountants, attorneys and auditors (each an "Inspecting Party") will be
permitted from time to time upon reasonable notice to the Collateral Agent and
the Company, and at such time as may be mutually acceptable to such Inspecting
Party, the Collateral Agent and the Company 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 relating to any or all
Collateral and to make copies thereof. Any such activity will be at the cost and
expense of the Secured Party requesting such access, except that following the
occurrence of an Event of Default, all reasonable out-of-pocket costs and
expenses associated with the exercise by the Credit Agent of its rights under
this Paragraph 12 shall be promptly paid by the Company upon demand of the
Credit Agent.
13. Representations and Warranties. The Company hereby represents and
warrants that: (a) it is the sole owner of the Collateral (or, in the case of
after-acquired Collateral, at the time the Company acquires rights in the
Collateral, will be the sole owner thereof), subject only to the rights of
Approved Investors under the Approved Investor Commitments; (b) except for
security interests in favor of the Collateral Agent for the benefit of the
Secured Parties hereunder, no Person has (or, in the case of after-acquired
Collateral, at the time the Company acquires rights therein, will have) any
right, title, claim or interest in, against or to the Collateral and, in any
event, so long as the Collateral Agent complies with the procedures relating to
possession of Collateral set forth in this Security Agreement, the Collateral
Agent shall have a perfected, first priority security interest therein for the
benefit of the Secured Parties; (c) no consent of any Person is required that
has not been obtained for the granting of the security interests provided for
herein, nor will any consent be required for the Collateral Agent to exercise
its rights under this Security Agreement in accordance with the terms of this
Security Agreement (except for consents to assignments of options, futures
contracts or other interest rate protection products in
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<PAGE> 16
favor of the Secured Parties from the counterparties thereto, which consents
shall not be required to be obtained unless an Event of Default is continuing or
the Required Lenders request otherwise); (d) to the best of the Company's
knowledge, all information heretofore, herein or hereafter supplied to the
Collateral Agent or to any Lender by or on behalf of the Company with respect to
the Collateral is or will be accurate and complete; (e) the Approved Investor
Commitments covering such Collateral may be collaterally assigned to the
Collateral Agent as described herein; and (f) each Mortgage Loan and Security
is, at all dates included in the computation of the value of the Borrowing
Bases, Eligible Collateral.
14. Covenants of the Company. The Company hereby agrees: (a) to procure,
execute and deliver from time to time any endorsements, assignments, financing
statements and other writings deemed necessary or appropriate by the Collateral
Agent or the Credit Agent to perfect, maintain and protect the Collateral
Agent's security interest hereunder and the priority thereof and to deliver
promptly to the Collateral Agent all originals of any Collateral or proceeds
thereof consisting of chattel paper or instruments; (b) not to surrender or lose
possession of (other than to the Collateral Agent), sell, encumber, or otherwise
dispose of or transfer, any Collateral or right or interest therein other than
shipment of Mortgage Loans and Securities under Approved Investor Commitments
and as otherwise permitted under Paragraph 7 above and as otherwise permitted by
the Credit Agreement; (c) except as otherwise contemplated in any Custodial
Agreement, not to grant to any Federal Agency or Approved Investor any other
security interest in any Collateral, or otherwise acknowledge the creation of
any ownership rights of any Federal Agency or Approved Investor with respect to
any Collateral unless and until the Collateral Agent has received the proceeds
of such Collateral as described herein; (d) at all times to account fully for
and promptly to deliver to the Collateral Agent, in the form received, all
Collateral or proceeds thereof received, endorsed to the Collateral Agent or in
blank as appropriate and accompanied by such assignments and powers, duly
executed, as the Collateral Agent or the Credit Agent shall request, and until
so delivered all Collateral and proceeds thereof shall be held in trust for the
Collateral Agent for the benefit of the Secured Parties, separate from all other
property of the Company and identified as the property of the Collateral Agent
for the benefit of the Secured Parties; (e) to keep accurate and complete
records of the Collateral and at any reasonable time and at the Company's
expense, upon demand by the Collateral Agent or the Credit Agent, to exhibit to
and allow inspection of the Collateral and the records, reports and information
concerning the Collateral by the Collateral Agent or Credit Agent (or Persons
designated by the Collateral Agent or Credit Agent); (f) to keep the records
concerning the Collateral at the location(s) set forth in Paragraph 27 below and
not to remove the records from such
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location(s) without the prior written consent of the Collateral Agent and the
Credit Agent; (g) not to materially modify, compromise, extend, rescind or
cancel any deed of trust, mortgage, note or other document, instrument or
agreement connected with any Mortgage Loan 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 in any material respect; (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 Credit 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, the Credit 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 as otherwise permitted
in the Credit Agreement; (l) to notify the Collateral Agent and the Credit Agent
before any such change shall occur of any change in the Company's name, identity
or structure through merger, consolidation or otherwise; (m) to appear in and
defend, at the Company's cost and expense, any action or proceeding which may
affect its title to or the Collateral Agent's interest for the benefit of the
Secured Parties in the Collateral; and (n) to comply in all material respects
with all laws, regulations and ordinances relating to the possession, operation,
maintenance and control of the Collateral. Notwithstanding the foregoing, (1)
the requirements of clauses (g), (k) and (m) shall not apply to any Collateral
which is not required to be included in the computation of the value of any of
the Borrowing Base in order for the Company to be in compliance with the
requirements of the Credit Agreement unless failure to comply with the
requirements of said subparagraphs would have an adverse effect on the
Collateral which is included in such computation, and (2) the failure of the
Company to comply with its obligations under this Paragraph 14 with respect to
any Pledged Item shall cause such Pledged Item to cease to qualify as Eligible
Collateral.
15. Collection of Collateral Payments.
(a) The Company shall, at its sole cost and expense, use its
best efforts to obtain payment, when due and payable, of all sums due or to
become due with respect to any Collateral ("Collateral Payments" or a
"Collateral Payment"), consistent with all requirements of law and contractual
obligations binding upon the Company. Upon the request of the Collateral Agent
while an Event of Default exists, will notify and direct any party who is or
might become obligated to make any Collateral Payment, to make
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<PAGE> 18
payment thereof to the Collateral Agent (or to the Company in care of the
Collateral Agent) at such address as the Collateral Agent may designate. The
Company will reimburse the Collateral Agent promptly upon demand for all
out-of-pocket costs and expenses, including reasonable attorneys' fees and
litigation expenses, incurred by the Collateral Agent in seeking to collect any
Collateral Payment.
(b) The Collateral Agent shall, promptly upon receipt of any
funds delivered from any Servicing Purchaser as full or partial payment of any
Pledged Servicing Sale Receivable, deposit such funds into the Collateral
Agent's Settlement Account and notify the Company of the receipt of such funds.
If the Collateral Agent receives any check from a Servicing Purchaser in payment
of Servicing Sale Receivables and such check contains a restrictive endorsement,
the Collateral Agent shall obtain the consent of the Company and the Credit
Agent before cashing any such check.
(c) Following the occurrence of an Event of Default, upon the
request of the Collateral Agent the Company will transmit and deliver to the
Collateral 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 Collateral Agent)
which may be received by the Company at any time as payment on account of any
Collateral Payment and if such request shall be made, until delivery to the
Collateral Agent, such items will be held in trust for the Collateral Agent for
the benefit of the Secured Parties and will not be commingled by the Company
with any of their other funds or property. Thereafter, the Collateral Agent is
hereby authorized and empowered to endorse the name of the Company on any check,
draft or other instrument for the payment of money received by the Collateral
Agent on account of any Collateral Payment if the Collateral Agent believes such
endorsement is necessary or desirable for purposes of collection.
(d) The Company hereby agrees to indemnify, defend and save
harmless the Collateral Agent and its agents, officers, employees and
representatives from and against all reasonable liabilities and expenses on
account of any adverse claim asserted against the Collateral Agent relating to
any moneys received by the Collateral Agent on account of any Collateral Payment
(other than as a direct result of the gross negligence or willful misconduct of
the Collateral Agent) and such obligation of the Company shall continue in
effect after and notwithstanding the discharge of the Credit Indebtedness and/or
the release of the security interest granted in Paragraph 3 above.
