Exhibit 10.26
WAREHOUSING CREDIT AND SECURITY AGREEMENT
(SINGLE FAMILY MORTGAGE LOANS)
BETWEEN
NOVASTAR FINANCIAL, INC.,
a Maryland corporation
NOVASTAR MORTGAGE, INC.,
a Virginia corporation
NOVASTAR CAPITAL, INC.,
a Delaware corporation
AND
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
Dated as of December 29, 1999
TABLE OF CONTENTS
PAGE
----
1. DEFINITIONS............................................................................................ 1
1.1 Defined Terms................................................................................. 1
1.2 Other Definitional Provisions................................................................. 15
2. THE CREDIT............................................................................................. 15
2.1 The Commitment................................................................................ 15
2.2 Procedures for Obtaining Advances............................................................. 16
2.3 Note.......................................................................................... 18
2.4 Interest...................................................................................... 18
2.5 Principal Payments............................................................................ 20
2.6 Expiration of Commitment...................................................................... 23
2.7 Method of Making Payments..................................................................... 24
2.8 Commitment Fees and Non-Usage Fees............................................................ 24
2.9 Warehousing Fees.............................................................................. 25
2.10 Miscellaneous Charges......................................................................... 25
2.11 Interest Limitation........................................................................... 26
2.12 Increased Costs; Capital Requirements......................................................... 26
3. COLLATERAL............................................................................................. 27
3.1 Grant of Security Interest.................................................................... 27
3.2 Release of Security Interest in Collateral.................................................... 29
3.3 Delivery of Additional Collateral or Mandatory Prepayment..................................... 31
3.4 Release of Collateral......................................................................... 31
3.5 Collection and Servicing Rights............................................................... 31
1
3.6 Return of Collateral at End of Commitment..................................................... 32
3.7 Transfers of Pledged Mortgages Between Borrowers.............................................. 32
4. CONDITIONS PRECEDENT................................................................................... 33
4.1 Initial Advance............................................................................... 33
4.2 Each Advance.................................................................................. 38
5. REPRESENTATIONS AND WARRANTIES......................................................................... 39
5.1 Organization; Good Standing; Subsidiaries..................................................... 39
5.2 Authorization and Enforceability.............................................................. 40
5.3 Approvals..................................................................................... 40
5.4 Financial Condition........................................................................... 41
5.5 Litigation.................................................................................... 41
5.6 Compliance with Laws.......................................................................... 41
5.7 Regulation U.................................................................................. 42
5.8 Investment Company Act........................................................................ 42
5.9 Payment of Taxes.............................................................................. 42
5.10 Agreements.................................................................................... 42
5.11 Title to Properties........................................................................... 43
5.12 ERISA......................................................................................... 43
5.13 Eligibility................................................................................... 43
5.14 Place of Business............................................................................. 44
5.15 Special Representations Concerning Collateral................................................. 44
5.16 Servicing..................................................................................... 46
5.17 No Adverse Selection.......................................................................... 46
5.18 Year 2000 Compliance.......................................................................... 46
2
5.19 Assumed Names................................................................................. 47
6. AFFIRMATIVE COVENANTS.................................................................................. 47
6.1 Payment of Note............................................................................... 47
6.2 Financial Statements and Other Reports........................................................ 47
6.3 Maintenance of Existence; Conduct of Business................................................. 51
6.4 Compliance with Applicable Laws............................................................... 51
6.5 Inspection of Properties and Books............................................................ 51
6.6 Notice........................................................................................ 52
6.7 Payment of Debt, Taxes, etc................................................................... 52
6.8 Insurance..................................................................................... 53
6.9 Closing Instructions.......................................................................... 53
6.10 Subordination of Certain Indebtedness......................................................... 53
6.11 Other Loan Obligations........................................................................ 54
6.12 Use of Proceeds of Advances................................................................... 54
6.13 Special Affirmative Covenants Concerning Collateral........................................... 54
7. NEGATIVE COVENANTS..................................................................................... 55
7.1 Contingent Liabilities........................................................................ 56
7.2 Sale or Pledge of Servicing Contracts......................................................... 56
7.3 Merger; Sale of Assets; Acquisitions.......................................................... 56
7.4 Deferral of Subordinated Debt................................................................. 56
7.5 Loss of Eligibility........................................................................... 56
7.6 Required Equity Ratio......................................................................... 56
7.7 Minimum Adjusted Tangible Net Worth........................................................... 56
7.8 Quarterly Losses and Negative Cash............................................................ 57
7.9 Transactions with Affiliates.................................................................. 57
3
7.10 Acquisition of Recourse Servicing Contracts................................................... 57
7.11 Gestation Facilities.......................................................................... 57
7.12 Special Negative Covenants Concerning Collateral.............................................. 57
8. DEFAULTS; REMEDIES..................................................................................... 57
8.1 Events of Default............................................................................. 57
8.2 Remedies...................................................................................... 61
8.3 Application of Proceeds....................................................................... 66
8.4 Lender Appointed Attorney-in-Fact............................................................. 66
8.5 Right of Set-Off.............................................................................. 66
9. NOTICES................................................................................................ 67
10. REIMBURSEMENT OF EXPENSES; INDEMNITY................................................................... 67
11. FINANCIAL INFORMATION.................................................................................. 68
12. MISCELLANEOUS.......................................................................................... 68
12.1 Terms Binding Upon Successors; Survival of Representations.................................... 68
12.2 Assignment.................................................................................... 69
12.3 Amendments.................................................................................... 69
12.4 Governing Law................................................................................. 69
12.5 Participations................................................................................ 69
12.6 Relationship of the Parties................................................................... 69
12.7 Severability.................................................................................. 70
12.8 Operational Reviews........................................................................... 70
12.9 Consent to Jurisdiction....................................................................... 70
12.10 Counterparts.................................................................................. 70
12.11 Entire Agreement................................................................................. 71
4
12.12 WAIVER OF JURY TRIAL............................................................................. 71
5
EXHIBITS
--------
Exhibit A Promissory Note
Exhibit B Guaranty
Exhibit C-SF Request for Advance Against Single Family
Mortgage Loans
Exhibit D-SF Procedures and Documentation for
Warehousing Single Family Mortgage Loans
Exhibit E-1 Schedule of Servicing Contracts (NFI)
Exhibit E-2 Schedule of Servicing Contracts (NMI)
Exhibit E-3 Schedule of Servicing Contracts (NCI)
Exhibit F Subordination of Debt Agreement
Exhibit G Subsidiaries
Exhibit H Legal Opinion
Exhibit I-SF Officer's Certificate
Exhibit J Schedule of Existing Warehouse Lines
Exhibit K-1 Funding Bank Agreement (NFI)
Exhibit K-2 Funding Bank Agreement (NMI)
Exhibit K-3 Funding Bank Agreement (NCI)
Exhibit L Commitment Summary Report
Exhibit M Terms Applicable to Advances Against
Eligible Loans
Exhibit N RFConnects Pledge Agreement
Exhibit O Assumed Names
Exhibit P Terms of Guaranteed Obligations
6
THIS WAREHOUSING CREDIT AND SECURITY AGREEMENT, dated as of December 29,
1999, between NOVASTAR FINANCIAL, INC., a Maryland corporation ("NFI"), NOVASTAR
MORTGAGE, INC., a Virginia corporation ("NMI"), and NOVASTAR CAPITAL, INC., a
Delaware corporation ("NCI;" NFI, NMI and NCI are hereinafter collectively
referred to as the "Borrowers"), having their principal office at 0000 Xxxx 00xx
Xxxxx, Xxxxx 000, Xxxxxxxx, XX 00000 and RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation (the "Lender"), having its principal office at 0000
Xxxxxxxxxx Xxxx Xxxx., Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000.
WHEREAS, the Borrowers and the Lender desire to set forth herein the terms
and conditions upon which the Lender shall provide warehouse financing to the
Borrowers;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. Capitalized terms defined below or elsewhere in this
--------------
Agreement (including the Exhibits hereto) shall have the following
meanings:
"Acquisition Cost" means, with respect to any Mortgage Loan, the cash
----------------
price paid by the Borrowers to acquire such Mortgage Loan minus any portion
-----
thereof attributable to amounts other than principal and interest payable
with respect to such Mortgage Loan.
"Adjusted Servicing Portfolio" means, for any Person, the Servicing
----------------------------
Portfolio of such Person, but excluding the principal balance of Mortgage
Loans included in the Servicing Portfolio at such date (a) which are past
due for principal or interest for 60 days or more, (b) with respect to
which such Person is obligated to repurchase or indemnify the holder of the
Mortgage Loans as a result of defaults on the Mortgage Loans at any time
during the term of such Mortgage Loans, (c) for which the Servicing
Contracts are not owned by such Person free and clear of all Liens (other
than in favor of the Lender), or (d) which are serviced by the Borrowers
for others under subservicing arrangements.
