<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- -----------------
Commission file number 0-17224
-------
First Financial Caribbean Corporation
-------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Puerto Rico 66-0312162
----------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
1159 F.D. Roosevelt Avenue,
Puerto Nuevo
San Juan, Puerto Rico 00920-2998
--------------------- ----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, (809) 749-7100
including area code --------------
Former name, former address and Not Applicable
former fiscal year, if changed --------------
since last report
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of Common Stock outstanding at June 30, 1995 - 7,215,570
---------
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<PAGE> 2
2
FIRST FINANCIAL CARIBBEAN CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
--------------------
Consolidated Balance Sheet as of June 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . 3
Consolidated Statement of Income and Retained Earnings - Quarters ended June 30, 1995
and June 30, 1994 and six months ended June 30, 1995 and June 30, 1994 . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows - Six-month period ended June 30, 1995 and June
30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . 8
-------------------------------------------------------------------------------------
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-----------------
Item 2 - Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
---------------------
Item 3 - Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-------------------------------
Item 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . 16
---------------------------------------------------
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-----------------
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------------------------
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
<PAGE> 3
3
FIRST FINANCIAL CARIBBEAN CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
(unaudited) (audited)
----------- ---------
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 64,112 $ 35,916
Mortgage loans held for sale, net 190,645 263,773
Mortgage-backed securities held for trading, net 395,356 319,204
Mortgage-backed securities and investments held to maturity 72,776 67,519
Loans receivable, net 52,583 34,809
Accounts receivable and mortgage servicing advances, net 10,534 7,086
Accrued interest receivable 8,408 7,875
Excess servicing fee receivable 9,510 8,757
Property, leasehold improvements and equipment, net 6,846 7,467
Cost in excess of fair value of net assets acquired 6,576 6,609
Real estate held for sale, net 2,325 2,116
Mortgage servicing rights, net 5,300 3,543
Prepaid expenses and other assets 6,308 3,345
-------- --------
$831,279 $768,019
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Loans payable $243,691 $282,761
Securities sold under agreements to repurchase 378,892 303,730
Deposit accounts 88,700 66,471
Advances from Federal Home Loan Bank 413 419
Accounts payable and other liabilities 16,347 17,793
Income tax payable --- 2,572
Deferred tax liability 5,254 3,777
-------- --------
Total liabilities 733,297 677,523
-------- --------
Commitments and contingencies
-------- --------
Stockholders' equity:
10.5% Cumulative Convertible Preferred Stock, Series A,
$1.00 par value, 2,000,000 shares authorized; 180,697
shares issued and outstanding (1994 - 204,329) (liquidating
preference of $10 per share, aggregating $1,806,970) 181 204
Common stock, $1.00 par value, 10,000,000 shares
authorized; 7,229,570 shares issued and outstanding (1994- 7,230 7,182
7,182,306)
Paid-in capital 16,651 16,675
Retained earnings 74,159 66,706
-------- --------
98,221 90,767
Treasury stock at par value, 14,000 shares (14) (14)
Unearned compensation under employment contracts (225) (257)
-------- --------
Total stockholders' equity 97,982 90,496
-------- --------
$831,279 $768,019
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
4
FIRST FINANCIAL CARIBBEAN CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(In thousands of dollars, except per share data)
Unaudited
<TABLE>
<CAPTION>
Quarter Ended Six-Month Period Ended
-------------------- ------------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Mortgage loans sales and fees $ 1,210 $ 3,621 $ 3,705 $ 7,096
Servicing income 2,752 3,263 5,441 6,032
Interest income 15,544 11,951 30,918 20,675
Gain on sale of servicing rights 3,623 --- 3,623 ---
Rental and other income 148 132 299 239
------- ------- ------- --------
23,277 18,967 43,986 34,042
------- ------- ------- --------
Expenses:
Interest 10,404 5,489 20,184 9,060
Employee cost, net (See Note i) 1,300 1,952 3,872 3,362
Taxes, other than payroll and income taxes 287 321 523 604
Maintenance 162 218 298 353
Advertising 539 1,100 994 1,920
Professional services 679 870 1,377 1,787
Telephone 444 565 855 1,080
Rent 517 554 1,019 995
Other, net (See Note i) 1,799 2,061 3,761 5,341
------- ------- ------- --------
16,131 13,130 32,883 24,502
------- ------- ------- --------
Income before income taxes and cumulative effect 7,146 5,837 11,103 9,540
Income taxes:
Current 59 94 59 202
Deferred 950 958 1,477 1,245
------- ------- ------- --------
1,009 1,052 1,536 1,447
------- ------- ------- --------
Income before cumulative effect 6,137 4,785 9,567 8,093
Cumulative effect of change in accounting
principle-adoption of SFAS No. 115, net of income
taxes of $880 --- --- --- 1,215
------- ------- ------- --------
Net income 6,137 4,785 9,567 9,308
Retained earnings at beginning of period 69,153 56,756 66,706 53,219
Less cash dividends paid:
Convertible preferred stock 48 82 97 168
Common stock 1,083 903 2,017 1,803
------- ------- ------- --------
Retained earnings at end of period $74,159 $60,556 $ 74,159 $ 60,556
======= ======= ======== ========
Earnings per share:
Primary:
Income before cumulative effect $ 0.84 $ 0.68 $ 1.32 $ 1.15
Cumulative effect --- --- --- 0.18
------- ------- ------- --------
Net Income $ 0.84 $ 0.68 $ 1.32 $ 1.33
======= ======= ======= ========
Fully Diluted:
Income before cumulative effect $ 0.81 $ 0.63 $ 1.26 $ 1.07
Cumulative effect --- --- --- 0.16
------- ------- ------- --------
Net Income $ 0.81 $ 0.63 $ 1.26 $ 1.23
======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 5
5
FIRST FINANCIAL CARIBBEAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Six-Month Period Ended
June 30,
---------------------------
1995 1994
---- ----
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,567 $ 9,308
-------- --------
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of excess servicing fee receivable . . . . . . . . . . . . . . . . . 441 203
Amortization of cost in excess of fair value of net assets acquired . . . . . . . 188 164
Amortization of mortgage servicing rights . . . . . . . . . . . . . . . . . . . . 274 360
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 774 690
Gain on sale of servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . (3,623) ---
Cumulative effect of change in accounting principle . . . . . . . . . . . . . . . --- (1,215)
Allowances for losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 115
Origination and purchases of mortgage loans held for sale . . . . . . . . . . . . (268,769) (482,797)
Principal repayment and sales of loans held for sale . . . . . . . . . . . . . . 164,190 184,514
Purchases of mortgage-backed securities held for trading . . . . . . . . . . . . . (64,262) (145,167)
Principal repayments and sales of mortgage-backed securities held for trading . . 165,818 356,217
Increase in interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . (533) (3,120)
Decrease in loans payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73,805) (4,576)
Increase in loans payable related to securities sold not yet purchased . . . . . . 19,835 ---
Increase in interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 293 849
Increase in securities sold under agreements to repurchase . . . . . . . . . . . . 75,162 99,720
Decrease in payables and accrued liabilities . . . . . . . . . . . . . . . . . . . (1,739) (8,976)
Decrease in income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . (2,572) (3,353)
Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,477 1,245
Amortization of unearned compensation under employment contracts . . . . . . . . . 32 32
-------- --------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,347 (5,095)
-------- --------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . 22,914 4,213
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of mortgage-backed securities and investments held to maturity . . . . . . (10,841) (18,788)
Principal repayments and sales of investments held to maturity . . . . . . . . . . . 5,584 331
Origination of loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . (20,166) (6,206)
Principal repayments of loans receivable . . . . . . . . . . . . . . . . . . . . . . 2,392 714
(Increase) decrease in accounts receivable and mortgage servicing advances . . . . . (3,614) 955
Additions to excess servicing fee receivable . . . . . . . . . . . . . . . . . . . . (1,194) (1,603)
Purchase of property, leasehold improvements and equipment . . . . . . . . . . . . . (153) (2,533)
Additions to cost in excess of fair value of net assets acquired . . . . . . . . . . (155) (148)
Proceeds from disposal of real estate held for sale . . . . . . . . . . . . . . . . 1,159 1,422
Acquisition of real estate held for sale . . . . . . . . . . . . . . . . . . . . . . (1,368) (829)
Acquisition of mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . (981) (111)
Originated mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . . (1,135) ---
Proceeds from sale of servicing rights . . . . . . . . . . . . . . . . . . . . . . . 3,708 ---
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,963) (1,334)
-------- --------
Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . (29,727) (28,130)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable related to senior secured term loan . . . . . . . . . . . 14,900 ---
Increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,229 13,774
Dividends declared and paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,114) (1,971)
Repayment of advances from FHLB . . . . . . . . . . . . . . . . . . . . . . . . . . (6) (906)
-------- --------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . 35,009 10,897
-------- --------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . 28,196 (13,020)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . 35,916 37,307
-------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . $ 64,112 $ 24,287
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Noncash financing activities-conversion of preferred stock . . . . . . . . . . . . . $ 230 $ 1,010
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash used to pay interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,891 $ 8,211
======== ========
Cash used to pay income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,965 $ 3,555
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 6
6
FIRST FINANCIAL CARIBBEAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
a. The Consolidated Financial Statements (unaudited) have been prepared
in conformity with the accounting policies stated in the Company's
Annual Audited Financial Statements included in the Company's 1994
Annual Report to Stockholders, and should be read in conjunction
with the Notes to the Consolidated Financial Statements appearing in
that report. All adjustments (consisting only of normal recurring
accruals) which are, in the opinion of management, necessary for a
fair presentation of results for the interim periods have been
reflected.
b. The results of operations for the quarter and six-month period ended
June 30, 1995 are not necessarily indicative of the results to be
expected for the full year.
c. Primary net income per share is determined by dividing net income,
after deducting preferred stock dividends, by the weighted average
number of shares of common stock outstanding considering the
dilutive effect of restricted stock awards. Fully diluted net
income per share has been computed based on the assumption that all
the shares of the Company's 10 1/2% Cumulative Convertible Preferred
Stock, Series A (the "Series A Preferred Stock") are converted into
common stock.
d. Cash dividends per share paid for the quarter and six-month period
ended June 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Quarter Ended Six-Month Period Ended
June 30, June 30,
------------------ ---------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Series A Preferred Stock $0.2625 $0.2625 $0.525 $0.525
Common Stock $0.15 $0.13 $0.28 $0.26
</TABLE>
e. At June 30, 1995, escrow funds include approximately $19.7 million
deposited with Doral Federal Savings Bank ("Doral Federal"). These
funds are included in the Company's financial statements. Escrow
funds also include approximately $12.5 million deposited with other
banks which are excluded from the Company's assets and liabilities
f. Certain reclassifications of prior year's data have been made to
conform to 1995 classifications.
g. Investments held to maturity consist of GNMA, FNMA and FHLMC
mortgage-backed securities, U.S. Treasury Notes, Federal Home Loan
Bank Notes and collateralized mortgage obligations.
<PAGE> 7
7
h. The number of average shares of common stock used for computing the
primary and fully diluted net income per share was as follows:
<TABLE>
<CAPTION>
Quarter Ended Six-Month Period Ended
June 30, June 30,
------------------------------ -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary 7,211,514 6,950,264 7,198,324 6,895,660
Fully diluted 7,576,964 7,576,964 7,576,964 7,576,964
</TABLE>
i. Employee costs and other expenses are shown in the Consolidated
Statement of Income and Retained Earnings net of direct loan
origination costs which, pursuant to SFAS-91, are capitalized as
part of the carrying cost of mortgage loans and are offset against
mortgage loan sales and fees when the loans are sold. Employee
costs would have been $6.5 million and $8.1 million, respectively,
for the quarters ended June 30, 1995 and 1994, and $12.2 million and
$15.8 million, respectively, for the six month periods ended June
30, 1995 and June 30, 1994, except for the application of SFAS-91.
Other expenses would have been $2.8 million and $3.1 million,
respectively, for the quarters ended June 30, 1995 and 1994, and
$5.5 million and $7.4 million, respectively, for the six month
periods ended June 30, 1995 and June 30, 1994, except for the
application of SFAS-91.
Set forth below is a breakdown of direct loan origination costs that
were deferred pursuant to SFAS-91.
<TABLE>
<CAPTION>
Quarter Ended Six-Month Period Ended
June 30, June 30,
---------------------- ------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Employee Costs $5,226 $6,186 $ 8,354 $12,376
Other Costs 975 987 1,806 2,060
------ ------ ------- -------
$6,201 $7,173 $10,160 $14,436
====== ====== ======= =======
</TABLE>
j. On May 12, 1995, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 122, "Accounting for Mortgage
Servicing Rights" ("SFAS No. 122"), an amendment to SFAS No. 65.
The Company elected to adopt this standard for its financial
statement reporting in the second quarter of 1995. SFAS No. 122
prohibits retroactive application to 1994. Accordingly, the
Company's financial statement reporting for the first quarter of
1995 and for the quarter and six-month period ended June 30, 1994
was accounted for under the original SFAS No. 65 and such results
are not directly comparable to the results for the quarter and six
months ended June 30, 1995 with respect to this specific matter.
The Company realized additional net income of approximately $320,000
as a result of the adoption of SFAS No. 122. If the Company had not
applied SFAS No. 122 in the second quarter of 1995, the Company
would have reported a net income of approximately $9.3 million for
the six-month period ended June 30, 1995 and approximately $5.8
million for the quarter then ended; and earnings per common share
would have been $1.28 and $1.22 on a primary and fully-diluted
basis, respectively, for
<PAGE> 8
8
the six-month period ended June 30, 1995 (and $0.81 and $0.77 on a
primary and fully-diluted basis, respectively, for the quarter then
ended).
SFAS No. 122 requires that a portion of the cost of originating a
mortgage loan be allocated to the mortgage servicing right based on
its fair value relative to the loan as a whole. To determine the
fair value of the servicing rights created during the second
quarter, the Company used the market prices under comparable
servicing sale contracts.
In determining servicing value impairment at the end of the quarter,
the post-implementation originated servicing portfolio and the
purchased servicing portfolio were disaggregated into their
predominant risk characteristics. The Company has determined those
risk characteristics to be loan type and investor type. The
portfolio was then valued using market prices under comparable
servicing sale contracts when available, or alternatively, using the
same model as was used to originally determine the fair value at
origination or date of purchase, using current assumptions. The
calculated value was then compared with the book value of each
segment to determine if a reserve for impairment was required. The
Company determined that no reserve for impairment was required as of
June 30, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires continuous access to short term sources of debt
financing and equity capital. The Company's cash requirements arise from loan
originations and purchases, repayments of debt upon maturity, payments of
operating and interest expenses and servicing advances. The Company's primary
sources of liquidity are sales in the secondary mortgage market of the loans it
originates and purchases, short term borrowings under warehouse, gestation and
repurchase agreement lines of credit (secured by pledges of its loans and
mortgage-backed securities in most cases until such loans are sold and the
lenders repaid) and revenues from operations. In the past, the Company has
also relied on privately-placed financings and public offerings of preferred
and common stock. In addition, the Company recently entered into a syndicated
bank agreement which included a revolving credit facility and servicing secured
facility which are discussed in greater detail below.
Total liabilities were approximately 7.5 times stockholders' equity at June 30,
1995 and December 31, 1994. The Company's leverage at June 30, 1995 reflects a
decrease in loans payable as compared to December 31, 1994 which was partially
offset by an increase in securities sold under agreements to repurchase.
FFCC borrows money under warehousing lines of credit to fund its mortgage loan
commitments and repays the borrowings as the mortgages are sold. The
warehousing lines of credit then become available for additional borrowings.
FFCC held mortgage loans (including mortgage loans converted into
mortgage-backed securities) prior to sale for an average period of
approximately 354 days for the six-month period ended June 30, 1995 and 212
days during the year ended December 31, 1994. The increase in the days
mortgage loans were held prior to sale was due to higher levels of
mortgage-backed securities held for trading resulting from a decision made by
the Company to hold such mortgage-backed securities for longer periods of time
prior to sale in order to maximize net interest income. At June 30, 1995 and
December 31, 1994, FFCC had available warehousing lines of credit of $195
million and $92 million, respectively. At June 30, 1995 and December 31, 1994,
FFCC had used approximately $20.7 million and $79.6 million, respectively, of
credit available under its warehousing lines of credit. FFCC's warehousing
lines of credit are generally subject to termination at the discretion of the
lender.
FFCC also obtains short-term financing through repurchase agreement lines of
credit with financial institutions and investment banking firms. Under these
agreements, FFCC sells GNMA, FNMA or FHLMC-guaranteed mortgage-backed
securities and simultaneously agrees to repurchase them at a future date at a
fixed price. FFCC uses the
<PAGE> 9
9
proceeds of such sales to repay borrowings under its warehousing lines of
credit. The effective cost of funds under repurchase agreements is typically
lower than the cost of funds borrowed under FFCC's warehousing lines of credit.
At June 30, 1995, FFCC had used approximately $357.6 million of credit under
repurchase agreements. FFCC's continued use of repurchase agreements will
depend on the cost of repurchase agreements relative to the cost of borrowing
under its warehousing lines of credit with banks.
Also included among FFCC's credit facilities are gestation or pre-sale
facilities which permit the Company to obtain more favorable rates once
mortgage loans are in the process of securitization but prior to the actual
issuance of the mortgage-backed securities as well as to finance such
mortgage-backed securities upon their issuance. At June 30, 1995 and December
31, 1994, FFCC had available gestation facilities of $450.0 million and $300.0
million, respectively. At June 30, 1995 and December 31, 1994, FFCC had used
approximately $171.2 million and $196.0 million, respectively, of credit
available under its gestation facilities. Approximately $149.9 million of the
$171.2 million used by the Company at June 30, 1995 was used to finance
mortgage loans while approximately $21.3 million was used to finance mortgage-
backed securities. Borrowings under gestation credit facilities used to
finance whole loans are classified as "Loans payable" on the Company's
Consolidated Balance Sheet while borrowings under such credit facilities used
to finance mortgage-backed securities are classified as "Securities sold under
agreements to repurchase."
The monthly weighted average interest rate of FFCC's borrowings for warehousing
lines of credit and for repurchase agreement lines of credit was 7.3% and 5.9%,
respectively, for the six-month period ended June 30, 1995 compared to 5.7% for
warehousing lines of credit and 4.3% for repurchase agreements in each case for
the year ended December 31, 1994.
On June 30, 1995, FFCC entered into a syndicated credit agreement (the "Credit
Agreement") with six banks providing for three credit facilities totaling up to
$125 million. The credit facilities were structured by Bankers Trust Company,
as administrative and syndicate agent. The three facilities include: (i) a
$100 million secured one-year revolving warehousing credit facility to finance
residential mortgage loans and mortgage-backed securities, (ii) a $7 million
secured one-year revolving credit facility to provide financing for receivables
and working capital needs, and (iii) an $18 million five-year senior secured
term loan, secured with a portion of the Company's servicing portfolio, to
finance the acquisition of additional servicing rights and general working
capital purposes. The amounts available under the Credit Agreement are subject
to a borrowing base which consists of mortgage loans and mortgage-backed
securities for the first facility, receivables relating to servicing advances
and real estate owned for the second facility and mortgage servicing rights for
the third facility.
Certain of the debt obligations of FFCC, including the Credit Agreement,
contain various provisions that may affect the ability of FFCC to pay dividends
and remain in compliance with such obligation. These provisions include, among
others, requirements containing minimum net worth, debt to equity ratios, ratio
of quarterly net income to debt service and dividends, maintenance of a minimum
servicing portfolio and other financial covenants. These provisions are not
expected to have an adverse impact on the ability of the Company to pay
dividends. At June 30, 1995, FFCC had drawn $14.9 million of the five-year
senior secured term loan which is due and payable on June 30, 2000 and bears
interest at a variable rate of interest (8 3/8% at June 30, 1995). This
borrowing is classified as "Loans Payable" on the Company's Consolidated
Balance Sheet.
As of June 30, 1995, Doral Federal met all its fully phased-in capital
requirements (i.e., tangible and core capital of at least 1.5% and 3.0%,
respectively, of adjusted assets and risk-based capital at least 8% of risk
adjusted assets). As of June 30, 1995 Doral Federal had tangible capital and
core capital of $6.5 million or approximately 6.3% of adjusted assets. As of
such date, Doral Federal had risk-based capital of $6.5 million or 14.2% of
risk adjusted assets.
Doral Federal obtains funding for its lending activities through the receipt of
deposits and to a lesser extent from other borrowings such as Federal Home Loan
Bank advances and repurchase agreements with brokerage houses. At June 30,
1995, Doral Federal held $89 million in deposits at a weighted average interest
rate of 3.48%. Doral
<PAGE> 10
10
Federal, as a member of Federal Home Loan Bank of New York (the "FHLB-NY"),
also has access to collateralized borrowings from the FHLB-NY up to a maximum
of 30% of its total assets. Such advances must be secured by qualifying assets
with a value equal to between 105% to 115% of the advances. At June 30, 1995,
Doral Federal had $403,000 in outstanding advances from the FHLB-NY at a
weighted average interest rate cost of 4.47%.
The Company also has entered into servicing agreements relating to the
mortgage-backed securities programs of FNMA, FHLMC and GNMA and certain other
investors as well as mortgage loans sold to certain other purchasers. These
agreements require FFCC to advance funds to make scheduled payments of
principal, interest, taxes and insurance, if such payments have not been
received from the borrowers. Funds advanced by FFCC pursuant to these
arrangements are generally recovered by FFCC within 30 days. During the
six-month period ended June 30, 1995, the monthly average amount of funds
advanced by the Company under such servicing agreements was approximately $4.8
million.
During the six-month period ended June 30, 1995, the Company collected an
average of approximately $900,000 per month in net servicing fees, including
late charges. At June 30, 1995 and December 31, 1994, the servicing portfolio
amounted to approximately $2.5 billion and $2.6 billion, respectively. The
Company may, from time to time, determine to sell portions of its servicing
portfolio as well as to purchase servicing rights from third parties.
FFCC generally has been able to provide for its growth and expansion and for
continued liquidity with funds from short-term borrowings and revenues from
operations. FFCC expects that it will continue to have adequate liquidity
arrangements to finance its operations. The Company will continue to explore
alternative and supplementary methods of financing its operations, including
both debt and equity financing. There can be no assurance, however, that the
Company will be successful in consummating any such transactions.
Cash Flows
The interim Consolidated Statement of Cash Flows reflect the working capital
needs of the Company. Operating activities provided approximately $22.9
million of net cash during the six-month period ended June 30, 1995, versus
approximately $4.2 million in the comparable period of 1994. The major changes
in cash flow for the first six months of 1995 compared to 1994 were primarily
related to a net increase of approximately $3.0 million in the Company's
portfolio of mortgage loans held for sale and mortgage-backed securities held
for trading. This increase resulted in a net increase in related borrowings of
$1.4 million reflecting increased use of repurchase and gestation lines of
credit which require lower collateralization levels than bank warehousing lines
of credits. In addition, the Company incurred $19.8 million in liabilities
related to securities sold not yet purchased in connection with its interest
rate risk management strategy.
Investing activities used cash of approximately $29.7 million in the first half
of 1995 due primarily to net originations of loans receivable of approximately
$17.8 million. The Company capitalized $2.1 million of mortgage servicing
rights during the first six months of 1995 related to wholesale mortgage loan
purchases and implementation in the second quarter of SFAS No. 122. When the
Company purchases mortgage loans together with the related servicing rights, a
portion of the purchase price is allocated to the servicing rights acquired.
SFAS No. 122 requires that a portion of the cost of originating a mortgage loan
be allocated to the related mortgage servicing right based on its fair value
relative to the loan as a whole. Investing activities also reflected an
increase in short term servicing advances and accounts receivable of $3.6
million.
During the first six months of 1995, financing activities provided
approximately $35.0 million of net cash due to additional deposits amounting to
approximately $22.2 million received by Doral Federal, the Company's thrift
subsidiary, $14.9 from the proceeds of a senior secured term loan obtained
under the Credit Agreement, net of dividend payments of approximately $2.1
million.
<PAGE> 11
11
ASSETS AND LIABILITIES
At June 30, 1995, total assets were $831 million compared to $768 million at
December 31, 1994. This increase was due to several factors of which the most
important include an increase of $18 million in loans receivable held at Doral
Federal, a $28.2 million increase in cash and cash equivalents and a net
increase of $3.0 million in mortgage loans held for sale and mortgage-backed
securities held for trading. Total liabilities were $732 million at June 30,
1995 compared to $678 million at December 31, 1994. This increase was largely
the result of an increase in securities sold under agreements to repurchase
related to the financing of the higher level of mortgage-backed securities held
for trading and to maturity.
As of June 30, 1995, Doral Federal had $104 million in assets compared to $86
million at December 31, 1994. This increase was due primarily to an increase
of $18 million in loans receivable. Loans receivable and investments owned by
Doral Federal are classified as held to maturity. At June 30, 1995, Doral
Federal's deposit accounts totalled $88.7 million compared to $66.5 million at
December 31, 1994. Deposit accounts include $19.7 million in non-interest
bearing demand deposits representing escrow funds and other servicing accounts
from FFCC's servicing operations. All other deposits at June 30, 1995, are
retail deposits, most of them in the form of certificates of deposit. The
increase in deposits is due to an aggressive campaign to attract funds by
offering competitive interest rates.
The sale of mortgage loans and mortgage-backed securities can generate a gain
or a loss. Losses on sales of loans occur when FFCC sells loans at a discount
from their book value. A loss from the sale of loans may occur if interest
rates rise between the time FFCC fixes the interest rates charged to the
borrowers on the loans and the time the loans or mortgage-backed securities are
sold to investors.
FFCC attempts to minimize this interest rate risk through the use of forward
commitments and other hedging techniques. In the case of FNMA and FHLMC
conforming loans and FNMA, FHLMC mortgage-backed securities, and to a lesser
extent, GNMA mortgage-backed securities, the Company may obtain commitments for
the purchase of loans or mortgage-backed securities at the time it fixes the
interest rates on the loans. In the case of GNMA mortgage-backed securities,
the Company normally holds such securities for longer periods prior to sale in
order to maximize its net interest income and to take advantage of the tax
exempt status of the interest on such securities under Puerto Rico law. The
Company has in place long-term repurchase agreements secured by certain GNMA
certificates with a principal amount of approximately $36.3 million. The
Company does not hedge such GNMA certificates because they are financed
pursuant to long-term repurchase agreements. Prices for GNMA certificates in
Puerto Rico tend to be more stable than on the mainland U.S. because of the tax
exempt status of such securities under Puerto Rico law.
In the case of FNMA and FHLMC conforming loans and mortgage-backed securities
not subject to long term repurchase agreements, the Company also seeks to
protect itself from interest rate risk by purchasing options on interest rate
sensitive instruments such as eurodollar certificates of deposit, futures
contracts and, to a lesser extent, options on treasury bond futures contracts.
Contracts designated as trading hedges are marked-to-market on a monthly basis
with the resulting gains and losses charged to operations. Changes in the
market value of futures contracts that qualify as hedges of existing assets and
liabilities are recognized as an adjustment to the book value of the asset or
liability being hedged. The level of investment in such options is increased
or decreased as interest rates change and may reach significant levels relative
to the Company's portfolio of mortgage loans and mortgage-backed securities.
In the future, FFCC may utilize alternative hedging techniques including
futures, options or other synthetically created hedge vehicles to help mitigate
interest rate and market risk. There can be no assurance, however, that any of
the above hedging techniques will be successful. To the extent they are not
successful, the Company's profitability may be adversely affected. Losses on
hedging activities are generally indicative of higher profits realized on the
sale of mortgage loans and mortgage-backed securities.
At June 30, 1995, investments held to maturity consisted of GNMA, FNMA and
FHLMC mortgage-backed securities, U.S. Treasury Notes, Federal Home Loan Bank
Notes and collateralized mortgage obligations. The Company has the intent and
ability
<PAGE> 12
12
to hold the investments to maturity by obtaining continuing financing under its
existing credit facilities. A portion of these securities are held at Doral
Federal and the maturity of such securities generally have been matched against
deposits.
As of June 30, 1995, FFCC held $2.3 million of real estate owned, compared to
$2.1 million as of December 31, 1994.
RESULTS OF OPERATIONS FOR QUARTERS ENDED JUNE 30, 1995 AND 1994
Net income for the quarter ended June 30, 1995 increased to $6.1 million from
$4.8 million for the comparable period of 1994. Earnings for the second
quarter of 1995 reflected a $3.6 million gain on a pre-tax basis from the sale
of approximately $208 million of servicing rights. No such sales were made
during the second quarter of 1994. Doral Federal contributed approximately
$311,000 in net income for the second quarter of 1995 compared to $69,000 for
the second quarter of 1994.
Results for the second quarter of 1995 reflect the adoption by the Company, as
of April 1, 1995, of SFAS No. 122. See Note j to "Notes to Consolidated
Financial Statements (Unaudited)" herein. Additional net income of
approximately $320,000 was realized as a result of the adoption of this
prouncement. Since SFAS No. 122 prohibits retroactive application, historical
accounting results have not been restated and, accordingly results for the
quarter ended June 30, 1995 are not directly comparable to the quarter ended
June 30, 1994 with respect to the application of SFAS No. 122.
Revenues from mortgage loan sales and origination fees decreased to $1.2
million for the quarter ended June 30, 1995 from $3.6 million for the
comparable period of 1994. This decrease was due to a lower level of loan
originations and hedging losses of approximately $2.3 million for the quarter
ended June 30, 1995, compared to hedging gains of $848,000 for the quarter
ended June 30, 1994. Hedging losses reflect the decrease in interest rates
experienced during the period. Mortgage loan sales and fees for the quarter
ended June 30, 1995, included approximately $1.6 million relating to gross
unrealized gains of the Company's mortgage-backed securities held for trading
portfolio experienced during the quarter compared to a reduction in mortgage
loan sales and fees of approximately $800,000 from gross unrealized losses on
mortgage-backed securities held for trading during the second quarter of 1994.
As a result of the adoption of SFAS No. 115, unrealized gains and losses on
mortgage-backed securities held for trading after January 1, 1994 are included
in earnings as a component of mortgage loan sales and fees. Mortgage loan
sales and fees also reflect the adoption during the second quarter of SFAS No.
122, which requires the recognition of internally originated servicing rights
("OMSRs"). Under prior accounting practices, OMSRs were not recognized as
assets and were charged to earnings when the related loan was sold. SFAS No.
122 has the effect of increasing gains on sales of mortgages by requiring that
the carrying cost of the loan be reduced by the amount allocated to the related
OMSRs. Mortgage loan sales include approximately $550,000 as a result of the
adoption of SFAS No. 122.
The Company entered the Puerto Rico wholesale mortgage loan purchase market
during the second quarter of 1994 to diversify its sources of loan production
and compensate for the decrease in the volume caused by higher interest rates
and increased competition. The total volume of loans originated and purchased
was $145 million for the three-month period ended June 30, 1995 compared to
$252 million for the three-month period ended June 30, 1994. The total volume
of loans purchased was approximately $24 million for the three-month period
ended June 30, 1995 compared to $6 million for the comparable period of 1994.
The decrease in loan originations was the result of decreased demand for
mortgage loans, especially refinancing loans, resulting principally from
increases in interest rates.
Net interest income decreased by $1.3 million for the three-month period ended
June 30, 1995 versus the comparable period of 1994. The decrease in net
interest income for the quarter reflects decreased interest spreads as mortgage
interest rates have declined more rapidly than short-term interest rates
payable on warehousing and repurchase agreements line of credit. During the
second quarter of 1995, the Company continued to realize a major percentage
<PAGE> 13
13
of total revenues from interest income associated with the Company's
mortgage-backed securities inventory, resulting from an increase in the length
of time for which the Company holds mortgage loans and mortgage-backed
securities prior to sale, a substantial portion of which is tax-exempt to the
Company under Puerto Rico law. The implementation of this strategy has led to
increases in the Company's net interest income and the amount of assets held
for sale and a decrease in the Company's effective tax rate.
The Company continues to maintain and monitor its hedging program to manage
the risk to the value of its mortgage-backed securities portfolio due to
changes in interest rates. Net interest income totaled $5.1 million in the
second quarter of 1995, versus $6.5 million a year earlier. Continued weakness
in the refinance market will likely cause total mortgage production in Puerto
Rico to continue to be lower than levels experienced by the industry during
1994. Because of the Company's ability to finance its mortgage-backed
securities inventory with low-cost tax advantaged funds, the Company has made a
strategic decision to compensate, in part, for the decrease in mortgage loan
sales and fees by increasing net interest income through investment in
mortgage-backed securities, an activity that improves net interest income while
lowering the Company's effective tax rates.
The weighted average interest rate spread was 289 basis points during the
second quarter of 1995 compared to 454 basis points for the comparable period
of 1994.
When FFCC sells the mortgage loans it has originated or purchased, it generally
retains the rights to service such loans and receives the related servicing
fees. Mortgage loan servicing fees are based on a percentage of the principal
balances of the mortgages serviced and are credited to income as mortgage
payments are collected. Loan servicing income decreased 16% to $2.8 million
for the quarter ended June 30, 1995 compared to $3.3 million for the same
period in 1994. The decrease is primarily attributable to sales totalling
approximately $400 million of servicing rights made in the fourth quarter 1994
and second quarter of 1995 and the higher amortization of excess servicing.
The Company's servicing portfolio totaled $2.5 billion at June 30, 1995
compared to $2.6 billion at the same date a year ago. The Company's servicing
portfolio at June 30, 1995 decreased $100,000 over the December 31, 1994 level.
FFCC capitalizes as an asset an excess servicing fee on loans sold with
servicing rights retained whenever the stated servicing fee rate is materially
higher than servicing fee normally permitted by FNMA, GNMA or FHLMC. The
excess servicing fee receivable is recognized at the time of sale as an
adjustment to the resulting gain or loss on the loans sold and is recorded in
the accompanying Consolidated Statement of Income and Retained Earnings under
"Mortgage loan sales and fees." Amortization of excess servicing fee
receivable is based on the amount and timing of estimated future cash flows.