16. Authorized Action by Collateral Agent. The Company hereby
irrevocably appoints the Collateral Agent as its attorney-in-fact to do (but
the Collateral Agent shall not be
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<PAGE> 19
obligated to and shall incur no liability to the Company or any Secured Party or
any other third party for failure so to do) at any time and from time to time at
the written request and direction, given while an Event of Default exists, of
the Required Lenders, any act which the Company is obligated by this Security
Agreement to do, and to exercise such rights and powers as the Company might
exercise with respect to the Collateral, including, without limitation, the
right to (a) 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; (b)
insure, process, service and preserve the Collateral; (c) transfer the
Collateral to the Collateral Agent's own or its nominee's name; and (d) make any
compromise or settlement, and take any other action it deems advisable with
respect to the Collateral. Notwithstanding the preceding sentence, the
Collateral Agent shall endeavor to take only such actions with respect to the
Collateral as are consistent with general servicing of such Collateral and in
compliance with Federal Agency requirements; provided, however, that the
Collateral Agent shall not be liable to the Company for any actions taken by the
Collateral Agent absent gross negligence or willful misconduct. Notwithstanding
anything contained herein, in no event shall the Collateral Agent be required to
make any presentment, demand or protest, or give any notice, and the Collateral
Agent need not take any action to preserve any rights against any prior party or
any other person in connection with the Secured Debt or with respect to the
Collateral.
17. Default and Remedies.
(a) While an Event of Default exists under any Credit
Document, the Collateral Agent shall at the written request and direction of the
Required Lenders, without notice to or demand upon the Company: (a) foreclose or
otherwise enforce the Collateral Agent's security interest for the benefit of
the Secured Parties in the Collateral in any manner permitted by law or provided
for hereunder; (b) sell or otherwise dispose of the Collateral or any part
thereof at one or more public or private sales or at any broker's board or on
any securities exchange, 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 Collateral Agent may
determine; (c) require the Company to assemble the Collateral and/or books and
records relating thereto and make such available to the Collateral Agent at a
place to be designated by the Collateral Agent; (d) enter into property where
any Collateral or books and records relating thereto are located and take
possession thereof with or without judicial process; and (e) prior to the
disposition of the Collateral, prepare it for disposition in any manner and to
the extent the Collateral Agent deems appropriate. Whether or not the Collateral
Agent exercises any right given pursuant to this
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<PAGE> 20
Paragraph 17, upon the occurrence of any Event of Default, the Collateral Agent
on behalf of the Secured Parties shall have as to any Collateral all other
rights and remedies provided for herein and all rights and remedies of a secured
party under the Illinois Uniform Commercial Code and, in addition thereto and
not in lieu thereof, all other rights or remedies at law or in equity existing
or conferred upon the Collateral Agent on behalf of the Secured Parties by other
jurisdictions or other applicable law or given to the Collateral Agent on behalf
of the Secured Parties pursuant to any security agreement, other instrument or
agreement heretofore, now, or hereafter given as security for the Company's
obligations hereunder.
(b) The Collateral Agent is authorized, at any such sale, if
it deems it advisable so to do, to restrict the prospective bidders or
purchasers to Persons who will represent and agree that they are purchasing for
their own account, for investment, and not with a view to the distribution or
sale of any of the Collateral. Upon any sale or other disposition pursuant to
this Security Agreement, the Collateral 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 promptly distributed as
set forth in Paragraph 18 hereof. 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 or right of redemption of the Company, and the
Company specifically waives (to the extent permitted by law) all rights of
redemption, stay or appraisal which it has or may have under any rule of law or
statute now existing or hereafter adopted. The Collateral Agent shall give the
Company only such notice and shall publish such notice as may be required by the
Illinois Uniform Commercial Code or the Kentucky Uniform Commercial Code or by
other applicable law of the intention to make any such public or private sale or
sale at broker's board or on a securities exchange. Any such public sale shall
be held at such time or times within the ordinary business hours and at such
place or places permitted by the Illinois Uniform Commercial Code or the
Kentucky Uniform Commercial Code. At any such sale the Collateral may be sold in
one lot as an entirety or in separate parcels, as the Collateral Agent may
determine. The Collateral Agent may adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, (i) the Collateral so sold may be
retained by the Collateral Agent until the selling price is paid by the
purchaser thereof, (ii) none of the Secured Parties shall incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold, and (iii) in case of any such failure, such Collateral may again be sold
as provided herein. Nothing contained in this
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<PAGE> 21
Security Agreement shall prohibit any Lender or Lenders from purchasing the
Collateral at such sale.
18. Disposition of Proceeds.
"Net Proceeds" shall mean the proceeds realized upon the sale or
other disposition of any Collateral after deducting therefrom the payment of
the costs and expenses of such sale or disposition, including reasonable
compensation to the Collateral Agent's and Credit Agent's agents and counsel,
and all expenses, liabilities and advances made or incurred by any Secured Party
acting on instructions of the Required Lenders. All such costs and expenses
shall be deducted from the proceeds directly related thereto or, in the absence
of any such direct relationship, on a pro rata basis from all types of proceeds
recovered by the Collateral Agent. The total of all Net Proceeds for all
categories of Collateral is referred to as "Aggregate Net Proceeds." To the
extent the Credit Agent is holding any Net Proceeds (e.g. amounts held in the
Settlement Account), the Credit Agent shall notify the Collateral Agent of the
amount of such Net Proceeds in order to enable the Collateral Agent to calculate
the Aggregate Net Proceeds. The Collateral Agent shall distribute to the Credit
Agent for the benefit of the Lenders an amount equal to the Aggregate Net
Proceeds held by the Collateral Agent. The Credit Agent shall notify the
Collateral Agent in writing of the manner in which Aggregate Net Proceeds shall
be delivered to the Credit Agent (e.g. by providing wire transfer instructions).
19. Waiver. No Secured Party shall incur any liability as a result of
the sale of the Collateral, or any part thereof, at any public or private sale.
The Company hereby waives any claims it may have against any Secured Party
arising by reason of the fact that the price at which the Collateral may have
been sold at such private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the Secured
Debt then outstanding.
20. The Collateral Agent
(a) Collateral Agent's Fee. Compensation of the Collateral
Agent for its services hereunder and reimbursement for any expenses incurred by
it in the performance of its duties hereunder shall be paid by the Company
pursuant to a separate written agreement between the Collateral Agent and the
Company.
(b) Actions by the Collateral Agent. The obligations of the
Collateral Agent hereunder are only those expressly set forth herein. The
Collateral Agent shall be entitled to (but shall not be obligated to) take or
refrain from taking any discretionary powers or actions under this Security
Agreement or any other Credit Document unless and until the Collateral Agent
shall have received
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<PAGE> 22
the written direction to take or refrain from taking such action from the
Required Lenders. The Collateral Agent shall not be required to take any action
hereunder if it shall reasonably determine that by so doing it may incur
criminal or civil liability.
(c) Consultation with Experts. The Collateral Agent may
consult with legal counsel (who may be counsel for the Company), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
(d) Liability of Collateral Agent.
(1) Neither the Collateral Agent nor any of its directors,
officers, agents, or employees shall be liable for any action taken or
not taken by it in connection herewith (i) with the consent or at the
request of the Required Lenders or (ii) in the absence of its own gross
negligence or willful misconduct.
(2) The Collateral Agent shall not incur any liability by
acting in reliance upon any notice, consent, certificate, statement, or
other writing (which may be a bank wire, telex or similar writing) or
telephone communication believed by it to be genuine or, in the case of
a writing, to be signed by the proper party or parties.
(e) Indemnification. Subject to the limitations set forth
below, the Lenders shall indemnify the Collateral Agent (to the extent not
reimbursed by the Company) against any cost, expense (including reasonable
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from the Collateral Agent's gross negligence or willful
misconduct) that the Collateral Agent may suffer or incur in connection with
this Security Agreement or any action taken or omitted by the Collateral Agent
hereunder (the "Indemnified Amount"). Any Indemnified Amount due to the
Collateral Agent shall be paid by the Lenders pro rata in accordance with their
respective Commitment Percentages.
(f) Knowledge of Defaults. The Collateral Agent shall not be
deemed to have knowledge or notice of the occurrence of any Event of Default
unless the Collateral Agent has received notice from a Secured Party or the
Company referring to the Credit Agreement, this Security Agreement describing
such Event of Default and stating that such notice is a "Notice of Default."