"Adjusted Tangible Net Worth" shall mean at any date:
---------------------------
(a) Book Net Worth, minus
-----
(b) The sum of (1) all assets which would be classified as intangible
assets of NFI and its consolidated Subsidiaries under GAAP, including,
without limitation,
1
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
and deferred charges (including, without limitation, unamortized debt
discount and expense, organization costs and research and product
development costs) plus (2) all receivables from directors, officers
----
and shareholders of NFI and its consolidated Subsidiaries, plus (3)
----
any other assets, not related to residential mortgage banking, that
the Lender may determine to be unacceptable in its sole discretion,
plus
----
(c) The amount of combined reserves of NFI and any Subsidiaries of
the Parent for credit losses, minus
-----
(d) The amount of unrealized gains on debt securities (as defined in
FASB 115) of NFI and any Subsidiaries of the Parent, plus
----
(e) The amount of unrealized losses on debt securities (as defined in
FASB 115) of NFI and any Subsidiaries of the Parent.
Provided, that in all cases such amounts shall be determined by
--------
combining the relevant figures for NFI and for the Parent and its
consolidated Subsidiaries and its Affiliates, as accounted for under
the equity method, in the form shown on the example Officer's
Certificate attached as Exhibit I-SF hereto.
------------
"Advance" means a disbursement by the Lender under the Commitment
-------
pursuant to Section 2.1 of this Agreement.
"Advance Request" has the meaning set forth in Section Error!
---------------
Reference source not found. hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 of the General
---------
Rules and Regulations under the Exchange Act.
"Agency Security" means a Mortgage-backed Security issued or
---------------
guaranteed by Xxxxxx Xxx, Xxxxxxx Mac or Xxxxxx Mae.
"Agreement" means this Warehousing Credit and Security Agreement
---------
(Single Family Mortgage Loans), either as originally executed or as it may
from time to time be supplemented, modified or amended.
2
"Approved Custodian" means a pool custodian or other Person which is
------------------
deemed acceptable to the Lender from time to time in its sole discretion to
hold the Collateral Documents for a Mortgage Loan for inclusion in a
Mortgage Pool or to hold the Collateral Documents for a Mortgage Loan as
agent for an Investor who has issued a Purchase Commitment for such
Mortgage Loan.
"Book Net Worth" means the excess of total assets of NFI and its
--------------
consolidated Subsidiaries over Total Liabilities of NFI and its
consolidated Subsidiaries determined in accordance with GAAP (in each case
determined by combining the relevant figures for NFI, the Parent and their
consolidated Subsidiaries, in the form shown on the example Officer's
Certificate attached as Exhibit I-SF hereto).
------------
"Borrowers" has the meaning set forth in the first paragraph of this
---------
Agreement.
"Business Day" means any day excluding Saturday or Sunday and
------------
excluding any day on which national banking associations are closed for
business.
"Calendar Quarter" means the 3 month period beginning on any January
----------------
1, April 1, July 1 or October 1.
"Cash Collateral Account" means a demand deposit account maintained at
-----------------------
the Funding Bank in the name of the Lender and designated for receipt of
the proceeds of the sale or other disposition of the Collateral.
"Check Disbursement Account" means a demand deposit account maintained
--------------------------
at the Funding Bank in the name of the Borrowers and under the control of
the Lender for the clearing of checks written by the Borrowers to fund
Advances.
"Closing Date" means December 30, 1999.
------------
"Collateral" has the meaning set forth in Section 0 hereof.
----------
"Collateral Documents" means, with respect to each Mortgage Loan: (a)
--------------------
the Mortgage Note, the Mortgage, and all other documents executed in
connection with or otherwise relating to the Mortgage Loan, (b) as
applicable, the original lender's ALTA Policy of Title Insurance or its
equivalent, documents evidencing the FHA Commitment to Insure or the VA
Guaranty, the appraisal, Private Mortgage Insurance, the Regulation Z
Statement, certificates of
3
casualty or hazard insurance, credit information on the maker(s) of the
Mortgage Note, the HUD-1 or corresponding purchase advice, and (c) any
other documents that are customarily desired for inspection or transfer
incidental to the purchase of any Mortgage Note by an Investor or which are
customarily executed by the seller of a Mortgage Note to an Investor.
"Collateral Value" means (a) with respect to any Eligible Loan as of
----------------
the date of determination, the lesser of (i) the amount of any Advance made
against such Eligible Loan under Section 0 hereof or (ii) the Fair Market
Value of such Eligible Loan; (b) in the event Pledged Mortgages have been
exchanged for Agency Securities, the lesser of (i) the amount of any
Advances outstanding against the Eligible Loans backing such Agency
Securities or (ii) the Fair Market Value of such Agency Securities; and (c)
with respect to cash, the amount of such cash.
"Commitment" has the meaning set forth in Section 0 hereof.
----------
"Commitment Amount" means Fifty Million Dollars ($50,000,000).
-----------------
"Commitment Fee" means a fee payable by the Borrowers in consideration
--------------
of the Lender's issuance of the Commitment. The amount of the Commitment
Fee, if any, is set forth in Section 0 hereof.
"Committed Purchase Price" means for an Eligible Loan the product of
------------------------
the Mortgage Note Amount multiplied by (a) the price (expressed as a
percentage) as set forth in a Purchase Commitment for the Eligible Loan or
(b) in the event the Eligible Loan is to be used to back an Agency
Security, the price (expressed as a percentage) as set forth in a Purchase
Commitment for the Agency Security.
"Credit Score" means a mortgagor's overall consumer credit rating,
------------
represented by a single numeric credit score calculated using the Fair,
Xxxxx consumer credit scoring system, provided by a credit repository
acceptable to the Lender and the Investor that issued the Purchase
Commitment covering the related Mortgage Loan.
"Debt" means, with respect to any Person at any date, (a) all
----
indebtedness or other obligations of such Person which, in accordance with
GAAP, would be included in determining total liabilities as shown on the
liabilities
4
side of a balance sheet of such Person at such date, and (b) all
indebtedness or other obligations of such Person for borrowed money or for
the deferred purchase price of property or services; provided that for
purposes of this Agreement, there shall be excluded from Debt at any date
Subordinated Debt not due within one year of such date and deferred taxes
arising from capitalized excess servicing fees and capitalized servicing
rights.
"Default" means the occurrence of any event or existence of any
-------
condition which, but for the giving of Notice, the lapse of time, or both,
would constitute an Event of Default.
"Depository Benefit" shall mean the compensation received by the
------------------
Lender, directly or indirectly, as a result of the Borrowers' maintenance
of Eligible Balances with a Designated Bank.
"Designated Bank" means any bank(s) designated from time to time by
---------------
the Lender as a Designated Bank, but only for as long as the Lender has an
agreement under which the Lender can receive a Depository Benefit.
"Designated Bank Charges" means any fees, interest or other charges
-----------------------
that would otherwise be payable to a Designated Bank in connection with
Eligible Balances maintained at a Designated Bank, including Federal
Deposit Insurance Corporation insurance premiums, service charges and such
other charges as may be imposed by governmental authorities from time to
time.
"Electronic Advance Request" means an electronic transmission through
--------------------------
RFConnects Delivery containing the same information as Exhibit C-SF to this
------------
Agreement, together with the RFConnects Pledge Agreement, duly executed by
the Borrowers, and a list of the Mortgage Loans (including mortgagor's
name, loan number and loan amount) to be funded with the Advance sent to
the Lender by facsimile.
"Eligible Balances" means all funds of or maintained by the Borrowers
-----------------
and their Subsidiaries in accounts at a Designated Bank, less balances to
support float, reserve requirements, and such other reductions as may be
imposed by governmental authorities from time to time.
"Eligible Loan" means a Single Family Mortgage Loan secured by a
-------------
Mortgage on real property located in one of the states of the United States
or the District of Columbia that
5
is designated as such on Exhibit M attached hereto and made a part hereof.
---------
"Eligible Mortgage Pool" means a Mortgage Pool for which (a) an
----------------------
Approved Custodian has issued its initial certification (on the basis of
which an Agency Security is to be issued), (b) there exists a Purchase
Commitment covering such Agency Security, and (c) such Agency Security will
be delivered to the Lender.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
-----
all rules and regulations promulgated thereunder, as amended from time to
time and any successor statute.
"Event of Default" means any of the conditions or events set forth in
----------------
Section 0 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, and any successor statute.
"Fair Market Value" means at any time for an Eligible Loan or the
-----------------
related Agency Security (if the Eligible Loan is to be used to back an
Agency Security), (a) if the Eligible Loan is covered by a Purchase
Commitment from Xxxxxx Mae or Xxxxxxx Mac, or the Eligible Loan is to be
exchanged for an Agency Security and such Agency Security is covered by a
Purchase Commitment, the Committed Purchase Price, or (b) otherwise, the
market price for such Eligible Loan or Agency Security, determined by the
Lender based on market data for similar Mortgage Loans or Agency Securities
and such other criteria as the Lender deems appropriate in its sole
discretion.