The amortization of excess servicing fee receivable is recorded as a reduction
of servicing income. Amortization of such excess servicing fee receivable for
each of the quarters ended June 30, 1995 and 1994 was approximately $224,000
and $135,000, respectively.
The cost of acquiring the rights to service mortgage loans is capitalized by
the Company on its financial statements. The amount capitalized is amortized
in proportion to, and over the period of, estimated net servicing income. Any
unamortized balance related to rights sold is charged to income at time of
sale. Capitalized purchased servicing rights are analyzed quarterly by
stratifying the mortgage servicing portfolio and reviewing the payment history
on a pool-by-pool basis. Whenever it is determined that there is a prepayment
pattern indicative that the fair value of the purchased mortgage servicing
rights (determined based on estimated future net cash flows discounted at
current rates) will be less than their carrying amounts, an impairment is
recognized by charging such excess to income. Effective April 1, 1995, with
the adoption of SFAS No. 122, the Company is also required to capitalize and
amortize OMSRs in the same manner as purchased mortgage servicing rights. See
Note j to "Notes to Consolidated Financial Statements (Unaudited)" herein. At
June 30, 1995, the unamortized balance of servicing rights approximates their
fair value. The amortization of mortgage servicing rights for the quarters
ended June 30, 1995 and 1994 was $46,000 and $180,000, respectively, and is
recorded in the accompanying Consolidated Statement of Income and Retained
Earnings under "Other Expenses." During the second quarter of 1995, the
Company purchased approximately $23.8 million in FHA-insured and VA-guaranteed
mortgages from third parties. As a result of such acquisitions, the Company
capitalized approximately $595,000 in servicing rights during the second
<PAGE> 14
14
quarter of 1995. In addition, as the result of the adoption of SFAS No. 122
during the second quarter, the Company capitalized approximately $1.2 million
in OMSR for the quarter.
Aggregate expenses for the quarter ended June 30, 1995, increased by
approximately $3.0 million compared to the first quarter of 1994, primarily as
a result of higher interest expense associated with the financing of the
Company's mortgage loans and mortgage-backed securities portfolios. All other
expenses associated with the loan origination and general and administrative
decreased to $5.7 million for the quarter ended June 30, 1995 compared to $7.6
million a year ago in line with the reduction in the volume of mortgage loan
originations.
The provision for income taxes decreased to $1 million for the three-month
period ended June 30, 1995, compared to $1.1 million for the three-month period
ended June 30, 1994, as a result of a decrease in the Company's effective tax
rate. The decrease in the effective tax rate was due primarily to an increase
in the proportion of total income before taxes consisting of tax exempt income.
Interest on FHA and VA mortgages secured by real property in Puerto Rico and
GNMA mortgage-backed securities consisting of such mortgages are tax exempt
under Puerto Rico law.
RESULTS OF OPERATIONS FOR SIX MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1994
The Company's net income for the six months ended June 30, 1995, increased to
$9.6 million, compared to $9.3 million for the corresponding period in 1994.
Consolidated results for the 1995 periods include the operations of Doral
Federal which was acquired by the Company in September 1993. For the six-month
period ended June 30, 1995, Doral Federal's net income amounted to
approximately $574,000 compared to $2,000 for the six months ended June 30,
1994. Results for the first six months of 1995 reflect the adoption by the
Company as of April 1, 1995 of SFAS No. 122. An additional net income of
approximately $320,000 was realized for the six months ended June 30, 1995, as
a result of the adoption of SFAS No. 122. Since SFAS No. 122 does not permit
retroactive application the results for the first six months of 1995 and 1994
are not directly comparable. Earnings for the first six months of 1995
reflected a $3.6 million gain from the sale of mortgage servicing rights. No
such sales were made in the first six months of 1994. Six months results for
1994 include a benefit of $1.2 million from the cumulative effect of the
adoption of SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" as of January 1, 1994.
Revenues from mortgage loan sales and fees decreased 47% to $3.7 million from
$7.1 a year ago. This decrease was due to a lower volume of loan originations.
The decrease also reflected hedging losses of approximately $3.3 million for
the first six months of 1995 compared to hedging gains of $1.1 million for the
first six months of 1994. Hedging losses reflect the decrease in interest
rates experienced during the period. The total volume of loans originated and
purchased was approximately $289 million for the six-month period ended June
30, 1995 compared to approximately $486 million for the six-month period ended
June 30, 1994. The decrease of 41% in loan originations and purchases was the
result of decreased demand for mortgage loans, including refinancing loans.
Refinancing loans comprised 37% of production in the first six-months of 1995
compared to 68% for the same period in 1994. Mortgage loan sales and fees also
reflect approximately $550,000 of additional gain on sale of mortgage loans as
the result of the adoption of SFAS No. 122 during the second quarter.
Following the adoption of SFAS No. 115, effective January 1, 1994, unrealized
gains and losses on holdings of trading securities are included in earnings as
a component of mortgage loan sales and fees. Mortgage loan sales and fees for
the six-month period ended June 30, 1995, included $2.3 million gross
unrealized gains on the Company's trading securities portfolio during such
period compared to $1.0 million of gross unrealized losses for the comparable
period of 1994.
Net interest income decreased by approximately $880,000 or 8% for the six-month
period ended June 30, 1995 versus the comparable period of 1994. The decrease
in net interest income for the six month period reflects decreased interest
spreads as mortgage interest rates have declined more rapidly than short-term
interest rates payable
<PAGE> 15
15
on warehousing and repurchase agreement lines of credit. The weighted average
interest rate spread was 302 basis points during the six months ended June 30,
1995 compared to 447 basis points for the comparable period of 1994.
Loan servicing income decreased 10% to $5.4 million for the six-month period
ended June 30, 1995 compared to $6.0 million for the same period in 1994. The
decrease in loan servicing income is due primarily to the sale of approximate-
ly $400 million of servicing rights made in the fourth quarter of 1994 and
second quarter of 1995 and higher amortization of excess servicing portfolio.
Amortization of excess servicing fee receivable for each of the six-month
period ended June 30, 1995 and 1994 was approximately $441,000 and $203,000,
respectively. The amortization of excess servicing fee receivable is recorded
as a reduction of servicing income. For the six-month periods ended June 30,
1995 and 1994, amortization of mortgage servicing rights was $274,000 and
$360,000, respectively. Amortization of servicing rights is recorded as a
component of "Other Expenses." Effective April 1, 1995, with the adoption of
SFAS No. 122, OMSRs must be amortized in the same manner as purchased mortgage
servicing rights.
Aggregate expenses for the six months period ended June 30, 1995 increased by
$8.3 million compared to the same period for 1994, primarily as a result of
higher interest expense associated with the financing of the Company's mortgage
loans and mortgage-backed securities portfolios. Loan origination, general and
administrative expenses decreased by $2.7 million compared to the same period
for 1994, in line with the reduction in the volume of mortgage loan
originations.
The provision for income taxes decreased to $1.5 million for the six-month
period ended June 30, 1995, compared to $2.3 million for the six-months ended
June 30, 1994, including $880,000 attributed to the cumulative effect of
adopting SFAS No. 115, due to a decrease in the effective tax rate from 23% to
14%. The decrease in the effective income tax rate was due primarily to an
increase in the proportion of total income before taxes consisting of tax
exempt income. Interest on FHA and VA mortgage loans secured by residential
property in Puerto Rico and GNMA mortgage-backed securities composed of such
loans is tax exempt under Puerto Rico law.
<PAGE> 16
15
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 thereunto duly authorized.
FIRST FINANCIAL CARIBBEAN CORPORATION
(Registrant)
Date: August 10, 1995 /s/ Salomon Levis
----------------------------------------
Salomon Levis
Chairman of the Board
and Chief Executive Officer
Date: August 10, 1995 /s/ Richard F. Bonini
-----------------------------------------
Richard F. Bonini
Senior Executive Vice President
and Secretary
Date: August 10, 1995 /s/ Luis Alvarado
------------------------------------------
Luis Alvarado
Executive Vice President
Chief Financial Officer and
Principal Accounting Officer
<PAGE> 17
16
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Other than legal proceedings in the normal course of its business, the
Company is not a party to any material legal proceeding and, to the knowledge
of the Company's management, there are no material legal proceedings
threatened. In the opinion of the Company's management, the pending and
threatened legal proceedings of which management is aware will not have a
material adverse effect on the financial condition of the Company.
ITEM 2 - CHANGES IN SECURITIES
Not Applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5 - OTHER INFORMATION
Not Applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.61 - Credit Agreement, dated as of June 30, 1995, between
FFCC, Doral Mortgage Corporation, the lenders party thereto and
Bankers Trust Company, as Agent.
Exhibit 27 - Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None.
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C>
10.61 - Credit Agreement, dated as of June 30, 1995, between FFCC, Doral
Mortgage Corporation, the lenders party thereto and Bankers
Trust Company, as Agent
27 - Financial Data Schedule (for SEC use only)
</TABLE>
<PAGE> 1
EXHIBIT 10.61
--------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of June 30, 1995
Between
FIRST FINANCIAL CARIBBEAN CORPORATION,
DORAL MORTGAGE CORPORATION,
THE LENDERS PARTY HERETO
And
BANKERS TRUST COMPANY,
as Agent
--------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Section Page
------- ------- ----
<S> <C> <C>
I. DEFINITIONS
Section 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Terms Generally . . . . . . . . . . . . . . . . . . 25
II. AMOUNTS AND TERMS OF LOANS AND ACCEPTANCES
Section 2.1 Commitments . . . . . . . . . . . . . . . . . . . . 25
Section 2.2 Method of Borrowing and of Conversions/Continuations;
Creation of Acceptances . . . . . . . . . . . 29
Section 2.3 Conversions/Continuations of Loans; Exchange of
Acceptances . . . . . . . . . . . . . . . . . 31
Section 2.4 Disbursement of Funds; Bank Acceptance Participants . 32
Section 2.5 Notes; Acceptance Obligations . . . . . . . . . . . . 36
Section 2.6 Interest . . . . . . . . . . . . . . . . . . . . . . 37
Section 2.7 Termination or Reduction of Commitments . . . . . . 38
Section 2.8 Mandatory Repayments . . . . . . . . . . . . . . . . 38
Section 2.9 Optional Prepayments . . . . . . . . . . . . . . . . 42
Section 2.10 Fees . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 2.11 Payments, Etc. . . . . . . . . . . . . . . . . . . . 44
Section 2.12 Eurodollar Rate Not Determinable; Illegality
or Impropriety . . . . . . . . . . . . . . . . 49
Section 2.13 Reserve Requirements; Change in Circumstances . . . 50
Section 2.14 Indemnity . . . . . . . . . . . . . . . . . . . . . 52
Section 2.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . 53
Section 2.16 Sharing of Setoffs . . . . . . . . . . . . . . . . . 54
</TABLE>
i
<PAGE> 3
EXHIBITS (continued)
<TABLE>
<S> <C> <C>
III. CONDITIONS TO CREDIT EVENTS
Section 3.1 Conditions to Credit Events . . . . . . . . . . . . 54
IV. REPRESENTATIONS AND WARRANTIES
Section 4.1 Corporate Existence; Compliance with Law and
Contractual Obligations . . . . . . . . . . . 58
Section 4.2 Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . 59
Section 4.3 No Legal or Contractual Bar . . . . . . . . . . . . 59
Section 4.4 Financial Information . . . . . . . . . . . . . . . 59
Section 4.5 No Material Litigation . . . . . . . . . . . . . . . 60
Section 4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . 60
Section 4.7 Investment Company Act . . . . . . . . . . . . . . . 60
Section 4.8 Subsidiaries . . . . . . . . . . . . . . . . . . . . 61
Section 4.9 Use of Proceeds . . . . . . . . . . . . . . . . . . 61
Section 4.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . 61
Section 4.11 Security Interests . . . . . . . . . . . . . . . . . 62
Section 4.12 Agency Approvals . . . . . . . . . . . . . . . . . . 62
Section 4.13 Solvency . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
ii
<PAGE> 4
EXHIBITS (continued)
<TABLE>
<S> <C> <C> <C>
V. COVENANTS
Section 5.1 Affirmative Covenants . . . . . . . . . . . . . . . 62
Section 5.2 Negative Covenants of Each Borrower . . . . . . . . 68
Section 5.3 Additional Negative Covenants . . . . . . . . . . . 71
VI. EVENTS OF DEFAULT
Section 6.1 Events of Default . . . . . . . . . . . . . . . . . 73
VII. THE AGENT
Section 7.1 Appointment of Agent . . . . . . . . . . . . . . . . 76
Section 7.2 Nature of Duties of Agent . . . . . . . . . . . . . 76
Section 7.3 Lack of Reliance on Agent . . . . . . . . . . . . . 76
Section 7.4 Certain Rights of Agent . . . . . . . . . . . . . . 77
Section 7.5 Reliance by Agent . . . . . . . . . . . . . . . . . 77
Section 7.6 Indemnification of Agent . . . . . . . . . . . . . . 78
Section 7.7 Agent in its Individual Capacity . . . . . . . . . . 78
Section 7.8 Holders of Notes . . . . . . . . . . . . . . . . . . 78
Section 7.9 Successor Agent . . . . . . . . . . . . . . . . . . 79
</TABLE>
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<PAGE> 5
EXHIBITS (continued)
<TABLE>
<S> <C> <C>
VIII. MISCELLANEOUS PROVISIONS
Section 8.1 Notices . . . . . . . . . . . . . . . . . . . . . . 80
Section 8.2 Amendments, Etc. . . . . . . . . . . . . . . . . . . 81
Section 8.3 No Waiver; Remedies Cumulative . . . . . . . . . . . 81
Section 8.4 Payment of Expenses, Etc. . . . . . . . . . . . . . 82
Section 8.5 Right of Setoff . . . . . . . . . . . . . . . . . . 83
Section 8.6 Benefit of Agreement . . . . . . . . . . . . . . . . 83
SECTION 8.7 GOVERNING LAW; SUBMISSION TO JURISDICTION . . . . . 84
Section 8.8 Counterparts . . . . . . . . . . . . . . . . . . . . 85
Section 8.9 Headings Descriptive . . . . . . . . . . . . . . . . 86
Section 8.10 Survival of Representations and Indemnities . . . . 86
Section 8.11 Severability . . . . . . . . . . . . . . . . . . . . 86
Section 8.12 Indemnification of Collateral Agents . . . . . . . . 86
Section 8.13 Joint and Several Nature of the Obligations . . . . . 87
Section 8.14 Certain Waivers . . . . . . . . . . . . . . . . . . . 87
Section 8.15 Subrogation, Etc. . . . . . . . . . . . . . . . . . . 88
Section 8.16 Commercial Paper Discussions . . . . . . . . . . . . 88
Section 8.17 Confidentiality . . . . . . . . . . . . . . . . . . . 89
EXHIBITS
Exhibit A-1 Form of Facility 1 Note
Exhibit A-2 Form of Facility 2 Note
Exhibit A-3 Form of Facility 3 Note
</TABLE>
iv
<PAGE> 6
EXHIBITS (continued)
<TABLE>
<S> <C>
Exhibit B-1 Request For Acceptance
Exhibit B-2 Form of Draft
Exhibit C Security Agreement (Warehousing Collateral)
Exhibit D Security Agreement (Servicing Collateral)
Exhibit E Cash Collateral Agreement
Exhibit F-1 Form of Opinion of New York Counsel
Exhibit F-2 Form of Opinion of Puerto Rico Counsel
Exhibit G-1 Officer's Certificate (FFCC)
Exhibit G-2 Officer's Certificate (DMC)
Exhibit H-1 Facility 1 Borrowing Base Certificate
Exhibit H-2 Facility 2 Tranche A Borrowing Base Certificate
Exhibit H-3 Facility 2 Tranche B Borrowing Base Certificate
Exhibit I Notice of Borrowing
Exhibit J Notice of Conversion/Continuation
Exhibit K Form of Power of Attorney
Exhibit L Approved Investors
Exhibit M Addresses for Notices
Exhibit N Eligible REO Criteria
Exhibit O Material Litigation
Exhibit P Debt Service Coverage Test Example
Exhibit Q Confidentiality Agreement Form
Exhibit R Permitted Subordinated Indebtedness
Exhibit S-1 REO Demand Note
Exhibit S-2 REO Pledge
Exhibit S-3 REO Mortgage
Exhibit T Pledged Servicing Portfolio Report
Exhibit U Form of Statement of Accounts Receivable
Exhibit V Authorized Officers
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and dated as of June 30, 1995, by
and between the Lenders party hereto from time to time, BANKERS TRUST COMPANY,
a New York banking corporation, as agent for the Lenders, and FIRST FINANCIAL
CARIBBEAN CORPORATION, a corporation organized under the laws of the
Commonwealth of Puerto Rico ("FFCC"), and DORAL MORTGAGE CORPORATION, a
corporation organized under the laws of the Commonwealth of Puerto Rico, and a
wholly-owned subsidiary of FFCC ("DMC", and together with FFCC, each a
"Borrower" and collectively, the "Borrowers"). Capitalized terms not otherwise
defined herein are defined in Article I.
A. The Borrowers, intending to be jointly and severally
liable, have requested that the Lenders provide revolving credit facilities and
term loans to them, to finance (i) the origination and acquisition of
residential mortgage loans, (ii) the acquisition of servicing rights relating
to residential mortgage loans, and (iii) certain working capital needs.
B. The Lenders have agreed to provide such revolving credit
facilities and term loans to the Borrowers on the terms and subject to the
conditions hereinafter set forth.
ACCORDINGLY, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms.
For purposes of this Agreement, the terms set forth below shall
have the following meanings:
"Acceptance" shall mean a Facility 1 Acceptance or a Facility 3
Acceptance, as the context shall require.
"Acceptance Obligation" shall have the meaning set forth in
Section 2.5(b).
"Acceptance Participant" shall have the meaning set forth in
Section 2.4(g).
"Accumulated Funding Deficiency" shall mean a funding deficiency
described in Section 302 of ERISA.
"Acknowledgment Agreement" shall mean an acknowledgment agreement
in form and substance satisfactory to the Agent pursuant to which FNMA, FHLMC,
GNMA or any
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<PAGE> 8
private Person which owns mortgage loans or has issued mortgaged-backed
securities for which either Borrower holds direct servicing rights,
acknowledges and recognizes the security interest in such rights granted to the
Secured Parties.
"Adjusted Tangible Net Worth" shall mean, as of any date, (a) the
sum of: (i) Book Net Worth as of such date, (ii) seventeen-twentieths of one
percent (0.85%) of the outstanding principal balance of mortgage loans with
respect to which the Borrowers have direct servicing rights on such date, and
(iii) the aggregate principal amount of Permitted Subordinated Indebtedness
outstanding as of such date, less (b) all excess servicing fees receivable, all
purchased loan administration contracts and all other assets that would be
classified as intangible assets under GAAP, including purchased and capitalized
value of servicing rights, goodwill (whether representing the excess cost over
book value of assets acquired or otherwise), patents, trademarks, trade names,
copyrights, franchises, deferred charges (including unamortized debt discount
and expense, organization and acquisition costs and research and product
development costs), and in accordance with FASB 65, as amended by FASB 122, by
the Financial Accounting Standards Board, any originated mortgage servicing
rights.
"Administrative Fee" shall have the meaning set forth in Section
2.10(d).
"Affiliate" shall mean, as to any Person, any other Person
directly or indirectly Controlling, Controlled by or under direct or indirect
common Control with, such Person, whether through the ownership of voting
securities, by contract or otherwise. "Control" as used herein (and all forms
of the word) means the power to direct the management and policies of a Person.
"Agency" shall mean FHA, FHLMC, FNMA, GNMA or VA.
"Agency Custodial Agreement" shall mean the agreement, as amended,
modified or supplemented from time to time, between FHLMC, FNMA or GNMA, as
applicable, and the Borrowers and any Person meeting the eligibility
requirements set forth in the FHLMC Guide, FNMA Guide or GNMA Guide, as
applicable, to serve as a "custodian," "certificating custodian," or as
"document custodian", as applicable, pursuant to which such Person is
authorized to act as Certificating Custodian.
"Agency Fee" shall have the meaning given such term in Section
2.10(e).
"Agency Guides" shall mean the FHLMC Guide, the FNMA Guide and the
GNMA Guide.
"Agent" shall mean Bankers Trust Company, in its capacity as agent
for the Lenders hereunder, and any successor agent appointed pursuant to
Section 7.9.
"Agreement" shall mean this Agreement, as amended, modified or
supplemented from time to time.
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<PAGE> 9
"Approved Investor" shall mean FNMA, FHLMC or any Person listed on
Exhibit L. At the request of the Borrowers, the Required Facility 1 Lenders
may from time to time agree in writing to add Persons to the list set forth on
Exhibit L. By written notice to the Borrowers, the Required Facility 1 Lenders
or the Agent may in their or its reasonable discretion, based on their or its
evaluation of the creditworthiness or funding ability of any Approved Investor
listed on Exhibit L, remove such Approved Investor from such list. Such
removal shall become effective immediately upon written notice from the Agent.
"Authorized Officers" shall mean those officers identified on
Exhibit V attached hereto; provided that FFCC or DMC, as the case may be, may,
with respect to its Authorized Officers, by notice to the Agent in accordance
with Section 8.1, add or delete any person from the list of Authorized Officers
set forth above.
"Bank Book" shall mean that certain binder entitled "First
Financial Caribbean Corporation" dated April 26, 1995 compiled by Bankers Trust
containing information delivered to Bankers Trust by the Borrowers, which
binder was delivered to each of the Lenders.
"Bankers Trust" shall mean Bankers Trust Company, in its capacity
as a Lender hereunder.
"Base Eurodollar Rate" shall mean, with respect to any Eurodollar
Loan, a rate per annum equal to the offered rate for U.S. Dollar deposits, in
an amount equal to amount of the Eurodollar Loan proposed to be subject to such
rate and with maturities comparable to such Eurodollar Interest Period, that
appears on Telerate Page 314 as of approximately 11:00 a.m., London time, two
(2) Eurodollar Business Days prior to the commencement of such Eurodollar
Interest Period; provided that if such rate does not appear on Telerate Page
314, the "Base Eurodollar Rate" applicable to a particular Eurodollar Interest
Period shall mean a rate per annum equal to the rate at which U.S. Dollar
deposits, in an amount equal to the principal amount of the Eurodollar Loans
proposed to be subject to such rate and with maturities comparable to such
Eurodollar Interest Period, are offered in immediately available funds in the
London Interbank Market to the London office of the Agent by leading banks in
the London Interbank Market as of approximately 11:00 a.m., London time, two
(2) Eurodollar Business Days prior to the commencement of the Eurodollar
Interest Period to which such Base Eurodollar Rate is applicable.
"Board" shall mean the Board of Governors of the Federal Reserve
System of the United States and any successor thereto.
"Book-Entry MBS" shall mean a Mortgage-Backed Security (a) that is
not represented by an instrument (other than the physical security issued to
GNMA's nominee, MBSCC & Co., evidencing a GNMA Mortgage-Backed Security) and
(b) the ownership and transfer of which are entered upon books maintained for
that purpose by a depository.
"Book Net Worth" shall mean (a) the sum of (i) the net worth,
determined in accordance with GAAP consistently applied, of (A) FFCC on a
non-consolidated basis,
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<PAGE> 10
(B) DMC, (C) RSC Corp., (D) Centro Hipotecaro de Puerto Rico, Inc. and (E)
other Subsidiaries of FFCC engaged primarily in the business of mortgage
banking (as reasonably determined by the Agent) and (ii) the amount of
intercompany payables between FFCC and DMC, less (b) the sum of (i) the amount
of intercompany receivables between FFCC and DMC and (ii) investments by FFCC
and/or DMC in any Subsidiaries, which investments are listed under the account
titled "Other Assets" (as such term is used in the consolidated balance sheet
of FFCC dated as of December 31, 1994) or which are listed under other
accounts. Notwithstanding the foregoing, if at any time any of the entities
listed in clauses (B), (C) or (D) above become businesses engaged primarily in
activities other than mortgage banking (as reasonably determined by the Agent),
then the net worth of such entity shall not be included in clause (i) for the
purposes of calculating Book Net Worth.
"Borrower" and "Borrowers" shall have the meaning given such terms
in the introductory paragraph.
"Borrowing" shall mean a Facility 1 Borrowing, a Facility 2
Borrowing, a Facility 3 Borrowing or a Swing-Line Borrowing.
"Borrowing Date" shall mean the Effective Date and any date on
which Bankers Trust makes a Swing-Line Loan or the Lenders make Facility 1
Loans, Facility 2 Loans or Facility 3 Loans at the Borrowers' request pursuant
to Section 2.2.
"BTCCM" shall mean Bankers Trust Caribe Capital Markets, Inc., a
corporation organized under the laws of the Commonwealth of Puerto Rico and
licensed as a broker-dealer.
"Business Day" shall mean any day other than (i) a Saturday,
Sunday and any other day on which banks in New York City are required or
authorized to close or (ii) any public or bank holiday in the Commonwealth of
Puerto Rico.
"Cash Collateral Account" shall have the meaning set forth in the
Cash Collateral Agreement.
"Cash Collateral Agreement" shall mean the Cash Collateral
Agreement, substantially in the form of Exhibit E hereto, as amended, modified
or supplemented from time to time.
"Cash Collateral Security" shall mean the cash collateral pledged
to the Agent and the Secured Parties pursuant to the Cash Collateral Agreement,
as such amount may fluctuate from time to time.
"Certificating Custodian" shall mean any Person acting as the
Borrowers' "document custodian," "custodian" or "certificating custodian," as
such terms are used in the Agency Guides, for purposes of (a) certifying that
the documentation relating to Mortgage Loans received by such Person from the
Borrowers (or the Warehousing Collateral Agent) is complete and acceptable
under an applicable Agency Guide for purposes of including such
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<PAGE> 11
Mortgage Loan in a pool of Mortgage Loans in which Mortgage-Backed Securities
will represent interests and (b) holding such documentation following formation
of such pools and issuance of such Mortgage-Backed Securities. The
Certificating Custodian shall at all times be party to the Agency Custodial
Agreements. The Certificating Custodian shall be initially Banco Popular de
Puerto Rico.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations issues thereunder as from time
to time in effect.
"Collateral" shall mean the Warehousing Collateral, the Servicing
Collateral, the Collateral as defined in the Cash Collateral Agreement, the REO
Notes and the REO Property encumbered by the REO Mortgages.
"Collateral Agents" shall mean the Warehousing Collateral Agent
and the Servicing Collateral Agent.
"Collateral Value of the Facility 1 Borrowing Base" shall mean, at
the time of determination thereof, (a) the aggregate collateral value of all
Eligible Conforming Mortgage Loans and Eligible Non-Conforming Mortgage Loans
included in the Facility 1 Borrowing Base plus (b) the aggregate collateral
value of all Eligible Mortgage-Backed Securities included in the Facility 1
Borrowing Base. For purposes hereof, the collateral value of (x) each Eligible
Conforming Mortgage Loan and each Eligible Mortgage-Backed Security shall be
an amount equal to ninety-six percent (96%) of the current unpaid principal
balance of such Mortgage Loan or the unpaid principal balance of such
Mortgage-Backed Security at the time such Mortgage-Backed-Security is included
in the Facility 1 Borrowing Base, as applicable, and (y) each Eligible
Non-Conforming Mortgage Loan shall be in an amount equal to ninety-two percent
(92%) of the current unpaid principal balance thereof provided that if the
Agent, in its sole discretion, at any time believes that the collateral value
of any Seasoned Loan included in the Facility 1 Borrowing Base is greater than
the Fair Market Value of such Seasoned Loan then the collateral value of any
such Seasoned Loan shall, until further notice from the Agent, be equal to (I)
in the case of each Eligible Conforming Mortgage Loan, ninety-six percent (96%)
of the lesser of (x) the Fair Market Value of such Seasoned Loan and (y) the
current unpaid principal balance of such Seasoned Loan and (II) in the case of
each Eligible Non-Conforming Mortgage Loan, ninety-two percent (92%) of the
lesser of (x) the Fair Market Value of such Seasoned Loan and (y) the current
unpaid principal balance of such Seasoned Loan. The Collateral Value of the
Facility 1 Borrowing Base shall be determined by reference to the most recent
Facility 1 Borrowing Base Certificate delivered by the Borrowers to the Agent
absent any error in such Facility 1 Borrowing Base Certificate as of the date
delivered. By adding any Mortgage Loan or Mortgage-Backed Security to the
Facility 1 Borrowing Base in accordance with the Warehousing Security
Agreement, each Borrower shall be deemed to represent and warrant to the Agent
and each Lender at and as of the date of such addition that with respect to
such Mortgage Loans or Mortgage-Backed Securities, that each of the statements
set forth in the definition of Eligible Conforming Mortgage Loan, Eligible Non-
Conforming Mortgage Loan or Eligible Mortgage-Backed Security, as the case may
be, is true and correct. If any such statement proves to be untrue or
incorrect in any respect at any time, then such Mortgage Loan or
Mortgage-Backed Security,
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<PAGE> 12
as the case may be, shall be deemed to have no collateral value for purposes of
computing the Collateral Value of the Facility 1 Borrowing Base.
"Collateral Value of the Facility 2 Tranche A Borrowing Base"
shall mean, at the time of determination thereof, an amount equal to seventy
percent (70%) of the aggregate amount of Eligible Servicing Receivables that
are included in the Facility 2 Tranche A Borrowing Base at such time. The
Collateral Value of the Facility 2 Tranche A Borrowing Base shall be determined
by reference to the most recent Facility 2 Tranche A Borrowing Base Certificate
delivered by the Borrowers to the Agent absent any error in such Facility 2
Tranche A Borrowing Base Certificate as of the date delivered. Notwithstanding
the foregoing, no Eligible Servicing Receivable shall be deemed to have any
collateral value for purposes of computing the Collateral Value of the Facility
2 Tranche A Borrowing Base (x) on the date of repayment of any advanced amount
which is an Eligible Servicing Receivable by any Obligor or any other Person
(including any Agency) and (y) to the extent such reimbursement right which is
an Eligible Servicing Receivable is being contested or disputed by any
applicable Agency or by any Person who could be liable for such reimbursement
or by any other Person with standing to do so. By adding any Eligible
Servicing Receivable to the Facility 2 Tranche A Borrowing Base in accordance
with the Servicing Security Agreement, each Borrower shall be deemed to
represent and warrant to the Agent and each Lender at and as of the date of
such addition that with respect to such Eligible Servicing Receivable, each of
the statements set forth in the definition of Eligible Servicing Receivable, is
true and correct. If any such statement proves to be untrue or incorrect in
any respect at any time, then such Eligible Servicing Receivable shall be
deemed to have no collateral value for purposes of computing the Collateral
Value of the Facility 2 Tranche A Borrowing Base.
"Collateral Value of the Facility 2 Tranche B Borrowing Base"
shall mean, at any time, an amount equal to fifty percent (50%) of the REO
Valuation of the REO Property included in the Facility 2 Tranche B Borrowing
Base at such time. The Collateral Value of the Facility 2 Tranche B Borrowing
Base shall be determined by reference to the most recent Facility 2 Tranche B
Borrowing Base Certificate delivered by the Borrowers to the Agent absent any
error in such Facility 2 Tranche B Borrowing Base Certificate as of the date
delivered.
"Collateral Value of the Facility 3 Borrowing Base" shall mean, at
the time of determination thereof, an amount equal to the lesser of (i)
fifty-five percent (55%) of the fair market value of the servicing rights
relating to the mortgage loans included in the Pledged Servicing Portfolio and
(ii) 0.85% of the unpaid principal balance of the mortgage loans included in
the Pledged Servicing Portfolio (in each case as reflected on the most recent
Pledged Servicing Valuation Report delivered to the Agent). Notwithstanding
the foregoing, in no event shall the total amount of outstanding Facility 3
Loans and Facility 3 Acceptance Obligations which are secured by a pledge of
the portion of FNMA/FHLMC Servicing Portfolio consisting of servicing rights
relating to FNMA loans and FNMA Mortgaged-Backed Securities, exceed $1,500,000.
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<PAGE> 13
"Commitments" shall mean the Facility 1 Commitments, the Facility
2 Commitments and the Facility 3 Commitments.
"Conforming Loan" shall mean a Mortgage Loan underwritten in
conformity with the underwriting standards of FNMA or FHLMC in effect at the
time of such underwriting and that is otherwise eligible for inclusion in a
pool of Mortgage Loans supporting FNMA or FHLMC Mortgage-Backed Securities or
for sale at the FNMA or FHLMC cash window.
"Contractual Obligation" shall mean, as to any Person, any
provision of any security issued by such Person or of any agreement, instrument
or undertaking to which such Person is a party or by which it or any of its
property is bound.
"Conventional Mortgage Loan" shall mean a Mortgage Loan that is
not insured by the FHA or guaranteed by the VA.
"Conversion/Continuation Date" shall mean (a) any date on which
the Lenders, pursuant to Sections 2.2 and 2.3, (i) convert Facility 1 Loans or
Facility 3 Loans to Facility 1 Loans or Facility 3 Loans, as the case may be,
bearing interest at a different interest rate, or continue outstanding
Eurodollar Loans for an additional Eurodollar Interest Period (which date shall
be a Eurodollar Business Day in the case of a conversion of Prime Loans or Fed
Funds Loans into Eurodollar Loans or the continuation of a Eurodollar Loan) or
(ii) exchange Old Acceptances for New Acceptances and (b) the last day of each
Eurodollar Interest Period in the case of a Eurodollar Loan.
"Credit Event" shall mean either (i) a Borrowing, or (ii) the
creation of an Acceptance as provided in Section 2.1(f)(iii).
"Default Rate" shall have the meaning given such term in Section
2.6(d).
"Defaulting Lender" shall have the meaning given such term in
Section 2.4(b).
"Discount Expense" shall have the meaning given such term in
Section 2.8(f).
"Draft" shall have the meaning given such term in Section
2.1(f)(iii).
"Effective Date" shall mean the date of this Agreement.