Following receipt of a Notice of Default, the Collateral Agent shall assume that
the Event of Default is continuing until the Collateral Agent receives written
information to the contrary from the Credit Agent.
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<PAGE> 23
(g) Reports. The Collateral Agent may, at its option with the
approval of the Company and the Credit Agent, alter the format of any report
required hereunder, provided such modified report contains the same information
previously furnished in the unmodified report.
(h) Other Transactions with Company. The Collateral Agent and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of business with, the Company or any Subsidiary or Affiliate of the
Company as if it were not the Collateral Agent hereunder.
(i) Resignation/Removal. The Collateral Agent may resign at
any time by giving 90 days prior written notice thereof to the Credit Agent and
the Company. The Collateral Agent agrees to resign within 60 days after written
notice by the Company requesting the resignation of the Collateral Agent
provided that no Event of Default has occurred and is continuing at the time of
such request. In addition, in the event the Collateral Agent fails to perform
its obligations under this Security Agreement in any material manner and fails
to correct its performance within 30 days of receipt of written notice of such
failure given by the Credit Agent at the request of not less than the Required
Lenders, then the Collateral Agent may be removed upon 30 days written notice
given by the Credit Agent at the direction of not less than the Required
Lenders. Upon any such resignation or removal: (i) so long as there has not
occurred and is continuing an Event of Default, the Company shall appoint from
among the Lenders (which appointment shall be subject to the approval of the
Required Lenders, such approval not to be unreasonably withheld or delayed), a
successor agent for such Collateral Agent, and (ii) following the occurrence and
during the continuance of an Event of Default, the Required Lenders shall
appoint from among the Lenders, a successor agent for such Collateral Agent.
Following the appointment and acceptance of a successor Collateral Agent the
Credit Agent shall notify the Collateral Agent as to who the successor
Collateral Agent is and the Collateral shall be transferred to the new
Collateral Agent within 30 days after such acceptance. If the Company and/or the
Required Lenders, as applicable, are unable to agree on the appointment of a
successor agent prior to the expiration of any of the time periods set forth
above, the Credit Agent (or an Affiliate thereof designated by the Credit Agent)
shall be deemed a successor Collateral Agent until the appointment of and
acceptance by a different successor Collateral Agent, and the Collateral Agent
shall be permitted to transfer all the Collateral held by the Collateral Agent
to the Credit Agent (or an Affiliate thereof designated by the Credit Agent)
within 30 days after the of the applicable time period set forth above. Within
30 days after the appointment of a successor Collateral Agent and the
successor's acceptance of such appointment, that successor Collateral Agent
shall thereupon succeed to and become vested with
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<PAGE> 24
all the rights, powers, privileges and duties of the retiring Collateral Agent,
and the retiring Collateral Agent shall be discharged from its duties and
obligations under this Security Agreement; provided, however, that the retiring
Collateral Agent shall not be discharged from any liability as a result of its
or its directors', officers', agents' or employees' gross negligence or willful
misconduct in connection with the performance of its duties and obligations
under this Security Agreement prior to the effective date of its resignation or
removal. Notwithstanding the foregoing, the Collateral Agent shall continue to
hold the Pledged Items and the security interest created hereunder for the
benefit of the Secured Parties until such Pledged Items and security interest
have been effectively transferred to the successor agent. After the resignation
or removal of any Collateral Agent hereunder, the provisions of this Security
Agreement shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Collateral Agent under this Security Agreement.
(j) Representations and Warranties. The Collateral Agent
hereby represents and warrants:
(1) The Collateral Agent is a national banking association
validly existing, in good standing and authorized to exercise
its powers, rights and privileges and is qualified to do
business in all jurisdictions where necessary, and has all
requisite power and authority to perform all of its
obligations under this Security Agreement;
(2) The execution, delivery and performance by the Collateral
Agent of this Security Agreement and all documents required
hereby to be executed by the Collateral Agent have been duly
authorized by all necessary corporate action and do not and
will not violate any existing provision of any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having
applicability to the Collateral Agent; and
(3) This Security Agreement and all documents required hereby
to be executed by the Collateral Agent have been duly executed
and delivered by the Collateral Agent.
21. Confidentiality. The Collateral Agent agrees to take normal and
reasonable precautions and exercise due care to maintain the confidentiality of
all non-public information provided to it by the Company or by any other party
on the Company's behalf in connection with this Security Agreement or the Credit
Documents and agrees and undertakes that neither it nor any of its Affiliates
shall disclose any such information for any purpose or in any manner other than
pursuant to the terms contemplated by this
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<PAGE> 25
Security Agreement or the Credit Documents. The Collateral Agent may disclose
such information (1) to any Secured Party, (2) at the request of any regulatory
authority or in connection with an examination of the Collateral Agent or any of
its Affiliates by any such authority, (3) pursuant to subpoena or other court
process, (4) when required to do so in accordance with the provisions of any
applicable law, (5) at the express direction of any other governmental authority
of any State of the United States of America or of any other jurisdiction in
which the Collateral Agent or any of its Affiliates conducts its business, (6)
to the Collateral Agent's or any of its Affiliates' independent auditors,
attorneys and other professional advisors, (7) if such information has become
public other than through disclosure by the Collateral Agent or any of its
Affiliates or any Lender, and (8) in connection with any litigation involving
the Collateral Agent or any of its Affiliates. Notwithstanding the foregoing,
the Company authorizes the Collateral Agent to disclose to any lending
institution proposed by the Company to become a Lender under the Credit
Agreement or any prospective or actual Participants such financial and other
information in its possession (i) which has been delivered to the Collateral
Agent pursuant to the Credit Documents or which has been delivered to the
Collateral Agent by the Company prior to entering into the Credit Documents or
(ii) which is reasonably necessary to effectuate the purposes of the Credit
Agreement and this Security Agreement, provided that unless otherwise agreed by
the Company, such lending institution or Participant shall agree in writing to
keep such information confidential to the same extent required of the Collateral
Agent hereunder.
22. Voting by Required Lenders.
In all cases in which this Security Agreement requires the consent,
approval or direction of the Required Lenders or all of the Lenders with respect
to any action, the Credit Agent shall be responsible for determining whether the
Required Lenders has given such consent, approval or direction and shall notify
the Collateral Agent thereof in writing. The Collateral Agent shall be entitled
to rely without independent verification upon the information supplied by the
Credit Agent with respect to any consent, approval or direction of the Required
Lenders (or all of the Lenders with respect to actions which require unanimous
approval of the Lenders).
23. Binding Upon Successors. All rights of the Collateral Agent and the
Secured Parties under this Security Agreement shall inure to the benefit of the
Collateral Agent and the Secured Parties and their successors and assigns, and
all obligations of the Company shall bind its successors and assigns; provided
that the Company shall not have the right to assign its rights or obligations
under this Security Agreement without the consent of all the Lenders.
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<PAGE> 26
24. Entire Agreement; Severability. This Security Agreement contains the
entire security agreement and collateral agency agreement with respect to the
Collateral among Secured Parties and the Company and supersedes all prior
written or oral agreements and understandings relating thereto. All waivers by
the Company provided for in this Security 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.
25. Choice of Law. This Security Agreement shall be construed in
accordance with and governed by the laws of the State of Illinois and, where
applicable and except as otherwise defined herein, terms used herein shall have
the meanings given them in the Illinois Uniform Commercial Code.
26. Place of Business; Records. The Company represents and warrants that
its principal place of business and chief executive office is at the address set
forth beneath its signature below, and that its books and records concerning the
Collateral are kept at its principal place of business and chief executive
office. The Company shall not change its principal place of business and chief
executive office without 30 days' prior written notice to the Credit Agent and
the Collateral Agent.
27. Notice. Except where instructions or notices are expressly authorized
elsewhere in this Security Agreement to be given by telephone or by other means
of transmission, all instructions, notices and other communications to be given
to any party hereto shall be in writing and shall be personally delivered or
sent by certified mail, postage prepaid, private delivery service or by
facsimile, and shall be deemed to be given for purposes of this Security
Agreement on the day (or at the time of day, if applicable) when actually
received by the intended party at its address or facsimile or telephone number
as set forth following its signature below (or as such party may specify to the
other parties in writing).