"Xxxxxx Mae" means Xxxxxx Xxx, a corporation created under the laws of
----------
the United States, and any successor thereto.
"FHA" means the Federal Housing Administration and any successor
---
thereto.
"FICA" means the Federal Insurance Contributions Act.
----
"FIRREA" means the Financial Institutions Reform, Recovery and
------
Enforcement Act of 1989, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
6
"First Mortgage" means a Mortgage which constitutes a first Lien on
--------------
the property covered thereby.
"First Mortgage Loan" means a Mortgage Loan secured by a First
-------------------
Mortgage.
"Xxxxxxx Mac" means Xxxxxxx Mac, a corporation created under the laws
-----------
of the United States, and any successor thereto.
"Funding Bank" means Bank One, NA or any other bank designated from
------------
time to time by the Lender.
"Funding Bank Agreement" means the letter agreement substantially in
----------------------
the form of Exhibit K hereto.
---------
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, which are applicable to the circumstances as
of the date of determination.
"Gestation Agreement" means an agreement under which the Borrowers
-------------------
agree to sell or finance (a) a Pledged Mortgage prior to the date of
purchase by an Investor, or (b) a Mortgage Pool prior to the date an Agency
Security backed by such Mortgage Pool is issued.
"Xxxxxx Mae" means the Government National Mortgage Association, an
----------
agency of the United States government, and any successor thereto.
"Guarantor" means NFI HOLDING CORPORATION and any other Person that
---------
hereafter guarantees all or any portion of the Borrowers' Obligations. If
more than one Person is named as Guarantor, the term "Guarantor" shall mean
each of such Persons and all of them.
"Guaranty" means a guaranty of all or any portion of the Borrowers'
--------
Obligations. If more than one Guaranty is executed and delivered to the
Lender, the term "Guaranty" shall mean each of such Guaranties and all of
them.
"Hedging Arrangements" means, with respect to any Person, any
--------------------
agreements or other arrangement (including,
7
without limitation, interest rate swap agreements, interest rate cap
agreements and forward sale agreements) entered into by such Person to
protect itself against changes in interest rates or the market value of
assets.
"HUD" means the Department of Housing and Urban Development and any
---
successor thereto.
"HUD 203(k) Mortgage Loan" means an FHA insured closed-end First
------------------------
Mortgage Loan secured by a First Mortgage, of which a portion will be used
for the purpose of rehabilitating and/or repairing the related single
family property, and which satisfies the definition of "rehabilitation
loan" under 24 C.F.R. ss. 203.50(a).
"Indemnified Liabilities" has the meaning set forth in Article 10
-----------------------
hereof.
"Internal Revenue Code" means the Internal Revenue Code of 1986, Title
---------------------
26 of the United States Code, the regulations, rulings and interpretations
issued thereunder, and any subsequent federal income tax law or laws, as
any of the foregoing have been or may from time to time be amended.
"Investor" means Xxxxxx Xxx, Xxxxxxx Mac or a financially responsible
private institution which is deemed acceptable by the Lender from time to
time in its sole discretion with respect to a particular category of
Pledged Mortgages. "Investor" shall not include any Borrower, the
Guarantor, or any of their Subsidiaries.
"Lender" has the meaning set forth in the first paragraph of this
------
Agreement.
"LIBOR" means, for each calendar week, the rate of interest per annum
-----
which is equal to the arithmetic mean of the U.S. Dollar London Interbank
Offered Rates for 1 month periods of certain U.S. banks as of 11:00 a.m.
London time on the first Business Day of such week on which the London
Interbank market is open, as published by Bloomberg L.P. If such U.S.
dollar LIBOR rates are not so offered or published for any period, then
during such period LIBOR shall mean the London Interbank Offered Rate for 1
month periods published on the first Business Day of each week on which the
London Interbank market is open, in the Wall Street Journal in its regular
column entitled "Money Rates."
-----------
"Lien" means any lien, mortgage, deed of trust, pledge, security
----
interest, charge or encumbrance of any kind
8
(including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security
interest).
"Loan Documents" means this Agreement, the Note, the Guaranty, any
--------------
agreement of the Borrowers relating to Subordinated Debt, and each other
document, instrument or agreement executed by the Borrowers in connection
herewith or therewith, as any of the same may be amended, restated, renewed
or replaced from time to time.
"Manufactured Home" means a structure that is built on a permanent
-----------------
chassis (steel frame) with the wheel assembly necessary for transportation
in one or more sections to a permanent site or semi-permanent site and
which has been built in compliance with the National Manufactured Housing
Construction and Safety Standards established by HUD.
"Margin Stock" has the meaning assigned to that term in Regulation U
------------
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"Maturity Date" shall mean the earlier of: (a) the close of business
-------------
on December 27, 2000, as such date may be extended from time to time in
writing by the Lender, in its sole discretion, on which date the Commitment
shall expire of its own term and without the necessity of action by the
Lender, and (b) the date the Advances become due and payable pursuant to
Section 8.2 below.
"Miscellaneous Charges" has the meaning set forth in Section 0 hereof.
---------------------
"Mortgage" means a mortgage or deed of trust on improved and
--------
substantially completed real property (including, without limitation, real
property to which a Manufactured Home has been affixed in a manner such
that the Lien of a mortgage or deed of trust would attach to such
manufactured home under applicable real property law).
"Mortgage-backed Securities" means securities that are secured or
--------------------------
otherwise backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage Note and
-------------
secured by a Mortgage.
"Mortgage Note" means a promissory note secured by a Mortgage.
-------------
9
"Mortgage Note Amount" means, as of the date of determination, the
--------------------
then outstanding unpaid principal amount of a Mortgage Note or not an
additional amount is available to be drawn thereunder).
"Mortgage Pool" means a pool of one or more Pledged Mortgages on the
-------------
basis of which there is to be issued a Mortgage-backed Security.
"Multiemployer Plan" means a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA which is maintained for employees of the
Borrowers or a Subsidiary of the Borrowers.
"Non-Usage Fee" has the meaning set forth in Section 0 hereof.
-------------
"Note" has the meaning set forth in Section 0 hereof.
----
"Notices" has the meaning set forth in Article 9 hereof.
-------
"Obligations" means any and all indebtedness, obligations and
-----------
liabilities of any one or more Borrowers to the Lender (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), whether or not
arising out of or related to the Loan Documents.
"Officer's Certificate" means a certificate executed on behalf of the
---------------------
Borrowers by the chief financial officer or the treasurer or by such other
officer as may be designated herein and substantially in the form of
Exhibit I-SF attached hereto.
------------
"Operating Account" means a demand deposit account maintained at the
-----------------
Funding Bank jointly in the name of the Borrowers and designated for
funding that portion of each Eligible Loan not funded by an Advance made
against such Eligible Loan and for returning any excess payment from an
Investor for a Pledged Mortgage or Pledged Security.
"Parent" shall mean NFI HOLDING CORPORATION, a Delaware corporation
------
("NFI Holding"), which is the Parent of NMI and NCI.
10
"Participant" has the meaning set forth in Section 0 hereof.
-----------
"Percentage Multipliers" means, with respect to any "Asset Class" as
----------------------
set forth in the definition of "Required Equity," that percentage multiplier
corresponding thereto as determined by reference to NFI's Allocation Guidelines
as set forth in the definition of "Required Equity;" provided, however, that if
-------- -------
at any time after December 29, 1999, the Board of Directors of NFI approves an
amendment to NFI's Allocation Guidelines that materially alters any Percentage
Multiplier from that shown in the definition of the term "Required Equity," NFI
shall give the Lender Notice of such amendment and, if the Lender gives its
consent (which it may withhold in its sole and absolute discretion) to the
change, the applicable Percentage Multiplier shall be deemed altered in
accordance with such amendment for all purposes hereunder.
"Person" means and includes natural persons, corporations,
------
limited liability companies, limited partnerships, general partnerships,
joint stock companies, joint ventures, associations, companies, trusts,
banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies
and political subdivisions thereof.
"Plans" has the meaning set forth in Section 0 hereof.
-----
"Pledged Mortgages" has the meaning set forth in Section 0 hereof.
-----------------
"Pledged Securities" has the meaning set forth in Section 0 hereof.
------------------
"Purchase Commitment" means a written commitment, in form and
-------------------
substance satisfactory to the Lender, issued in favor of a Borrower by an
Investor, pursuant to which that Investor commits to purchase Mortgage
Loans or Mortgage-backed Securities.
"Release Amount" has the meaning set forth in Section 0 hereof.