"Eligible Conforming Mortgage Loan" shall mean a Mortgage Loan
with respect to which each of the following statements is true and correct:
(a) such Mortgage Loan is an Eligible Mortgage Loan; and
(b) such Mortgage Loan is insured by the FHA or guaranteed by
the VA (or there exists a binding commitment to issue such insurance or
guaranty subject to the satisfaction of customary conditions) or is a
Conforming Loan.
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<PAGE> 14
"Eligible Mortgage-Backed Security" shall mean a Mortgage-Backed
Security owned by the Borrowers with respect to which each of the following
statements is true and correct:
(a) such Mortgage-Backed Security is a valid and binding
obligation of the Obligor thereon, is in full force and effect and is
enforceable in accordance with its terms;
(b) such Mortgage-Backed Security is free of any default and
from any rescission, cancellation or avoidance, and all rights thereof, whether
by operation of law or otherwise;
(c) such Mortgage-Backed Security has either been deposited
with and is held by the Warehousing Collateral Agent or an agent, bailee and
custodian of the Warehousing Collateral Agent under the Warehousing Security
Agreement (or by a Person who has executed a custodial agreement acceptable to
the Required Facility 1 Lenders), properly endorsed in blank for transfer or,
if such Mortgage-Backed Security is a Book-Entry MBS, such Mortgage-Backed
Security is the subject of a Perfected Assignment;
(d) at all times such Mortgage-Backed Security will be free and
clear of all liens, encumbrances, charges, rights and interests of any kind,
except in favor of the Secured Parties under the Warehousing Security
Agreement; and
(e) such Mortgage-Backed Security represents an interest in
Eligible Conforming Mortgage Loans.
"Eligible Mortgage Loan" shall mean a Mortgage Loan owned by the
Borrowers for which each of the following statements is true and correct:
(a) such Mortgage Loan is a valid and binding obligation of the
Obligor thereon, is in full force and effect and is enforceable in accordance
with its terms;
(b) such Mortgage Loan is secured by a first or second priority
mortgage (or deed of trust) on the Property encumbered thereby;
(c) such Mortgage Loan is genuine, in all respects, as
appearing on its face or as represented in the books and records of the
applicable Borrower, and all information set forth therein is true and correct;
(d) such Mortgage Loan is free of any material default (other
than as permitted in subsection (e) below) of any party thereto (including the
Borrowers), counterclaims, offsets and defenses and from any rescission,
cancellation or avoidance, and all rights thereof, whether by operation of law
or otherwise;
(e) no payment under such Mortgage Loan is more than thirty
(30) days past due the payment due date set forth in the underlying promissory
note and mortgage (or deed of trust);
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(f) such Mortgage Loan contains the entire agreement of the
parties thereto with respect to the subject matter thereof, has not been
modified or amended in any respect and is free of concessions or understandings
with the Obligor thereon of any kind not expressed in writing therein;
(g) such Mortgage Loan is in all respects as required by and in
accordance with all applicable laws and regulations governing the same,
including the federal Consumer Credit Protection Act and the regulations
promulgated thereunder and all applicable usury laws and restrictions; and all
notices, disclosures and other statements or information required by law or
regulation to be given, and any other act required by law or regulation to be
performed, in connection with such Mortgage Loan have been given and performed
as required;
(h) all advance payments and other deposits on such Mortgage
Loan have been paid in cash, and no part of such sums has been loaned, directly
or indirectly, by either Borrower to the Obligor thereon;
(i) at all times such Mortgage Loan will be free and clear of
all liens, encumbrances, charges, rights and interests of any kind, except in
favor of the Secured Parties under the Warehousing Security Agreement;
(j) the Property encumbered by such Mortgage Loan is insured
against loss or damage by fire and all other hazards normally included within
standard extended insurance coverage (including flood plain insurance if such
Property is located in a federally designated flood plain) in accordance with
the provisions of such Mortgage Loan with the applicable Borrower named as a
loss payee thereon;
(k) the Property encumbered by such Mortgage Loan is free and
clear of all Liens except Liens in favor of the applicable Borrower, which has
assigned any and all such Liens to the Secured Parties under the Warehousing
Security Agreement, subject only to (i) Liens junior in priority to the Lien of
such Borrower; (ii) the Lien of real property taxes and assessments not yet due
and payable; (iii) covenants, conditions and restrictions, rights of way,
easements and other matters of public record, as of the date of recording,
being acceptable to mortgage lending institutions generally and specifically
referred to in a lender's title insurance policy delivered to the originator of
the Mortgage Loan and (A) referred to or otherwise considered in the appraisal
made for the originator of the Mortgage Loan or (B) that do not materially
adversely affect the appraised value of such Property as set forth in such
appraisal; and (iv) other matters to which like properties are commonly subject
that do not materially interfere with the benefits of the security intended to
be provided by the Mortgage Loan or the use, enjoyment, value or marketability
of the related Property;
(l) if the promissory note for such Mortgage Loan (or any other
documentation relating thereto) has been withdrawn from the possession of the
Warehousing Collateral Agent on terms and subject to conditions set forth in
Section 6 of the Warehousing Security Agreement, the promissory note and any
related documentation for such Mortgage Loan has been shipped by the
Warehousing Collateral Agent directly to an Approved Investor for purchase, as
permitted under Section 6(b) of the Warehousing Security Agreement, and such
shipment has occurred within the immediately preceding twenty-four (24) hours;
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(m) with respect to Conventional Mortgage Loans, in the event
the Loan-to-Value Ratio of such Mortgage Loan exceeds eighty percent (80%),
such Mortgage Loan is the subject of a private mortgage insurance policy issued
in favor of the applicable Borrower by an insurer approved by FNMA, FHLMC, GNMA
or by nationally recognized rating agencies or pool insurers for inclusion in
privately-issued mortgage-backed securities;
(n) such Mortgage Loan has not been included in the Facility 1
Borrowing Base for a period in excess of one hundred and eighty (180) days from
the date such Mortgage Loan was first included in the Facility 1 Borrowing
Base;
(o) (i) if such Mortgage Loan is to be included in the Facility
1 Borrowing Base, the Borrowers have delivered (or caused to be delivered)
those items described on Attachment 2 to the Warehousing Security Agreement for
such Mortgage Loan to the Warehousing Collateral Agent prior to the inclusion
of such Mortgage Loan in the Facility 1 Borrowing Base; and (ii) the Borrowers
hold in trust for the Secured Parties those items described in Attachment 6 to
the Warehousing Security Agreement; and
(p) such Mortgage Loan is not subject to any servicing
arrangement with any Person other than the Borrowers nor are any servicing
rights relating to such Mortgage Loan subject to any lien, claim, interest or
negative pledge in favor of any Person other than as permitted hereunder.
"Eligible Non-Conforming Mortgage Loan" shall mean a Mortgage Loan
with respect to which each of the following statements is true and correct:
(a) such Mortgage Loan is an Eligible Mortgage Loan;
(b) such Mortgage Loan (i) would be a Conforming Mortgage Loan
but for the fact that (A) its original principal amount is in excess of the
maximum amount eligible for purchase by FNMA or (B) it is a second-priority
Mortgage Loan, or (ii) has been underwritten to guidelines approved by
nationally recognized rating agencies or pool insurers whose long term debt is
rated AAA by Standard and Poor's Corporation and AA by Moody's Investors
Service for inclusion in privately-issued mortgage-backed securities;
(c) the original principal amount of such Mortgage Loan is
$600,000 or less; and
(d) if such Mortgage Loan is a second-priority Mortgage Loan,
then if the original principal amount of such second-priority Mortgage Loan,
when added to the original principal amount of any other second Eligible
Non-Conforming Mortgage Loans which are second-priority mortgage loans included
in the Facility 1 Borrowing Base, exceeds $3,000,000, then such Mortgage Loan
shall be deemed to have no collateral value for purposes of computing the
Collateral Value of the Facility 1 Borrowing Base.
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"Eligible REO Property" shall mean REO Property meeting the
criteria set forth on Exhibit N hereto.
"Eligible Servicing Receivable" shall mean either Borrower's right
to be reimbursed for the amount that such Borrower has advanced to investors as
servicer of any FHA-insured, VA-guaranteed or Conforming Mortgage Loan included
in its Servicing Portfolio in respect of principal, interest, tax or insurance
payments or any other payments in connection with the servicing of such
Mortgage Loan, which advanced amount is fully or substantially reimbursable by
the Obligor under such Mortgage Loan or any other Person (including any
Agency), and the right of such Borrower to such reimbursement is subject to the
Lien of the Servicing Security Agreement and is also reflected on the books and
records of such Borrower as a current receivable.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be supplemented or amended, and the
rules and regulations issued thereunder as from time to time in effect.
"ERISA Affiliate" shall mean each trade or business, including the
Borrowers, whether or not incorporated, that together with the Borrowers would
be treated as a single employer under section 4001 of ERISA.
"Eurodollar Business Day" shall mean any Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London, England.
"Eurodollar Interest Period" shall mean, with respect to any
Eurodollar Loan, the period commencing on the Borrowing Date or a
Conversion/Continuation Date for such Eurodollar Loan, as the case may be, and
ending thirty (30), sixty (60) or ninety (90) days thereafter as the Borrowers
may elect in the applicable Notice of Borrowing or Notice of
Conversion/Continuation; provided that (a) any Eurodollar Interest Period that
would otherwise end on a day that is not a Eurodollar Business Day shall be
extended to the next succeeding Eurodollar Business Day, unless such Eurodollar
Business Day falls in another calendar month, in which case such Eurodollar
Interest Period shall end on the next preceding Eurodollar Business Day; (b)
any Eurodollar Interest Period that begins on the last Eurodollar Business Day
of a calendar month or any Eurodollar Interest Period that begins on a day for
which there is no numerically corresponding day in the calendar month at the
end of such Eurodollar Interest Period shall end on the last Eurodollar
Business Day of such calendar month at the end of such Eurodollar Interest
Period; and (c) no Eurodollar Interest Period shall end after (i) the Revolving
Loan Maturity Date if such interest period relates to a Facility 1 Loan and
(ii) after the Term Loan Maturity date if such interest period relates to a
Facility 3 Loan.
"Eurodollar Loan" shall mean any Facility 1 Loan or Facility 3
Loan bearing interest at the rate set forth in Section 2.6(b).
"Eurodollar Rate" shall mean, with respect to any Eurodollar
Interest Period, a rate per annum equal to the quotient obtained by dividing
(a) the Base Eurodollar Rate applicable
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to such Eurodollar Interest Period by (b) one minus the Reserve Requirement
(expressed as a decimal) applicable to such Eurodollar Interest Period. The
Eurodollar Rate shall be rounded, if necessary, to the next higher
one-sixteenth of one percent (1/16 of 1%).
"Event of Default" shall have the meaning given such term in
Article VI.
"Facility 1 Acceptance" shall have the meaning given such term in
Section 2.1(f).
"Facility 1 Acceptance Obligations" shall mean the Acceptance
Obligations relating to any Facility 1 Acceptance.
"Facility 1 Borrowing" shall mean a borrowing pursuant to a Notice
of Borrowing consisting of Facility 1 Loans made concurrently by all of the
Facility 1 Lenders.
"Facility 1 Borrowing Base" shall mean, at any time, all Eligible
Conforming Mortgage Loans, Eligible Non-Conforming Mortgage Loans and Eligible
Mortgage-Backed Securities delivered to and held by the Warehousing Collateral
Agent under the Warehousing Security Agreement as collateral security for the
Obligations.
"Facility 1 Borrowing Base Certificate" shall mean a certificate
in the form of and containing the information required by Exhibit H-1,
delivered to the Agent pursuant to the Loan Documents.
"Facility 1 Commitment" shall mean, with respect to each Lender,
the commitment, if any, of such Lender to make Facility 1 Loans or to become an
Acceptance Participant with respect to Facility 1 Acceptances hereunder as set
forth in Section 2.1(a) and 2.1(f), as such commitment may be reduced pursuant
to Section 8.6(c).
"Facility 1 Lender" shall mean any Lender with a Facility 1
Commitment or an outstanding Facility 1 Loan or Swing-Line Loan or any Lender
who is an Acceptance Participant with respect to a Facility 1 Acceptance.
"Facility 1 Loan" shall mean a loan made by a Facility 1 Lender
pursuant to Section 2.1(a) for the purposes set forth in the first sentence of
Section 4.9.
"Facility 1 Maximum Amount" shall have the meaning set forth in
Section 2.1(a).
"Facility 1 Note" shall have the meaning given such term in
Section 2.5.
"Facility 1 Settlement Account" shall have the meaning given such
term in Section 6(b) of the Warehousing Security Agreement.
"Facility 2 Borrowing" shall mean a Facility 2 Tranche A Borrowing
or a Facility 2 Tranche B Borrowing.
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"Facility 2 Collateral" shall mean the Facility 2 Tranche A
Collateral and all REO Pledges, all REO Notes and all REO Mortgages.
"Facility 2 Tranche A Collateral" shall have the meaning given
such term in the Servicing Security Agreement.
"Facility 2 Commitment" shall mean, with respect to each Lender,
the commitment, if any, of such Lender to make Facility 2 Loans hereunder as
set forth in Section 2.1(b) and (c), as such commitment may be reduced from
time to time pursuant to Section 8.6(c).
"Facility 2 Lender" shall mean any Lender with a Facility 2
Commitment or an outstanding Facility 2 Loan.
"Facility 2 Loans" shall mean Facility 2 Tranche A Loans and
Facility 2 Tranche B Loans, as the context requires.
"Facility 2 Note" shall have the meaning given such term in
Section 2.5.
"Facility 2 Tranche A Borrowing" shall mean a borrowing pursuant
to a Notice of Borrowing consisting of Facility 2 Tranche A Loans made
concurrently by all of the Facility 2 Lenders.
"Facility 2 Tranche A Borrowing Base" shall mean, at any time, all
Eligible Servicing Receivables, the proceeds of the repayment of which have
been pledged to the Servicing Collateral Agent under the Servicing Security
Agreement as collateral security for the Obligations.
"Facility 2 Tranche A Borrowing Base Certificate" shall mean a
certificate in the form of Exhibit H-2 delivered to the Agent pursuant to the
Loan Documents.
"Facility 2 Tranche A Loan" shall mean a loan made by a Facility 2
Lender pursuant to Section 2.1(b) for the purposes set forth in the second
sentence of Section 4.9.
"Facility 2 Tranche A Maximum Amount" shall have the meaning set
forth in Section 2.1(b).
"Facility 2 Tranche B Borrowing" shall mean a borrowing pursuant
to a Notice of Borrowing consisting of Facility 2 Tranche B Loans made
concurrently by all of the Facility 2 Lenders.
"Facility 2 Tranche B Borrowing Base" shall mean, at any time, all
Eligible REO Property mortgaged to the Secured Parties, as collateral security
for the Obligations.
"Facility 2 Tranche B Borrowing Base Certificate" shall mean a
certificate in the form of Exhibit H-3 delivered to the Agent pursuant to the
Loan Documents.
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"Facility 2 Tranche B Loan" shall mean a loan made by a Facility 2
Lender pursuant to Section 2.1(c) for the purposes set forth in the second
sentence of Section 4.9.
"Facility 2 Tranche B Maximum Amount" shall have the meaning set
forth in Section 2.1(c).
"Facility 3 Acceptance" shall have the meaning given such term in
section 2.1(f).
"Facility 3 Acceptance Obligations" shall mean the Acceptance
Obligations relating to Facility 3 Acceptances.
"Facility 3 Borrowing" shall mean a borrowing consisting of
Facility 3 Loans made concurrently by all of the Facility 3 Lenders.
"Facility 3 Borrowing Base" shall mean all servicing rights
relating to the Pledged Servicing Portfolio.
"Facility 3 Collateral" shall have the meaning given such term in
the Servicing Security Agreement.
"Facility 3 Commitment" shall mean, with respect to each Lender,
the commitment, if any, of such Lender to make Facility 3 Loans or to become an
Acceptance Participant with respect to Facility 3 Acceptances hereunder as set
forth in Section 2.1(c) and 2.1(f), as such commitment may be reduced pursuant
to Sections 2.7(c) and 8.6(c).
"Facility 3 Lender" shall mean a Lender with an outstanding
Facility 3 Loan or any Lender who is an Acceptance Participant with respect to
a Facility 3 Acceptance.
"Facility 3 Loan" shall mean a loan made by a Facility 3 Lender
pursuant to Section 2.1(d) for the purposes set forth in the third sentence of
Section 4.9.
"Facility 3 Maximum Amount" shall have the meaning set forth in
Section 2.1(d).
"Facility 3 Note" shall have the meaning given such term in
Section 2.5.
"Fair Market Value" shall mean at any date with respect to any
Eligible Mortgage Loan or Eligible Non-Conforming Mortgage Loan, (i) the bid
price (expressed as a percentage) quoted to the Agent as of the computation
date by any nationally recognized dealer (or Puerto Rican subsidiary of such
dealer) or investor selected by the Agent or its designee who at the time
regularly purchases similar Mortgage Loans, multiplied by (ii) the outstanding
principal balance thereof.
"FDIC" shall mean the Federal Deposit Insurance Corporation and any
successor thereto.
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<PAGE> 21
"Fed Funds Loan" shall mean any Facility 1 Loan or Facility 2 Loan
bearing interest at the rate set forth in Section 2.6(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the preceding Business
Day) by the Federal Reserve Bank of New York or, if such rate is not so
published for any day that is a Business Day, the average of the quotations for
such day on such transactions received by the Agent from three (3) Federal
funds brokers of recognized standing selected by it.
"Fees" shall mean all fees payable by the Borrowers to the Agent
and/or the Lenders pursuant to Section 2.10 or otherwise.
"FHA" shall mean the Federal Housing Administration and any
successor thereto.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation and
any successor thereto.
"FHLMC Guide" shall mean the "Sellers" & Servicers' Guide"
published by FHLMC, as amended, modified or supplemented from time to time.
"FNMA" shall mean the Federal National Mortgage Association and
any successor thereto.
"FNMA Guide" shall mean, collectively, the "Selling Guide" and the
"Servicing Guide" published by FNMA, as amended, modified or supplemented from
time to time.
"FNMA/FHLMC Servicing Portfolio" shall mean the portfolio of
outstanding residential mortgage loans (other than mortgage loans owned by
either Borrower or its Affiliates that are not covered by a Permitted Affiliate
Servicing Agreement) specified on Attachment 1-A to the Servicing Security
Agreement, as such attachment is amended, modified or supplemented from time to
time, that are owned by FNMA or FHLMC or included in pools of mortgage loans
with respect to which FNMA or FHLMC has issued a mortgage-backed security and
with respect to which either Borrower holds direct servicing rights, and that
are covered by an effective Acknowledgment Agreement.
"Funding Agreement" shall mean that certain Funding Agreement
dated as of the date hereof between the Borrowers and BTCCM.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"GNMA" shall mean the Government National Mortgage Association and
any successor thereto.
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"GNMA Guide" shall mean, collectively, the "GNMA I Mortgage-Backed
Securities Guide" and the "GNMA II Mortgage-Backed Securities Guide" published
by HUD, as amended, modified or supplemented from time to time.
"GNMA Servicing Portfolio" shall mean the portfolio of outstanding
residential mortgage loans (other than mortgage loans owned by either Borrower
or its Affiliates that are not covered by a Permitted Affiliate Servicing
Agreement) specified on Attachment 1-B to the Servicing Security Agreement, as
such attachment is amended, modified or supplemented from time to time, that
are guaranteed by GNMA or included in pools of mortgage loans with respect to
which GNMA has issued a mortgage-backed security and with respect to which
either Borrower holds direct servicing rights, and that are covered by an
effective Acknowledgment Agreement, when and if one is available.
"Governmental Authority" shall mean any nation or government, any
state, commonwealth or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Hedging Inventory Report" shall mean a report, prepared by the
Borrowers, in form and substance satisfactory to the Agent, setting forth the
existing Take-Out Commitments and all options or cash market instruments,
pursuant to which the Borrowers have hedged against interest rate fluctuations
to protect the value of Mortgage Loans and/or Mortgage-Backed Securities owned
by the Borrowers, and whether there has been any change in the hedging policies
of the Borrowers from the statement of hedging policies dated January 1995 and
delivered to the Lenders prior to the Effective Date.
"Hedging Policy" shall mean the hedging policy of the Borrowers as
described in the statement of hedging policies dated January 1995 included in
the Bank Book.
"HUD" shall mean the Department of Housing and Urban Development
and any successor thereto.
"Indebtedness" shall mean, with respect to any Person, all items
of indebtedness that, in accordance with GAAP, would be included in determining
liabilities as shown on the liability side of a statement of financial
condition of such Person as of the date as of which indebtedness is to be
determined, including all obligations for money borrowed, the deferred purchase
price of property or services and capitalized lease obligations, and shall also
include all indebtedness and liabilities of others assumed or guaranteed by
such Person, or secured by any Lien upon property owned by such Person, whether
or not such indebtedness is assumed, or in respect of which such Person is
secondarily or contingently liable (other than by endorsement of instruments in
the course of collection), including contingent reimbursement obligations of
such Person under undrawn letters of credit, whether by reason of any agreement
to acquire such indebtedness or to supply or advance sums or otherwise (but
excluding any obligations (whether recourse or nonrecourse) to advance
principal and interest payments and taxes and insurance payments on Mortgage
Loans in advance of receipt of such payments from the underlying Obligor under
servicing agreements entered into by either Borrower which agreements exist on
the date hereof and any similar agreements entered into after the date hereof).
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"Lenders" shall mean the banks and other financial institutions
party hereto from time to time.
"Lien" shall mean any security interest, mortgage, pledge, lien,
claim on property, charge or encumbrance (including any conditional sale or
other title retention agreement), any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction.
"Loan Documents" shall mean this Agreement, the Security
Agreements, the Notes, the Acknowledgment Agreements and any other document,
instrument or agreement executed by the Borrowers in connection herewith or
therewith, as any of the same may be amended, modified or supplemented from
time to time.
"Loan-to-Value Ratio" shall mean, with respect to any Mortgage
Loan, the ratio of the principal amount of such Mortgage Loan outstanding at
the origination thereof divided by the appraised value of the Property
encumbered thereby (as set forth in the appraisal delivered in connection with
the origination of such Mortgage Loan).
"Loans" shall mean the Facility 1 Loans, the Facility 2 Loans, the
Facility 3 Loans and the Swing-Line Loans.
"Margin Stock" shall have the meaning given such term in
Regulation U of the Board.
"Material Adverse Effect" shall mean a material adverse effect
with respect to (a) the business, operations or financial condition of a
Borrower, (b) the ability of any Borrower to pay and perform its Obligations,
(c) the validity or enforceability of this Agreement, any of the other Loan
Documents, the Funding Agreement or the rights and remedies of the Secured
Parties hereunder or thereunder or (d) the value of the Collateral.
"Material Amount" shall mean, at any time, ten percent (10%) of
Book Net Worth, as set forth in the most recent annual or quarterly financial
statement of FFCC delivered to the Lenders and used in FFCC's Securities and
Exchange Commission 10-K or Securities and Exchange Commission 10-Q filing, as
applicable, absent manifest error in such statement.
"Mortgage-Backed Security" shall mean (a) a security (including a
participation certificate) guaranteed by GNMA that represents interests in a
pool of loans secured by mortgages, deeds of trusts or other instruments
creating a Lien on property that is improved by a completed single family
dwelling (one-to-four family units) other than a mobile home or other temporary
housing facilities, or (ii) a security (including a participation certificate)
issued by FNMA or FHLMC that represents interests in such a pool.
"Mortgage Loan" shall mean a one-to-four family, residential real
estate secured loan other than any loan secured by mobile homes or other
temporary housing facilities.
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<PAGE> 24
"Multiemployer Plan" shall mean a plan described in section
4001(a)(3) of ERISA to which the Borrowers or any ERISA Affiliate is required
to contribute on behalf of any of its employees.
"New Acceptance" shall have the meaning set forth in Section
2.3(b).
"Notes" shall mean the Facility 1 Notes, the Facility 2 Notes and
the Facility 3 Notes.
"Notice of Borrowing" shall have the meaning given such term in
Section 2.2.
"Notice of Conversion/Continuation" shall have the meaning given
such term in Section 2.2.
"Obligations" shall mean, in respect of each of the Borrowers, any
and all debts, obligations and liabilities (including Acceptance Obligations)
of such Borrower to the Lenders, the Agent, the Collateral Agents and any other
Secured Parties, (whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owed with others, direct or indirect,
absolute or contingent, liquidated or unliquidated, and whether or not from
time to time decreased or extinguished and later increased, created or
incurred), under or arising out of the Loan Documents.
"Obligor" shall mean the Person or Persons obligated to pay the
indebtedness that is the subject of a Mortgage Loan or Mortgage-Backed
Security, including any guarantor of such indebtedness.
"Old Acceptance" shall have the meaning set forth in Section
2.3(b).
"Payment Office" shall mean the Agent's office located at One
Bankers Trust Plaza, New York, New York 10015, or such other office as the
Agent shall specify by notice to the Borrowers and the Lenders.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any successor
thereto.
"Perfected Assignment" shall mean as to any Book-Entry MBS, that
such Book-Entry MBS has been transferred to the Warehousing Collateral Agent or
any entity designated by the Warehousing Collateral Agent so that the
Warehousing Collateral Agent or such entity may maintain such Book-Entry MBS as
depository in one of its book-entry accounts with a Federal Reserve Bank or
with the Participants Trust Company or its nominee, MBSCC & Co., and a pledge
to the Secured Parties has been registered with the Warehousing Collateral
Agent or such entity, or the Borrowers has taken such other action as the
Warehousing Collateral Agent may reasonably request to perfect, protect and
maintain the valid, first priority security interest of the Secured Parties in
such Book-Entry MBS.
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<PAGE> 25
"Permitted Affiliate Servicing Agreement" shall mean an agreement
between either Borrower and an Affiliate thereof pursuant to which such
Borrower has direct servicing rights to service mortgage loans owned by such
Affiliate on terms and at rates no less favorable than would be obtained from a
non-Affiliate.
"Permitted Subordinated Indebtedness" shall mean Indebtedness
incurred by each Borrower (other than the Obligations) that is subordinated to
the Obligations in accordance with the criteria set forth on Exhibit R attached
hereto.
"Person" shall mean any corporation, natural person, firm, joint
venture, partnership, trust, unincorporated organization, government or any
political subdivision, department, agency or instrumentality of any government.
"Plan" shall mean any plan (other than a Multiemployer Plan)
subject to Title IV of ERISA maintained for employees of the Borrowers or any
ERISA Affiliate (and any such plan no longer maintained by the Borrowers or any
of its ERISA Affiliates to which the Borrowers or any of its ERISA Affiliates
has made or was required to make any contributions during the five years
preceding the date on which such plan ceased to be maintained).
"Pledged Servicing Contract" shall have the meaning given such
term in Section 2(a) of the Servicing Security Agreement.
"Pledged Servicing Portfolio" shall mean the FNMA/FLHMC Servicing
Portfolio and the GNMA Servicing Portfolio.
"Pledged Servicing Portfolio Report" shall mean a report prepared
by the Borrowers in the format prescribed by the Mortgage Bankers' Association
of America listing the FNMA/GNMA /FHLMC statistics and the other information
shown on Exhibit T.
"Pledged Servicing Valuation Report" shall mean a report prepared
by a nationally recognized mortgage servicing broker acceptable to the Agent
and the Borrowers, and otherwise in form and substance reasonably satisfactory
to the Agent, setting forth the fair market value of the servicing rights
relating to the mortgage loans included in the Pledged Servicing Portfolio as
of such date (with the FNMA/FHLMC Servicing Portfolio and the GNMA Servicing
Portfolio each listed and valued separately), with such value determined on the
basis of the net present value of the expected stream of annual cash flow
generated thereby using assumptions reasonably acceptable to the Agent.
"Power of Attorney" shall mean a power of attorney granted by the
Borrowers, substantially in the form of Exhibit K attached hereto.
"Potential Default" shall mean an event that with the lapse of
time or the giving of notice, or both, would, unless cured or waived,
constitute an Event of Default.
"Prime Loan" shall mean any Loan bearing interest at the rate set
forth in Section 2.6(a).
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<PAGE> 26
"Prime Rate" shall mean the rate of interest that is publicly
announced from time to time by Bankers Trust Company in New York City as its
prime lending rate as in effect from time to time, such rate to change
automatically and without notice to the Borrowers when and as such prime
lending rate changes. The Prime Rate is a reference rate and does not
necessarily represent the best or lowest rate actually charged by Bankers Trust
Company to any customer. Bankers Trust Company may make commercial loans or
other loans at rates of interest at, above or below the Prime Rate.
"Proceeds" shall mean whatever is receivable or received when
Collateral or proceeds are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes all rights
to payment, including return premiums, with respect to any insurance relating
thereto.
"Process Agent" shall have the meaning set forth in Section 8.7.
"Prohibited Transaction" shall mean any transaction described in
section 406 of ERISA that is not exempt by reason of section 408 of ERISA or
the transitional rules set forth in section 414(c) of ERISA and any transaction
described in section 4975(c)(1) of the Code that is not exempt by reason of
section 4975(c)(2) or section 4975(d) of the Code, or the transitional rules of
section 2003(c) of ERISA.
"Property" shall mean the real property, including the
improvements thereon, and the personal property (tangible and intangible) which
are encumbered pursuant to a Mortgage Loan.
"Real Estate Closing" shall mean a real estate closing with
respect to a Borrowing of a Facility 2 Tranche B Loan.
"Regulation D" shall mean Regulation D of the Board as from time
to time in effect, and any other regulation hereafter promulgated by the Board
to replace the prior Regulation D and having substantially the same function.
"REO Demand Note" shall mean a demand note, substantially in the
form of Exhibit S-1 hereto, as amended, modified or supplemented from time to
time.
"REO Mortgage" shall mean the deed of mortgage, substantially in
the form of Exhibit S-3 hereto, as amended, modified or supplemented from time
to time.
"REO Pledge" shall mean the pledge agreement, substantially in the
form of Exhibit S-2 hereto, as amended, modified or supplemented from time to
time.
"REO Property" shall mean real property owned by either Borrower
as a result of foreclosure of a mortgage loan held by such Borrower.
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<PAGE> 27
"REO Valuation" shall mean a valuation of the fair market value of
the REO Property, as determined by (i) an appraisal of such REO Property
conducted by an appraiser, which appraisal and appraiser meet the criteria
specified by FNMA, FHLMC and HUD in connection with the origination of Mortgage
Loans and which appraisal was conducted and had an effective date within the
ninety (90) days preceding the date of the Real Estate Closing covering such
REO Property, or (ii) an inspection report if no appraisal conducted within
such preceding ninety (90) days described in clause (i) exists, which
inspection report (A) was prepared by an appraiser described in clause (i)
above after an inspection of such REO Property, (B) is an update of a previous
appraisal described in clause (i) above, and (C) has an effective date relating
to an inspection conducted within such preceding ninety (90) days.
"Reportable Event" shall mean any of the events set forth in
section 4043(c) of ERISA or the regulations thereunder, a withdrawal from a
Plan described in section 4063 of ERISA, a cessation of operations described in
section 4068(f) of ERISA, an amendment to a Plan necessitating the posting of
security under section 401(a)(29) of the Code, or a failure to make a payment
required by section 412(m) of the Code and section 302(e) of ERISA when due.
"Request for Acceptance" shall have the meaning set forth in
Section 2.2(b).
"Required Acceptance Payment" shall have the meaning given such
term in Section 2.8(f).
"Required Facility 1 Lenders" shall mean, at any time, Lenders
holding at least sixty-six and two-thirds percent (66.66%) of (i) the then
aggregate unpaid principal amount of the Facility 1 Loans (and, in the case of
Bankers Trust, Swing-Line Loans to the extent any Lender shall have failed to
comply with its obligation to refinance such Swing-Line Loans as provided in
Section 2.4) and (ii) Facility 1 Acceptance Obligations (provided that Bankers
Trust shall be deemed to hold the Acceptance Obligations for any Lender who has
failed to pay when due any amounts due to Bankers Trust as a result of such
Lender being an Acceptance Participant) or, if no Facility 1 Loans or
Swing-Line Loans or Facility 1 Acceptance Obligations are then outstanding,
Lenders holding at least sixty-six and two-thirds percent (66.66%) of the
Facility 1 Commitments.
"Required Facility 2 Lenders" shall mean, at any time, Lenders
holding at least sixty-six and two-thirds percent (66.66%) of the then
aggregate unpaid principal amount of the Facility 2 Loans or, if no Facility 2
Loans are then outstanding, Lenders holding at least sixty-six and two-thirds
percent (66.66%) of the Facility 2 Commitments.
"Required Facility 3 Lenders" shall mean, at any time, Lenders
holding at least sixty-six and two-thirds percent (66.66%) of (i) the then
aggregate unpaid principal amount of the Facility 3 Loans and (ii) Facility 3
Acceptance Obligations (provided that Bankers Trust shall be deemed to hold the
Acceptance Obligations for any Lender who has failed to pay when due any
amounts due to Bankers Trust as a result of such Lender being an Acceptance
Participant).
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"Required Lenders" shall mean, at any time, Lenders holding at
least sixty-six and two-thirds percent (66.66%) of (i) the then aggregate
unpaid principal amount of all outstanding Facility 1 Loans (and, in the case
of Bankers Trust, Swing-Line Loans to the extent any Lender shall have failed
to comply with its obligations to refinance such Swing-Line Loans as provided
in Section 2.4), Facility 2 Loans and Facility 3 Loans and (ii) Acceptance
Obligations (provided that Bankers Trust shall be deemed to hold the Acceptance
Obligations for any Lender who has failed to pay when due any amounts due to
Bankers Trust as a result of such Lender being an Acceptance Participant), or
if no Loans or Acceptances are then outstanding, Lenders holding at least
sixty-six and two-thirds percent (66.66%) of the Commitments.
"Required Revolving Loan Lenders" shall mean at any time the
Lenders constituting the Required Facility 1 Lenders and the Required Facility
2 Lenders.
"Requirements of Law" shall mean as to any Person the Articles or
Certificate of Incorporation and Bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or a final
and binding determination of an arbitrator or a determination of a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Reserve Requirement" shall mean, with respect to any Eurodollar
Interest Period, the daily average during such Eurodollar Interest Period of
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves and taking into account any transitional
adjustments or other scheduled changes in reserve requirements during such
Eurodollar Interest Period) which is imposed under Regulation D on any member
bank of the Federal Reserve System, in respect of eurocurrency or eurodollar
funding, lending or liabilities.