28. Modification of Agreement. No provisions of this Agreement may be
amended or waived (except for waivers expressly provided for hereunder) unless
such amendment or waiver is in writing and is signed by the Company, the
Collateral Agent if the rights or duties of the Collateral Agent are affected
thereby, and the Credit Agent on behalf of the Lenders. The Credit Agent shall
not consent to any such amendment or waiver without the prior written consent of
(i) each Lender if such amendment or waiver
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<PAGE> 27
(1) would amend or waive the method of
calculating the Aggregate Borrowing Base; or
(2) releases any Collateral beyond the
releases expressly provided for herein or in the Credit
Agreement; or
(3) changes or waives any restriction on the
Company's ability to assign its rights or obligations under
any of the Credit Documents; or
(4) changes or waives any provision herein
regarding the indemnification of the Credit Agent, the
Collateral Agent or such Lender; or
(5) changes the definition of Required Lenders
or modifies any requirement for consent by all of the Lenders;
or
(6) changes or waives any provision herein
regarding the allocation among the Secured Parties of any
payments or proceeds received by the Collateral Agent
hereunder; or
(ii) the Required Lenders in the case of all other waivers or
amendments.
29. Consent of Jurisdiction.
THE COMPANY AND THE COLLATERAL AGENT EACH HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY CREDIT DOCUMENTS AND EACH HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION THEY MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE CREDIT AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE
COMPANY OR THE COLLATERAL AGENT IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY THE COMPANY OR THE COLLATERAL AGENT AGAINST THE CREDIT
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE CREDIT AGENT OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH ANY CREDIT DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
CHICAGO, ILLINOIS.
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<PAGE> 28
30. Waiver of Jury Trial.
EACH PARTY TO THIS SECURITY AGREEMENT HEREBY WAIVES TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY CREDIT DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
EXECUTED the day and year first above written.
SOURCE ONE MORTGAGE SERVICES CORPORATION
By:
-------------------------------------
Larry N. Ciofu
Vice President
Address for Notices:
27555 Farmington Road
Farmington Hills, MI 48334-3357
Attn: Chief Financial Officer
Telephone No.: (248) 488-8639
Facsimile No.: (248) 488-7300
and
Attn: Vice President/Treasury
Telephone No.: (248) 488-7338
Facsimile No.: (248) 488-7812
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:
-------------------------------------
Andrew H. Heinecke
First Vice President
Address for Notices Regarding
Fundings:
One First National Plaza
Chicago, Illinois 60670
Attn: Denise Lee
Telephone No.: (312) 732-6455
Facsimile No.: (312) 732-3852
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<PAGE> 29
Address for Other Notices:
One First National Plaza
Chicago, Illinois 60670
Attn: Patrick J. Power
Telephone No.: (312) 732-1188
Facsimile No.: (312) 732-6222
NATIONAL CITY BANK OF KENTUCKY, a
national banking association, as
Collateral Agent
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address for notices:
421 West Market Street
Louisville, Kentucky 40202
Attn: Ms. Wilma Kuerzi
Telephone No.: (502) 581-4354
Facsimile No.: (502) 581-4154
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<PAGE> 30
EXHIBITS AND SCHEDULES
TO
SECURITY AGREEMENT
SCHEDULE DOCUMENT
A Required Mortgage Documents
B Additional Required Mortgage Documents
C Form of Borrowing Base Report
EXHIBIT DOCUMENT
1 Required Review Steps
2 Form of Company Trust Receipt
3 Form of Shipping Request
4 Form of Whole Loan Sale Transmittal
Letter
5 Form of Warehouse-Related MBS Transmittal
6 Form of Custodial Agreement
7 Form of Collateral Transmittal - Initial
Mortgage Information
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<PAGE> 31
SCHEDULE A
TO SECURITY AGREEMENT
REQUIRED MORTGAGE DOCUMENTS
1. Original of mortgage note executed in favor of the Company
(with a complete series of endorsements from the original
payee thereof, through any subsequent holders to the Company
if purchased by the Company) and endorsed by an authorized
signatory of the Company in blank.
2. Recorded Mortgage or deed of trust securing the above mortgage
note. In lieu of a recorded document, the Collateral Agent may
accept a copy certified as being out for recordation by the
escrow company, title insurance company, closing agent, or the
Company.
3. Assignment of the mortgage or deed of trust by an
authorized signatory of the Company in blank, in
recordable form and the original or a copy, certified as
being out for recordation by the records office or escrow
or title insurance company or the Company, of a proper
assignment or assignments of the related mortgage or deed
of trust from the original holder, through any subsequent
transferees, to the Company.
4. A copy, certified by the title insurance company or the
closing agent, of all applicable and necessary
powers-of-attorney and assumed name certificates.
5. For New York Consolidation Loans only, the original of the
prior mortgage note and a copy of the recorded original of the
prior mortgage which are being consolidated into the new
mortgage loan.
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SCHEDULE B
TO SECURITY AGREEMENT
ADDITIONAL REQUIRED MORTGAGE DOCUMENTS
1. The original recorded mortgage or deed of trust securing the
mortgage note.
2. Evidence of fire and extended coverage insurance in an amount
not less than the highest of the following: (a) the amount of
the Mortgage Loan, (b) 90% of the insurable value of the
improvements, and (c) an amount sufficient to prevent
co-insurance. The Collateral Agent reserves the right to
obtain a loss payable endorsement in its favor if it so
desires.
3. Evidence of Notice to Customer required by the federal
Truth-in-Lending Law and Federal Reserve Regulation Z.
4. In the case of an FHA mortgage note, an FHA insurance
certificate or a commitment to deliver such; in the case of a
VA mortgage note; a VA guaranty certificate or a commitment to
deliver such and in the case of a conventional mortgage note,
an appraisal.
5. In the case of a conventional mortgage note with a
loan-to-value ratio in excess of 80%, the applicable private
mortgage insurance policy.
6. A certified copy of the preliminary policy of or commitment
for title insurance insuring the mortgage or deed of trust as
a first lien on the property subject thereto written by a
title company and in amount and containing exceptions
satisfactory to the Collateral Agent.
7. Evidence of certificate of completion, as appropriate under
the circumstances.
8. Other documentation as the Collateral Agent may reasonably
deem appropriate, as well as documentation necessary to
fulfill requirements of the Approved Investor Commitments.
9. Such additional documents as may be necessary in the opinion
of the Collateral Agent to transfer to the Collateral Agent,
for the benefit of the Secured Parties, the title to any
Collateral pledged and/or hypothecated pursuant to the
Security Agreement.
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SCHEDULE C
TO SECURITY AGREEMENT
FORM OF BORROWING BASE REPORT
Date:_________________________
Reference is made to that certain Fourth Amended and Restated Revolving
Credit Agreement among the Company, The First National Bank of Chicago,
individually and as administrative agent, and the lenders named therein, dated
as of July 10, 1998 (the "Credit Agreement"). Capitalized terms not otherwise
defined herein are used with the same meanings as in the Credit Agreement.
BORROWING BASE:
Eligible Mortgage Loans
(Mortgage Collateral Value):
Eligible Delivered Mortgages $_______________
Eligible AP Mortgages $_______________
Total Pledged Mortgage Loans $_______________
Percentage Factor 98%
Eligible Pledged Securities $_______________
(MBS Value)
Percentage Factor 99%
Total Pledged Securities $_______________
(A) BORROWING BASE
FROM PLEDGED ITEMS $_______________
Eligible Repurchased
Agency Loans and Receivables $_______________
Percentage Factor 90%
(B) BORROWING BASE
FROM REPURCHASED AGENCY LOANS
AND RECEIVABLES $_______________
Eligible Servicing Sale Receivables $_______________
Percentage Factor 75%
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<PAGE> 34
(C) BORROWING BASE
FROM ELIGIBLE SERVICING SALE
RECEIVABLES $_______________
(D) BALANCE IN SETTLEMENT ACCOUNT $_______________
(E) CASH AND CASH EQUIVALENTS $_______________
SUM OF (A) - (E) ABOVE $_______________
Reconciling Items:
Timing Difference $_______________
Loan Detail Difference $_______________
BORROWING BASE $_______________
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<PAGE> 35
EXHIBIT 1
TO SECURITY AGREEMENT
REQUIRED REVIEW STEPS
1. All submitted documents, are consistent with the related
Collateral Transmittal as to borrower name, loan face amount,
loan type and the Company's loan number.