--------------
"Required Equity" means the sum of: the product of the total assets
---------------
of NFI and the Parent (and their consolidated Subsidiaries) in each Asset
Class described in the table below multiplied by the Percentage Multiplier
listed for that Asset Class, as shown in the Officer's Certificate attached
as Exhibit I-SF hereto. If any such assets do not clearly
------------
11
belong to one particular Asset Class (but rather, could belong to one of
several asset classes), then the Borrowers shall make a reasonable
classification or apportionment of those assets to the Asset Classes, shall
inform the Lender in writing of the classification or apportionment, and if
the Lender gives its approval (which it may withhold for any reason or for
no reason), shall calculate the Required Equity accordingly.
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Asset Class Percentage Multiplier
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Cash 0.0%
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Property, Plant, and Equipment 50.0%
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Intangible Assets 100.0%
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AAA-Rated Agency Issued Conventional ARM Mortgage-Backed Securities 4.75%
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AAA-Rated Agency Issued GNMA ARM Mortgage-Backed Securities 5.25%
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AAA-Rated Agency Issued Conventional 30-year Current Coupon
Mortgage-Backed Securities 6.00%
--------------------------------------------------------------------------------------------------
AAA-Rated Agency Issued Conventional 30-year Discount Mortgage-Backed
Securities 6.50%
--------------------------------------------------------------------------------------------------
AAA-Rated Agency Issued Conventional 30-year Premium Mortgage-Backed
Securities 4.50%
--------------------------------------------------------------------------------------------------
AAA-Rated Agency Issued Conventional 15-year Current Coupon
Mortgage-Backed Securities 5.50%
--------------------------------------------------------------------------------------------------
AAA-Rated Agency Issued Conventional Fixed Balloon Mortgage-Backed
Securities 5.00%
--------------------------------------------------------------------------------------------------
AAA-Rated Private Label Short Term Mortgage-Backed Securities 6.20%
--------------------------------------------------------------------------------------------------
AAA-Rated Private Label Medium Term Mortgage-Backed Securities 7.60%
--------------------------------------------------------------------------------------------------
AAA-Rated Private Label Long Term Mortgage-Backed Securities 9.20%
--------------------------------------------------------------------------------------------------
AA-Rated Private Label Short Term Mortgage-Backed Securities 6.40%
--------------------------------------------------------------------------------------------------
AA-Rated Private Label Medium Term Mortgage-Backed Securities 8.00%
--------------------------------------------------------------------------------------------------
AA-Rated Private Label Long Term Mortgage-Backed Securities 9.80%
12
--------------------------------------------------------------------------------------------------
Asset Class Percentage Multiplier
--------------------------------------------------------------------------------------------------
A-Rated Mortgage-Backed Securities 25.0%
--------------------------------------------------------------------------------------------------
BBB-Rated Mortgage-Backed Securities 25.0%
--------------------------------------------------------------------------------------------------
BB-Rated Mortgage-Backed Securities 50.0%
--------------------------------------------------------------------------------------------------
B-Rated Mortgage-Backed Securities 50.0%
--------------------------------------------------------------------------------------------------
NonRated Mortgage-Backed Securities 50.0%
--------------------------------------------------------------------------------------------------
Agency Issued "Principal Only" Mortgage-Backed Securities 25.0%
--------------------------------------------------------------------------------------------------
Agency Issued "Interest Only" Mortgage-Backed Securities 25.0%
--------------------------------------------------------------------------------------------------
Excess Cash Flows 50.0%
--------------------------------------------------------------------------------------------------
Warehouse Mortgage Loans 4.0%
--------------------------------------------------------------------------------------------------
Servicing Agreements 45.0%
--------------------------------------------------------------------------------------------------
Hedging Agreements 100.0%
--------------------------------------------------------------------------------------------------
Other Receivables 35.0%
--------------------------------------------------------------------------------------------------
"RFC" means Residential Funding Corporation, a Delaware
---
corporation, and any successor thereto.
"RFConnects Delivery" means the Lender's proprietary service
-------------------
to support the electronic exchange of information between the Lender and
the Borrowers, including, but not limited to, Advance Requests, shipping
requests, payoff requests, activity reports and exception reports.
"RFConnects Pledge Agreement means a pledge agreement in the
---------------------------
form of Exhibit N to the Agreement.
---------
"Second Mortgage" means a Mortgage which constitutes a second
---------------
Lien on the property covered thereby.
"Second Mortgage Loan" means a Mortgage Loan secured by a
--------------------
Second Mortgage.
"Servicing Contract" means, with respect to any Person, the
------------------
arrangement, whether or not in writing, pursuant to which such Person
has the right to service Mortgage Loans.
13
"Servicing Portfolio" means, as to any Person, the unpaid principal
-------------------
balance of Mortgage Loans serviced by such Person under Servicing
Contracts.
"Shareholder Equity" means the stockholders' equity of NFI, the Parent
------------------
and their Subsidiaries, when calculated on a consolidated basis, as
determined in accordance with GAAP and shown on the Officer's Certificate
attached as Exhibit I-SF hereto.
------------
"Single Family Mortgage Loan" means a Mortgage Loan secured by a
---------------------------
Mortgage covering improved real property containing one to four family
residences.
"Statement Date" means the date of the most recent financial
--------------
statements of the Borrowers (and, if applicable, their Subsidiaries, on a
consolidated basis) delivered to the Lender under the terms of this
Agreement.
"Sublimit" means the aggregate amount of Advances (expressed as a
--------
dollar amount or as a percentage of the Commitment Amount) that is
permitted to be outstanding at any one time against a specific type of
Eligible Loan.
"Subordinated Debt" means (a) all indebtedness of the
-----------------
Borrowers for borrowed money which is effectively subordinated in right of
payment to all other present and future Obligations either (i) pursuant to
a Subordination of Debt Agreement in the form of Exhibit F hereto or (ii)
---------
otherwise on terms acceptable to the Lender, and (b) solely for purposes of
Section 0 hereof, all indebtedness of the Borrowers which is required to be
subordinated by Section 4.1(b) or Section 0 hereof.
"Subsidiary" means any corporation, association or other business
----------
entity in which more than 50% of the total voting power or shares of stock
entitled to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by any Person
or one or more of the other Subsidiaries of that Person or a combination
thereof.
14
"Title I Mortgage Loan" means an FHA co-insured closed-end First
---------------------
Mortgage Loan or Second Mortgage Loan which is underwritten in accordance
with HUD underwriting standards for the Title I Property Improvement
Program as set forth in and which is reported for insurance under the
Mortgage Insurance Program authorized and administered under Title I of the
National Housing Act of 1934, as amended, and the regulations promulgated
thereunder.
"Trust Receipt" means a trust receipt in a form approved by and
-------------
pursuant to which the Lender may deliver any document relating to the
Collateral to the Borrowers for correction or completion.
"Unused Portion" has the meaning set forth in Section 0 hereof.
--------------
"Used Portion" has the meaning set forth in Section 0 hereof.
------------
"VA" means the U.S. Department of Veterans Affairs and any successor
--
thereto.
"Warehousing Fee" has the meaning set forth in Section 0 hereof.
---------------
"Warehouse Period" means, the maximum amount of time (from the date
----------------
that the first Advance is made) that any Advances may remain against
outstanding against a Pledged Mortgage, as set forth on Exhibit M attached
---------
to this Agreement.
"Wet Settlement Advance" means any Advance, from the date the Advance
----------------------
is made until the date of the Lender's receipt of all Collateral Documents
as provided in Section 2.2(b) of this Agreement and the Exhibit referenced
therein.
"Wire Disbursement Account" means a demand deposit account maintained
-------------------------
at the Funding Bank in the name of the Lender for the clearing of wire
transfers requested by the Borrowers to fund Advances.
15
"Year 2000 Problem" means the risk that computer applications may not
-----------------
be able to properly perform date-sensitive functions after December 31,
1999.
1.2 Other Definitional Provisions.
-----------------------------
1.2(a) Accounting terms not otherwise defined herein shall have
the meanings given the terms under GAAP.
1.2(b) Defined terms may be used in the singular or the plural,
as the context requires.
1.2(c) All references to time of day shall mean the then
applicable time in Chicago, Illinois, unless expressly provided to the
contrary.
2. THE CREDIT.
2.1 The Commitment.
--------------
2.1(a) Subject to the terms and conditions of this Agreement and
provided no Default or Event of Default has occurred and is
continuing, the Lender agrees from time to time during the period from
the Closing Date to, but not including, the Maturity Date, to make
Advances to the Borrowers, provided the total aggregate principal
amount outstanding at any one time of all such Advances shall not
exceed the Commitment Amount. The obligation of the Lender to make
Advances hereunder up to the Commitment Amount is hereinafter referred
to as the "Commitment." Within the Commitment, the Borrowers may
borrow, repay and reborrow. All Advances under this Agreement shall
constitute a single indebtedness, and all of the Collateral shall be
security for the Note and for the performance of all the Obligations.