"Revolving Loan Maturity Date" shall mean June 29, 1996; provided
that upon the written request of the Borrowers to the Agent, the Facility 1
Lenders and the Facility 2 Lenders may elect to extend the Revolving Loan
Maturity Date on terms as they may deem appropriate in their sole discretion.
"Seasoned Loan" shall mean an Eligible Mortgage Loan or an
Eligible Non-Conforming Mortgage Loan (a) for which the date of the underlying
promissory note relating to such underlying mortgage loan is earlier than
ninety (90) days prior to the date such Mortgage Loan is first included in the
Facility 1 Borrowing Base and (b) which was originated and underwritten by
either Borrower.
"Secured Parties" shall have the meaning given such term in the
Security Agreements.
"Security Agreements" shall mean all REO Demand Notes, all REO
Mortgages, all REO Pledges, the Warehousing Security Agreement, the Servicing
Security Agreement, the Cash Collateral Agreement and any other documents or
certificates creating or evidencing security interests granted to the Secured
Parties in connection with this Agreement and the other Loan Documents.
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"Servicing Collateral" shall mean the collateral described in
Section 1 of the Servicing Security Agreement.
"Servicing Collateral Agent" shall mean initially Bankers Trust
Company, and any successor collateral agent thereto acceptable to the Required
Facility 3 Lenders and the Borrowers and designated as the "Collateral Agent"
under the Servicing Security Agreement.
"Servicing Portfolio" shall mean, at any time, the portfolio of
outstanding residential mortgage loans (other than mortgage loans owned by the
Borrowers and its Affiliates which are not covered by Permitted Affiliate
Servicing Agreements) with respect to which the Borrowers have direct servicing
rights.
"Servicing Security Agreement" shall mean the Security and
Collateral Agency Agreement (Servicing Collateral) substantially in the form of
Exhibit D, as amended, modified or supplemented from time to time.
"Statement of Accounts Receivable" shall mean a Statement of
Accounts Receivable, substantially in the form of Exhibit U attached hereto.
"Subsidiary" shall mean with respect to any Person, any
corporation, association or other business entity of which more than fifty
percent (50%) of the securities or other ownership interests having ordinary
voting power is, or with respect to which rights to control management
(pursuant to any contract or other agreement or otherwise) are, at the time as
of which any determination is being made, owned, controlled or held by such
Person or one or more subsidiaries of such Person.
"Swing-Line Borrowing" shall mean a borrowing, pursuant to a
Notice of Borrowing, of a Swing-Line Loan made by Bankers Trust.
"Swing-Line Loan" shall mean a loan made by Bankers Trust pursuant
to Section 2.1(e) for the purposes set forth in the first sentence of Section
4.9.
"Take-Out Commitment" shall mean, with respect to any specified
aggregate amount of Mortgage Loans or Mortgage-Backed Securities included in
the Facility 1 Borrowing Base, a bona fide current, unfilled and unexpired
commitment of an Approved Investor, issued in favor of and held by either
Borrower, under which such Approved Investor agrees to purchase such specified
aggregate amount of Mortgage Loans or Mortgage-Backed Securities at a specified
price, which commitment in the reasonably anticipated course of events, (a) can
be fully complied with prior to the expiration thereof, (b) is not subject to
any term or condition that is not customary in commitments of like nature and
(c) is for a purchase to be consummated in more than thirty (30) days from the
date such commitment was entered into.
"Taxes" shall have the meaning given such term in Section 2.15(a).
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"Telerate Page 314" shall mean the display designated as "Page
314" on the Associated Press-Dow Jones Telerate Service (or such other page as
may replace Page 314 on the Associated Press-Dow Jones Telerate Service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purposes of displaying British Bankers' Association
interest settlement rates for U.S. Dollar deposits). Any Base Eurodollar Rate
determined on the basis of the rate displayed on Telerate Page 314 shall be
subject to corrections, if any, made in such rate and displayed by the
Associated Press-Dow Jones Telerate Service within one (1) hour of the time
when such rate is first displayed by such service.
"Term Loan Maturity Date" shall mean June 30, 2000.
"Total Liabilities" shall mean (i) the aggregate amount of all
liabilities of each Borrower and each of its consolidated Subsidiaries (other
than Doral Federal Savings Bank) determined in accordance with GAAP,
consistently applied, other than Permitted Subordinated Indebtedness less (ii)
the aggregate amount of intercompany payables owing from one Borrower to the
other.
"Type" shall mean (a) when used in respect of any Mortgage Loan,
an Eligible Conforming Mortgage Loan or an Eligible Non-Conforming Mortgage ;
(b) when used in respect of any Commitment, a Facility 1 Commitment, a Facility
2 Commitment or a Facility 3 Commitment; (c) when used in respect of any Loan,
a Facility 1 Loan, a Facility 2 Loan, a Facility 3 Loan or a Swing-Line Loan;
and (d) when used in respect of any Acceptance, a Facility 1 Acceptance or a
Facility 3 Acceptance.
"VA" shall mean the Veterans Administration and any successor
thereto.
"Warehousing Collateral" shall mean the collateral described in
Section 1 of the Warehousing Security Agreement.
"Warehousing Collateral Agent" shall mean initially Banco Popular
de Puerto Rico, and any successor collateral agent thereto acceptable to the
Required Facility 1 Lenders and the Borrowers and designated as the "Collateral
Agent" under the Warehousing Security Agreement.
"Warehousing Security Agreement" shall mean the Security, Custody
and Collateral Agency Agreement (Warehousing Collateral) substantially in the
form of Exhibit C, as amended, modified or supplemented from time to time.
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Section 1.2 Terms Generally.
The definitions in Section 1.1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation." All references herein to
Articles, Sections, Exhibits and Attachments shall be deemed references to
Articles and Sections of, and Exhibits and Attachments to, this Agreement or to
an Exhibit to this Agreement unless the context shall otherwise require.
Except as otherwise provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from time to
time; provided that, except as provided with respect to the adoption of FASB 65
in the definition of "Adjusted Tangible Net Worth" set forth in Section 1.1,
for purposes of determining compliance with any covenant set forth in Article
V, such term shall be construed in accordance with GAAP as in effect on the
date of this Agreement applied on a basis consistent with the financial
statements referred to in Section 4.4(a).
ARTICLE II
AMOUNTS AND TERMS OF LOANS AND ACCEPTANCES
Section 2.1 Commitments.
(a) Facility 1 Loans. Subject to and upon the terms and
conditions herein set forth, each Facility 1 Lender agrees, severally and not
jointly, at any time and from time to time from the Effective Date up to but
excluding the date upon which the Facility 1 Commitments are terminated, to
make Facility 1 Loans to the Borrowers in an aggregate principal amount at any
time outstanding not to exceed the aggregate Facility 1 Commitment set forth
opposite such Facility 1 Lender's name on the signature pages hereto, as such
commitment may be reduced from time to time pursuant to Section 8.6(c);
provided that the aggregate principal amount of Facility 1 Loans and Swing-Line
Loans plus the aggregate face amount of Facility 1 Acceptances outstanding at
any time shall not exceed the lesser of: (i) the aggregate Facility 1
Commitments of the Facility 1 Lenders then in effect and (ii) the then current
Collateral Value of the Facility 1 Borrowing Base (such lesser amount is
referred to herein as the "Facility 1 Maximum Amount"). Subject to Section
2.12, each Facility 1 Loan shall be a Eurodollar Loan or a Fed Funds Loan.
Subject to Section 2.2(a)(ii), each Facility 1 Borrowing shall be in an
aggregate principal amount of at least $1,000,000 (or in any lesser amount
equal to the unused Facility 1 Commitments) and shall be made ratably by the
Facility 1 Lenders in proportion to their respective Facility 1 Commitments.
Within the foregoing limits and subject to the conditions set forth in Article
III, the Borrowers may borrow and reborrow Facility 1 Loans under Section 2.2
and prepay Facility 1 Loans under Section 2.9.
(b) Facility 2 Tranche A Loans. Subject to and upon the terms
and conditions herein set forth, each Facility 2 Lender agrees, severally and
not jointly, at any time and from
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time to time from the Effective Date up to but excluding the date upon which
the Facility 2 Commitments are terminated, to make Facility 2 Tranche A Loans
to the Borrowers in an aggregate principal amount at any time outstanding not
to exceed the Facility 2 Commitment set forth opposite such Facility 2 Lender's
name on the signature pages hereto, as such commitment may be reduced from time
to time pursuant to Section 8.6(c); provided that the aggregate principal
amount of Facility 2 Tranche A Loans outstanding at any time shall not exceed
the lesser of (i) the aggregate Facility 2 Commitments of all of the Facility 2
Lenders then in effect less the aggregate amount of Facility 2 Tranche B Loans
outstanding and (ii) the then current Collateral Value of the Facility 2
Tranche A Borrowing Base (such lesser amount is referred to herein as the
"Facility 2 Tranche A Maximum Amount"); and provided further, that the
Borrowers shall not make any Facility 2 Tranche A Borrowing, the Facility 2
Lenders shall not make any Facility 2 Tranche A Loans and, pursuant to Section
2.8(b), no Facility 2 Tranche A Loans shall be outstanding, during the period
commencing on the seventh (7th) calendar day and ending on the twelfth (12th)
calendar day of each month. Each Facility 2 Tranche A Loan shall be a Fed
Funds Loan. Each Facility 2 Tranche A Borrowing shall be in an aggregate
principal amount of at least $500,000 (or in any lesser amount equal to the
unused Facility 2 Tranche A Commitments) and shall be made by the Facility 2
Lenders ratably in proportion to their respective Facility 2 Commitments.
Within the foregoing limits and subject to the conditions set forth in Article
III, the Borrowers may borrow and reborrow Facility 2 Loans under Section 2.2
and prepay Facility 2 Tranche A Loans under Section 2.9.
(c) Facility 2 Tranche B Loans. Subject to and upon the terms
and conditions herein set forth, each Facility 2 Lender agrees, severally and
not jointly, at any time and from time to time from the Effective Date up to
but excluding the date upon which the Facility 2 Commitments are terminated, to
make Facility 2 Tranche B Loans to the Borrowers in an aggregate principal
amount at any time outstanding not to exceed the Facility 2 Commitment set
forth opposite such Facility 2 Lender's name on the signature pages hereto, as
the same may be reduced from time to time pursuant to Section 8.6(c); provided
that the aggregate principal amount of Facility 2 Tranche B Loans outstanding
at any time shall not exceed the least of: (i) the sum of the Facility 2
Commitments of all of the Facility 2 Lenders then in effect less the aggregate
amount of Facility 2 Tranche A Loans outstanding, (ii) the then current
Collateral Value of the Facility 2 Tranche B Borrowing Base and (iii)
$2,000,000 (such least amount is referred to herein as the "Facility 2 Tranche
B Maximum Amount"). Each Facility 2 Tranche B Loan shall be a Fed Funds Loan.
Each Facility 2 Tranche B Borrowing shall in an aggregate principal amount of
at least $1,000,000 (or in any lesser amount equal to the unused Facility 2
Tranche B Commitments) and shall be made by the Facility 2 Lenders ratably in
proportion to their respective Facility 2 Commitments. No more than two (2)
Borrowings for a Facility 2 Tranche B Loan may be made hereunder. Within the
foregoing limits and subject to the conditions set forth in Article III, the
Borrowers may borrow and reborrow Facility 2 Tranche B Loans under Section 2.2
and prepay Facility 2 Tranche B Loans under Section 2.9.
(d) Facility 3 Loans. Subject to and upon the terms and
conditions herein set forth, each Facility 3 Lender agrees, severally and not
jointly, at any time and from time to time from the Effective Date up to but
excluding the date upon which the Facility 3
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Commitments are terminated, to make Facility 3 Loans to the Borrowers, in an
aggregate principal amount outstanding not to exceed the Facility 3 Commitment
set forth opposite such Facility 3 Lender's name on the signature pages hereto,
as such commitment may be reduced from time to time pursuant to Section 8.6(c)
; provided that the aggregate principal amount of Facility 3 Loans plus the
aggregate face amount of Facility 3 Acceptances outstanding at any time shall
not exceed the lesser of: (i) the aggregate Facility 3 Commitments of the
Facility 3 Lenders as such commitments shall be reduced in accordance with
Section 2.7(c) and (ii) the then current Collateral Value of the Facility 3
Borrowing Base (such lesser amount is referred to herein as the "Facility 3
Maximum Amount"). Subject to Section 2.12, each Facility 3 Loan shall be a
Eurodollar Loan or a Prime Loan. Once prepaid or repaid, Facility 3 Loans may
not be reborrowed. Prior to the Term Loan Maturity Date and subject to the
conditions precedent to the creation of an Acceptance set forth in Section
2.1(f)(iii), nothing contained in this Section 2.1(d) shall prevent the
Borrowers from converting Facility 3 Loans or exchanging Facility 3 Acceptances
in accordance with Section 2.3 after the expiration of the Facility 3
Commitments provided that no additional sums are borrowed or increased
Acceptance Obligations are created.
(e) Swing-Line Loans. Subject to and upon the terms and
conditions herein set forth, Bankers Trust may, in its sole discretion, at any
time and from time to time from the Effective Date up to but excluding the
Revolving Loan Maturity Date, make Swing-Line Loans to the Borrowers in an
aggregate principal amount at any time outstanding not to exceed $10,000,000;
provided that the aggregate principal amount of Swing-Line Loans outstanding at
any time shall not exceed the limitations set forth in Section 2.1(a). Subject
to Section 2.12, Each Swing-Line Loan shall be a Fed Funds Loan. Within the
foregoing limits and subject to the conditions set forth in Article III, the
Borrowers may borrow and reborrow Swing-Line Loans under Section 2.2 and prepay
such Loans under Section 2.9. If Bankers Trust, in its sole discretion, elects
not to make a Swing-Line Loan on any date, the Agent shall treat the Notice of
Borrowing for such Swing-Line Loan as a Notice of Borrowing for Facility 1
Loans.
(f) Bankers' Acceptances. (i) Subject to and upon the terms
and conditions herein set forth, the Borrowers, at any time and from time to
time on or after the Effective Date up to but excluding the date on which the
Facility 1 Commitments are terminated, may request that Bankers Trust accept a
draft (a "Facility 1 Acceptance") as herein provided in lieu of borrowing
additional sums under the Facility 1 Commitments in an aggregate face amount at
any time outstanding not to exceed the aggregate Facility 1 Commitments, as
such commitments may be reduced from time to time pursuant to Section 8.6(c);
provided that the aggregate principal amount of Facility 1 Loans and Swing-Line
Loans plus the aggregate face amount of all Facility 1 Acceptances outstanding
at any time shall not exceed the Facility 1 Maximum Amount.
(ii) Subject to and upon the terms and conditions herein set
forth, the Borrowers, at any time and from time to time on or after the
Effective Date up to but excluding the date on which the Facility 3 Commitments
are terminated, may request that Bankers Trust accept a draft (a "Facility 3
Acceptance") as herein provided in lieu of borrowing additional sums under the
Facility 3 Commitments, in an aggregate face amount at any time outstanding not
to
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exceed the aggregate Facility 3 Commitments as such commitments may be reduced
from time to time pursuant to Section 8.6(c); provided that the aggregate
principal amount of all Facility 3 Loans plus the aggregate face amount of
Facility 3 Acceptances outstanding at any time shall not exceed the Facility 3
Maximum Amount. Prior to the Term Loan Maturity Date and subject to the
conditions precedent to the creation of an Acceptance set forth in Section
2.1(f)(iii), nothing contained in this Section 2.1(f)(ii) shall prevent the
Borrowers from converting Facility 3 Loans or exchanging Facility 3 Acceptances
in accordance with Sections 2.3(b) after the expiration of the Facility 3
Commitments provided that no additional sums are borrowed or increased
Acceptance Obligations are created.
(iii) Bankers Trust may create Acceptances in its sole and
absolute discretion upon a request by the Borrowers delivered in accordance
with clause (i) or (ii) above, and each such Acceptance shall be created
hereunder by Bankers Trust's accepting a draft, in substantially the form of
Exhibit B-2 hereto (a "Draft"). Each Draft shall be (a) drawn by the Borrowers
on Bankers Trust in accordance with the terms hereof and be payable in U.S.
Dollars, (b) payable only to the order of BTCCM, (c) dated the date of
acceptance of such Draft by Bankers Trust, (d) in a face amount at least equal
to $1,000,000 and shall (e) mature on a Business Day either thirty (30), sixty
(60) or ninety (90) days after the date of such Draft; provided that in no
event shall an Acceptance (i) be created unless the conditions set forth in
Article III have been satisfied with respect to the issuance of such
Acceptance, (ii) mature after the Revolving Loan Maturity Date in the case of
Facility 1 Acceptances or the Term Loan Maturity Date in the case of Facility 3
Acceptances, or (iii) have a face amount, (A) in the case of Facility 1
Acceptances together with the aggregate face amount of all other Facility 1
Acceptances plus the aggregate principal amount of Facility 1 Loans and
Swing-Line Loans then outstanding, exceeding the Facility 1 Maximum Amount and
(B) in the case of Facility 3 Acceptances, together with the aggregate face
amount of all other Facility 3 Acceptances plus the aggregate principal amount
of Facility 3 Loans then outstanding, exceeding the Facility 3 Maximum Amount.
(iv) The Borrowers hereby acknowledge and agree that (a) Bankers
Trust has no obligation to discount any Acceptance, (b) Bankers Trust has no
obligation to create any Acceptance except in the exercise of its sole and
absolute discretion and, if and to the extent that any Acceptance is created,
such Acceptance may only be discounted by BTCCM in accordance with the Funding
Agreement which shall be in full force and effect and (c) on the date of the
creation by Bankers Trust of any Acceptance, Bankers Trust is only obligated to
deliver such Acceptance as set forth in the Request for Acceptance and to pay
such Acceptance in accordance with its terms.
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Section 2.2 Method of Borrowing and of Conversions/Continuations;
Creation of Acceptances.
(a) Whenever the Borrowers desire to make a Facility 1
Borrowing, a Facility 2 Borrowing, a Facility 3 Borrowing or a Swing-Line
Borrowing hereunder, to convert any Facility 1 Loan or Facility 3 Loan pursuant
to Section 2.3 or to continue any Facility 1 Loan or Facility 3 Loan for an
additional Eurodollar Interest Period pursuant to Section 2.3, an Authorized
Officer shall deliver to the Agent written notice of such proposed Borrowing,
conversion or continuation (a "Notice of Borrowing" or "Notice of
Conversion/Continuation," as the case may be), each such notice to be given (x)
prior to 12:00 noon (New York City time) on the date of such proposed Borrowing
or conversion, in the case of a Borrowing of Prime Loans or Fed Funds Loans or
a conversion of Eurodollar Loans into Prime Loans or Fed Funds Loans; and (y)
prior to 12:00 noon (New York City time) on the third Eurodollar Business Day
before the date of such proposed Borrowing, conversion or continuation (which
date shall be a Eurodollar Business Day), in the case of a Borrowing of
Eurodollar Loans, a conversion of Prime Loans or Fed Funds Loans into
Eurodollar Loans or a continuation of Eurodollar Loans for an additional
Eurodollar Interest Period. Each such notice shall be irrevocable and shall be
in the form of Exhibit I or J, as the case may be. Notwithstanding any other
provision hereof to the contrary, (i) no more than four (4) Eurodollar Interest
Periods for Facility 1 Loans and Facility 3 Loans may be in effect hereunder at
any time; and (ii) no Facility 1 Borrowing or Facility 3 Borrowing of
Eurodollar Loans shall be in an aggregate principal amount of less than
$1,000,000.
(b) Whenever the Borrowers desire to have Bankers Trust accept
a Draft the Borrowers shall, prior to 12:00 noon (New York City time) on the
Business Day prior to the proposed date of creation of such Acceptance, deliver
to (i) Bankers Trust a notice, in substantially the form of Exhibit B-1 hereto
("Request for Acceptance"), specifying the information necessary to complete
the relevant Draft or Drafts, and (ii) the Collateral Agent, Collateral of the
type required for the Facility 1 Borrowing Base or the Facility 3 Borrowing
Base, as applicable, so that the condition precedent set forth in Section
3.1(b)(iii) hereof shall be satisfied with respect to the Acceptance to be
created. Not later than 12:00 noon (New York City time) on the Business Day
specified by the Borrowers in the Request for Acceptance and upon fulfillment
of the applicable conditions set forth in Article III, Bankers Trust, will, if
it chooses to do so in the exercise of its sole and absolute discretion and in
accordance with such Request for Acceptance, (x) fill in the date, amount and
tenor of a Draft or Drafts in such denominations as the Borrowers shall specify
in such Request for Acceptance, (y) accept such Draft or Drafts at its address
referred to in Section 8.1 and (z) deliver such Acceptance or Acceptances as
set forth in the Request for Acceptance.
(c) Without in any way limiting the Borrowers' obligation to
deliver to the Agent a copy of any written Notice of Borrowing, Notice of
Conversion/Continuation or Request for Acceptance, the Agent may act without
liability upon the basis of any telephonic Notice of Borrowing, Notice of
Conversion/Continuation or Request for Acceptance believed by the Agent in good
faith to be from an Authorized Officer prior to receipt of written
confirmation. In each such case, the Borrowers hereby waive the right to
dispute the Agent's record of the terms of such telephonic notice. An
Authorized Officer shall promptly confirm
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in writing any Notice of Borrowing, Notice of Conversion/Continuation or
Request for Acceptance given by telephone.
(d) On the date of receipt of any Notice of Borrowing or Notice
of Conversion/Continuation), the Agent shall promptly give (and in any event by
1:00 p.m. (New York City time)) each Lender with a related Commitment
telefacsimile notice of each proposed Facility 1 Borrowing, Facility 2
Borrowing or Facility 3 Borrowing, such Lender's proportionate share thereof,
each proposed conversion or continuation and any other matters covered by the
Notice of Borrowing or Notice of Conversion/Continuation. Upon the creation or
exchange of an Acceptance by Bankers Trust, the Agent shall promptly give each
Acceptance Participant telefacsimile notice of the creation or exchange of any
Acceptance and any other matters set forth in the Request for Acceptance
relating to the Acceptance. The Agent shall not be required to notify any
Lender (other than Bankers Trust) of a Swing-Line Borrowing.
(e) Unless otherwise specified in a Notice of Borrowing, each
Loan to be made as part of a Facility 1 Borrowing shall be made as a Fed Funds
Loan and each Loan to be made as part of a Facility 3 Borrowing shall be made
as a Prime Loan. If a timely notice as specified in Section 2.2(a) is not
received from the Borrowers prior to the expiration of any Eurodollar Interest
Period for any outstanding Eurodollar Loan, the Borrowers shall be deemed to
have irrevocably elected to convert such Loan into a Fed Funds Loan in the case
of a Facility 1 Loan and a Prime Loan in the case of a Facility 3 Loan. The
Agent will endeavor to notify the Borrowers prior to the expiration of any
Eurodollar Interest Period but shall have no liability for failure to provide
such notice.
(f) By delivering a Notice of Conversion/Continuation to the
Agent hereunder of the continuation of any Eurodollar Loans for an additional
Eurodollar Interest Period or the conversion of any outstanding Loans to
Eurodollar Loans, or by delivering a notice in accordance with Section 2.3(b)
for the exchange of any Acceptances, the Borrowers shall be deemed to have
represented and warranted that no Potential Default or Event of Default has
occurred and is continuing.
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Section 2.3 Conversions/Continuations of Loans; Exchange of Acceptances.
(a) Subject to the terms and conditions hereof and in
accordance with the procedures for conversions and continuations and the other
provisions set forth in Section 2.2, each Facility 1 Lender agrees to convert
outstanding Facility 1 Loans that are Fed Funds Loans into Eurodollar Loans and
Eurodollar Loans into Fed Funds Loans and to continue Facility 1 Loans that are
Eurodollar Loans for an additional Eurodollar Interest Period, in each case in
an aggregate principal amount not to exceed the principal amount of the Fed
Funds Loans or Eurodollar Loans, as the case may be, being converted or
Eurodollar Loans, as the case may be, being continued; provided that no Lender
shall convert any Facility 1 Loan into a Eurodollar Loan or continue any
Eurodollar Loan for an additional Eurodollar Interest Period if a Potential
Default or an Event of Default has occurred and is continuing. Subject to the
terms and conditions hereof and in accordance with the procedures for
conversions and continuations and the other provisions set forth in Section
2.2, each Facility 3 Lender agrees to convert outstanding Facility 3 Loans that
are Prime Loans into Eurodollar Loans and Eurodollar Loans into Prime Loans and
to continue Facility 3 Loans that are Eurodollar Loans for an additional
Eurodollar Interest Period, in each case in an aggregate principal amount not
to exceed the principal amount of the Prime Loans or Eurodollar Loans, as the
case may be, being converted or Eurodollar Loans being continued; provided that
no Lender shall convert any Facility 3 Loan into a Eurodollar Loan or continue
any Eurodollar Loan for an additional Eurodollar Interest Period if a Potential
Default or an Event of Default has occurred and is continuing. Each Lender
will make such conversion without an exchange of funds.
(b) Subject to the terms and conditions hereof and in accordance
with the procedures for accepting Drafts set forth in Section 2.1(f)(iii) and
the other procedures for creating Acceptances and exchanges thereof set forth
in Section 2.2, Bankers Trust, if it chooses to do so in the exercise of its
sole and absolute discretion, shall exchange any existing Acceptance (an "Old
Acceptance") for a new Acceptance (a "New Acceptance") on the maturity date of
such Old Acceptance, provided that (i) all conditions precedent to the issuance
of an Acceptance set forth in Section 2.1(f) have been satisfied and (ii) the
Borrowers shall have paid to Bankers Trust the amounts required to be paid
pursuant to Section 2.8(f). If the Borrowers desire to, or if the Borrowers
have requested BTCCM to, have Bankers Trust exchange an Old Acceptance for a
New Acceptance on the maturity date of such Old Acceptance, the Borrowers or
BTCCM, as applicable, shall give Bankers Trust notice thereof no later than
12:00 noon (New York City time) two (2) Business Days prior to the maturity
date of the Old Acceptance being exchanged. The Borrowers hereby authorize
Bankers Trust to replace an Old Acceptance with a New Acceptance if Bankers
Trust receives authorization therefor from BTCCM pursuant to the Funding
Agreement. The requirements governing the issuance by Bankers Trust of a New
Acceptance shall be the same requirements for the issuance of an Acceptance
hereunder except that prior to the issuance of the New Acceptance (i) the
Borrowers or BTCCM, as applicable, shall deliver the Old Acceptance marked
"canceled" or "paid" to Bankers Trust, at the Acceptance Desk, 12th Floor, 130
Liberty Street, New York, New York 10006 or to such other place as Bankers
Trust directs, and (ii) the Borrowers shall have paid to Bankers Trust the
amounts required pursuant to Section 2.8(f).
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Section 2.4 Disbursement of Funds; Bank Acceptance Participants.
(a) No later than 2:00 p.m. (New York City time) on the date of
each Facility 1 Borrowing, Facility 2 Borrowing and Facility 3 Borrowing, each
Facility 1 Lender, Facility 2 Lender or Facility 3 Lender, as the case may be,
will make available to the Agent the full amount of such Lender's pro rata
share of such Borrowing, in immediately available funds, by wire transfer of
such funds to the Agent at the Payment Office. Unless the Agent determines
that any applicable condition in Article III has not been satisfied, the Agent
shall make the funds so received from the Lenders available to the Borrowers by
wire transfer of such funds to such account as the Borrowers through the Agent
may direct in writing for such purpose. If a Facility 1 Borrowing, a Facility
2 Borrowing or a Facility 3 Borrowing does not occur on the requested date
because any condition precedent herein specified has not been satisfied, the
Agent shall so notify the affected Lenders promptly and shall return the
amounts so received to the respective Lenders.
(b) Unless the Agent has been notified by any Facility 1
Lender, Facility 2 Lender or Facility 3 Lender, as the case may be, before 2:00
p.m. (New York City time) on the date of a proposed Facility 1 Borrowing,
Facility 2 Borrowing or Facility 3 Borrowing, as the case may be, that such
Lender does not intend to make available to the Agent on such date such
Lender's portion of such Facility 1 Borrowing, Facility 2 Borrowing or Facility
3 Borrowing, the Agent may assume that such Lender will make such amount
available to the Agent on such date and the Agent may (but shall not be
obligated to) make available to the Borrowers a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Lender
(a "Defaulting Lender") on such date, the Agent shall be entitled to recover
such corresponding amount on demand from such Defaulting Lender, together with
interest at the overnight Federal Funds Rate for each day until paid. A
Defaulting Lender shall be deemed to have assigned to the Agent the right to
receive any and all payments due to it in respect of the Obligations until the
sum of such payments received by the Agent is equal to the amount owed to the
Agent by such Defaulting Lender pursuant to the preceding sentence. The
foregoing assignment shall be deemed to be a power coupled with an interest and
shall be absolute and irrevocable. Nothing in this subsection shall be deemed
to relieve any Lender from its obligation to fulfill its obligation to make
Loans hereunder or to prejudice any rights that the Borrowers, the Agent or any
Lender may have against any Defaulting Lender hereunder.
(c) No later than 3:00 p.m. (New York City time) on the date of
each Swing-Line Borrowing, Bankers Trust shall, unless it has elected not to
make a Swing-Line Loan pursuant to the related Notice of Borrowing, or unless
it determines that any applicable condition in Article III has not been
satisfied, make the full amount of such Swing-Line Borrowing available to the
Borrowers by wire transfer of such funds such account as the Borrowers may
direct in writing for such purpose.
(d) No later than 12:00 noon (New York City time) on any
Business Day, the Agent shall, upon Bankers Trust's request, notify each
Facility 1 Lender of the aggregate principal amount of Swing-Line Loans that
are outstanding and the amount of Facility 1 Loans required to be made by each
Facility 1 Lender (including Bankers Trust) to refinance
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such outstanding Swing-Line Loans (which amount shall be equal to each Facility
1 Lender's pro rata share of such outstanding Swing-Line Loan and which notice
shall be deemed automatically given upon the occurrence of an Event of Default
under 6.1(h)). Interest on the Swing-Line Loans being refinanced shall be
payable by the Borrowers in accordance with Section 2.6. Bankers Trust may
request that the Swing-Line Loans be refinanced pursuant to this Section 2.4(d)
on any Business Day.
(e) No later than 2:00 p.m. (New York City time) on each date
that the Agent gives notices to the Facility 1 Lenders of the refinancing of
Swing-Line Loans pursuant to Section 2.4(d), each Facility 1 Lender will make
available to the Agent for payment to Bankers Trust the full amount of such
Lender's pro rata share of the outstanding amount of Swing-Line Loans being
refinanced. Each amount made available to the Agent pursuant to this Section
2.4(e) (including Bankers Trust's pro rata share of such amount) shall be
deemed a Facility 1 Loan. Each such Swing-Line Loan being refinanced as a
Facility 1 Loan shall be Fed Funds Loan. The proceeds of Facility 1 Loans made
pursuant to this Section 2.4(e) shall be paid to the Agent (and not to the
Borrowers ) and then paid over by the Agent to Bankers Trust, to be applied to
the outstanding Swing-Line Loans. The Borrowers authorize the Agent to charge
any account maintained by the Borrowers with the Agent in order to immediately
pay the Agent the amount of such outstanding Swing-Line Loans, to the extent
amounts received from the Facility 1 Lenders are insufficient to repay in full
the outstanding Swing-Line Loans to be refinanced. If any portion of any
amount paid to the Agent by the Borrowers pursuant to this Section 2.4(e)
(other than any amounts received by the Agent pursuant to the preceding
sentence) should be recovered by or on behalf of the Borrowers from the Agent
or Bankers Trust in bankruptcy or otherwise, the loss of the amount so
recovered shall be ratably shared among all the Facility 1 Lenders. In the
event that a refinancing of the Swing-Line loans cannot be made for any reason
on any date required by Bankers Trust, each Facility 1 Lender hereby agrees
that it shall immediately purchase from Bankers Trust (without recourse or
warranty) such assignment of the outstanding Swing-Line Loans as shall be
necessary to cause the Facility 1 Lenders to share in such Swing-Line Loans
ratably based on their respective pro rata Facility 1 Commitments; provided
that all interest payable on such Swing-Line Loans shall be for the account of
Bankers Trust until the date the respective assignment is purchased and, to the
extent attributable to the purchased assignment, shall be for the account of
the Facility 1 Lender purchasing the assignment from and after the date of such
purchase. Each Facility 1 Lender's obligation to make Facility 1 Loans or
purchase assignments pursuant to this Section 2.4(e) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (1) any setoff, counterclaim, recoupment, defense or other right
that such Facility 1 Lender may have against the Agent, Bankers Trust, any
Lender, the Borrowers or any other Person for any reason whatsoever; (2) the
occurrence or continuance of a Potential Default or Event of Default; (3) any
adverse change in the condition (financial or otherwise) of the Borrowers ; (4)
any breach of this Agreement or any other Loan Document by the Borrowers, the
Agent or any Lender; or (5) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing including those
described in Section 2.4(k); provided that in no event shall a Facility 1
Lender be obligated to make a Facility 1 Loan pursuant to this Section 2.4(e)
if after giving effect thereto, the outstanding principal amount of such
Facility 1 Lender's Facility 1 Loans plus its pro rata share of any Swing-Line
Loans
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remaining outstanding plus its pro rata share of the aggregate face amount of
Facility 1 Acceptances outstanding would exceed its Facility 1 Commitment. If
any Lender fails to make the full amount of its Facility 1 Loan available to
the Agent pursuant to this Section 2.4(e), Bankers Trust shall be entitled to
recover such corresponding amount on demand from such Lender together with
interest for each day until paid at the overnight Fed Funds Rate. Such Lender
shall be deemed to have assigned to Bankers Trust the right to receive any and
all payments due to it in respect of the Obligations until the sum of such
payments received by the Agent and paid over to Bankers Trust is equal to the
amount owed to Bankers Trust by such Lender pursuant to the preceding sentence.