2. 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 certified copy of the mortgage/deed of trust,
such copy bears what appears to be a reproduction of such
signature or signatures.
3. Except for (a) the endorsement to the Company of the note
in the event such loan was purchased by the Company and
(b) the endorsement in blank of the note by an authorized
signatory of the Company, neither the note, the
mortgage/deed of trust, nor the assignment(s) of the
mortgage/deed of trust contain any irregular writings
which appear on their face to affect the validity of any
such endorsement or to restrict the enforceability of the
document on which they appear.
4. The note is endorsed in blank by an authorized signatory of
the Company.
5. The assignment of the mortgage/deed of trust bears an original
signature of an authorized signatory of the Company.
6. Such other review steps as the Collateral Agent, in its sole
discretion, deems appropriate.
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EXHIBIT 2
TO SECURITY AGREEMENT
FORM OF COMPANY TRUST RECEIPT
_______________, 19__
The undersigned, SOURCE ONE MORTGAGE SERVICES CORPORATION, a Delaware
corporation (the "Company"), acknowledges receipt from NATIONAL CITY BANK OF
KENTUCKY, acting as agent, bailee and custodian (in such capacity "Collateral
Agent") for the exclusive benefit of the Secured Parties pursuant to the
Security Agreement (as those terms and capitalized terms not otherwise defined
herein are defined in that certain Fourth Amended and Restated Revolving Credit
Agreement dated as of July 10, 1998, among the Lenders, the Company and The
First National Bank of Chicago, as Agent) of the following described
documentation for the identified Mortgage Loans (the "Collateral Documents"),
possession of which is herewith entrusted to the Company solely for the purpose
of correcting documentary defects relating thereto:
Loan Document
Borrower Name Loan Number Note Amount Delivered
It is hereby acknowledged that a security interest pursuant to the
Illinois Uniform Commercial Code and the Kentucky Commercial Code in the
Collateral hereinabove described and in the proceeds of said Collateral has been
granted to Collateral Agent for the benefit of the Secured Parties pursuant to
the Security Agreement.
In consideration of the aforesaid delivery by Collateral Agent, the
Company hereby agrees to hold said Collateral in trust for Collateral Agent on
behalf of the Secured Parties as provided under and in accordance with all
provisions of the Security Agreement and to return said Collateral to Collateral
Agent no later than the close of business on the fifteenth calendar day
following the date hereof or, if such day is not a Business Day, on the
immediately succeeding Business Day. The Company represents and warrants that
the aforesaid delivery by the Collateral Agent shall not cause any violation of
any of the Borrowing Bases or any other provision of the Credit Agreement.
SOURCE ONE MORTGAGE SERVICES CORPORATION,
a Delaware corporation
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT 3
TO SECURITY AGREEMENT
FORM OF SHIPPING REQUEST
Date:_______________
National City Bank of Kentucky,
as Collateral Agent
421 West Market Street
Louisville, Kentucky 40202
Attention: ________________
This letter is to serve as authorization for you to endorse and ship the
following loans:
Loan Number Borrower Name Note Amount
to the following address under Commitment #__________ (the "Commitment") from an
Approved Investor as follows:
NAME:
ADDRESS:
ATTENTION:
Please endorse the notes as follows:
Please ship the loan documents either by ____________________ or by such other
courier service as we have designated to you as "approved". The courier shall
act as an independent contractor bailee acting solely on your behalf as
Collateral Agent for the Secured Parties (as defined in that certain Fourth
Amended and Restated Security and Collateral Agency Agreement dated as of July
10, 1998, as the same may be amended, extended or replaced from time to time),
but we acknowledge and agree that you are not responsible for any delays in
shipment caused by courier or any other actions or inactions of the courier,
including, without limitation, any loss of any loan documents; however, because
the Commitment expires on _______________, 199_, we ask that you deliver the
loan documents to the courier no later than _______________, 199_.
Please have the courier bill us by using our acct #__________. If you should
have any questions, or should feel the need for
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<PAGE> 38
additional documentation, please do not hesitate to call
______________.
SOURCE ONE MORTGAGE SERVICES CORPORATION,
a Delaware corporation
By:________________________________
Name:______________________________
Title:_____________________________
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<PAGE> 39
EXHIBIT 4
TO SECURITY AGREEMENT
(Direct Investor)
Date:____________
Name of Delivery Service:____________________________________
Airbill No.:____________________
FORM OF WHOLE LOAN SALE TRANSMITTAL LETTER
[LETTERHEAD OF COLLATERAL AGENT]
[Approved Investor]
_________________________
_________________________
Re: Source One Mortgage Services Corporation;
Sale of Mortgage Loans
Attached please find those Mortgage Loans listed separately on the
attached schedule, which Mortgage Loans are owned by SOURCE ONE MORTGAGE
SERVICES CORPORATION (the "Company") and are being delivered to you for
purchase.
The Mortgage Loans comprise a portion of the Collateral under (and as
the term "Collateral" and capitalized terms not otherwise defined herein are
defined in) that certain Fourth Amended and Restated Revolving Credit Agreement
dated as of July 10, 1998 by and among the Company, The First National Bank of
Chicago, as Agent, and the Lenders thereunder. Each of the Mortgage Loans is
subject to a security interest in favor of National City Bank of Kentucky (the
"Collateral Agent") on behalf of the Secured Parties which security interest
shall be automatically released upon your remittance of the full amount of the
purchase price of such Mortgage Loan (as set forth on the schedule attached
hereto) by wire transfer to the following account:
WIRE INSTRUCTIONS TO SETTLEMENT ACCOUNT:
______________________________
______________________________
______________________________
Pending your purchase of each Mortgage Loan and until payment therefor
is received, the aforesaid security interest therein will remain in full force
and effect, and you shall hold possession of such Collateral and the
documentation evidencing same as custodian, agent and bailee for and on behalf
of the Secured Parties. In the event any Mortgage Loan is unacceptable for
purchase, return the rejected item directly to the Collateral Agent at the
address set
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<PAGE> 40
forth below. The Mortgage Loan must be so returned or sales proceeds remitted in
full no later than [forty-five (45) days][UNLESS DELIVERED TO A GOVERNMENT
HOUSING PROGRAM WHICH IS NOT A FEDERAL AGENCY] [seventy-five (75) days][IN THE
CASE OF DELIVERY TO A GOVERNMENT HOUSING WHICH IS NOT A FEDERAL AGENCY] from the
date hereof. In no event shall any Mortgage Loan be returned or sales proceeds
remitted to the Company. If you are unable to comply with the above
instructions, please so advise the undersigned immediately.
NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS
LETTER, YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR THE SECURED
PARTIES ON THE TERMS DESCRIBED IN THIS LETTER. THE UNDERSIGNED, AS COLLATERAL
AGENT, REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND
THIS LETTER BY SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE
UNDERSIGNED; HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT.
Sincerely,
NATIONAL CITY BANK of KENTUCKY, as
Collateral Agent
By:________________________________
Title:_____________________________
Address: _________________________
_________________________
_________________________
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<PAGE> 41
The undersigned Company agrees to and acknowledges the terms of this
letter and, notwithstanding any contrary understanding with or instructions to
you, the addressee of this letter, the Company instructs you to act according to
the instructions set forth in this letter. These instructions cannot be altered
except by written instructions executed by Collateral Agent. The Company and the
Collateral Agent agree that a counterpart facsimile of this letter executed by
the Company shall suffice as an original of the Company's agreement to and
acknowledgment of the terms of this letter.