Further, the Borrowers shall be jointly and severally liable for all
of the Obligations. Advances shall be made to NFI, NMI or NCI, as
shall be requested by NFI, NMI or NCI, but each Advance, whether made
to NFI, NMI or NCI shall be deemed made to or for the benefit of NFI,
NMI and NCI, and NFI, NMI and NCI,
16
jointly and severally, shall be obligated to repay any Advances made
to NFI, NMI or NCI under the Commitment. With respect to its
obligation to repay Advances made to the other Borrower, each Borrower
agrees to the terms set forth in Exhibit P attached hereto and made a
---------
part hereof.
2.1(b) Advances shall be used by the Borrowers solely for the
purpose of funding the acquisition or origination of Eligible Loans
and shall be made at the request of the Borrowers, in the manner
hereinafter provided in Section 0 hereof, against the pledge of such
Eligible Loans as Collateral therefor. The limitations on the use of
Advances set forth on Exhibit M attached hereto and made a part hereof
---------
shall be applicable. In addition, the following limitations on the use
of Advances shall be applicable:
(1) Except as expressly permitted on Exhibit M, no Advance
---------
shall be made against any Mortgage Loan which was closed more
than 90 days prior to the date of the requested Advance.
(2) No Advance shall be made against a Mortgage Loan other
than a Mortgage Loan secured by a Mortgage on real property
located in one of the states of the United States or the District
of Columbia.
(3) Except as expressly permitted by Section 0, no Advance
shall be made against any Pledged Mortgage that was previously:
(a) financed or pledged as security by any Borrower or any of
their Subsidiaries or Affiliates, or (b) owned by any Borrower,
other than the one currently pledging it, or by any Subsidiary or
Affiliate of any Borrower.
2.1(c) No Advance shall exceed the following amount applicable to
the type of Eligible Loan at the time it is pledged to secure an
Advance hereunder:
17
(1) For an Eligible Loan pledged hereunder, the amount
set forth on Exhibit M attached hereto and made a part
---------
hereof.
2.2 Procedures for Obtaining Advances.
---------------------------------
2.2(a) To obtain an Advance, the Borrowers must comply with
the conditions set forth in Sections 4.1 and 4.3 of this
Agreement, the procedures set forth in this Section 2.2(a), and
the procedures and documentation required under the Exhibit D for
---------
the type of Mortgage Loan against which the Borrowers are
requesting the Advance. The Borrowers will request an Advance
either by delivering to Lender a completed and signed advance
request in the applicable form of Exhibit C or by sending to
---------
Lender an Electronic Advance Request, together with a list of
Mortgage Loans for which the request is being made and a
completed and signed RFConnects Pledge Agreement sent by
facsimile (each an "Advance Request"), each no later than 1
Business Day prior to the Business Day the requested Advance is
to be made. The current forms of the Exhibit C and Exhibit D
--------- ---------
referred to above are attached to this Agreement. The Lender is
entitled, upon not less than 3 Business Days' prior Notice to the
Borrowers, to modify any of those Exhibits or the form of
Electronic Advance Request to conform to current legal
requirements or Lender's lending practices. Exhibits and
Electronic Advance Requests so modified automatically become a
part of this Agreement.
2.2(b) In the case of a Wet Settlement Advance, the
Borrowers shall follow the procedures and, at or prior to the
Lender's making of such Wet Settlement Advance, shall deliver to
the Lender the documents set forth in Exhibit D-SF hereto. In the
------------
case of a Mortgage Loan financed through a Wet Settlement
Advance, the Borrowers shall cause all Collateral Documents
required to be delivered to the Lender pursuant to Exhibit D-SF
------------
within 7 Business Days after the date of the Wet Settlement
Advance relating thereto.
18
2.2(c) Before funding, the Lender shall have a reasonable
time (1 Business Day under ordinary circumstances) to examine
such Advance Request and the Collateral Documents to be delivered
prior to such requested Advance, as set forth in the applicable
Exhibit hereto, and may reject such of them as do not meet the
requirements of this Agreement or of the related Purchase
Commitment, if required.
2.2(d) The Borrowers shall hold in trust for the Lender, and
the Borrowers shall deliver to the Lender promptly upon request,
or if the recorded Collateral Documents have not yet been
returned from the recording office, immediately upon receipt by
the Borrowers of such recorded Collateral Documents, and provided
that the Pledged Mortgage is not being held by an Investor for
purchase and has not been redeemed from pledge, the following:
(1) the originals of the Collateral Documents for which copies
are required to be delivered to the Lender pursuant to Exhibit D-
----------
SF, (2) all Collateral Documents not yet delivered to the Lender,
--
and (3) any other documents relating to a Pledged Mortgage which
the Lender may request, including, without limitation,
documentation evidencing the FHA Commitment to Insure or the VA
Guaranty of any Pledged Mortgage which is either FHA insured or
VA guaranteed, the appraisal, Private Mortgage Insurance
Certificate, if applicable, the Regulation Z Statement,
certificates of casualty or hazard insurance, credit information
on the maker of each such Mortgage Note, a copy of a HUD-1 or
corresponding purchase advice and other documents of all kinds
which are customarily desired for inspection or transfer
incidental to the purchase of any Mortgage Note by an Investor
and any additional documents which are customarily executed by
the seller of a Mortgage Note to an Investor.
2.2(e) To make an Advance, the Lender shall cause the
Funding Bank to credit either the Wire Disbursement Account or
the Check Disbursement Account upon compliance by the Borrowers
with the terms of the Loan Documents. The Lender shall determine
in its sole discretion the method by which Advances and other
19
amounts on deposit in the Wire Disbursement Account are disbursed
by the Funding Bank to or for the account of the Borrowers.
2.2(f) If, pursuant to the authorization given by the
Borrowers in the Funding Bank Agreement, for the purpose of
funding a Mortgage Loan against which the Lender has made an
Advance in accordance with a Request for Advance (i) the Lender
debits the Borrowers' Operating Account at the Funding Bank to
the extent necessary to cover a wire to be initiated by the
Lender, or (ii) the Lender directs the Funding Bank to honor a
check drawn by the Borrowers on their Check Disbursement Account
at the Funding Bank, and such debit or direction results in an
overdraft, the Lender may make an additional Advance to fund such
overdraft.
2.3 Note. The Borrowers' Obligations shall be evidenced by the
----
promissory note (the "Note") dated as of the date hereof substantially
in the form of Exhibit A attached hereto. The term "Note" shall include
---------
all extensions, renewals and modifications of the Note and all
substitutions therefor. All terms and provisions of the Note are hereby
incorporated herein.
2.4 Interest.
--------
2.4(a) Except as otherwise provided in Section 0 hereof, the
unpaid amount of each Advance against an Eligible Loan shall bear
interest, from the date the Advance until paid in full, at the
rate(s) per annum set forth on Exhibit M attached hereto and made
---------
a part hereof.
2.4(b) Provided no Default or Event of Default exists, the
Borrowers are entitled to receive a benefit in the form of an
"Earnings Credit" on the portion of the Eligible Balances
maintained in time deposit accounts with a Designated Bank, and
the Borrowers are entitled to receive a benefit in the form of an
"Earnings Allowance" on the portion of the Eligible Balances
maintained in demand deposit accounts with a Designated Bank. Any
Earnings Allowance shall be used
20
first and any Earnings Credit shall be used second as a credit
against accrued Designated Bank Charges, any other Miscellaneous
Charges and fees, including, but not limited to Commitment Fees,
Non-Usage Fees and Warehousing Fees, and may be used, at the
Lender's option, to reduce accrued interest. Any Earnings
Allowance not used during the month in which the benefit was
received shall be accumulated for use and must be used within 6
months of the month in which the benefit was received. Provided
no Default or Event of Default exists, any Earnings Credit not
used during the month in which the benefit was received shall be
used to provide a cash benefit to the Borrowers. Any Earnings
Credit retained by the Lender as a result of a Default or Event
of Default will be applied to the payment of the Borrowers'
Obligations in such order as the Lender will determine in its
sole discretion. The Lender's determination of the Earnings
Credit and the Earnings Allowance for any month shall be
determined by the Lender in its sole discretion and shall be
conclusive and binding absent manifest error. In no event shall
the benefit received by the Borrowers exceed the Depository
Benefit.
Either party hereto may terminate the benefits provided for
in this Section effective immediately upon Notice to the other
party, if the terminating party shall have determined (which
determination shall be conclusive and binding absent manifest
error) at any time that any applicable law, rule, regulation,
order or decree or any interpretation or administration thereof
by any governmental authority charged with the interpretation or
administration thereof, or compliance by such party with any
request or directive (whether or not having the force of law) of
any such authority, shall make it unlawful or impossible for such
party to continue to offer or receive the benefits provided for
in this Section. No Notice is required for a termination of
benefits as a result of a Default or Event of Default.