The foregoing assignment shall be deemed to be a power coupled with an interest
and shall be absolute and irrevocable.
(f) No Lender shall be responsible for any default by any other
Lender in its obligation to make Loans hereunder, and each Lender shall be
obligated to make the Loans on the terms set forth herein, regardless of the
failure of any other Lender to fulfill its obligations hereunder. If any
Facility 1 Lender fails to make available its pro rata share of any Facility 1
Borrowing, any Facility 2 Lender fails to make available its pro rata share of
any Facility 2 Borrowing or any Facility 3 Lender fails to make available its
pro rata share of any Facility 3 Borrowing (and the Agent does not advance such
Lender's share to the Borrowers pursuant to subsection (b) above), then the
Borrowers may, subject to all of the terms and conditions set forth in Sections
2.1 and 2.2, make additional Facility 1 Borrowings, Facility 2 Borrowings or
Facility 3 Borrowings hereunder to cover the unfunded share of the original
Facility 1 Borrowing, Facility 2 Borrowing or Facility 3 Borrowing.
(g) Immediately upon the creation by Bankers Trust of any
Acceptance, Bankers Trust shall be deemed to have sold and transferred to each
other Lender that is a Lender under the applicable Commitment to which the
Acceptance relates (each such other Lender, in its capacity as an obligor with
respect to any Acceptance, an "Acceptance Participant"), and each such
Acceptance Participant shall be deemed irrevocably and unconditionally to have
purchased and received from Bankers Trust, without recourse or warranty, an
undivided interest and participation (each a "participation"), to the extent of
such Acceptance Participant's pro rata share (based on the ratio that such
Acceptance Participant's pro rata share of the Facility 1 Commitment or
Facility 3 Commitment, as applicable, bears to the total amount of Facility 1
Commitments or Facility 3 Commitments, respectively) in such Acceptance, each
substitute Acceptance and the obligations of the Borrowers under this Agreement
with respect thereto, and any security therefor or guaranty pertaining thereto
(although Administrative Fees will be paid directly to the Agent for the
ratable account of the Acceptance Participants as provided in Section 2.10(d)).
(h) Bankers Trust shall have no liability for any action taken
or omitted to be taken by Bankers Trust under or in connection with any
Acceptance if taken or omitted in the absence of gross negligence or willful
misconduct.
(i) In the event that Bankers Trust makes any payment under any
Acceptance and the Borrowers shall not have reimbursed such amount in full to
Bankers Trust on the maturity date for such acceptance pursuant to Section
2.5(b), Bankers Trust shall promptly
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notify the Agent, who shall immediately notify each Acceptance Participant of
such failure, and each Acceptance Participant shall immediately and
unconditionally pay to the Agent for the account of Bankers Trust, the amount
of such Acceptance Participant's pro rata share (as described above in Section
2.4(g)) of such unreimbursed payment in U.S. Dollars and in same day funds. If
and to the extent such Acceptance Participant shall not have made such payment,
Bankers Trust shall be entitled to recover such corresponding amount on demand
from such Lender together with interest thereon for each day until paid at the
Federal Funds Rate in effect from time to time. Such Acceptance Participant
shall be deemed to have assigned to Bankers Trust the right to receive any and
all payments due to it in respect of the Acceptance Obligations until the sum
of such payments received by the Agent and paid over to Bankers Trust is equal
to the amount owed to Bankers Trust by such Acceptance Participant pursuant to
the preceding sentence. The foregoing assignment shall be deemed to be coupled
with an interest and shall be absolute and irrevocable. No Acceptance
Participant shall be responsible for the failure of any other Acceptance
Participant to make available to the Agent such other Acceptance Participant's
pro rata share of any such payment, and each Acceptance Participant shall be
obligated to make its pro rata share of payments under this Section 2.4(i) on
the terms set forth herein, regardless of the failure of any other Acceptance
Participant to fulfill its obligations hereunder.
(j) [Reserved.]
(k) The obligations of the Acceptance Participants to make
payments to the Agent for the account of Bankers Trust with respect to
Acceptances, and the Acceptance Obligations of the Borrower, shall be absolute
and irrevocable and not subject to counterclaim, set-off or other defense or
any other qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances,
including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense or other
right which the Borrowers or any Lender may have at any time against
Bankers Trust, any transferee of any Acceptance (or any Person for
whom any such transferee may be acting), the Agent, Bankers Trust, any
Lender or Acceptance Participant, or other Person, whether in
connection with this Agreement, any Acceptance, the transactions
contemplated herein or any unrelated transactions (including any
underlying transaction between the Borrowers and the holder of an
Acceptance);
(iii) any Acceptance proving to be forged or fraudulent;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents;
(v) the occurrence of any Potential Default or Event
of Default; or
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(vi) the failure of any condition precedent set forth in
Article III hereof to have been satisfied at the time of the creation
of any Acceptance.
Section 2.5 Notes; Acceptance Obligations.
(a) Each Borrower's joint and several obligation to pay the
principal of and interest on the Facility 1 Loans made by each Facility 1
Lender and Swing-Line Loans made by Bankers Trust shall be evidenced by a
promissory note (each a "Facility 1 Note" and collectively the "Facility 1
Notes") substantially in the form of Exhibit A-1, with blanks appropriately
completed in conformity therewith and payable to the order of such Facility 1
Lender. Each Borrower's joint and several obligation to pay the principal of
and interest on the Facility 2 Loans made by each Facility 2 Lender shall be
evidenced by a promissory note (each a "Facility 2 Note and collectively the
"Facility 2 Notes") substantially in the form of Exhibit A-2, with blanks
appropriately completed in conformity therewith and payable to the order of
such Facility 2 Lender. Each Borrower's joint and several obligation to pay
the principal of and interest on the Facility 3 Loans made by each Facility 3
Lender shall be evidenced by a promissory note (each, a "Facility 3 Note" and
collectively the "Facility 3 Notes") substantially in the form of Exhibit A-3
with blanks appropriately completed in conformity therewith and payable to the
order of such Facility 3 Lender. Each Lender shall, and is hereby authorized
by the Borrowers to, endorse on the schedule attached to the applicable Note
delivered to such Lender (or on a continuation of such schedule attached to
such Note and made a part thereof), or otherwise to record in such Lender's
internal records, an appropriate notation evidencing the date and amount of
each Loan of the related Type from such Lender, each payment and prepayment of
principal of any such Loan, each payment of interest on any such Loan, and
applicable interest rates and Eurodollar Interest Periods and other information
with respect thereto, and any such recordation shall absent manifest error
constitute prima facie evidence of the accuracy of the information so recorded;
provided that the failure of any Lender to make such a notation or any error
therein shall not affect the joint and several Obligations of the Borrowers,
including the joint and several Obligation of the Borrowers to repay the Loans
made by such Lender in accordance with the terms of this Agreement and the
applicable Notes.
(b) The Borrowers hereby agree to reimburse Bankers Trust, on
the maturity date for each Acceptance, an amount equal to the face amount of
such Acceptance (the obligation of the Borrowers under this Section 2.5(b) and
under Sections 2.6(h) and 2.10(d) with respect to any Acceptance are referenced
herein as the "Acceptance Obligations"). The Acceptance Obligations of the
Borrowers are joint and several and absolute and unconditional irrespective of
the value, genuineness, validity, regularity or enforceability of any
Acceptance or any other matter described in Section 2.4(k), it being the intent
that the obligations of the Borrowers hereunder shall be absolute and
unconditional under any and all circumstances. The Borrowers hereby expressly
waive diligence, presentment, demand of payment, protest and all other
formalities of any kind with respect to any Acceptance Obligation.
(c) To enable Bankers Trust to create Acceptances in the manner
specified in Section 2.2(b), the Borrowers shall supply Bankers Trust, upon the
Borrower's execution of
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this Agreement and thereafter forthwith upon request by Bankers Trust, with a
sufficient number of blank Drafts as Bankers Trust may reasonably request, duly
executed by the Borrowers. In that connection, the Borrowers hereby
irrevocably appoint Bankers Trust and each of its authorized signatories as
attorneys-in-fact of the Borrowers for the purpose of completing blank Drafts
in accordance with this Agreement. Bankers Trust shall hold each Draft
supplied in safekeeping to be filled in and completed in accordance with this
Agreement. Each Draft completed by Bankers Trust pursuant to any written,
telexed, telecopied or cable transmission or oral instruction purported to be
delivered by or on behalf of the Borrowers shall be duly drawn, executed and
delivered on behalf of the Borrowers for the purposes of this Agreement.
Bankers Trust shall incur no liability to the Borrowers in acting on any such
transmission or instruction that Bankers Trust believes in good faith to have
been given by a Person authorized to act on behalf of the Borrowers or
otherwise acting in good faith under this Agreement without gross negligence.
Section 2.6 Interest.
(a) The Borrowers agree to pay interest in respect of the
unpaid principal amount of each Facility 3 Loan that is a Prime Loan for each
day such Prime Loan is outstanding at a rate per annum equal to one percent
(1%) per annum plus the Prime Rate.
(b) The Borrowers agree to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan for each day during the
Eurodollar Interest Period applicable thereto at a rate per annum equal to (i)
one percent (1.0%) per annum plus the Eurodollar Rate for such Eurodollar
Interest Period if such Eurodollar Loan is a Facility 1 Loan and (ii) two and
one-quarter percent (2.25%) per annum plus the Eurodollar Rate for such
Eurodollar Interest Period if such Eurodollar Loan is a Facility 3 Loan.
(c) The Borrowers agree to pay interest in respect of the
unpaid principal amount of each Fed Funds Loan for each day such Fed Funds Loan
is outstanding at a rate per annum equal (i) one and one-eighth percent
(1.125%) per annum plus the Federal Funds Rate if such Fed Funds Loan is a
Facility 1 Loan or a Swing-Line Loan and (ii) one and five-eighths percent
(1.625%) per annum plus the Federal Funds Rate if such Fed Funds Loan is a
Facility 2 Loan.
(d) Overdue principal and interest in respect of each Loan and
all other overdue amounts owing hereunder shall bear interest for each day that
such amounts are overdue (after as well as before judgment) at a rate per annum
equal to two and one-quarter percent (2.25%) per annum plus the Prime Rate
(the "Default Rate").
(e) Interest on each Loan shall accrue from and including the
Borrowing Date thereof to but excluding the date of any repayment thereof and
shall be payable (i) on or before the third (3rd) Business Day after receipt of
the billing statement referred to in clause (f) below, (ii) on any prepayment
in full of all of any Lender's outstanding Loans, (iii) at maturity (whether by
acceleration or otherwise) and (iv) after maturity, on demand.
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(f) The Agent shall deliver to the Borrowers one interest
billing statement for each month on or before the third (3rd) Business Day of
the next succeeding month, which interest billing statement shall set forth the
interest accrued on the Loans for such month; provided that any failure or
delay in delivering such interest billing statement or any inaccuracy therein
shall not affect the Obligations.
(g) The Borrowers hereby promise to pay to Bankers Trust and
the other Lenders interest on any Acceptance Obligation, and on any other
amount payable by the Borrowers hereunder with respect to any Acceptance
Obligation, that shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise), for the period from and including the
due date thereof to but excluding the date the same is paid in full, at a rate
per annum equal to the Default Rate.
Section 2.7 Termination or Reduction of Commitments.
(a) The Facility 1 Commitments shall automatically terminate on
the earliest of: (i) the Revolving Loan Maturity Date and (ii) the date upon
which the principal of and interest on all of the outstanding Facility 1 Loans
become due and payable, and/or the Facility 1 Acceptance Obligations are
accelerated, pursuant to Section 6.1. The Facility 1 Commitments may not be
reduced in part by the Borrowers, but may be terminated in their entirety at
any time by the Borrowers upon at least fifteen (15) days' prior irrevocable
written notice to the Agent.
(b) The Facility 2 Commitments shall automatically terminate on
the earliest of: (i) the Revolving Loan Maturity Date and (ii) the date upon
which the principal of and interest on all of the outstanding Facility 2 Loans
become due and payable pursuant to Section 6.1; and (iv) the date on which the
Facility 1 Commitments terminate. The Facility 2 Commitments may not be
reduced in part by the Borrowers, but may be terminated in their entirety at
any time by the Borrowers upon at least fifteen (15) days' prior irrevocable
written notice to the Agent.
(c) The Facility 3 Commitments shall automatically terminate on
the earliest of: (i) the date on which the Facility 3 Commitments have been
drawn down in their entirety; (ii) December 31, 1995 and (iii) the date upon
which the principal of and interest on all of the outstanding Facility 3 Loans
become due and payable, and/or the Acceptances Obligations relating to Facility
3 Acceptances are accelerated, pursuant to Section 6.1. Notwithstanding the
foregoing, to the extent the entire Facility 3 Commitments are not drawn down
in their entirety on the Effective Date, then the unused Facility 3 Commitments
shall be reduced by $500,000 in the aggregate on each of September 30, 1995 and
December 31, 1995. If the Facility 3 Commitments are not drawn down in full
(as reduced as described in the preceding sentence) on December 31, 1995, then
the unused Facility 3 Commitments shall terminate in their entirety on such
date.
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Section 2.8 Mandatory Repayments.
(a) The Borrowers shall repay all outstanding Facility 1
Loans and Acceptance Obligations relating to Facility 1 Acceptances (whether
matured or unmatured) on the earlier to occur of (i) the Revolving Loan
Maturity Date, and (ii) the date of any termination of the Facility 1
Commitments pursuant to Section 2.7(a). Payments received on account of
Acceptance Obligations prior to the maturity date of the Acceptance relating
thereto shall be applied in accordance with Section 2.11(d).
(b) The Borrowers shall repay all outstanding Facility 2
Loans on the earlier to occur of (i) the Revolving Loan Maturity Date, and (ii)
the date of any termination of the Facility 2 Commitments pursuant to Section
2.7(b). Additionally, the Borrowers shall repay all outstanding Facility 2
Tranche A Loans on the seventh (7th) calendar day of each month, so that no
Facility 2 Tranche A Loans remain outstanding during the period commencing on
the seventh (7th) calendar day and ending on the twelfth (12th) calendar day of
each month.
(c) On any date upon which the aggregate principal amount
of the outstanding Facility 1 Loans, Swing-Line Loans and/or the aggregate face
amount of Facility 1 Acceptances exceeds the Facility 1 Maximum Amount, the
Borrowers shall repay on such date the aggregate principal amount of the
Facility 1 Loans, Swing-Line Loans and/or Facility 1 Acceptance Obligations or,
provided no Potential Default or Event of Default exists, deliver additional
Collateral of the type required for the Facility 1 Borrowing Base, as shall be
necessary so that the aggregate principal amount of outstanding Facility 1
Loans and Swing-Line Loans and the aggregate face amount of Facility 1
Acceptances outstanding does not exceed the Facility 1 Maximum Amount. On any
date upon which the aggregate principal amount of the outstanding Facility 2
Tranche A Loans exceeds the Facility 2 Tranche A Maximum Amount, the Borrowers
shall repay on such date the aggregate principal amount of the Facility 2
Tranche A Loans or, provided no Potential Default or Event of Default exists,
deliver additional Collateral of the type required for the Facility 2 Tranche A
Borrowing Base, as shall be necessary so that the aggregate principal amount of
outstanding Facility 2 Tranche A Loans does not exceed the Facility 2 Tranche A
Maximum Amount. On any date upon which the aggregate principal amount of the
outstanding Facility 2 Tranche B Loans exceeds the Facility 2 Tranche B Maximum
Amount , the Borrowers shall repay on such date the aggregate principal amount
of the Facility 2 Tranche B Loans as shall be necessary so that the aggregate
principal amount of outstanding Facility 2 Tranche B Loans does not exceed the
Facility 2 Tranche B Maximum Amount.
(d) (i) The Borrowers shall make the following
payments on the following dates:
(A) On September 30, 1995, the Borrowers
shall pay the amount necessary to reflect a mandatory reduction in the Facility
3 Commitment to $17,500,000 if and to the extent that the aggregate principal
amount of Facility 3 Loans plus the aggregate face amount of Facility 3
Acceptances outstanding exceeds $17,500,000. Such payment, if any, shall be
applied first to the principal amount of Facility 3 Loans then
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outstanding, and the remaining amount, if any, shall be applied to unmatured
Acceptance Obligations relating to Facility 3 Acceptances in accordance with
Section 2.11(d).
(B) On December 31, 1995, the Borrowers
shall pay the amount necessary to reflect a mandatory reduction in the Facility
3 Commitment to $17,000,000 if and to the extent that the aggregate principal
amount of Facility 3 Loans plus the aggregate face amount of Facility 3
Acceptances outstanding exceeds $17,000,000. Such payment, if any, shall be
applied first to the principal amount of Facility 3 Loans then outstanding, and
the remaining amount, if any, shall be applied to unmatured Acceptance
Obligations relating to Facility 3 Acceptances in accordance with Section
2.11(d).
(C) On March 31, 1996, the Borrowers shall
pay $500,000. Such payment shall be applied first to the principal amount of
Facility 3 Loans then outstanding, and the remaining amount, if any, shall be
applied to unmatured Acceptance Obligations relating to Facility 3 Acceptances
in accordance with Section 2.11(d).
(D) On June 30, 1996, the Borrowers shall
pay $500,000. Such payment shall be applied first to the principal amount of
Facility 3 Loans then outstanding, and the remaining amount, if any, shall be
applied to unmatured Acceptance Obligations relating to Facility 3 Acceptances
in accordance with Section 2.11(d).
(ii) After making the payments required under
Section 2.8(d)(i) above, the Borrowers shall repay the aggregate principal
amount of the outstanding Facility 3 Loans plus the aggregate face amount of
Facility 3 Acceptances in sixteen (16) equal quarterly installments, each equal
to one-sixteenth (1/16th) of the principal amount of the Facility 3 Loans
outstanding on June 30, 1996, such payments to be made on the last Business Day
of September, December, March and June of each year commencing with September
30, 1996; provided that on the Term Loan Maturity Date the Borrowers shall also
repay any additional amount required to pay in full any outstanding portion of
the principal amount of Facility 3 Loans and Facility 3 Acceptance Obligations.
Such payments shall be applied first to the principal amount of Facility 3
Loans then outstanding, and the remaining amount, if any, shall be applied to
outstanding Facility 3 Acceptance Obligations relating to unmatured Acceptances
in accordance with Section 2.11(d).
(iii) The Borrowers shall repay all outstanding
Facility 3 Loans and Facility 3 Acceptance Obligations on the earliest of: (i)
the Term Loan Maturity Date and (ii) the date upon which the principal of and
interest on all of the outstanding Facility 3 Loans become due and payable,
and/or the Facility 3 Acceptance Obligations are accelerated, pursuant to
Section 6.1. Until the Facility 3 Loans have been repaid in full, no repayment
of any Facility 3 Loan pursuant to Section 2.8(e) or any prepayment of any
Facility 3 Loan pursuant to Section 2.9 shall reduce any amount required to be
repaid under this Section 2.8(d) on any of the dates set forth above. Payments
received on account of Acceptance Obligations prior to the maturity date of the
Acceptance relating thereto shall be applied in accordance with Section
2.11(d).
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(e) If on any date the aggregate outstanding principal
amount of the Facility 3 Loans plus the aggregate face amount of Facility 3
Acceptances outstanding exceeds the lesser of: (i) fifty-five percent (55%) of
the fair market value of the servicing rights relating to the mortgage loans
included in the Pledged Servicing Portfolio and (ii) 0.85% of the unpaid
principal balance of the mortgage loans included in the Pledged Servicing
Portfolio (in each case as reflected on the most recent Pledged Servicing
Valuation Report delivered to the Agent), then, the Borrowers shall repay the
aggregate principal amount of Facility 3 Loans and Acceptance Obligations
relating to Facility 3 Acceptances, or, provided no Potential Default or Event
of Default exists, deliver additional Collateral of the type required for the
Facility 3 Borrowing Base, as shall be necessary so that the aggregate
outstanding principal amount of the Facility 3 Loans and Acceptance Obligations
relating to Facility 3 Acceptances outstanding does not exceed the lesser of
such amounts described in clauses (i) and (ii). Payments received on account
of Acceptance Obligations prior to the maturity date of the Acceptance relating
thereto shall be applied in accordance with Section 2.11(d).
(f) If an Old Acceptance is being exchanged for a New
Acceptance in accordance with Section 2.3(b), the Borrowers shall repay on the
date of such exchange an amount equal to (i) the Discount Expense if the face
amount of the New Acceptance equals or exceeds the face amount of the Old
Acceptance and (ii) the Discount Expense plus the Required Acceptance Payment
if the face amount of the New Acceptance is less than the face amount of the
Old Acceptance. As used herein, "Discount Expense" shall mean the face amount
of the Old Acceptance less the discount proceeds of such Old Acceptance
received by the Borrowers on the date of discount of the Old Acceptance. As
used herein "Required Acceptance Payment" shall mean the difference between
(x)(I) the face amount of the Old Acceptance less (II) the Discount Expense
relating thereto and (y)(I) the face amount of the New Acceptance less (II) the
Discount Expense relating thereto.
(g) Each repayment of Loans of a certain Type under this
Section 2.8 shall be allocated among the Lenders in accordance with the
aggregate outstanding principal amounts of their respective Loans of such Type.
All repayments of the Facility 1 Loans of any Facility 1 Lender and all
repayments of the Facility 3 Loans of any Facility 3 Lender under this Section
2.8 shall be applied first to such Lender's Facility 1 Loans or Facility 3
Loans, as the case may be, that are Fed Funds Loans or Prime Loans,
respectively, and second, to such Lender's Facility 1 Loans or Facility 3
Loans, as the case may be, that are Eurodollar Loans. All repayments of Loans
under this Section 2.8 shall be without premium or penalty, except that any
repayment of Eurodollar Loans shall be subject to the provisions of Section
2.14. Interest shall be payable in accordance with the provisions of Section
2.6. Payments received on account of Acceptance Obligations prior to the
maturity date of the Acceptance relating thereto shall be applied in accordance
with Section 2.11(d). Any prepayment on account of outstanding Acceptance
Obligations prior to the maturity date of the Acceptance relating thereto
required under Section 2.8 shall be held by Bankers Trust in accordance with
Section 2.11(d), provided that such prepayment shall include payment of the
Administrative Fees due under Section 2.10(d), which Administrative Fees shall
be due in the full amount as if the Acceptance Obligations were not being
prepaid (and regardless of whether less than the aggregate face amount of the
applicable Acceptance is being prepaid) and were being paid on the date of the
maturity of the Acceptance relating thereto.
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Section 2.9 Optional Prepayments.
The Borrowers shall have the right at any time and from time to
time to prepay outstanding Loans of any Type, in whole or in part, upon one (1)
Business Days' prior written notice to the Agent, in the case of Eurodollar
Loans, and without prior notice in the case of all other Loans; provided that
each partial prepayment of any Loan (other than a Swing-Line Loan, which may be
prepaid in any amount) shall be in an aggregate principal amount of $100,000 or
any multiple of $50,000 in excess thereof; and provided further, that the
Borrowers shall not prepay any Facility 1 Loans so long as any Swing-Line Loans
are outstanding. The Borrowers shall, at the time of making such prepayment,
designate whether it is a prepayment of Facility 1 Loans, Facility 2 Tranche A
Loans, Facility 2 Tranche B Loans or Facility 3 Loans. If the Borrowers fail
to make such a designation, any funds received as a prepayment pursuant to this
Section 2.9 shall be applied first, to Facility 2 Tranche B Loans then
outstanding; second, to Facility 2 Tranche A Loans then outstanding; third, to
Facility 1 Loans then outstanding and fourth, to Facility 3 Loans then
outstanding. If such prepayment has not been designated by the Borrowers, the
Agent shall endeavor to contact the Borrowers for prepayment instructions
before applying the prepayment as noted herein but the Agent shall not be
liable for failure to so contact the Borrowers. Each prepayment of Loans of a
certain Type under this Section 2.9 shall be allocated among the Lenders in
accordance with the aggregate outstanding principal amounts of their respective
Loans of such Type. All prepayments of the Facility 1 Loans of any Facility 1
Lender and all prepayments of the Facility 3 Loans of any Facility 3 Lender
under this Section 2.9 shall be applied first, to such Lender's Facility 1
Loans or Facility 3 Loans, as the case may be, that are Fed Funds Loans or
Prime Loans, respectively, and second, to such Lender's Facility 1 Loans or
Facility 3 Loans, as the case may be, that are Eurodollar Loans. All
prepayments of Loans under this Section 2.9 shall be without premium or
penalty, except that any prepayment of Eurodollar Loans shall be subject to the
provisions of Section 2.14. Interest shall be payable upon such prepayment in
accordance with the provisions of Section 2.6.
Section 2.10 Fees.
(a) The Borrowers agree to pay to the Agent for the account of
each Facility 1 Lender a facility fee at a rate per annum equal to 0.1875% on
the amount of such Lender's Facility 1 Commitment (whether used or unused).
The Borrowers agree to pay to the Agent for the account of each Facility 2
Lender a facility fee at a rate per annum equal to one-quarter of one percent
(0.25%) on the amount of such Lender's Facility 2 Commitment (whether used or
unused). Such fees shall be deemed to be earned in full upon the Effective
Date and shall be payable in advance on the Effective Date and thereafter in
quarterly installments on the last Business Day of each of March, June,
September and December commencing September 29, 1995; provided that if the
Facility 1 Commitments and Facility 2 Commitments are terminated at any time
prior to the Revolving Loan Maturity Date, each remaining unpaid quarterly
installment of such fees shall be paid in full on the date of such termination.
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(b) The Borrowers agree to pay to the Agent for the account of
each Facility 1 Lender a commitment fee at a rate per annum equal to one-tenth
of one percent (0.10%) of the amount of such Lender's unutilized Facility 1
Commitment, which fee shall be payable quarterly in arrears, on the last
Business Day of each March, June, September and December, commencing September
29, 1995. Notwithstanding the foregoing, no such fees shall be payable with
respect to any quarter if during the quarter for which payment would be due,
the average daily principal amount of outstanding Facility 1 Loans and
Swing-Line Loans plus the aggregate face amount of unmatured Facility 1
Acceptances was equal to or greater than fifty percent (50%) of the total
Facility 1 Commitment.
(c) The Borrowers agree to pay to the Agent on the Effective
Date for the account of each of the Facility 3 Lenders an upfront commitment
fee in an amount equal to one-quarter of one percent (0.25%) of the amount of
each Lender's Facility 3 Commitment (which Commitments total $18,000,000).
Such fees shall be deemed earned in full on the Effective Date.
(d) The Borrowers agree to pay to the Agent for the account of
each Facility 1 Lender and each Facility 3 Lender, as applicable, a fee in
respect of each Facility 1 Lender's or Facility 3 Lender's pro rata share of
the face amount of each applicable Acceptance (the "Administrative Fee"),
computed for each day such Acceptance is outstanding at a rate equal to one
percent (1%) per annum of the face amount of each Facility 1 Acceptance and two
and one-quarter percent (2.25%) per annum of the face amount of each Facility 3
Acceptance. The Administrative Fees relating to an Acceptance shall be due and
payable on the maturity date of such Acceptance.
(e) The Borrowers agree to pay to the Agent, for its own
account, an agency fee (the "Agency Fee") in the amount and on the dates
separately agreed to by the Agent and the Borrowers.
(f) The fees set forth in this Section 2.10, once paid, shall
not be refundable under any circumstances.
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Section 2.11 Payments, Etc.
(a) Except as otherwise specifically provided herein, all
payments by the Borrowers under this Agreement (including payments with respect
to Acceptance Obligations) shall be made without defense, set-off or
counterclaim to the Agent not later than 1:00 p.m. (New York City time) on the
date when due, it being expressly agreed and understood that if a payment is
received after 1:00 p.m. (New York City time) by the Agent, such payment will
be deemed to have been made on the next succeeding Business Day and interest
thereon shall be payable at the then applicable rate during such extension;
provided that if the Agent receives the federal wire confirmation number with
respect to such payment before 1:00 p.m. (New York City time) on the date when
such payment is due, and the payment is actually received and credited for
value to the appropriate account at Bankers Trust before the close of business
on such due date, then the payment will be deemed to be made on such due date.
All payments hereunder shall be made in U.S. Dollars in immediately available
funds at the Payment Office. The Agent will promptly after receipt of each
such payment (and in any event by the close of business on the day on which
such funds are received or deemed to have been received) distribute funds in
the form received relating to the payment of (i) principal or interest on any
Type of Loan to the Lenders with Loans of the corresponding Type ratably in
accordance with the aggregate principal amount of the Loans of such Type of
such Lenders, (ii) payments with respect to Acceptance Obligations to the Cash
Collateral Account if the Acceptances to which the payment relates have not
matured, to BTCCM if the Acceptances to which the payment relates have matured
unless Bankers Trust has already made payment to BTCCM, and otherwise to
Bankers Trust or to the Lenders entitled thereto if any Lender has reimbursed
Banker's Trust for such Lender's obligation as an Acceptance Participant, (iii)
Fees with respect to any Type of Commitment or Acceptance Obligation ratably to
Lenders with Commitments or to Acceptance Participants with a pro rata share of
liability relating to Acceptances of the corresponding Type, as applicable and
(iv) any other amount payable to any Lender to such Lender.
(b) Whenever any payment to be made hereunder or under any Note
shall be stated to be due on a day that is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
(c) All computations of interest and Fees shall be made on the
basis of a year of three hundred and sixty (360) days for the actual number of
days (including the first day but excluding the last day) occurring in the
period for which such interest or Fees are payable. Each determination by the
Agent of an interest rate or Fee hereunder shall be conclusive and binding
absent manifest error.
(d) Any payments received by Bankers Trust on account of
Acceptance Obligations as a result of a mandatory repayment of such Acceptance
Obligations under the Loan Documents prior to the maturity date of the
Acceptance to which such Acceptance Obligations relate shall be held by Bankers
Trust as collateral security for the Obligations, including the Acceptance
Obligations, in a Cash Collateral Account pursuant to the Cash Collateral
Agreement.
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(e) Prior to the maturity of the Facility 1 Loans, Swing-Line
Loans and Facility 1 Acceptance Obligations (whether upon acceleration, upon
any date that the Facility 1 Commitments are terminated pursuant to Section
2.7(a) or otherwise) or the occurrence and continuance of a Potential Default
or an Event of Default, all amounts received on any day by the Agent hereunder
in respect of principal of Facility 1 Loans or Swing-Line Loans or the Facility
1 Acceptance Obligations or under the Warehousing Security Agreement, including
amounts received by the Agent from the Facility 1 Settlement Account, shall be
applied by the Agent as follows: first, to Bankers Trust, to repay the
aggregate principal amount of Swing-Line Loans outstanding on such day; second,
to Bankers Trust to the extent of any amounts due and payable on account of
matured Facility 1 Acceptance Obligations or otherwise payable pursuant to
Section 2.8 on account of Facility 1 Acceptance Obligations (and Bankers Trust
shall distribute such payments in accordance with 2.11(a)(ii)); third, ratably
to the Facility 1 Lenders in accordance with the aggregate principal amounts of
their respective outstanding Facility 1 Loans to repay the aggregate principal
amount of Facility 1 Loans due and payable on such day pursuant to Section 2.8;
fourth, ratably to the Facility 1 Lenders in accordance with the aggregate
principal amounts of their respective outstanding Facility 1 Loans, to prepay
outstanding Facility 1 Loans being prepaid on such day pursuant to Section 2.9;
and fifth, the balance, if any, shall be released by the Agent to the Borrowers
by transfer to such account as the Borrowers may direct in writing for such
purpose; provided that if a Potential Default or an Event of Default has
occurred and is continuing, but the Lenders have not accelerated the Facility 1
Loans, Swing-Line Loans, or the Facility 1 Acceptance Obligations hereunder,
then the Agent shall not release any such amounts to the Borrowers and shall
hold such amounts in the Facility 1 Settlement Account until the earlier of (x)
the cure of such Potential Default or Event of Default or (y) the acceleration
of the Facility 1 Loans, Swing-Line Loans, or the Facility 1 Acceptance
Obligations and, if the event described in clause (x) occurs first, such
amounts shall be released to the Borrowers as described above in this
subsection (e), and if the event described in clause (y) occurs first, then
such amounts shall be applied in accordance with Section 2.11(h).
(f) Prior to the maturity of the Facility 2 Loans (whether upon
acceleration, upon any date that the Facility 2 Commitments are terminated
pursuant to Section 2.7(b) or otherwise), or the occurrence and continuance of
a Potential Default or an Event of Default, all amounts received on any day by
the Agent hereunder in respect of principal of Facility 2 Loans or under the
Servicing Security Agreement in respect of Facility 2 Tranche A Collateral and
Eligible REO Property mortgaged to the Secured Parties, shall be applied by the
Agent as follows: first, ratably to the Facility 2 Lenders in accordance with
the aggregate principal amounts of their respective outstanding Facility 2
Loans, to repay the aggregate principal amount of Facility 2 Loans due and
payable on such day pursuant to Section 2.8; second, ratably to the Facility 2
Lenders in accordance with the aggregate principal amounts of their respective
outstanding Facility 2 Loans, to prepay outstanding Facility 2 Loans being
prepaid on such day pursuant to Section 2.9; and third, the balance, if any,
shall be released by the Agent to the Borrowers by transfer to such account as
the Borrowers may direct in writing for such purpose; provided that if a
Potential Default or an Event of Default exists, but the Lenders have not
accelerated the Facility 2 Loans hereunder, then the Agent shall not release
any such amounts to the Borrowers and shall hold such sums in the Cash
Collateral
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Account until the earlier of (x) the cure of any Potential Default or Event of
Default or (y) the acceleration of the Facility 2 Loans, and if the event
described in clause (x) occurs first, the amounts shall be released to the
Borrowers as described in this subsection (f), and if the event described in
clause (y) occurs first, then such amounts shall be applied in accordance with
Section 2.11(i).