SOURCE ONE MORTGAGE SERVICES CORPORATION,
a Delaware corporation
By:________________________________
Name:______________________________
Title:_____________________________
ACKNOWLEDGEMENT OF RECEIPT
[Approved Investor]
By:_______________________________
Name:_____________________________
Title:____________________________
Date:_____________________________
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<PAGE> 42
EXHIBIT 5
TO SECURITY AGREEMENT
(Pool Formation)
FORM OF WAREHOUSE-RELATED SECURITY TRANSMITTAL LETTER
[COLLATERAL AGENT LETTERHEAD]
Date:____________________
[Certificating Custodian]
_________________________
_________________________
Re: Source One Mortgage Services Corporation;
Shipment of Mortgage Loans for Pool Formation
Attached please find those Mortgage Loans listed separately on the
attached schedule, which are owned by SOURCE ONE MORTGAGE SERVICES CORPORATION,
a Delaware corporation (the "Company") and are being delivered to you, as
custodian/trustee (the "Certificating Custodian"), for certification in
connection with the formation of a mortgage pool supporting the issuance of a
mortgage-backed security (the "Warehouse-Related Security") described as
follows: ______________________________.
The Mortgage Loans comprise a portion of the Collateral under (and as
the term "Collateral" and capitalized terms not otherwise defined herein are
defined in) that certain Fourth Amended and Restated Revolving Credit Agreement
dated as of July 10, 1998, by and among the Company, The First National Bank of
Chicago, as Agent, and the Lenders. Each of the Mortgage Loans is subject to a
security interest in favor of National City Bank of Kentucky ("Collateral
Agent") for the benefit of the Secured Parties, which security interest shall be
automatically released upon the issuance of the Warehouse-Related Security in
accordance with the terms of the prescribed GNMA, FNMA or FHLMC form enclosed
herewith.
Pending issuance of the Warehouse-Related Security, the aforesaid
security interest in each Mortgage Loan will remain in full force and effect,
and you shall hold such Collateral as custodian, agent and bailee for and on
behalf of the Secured Parties. In the event any Mortgage Loan is unacceptable
for pool formation, return the rejected item directly to the undersigned, as
Collateral Agent, at the address set forth below. Each Mortgage Loan must be so
returned or the Warehouse-Related Security issued no later than [forty-five (45)
days][UNLESS DELIVERED TO A GOVERNMENT HOUSING PROGRAM WHICH IS NOT A FEDERAL
AGENCY] [seventy-five (75) days][IN THE CASE OF DELIVERY TO A GOVERNMENT HOUSING
WHICH IS NOT A FEDERAL AGENCY] from the date hereof. In no event shall any
Mortgage Loan be returned or proceeds relating thereto be
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<PAGE> 43
remitted to the Company. If you are unable to comply with the above
instructions, please so advise the undersigned immediately.
NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS
LETTER, YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR THE SECURED
PARTIES ON THE TERMS DESCRIBED IN THIS LETTER. THE UNDERSIGNED, AS COLLATERAL
AGENT, REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND
THIS LETTER BY SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE
UNDERSIGNED; HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT.
Sincerely,
NATIONAL CITY BANK OF KENTUCKY, as
Collateral Agent
By:________________________________
Title:_____________________________
Address: _________________________
_________________________
_________________________
ACKNOWLEDGEMENT OF RECEIPT
[Certificating Custodian]
By:_______________________________
Name:_____________________________
Title_____________________________
Date:_____________________________
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<PAGE> 44
EXHIBIT 6
TO SECURITY AGREEMENT
FORM OF CUSTODIAL AGREEMENT
(With Operating Instructions Attached)
_______________, 199_
_________________________
_________________________
_________________________
Re: Source One Mortgage Services Corporation
Ladies and Gentlemen:
The undersigned, National City Bank of Kentucky (the "Collateral
Agent") acts in the capacity as Collateral Agent pursuant to: (1) that certain
Fourth Amended and Restated Revolving Credit Agreement dated as of July 10, 1998
(as amended from time to time, the "Credit Agreement", and as capitalized terms
not otherwise defined herein are used with the same meaning as in the Credit
Agreement) by and among SOURCE ONE MORTGAGE SERVICES CORPORATION (the
"Company"), the lenders participating therein (collectively, the "Lenders"), and
the FIRST NATIONAL BANK OF CHICAGO, as agent for the Lenders (the "Credit
Agent"), and (2) that certain Fourth Amended and Restated Security and
Collateral Agency Agreement (as amended from time to time, the "Security
Agreement") dated concurrently therewith among the Collateral Agent, the Company
and the Credit Agent.
The Collateral Agent represents and confirms that it has the power and
authority under the Credit Agreement and the Security Agreement to execute this
Custodial Agreement. The Collateral Agent may execute any of its duties
hereunder by or through agents or attorneys-in-fact of whose appointment you
have been notified in writing.
The Collateral Agent hereby appoints you and you hereby accept
appointment to act as agent, custodian and bailee for the benefit of the Secured
Parties (as defined in the Security Agreement) (in such capacity, the "Approved
MBS Custodian"). In such capacity, you agree to accept delivery only on a free
basis of certain mortgage-backed securities delivered to you from time to time
identified in a letter in the form attached hereto as Exhibit A (all such
mortgage-backed securities delivered to you and so identified being referred to
herein as "Subject Securities"). This Custodial Agreement governs your rights
and responsibilities as Approved MBS Custodian with respect to all Subject
Securities.
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<PAGE> 45
The Collateral Agent hereby directs you, as Approved MBS Custodian, to
hold or dispose of Subject Securities deposited with you only in accordance with
the instructions of a person described as an "Authorized Collateral Agent
Representative" on a schedule from time to time delivered to you by the
Collateral Agent (the initial list of such persons being attached hereto as
Schedule I) or otherwise as expressly permitted hereunder, including without
limitation the Company's right to direct the sale or disposition of the Subject
Securities as described in the following paragraph. You are authorized, directed
and instructed to act upon all instructions from persons reasonably believed by
you to be genuine and authorized. Any instruction given hereunder may, in your
discretion, be by telegraph, cable, facsimile or electronic communication which
is received by you.
All Subject Securities are to be held by you in a custodial account
(Account No. __________) maintained with you (the "MBS Custodial Account").
Unless and until you have received written notice to the contrary from the
Collateral Agent at the direction of the Required Lenders (which notice may be
by facsimile transmission) following an Event of Default, you may from time to
time deliver Subject Securities at the direction of the Company, to, but only
to, Approved Investors (as listed on a schedule of "Approved Investors"
delivered to you from time to time by an Authorized Collateral Agent
Representative) against payment of the purchase price therefor. Notwithstanding
the preceding sentence, even after your receipt of notice from the Collateral
Agent that an Event of Default exists, you may deliver Subject Securities at the
direction of the Company, but only to Approved Investors pursuant to
then-existing Approved Investor Commitments. The proceeds of the sale or other
disposition of all Subject Securities are to be held by you in an account
(Account No. __________) maintained with you (the "Custodian Settlement
Account") and transferred by the end of each Business Day to Account No.
19-19210 maintained in the Credit Agent's name at The First National Bank of
Chicago (the "Settlement Account") as follows:
______________________________
______________________________
______________________________
By executing this Custodial Agreement the Company confirms and the
Collateral Agent and the Company notify you that the Company has assigned and
granted to the Collateral Agent a security interest in and lien upon all now
existing and hereafter arising right, title and interest of the Company in the
MBS Custodial Account, the Custodian Settlement Account and the Settlement
Account and in any and all investments and proceeds at any time held therein.
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<PAGE> 46
Unless and until you have received written notice from an Authorized
Collateral Agent Representative (which notice may be by facsimile transmission)
that there has occurred an Event of Default or Default, you may, at your
election, elect to make advances against Subject Securities held by you in the
MBS Custodial Account pending their sale and delivery to a purchaser thereof, in
accordance with a repo line of credit established between you and the Company;
provided, however, that: (1) any such repo line of credit shall be on terms and
conditions customary for similar lines of credit which you provide to customers,
including, without limitation, as to advance rate and interest charge; (2) all
advances to the Company under such repo line of credit (each, a "Repo Advance")
shall be transferred to the Custodian Settlement Account; and (3) you hereby
waive any and all rights of offset, counterclaim or other recoupment rights
which you may have with respect to any Repo Advance against the MBS Custodial
Account, the Custodian Settlement Account and any Subject Securities or proceeds
thereof at any time held therein (other than the Subject Securities which are
the subject of the Repo Advance). If, but only if and only to the extent there
has been transferred to the Custodian Settlement Account the proceeds of a given
Repo Advance, the rights of the Collateral Agent in the Subject Securities which
are the subject of the Repo Advance are hereby automatically subordinated to
your rights therein as collateral security for the repayment of such Repo
Advance, and upon receipt of such proceeds in the Settlement Account, such
rights of the Collateral Agent shall be automatically released.