2.4(c) Interest shall be computed on the basis of a 360-day
year and applied to the actual number of
21
days elapsed in each interest calculation period and shall be
payable monthly in arrears, on the first day of each month,
commencing with the first month following the Closing Date and on
the Maturity Date.
2.4(d) If, for any reason, no interest is due on an Advance,
the Borrowers agree to pay to the Lender an administrative fee
equal to one day of interest on such Advance at the rate of
interest applicable to such Advance, as in effect on the date of
such Advance. Administrative and other fees shall be due and
payable in the same manner as interest is due and payable
hereunder.
2.4(e) Upon Notice to the Borrowers, after the occurrence
and during the continuation of an Event of Default, the unpaid
amount of each Advance shall bear interest until paid in full at
a per annum rate of interest (the "Default Rate") equal to 4% in
excess of the rate of interest otherwise applicable to the
Advance or, if no rate is applicable, the highest rate then
applicable to any outstanding Advances.
2.4(f) The floating rates of interest provided for in this
Agreement will be adjusted as of the effective date of each
change in the applicable index. The Lender's determination of
such rates as of any date of determination shall be conclusive
and binding, absent manifest error.
2.5 Principal Payments
------------------
2.5(a) The outstanding principal amount of all Advances
shall be payable in full on the Maturity Date.
2.5(b) The Borrowers shall have the right to prepay the
outstanding Advances in whole or in part, from time to time,
without premium or penalty.
2.5(c) The Borrowers shall pay the Lender, without the
necessity of prior demand or notice from the Lender, and the
Borrowers authorize the Lender to cause
22
the Funding Bank to charge the Borrowers' Operating Account for,
the amount of any outstanding Advance against a specific Pledged
Mortgage, upon the earliest occurrence of any of the following
events:
(1) One Business Day elapses from the date an Advance
was made and the Pledged Mortgage which was to have been
funded by such Advance is not closed and funded.
(2) Ten Business Days elapse from the date a Collateral
Document was delivered to the Borrowers for correction or
completion under a Trust Receipt, if such Collateral
Document has not been returned to the Lender.
(3) On the date on which a Pledged Mortgage is
determined to have been originated based on untrue,
incomplete or inaccurate information, whether or not the
Borrowers have knowledge of such misrepresentation or
incorrect information or on the date on which the Borrowers
know, or have reason to know, or receives notice from the
Lender, that one or more of the representations and
warranties set forth in Section 0 were inaccurate or
incomplete in any material respect on any date when made or
deemed made.
(4) On the date the Pledged Mortgage is defaulted and
remains in default for a period of 60 days or more.
(5) If a Purchase Commitment is required for Eligible
Loans of a specific type, and the outstanding Advances
against Pledged Mortgages of that type exceed the aggregate
Purchase Commitments for such Mortgage Loan type.
(6) Three Business Days after the mandatory delivery
date of the related Purchase Commitment, if any, and the
specific Pledged Mortgage or the Pledged Security backed
thereby was not delivered under the Purchase Commitment
prior to such
23
mandatory delivery date, or the Purchase Commitment is
terminated; unless in each case, such Pledged Mortgage or
Pledged Security is eligible for delivery to an Investor
under a comparable Purchase Commitment acceptable to the
Lender.
(7) Upon sale or other disposition of the Pledged
Mortgage or, if a Pledged Mortgage is included in an
Eligible Mortgage Pool, upon sale or other disposition of
the related Agency Security.
2.5(d) Upon Notice to the Borrowers by the Lender, the
Borrowers shall pay to the Lender, and the Borrowers authorize
the Lender to cause the Funding Bank to charge the Borrowers'
Operating Account for, the amount of any outstanding Advance
against a specific Pledged Mortgage upon the earliest occurrence
of any of the following events:
(1) For any Pledged Mortgage, the Warehouse Period
elapses.
(2) On the date the payment of a Lien senior to a
Pledged Mortgage is delinquent for a period of 60 days.
(3) Forty-five days elapse from the date the Pledged
Mortgage was delivered to an Investor or an Approved
Custodian for examination and purchase or inclusion in a
Mortgage Pool, without the purchase being made or an
Eligible Mortgage Pool being initially certified, or upon
the second rejection of the Pledged Mortgage as
unsatisfactory by an Investor or an Approved Custodian.
(4) Seven Business Days elapse from the date a Wet
Settlement Advance was made without receipt by the Lender of
all Collateral Documents relating to such Pledged Mortgage,
or such Collateral Documents, upon examination by the
Lender, are found not to be in compliance with the
requirements of this Agreement or the related Purchase
Commitment, if any.
24
(5) With respect to any Pledged Mortgage, any of the
items described in Section 2.2(d), upon examination by the
Lender, are found not to be in compliance with the
requirements of this Agreement or the related Purchase
Commitment, if any.
(6) If 3 Business Days have elapsed since Lender
shipped a Pledged Mortgage, pursuant to Exhibit D, to a
---------
Person other than an Investor or an Approved Custodian, and
Lender has not received payment of the Release Amount.
2.5(e) The outstanding amount of any Advance made pursuant
to Section 0 shall be payable in full within 1 Business Day after
the date of such Advance.
2.5(f) In addition to the payments required pursuant to
Sections 2.5(d) and 2.5(e), if the principal amount of any
Pledged Mortgage is prepaid in whole or in part while an Advance
is outstanding against such Pledged Mortgage, the Borrowers shall
be obligated to pay to the Lender, without the necessity of prior
demand or notice from the Lender, and the Borrowers authorize the
Lender to cause the Funding Bank to charge the Borrowers'
Operating Account for the amount of such prepayment, to be
applied to such Advance.
2.5(g) The proceeds of the sale or other disposition of
Pledged Mortgages and Pledged Securities shall be paid directly
by the Investor to the Cash Collateral Account. The Borrowers
shall give Notice to the Lender (telephonically, to be followed
by written notice) of the Pledged Mortgages or Pledged Securities
for which proceeds have been received. Upon receipt of such
Notice the Advances against such Pledged Mortgages or Pledged
Securities shall be repaid from such proceeds and such Pledged
Mortgages or Pledged Securities shall be considered to have been
redeemed from pledge. The Lender is entitled to rely upon the
Borrowers' affirmation that deposits in the Cash Collateral
Account represent payment from Investors for the purchase of
Pledged Mortgages or Pledged Securities as specified by
25
the Borrowers. In the event that the payment from an Investor for
the purchase of Pledged Mortgages or Pledged Securities is less
than the outstanding Advances against such Pledged Mortgages or
the Mortgage Loans backing Pledged Securities, the Lender is
authorized to cause the Funding Bank to charge the Borrowers'
Operating Account for an amount equal to such deficiency.
Provided no Default or Event of Default exists, the Lender shall
return any excess payment from an Investor for Pledged Mortgages
or Pledged Securities to the Borrowers.
2.5(h) The Borrowers may, from time to time, prepay a
portion of the Advances pursuant to this Section 0 (any such
prepayment is hereafter referred to as a "Buydown"). A Buydown
shall not, except as set forth below, be deemed a prepayment of
any particular Advances or of the Advances to a particular
Borrower, and shall not entitle any Borrower to the release of
any Collateral, but the Buydown shall be considered generally to
be a reduction in the amount of Advances outstanding under this
Agreement. Any Borrower may reborrow all or any portion of a
Buydown, whether or not the Buydown was made by that Borrower,
provided no Default or Event of Default has occurred and is
continuing, upon written notice to the Lender that the Borrower
desires to reborrow such amount. In the event the Lender receives
a payment of Advances that would, as a result of the Buydown,
reduce the outstanding principal balance of the Advances to an
amount less than zero, the Buydowns, or a portion thereof equal
to such excess, shall be re-advanced to any Borrower. The Lender
may apply the Buydown to reduce the interest on any outstanding
Advances that it chooses, in its sole and absolute discretion.
2.6 Expiration of Commitment. The Commitment shall expire on the
------------------------
Maturity Date.
2.7 Method of Making Payments.
-------------------------
26
2.7(a) Except as otherwise specifically provided herein, all
payments hereunder shall be made to the Lender not later than the
close of business on the date when due unless such date is a non-
Business Day, in which case, such payment shall be due on the first
Business Day thereafter, and shall be made in lawful money of the
United States of America in immediately available funds transferred
via wire to accounts designated by the Lender from time to time.
2.7(b) After the occurrence and during the continuance of an
Event of Default, and without the necessity of prior demand or notice
from the Lender, the Borrowers authorize the Lender to cause the
Funding Bank to charge the Borrowers' Operating Account for any
Obligations due and owing the Lender.