(g) Prior to the maturity of the Facility 3 Loans and Facility
3 Acceptance Obligations (whether upon acceleration, upon stated maturity or
otherwise) or the occurrence and continuance of a Potential Default or an Event
of Default, all amounts received on any day by the Agent hereunder in respect
of principal of Facility 3 Loans or Facility 3 Acceptance Obligations or under
the Servicing Security Agreement with respect to the Facility 3 Collateral
shall be applied by the Agent as follows: first, to Bankers Trust to the
extent of any amounts due and payable on account of matured Facility 3
Acceptance Obligations or otherwise payable pursuant to Section 2.8 on account
of Facility 3 Acceptance Obligations (and Bankers Trust shall distribute such
payments in accordance with 2.11(a)(ii)); second, ratably to the Facility 3
Lenders in accordance with the aggregate principal amounts of their respective
outstanding Facility 3 Loans to repay the aggregate principal amount of
Facility 3 Loans due and payable on such day pursuant to Section 2.8; third,
ratably to the Facility 3 Lenders in accordance with the aggregate principal
amounts of their respective outstanding Facility 3 Loans to prepay outstanding
Facility 3 Loans being prepaid on such day pursuant to Section 2.9; and fourth,
the balance, if any, shall be released by the Agent to the Borrowers by
transfer to such account as the Borrowers may direct in writing for such
purpose; provided that if a Potential Default or an Event of Default has
occurred and is continuing, but the Lenders have not accelerated the Facility 3
Loans or the Facility 3 Acceptance Obligations hereunder, then the Agent shall
not release any such amounts to the Borrowers and shall hold such amounts in
the Cash Collateral Account until the earlier of (x) the cure of any Potential
Default or Event of Default or (y) the acceleration of the Facility 3 Loans and
Facility 3 Acceptance Obligations and if the event described in clause (x)
occurs first, the amounts shall be released to the Borrowers as described above
in this subsection (g), and if the event described in clause (y) occurs first,
then such amounts shall be applied in accordance with Section 2.11(j).
(h) Upon the maturity of the Facility 1 Loans and Facility 1
Acceptance Obligations (whether upon acceleration, upon any date that the
Facility 1 Commitments are terminated pursuant to Section 2.7(a) or otherwise),
all amounts in the Facility 1 Settlement Account and all amounts received by
the Agent from the Warehousing Collateral Agent under the Warehousing Security
Agreement shall be disbursed by the Agent as follows: first, ratably to the
Collateral Agents in accordance with the amounts due to them, to reimburse them
for all fees, costs and expenses reasonably incurred by them in connection with
a Potential Default or an Event of Default or otherwise payable to them in
their capacities as Collateral Agents under the Loan Documents or otherwise
payable to one or more of them under the Cash Collateral Agreement; second, to
the Agent, to reimburse the Agent for all fees, costs and expenses reasonably
incurred by it in connection with a Potential Default or an Event of Default,
or otherwise payable to it in its capacity as Agent under the Loan Documents;
third, to Bankers Trust to pay all accrued and unpaid interest on the
Swing-Line Loans due hereunder and to repay the principal of all outstanding
Swing-Line Loans; fourth,
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to Bankers Trust to pay all amounts due on account of Facility 1 Acceptance
Obligations (and Bankers Trust shall distribute such payments in accordance
with 2.11(a)(ii)); fifth, ratably to the Facility 1 Lenders in accordance with
the amount of interest and Fees on the Facility 1 Loans due to such Lenders, to
pay all accrued and unpaid interest on and Fees with respect to the Facility 1
Loans due hereunder; sixth, ratably to the Facility 1 Lenders in accordance
with the aggregate principal amounts of their respective outstanding Facility 1
Loans, to repay all outstanding Facility 1 Loans; seventh, to Bankers Trust to
pay all amounts due on account of Facility 3 Acceptance Obligations (and
Bankers Trust shall distribute such payments in accordance with 2.11(a)(ii));
eighth, ratably to all of the Facility 3 Lenders in accordance with their
respective unpaid Obligations relating to Facility 3 Loans, to pay all of their
remaining unpaid Obligations relating to Facility 3 Loans; ninth, ratably to
all of the Facility 2 Lenders in accordance with their respective unpaid
Obligations relating to Facility 2 Loans, to pay all of their remaining unpaid
Obligations relating to Facility 2 Loans; and tenth, provided no Obligations
remain unpaid to the Borrowers by transfer to such account as the Borrowers may
direct in writing for such purpose; also provided, however, that no payments
shall be made under clauses seventh and eighth above unless the Facility 3
Loans and Facility 3 Acceptance Obligations have matured and payments are being
made pursuant to subsection (j) below;
(i) Upon the maturity of the Facility 2 Loans (whether upon
acceleration, upon any date that the Facility 2 Commitments are terminated
pursuant to Section 2.7(b) or otherwise), all amounts received by the Agent
from the Servicing Collateral Agent under the Servicing Security Agreement in
respect of the Facility 2 Collateral shall be disbursed by the Agent as
follows: first, ratably to the Collateral Agents in accordance with the amounts
due to them, to reimburse them for all fees, costs and expenses reasonably
incurred by them in connection with a Potential Default or an Event of Default
or otherwise payable to them in their capacities as Collateral Agents under the
Loan Documents or otherwise payable to one or more of them under the Cash
Collateral Agreement; second, to the Agent, to reimburse the Agent for all
fees, costs and expenses reasonably incurred by it in connection with a
Potential Default or an Event of Default or otherwise payable to it in its
capacity as Agent under the Loan Documents; third, ratably to the Facility 2
Lenders in accordance with the amount of interest on and Fees with respect to
the Facility 2 Loans due to such Lenders, to pay all accrued and unpaid
interest on and Fees with respect to the Facility 2 Loans due hereunder;
fourth, ratably to the Facility 2 Lenders in accordance with the aggregate
principal amounts of their respective outstanding Facility 2 Loans, to repay
all outstanding Facility 2 Loans; fifth, to Bankers Trust to pay all amounts
due on account of Facility 3 Acceptance Obligations (and Bankers Trust shall
distribute such payments in accordance with 2.11(a)(ii)); sixth, ratably to all
of the Facility 3 Lenders in accordance with their respective unpaid
Obligations relating to Facility 3 Loans, to repay all of their remaining
unpaid Obligations relating to Facility 3 Loans; seventh, to Bankers Trust to
pay all accrued and unpaid interest on the Swing-Line Loans due hereunder and
to repay the principal of all outstanding Swing-Line Loans; eighth, to Bankers
Trust to pay all amounts due on account of Facility 1 Acceptance Obligations
(and Bankers Trust shall distribute such payments in accordance with
2.11(a)(ii)); ninth, ratably to all of the Facility 1 Lenders in accordance
with their respective unpaid Obligations relating to Facility 1 Loans, to repay
all of their remaining unpaid Obligations relating to Facility 1 Loans; and
tenth, provided no Obligations remain unpaid, to the Borrowers by transfer to
such account as the Borrowers may direct in writing for such purpose; also
provided, however, that
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no payments shall be made under clauses fifth and sixth above unless the
Facility 3 Loans and Facility 3 Acceptance Obligations have matured and
payments are being made pursuant to subsection (j) below;
(j) Upon the maturity of the Facility 3 Loans and Facility 3
Acceptance Obligations (whether upon acceleration, upon stated maturity or
otherwise), all amounts received by the Agent under the Servicing Security
Agreement in respect of the Facility 3 Collateral shall be disbursed by the
Agent as follows: first, ratably to the Collateral Agents in accordance with
the amounts due to them, to reimburse them for all fees, costs and expenses
reasonably incurred by them in connection with a Potential Default or an Event
of Default or otherwise payable to them in their capacities as Collateral
Agents under the Loan Documents or otherwise payable to one or more of them
under the Cash Collateral Agreement; second, to the Agent, to reimburse the
Agent for all fees, costs and expenses reasonably incurred by it in connection
with a Potential Default or an Event of Default or otherwise payable to it in
its capacity as Agent under the Loan Documents; third, to Bankers Trust to pay
all amounts due on account of Facility 3 Acceptance Obligations (and Bankers
Trust shall distribute such payments in accordance with 2.11(a)(ii)); fourth,
ratably to the Facility 3 Lenders in accordance with the amount of interest and
Fees on the Facility 3 Loans due to such Lenders, to pay all accrued and unpaid
interest and Fees on the Facility 3 Loans due hereunder; fifth, ratably to the
Facility 3 Lenders in accordance with the aggregate principal amounts of their
respective outstanding Facility 3 Loans, to repay all outstanding Facility 3
Loans; sixth, ratably to all of the Facility 2 Lenders in accordance with their
respective unpaid Obligations relating to Facility 2 Loans, to pay all of their
remaining unpaid Obligations relating to Facility 2 Loans; seventh, to Bankers
Trust to pay all accrued and unpaid interest on the Swing-Line Loans due
hereunder and to repay the principal of all outstanding Swing-Line Loans;
eighth, to Bankers Trust to pay all amounts due on account of Facility 1
Acceptance Obligations (and Bankers Trust shall distribute such payments in
accordance with 2.11(a)(ii)); ninth, ratably to all of the Facility 1 Lenders
in accordance with their respective unpaid Obligations relating to Facility 1
Loans, to pay all of their remaining unpaid Obligations relating to Facility 1
Loans; and tenth, provided no Obligations remain unpaid to the Borrowers by
transfer to such account as the Borrowers may direct in writing for such
purpose; and
(k) Upon the maturity of the Loans and all other Obligations
pursuant to Section 6.1, all amounts in any account of the Borrower maintained
with the Agent and all amounts (other than the amounts referred to in
subsections (h), (i) and (j) above) received by the Agent on account of the
Obligations shall be disbursed by the Agent as follows: first, ratably to the
Collateral Agents in accordance with the amounts due to them, to reimburse them
for all fees, costs and expenses reasonably incurred by them in connection with
a Potential Default or an Event of Default or otherwise payable to them in
their capacities as Collateral Agents under the Loan Documents; second, to the
Agent, to reimburse the Agent for all fees, costs and expenses reasonably
incurred by it in connection with a Potential Default or an Event of Default or
otherwise payable to it in its capacity as Agent under the Loan Documents;
third, to Bankers Trust to pay all accrued and unpaid interest on the
Swing-Line Loans and to repay the principal of all outstanding Swing-Line
Loans; fourth, to Bankers Trust to pay all amounts due on account of Acceptance
Obligations (and Bankers Trust shall
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distribute such payments in accordance with 2.11(a)(ii)); fifth, ratably to the
Lenders in accordance with the amount of interest and Fees due to each Lender,
to pay all accrued and unpaid interest and Fees due hereunder; sixth, ratably
to the Lenders in accordance with the aggregate principal amounts of their
respective outstanding Loans, to repay all outstanding Loans; seventh, ratably
to the Lenders in accordance with their respective unpaid Obligations, to pay
all remaining unpaid Obligations; and eighth, to the Borrowers by transfer to
such account as the Borrowers may direct in writing for such purpose.
Section 2.12 Eurodollar Rate Not Determinable; Illegality or
Impropriety.
(a) In the event, and on each occasion, that on or before the
day on which the Eurodollar Rate for a Facility 1 Borrowing or Facility 3
Borrowing that is to include Eurodollar Loans is to be determined, the Agent
has determined in good faith that the Eurodollar Rate cannot be determined for
any reason, the Agent shall, as soon as practicable thereafter, give written
notice of such determination to the Borrowers and the Lenders. Upon any such
determination, any request by the Borrowers for a Eurodollar Loan pursuant to
Section 2.2 shall, until the Agent has advised the Borrowers and the Lenders
that the circumstances giving rise to such notice no longer exist, be deemed to
be a request for a Fed Funds Loan if the request relates to a Facility 1 Loan
and for a Prime Loan if the request relates to a Facility 3 Loan. Each
determination by the Agent hereunder shall be conclusive and binding absent
manifest error.
(b) If any Lender determines at any time that the introduction
of, or any change in, any applicable law, rule, regulation, order or decree or
in the interpretation or the administration thereof by any Governmental
Authority charged with the interpretation or administration thereof, or
compliance by such Lender with any request or directive (whether or not having
the force of law) of any such Governmental Authority, shall make it unlawful or
improper for such Lender to make, maintain or fund any Eurodollar Loan as
contemplated by this Agreement, then such Lender shall immediately give notice
thereof to the Agent and the Borrowers describing such illegality or
impropriety in reasonable detail. Effective thirty (30) days after the giving
of such notice (or effective upon such earlier date as required by such
Governmental Authority), the obligation of such Lender to make Eurodollar Loans
shall be suspended for the duration of such illegality or impropriety and, if
and when such illegality or impropriety ceases to exist, such suspension shall
cease and such Lender shall notify the Agent and the Borrowers thereof. If any
such change makes it unlawful or improper for any Lender to maintain any
Eurodollar Loan such Lender shall, upon the happening of such event, notify the
Agent and the Borrowers thereof, and the Borrowers shall immediately, or if
permitted by applicable law, rule, regulation, order, decree, interpretation,
request or directive, no later than the date permitted thereby, convert each
such Eurodollar Loan into a Fed Funds Loan if the Eurodollar Loan is a Facility
1 Loan and into a Prime Loan if the Eurodollar Loan is a Facility 3 Loan. If
any Lender notifies the Agent and the Borrowers pursuant to this Section
2.12(b) that it is unlawful or improper for such Lender to make or maintain
Eurodollar Loans, as the case may be, but no other Lenders give similar
notices, then the Borrowers may require such Lender to sell, pursuant to
Section 8.6(c) all of its outstanding Loans and Commitments to another Lender
(if any other Lender agrees, in its sole and absolute discretion, to purchase
such Loans and Commitments) or to any other financial
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institution reasonably acceptable to the Agent that is willing to make and
maintain Eurodollar Loans. The purchase price for such Loans and Commitments
shall be equal to the aggregate outstanding principal amount of the Loans of
such Lender plus such Lender's pro rata share of all other accrued and unpaid
Obligations (including obligations arising as a result of being an Acceptance
Participant) minus the pro rata portion (based on the number of days in the
applicable period) of such Lender's facility fees that relate to the period
from the date of such sale to the next payment date for the facility fees.
Section 2.13 Reserve Requirements; Change in Circumstances.
(a) Notwithstanding any other provision herein, if after the
date of this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof (whether or not having the
force of law) imposes any tax on or changes the basis of taxation of payments
to any Lender of the principal of or interest on any Eurodollar Loan or the
face amount of an Acceptance made by such Lender or any interest due on any
Acceptance Obligations or any Fees or other amounts payable hereunder (other
than taxes imposed on the overall net income of such Lender by the jurisdiction
in which such Lender has its principal office or by any political subdivision
or taxing authority therein), or imposes, modifies or deems applicable any
reserve, special deposit or similar requirement against assets of, deposits
with or for the account of or credit extended by such Lender (except any such
reserve requirement that is reflected in the Eurodollar Rate) or imposes on
such Lender any other condition affecting this Agreement or Eurodollar Loans or
Acceptances created by Bankers Trust, and the result of any of the foregoing is
to increase the cost to such Lender of making or maintaining any Eurodollar
Loan, becoming or remaining as an Acceptance Participant or to reduce the
amount of any sum received or receivable by such Lender hereunder (whether of
principal, interest, fee or otherwise) in respect thereof by an amount deemed
by such Lender to be material, then the Borrowers shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered. Any amount or amounts payable by the
Borrowers to any Lender in accordance with the provisions of this Section
2.13(a) shall be paid by the Borrowers to such Lender within ten (10) Business
Days of receipt by the Borrowers from such Lender of a statement setting forth
in reasonable detail the amount or amounts due and the basis for the
determination from time to time of such amount or amounts, which statement
shall be conclusive and binding absent manifest error.
(b) If any Lender has determined that the adoption after the
date hereof of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by such Lender (or any lending office of such Lender, as the case
may be) or by the holding company of such Lender, as the case may be, with any
request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has the
effect of reducing the rate of return on such Lender's capital or on the
capital of such Lender's holding company, as the case may be, as a consequence
of such Lender's obligations under the Loan Documents to a level below that
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which such Lender or such Lender's holding company, as the case may be, could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender's policies or such Lender's holding company's
policies, as the case may be, with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the Borrowers
shall reimburse such Lender or such Lender's holding company, as the case may
be, for such reduction. Any amount or amounts payable by the Borrowers to any
Lender in accordance with the provisions of this Section 2.13(b) shall be paid
by the Borrowers to such Lender within ten (10) Business Days of receipt by the
Borrowers from such Lender of a statement setting forth in reasonable detail
the amount or amounts due and the basis for the determination from time to time
of such amount or amounts, which statement shall be conclusive and binding
absent manifest error.
(c) Each Lender agrees to use reasonable efforts to change its
lending office to avoid or minimize (i) any amounts that might otherwise be
payable to such Lender pursuant to this Section 2.13 or pursuant to Section
2.15 or (ii) the effect of any event referred to in Section 2.12(b); provided
that such efforts or change shall not cause the imposition on such Lender of
any additional cost or legal, regulatory or administrative burdens deemed by
such Lender, in its sole discretion, to be material.
(d) Failure on the part of any Lender to demand compensation
for any increased costs or reduction in amounts received or receivable or
reduction in return on capital with respect to any period shall not constitute
a waiver of such Lender's right to demand compensation with respect to such
period or any other period. The protection of this Section 2.13(d) shall be
available to any Lender regardless of any possible contention of the invalidity
or inapplicability of the law, rule, regulation, guideline or other change or
condition that shall have occurred or been imposed.
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Section 2.14 Indemnity.
(a) The Borrowers shall indemnify and hold harmless each Lender
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorney's fees) that such Lender
actually sustains or incurs as a consequence of (i) any failure by the
Borrowers to fulfill on the Effective Date or on the date of any Credit Event
hereunder the applicable conditions set forth in Article III, (ii) the creation
of any Acceptance or failure to accept any Draft, (iii) any failure by the
Borrowers to borrow any Eurodollar Loan hereunder, to convert any Loan into a
Eurodollar Loan or to continue any Eurodollar Loan for an additional Eurodollar
Interest Period, after irrevocable notice of such borrowing, conversion or
continuation has been given pursuant to Section 2.2 or the breach by the
Borrowers of any obligation under the Funding Agreement, (iv) any payment,
prepayment or conversion of a Eurodollar Loan required by any provision of this
Agreement or otherwise made on a date other than the last day of the Eurodollar
Interest Period applicable thereto or any payment, prepayment of Acceptance
Obligations or required by the Loan Documents made on a date other than the
maturity date applicable thereto, (v) any default in payment or prepayment of
the principal amount of any Eurodollar Loan or an Acceptance Obligation or any
part thereof or interest accrued thereon, as and when due and payable (at the
due date thereof, by irrevocable notice of prepayment or otherwise) or (vi) the
occurrence of any Event of Default, including, in each such case, any loss or
reasonable expense sustained or incurred in liquidating or employing deposits
from third parties acquired to effect or maintain such Eurodollar Loan or any
part thereof as a Eurodollar Loan. Such loss or reasonable expense shall
include but not be limited to an amount equal to the excess, if any, as
reasonably determined by such Lender, of (A) its cost of obtaining the funds
for the Eurodollar Loan being paid, prepaid or converted or not borrowed,
converted or continued (based on the Eurodollar Rate applicable thereto) for
the period from the date of such payment, prepayment, conversion or failure to
borrow, convert or continue to the last day of the Eurodollar Interest Period,
as the case may be, for such Loan (or, in the case of a failure to borrow,
convert, or continue the Eurodollar Interest Period, as the case may be, for
such Loan that would have commenced on the date of such failure to borrow,
convert or continue) over (B) the amount of interest (as reasonably determined
by such Lender) that would be realized by such Lender in re-employing the funds
so paid, prepaid or converted or not borrowed, converted or continued for such
period or Eurodollar Interest Period, as the case may be. A certificate of any
Lender setting forth in reasonable detail any amount or amounts which such
Lender is entitled to receive pursuant to this Section 2.14 shall be delivered
to the Borrowers and shall be conclusive and binding absent manifest error.
(b) The Borrowers shall assume all risks of the acts, omissions
or misuse of any Acceptance by the holder thereof. Neither Bankers Trust nor
the Lenders shall be responsible for the following (except to the extent caused
by the gross negligence or willful misconduct of the Agent or the Lenders):
(i) the form, validity, sufficiency, accuracy, genuineness or legal effect of
any Acceptance, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any Acceptance or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (iii) failure of the holder of an Acceptance to
comply
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fully with conditions required in order to receive payment under an Acceptance;
(iv) errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher; (v) errors in interpretation of technical terms; (vi) any
loss or delay in the transmission or otherwise of any document required in
order to receive payment under an Acceptance or of the proceeds thereof; and
(vii) any consequences arising from causes beyond the control of Bankers Trust,
including, without limitation, any acts of any Governmental Authority. None of
the above shall affect, impair, or prevent the vesting of Bankers Trusts'
rights or powers hereunder.
(c) Nothing in this Section is intended to limit the
reimbursement obligation of the Borrowers contained elsewhere in this
Agreement. The obligations of the Borrowers under this Section shall survive
the termination of this Agreement.
Section 2.15 Taxes.
All payments made by the Borrowers under this Agreement and the
other Loan Documents shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding, in the case of the Agent, each Collateral
Agent and each Lender, net income taxes and franchise taxes (imposed in lieu
of net income taxes) imposed on the Agent, such Collateral Agent or such
Lender, as the case may be, as a result of a present or former connection
between the jurisdiction of the government or taxing authority imposing such
tax and the Agent, such Collateral Agent or such Lender (excluding a connection
arising solely from the Agent, such Collateral Agent or such Lender having
executed, delivered, performed its obligations or received a payment under, or
enforced, this Agreement or the other Loan Documents) or any political
subdivision or taxing authority thereof or therein (all such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions and withholdings
being hereinafter called "Taxes"). If any Taxes are required to be withheld
from any amounts payable to the Agent, any Collateral Agent or any Lender
hereunder or under other Loan Documents, the amounts so payable to the Agent,
such Collateral Agent or such Lender shall be increased to the extent necessary
to yield to the Agent, such Collateral Agent or such Lender (after payment of
all Taxes) interest or any such other amounts payable hereunder at the rates or
in the amounts specified in this Agreement and the other Loan Documents.
Whenever any Taxes are payable by the Borrowers, as promptly as possible
thereafter the Borrowers shall send to the Agent for its own account or for the
account of such Collateral Agent or such Lender, as the case may be, a
certified copy of an original official receipt received by the Borrowers
showing payment thereof. If the Borrowers fail to pay any Taxes when due to
the appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrowers shall indemnify
the Agent, the Collateral Agents and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Agent, any Collateral
Agent or any Lender as a result of any such failure. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable under the Loan Documents.
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Section 2.16 Sharing of Setoffs.
Each Lender agrees that if it shall, through the exercise of a
right of banker's lien, setoff or counterclaim against the Borrowers, or
pursuant to a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim, received by such Lender under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by any other means, obtain payment
(voluntary or involuntary) in respect of any Obligation as a result of which
the unpaid portion of its Obligations shall be proportionately less than the
unpaid portion of the Obligations of any other Lender, it shall simultaneously
purchase from such other Lender at face value a participation in the
Obligations of such other Lender, so that the aggregate unpaid amount of the
Obligations and such participations in Obligations held by each Lender shall be
in the same proportion to the aggregate unpaid amount of all Obligations then
outstanding as the amount of its Obligations prior to such exercise of banker's
lien, setoff or counterclaim or other event was to the principal amount of all
Obligations outstanding prior to such exercise of banker's lien, setoff or
counterclaim or other event; provided that, if any such purchase or purchases
or adjustments are made pursuant to this Section 2.16 and the payment giving
rise thereto is thereafter recovered, such purchase or purchases or adjustments
shall be rescinded to the extent of such recovery and the purchase price or
prices or adjustments restored without interest. The Borrowers expressly
consent to the foregoing arrangements and agrees that any Lender holding a
participation in an Obligation deemed to have been so purchased may exercise
any and all rights of banker's lien, setoff or counterclaim with respect to any
and all moneys owing by the Borrowers to such Lender by reason thereof as fully
as if such Lender had made a loan directly to the Borrowers in the amount of
such participation.
ARTICLE III
CONDITIONS TO CREDIT EVENTS
Section 3.1 Conditions to Credit Events.
(a) As conditions precedent to the initial Credit Event
hereunder:
(i) Each Borrower shall have delivered or shall have had
delivered to the Agent, in form and substance and in quantities reasonably
satisfactory to the Agent and its counsel, each of the following:
(A) this Agreement, duly executed by the parties hereto;
(B) each of the Warehouse Security Agreement, Servicing Security
Agreement, the Cash Collateral Agreement, the Statement of Accounts Receivable
and the Power of Attorney for each Borrower, duly executed (and notarized where
required) by the parties thereto (which Powers of Attorney shall be
"protocolized" under the laws of Puerto Rico by counsel to the Borrowers, and
filed with the Registry of Powers of Attorneys and Wills by local counsel to
the Agent promptly after the closing contemplated hereunder);
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(C) a duly executed Facility 1 Note for each Lender with a Facility
1 Commitment, a duly executed Facility 2 Note for each Lender with a Facility 2
Commitment and a duly executed Facility 3 Note for each Lender with a Facility
3 Commitment;
(D) duly executed Drafts as required under Section 2.5(c);
(E) duly executed documents, instruments and agreements, properly
executed, deemed necessary or appropriate by the Agent, in its reasonable
discretion, to create in favor of the Lenders a valid and perfected, first
priority security interest in and lien upon the Collateral;
(F) a certified copy of resolutions of the Board of Directors of
each of the Borrowers approving the execution, delivery and performance of all
Loan Documents required to be delivered by such parties hereunder and the
transactions contemplated therein;
(G) a certificate of the Secretary or an Assistant Secretary of each
of the Borrowers certifying the names and true signatures of the officers of
such parties authorized to sign the Loan Documents required to be executed and
delivered by such parties hereunder, in each case dated the Effective Date;
(H) an opinion of special New York counsel to the Agent in the form
of Exhibit F-1 and covering such other matters as the Agent may reasonably
request and an opinion of Puerto Rico counsel for the Borrowers in the form of
Exhibit F-2 and covering such other matters as the Agent may reasonably
request, in each case dated the Effective Date;
(I) a copy of the Certificate of Incorporation or other equivalent
document available in the applicable jurisdiction of the Borrowers certified by
the appropriate officer of the jurisdiction of such party's incorporation as of
a recent date;
(J) a copy of the Bylaws of the Borrowers, certified by the
Secretary or an Assistant Secretary or other appropriate officer of each such
party on the Effective Date as being accurate and complete;
(K) a certificate of the applicable officer in the relevant
jurisdiction or other equivalent document available in the applicable
jurisdiction of the jurisdiction of incorporation of each of the Borrowers
certifying that such party is in good standing as of a recent date and a good
standing certificate from each jurisdiction in which each such party is
qualified to conduct business;
(L) a certificate of an executive officer of each of the Borrowers,
in the form of Exhibits G-1 and G-2, respectively, dated the Effective Date;
(M) evidence satisfactory to the Agent that the Facility 1
Settlement Account has been opened and that all requirements for the opening of
the Cash Collateral Account have occurred;
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(N) duly executed acknowledgment agreements from each of FNMA and
FHLMC relating to the validity of the Servicing Collateral Agent's security
interest in the Pledged Servicing Portfolio;
(O) evidence of (I) the acceptance by the Process Agent of its
appointment pursuant to Section 8.7 and (II) payment of all fees required by
the Process Agent for serving in such capacity;
(P) a copy of the letter delivered to the parties to the contracts
pledged and assigned to the Secured Parties pursuant to the Loan Documents
(together with evidence of such delivery) notifying such parties of the
security interests in such contracts and the contract rights related thereto
granted to the Secured Parties pursuant to the Loan Documents, which letter
shall be in substantially the form of Attachments 5 and 2 to the Warehousing
Security Agreement and the Servicing Security Agreement, respectively;
(Q) evidence satisfactory to the Agent that all reasonable fees,
costs and expenses of its New York and Puerto Rican counsel relating to the
preparation, negotiation and closing of the transaction contemplated hereby
through the Effective Date will be paid in full on such date;
(R) a Pledged Servicing Valuation Report and a Pledged Servicing
Portfolio Report;
(S) a Hedging Inventory Report dated as of a date which is no longer
than ten (10) days prior to the Effective Date; and
(T) a letter agreement from the Warehousing Collateral Agent
pursuant to which the Warehousing Collateral Agent agrees to serve as
Collateral Agent in connection with the REO Pledges.
(ii) All acts and conditions (including the obtaining of any
necessary regulatory approvals and the making of any required filings,
recordings or registrations) required to be done and performed and to have
happened prior to the execution, delivery and performance of the Loan Documents
and to constitute the same legal, valid and binding obligations, enforceable in
accordance with their respective terms, shall have been done and performed and
shall have happened in due and strict compliance with all applicable laws or if
any of such have not been done, performed or happened, such has been expressly
disclosed to the Agent and waived by all of the Lenders in writing.
(iii) All documentation, including documentation for corporate
and legal proceedings in connection with the transactions contemplated by the
Loan Documents, shall be reasonably satisfactory in form and substance to the
Agent and its counsel.
(iv) The Borrowers shall have paid all Fees required to have
been paid under the Loan Documents prior to or on the Effective Date.
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(b) As conditions precedent to each Credit Event, at and as of
the date of such Credit Event, including the Effective Date:
(i) The representations and warranties of the
Borrowers contained in the Loan Documents
shall be accurate and complete in all
material respects on and as of the date of
such Credit Event as if made on and as of
such date.
(ii) No Potential Default or Event of Default
shall have occurred and be continuing.
(iii) Following the funding of the requested Loan
or the creation of any Acceptance, the
aggregate principal amount of Loans plus the
aggregate face amount of Acceptances
outstanding hereunder shall not exceed the
limitations set forth in Sections 2.1 and
2.8.
(iv) Since December 31, 1994, no material adverse
change shall have occurred in the business,
financial condition or results of operations
of the FFCC and its Subsidiaries, taken as a
whole.
(v) The Agent shall have received such other
documents or legal opinions as the Agent or
any Lender or special counsel to the Agent
may reasonably request, all in form and
substance reasonably satisfactory to the
Agent.
By delivering a Notice of Borrowing or Request for Acceptance to the Agent
hereunder for any Credit Event, as applicable, the Borrowers shall be deemed to
have represented and warranted the accuracy and completeness of the statements
set forth in subsections (i) through (iv) above as of the date of such Credit
Event.
(c) As conditions precedent to each Facility 2 Tranche B
Borrowing (in addition to those set forth in Sections 3.1(a) and (b) above):
(i) Each Borrower shall have delivered or shall have
had delivered to the Agent, in form and substance and in quantities reasonably
satisfactory to the Agent and its counsel, each of the following:
(A) all information reasonably requested by the
Agent contained in the files of the Borrowers relating to the Eligible
REO Property to be included in the Facility 2 Tranche B Borrowing
Base;
(B) duly executed REO Demand Note(s);
(C) duly executed REO Mortgages with respect to
all Eligible REO Property to be included in the Facility 2 Tranche B
Borrowing Base;
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(D) duly executed REO Pledge(s) of the REO Demand
Note(s) to the Agent and the Facility 2 Lenders; and
(E) documentation required under 3.1(a)(i)(F)-(L)
above, as applicable to the related Real Estate Closing, and as is
reasonable and customary, and such other documentation as is also
reasonable and customary, in connection with commercial real estate
closings in Puerto Rico as determined by the Agent's counsel.
(ii) Simultaneously with such Facility 2 Tranche B
Borrowing or as is otherwise customary in commercial real estate closings in
Puerto Rico, the REO Mortgages shall be filed for recording with the applicable
registries.
(iii) The Borrowers shall have paid all taxes, including
mortgage recording and documentary stamp taxes, recording fees and charges and
all other fees and charges of whatever kind in connection with the applicable
Real Estate Closing, including costs and expenses of the Agent's outside
counsel, and evidence thereof shall have been delivered to the Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
As an inducement to the Agent and each Lender to enter into this
Agreement and to make Loans and to be an Acceptance Participant as provided
herein, each of the Borrowers represents and warrants to the Agent and each
Lender that:
Section 4.1 Corporate Existence; Compliance with Law and
Contractual Obligations.
Each Borrower (a) is duly organized, validly existing and in good
standing as a corporation under the laws of the Commonwealth of Puerto Rico and
in each jurisdiction where its ownership of property or conduct of business
requires such qualification, except where the failure to be so qualified would
not have a Material Adverse Effect; (b) has the corporate power and authority
and the legal right to own and operate its property and to conduct business in
the manner in which it does and proposes so to do; and (c) is not in violation
of any Requirement of Law or any Contractual Obligation if such violation could
have a Material Adverse Effect.
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Section 4.2 Corporate Power; Authorization; Enforceable Obligations.
Each Borrower has the corporate power and authority to
execute, deliver and perform the Loan Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance of such Loan Documents. Such Loan Documents have been duly
executed and delivered on behalf of such Borrower and constitute legal, valid
and binding obligations of such Borrower enforceable against it in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally and by general principles of equity.
Section 4.3 No Legal or Contractual Bar.
The execution, delivery and performance of the Loan Documents,
including the creation and perfection of the security interests contemplated
hereunder and thereunder, the borrowings of Loans hereunder and the use of the
proceeds thereof, do not and will not (a) violate any Requirement of Law or any
Contractual Obligation of either Borrower or any of its Subsidiaries, (b)
except as contemplated by this Agreement and the Security Agreements, require
any license, consent, authorization, approval or any other action by, or any
notice to or filing or registration with, any Governmental Authority or any
other Person or (c) result in the creation or imposition of any Lien on any
asset of either Borrower or any of its Subsidiaries except as contemplated by
the Loan Documents. Without limiting the scope of the preceding
representation, no Take-Out Commitments assigned to the Secured Parties
prohibit assignment thereof to the Secured Parties. The parties acknowledge
that as of the date hereof, GNMA's policies do not include the execution and
delivery of an Acknowledgment Agreement by GNMA and no representation in any
Loan Document as of the date hereof will be deemed to include a representation
that the Borrowers may assign any rights under the GNMA Servicing Portfolio in
contravention of GNMA's policies. Nothing contained in the preceding sentence
shall affect the Borrowers' covenant contained in Section 5.1(g).