You shall be under no duty to take or omit to take any action with
respect to Subject Securities, except as specifically set forth in this
Agreement and the Operating Instructions attached hereto as Exhibit B, unless
specifically otherwise directed by the Collateral Agent and agreed to by you in
writing. In the event that you shall be uncertain as to your duties or rights
hereunder, you shall be entitled to refrain from taking any action until you
shall be directed otherwise by an order of a court of competent jurisdiction. In
case you should agree to our request and on our behalf to appear in, prosecute
or defend any legal or equitable proceeding either in your own name or in the
name of your nominee, you shall first be indemnified to your satisfaction (other
than against your gross negligence and willful misconduct).
By accepting delivery of any Subject Security, you shall be deemed to
have agreed to hold such Subject Security as Approved MBS Custodian hereunder,
free and clear of all liens, claims, interests and rights of offset in your
favor or in favor of persons claiming through you, subject only to the rights
with respect to Repo Advances described above. Until you have been notified in
writing (including by telecopier) by an Authorized Collateral Agent
Representative of the occurrence of an Event of Default, you are hereby
authorized to return Subject Securities to the
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<PAGE> 47
issuer/transfer agent therefor at the Company's written request in connection
with the reissuance thereof in smaller denominations; provided, however, that
any delivery of Subject Securities for reissuance shall be covered by a
transmittal letter or other written agreement instructing that the reissued
securities be returned directly to you. In this connection, we acknowledge
familiarity with the current securities industry practice of delivering physical
securities against later payment on the delivery date. Notwithstanding our
instructions to deliver Subject Securities against payment, you are authorized
to make delivery of such physical securities against a temporary receipt
(sometimes called a "window ticket") in lieu of payment. You agree to use your
best efforts to obtain payment therefor during the same business day, but we
confirm our assumption of all risks of payment for such deliveries. You may
accept certified checks in payment for Subject Securities delivered on the
Company's instruction and you shall not be responsible for the risks of
collectability of any such checks. YOU ARE HEREBY IRREVOCABLY INSTRUCTED BY THE
COMPANY AND THE COLLATERAL AGENT THAT ALL PROCEEDS RECEIVED FROM THE SALE OR
OTHER DISPOSITION OF SUBJECT SECURITIES AND ALL REPO ADVANCES, UNTIL OTHERWISE
NOTIFIED IN WRITING BY THE COLLATERAL AGENT, SHALL BE WIRED TO THE SETTLEMENT
ACCOUNT AS PROVIDED ABOVE.
You will provide to the Collateral Agent on a daily basis at or before
9:30 a.m. (Chicago time) a report of the prior day's activity with respect to
the MBS Custodial Account, the Custodian Settlement Account and Repo Advances
made by you hereunder.
You shall not be liable or accountable for any act or omission of
brokers, dealers or agents in connection with this Custodial Agreement. In
carrying out your duties hereunder, you may use such methods or agencies as you
determine in your sole discretion, including your own facilities.
You shall maintain regular business records documenting all
instructions transmitted to you through any authorized means and any response by
you. You are authorized to electronically record any telephone communications
with the Company or the Collateral Agent arising out of this Custodial
Agreement. Your records shall be determinative of the form, content and time of
all the Company's and Collateral Agent's instructions and any response from you.
The record of each instruction and any response thereto shall be retained by you
for at least ninety (90) days following the date of the instruction. Any claim
against you for failure to properly follow an instruction transmitted by the
Company or the Collateral Agent must be made in writing and received by you
within sixty (60) days after the date such instruction was received by you.
You shall give the Subject Securities that come into your possession
under this Custodial Agreement the same physical care and safeguards as are
afforded similar property owned by you;
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<PAGE> 48
provided, however, your responsibility hereunder is limited to losses occasioned
directly by the gross negligence or willful misconduct of your employees, to the
extent of the market value of the Subject Securities at the date of the
discovery of such loss. With respect to any Subject Securities which you deliver
for us to a third party, and with respect to such delivery, you shall be deemed
no more than an "intermediary" as referenced in Section 8-306(3) of the New York
Uniform Commercial Code, and the only warranty given by you shall be the
warranty provided in said Section 8-306(3). In no event shall you be liable for
any indirect, special or consequential loss, even if you have been advised of
the possibility of such loss. You may, at your option, make arrangements for
insuring yourselves against loss from any cause, but you shall not be under any
obligation to insure for our benefit.
Except as expressly set forth above with respect to advances made by
you in connection with "late deliveries" and Repo Advances, none of the Subject
Securities held in the MBS Custodial Account, the funds held at any time in the
Custodian Settlement Account, the Subject Securities or any proceeds of the sale
or other disposition thereof will be subject to any right, charge, security
interest, lien, encumbrance or claim of any kind in your or your creditors'
favor. Any claims for the payment of fees with respect to the safe custody or
administration of Subject Securities or for compensation, expenses, commitments
made by you upon instructions of the Collateral Agent, reimbursement of taxes
incurred by you for the account of the Collateral Agent, any penalties incurred
by or levied or assessed against you resulting from the Collateral Agent's
improper or incorrect instructions, or other liabilities of the Collateral Agent
to you, and for indemnity against any claim or liability to which you are
subjected by reason of any registration of Subject Securities shall be
enforceable solely against the Company and none of the Collateral Agent, the
Credit Agent or any Secured Party shall have any responsibility therefor (except
to the extent any of the foregoing are due to the gross negligence or willful
misconduct of the Collateral Agent, the Credit Agent or any Secured Party, as
applicable). The Collateral Agent and the Company agree to make no claim against
you except for any such claims or liabilities arising, or claimed to have
arisen, as a result of your gross negligence or willful misconduct.
The Operating Instructions attached hereto are hereby made part hereof
and any and all capitalized terms defined herein shall have the same meaning
when used therein.
This Custodial Agreement contains the whole of the understanding
between you and the Collateral Agent concerning the subject matter hereof and no
provision hereof shall be modified or altered except in a writing signed by both
you and the Collateral Agent.
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<PAGE> 49
This Custodial Agreement shall be governed by the laws of the State of
New York and shall be binding upon the Collateral Agent and upon its successors
and assigns and shall inure to your benefit and your successors and assigns and
shall be deemed continuing until terminated by either the Collateral Agent or
you upon at least sixty (60) days prior written notice to the other.
This letter is made in triplicate and will become an agreement between
you and the Collateral Agent upon your acceptance hereof in the space provided
below at your offices in the State of New York.
NATIONAL CITY BANK OF KENTUCKY, as
Collateral Agent
By:________________________________
Title:_____________________________
AGREED TO AND ACCEPTED:
_________________________,
as Approved MBS Custodian
By:______________________
Name:____________________
Title:___________________
ACKNOWLEDGEMENT AND AUTHORIZATION
The Company approves the foregoing Custodial Agreement and authorizes
the Approved MBS Custodian to act in accordance with the terms thereof. The
Company agrees to be bound by the terms of the Custodial Agreement (including
all Exhibits thereto) to the same extent as if a party thereto. The Company
agrees to indemnify the Approved MBS Custodian for, and hold the Approved MBS
Custodian harmless against, any loss, liability or expense in connection with,
arising out of or in any way related to the transaction contemplated and
relationship established by the Custodial Agreement, or any action or omission
by the Approved MBS Custodian in connection with the Custodial Agreement, or any
agent, broker or dealer employed by the Approved MBS Custodian hereunder,
including the reasonable costs and expenses incurred in defending any such claim
of liability, except that the Company shall not be liable for (i) any loss,
liability or expense that is determined by a judgment of a court of competent
jurisdiction that is binding on the Approved MBS Custodian, final and not
subject to review on appeal, to be the direct result of acts or omissions on the
Approved MBS
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Custodian's part constituting gross negligence or willful misconduct, or (ii)
any claim that is based on the Approved MBS Custodian's warranty as provided in
Section 8-306(3) of the New York Uniform Commercial Code.