2.8 Commitment Fees and Non-Usage Fees.
----------------------------------
2.8(a) The Borrowers agree to pay to the Lender a Commitment Fee
in the amount of one-eighth percent (1/8%) per annum of the Commitment
Amount which Commitment Fee shall be paid quarterly in advance and
shall be computed on the basis of a 365-day year and applied to the
actual number of days elapsed in such Calendar Quarter. On the Closing
Date, the Borrowers shall pay the prorated portion of the quarterly
Commitment Fee due from the Closing Date to the last day of the current
Calendar Quarter. Thereafter, the Borrowers shall make quarterly
payments of the Commitment Fee on the first (1st) day of each Calendar
Quarter. If the Maturity Date is other than the last day of a Calendar
Quarter, the Borrowers shall pay the prorated portion of the quarterly
Commitment Fee due from the beginning of the then current Calendar
Quarter to and including the Maturity Date. If, at any time during a
Calendar Quarter, the Commitment Amount is increased, on the first
(1st) day of the next succeeding Calendar Quarter the Borrowers shall
pay an additional Commitment Fee in the amount of one-eighth percent
(1/8%) per annum of the increased Commitment Amount from the date of
the increase to the end of the preceding
27
Calendar Quarter. The Borrowers shall not be entitled to a reduction
in the amount of the Commitment Fee, in the event the Commitment
Amount is reduced or in the event that the Commitment is terminated at
the request of the Borrowers or as a result of an Event of Default. If
the Commitment terminates at the request of the Borrowers or as a
result of an Event of Default, the unpaid balance of the Commitment
Fee shall be due and payable in full on the date of such termination.
2.8(b) At the end of each Calendar Quarter, during the term
hereof commencing with the Calendar Quarter beginning on April 1,
2000, the Lender shall determine the average usage of the Commitment
by calculating the arithmetic daily average of the Advances
outstanding during such Calendar Quarter. The Lender shall then
subtract such quarterly average usage (the "Used Portion") from the
arithmetic daily average of the Commitment Amount (and the result
thereof shall be known as the "Unused Portion"). If the Unused Portion
is greater than 50% of the Commitment Amount, the Borrowers shall pay
in arrears, within 30 days after the end of each Calendar Quarter, a
Non-Usage Fee (the "Non-Usage Fee") equal to one-eighth percent (1/8%)
per annum on the total amount of the Unused Portion of the Commitment
during such Calendar Quarter. If the Maturity Date of the Commitment
is other than the last day of a Calendar Quarter, the Borrowers shall
pay the prorated portion of the quarterly Non-Usage Fee due from the
beginning of the then current Calendar Quarter to and including the
Maturity Date. In the absence of manifest error, the calculation by
the Lender of the amount of any Non-Usage Fee shall be conclusive. If
the Commitment terminates at the request of the Borrowers or as a
result of an Event of Default, the Non-Usage Fee shall be due and
owing through the last day of the current Calendar Quarter.
2.9 Warehousing Fees. The Borrowers agree, at the time of each
----------------
Advance, to pay to the Lender a Warehousing Fee in the amount of $20.00 for
each Mortgage Loan pledged as Collateral for such Advance. Warehousing Fees
are due when incurred, but shall not be
28
delinquent if paid within 15 days after receipt of an invoice or an account
analysis statement from the Lender.
2.10 Miscellaneous Charges. The Borrowers agree to reimburse the
---------------------
Lender for miscellaneous charges and expenses (collectively, "Miscellaneous
Charges") incurred by or on behalf of the Lender in connection with the
handling and administration of Advances, and to reimburse the Lender for
Miscellaneous Charges incurred by or on behalf of the Lender in connection
with the handling and administration of the Collateral. For the purposes
hereof, Miscellaneous Charges shall include, but not be limited to, costs
for UCC, tax lien and judgment searches conducted by the Lender, filing
fees, charges for wire transfers, check processing charges, charges for
security delivery fees, charges for overnight delivery of Collateral to
Investors, the Funding Bank's service fees and overdraft charges and
Designated Bank Charges. Miscellaneous Charges are due when incurred, but
shall not be delinquent if paid within 15 days after receipt of an invoice
or an account analysis statement from the Lender.
2.11 Interest Limitation. All agreements between the Borrowers and the
-------------------
Lender are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of this Agreement
or the Note or otherwise, shall the amount paid or agreed to be paid to the
Lender for the use, forbearance, loaning or retention of the Advances
secured by this Agreement exceed the maximum permissible under applicable
law. If from any circumstances whatsoever, fulfillment of any provisions
hereof or of the Note, or any other document securing this Agreement at any
time given shall involve transcending the limit of validity prescribed by
law, then, the obligation to be fulfilled shall automatically be reduced to
the limit of such validity, and if from any circumstances the Lender should
ever receive as interest an amount which would exceed the highest lawful
rate of interest, such amount which would be in excess of interest shall be
applied to the reduction of the principal balance secured by the Note and
not to the payment of interest thereunder. This provision shall control
every other provision of all agreements between the Borrowers and Lender
29
and shall also be binding upon and available to any subsequent holder of
the Note.
2.12 Increased Costs; Capital Requirements. In the event any
-------------------------------------
applicable law, order, regulation or directive issued by any governmental
or monetary authority, or any change therein or in the governmental or
judicial interpretation or application thereof, or compliance by the Lender
with any request or directive (whether or not having the force of law) by
any governmental or monetary authority:
2.12(a) Does or shall subject the Lender to any tax of any kind
whatsoever with respect to this Agreement or any Advances made
hereunder, or change the basis of taxation on payments to the Lender
of principal, fees, interest or any other amount payable hereunder
(except for change in the rate of tax on the overall gross or net
income of the Lender by the jurisdiction in which the Lender's
principal office is located);
2.12(b) Does or shall impose, modify or hold applicable any
reserve, capital requirement, special deposit, compulsory loan or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or other
credit extended by, or any other acquisition of funds by, any office
of the Lender which are not otherwise included in the determination of
the interest rate as calculated hereunder;
and the result of any of the foregoing is to increase the cost to the
Lender of making, renewing or maintaining any Advance or to reduce any
amount receivable in respect thereof or to reduce the rate of return on the
capital of the Lender or any Person controlling the Lender as it relates to
credit facilities in the nature of that evidenced by this Agreement, then,
in any such case, the Borrowers shall promptly pay any additional amounts
necessary to compensate the Lender for such additional cost or reduced
amounts receivable or reduced rate of return as determined by the Lender
with respect to this Agreement or Advances made
30
hereunder. If the Lender becomes entitled to claim any additional
amounts pursuant to this Section, it shall notify the Borrowers of the
event by reason of which it has become so entitled and the Borrowers
shall pay such amount within 15 days thereafter. A certificate as to
any additional amount payable pursuant to the foregoing sentence
containing the calculation thereof in reasonable detail submitted by
the Lender to the Borrowers shall be conclusive in the absence of
manifest error. The obligations of the Borrowers under this Section
shall survive the payment of all other Obligations and the termination
of this Agreement.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of
---------------------------
the Note and for the performance of all of the Obligations, each of
the Borrowers hereby assigns and transfers to the Lender all right,
title and interest in and to and grants a security interest to the
Lender in the following described property (the "Collateral"):
3.1(a) All Mortgage Loans, including all Mortgage Notes and
Mortgages evidencing or securing such Mortgage Loans, which from
time to time are delivered or caused to be delivered to the
Lender (including delivery to a third party on behalf of the
Lender), come into the possession, custody or control of the
Lender for the purpose of assignment or pledge or in respect of
which an Advance has been made by the Lender hereunder, including
without limitation all Mortgage Loans in respect of which Wet
Settlement Advances have been made by the Lender (the "Pledged
Mortgages").
3.1(b) All Mortgage-backed Securities which are from time
to time created in whole or in part on the basis of the Pledged
Mortgages or are delivered or caused to be delivered to, or are
otherwise in the possession of the Lender or its agent, bailee or
custodian as assignee for the Lender's benefit, or pledged to the
Lender, or for such purpose are registered by book-entry in the
name of the Lender (including delivery to or registration in the
name of a
31
third party on behalf of the Lender) hereunder or in respect of
which from time to time an Advance has been made by the Lender
hereunder (the "Pledged Securities").
3.1(c) All private mortgage insurance and all commitments
issued by the FHA or VA to insure or guarantee any Mortgage Loans
included in the Pledged Mortgages; all Purchase Commitments held
by the Borrowers covering the Pledged Mortgages or the Pledged
Securities and all proceeds resulting from the sale thereof to
Investors pursuant thereto; and all personal property, contract
rights, servicing and servicing fees and income or other
proceeds, amounts and payments payable to the Borrowers as
compensation or reimbursement, accounts, payments, intangibles
and other general intangibles of whatsoever kind relating to the
Pledged Mortgages, the Pledged Securities, said FHA commitments
or VA commitments and the Purchase Commitments, and all other
documents or instruments relating to the Pledged Mortgages and
the Pledged Securities, including, without limitation, any
interest of the Borrowers in any fire, casualty or hazard
insurance policies and any awards made by any public body or
decreed by any court of competent jurisdiction for a taking or
for degradation of value in any eminent domain proceeding as the
same relate to the Pledged Mortgages.