Section 4.4 Financial Information.
(a) The consolidated and consolidating balance sheet of FFCC
and its consolidated Subsidiaries as at December 31, 1994 and the related
consolidated and consolidating statements of income, retained earnings and cash
flows for the fiscal year then ended, including in each case the related
schedules and notes, reported on by Price Waterhouse, true copies of which have
been previously delivered to each of the Lenders, are complete and correct and
fairly present the consolidated and consolidating financial condition of FFCC
and its consolidated Subsidiaries as at the date thereof and the consolidated
and consolidating results of operations and cash flows for such period, in
accordance with GAAP applied on a consistent basis.
(b) The unaudited consolidated and consolidating balance sheet
of each Borrower and its consolidated Subsidiaries as at March 31, 1995, and
the related unaudited combined statements of income, retained earnings and cash
flows for the three months then ended,
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certified by the chief financial officer of FFCC, true copies of which have
been previously delivered to each of the Lenders, are complete and correct and
fairly present the consolidated and consolidating financial condition of FFCC
and its consolidated Subsidiaries as at the date thereof and the consolidated
and consolidating results of operations and cash flows for such period in
conformity with GAAP applied on a basis consistent with the financial
statements referred to in subsection (a) of this Section 4.4, subject to normal
year-end audit adjustments.
(c) Neither Borrower has any material liability of any kind,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and no condition, situation or set of circumstances exists that could be
reasonably expected to result in such a liability, in each case that is not
reflected in the financial statements referred to in Section 4.4(b) or will not
be reflected in the most recent financial statements delivered to the Agent and
the Lenders pursuant to Section 5.1(a)(i) or (ii).
(d) Since December 31, 1994, no material adverse change has
occurred in the business, financial condition or results of operations of FFCC
and its Subsidiaries, taken as a whole.
Section 4.5 No Material Litigation.
Except as set forth on Exhibit O, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of either Borrower, threatened by or against such Borrower or
any of its Subsidiaries, or against any of such Borrower's or any such
Subsidiary's properties or revenues that, if adversely determined, could alone,
or with any other litigation, investigation or proceeding, affect the business,
financial condition or results of operations of such Borrower and its
Subsidiaries, taken as a whole, in excess of a Material Amount or could have a
Material Adverse Effect.
Section 4.6 Taxes.
Each Borrower and each of its Subsidiaries have filed or caused to
be filed all tax returns that are required to be filed and have paid all taxes
shown to be due and payable on such returns or on any assessments made against
them or any of their property other than taxes and assessments that are being
contested in good faith by appropriate proceedings and as to which such
Borrower or such Subsidiary has established adequate reserves in conformance
with GAAP.
Section 4.7 Investment Company Act.
Neither Borrower is an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
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Section 4.8 Subsidiaries.
FFCC has no Subsidiaries as of the Effective Date other than DMC,
Doral Federal Savings Bank, Centro Hipotecario de Puerto Rico, Inc., RSC Corp.
and First Florida Realty Corporation. FFCC owns, directly or through another
Subsidiary, one hundred percent (100%) of the stock of each such Subsidiary,
and all of the stock of each such Subsidiary has been duly issued and is fully
paid and nonassessable.
Section 4.9 Use of Proceeds.
The proceeds of all Facility 1 Loans and Swing-Line Loans shall be
used by the Borrowers solely for the purpose of originating, acquiring or
financing Eligible Conforming Mortgage Loans, Eligible Non-Conforming Mortgage
Loans and/or Eligible Mortgage-Backed Securities. The proceeds of all Facility
2 Tranche A Loans shall be used by the Borrowers solely to make advances (or to
refinance advances previously made by either Borrower) resulting in the
creation of Eligible Servicing Receivables and the proceeds of all Facility 2
Tranche B Loans shall be used by the Borrowers solely to provide financing of
the Eligible REO Property. The proceeds of the Facility 3 Loans and the
proceeds of the discounting of all Facility 1 Acceptances and Facility 3
Acceptances by BTCCM shall be used by the Borrowers solely to purchase
additional servicing portfolios and to provide general working capital.
Section 4.10 ERISA.
(a) No Prohibited Transactions, Accumulated Funding Deficiencies,
withdrawals from Multiemployer Plans or Reportable Events have occurred with
respect to any Plans or Multiemployer Plans that, in the aggregate, could
subject either Borrower or any of such Borrower's Subsidiaries to any material
tax, penalty or other liability where such tax, penalty or liability is not
covered in full, for the benefit of such Borrower or such Subsidiary, by
insurance; (b) no notice of intent to terminate a Plan has been filed, nor has
any Plan been terminated under Section 4041 of ERISA, nor has the PBGC
instituted proceedings to terminate, or appoint a trustee to administer, a Plan
and no event has occurred or condition exists that might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; (c) the present value of all benefits
liabilities (as defined in Section 4001(a)(16) of ERISA) under all Plans (based
on the actuarial assumptions used to fund the Plans) does not exceed the assets
of the Plans; and (d) the execution, delivery and performance by Borrowers of
the Loan Documents and the borrowing of the Loans hereunder and the use of the
proceeds thereof will not involve any Prohibited Transaction.
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Section 4.11 Security Interests.
Subject to the penultimate sentence of Section 4.3 regarding the
GNMA Servicing Portfolio, the security interests created in favor of the
Secured Parties under the Security Agreements constitute (a) valid and binding
security interests in the Collateral and (b) will constitute perfected security
interests in the mortgage notes evidencing the Mortgage Loans, the Mortgage-
Backed Securities, the Take-Out Commitments, the REO Notes and the REO Property
encumbered by REO Mortgages, the Facility 2 Tranche A Collateral and the
Facility 3 Collateral, and such collateral is not and will not be subject to
any other Liens except as permitted by Section 5.2(a).
Section 4.12 Agency Approvals.
Each Borrower is a FHLMC approved Seller/Servicer, a HUD Direct
Endorsement Lender and a VA approved Lender in good standing, and FFCC is also
a FNMA approved Seller/Servicer and a GNMA approved Issuer/Servicer.
Section 4.13 Solvency.
Each Borrower is able to pay its debts as they mature. The
aggregate estimated fair market value of each Borrower's assets is greater than
such Borrower's liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities and any and all Obligations hereunder). Each Borrower
has capital sufficient to carry on the business and transactions in which it is
engaged and all business and transactions in which it is about to engage.
ARTICLE V
COVENANTS
Section 5.1 Affirmative Covenants.
Each Borrower hereby covenants and agrees that, as long as any
Obligations remain unpaid or any Lender has any Commitment hereunder, the
Borrowers shall:
(a) Reports to Agent. Furnish or cause to be furnished to the
Agent (with sufficient numbers of copies for each Lender which the Agent shall
forward to each Lender within a reasonable time after receipt thereof):
(i) Annual Financial Statements. As soon as available
and in any event within ninety (90) days after the end of each fiscal year of
FFCC, a consolidated and consolidating balance sheet of FFCC and its
consolidated Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income, retained earnings and cash
flows of FFCC and its consolidated Subsidiaries for such fiscal year, setting
forth in
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each case in comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by a report thereon of Price Waterhouse or
other independent public accountants of comparable recognized national
standing, which report shall be unqualified as to scope of audit and shall
state that such financial statements present fairly the consolidated and
consolidating financial condition as at the end of such fiscal year, and the
consolidated and consolidating results of operations and cash flows for such
fiscal year, of FFCC and its consolidated Subsidiaries in accordance with GAAP
consistently applied (it being understood that the form of audited consolidated
and unaudited consolidating balance sheet, and the related statements of
income, retained earnings and cash flows contained in the Bank Book shall
satisfy the requirements of this subsection);
(ii) Quarterly Financial Statements. As soon as
available and in any event within forty-five (45) days after the end of each
fiscal quarter of FFCC, a consolidated and consolidating balance sheet of FFCC
and its consolidated Subsidiaries as at the end of such fiscal quarter and the
related consolidated and consolidating statements of income, retained earnings
and cash flows of FFCC and its consolidated Subsidiaries for such fiscal
quarter, setting forth in each case in comparative form the figures for the
previous fiscal quarter, all in reasonable detail and certified by the chief
financial officer of FFCC that they present fairly the consolidated and
consolidating financial condition as at the end of such fiscal quarter, and the
consolidated and consolidating results of operations and cash flows for such
fiscal quarter, of FFCC and its consolidated Subsidiaries in accordance with
GAAP consistently applied, subject to normal year-end adjustments (it being
understood that the form of consolidated and consolidating balance sheet, and
the related statements of income, retained earnings and cash flows contained in
the Bank Book shall satisfy the requirements of this subsection);
(iii) Monthly Financial Statements. Upon thirty (30)
days' notice from the Agent (such notice to be given no earlier than the first
day of a month to receive a statement for the previous month), a consolidated
and consolidating balance sheet of FFCC and its consolidated Subsidiaries as at
the end of the previous month and the related consolidated and consolidating
statements of income and retained earnings of FFCC and its consolidated
Subsidiaries for such month setting forth in each case in comparative form the
figures for the previous month, all in reasonable detail and certified by the
chief financial officer of FFCC that they are complete and correct and that
they present fairly the consolidated and consolidating financial condition as
at the end of such month, and the consolidated and consolidating results of
operations for such month and such portion of the fiscal year, of FFCC and its
consolidated Subsidiaries in accordance with GAAP consistently applied (subject
to normal year-end adjustments);
(iv) No Default/Compliance Certificate. Together with
the financial statements required pursuant to subsections (i) and (ii) above, a
certificate of the chief financial officer of FFCC (A) to the effect that,
based upon a review of the activities of FFCC and its Subsidiaries and such
financial statements during the period covered thereby, no Event of Default or
Potential Default exists, or if an Event of Default or a Potential Default
exists, specifying the nature thereof and the Borrowers' proposed response
thereto, and (B) demonstrating in reasonable detail compliance with Section 5.3
as at the end of such fiscal year or such fiscal quarter, as applicable;
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(v) Audit Reports. Upon request by the Agent, copies of
each HUD Single Family Audit Report and FNMA and FHLMC audit reports on each
Borrower and its operations;
(vi) Notice of Default or Misrepresentation. (a)
Promptly after obtaining knowledge of the occurrence of an Event of Default or
a Potential Default, a certificate of the chief financial officer of FFCC
specifying the nature thereof and FFCC's or DMC's proposed response thereto and
(b) at any time that any representation, warranty or other information
contained in any statement or certificate required to be delivered hereunder or
any representation or warranty deemed to have been made hereunder shall prove
to be false or misleading in any material way, promptly after obtaining
knowledge thereof give notice thereof to the Agent describing how such
representation, warranty or information is misleading.
(vii) Loss of Qualification. Promptly after the
occurrence thereof, notice of any Mortgage Loan or Mortgage-Backed Security
included in the Facility 1 Borrowing Base, that ceases to qualify as an
Eligible Mortgage Loan or Eligible Mortgage-Backed Security, as the case may
be;
(viii) Litigation. Promptly after the occurrence thereof,
notice of the institution of or any material adverse development in any action,
suit or proceeding or any governmental investigation or any arbitration, before
any court or arbitrator or any governmental or administrative body, agency or
official, against either Borrower or any material property of any thereof, in
each case if such action, suit, proceeding, investigation or arbitration could
result in a liability to the Borrowers in excess of the Material Amount;
(ix) ERISA. In connection with ERISA:
(A) Promptly and in any event within ten
(10) Business Days after either Borrower knows or has reason to know of the
occurrence of a Reportable Event with respect to a Plan with regard to which
notice must be provided to the PBGC, a copy of such materials required to be
filed with the PBGC with respect to such Reportable Event and in each such case
a statement of the chief financial officer of such Borrower setting forth
details as to such Reportable Event and the action that such Borrower proposes
to take with respect thereto;
(B) Promptly and in any event within ten
(10) Business Days after either Borrower knows or has reason to know of any
condition existing with respect to a Plan that presents a material risk of
termination of such Plan, imposition of an excise tax, requirement to provide
security to such Plan or occurrence of other liability by the applicable
Borrower or any ERISA Affiliate, a statement of the chief financial officer of
the applicable Borrower describing such condition;
(C) At least ten (10) Business Days prior
to the filing by any plan administrator of a Plan of a notice of intent to
terminate such Plan, a copy of such notice;
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(D) Promptly and in no event more than ten
(10) Business Days after the filing thereof with the Secretary of the Treasury,
a copy of any application by either Borrower or an ERISA Affiliate for a waiver
of the minimum funding standard under section 412 of the Code;
(E) Upon request by the Agent from time to
time, copies of each annual report that is filed on Internal Revenue Service
Form 5500, together with certified financial statements for any Plan (if any)
as of the end of such year and actuarial statements on Schedule B to such Form
5500;
(F) Promptly and in any event within ten
(10) Business Days after it knows or has reason to know of any event or
condition that might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, a
statement of the chief financial officer of the applicable Borrower describing
such event or condition;
(G) Promptly and in no event more than ten
(10) Business Days after receipt thereof by either Borrower or any ERISA
Affiliate, a copy of each notice received by such Borrower or an ERISA
Affiliate concerning the imposition of any withdrawal liability under section
4202 of ERISA; and
(H) Promptly after receipt thereof a copy
of any notice either Borrower or any ERISA Affiliate may receive from the PBGC
or the Internal Revenue Service with respect to any Plan or Multiemployer Plan;
provided that this subparagraph (H) shall not apply to notices of general
application promulgated by the PBGC or the Internal Revenue Service;
(x) Borrowing Base, Commitment Status and Servicing
Reports.
(A) On Monday of each week, and on such
other days as the Agent may reasonably request, a Facility 1 Borrowing Base
Certificate and a Facility 2 Tranche A Borrowing Base Certificate, in each case
prepared by the Borrowers and dated as of the Friday preceding such Monday or
as of such other day;
(B) On Monday of each week, and on such
other days as the Agent may reasonably request, a Hedging Inventory Report,
dated as of the Friday preceding such Monday or as of such other day;
(C) As soon as available and in any event
no later than forty-five (45) days after the end of each fiscal quarter, a
Pledged Servicing Valuation Report dated as of the last day of such quarter;
(D) As soon as available and in any event
no later than fifteen (15) days after the end of (i) each month through June
1996, and (ii) each fiscal quarter thereafter, a Pledged Servicing Portfolio
Report, dated as of the last day of each month or quarter, as applicable;
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(E) On the first Business Day of each
month, and on such other days as the Agent may reasonably request, a report, in
form and substance reasonably satisfactory to the Agent, prepared by the
Borrowers, on the aging of Mortgage Loans included in the Facility 1 Borrowing
Base; and
(F) On the first Business Day of each
month, and in connection with any Real Estate Closing, and on such other days
as the Agent may reasonably request, a Facility 2 Tranche B Borrowing Base
Certificate, dated as of the preceding Business Day.
(xii) Certificating Custodian. Promptly after a
replacement of any Certificating Custodian, notice thereof together with copies
of the Agency Custodial Agreements appointing a successor Certificating
Custodian; and
(xiii) Other Information. Promptly, such additional
financial and other information, including financial statements of the
Borrowers or any of its Subsidiaries or any Approved Investor (other than FNMA
or FHLMC), and such information regarding the Collateral as any Lender, through
the Agent, may from time to time reasonably request, including such information
as is necessary for any Lender to grant participations of its interests in
Loans hereunder or to enable another financial institution to become a
signatory hereto.
(b) Maintenance of Existence and Properties; Compliance with
Laws; Maintenance of Agency Status. (i) Except as provided in Section 5.2(e),
preserve and maintain, and cause each of its Subsidiaries to preserve and
maintain, its corporate existence and all rights, privileges, licenses,
approvals, franchises, properties and assets material to the normal conduct of
its business; comply, and cause each of its Subsidiaries to comply, in all
material respects with all Contractual Obligations and Requirements of Law,
except when the failure to maintain the existence of any such Subsidiary or to
so comply would not have a Material Adverse Effect; and (ii) except as
permitted under Section 5.2(m), preserve and maintain at all times its status
as a FHLMC approved Seller/Servicer, a HUD Direct Endorsement Lender and a VA
approved Lender in good standing and, with respect to FFCC, its status as a
FNMA approved Seller/Servicer and as a GNMA approved Issuer/Servicer.
(c) Inspection of Property; Books and Records; Discussions.
(i) Keep, and cause each of its Subsidiaries to keep, proper books of record
and account in which full, true and correct entries in conformity with GAAP and
all Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities, and, (ii) permit representatives of
the Agent and the Lenders (at no cost to such Borrower unless a Potential
Default or an Event of Default has occurred and is continuing) to visit and
inspect any of its properties and examine and make copies from any of its books
and records during normal business hours, upon reasonable advance notice and as
often as may reasonably be desired by the Agent, and to discuss the business,
operations, properties and financial and other condition of such Borrower and
its Subsidiaries with officers of such parties, and, with their independent
certified public accountants (if a representative of FFCC or DMC shall have
been given the right upon reasonable notice to be present by phone or in
person), and with the consent of such Borrower, which consent shall not be
unreasonably withheld, with employees of the Borrowers.
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(d) Insurance. Maintain or cause to be maintained with
financially sound and reputable insurers, insurance with respect to its
properties and business, and the properties and business of its Subsidiaries,
against loss or damage of the kinds customarily insured against by reputable
companies in the same or similar businesses, such insurance to be of such types
and in such amounts (with such deductible amounts) as is customary for such
companies under similar circumstances, including errors and omissions coverage
and fidelity coverage in form and substance acceptable under Agency guidelines,
and furnish the Agent on request evidence of all such insurance.
(e) Payment of Taxes and Claims, Etc. Pay, and cause each of
its Subsidiaries to pay, (i) all taxes, assessments and governmental charges
imposed upon it or upon its property, and (ii) all genuine claims (including
claims for labor, materials, supplies or services) that might, if unpaid,
become a Lien upon its property, unless, in each case, the validity or amount
thereof is being contested in good faith by appropriate proceedings and such
Borrower or such Subsidiary has maintained adequate reserves in accordance with
GAAP with respect thereto or has posted a bond in respect thereof satisfactory
to the Required Lenders.
(f) GNMA Acknowledgment Agreement. Obtain, execute and deliver
an Acknowledgment Agreement from GNMA relating to the acknowledgment of the
Servicing Collateral Agent's security interest in the GNMA Servicing Portfolio,
if and when GNMA is prepared and willing to execute and deliver such agreement.
(g) Debt Service Coverage Test Recalculation. After the
determination of the debt service coverage test described in Section 5.3(d) for
a particular fiscal quarter, if either or both of the Borrowers (i) declare any
dividends in excess of ten percent (10%) of the dollar amount of the dividends
used in the calculation of such test, which dividends are to be payable in the
quarter for which the test applies and/or (ii) purchase or buy-back any of the
stock of either Borrower in an amount greater than $100,000, which purchase or
buy-back is to be consummated in the quarter for which the test applies, then
the Borrowers shall prior to the payment of such dividends or the purchase or
buy-back of the Stock, as applicable, recalculate such debt service coverage
test and demonstrate to the Agent their compliance with the requirements of
Section 5.3(d).
(h) Further Documents. Execute and deliver or to cause to be
executed and delivered to the Agent or the Collateral Agents on behalf of the
Lenders from time to time such confirmatory or supplementary security
agreements, financing statements, reaffirmations and consents and such other
documents, instruments or agreements as the Agent may reasonably request, that
are in the Agent's reasonable judgment necessary or desirable to obtain for the
Agent on behalf of the Lenders the benefit of the Loan Documents and the
Collateral.
(i) Recording. Cause each Power of Attorney to be
"protocolized" under the laws of Puerto Rico and filed in the Registry of
Powers of Attorneys and Wills, and file each
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Statement of Accounts Receivable in the applicable registry, and pay any and
all fees and charges in connection therewith.
(j) Recourse/Purchase Obligations. If (i) FFCC sells
Mortgage-Backed Securities or Mortgage Loans and the terms of such sale
obligate FFCC to repurchase (whether conditionally or unconditionally) such
Mortgage-Backed Securities or Mortgage Loans or if FFCC has retained recourse
obligations with respect thereto and (ii) the then aggregate amount of all such
repurchase and recourse obligations of FFCC (in connection with the
contemplated transaction and all previous transactions) exceeds $250,000,000,
then FFCC shall give notice thereof to the Agent within five (5) Business Days
of such sale. If FFCC shall have assumed recourse obligations with respect to
Mortgage-Backed Securities or Mortgage Loans included in its Servicing
Portfolio and the aggregate amount of such recourse obligations of FFCC with
respect to Mortgage-Backed Securities or Mortgage Loans included in its
Servicing Portfolio exceeds $250,000,000, then FFCC shall give notice thereof
to the Agent within five (5) Business Days after such assumption.
Notwithstanding the foregoing, FFCC shall obtain the prior written consent of
the Agent acting at the direction of the Required Lenders before entering into
any of the transactions described in the preceding two sentences if, in the
reasonable judgment of the management of FFCC, such transaction (or the
aggregate of such transaction with all previous transactions for which
obligations still exist) could result in a decrease in FFCC's Book Net Worth by
a Material Amount.
Section 5.2 Negative Covenants of Each Borrower.
Each Borrower hereby covenants and agrees that, as long as any
Obligations remain unpaid or any Lender has any Commitment hereunder, such
Borrower shall not, directly or indirectly:
(a) Liens. Create, incur, assume or suffer to exist, or permit
any Subsidiary to create, incur, assume or suffer to exist, any Lien upon the
Collateral and the Servicing Portfolio now owned or hereafter acquired, except
as contemplated by the Security Agreements, other than:
(i) Liens or charges for current taxes, assessments or
other governmental charges that are not delinquent or which remain payable
without penalty;
(ii) Liens, deposits or pledges made to secure statutory
obligations, surety or appeal bonds, or bonds for the release of attachments or
for stay of execution, or to secure the performance of bids and tenders or for
purposes of like general nature in the ordinary course of business of such
Borrower or such Subsidiary;
(iii) Liens on that portion of the Servicing Portfolio not
pledged to the Secured Parties, provided that at least $1,000,000,000 of the
principal amount of the mortgage loans in the Servicing Portfolio remain
unencumbered;
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(iv) the interests of FNMA and FHLMC with respect to the
servicing rights relating to the underlying Mortgage Loans in the Pledged
Servicing Portfolio as set forth in acknowledgment agreements with such
Agencies and the interests of GNMA as set forth in the GNMA Guide; and
(v) involuntary Liens relating to liabilities not in
excess of $100,000 in the aggregate for each Borrower; provided that such
Borrower or such Subsidiary is making a diligent effort to remove such Liens as
soon as practicable.
(b) Change of Business. Except as permitted under Section
5.2(e), engage in any type of business that is unrelated to the mortgage
banking and lending business and the servicing of mortgage loans or permit any
of FFCC's Subsidiaries to engage in any type of business other than financial
services;
(c) Acquisitions. Except as permitted under Section 5.2(e),
purchase or acquire, or permit any of its Subsidiaries to purchase or acquire,
or incur liability for the purchase or acquisition of, or permit any of its
Subsidiaries or to incur liability for the purchase or acquisition of, any or
all of the assets or business of any Person (whether such purchase or
acquisition shall be by means of merger, stock purchase, asset purchase or
otherwise) other than (i) purchases and acquisitions in the ordinary course of
business as currently conducted and (ii) other purchases and acquisitions
relating to the mortgage banking and lending business and the servicing of
mortgage loans or other financial services.
(d) Transactions with Affiliates. Enter into, or permit any of
its Subsidiaries directly or indirectly to enter into, any transaction
(including the purchase, sale, lease or exchange of any property, the making or
borrowing of any loan or the rendering of any service) with any Affiliate on
terms that are less favorable to such Borrower or such Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates other
than the existing Master Production Agreement and the Master Purchase,
Servicing and Collection Agreement dated as of September 15, 1993 with Doral
Federal Savings as in effect on such date.
(e) Consolidation, Merger, Sale of Assets, Etc. (i) Enter into
any merger, consolidation or amalgamation, including any such transaction with
a regulated banking entity, or (ii) liquidate, wind-up or dissolve itself (or
suffer or permit any of the foregoing to occur) or (iii) sell, lease, assign,
transfer or otherwise dispose of, or permit any of its Subsidiaries to sell,
lease, assign, transfer or otherwise dispose of, more than twenty-five percent
(25%) of its assets based on the book value of all such assets as set forth in
the last audited financial statement of such Borrower whether now owned or
hereafter acquired, except that the following shall be permitted so long as no
Potential Default or an Event of Default has occurred and is continuing or
would result therefrom:
(A) the Borrowers may merge or consolidate with another
Person where FFCC is the surviving entity;
(B) The Borrowers may sell assets in the ordinary
course of business at fair market value (it being expressly agreed and
understood that the sale or other disposition
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of Mortgage-Backed Securities and of Mortgage Loans with or without servicing
released is in the ordinary course of business and that the Borrowers may sell
all or a portion of its servicing rights to the extent and in the manner
permitted by Sections 5.2(d) and (h) hereof and by the Servicing Security
Agreement. Notwithstanding the foregoing, DMC may be merged into, become
consolidated with or become a Subsidiary of any Person that is a regulated
banking entity so long as (x) FFCC (I) becomes the sole borrower under the Loan
Documents and affirms the same pursuant to documentation reasonably
satisfactory to Lenders and Agent and (II) satisfies all the representations,
warranties and covenants hereunder, including the financial covenants, without
DMC being included in its consolidated and consolidating financial statements;
(y) no Potential Default or Event of Default exists at the time of such event
and after giving effect thereto; and (z) such event does not have a Material
Adverse Effect; and
(C) The Borrowers may sell all of the outstanding stock
or assets of Centro Hipotecario de Puerto Rico, Inc.
(f) VA Guaranties and FHA Insurance. Commit any act that would
invalidate any VA guarantee or FHA insurance relating to any Mortgage Loan
pledged to the Secured Parties as Collateral under the Warehousing Security
Agreement if, after giving effect to such action, the then aggregate
outstanding principal amount of the Facility 1 Loans and Swing-Line Loans and
Facility 1 Acceptance Obligations would be less than the Collateral Value of
the Facility 1 Borrowing Base.
(g) ERISA. Take, or permit any of its Subsidiaries to take,
any of the following actions:
(i) Terminate or withdraw from any Plan so as to result
in any material liability to the PBGC;
(ii) Engage in or permit any Person to engage in any
Prohibited Transaction involving any Plan that would subject such Borrower or
any of its Subsidiaries to any material tax, penalty or other liability;
(iii) Incur or suffer to exist any material Accumulated
Funding Deficiency, whether or not waived, involving any Plan;
(iv) Allow or suffer to exist any event or condition that
presents a risk of incurring a material liability to the PBGC;
(v) Amend any Plan so as to require the posting of
security under section 401(a)(29) of the Code; or
(vi) Fail to make payments required under section 412(m)
of the Code and section 302(e) of ERISA that would subject such Borrower or any
of its Subsidiaries to any material tax, penalty or other liability.
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(h) Transfer to Affiliates. Subject to the proviso in
subsection (e) above, sell, assign or otherwise transfer any of its assets to
any Affiliate of a Borrower without the prior written consent of the Required
Lenders, or permit any of its Subsidiaries to sell, assign or otherwise
transfer any of their respective assets, to any Affiliate of a Borrower without
the prior written consent of the Required Lenders other than inter-company
dividends to Borrowers or Borrowers' Subsidiaries; provided that (I) any
Subsidiary of a Borrower may, subject to subsection (e) above, sell, assign or
otherwise transfer any of their respective assets to such Borrower, (II) DMC
may, subject to subsection (e) above, sell, assign or otherwise transfer its
assets to FFCC and (III) FFCC may make capital investments in its Subsidiaries.
(i) Subsidiaries. Form or cause to be formed after the date
hereof any Subsidiaries of the Borrowers without prior notice to the Agent.
(j) Margin Regulations. Use any or all of the proceeds of any
Loan or any Acceptance (i) to purchase or carry Margin Stock or extend credit
to others for the purpose of purchasing or carrying Margin Stock or (ii) in any
manner that will violate or be inconsistent with the provisions of Regulation
G, T, U or X of the Board.
(k) Funding Agreement. Fail to comply with any or all of its
obligations under the Funding Agreement or amend, modify, supplement, terminate
or assign the Funding Agreement.
(l) Hedging Policy. Fail to comply in all material respects
with the Hedging Policy or change the Hedging Policy in any material way, or
terminate the Hedging Policy without prior notice to the Agent.
(m) Fail to maintain the Agency approvals described in Section
4.12 as a result of a change in business plan of the Borrower without the prior
consent of the Agent and Lenders thereto, which consent shall not be
unreasonably withheld as long as no Material Adverse Effect would result
therefrom.
(n) Custody Account. Take any action that would cause the
custodial account maintained with the Warehousing Collateral Agent into which
Book-Entry MBS's relating to Mortgage Loans included in the Facility 1
Borrowing Base shall be issued to cease to be in effect.
Section 5.3 Additional Negative Covenants.
Each Borrower hereby covenants and agrees that, as long as any
Obligations remain unpaid or any Lender has any Commitment hereunder, such
Borrower shall not at any time, directly or indirectly:
(a) Total Liabilities. Permit FFCC on a consolidated
basis (excluding any Subsidiaries that are not primarily engaged primarily in
the business of mortgage banking as reasonably determined by the Agent) to
incur Total Liabilities in excess of the sum of (i) one-hundred percent (100%)
of "Cash" or "cash equivalents"; (ii) ninety-five percent (95%) of the
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sum of (A) "Mortgage Loans held for sale" and (B) "Mortgage-Backed Securities
held for trading"; (iii) eighty percent (80%) of the sum of (A) Mortgage-Backed
Securities held to maturity", and (B) "Accounts receivable and mortgage
servicing advances"; (iv) fifty percent (50%) of the sum of (A) "Property,
leasehold improvements and equipment," (B) "Real estate held for sale," and (C)
"Prepaid and other assets"; and (v) eighty-five one hundredths of one percent
(0.85%) of the principal amount of Mortgage Loans owned by Persons not
affiliated with FFCC or DMC or any of its Affiliates (unless covered by a
Permitted Affiliate Servicing Agreement) for which FFCC or DMC owns the direct
servicing rights. All quoted terms used in the preceding sentence shall have
the same meanings, and shall continue to be calculated and classified in the
same manner, as the terms used in the consolidated balance sheet of FFCC
prepared by Price Waterhouse, dated December 31, 1994.
(b) Adjusted Tangible Net Worth. Permit Adjusted
Tangible Net Worth at any time to be less than the greater of (i) $80,000,000
and (ii) eighty-five percent (85%) of Adjusted Tangible Net Worth shown in the
last fiscal year-end audited balance sheet delivered to the Agent in accordance
with Section 5.1(a).
(c) Book Net Worth. Permit Book Net Worth at any time
to be less than the greater of (i) $76,000,000 and (ii) eighty-five percent
(85%) of the Book Net Worth as shown in the last fiscal year-end audited
balance sheet delivered to the Agent in accordance with Section 5.1(a).
(d) Debt Service Coverage. Permit the ratio measured at
the end of each fiscal quarter of FFCC on a consolidated basis (excluding any
Subsidiaries that are not primarily engaged primarily in the business of
mortgage banking as reasonably determined by the Agent) of (I) the arithmetic
quarterly average of the sum of (A) the aggregate net income of FFCC for the
preceding four (4) fiscal quarters (including the quarter then ended) less any
non-cash income of FFCC, if applicable, plus (B) the aggregate depreciation,
amortization and other non-cash charges for such quarters to (II) the sum of
(A) payments of principal on amortizing, funded indebtedness which are
scheduled to be made by FFCC during the next succeeding fiscal quarter plus (B)
such aggregate dividend payments to be paid by FFCC during the next succeeding
fiscal quarter, to be less than 1.25:1.0; provided that dividend payments by
DMC to FFCC shall be excluded from the foregoing calculation. For purposes of
the foregoing ratio, "other non-cash income" refers to one time account
adjustments reflected on the applicable financial statement. An example of the
foregoing calculation is set forth on Exhibit P hereto.
(e) Servicing Portfolio. Permit FFCC on a consolidated
basis (excluding any Subsidiaries that are not primarily engaged in the
business of mortgage banking as reasonably determined by the Agent) to maintain
a Servicing Portfolio of mortgage loans with an aggregate outstanding principal
balance of less than $1,800,000,000 or such lesser amount as shall be agreed by
the Lenders in the exercise of their sole discretion.
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ARTICLE VI
EVENTS OF DEFAULT
Section 6.1 Events of Default.