SOURCE ONE MORTGAGE SERVICES CORPORATION,
a Delaware corporation
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT A
TO CUSTODIAL AGREEMENT
FORM OF LETTER TO APPROVED MBS CUSTODIAN
To: _________________________,
as Approved MBS Custodian
Re: Source One Mortgage Services Corporation;
Custodial and Collateral Agency Instructions
Ladies and Gentlemen:
Reference is made to the attached schedule relating to a
letter/certification to a transfer agent/trustee for the issuance of the
Security described more particularly therein, which Security is supported by a
pool of residential mortgage loans and/or mortgage-backed securities including
mortgage loans and/or mortgage-backed securities in which the undersigned as
collateral agent (in such capacity, the "Collateral Agent"), acting under that
certain Fourth Amended and Restated Security and Collateral Agency Agreement
dated as of July 10, 1998, as amended, extended or replaced from time to time,
holds a first priority perfected security interest. The attached schedule is (i)
Delivery Schedule Form 11705 in the case of GNMA Securities, (ii) Delivery
Schedule Form 996 in the case of FHLMC Securities, (iii) Delivery Schedule Form
2014 in the case of FNMA Securities, or (iv) a form containing substantially
similar information in the case of any other Securities. Pursuant to the
letter/certification, the transfer agent/trustee has been instructed to deliver
such Security to you. You are hereby notified that the Collateral Agent and the
Secured Parties named therein have a first perfected security interest in the
Security and in all proceeds of the sale or other disposition thereof and in all
accounts into which said proceeds may be deposited.
This letter will confirm your agreement to hold such Security as a
"Subject Security" under and on terms and conditions set forth more particularly
in that certain Custodial Agreement, dated as of _______________, 199_ between
you and the Collateral Agent.
Very truly yours,
NATIONAL CITY BANK OF KENTUCKY, as
Collateral Agent
By:________________________________
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The undersigned agree to and acknowledge the terms of this letter and,
notwithstanding any contrary understanding with or instructions to you, the
addressee of this letter, the undersigned instruct you to act according to the
instructions set forth in this letter. These instructions cannot be altered
except by written instructions executed by Collateral Agent.
SOURCE ONE MORTGAGE SERVICES CORPORATION,
a Delaware corporation
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT B
TO CUSTODIAL AGREEMENT
OPERATING INSTRUCTIONS
These Operating Instructions are attached to and made a part of the
Custodial Agreement between National City Bank of Kentucky and
___________________, dated as of _______________, 199_ (as amended from time to
time, the "Custodial Agreement"). Terms defined therein shall have their same
meanings when used herein.
1. From time to time GNMA, FNMA and FHLMC Subject Securities will be
issued at the request of the Company and credited to your account with the
Federal Reserve Bank of New York ("FRBNY") (in the case of FNMA and FHLMC
Subject Securities) or your account with the Participants Trust Company ("PTC")
(in the case of GNMA Subject Securities) (in each case, to be held by you for
the account of the Collateral Agent) in accordance with the Code of Federal
Regulations (in the case of FNMA and FHLMC Subject Securities) or the rules of
PTC (in the case of GNMA Subject Securities). Upon your receipt of confirmation
that such Subject Securities have been deposited into your account with FRBNY
(in the case of FNMA and FHLMC Subject Securities) or your account with PTC (in
the case of GNMA Subject Securities), you shall promptly issue to the Collateral
Agent and the Company your confirmation that (1) you have received such
confirmation of the Fedwire (in the case of FNMA and FHLMC Subject Securities,
which confirmation will include the number of Subject Securities deposited into
your account with FRBNY) or from PTC (in the case of GNMA Subject Securities),
(2) you have made appropriate entries on your books reflecting the interests of
the Company as beneficial owner and the Collateral Agent as secured party with
respect to such Subject Securities, and (3) there are no security interests or
any rights or claims of any third party in such Subject Securities in your favor
or known to you which have priority over the security interest of the Collateral
Agent in such Subject Securities. You shall be under no obligation to ensure or
verify that Securities identified in transmittal letters (in the form of Exhibit
A to the Custodial Agreement) are in fact credited to your account(s), but you
shall be obligated only to report your actual receipt of Subject Securities to
the Collateral Agent and the Company in accordance with the provision of this
Instruction 1.
2. With respect to the delivery or transfer of Subject Securities which
you hold for the account of the Collateral Agent, you are hereby authorized to
act only upon instructions from the Collateral Agent or, to the extent permitted
by the Custodial Agreement, by the Company. Upon notification to you by the
Collateral Agent at the direction of the Required Lenders following an "Event of
Default" under the Credit Agreement, no third party,
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including without limitation the Company, may direct you to make any delivery or
transfer of such Subject Securities other than Subject Securities to be
delivered pursuant to then-existing Approved Investor Commitments.
3. The proceeds of redemptions, collections and other receipts,
including dividend and interest income, shall be credited to the Custodial
Settlement Account upon collection or payment.
4. You are to notify the Collateral Agent and the Company upon receipt
of notice by you of any call for conversion, redemption, subscription rights or
similar proceeding affecting the Subject Securities held in the relevant account
(any of the foregoing being referred to herein as "Account Proceedings"), and
shall take such action in respect thereof as you may be directed in writing by
the Collateral Agent; provided, however, that you shall have no duty or
responsibility to notify the Company or the Collateral Agent of any Account
Proceedings which do not appear in The Wall Street Journal (New York Edition),
The Standard & Poor's Called Bond Record for Preferred Stocks, Financial Daily
Called Bond Service, The Kenney Services or official notifications from the
Depository Trust Company or such other publications which you may deem
reasonable from time to time. All solicitation fees payable to you as agent in
connection with such event will be retained by you unless specifically agreed to
the contrary by you.
5. You are authorized and empowered in the name and on behalf of the
Collateral Agent and the Company to execute any certificates of ownership or
other reports which you are or may hereafter be required to execute and furnish
under any regulation of the Internal Revenue Service, or other authority of the
United States, insofar as the same are required in connection with any property
which is now or may hereafter be in your possession by virtue of the Custodial
Agreement and these Operating Instructions, claiming no exemptions on behalf of
the Collateral Agent or the Company. In the preparation of such reports, the
status of the Collateral Agent is to be described as a bank, trust company or
financial institution, as the case may be, domiciled in the United States. The
Collateral Agent agrees to notify you immediately in writing of any change in
such status.
6. All mail communications which are to be furnished or forwarded
hereunder to the Collateral Agent or the Company shall be addressed to such
party at the last address on your records, provided that in case you in your
sole discretion shall determine that an emergency exists, you may use such other
means of communication as you shall deem advisable.
7. You are under no duty to supervise, recommend or advise the
Collateral Agent relative to the investment, purchase, sale,
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retention or other disposition of any property held hereunder unless
specifically provided for by the Custodial Agreement.
8. With respect to any direction to receive securities in transactions
not placed through you, you shall have no duty or responsibility to advise the
Company of non-receipt, or to take any steps to obtain delivery of securities
from any brokers or dealers. All dealer concessions made to you will be retained
by you unless specifically agreed to the contrary by you.
9. Notwithstanding anything herein to the contrary, unless instructions
are received from the Collateral Agent, specifying a different destination than
the address listed on your records for the Collateral Agent, within ten (10)
days of the receipt of any termination notice, you shall have the right to
transfer all securities and other property held by you or any depositary in
connection with the Custodial Agreement or registered in your name to the
Collateral Agent at the address listed on your records.
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SCHEDULE I
TO CUSTODIAL AGREEMENT
AUTHORIZED COLLATERAL AGENT REPRESENTATIVES
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EXHIBIT 7
TO SECURITY AGREEMENT
COLLATERAL TRANSMITTAL -- INITIAL MORTGAGE INFORMATION
1. CUSTOMER NAME ______________________________
2. LOAN NUMBER _________________________________
3. MORTGAGOR ___________________________________
SURNAME ONLY
4. AP STATUS CODE _______________________________
5. DEPOSIT DATE _________________________________
6. ORIGINAL NOTE AMOUNT $_____________________
7. ACQUISITION COST $____________________________
8. TAKE-OUT VALUE $_____________________________
9. NOTE DATE OR CONVERSION DATE _____________
10. NOTE RATE ____________________________________
11. LOAN TYPE (i.e. a group category (e.g. GNMA 15, FNMA/FHLMC 30,
etc.) set forth on Exhibit F to the Credit Agreement)
______________________
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