If one or more of the following events (each an "Event of
Default") shall have occurred and be continuing:
(a) Payments. (i) The Borrowers shall fail to pay when due
(whether at scheduled maturity, upon mandatory repayment or otherwise) any
principal of any Note or any Acceptance Obligation including any interest or
fee due with respect to any Acceptance Obligation; or (ii) the Borrowers shall
fail to pay within three (3) Business Days after the due date thereof any
interest on any Note or any other Obligation, or otherwise;
(b) Covenants Without Notice. The Borrowers shall fail to
observe or perform any covenant or agreement contained in Sections 5.1(b)(i),
5.1(f), 5.2 and 5.3 or if a default beyond applicable grace and cure periods
shall occur under the Funding Agreements; provided that any violation of
Section 5.2(a) that is attributable to the existence of an involuntary Lien on
the Collateral (other than an involuntary Lien expressly permitted by Section
5.2(a)) shall not constitute an Event of Default until thirty (30) days after
the imposition thereof if at all times during such thirty (30) day period the
Borrowers are making a diligent effort by appropriate means to remove such
Lien);
(c) Covenants With Seven Business Day Grace Period. The
Borrowers shall fail to observe or perform any covenant or agreement contained
in Sections 5.1(a), 5.1(b)(ii) and 5.1(c)(ii), and such failure shall remain
unremedied for seven (7) Business Days after oral notice thereof to an
Authorized Officer (which shall be confirmed in writing (which may be by
facsimile) before the end of such seven (7) Business Day period);
(d) Covenants With Thirty Day Grace Period. The Borrowers
shall fail to observe or perform any covenant or agreement contained in any
Loan Document, other than those referred to in Sections 6.1(a), (b) or (c),
and, if capable of being remedied, such failure shall remain unremedied for
thirty (30) days after the earlier of (i) either Borrower's obtaining knowledge
thereof or (ii) notice thereof shall have been given to an Authorized Officer
by any Lender or the Agent before the end of such thirty (30) day period);
provided that if such failure is capable of being remedied but only in a period
of more than thirty (30) days, then such failure shall not constitute an Event
of Default until sixty (60) days after the earlier of the above dates if each
Borrower is making a diligent effort by appropriate means to observe or perform
such covenant and there is otherwise no Material Adverse Effect as a result of
such delay;
(e) Representations. Any representation, warranty or statement
made or deemed to be made by either Borrower or any of their respective
officers under or in connection with any Loan Document shall have been
inaccurate, incomplete or incorrect in any respect when
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made or deemed to be made and such inaccuracy, incompleteness or incorrectness
could have a Material Adverse Effect;
(f) Non-Payment of Other Indebtedness. Either Borrower shall
fail to make any payment of principal of or interest on any of its Indebtedness
(other than the Obligations) exceeding the Material Amount in the aggregate
when due (whether at stated maturity, by acceleration, on demand or otherwise)
after giving effect to any applicable grace period;
(g) Defaults Under Other Agreements. Either Borrower shall
fail to observe or perform any covenant or agreement contained in any agreement
or instrument relating to any of its Indebtedness (other than the Obligations)
in excess of the Material Amount in the aggregate within any applicable grace
period, or any other event shall occur if the effect of such failure or other
event is to accelerate, or to permit the holder of such Indebtedness or any
other Person to accelerate, the maturity of such Indebtedness; or any such
Indebtedness shall be required to be prepaid (other than by a regularly
scheduled required prepayment) in whole or in part prior to its stated
maturity;
(h) Bankruptcy. Either Borrower shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled
"Bankruptcy" as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or any involuntary case is commenced against either
Borrower and the petition is not dismissed within sixty (60) days after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or any substantial part of the property
of either Borrower; or either Borrower commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law or there is commenced
against either Borrower any such proceeding that remains undismissed for a
period of sixty (60) days; or either Borrower is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or either Borrower shall fail to pay, or shall state
that it is unable to pay, or shall be unable to pay, its debts generally as
they become due; or either Borrower shall call a meeting of its creditors with
a view to arranging a composition or adjustment of its debts; or either
Borrower shall by any act or failure to act indicate its consent to, approval
of or acquiescence in any of the foregoing; or any corporate action is taken by
either Borrower for the purpose of effecting any of the foregoing;
(i) Money Judgment. A judgment or order for the payment of
money in excess of the Material Amount shall be rendered against either
Borrower and such judgment or order shall continue unsatisfied (in the case of
a money judgment) and in effect for a period of thirty (30) days during which
execution shall not be effectively stayed or deferred (whether by action of a
court, by agreement or otherwise);
(j) ERISA. (i) Any Reportable Event or a Prohibited
Transaction shall occur with respect to any Plan; (ii) a notice of intent to
terminate a Plan under section 4041 of ERISA shall be filed; (iii) a notice
shall be received by the plan administrator of a Plan that the PBGC has
instituted proceedings to terminate a Plan or appoint a trustee to administer a
Plan; (iv) any other event or condition shall exist that might, in the opinion
of the Required
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Lenders, constitute grounds under section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan; (v) the Borrowers or
any ERISA Affiliate shall withdraw from a Multiemployer Plan under
circumstances that the Required Lenders determine could have a material adverse
effect on the financial condition of either Borrower; and in case of the
occurrence of any event or condition described in clauses (i) through (v)
above, such event or condition together with all other such events or
conditions, if any, could subject either Borrower to any tax, penalty or other
liabilities in the aggregate material in relation to the business, operations,
property or financial or other condition of either Borrower;
(k) Loan Documents. Any of the Loan Documents shall cease for
any reason to be in full force and effect, a breach by the Borrowers under any
of the Acknowledgement Agreements shall occur, or any action shall be taken by
any Person to terminate, revoke or discontinue, or to assert the invalidity or
unenforceability of, any of the Loan Documents; or
(l) Security Interests. The Secured Parties shall cease for
any reason (other than pursuant to the terms of the respective Security
Agreements) to have valid, security interests in the Collateral (with such
priority as set forth in the Loan Documents) or perfected security interests in
the collateral specifically described in Section 4.11(b), or any Person shall
take any action to discontinue or to assert the invalidity or unenforceability
of such security interests;
THEN, the Agent shall notify the Lenders of such Event of Default and may, and
upon the written request of the Required Lenders, shall, by written notice to
the Borrower, take any or all of the following actions: (A) declare the
Commitments terminated, whereupon the Commitment of each Lender shall terminate
immediately without any other notice of any kind; and (B) declare the principal
of and any accrued interest on the Loans, and all other Obligations (including
the Acceptance Obligations, to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrowers; provided that, if an
Event of Default specified in Section 6.1(h) shall occur, the Commitments shall
terminate and all Obligations shall become immediately due and payable
automatically without the giving of any such notice and without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrowers.
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ARTICLE VII
THE AGENT
Section 7.1 Appointment of Agent.
Each Lender hereby designates Bankers Trust Company as Agent to
act as herein specified. Each Lender hereby irrevocably authorizes, and each
holder of any Note by the acceptance of a Note shall be deemed irrevocably to
authorize, the Agent to take such action on its behalf under the provisions of
this Agreement and the other Loan Documents and any other instruments and
agreements referred to herein or therein and to exercise such powers and to
perform such duties hereunder or thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof and such other powers as
are reasonably incidental thereto. The Agent may perform any of its duties
hereunder or thereunder by or through its agents or employees.
Section 7.2 Nature of Duties of Agent.
The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and the other Loan Documents. Neither
the Agent nor any of its officers, directors, employees or agents shall be
liable for any action taken or omitted hereunder or thereunder or in connection
herewith or therewith, unless caused by its or their gross negligence or
willful misconduct. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement
or any other Loan Document a fiduciary relationship in respect of any Lender;
and nothing in this Agreement or any other Loan Document, express or implied,
is intended to or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement or any other Loan Document except as
expressly set forth herein or therein.
Section 7.3 Lack of Reliance on Agent.
(a) Independently and without reliance upon the Agent, each
Lender, to the extent it deems appropriate, has made and shall continue to make
(i) its own independent investigation of the financial condition and affairs of
each Borrower and its Affiliates in connection with the taking or not taking of
any action in connection herewith and (ii) its own appraisal of the
creditworthiness of each Borrower and its Affiliates, and, except as expressly
provided in this Agreement, the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any
credit or other information with respect thereto, whether coming into its
possession before the making of the Loans or at any time or times thereafter.
(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection with this
Agreement or any other Loan Document or for the execution, effectiveness,
genuineness, validity, enforceability, collectibility, priority or
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sufficiency of this Agreement or any other Loan Document or for the sufficiency
of the Collateral or the validity, perfection or priority of any security
interest in the Collateral or the financial condition of each Borrower or its
Affiliates or be required to make any inquiry concerning either the performance
or observance of any of the terms, provisions or conditions of this Agreement
or any other Loan Document, or the financial condition of each Borrower or its
Affiliates, or the existence or possible existence of any Potential Default or
Event of Default.
Section 7.4 Certain Rights of Agent.
If the Agent shall request instructions from the Required Lenders,
the Required Facility 1 Lenders, the Required Facility 2 Lenders, the Required
Revolving Loan Lenders or the Required Facility 3 Lenders with respect to any
act or action (including the failure to act) in connection with this Agreement
or any other Loan Document, the Agent shall be entitled to refrain from such
act or taking such action unless and until the Agent shall have received
instructions from the Required Lenders, the Required Facility 1 Lenders, the
Required Facility 2 Lenders, the Required Revolving Loan Lenders or the
Required Facility 3 Lenders, as the case may be; and the Agent shall not incur
liability to any Lender by reason of so refraining. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder or
under any other Loan Document in accordance with the instructions of the
Required Lenders, the Required Facility 1 Lenders, the Required Facility 2
Lenders, the Required Revolving Loan Lenders or the Required Facility 3
Lenders, as the context may require. The provisions of this Section 7.4 are
not intended to supersede the provisions of Section 8.2 that require all of the
Lenders to approve certain actions under the Loan Documents.
Section 7.5 Reliance by Agent.
The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any notice, believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person. The Agent may consult
with legal counsel (including with the consent of FFCC, which consent shall not
be unreasonably withheld, counsel for FFCC or DMC), independent public
accountants (including those retained by FFCC or DMC if a representative of
FFCC or DMC, as applicable, shall have been given the right upon reasonable
notice to be present by phone or in person during such consultation) 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.
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Section 7.6 Indemnification of Agent.
To the extent the Agent is not reimbursed and indemnified by FFCC
or DMC, each Lender will reimburse and indemnify the Agent, in proportion to
its respective Commitments (before giving effect to any termination of the
Commitments pursuant to the terms of this Agreement) from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including reasonable attorneys' fees and disbursements)
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in performing its duties hereunder
and under the other Loan Documents, in any way relating to or arising out of
this Agreement or the other Loan Documents; provided that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct.
Section 7.7 Agent in its Individual Capacity.
With respect to its obligation to lend under this Agreement, the
Loans made by it and the Notes issued to it, the Agent shall have the same
rights and powers hereunder as any other Lender or holder of a Note and may
exercise the same as though it were not performing the duties specified herein;
and the terms "Lenders," "Required Lenders," "Required Facility 1 Lenders,"
"Required Facility 2 Lenders", "Required Revolving Loan Lenders," "Required
Facility 3 Lenders," "holders of Notes" or any similar terms shall, unless the
context clearly otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, and generally
engage in any kind of banking, trust, financial advisory or other business with
each Borrower or any Affiliate of the Borrowers as if it were not performing
the duties specified herein, and may accept fees and other consideration from
the Borrowers and any Affiliates of the Borrowers for services in connection
with this Agreement and the other Loan Documents and otherwise without having
to account for the same to the Lenders.
Section 7.8 Holders of Notes.
The Agent may deem and treat the payee of any Note as the owner
thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the Agent. 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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Section 7.9 Successor Agent.
(a) The Agent may resign as Agent hereunder at any time by
giving written notice thereof to the Lenders and the Borrowers if (i) it
believes that its duties hereunder present an actual or potential conflict of
interest with any other business of the Agent or (ii) it determines at any time
that the introduction of, or any change in, any applicable law, rule,
regulation, order or decree or in the interpretation or administration thereof
by any Governmental Authority charged with the interpretation or administration
thereof, or compliance by the Agent with any request or directive (whether or
not having the force of law) of any such Authority, shall make it unlawful or
improper for the Agent to continue as Agent hereunder. Upon any such
resignation or any removal of the Agent pursuant to Section 7.9(b), the
Required Lenders shall have the right, upon five (5) days' notice to the
Borrowers, to appoint a successor Agent, which shall be a Lender. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within thirty (30) days after the retiring
Agent's giving of notice of resignation, then, upon five (5) days' notice to
the Borrowers, the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a bank which maintains an office in the United
States, or a commercial bank organized under the laws of the United States of
America or of any State thereof, or any Affiliate of such bank, having a
combined capital and surplus of at least $250,000,000.
(b) The Agent may be removed by the unanimous vote of all the
Lenders hereunder (not including the vote of the Agent if the Agent is also a
Lender hereunder) if (i) the Agent has engaged in willful misconduct with
respect to its obligations and duties hereunder and (ii) has failed to cure
such willful misconduct after sixty (60) days notice by the Lenders to the
Agent of such willful misconduct.
(c) Any resignation or removal of the Agent hereunder shall be
effective only upon the acceptance of any appointment as Agent hereunder by a
successor Agent. Upon such acceptance, such successor Agent shall 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 and the other Loan Documents. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Article
VII shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Notices.
(a) Except as otherwise expressly set forth herein, all
notices, requests and other communications to any party hereunder shall be in
writing (including telecopy or similar teletransmission or writing) and shall
be given to such party at its address or telecopy number set forth on Exhibit M
hereto or such other address or telecopy number as such party may hereafter
specify by notice to the Agent and the Borrowers. Each such notice, request or
other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified herein and the receipt
thereof is confirmed by the recipient or (b) if sent by overnight courier (with
all charges paid) providing for confirmation of delivery, then upon
confirmation of delivery by such courier; provided that notices to the Agent
pursuant to Article II shall not be effective until received.
(b) Any notice required to be given to one or more
Borrowers hereunder or under any other Loan Document shall be effective if
delivered to FFCC, it being the intent that notice to FFCC is effective notice
to DMC. In connection therewith, DMC hereby irrevocably appoints FFCC as its
agent to receive any and all notices hereunder or under any other Loan Document
and such appointment is coupled with an interest. In addition to the
foregoing, the Agent and the Lenders shall be entitled to, but shall not be
required to, rely on notice from either Borrower as constituting notice from
both Borrowers.
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Section 8.2 Amendments, Etc.
No amendment or waiver of any provision of any Loan Document, nor
consent to any departure by the Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Borrowers and
the Required Lenders, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided that (a) notwithstanding anything else contained herein, no
amendment, waiver or consent shall, unless in writing and signed by all the
Lenders, do any of the following: (i) waive or change any of the conditions
specified in Article III, (ii) increase the Commitments of the Lenders or
subject the Lenders to any additional obligations, (iii) reduce the principal
of, or interest on, the Notes or the amount of the Acceptance Obligations or
reduce any fees payable to the Lenders hereunder, (iv) postpone any date fixed
for any payment in respect of principal of, or interest on, the Notes or
payment of any Acceptance Obligations, or the payment of any fees payable
hereunder, or waive any Event of Default under Section 6.1(a), (v) change the
percentage of the Commitments, the definitions of "Required Lenders,"
"Collateral Value of the Facility 1 Borrowing Base," "Collateral Value of the
Facility 2 Tranche A Borrowing Base," "Collateral Value of the Facility 2
Tranche B Borrowing Base," "Collateral Value of the Facility 3 Borrowing Base,"
"Eligible Conforming Mortgage Loan," "Eligible Mortgage-Backed Security,"
"Eligible Mortgage Loan," "Eligible Non-Conforming Mortgage Loan," "Eligible
REO Property" or "Eligible Servicing Receivable" (or any definitions contained
in such definitions), or the number or identity of Lenders that is required for
any or all of the Lenders to take any action hereunder, (vi) release the Lien
of the Secured Parties on any of the Collateral, except as provided in the
Security Agreements or (vii) amend this Section 8.2 or Section 8.6; (b) no
amendment, waiver or consent shall, unless in writing and signed by the Agent,
affect the rights or duties of the Agent under this Agreement or any other Loan
Document; and (c) no amendment, waiver or consent shall, unless in writing and
signed by Bankers Trust, amend, waive or modify Section 2.1(e) or Section
2.4(c), (d) or (e) or otherwise affect the rights or obligations of Bankers
Trust with respect to Swing-Line Loans and Acceptances.
Section 8.3 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or any Lender in
exercising any right or remedy hereunder or under any other Loan Document and
no course of dealing between the Borrowers, on the one hand, and the Agent or
any Lender, on the other hand, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right or remedy hereunder or under any other
Loan Document preclude any other or further exercise thereof or the exercise of
any other right or remedy hereunder or thereunder. The rights and remedies
expressly provided herein and in the other Loan Documents are cumulative and
not exclusive of any rights or remedies that the Agent or any Lender would
otherwise have. No notice to or demand on the Borrowers not required hereunder
or under the other Loan Documents in any case shall entitle the Borrowers to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Agent or any Lender to any other or
further action in any circumstances without notice or demand.
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Section 8.4 Payment of Expenses, Etc.
The Borrowers shall:
(a) (i) pay all reasonable out-of-pocket costs and
expenses of the outside legal counsel of the Agent in connection with the
preparation, execution and delivery of, this Agreement and the other Loan
Documents, or any amendment, modification or supplement hereof or thereof,
including the documentation required pursuant to Section 3.1(c) and the
closings contemplated thereunder, and (ii) pay all reasonable out-of-pocket
costs and expenses of the Agent and each Lender in the preservation of rights
under, enforcement of, and, after the occurrence of a Potential Default or an
Event of Default, the refinancing, the renegotiating or the restructuring of,
this Agreement and the other Loan Documents and the documents and instruments
referred to herein and therein including in connection with any bankruptcy,
insolvency, liquidation, reorganization or similar proceeding and any
amendment, waiver or consent relating hereto and thereto (including the
reasonable fees and disbursements of counsel (including allocated costs of
internal counsel) for the Agent and, in the case of enforcement, for each of
the Lenders);
(b) pay and hold the Agent and each of the Lenders
harmless from and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save the Agent and each
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay or omission to pay such taxes; and
(c) indemnify the Agent and each Lender, and their
respective officers, directors, employees, representatives and agents from, and
hold each of them harmless against, any and all out-of-pocket costs, losses,
liabilities, claims, damages or expenses actually incurred by any of them
(whether or not any of them is designated a party thereto) arising out of or by
reason of any investigation, litigation or other proceeding related to any
actual or proposed use by the Borrowers of the proceeds of any of the Loans or
the Borrowers' entering into and performing of the Loan Documents to which they
are a party, or arising out of the creation Acceptances or the Acceptance
Obligations including the reasonable fees and disbursements of counsel
(including allocated costs of internal counsel) incurred in connection with any
such investigation, litigation or other proceeding; provided that neither the
Agent nor any Lender shall have the right to be indemnified hereunder for its
own gross negligence or willful misconduct. If and to the extent that the
obligations of the Borrowers under this Section 8.4 are unenforceable for any
reason, the Borrowers hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations that is permissible under
applicable law.
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Section 8.5 Right of Setoff.
Subject to Section 2.16, in addition to and not in limitation of
all rights of offset that any Lender may have under applicable law, for so long
as any Event of Default has occurred and is continuing and whether or not any
Lender has made any demand or the Obligations have matured, such Lender shall
have the right to appropriate and apply to the payment of the Obligations all
deposits (general or special, time or demand, provisional or final) then or
thereafter held by, and other indebtedness or property then or thereafter owing
to the Borrowers by, such Lender, whether or not related to any Loan Document
or any transaction hereunder.
Section 8.6 Benefit of Agreement.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto; provided that neither of the Borrowers may assign or transfer
any of its interest or delegate any of its obligations under the Loan Documents
without the prior written consent of the Lenders and any such assignment or
transfer without the prior written consent of the Lenders shall be null and
void.
(b) Subject to the provisions of Section 2.13(c), any Lender
may make, carry or transfer Loans at, to or for the account of, any of its
branch offices or the office of an Affiliate of such Lender.
(c) Subject to the limitations set forth below, no Lender may
assign its rights or delegate its obligations under this Agreement and the
other Loan Documents to any other financial institution without the prior
consent of the Agent and the Borrowers (such consent not to be unreasonably
withheld) and provided that (i) no Lender may make an assignment hereunder to a
Person (other than an Affiliate of such Lender or an existing Lender) that is
not a financial institution; and (ii) an assignment fee in the amount of $2,500
for each assignment hereunder shall be payable to the Agent by the applicable
assignee. Any assignment or delegation specifically prohibited by the
preceding sentence shall be null and void. Notwithstanding the foregoing, any
Lender may assign its rights and delegate its obligations under this Agreement
and the other Loan Documents to any Affiliate of such Lender without notice to
or consent by the Borrowers, the Agent, or any other Person, provided the fee
set forth in the proviso to the immediately preceding sentence shall be paid.
In the case of an assignment by a Lender, upon notice thereof by such Lender to
the Borrowers and the Agent, the assignee shall have, to the extent of such
assignment (unless otherwise provided thereby), the same rights and benefits as
it would have if it were a Lender under the Loan Documents and the holder of a
Note and, if the assignee has expressly assumed, for the benefit of the
Borrowers, the assignor Lender's obligations hereunder, such assignor Lender
shall be relieved of its obligations hereunder to the extent of such assignment
and assumption.
(d) Each Lender may transfer, grant or assign participations in
all or any part of such Lender's interests and obligations hereunder pursuant
to this Section to another financial
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institution, provided that (i) such Lender shall remain a "Lender"
for all purposes of this Agreement and the transferee of such participation
shall not constitute a Lender hereunder and (ii) no participant under any such
participation shall have rights to approve any amendment to or waiver of this
Agreement or any other Loan Document except to the extent such amendment or
waiver would (x) extend the final scheduled maturity of any of the Loans or the
Commitment in which such participant is participating, (y) reduce the interest
rate (other than as a result of waiving the applicability of any post-default
increases in interest rates) or Fees applicable to any of the Loans,
Commitments or Acceptances or postpone the payment of any thereof or (z)
release any collateral under the Security Agreements. In the case of any such
participation, the participant shall not have any rights under this Agreement
or any of the other Loan Documents (the participant's rights against the
granting Lender in respect of such participation to be those set forth in the
agreement with such Lender creating such participation) and all amounts payable
by the Borrowers hereunder shall be determined as if such Lender had not sold
such participation, provided that such participant shall be entitled to receive
additional amounts under Sections 2.13, 2.14 and 2.15 on the same basis as if
it were a Lender.
(e) Any Lender may furnish any information concerning the
Borrowers and its Affiliates in the possession of such Lender from time to time
to Affiliates, participants and assignees, and prospective participants and
assignees, of such Lender. No Lender or its Affiliates may furnish such
information to any prospective assignee or participant without the prior
written consent of FFCC, which consent will not be unreasonably withheld. Any
prospective assignee or participant shall be required to execute a
confidentiality agreement in the form of Exhibit Q before receiving any such
information.
(f) Any Lender may at any time pledge all or any portion of its
rights under the Loan Documents to a Federal Reserve Bank without notice to or
consent of either Borrower, the Agent or any other Lender. No such pledge
shall release the transferor Lender from its obligations hereunder.
SECTION 8.7 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(A) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND UNDER THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS TO WHICH EITHER BORROWER IS A PARTY MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY OR
OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS HEREBY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY
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AND UNCONDITIONALLY WAIVE TRIAL BY JURY, AND, TO THE MAXIMUM EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE BORROWERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OR MAINTAINING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
(C) EACH OF THE BORROWERS IRREVOCABLY AND UNCONDITIONALLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO EACH SUCH BORROWER AT ITS SAID ADDRESS,
SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. IN
ADDITION, EACH BORROWER HEREBY IRREVOCABLY APPOINTS CT CORPORATION, 1633
BROADWAY, NEW YORK, NEW YORK 10019 (THE "PROCESS AGENT") TO RECEIVE, FOR IT AND
ON ITS BEHALF, SERVICE OF PROCESS IN ANY PROCEEDINGS OR ACTIONS IN NEW YORK.
IF FOR ANY REASON THE PROCESS AGENT IS UNABLE TO ACT AS SUCH, EACH BORROWER
WILL PROMPTLY NOTIFY THE AGENT AND WITHIN THIRTY (30) DAYS APPOINT A SUBSTITUTE
PROCESS AGENT ACCEPTABLE TO THE AGENT.
(D) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY
LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
(E) EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN THIS SECTION 8.7, ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. THIS WAVIER IS MADE KNOWINGLY
AND VOLUNTARILY.
Section 8.8 Counterparts.
This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
85
<PAGE> 92
Section 8.9 Headings Descriptive.
The headings of the several sections and subsections of this
Agreement, and the Table of Contents, are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of
this Agreement.
Section 8.10 Survival of Representations and Indemnities.
All covenants, agreements, representations and warranties made
herein and in any certificate delivered pursuant hereto shall survive the
making by the Lenders of the Loans and the execution and delivery to the Agent
for the account of the Lenders of the Notes regardless of any investigation
made by the Agent or the Lenders and of the Agent's and the Lender's access to
any information and shall continue in full force and effect so long as any
Obligation is outstanding and unpaid. The Borrowers' obligations under
Sections 2.13, 2.14, 2.15 and 8.4 and under any other indemnification
provisions of this Agreement and each Lender's obligations under Sections 7.6
and 8.12 and under any other indemnification provisions of this Agreement shall
survive the termination of this Agreement for any reason whatsoever and payment
of the Notes.
Section 8.11 Severability.
In case any one or more of the provisions contained in this
Agreement or the Notes should be invalid, illegal or unenforceable in any
respect in any jurisdiction, the validity, legality and enforceability of such
provisions shall not be affected or impaired in any other jurisdiction, nor
shall the remaining provisions contained herein and therein in any way be
affected or impaired thereby.
Section 8.12 Indemnification of Collateral Agents.
To the extent that any Collateral Agent is not reimbursed and
indemnified by the Borrowers pursuant to the applicable Security Agreement,
each Lender will reimburse and indemnify such Collateral Agent, in proportion
to its respective Commitments (before giving effect to any termination of the
Commitments pursuant to the terms of this Agreement), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including reasonable attorneys' fees and disbursements)
or disbursements of any kind or nature whatsoever that may be imposed on,
incurred by or asserted against such Collateral Agent in performing its duties
under the Loan Documents, in any way relating to or arising out of the Loan
Documents; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from such Collateral Agent's
gross negligence or willful misconduct. The Collateral Agents shall be
entitled to rely on the provisions of this Section 8.12 as if they were parties
to this Agreement.
86
<PAGE> 93
Section 8.13 Joint and Several Nature of the Obligations.
The Borrowers agree that any and all of the Obligations of the
Borrowers hereunder and under each other Loan Document shall be the joint and
several obligation of each of them notwithstanding any absence herein or
therein of a reference such as "jointly and severally" with respect to any such
obligation.
Section 8.14 Certain Waivers.
Each of the Borrowers agrees that its joint and several liability
under this Agreement and each of the other Loan Documents shall be absolute,
unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the
Obligations of the other Borrower or any other Person under this Agreement or
any other Loan Document;
(b) the failure of any Lender:
(i) to assert any claim or demand or to enforce any
right or remedy against the other Borrower or any other Person (including any
guarantor) under the provisions of this Agreement or any other Loan Document or
otherwise, or
(ii) to exercise any right or remedy against any
guarantor of, or Collateral securing, any Obligations;
(c) any change in the time, manner or place or payment of, or
in any other term of, all or any of the Obligations, or any other extension,
compromise or renewal of any Obligation with respect to the other Borrower or
any other Person;
(d) any reduction, limitation, impairment or termination of any
of the Obligations of the other Borrower or any other Person for any reason,
including any claim of waiver, release, surrender, alteration or compromise,
and the liability of each of the Borrowers shall not be subject to (and each of
them hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality, non-genuineness, irregularity, compromise, unenforceability of, or
any other event or occurrence affecting, any of the Obligations of the other
Borrower or any other Person;
(e) any rescission, waiver, amendment or other modification of,
or any consent to departure from, any of the Obligations of the other Borrower
or any other Person under the terms of this Agreement or any other Loan
Document;
(f) any exchange, release or non-perfection of any Collateral,
or any release, amendment or waiver of, or consent to departure from, any
guaranty or other agreement from the other Borrower or any other Person,
securing any of the Obligations; or
87
<PAGE> 94
(g) any other circumstances which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the other Borrower
or any surety or any guarantor. Each of the Borrowers waives any right to
require that any resort be made by the Lender to any of the Collateral.
Section 8.15 Subrogation, Etc.
At any time that a payment is made by either Borrower with respect
to the Obligations, such Borrower shall have a right of contribution against
the other Borrower in the maximum amount permitted by applicable law, which
right of contribution shall be subject to adjustment at the time of any
subsequent payment with respect to the Obligations; provided, that the maximum
aggregate liability of either Borrower with respect to such contribution rights
of the other Borrower shall not exceed the maximum amount of liability that
such first Borrower can incur without rendering such contribution rights void
or voidable under applicable law relating to fraudulent conveyance or
fraudulent transfers, and not for any greater amount, and provided further,
that neither Borrower will exercise any such contribution rights or any other
rights which it may acquire by reason of any payment made hereunder, whether by
way of rights of subrogation, reimbursement or otherwise, until the prior
payment, in full and in cash, of all Obligations and the termination of all
Commitments. Any amount paid to either Borrower on account of any payment made
hereunder prior to the payment in full of all Obligations other than
intercompany payments or reimbursements made in the ordinary course of the
businesses of each Borrower shall be held in trust for the benefit of the Agent
and the Lenders and shall immediately be paid to the Agent and credited and
applied against the Obligations, whether matured or unmatured, in accordance
with the terms of this Agreement and the other Loan Documents. In furtherance
of the foregoing, for so long as any Obligation or any Commitment remains
outstanding, each Borrower shall refrain from taking any action or commencing
any proceeding against the other Borrower (or its successors or assigns,
whether in connection with a bankruptcy proceeding or otherwise) to recover any
amounts in respect of payments made under this Agreement to the Agent and the
Lenders.
Section 8.16 Commercial Paper Discussions.
The parties hereto agree that they shall endeavor to enter into
further discussions regarding the replacement of the Acceptance mechanism
hereunder with a commercial paper program backed by credit support from the
Lenders, it being the intent that such program would be entered into within
one-hundred eighty (180) days after the Effective Date. Notwithstanding the
foregoing, nothing herein shall require the Agent or any of the Lenders to
enter into any such kind of program, and the Borrowers acknowledge that any
such program will require credit approval of the Lenders, and all documentation
therefor shall be required to be in form and substance satisfactory to the
Agent and the Lenders in their sole and absolute discretion. The parties
acknowledge that the Lenders have no Obligation to provide credit support for
any commercial paper program unless they choose to do so in the exercise of
their sole and absolute discretion.
88
<PAGE> 95
Section 8.17 Confidentiality.
Each Lender agrees not to disclose, without the prior written
consent of the Borrowers, any of the financial information or other information
of the Borrowers or any Affiliate of any of the Borrowers, designated in
writing by either Borrower as "confidential" and obtained under or in
connection with this Agreement or any of the other Loan Documents.
Notwithstanding the foregoing, each Lender may disclose such information: (a)
as is permitted under Section 8.6; (b) as is required by law or by subpoena or
similar court order, or by any governmental, regulatory or supervisory
authority or official or as otherwise required to be provided by the Lender in
the ordinary course of its business; (c) to counsel to such Lender in
connection with the transactions contemplated by this Agreement and the other
Loan Documents; (d) to independent auditors and other advisers retained by such
Lender; and (e) to the Agent or the Collateral Agents as contemplated by this
Agreement and the other Loan Documents. In addition, unless specifically
prohibited by applicable law or court order, each Lender shall, to the extent
practical, notify the Borrowers of any subpoena or similar court order or of
any request by any governmental, regulatory or supervising authority or
official (other than any such request in connection with an examination of the
financial condition of such Lender by such authority) for disclosure of any
such information prior to disclosure of such information so that the Borrowers
may seek an appropriate protective order. Notwithstanding the foregoing, the
Lenders shall have no obligation to keep any such information confidential if
such information (i) becomes generally available to the public other than as a
result of the disclosure by any Lender in violation of this Section 8.17, (ii)
is available to any Lender on a non-confidential basis prior to its disclosure
to such Lender by the Borrower or, if applicable, by the Lender from whom such
Lender has purchased its participation or assignment, or (iii) becomes
available to any Lender on a non-confidential basis from a source other than
the Borrower or, if applicable, the Lender from whom such Lender has purchased
its participation or assignment; and any Lender may disclose any such
information in connection with any litigation to which such Lender is party
relating to this Agreement or any of the other Loan Documents.
89
<PAGE> 96
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the day and year first above written.
FIRST FINANCIAL CARIBBEAN CORPORATION,
as a Borrower
By: ________________________________
Richard F. Bonini
Senior Executive Vice President
and Secretary
By: __________________________________
Mario S. Levis
Vice President and Treasurer
DORAL MORTGAGE CORPORATION,
as a Borrower
By: __________________________________
Mario S. Levis
Vice President
Facility 1 Commitment: $18,333,333 BANKERS TRUST COMPANY,
Facility 2 Commitment: $1,166,666 as Agent and as a Lender
Facility 3 Commitment: $3,000,000
By: __________________________________
Name: __________________________________
Title: __________________________________
Facility 1 Commitment: $18,333,333 FIRST UNION NATIONAL BANK OF
Facility 2 Commitment: $1,166,666 NORTH CAROLINA,
Facility 3 Commitment: $3,000,000 as a Lender
By: __________________________________
Name: __________________________________
Title: __________________________________
90
<PAGE> 97
Facility 1 Commitment: $18,333,333 THE BANK OF BOSTON,
Facility 2 Commitment: $1,166,666 as a Lender
Facility 3 Commitment: $3,000,000
By: __________________________________
Name: __________________________________
Title: __________________________________
Facility 1 Commitment: $15,000,000 BANK ONE, TEXAS N.A.,
Facility 2 Commitment: $1,166,666 as a Lender
Facility 3 Commitment: $3,000,000
By: __________________________________
Name: __________________________________
Title: __________________________________
Facility 1 Commitment: $15,000,000 THE BANK OF NEW YORK,
Facility 2 Commitment: $1,166,666 as a Lender
Facility 3 Commitment: $3,000,000
By: __________________________________
Name: __________________________________
Title: __________________________________
Facility 1 Commitment: $15,000,000 NATIONAL CITY BANK,
Facility 2 Commitment: $1,166,666 as a Lender
Facility 3 Commitment: $3,000,000
By: __________________________________
Name: __________________________________
Title: __________________________________
91
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST FINANCIAL CARIBBEAN CORPORATION FOR THE SIX
MONTHS ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 64,112
<SECURITIES> 468,132
<RECEIVABLES> 18,942
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,088
<DEPRECIATION> 4,242
<TOTAL-ASSETS> 831,279
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 7,230
0
181
<OTHER-SE> 90,571
<TOTAL-LIABILITY-AND-EQUITY> 831,279
<SALES> 0
<TOTAL-REVENUES> 43,986
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,699
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,184
<INCOME-PRETAX> 11,103
<INCOME-TAX> 1,536
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,567
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.26
</TABLE>