3.1(d) All right, title and interest of the Borrowers in and
to all escrow accounts, documents, instruments, files, surveys,
certificates, correspondence, appraisals, computer programs,
tapes, discs, cards, accounting records (including all
information, records, tapes, data, programs, discs and cards
necessary or helpful in the administration or servicing of the
Collateral) and other information and data of the Borrowers
relating to the Collateral.
3.1(e) All right, title and interest of the Borrowers in and
to any Hedging Arrangements entered into to protect the Borrowers
against changes in the value of specific Pledged Mortgages or
Pledged Securities, including, without limitation, all rights to
32
payment arising under such Hedging Arrangements that are related
to specific Pledged Mortgages or Pledged Securities.
3.1(f) All now existing or hereafter acquired cash delivered
to or otherwise in the possession of the Lender, the Funding
Bank, or the Lender's agent, bailee or custodian for the Lender's
benefit or designated on the books and records of the Borrowers
as assigned and pledged to the Lender.
3.1(g) All cash and non-cash proceeds of the Collateral,
including all dividends, distributions and other rights in
connection with, and all additions to, modifications of and
replacements for, the Collateral, and all products and proceeds
of the Collateral, together with whatever is receivable or
received when the Collateral or proceeds thereof are sold,
collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including, without
limitation, all rights to payment with respect to any cause of
action affecting or relating to the Collateral or proceeds
thereof.
3.2 Release of Security Interest in Collateral.
------------------------------------------
3.2(a) Pledged Mortgages shall be released from the
Lender's security interest only against payment to the Lender of
the Release Amount in connection with such Pledged Mortgages.
3.2(b) If Pledged Mortgages are to be transferred to a pool
custodian or to Xxxxxxx Mac or Xxxxxx Mae for inclusion in a
Mortgage Pool, the Lender's security interest in such Pledged
Mortgages shall be released only against payment to the Lender of
the Release Amounts for such Pledged Mortgages. To the extent
that the Lender does not receive the Release Amounts for one or
more such Pledged Mortgages by the time that the Mortgage-backed
Security is issued:
33
(1) The Borrowers are in Default under this Agreement;
(2) The Lender's security interest in the Pledged Mortgages
is not released;
(3) Borrowers hereby grant Lender a security interest in
the Mortgage-backed Security, effective immediately upon its
issuance, making it a Pledged Security hereunder; and
(4) The Lender shall be entitled to possession of such
Pledged Security in the manner provided below.
3.2(c) If Pledged Mortgages are transferred to an Approved
Custodian and included in an Eligible Mortgage Pool, the Lender's
security interest in the Pledged Mortgages comprising the Eligible
Mortgage Pool shall be released upon the issuance of the Agency
Security, which shall be a Pledged Security. The Lender's security
interest in such Pledged Security shall be released only against
payment to the Lender of the Release Amount in connection with the
Pledged Mortgages backing such Pledged Security. The Lender shall be
entitled to possession of such Pledged Security in the manner provided
below.
3.2(d) The Lender shall have the exclusive right to the
possession of the Pledged Securities or, if the Pledged Securities are
issued in book-entry form or issued in certificated form and delivered
to a clearing corporation (as such term is defined in the Uniform
Commercial Code of Minnesota) or its nominee, the Lender shall have
the right to have the Pledged Securities registered in the name of a
securities intermediary (as such term is defined in the Uniform
Commercial Code of Minnesota) in an account containing only customer
securities and credited to an account of the Lender. The Lender shall
have the right to cause delivery of the Pledged Securities to be made
to the Investor or the Pledged Securities credited to the account of
the Investor or the Investor's designee only against payment
34
therefor. The Borrowers acknowledge that the Lender may enter into one
or more standing arrangements with other financial institutions with
respect to Pledged Securities issued in book entry form or issued in
certificated form and delivered to a clearing corporation, pursuant to
which such Pledged Securities are registered in the name of such
financial institution, as agent or securities intermediary for the
Lender, and the Borrowers agree upon request of the Lender to execute
and deliver to such other financial institutions the Borrowers'
written concurrence in any such standing arrangements.
3.2(e) Prior to the occurrence of an Event of Default, a Borrower
may redeem a Pledged Mortgage or Pledged Security from the Lender's
security interest by notifying the Lender of its intention to redeem
such Pledged Mortgage or Pledged Security from pledge and either (a)
paying, or causing an Investor to pay, to the Lender, for application
to prepayment of the principal balance of the Note, the Release Amount
in connection with such Pledged Mortgage or Pledged Security, or (b)
delivering substitute Collateral which, in addition to being
acceptable to the Lender in its sole discretion will, when included
with the Collateral, result in a Collateral Value of all Collateral
held by the Lender which is at least equal to the aggregate
outstanding Advances.
3.2(f) Following the occurrence of a Default or Event of Default,
the Lender may, with no liability to the Borrowers or any Person,
continue to release its security interest in any Pledged Mortgage or
Pledged Security against payment of the Release Amount in connection
with such Pledged Mortgage or Pledged Security.
3.2(g) The amount (the "Release Amount") to be paid by the
Borrowers to obtain the release of the Lender's security interest in a
Pledged Mortgage shall be (i) prior to the occurrence of an Event of
Default, the principal amount of the Advances outstanding against such
Pledged Mortgage, and (ii) from and after the
35
occurrence and during the continuance of an Event of Default, the
Committed Purchase Price of such Pledged Mortgage or, if there is
no Purchase Commitment therefor, the amount paid to the Lender in
a commercially reasonable disposition thereof.
3.3 Delivery of Additional Collateral or Mandatory Prepayment.
---------------------------------------------------------
At any time that the aggregate Collateral Value of the Collateral then
pledged hereunder is less than the aggregate amount of the Advances
then outstanding hereunder, the Lender may request, and the Borrowers
shall within 2 Business Days after Notice by the Lender (a) deliver to
the Lender for pledge hereunder additional Collateral, with a
Collateral Value sufficient to cover the difference between the
Collateral Value of the Collateral pledged and the aggregate amount of
Advances outstanding hereunder, and/or (b) repay the Advances in an
amount sufficient to reduce the aggregate balance thereof outstanding
to or below the Collateral Value of the Collateral pledged hereunder.
3.4 Release of Collateral.
---------------------
3.4(a) The Lender may deliver documents relating to the
Collateral to the Borrowers for correction or completion pursuant
to a Trust Receipt.
3.4(b) Prior to the occurrence of a Default or Event of
Default, upon delivery by the Borrowers to the Lender of shipping
instructions pursuant to Exhibit D-SF, the Lender will transmit
------------
Pledged Mortgages or Pledged Securities and all related loan
documents or pool documents to the applicable Investor, Approved
Custodian or other party.
3.4(c) Upon receipt of Notice from the Borrowers under
Section 0 hereof, and repayment of the Release Amount with
respect to a Pledged Mortgage identified by the Borrowers, any
Collateral Documents relating to the redeemed Pledged Mortgage or
Mortgage Loan backing a Pledged Security which have not been
36
delivered to an Investor or Approved Custodian shall be released
by the Lender to the Borrowers.
3.5 Collection and Servicing Rights. So long as no Event of
-------------------------------
Default shall have occurred and be continuing, the Borrowers shall be
entitled to service and receive and collect directly all sums payable
to the Borrowers in respect of the Collateral other than proceeds of
any Purchase Commitment or proceeds of the sale of any Collateral.
Following the occurrence of any Event of Default, the Lender or its
designee shall thereafter be entitled to service and receive and
collect all sums payable to the Borrowers in respect of the Collateral,
and in such case (a) the Lender or its designee in its discretion may,
in its own name, in the name of the Borrowers or otherwise, demand, xxx
for, collect or receive any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral, but
shall be under no obligation to do so, (b) the Borrowers shall, if the
Lender so requests, hold in trust for the benefit of the Lender and
forthwith pay to the Lender at its office designated by Notice
hereunder, all amounts thereafter received by the Borrowers upon or in
respect of any of the Collateral, advising the Lender as to the source
of such funds, and (c) all amounts so received and collected by the
Lender shall be held by it as part of the Collateral.
3.6 Return of Collateral at End of Commitment. If (a) the
-----------------------------------------
Commitment shall have expired or been terminated, and (b) no Advances,
interest or other Obligations shall be outstanding and unpaid, the
Lender shall deliver or release its security interest and shall deliver
all Collateral in its possession to the Borrowers at the Borrowers'
expense. The receipt of the Borrowers for any Collateral released or
delivered to the Borrowers pursuant to any provision of this Agreement
shall be a complete and full acquittance for the Collateral so
returned, and the Lender shall thereafter be discharged from any
liability or responsibility therefor.
3.7 Transfers of Pledged Mortgages Between Borrowers. So long as
------------------------------------------------
there is not currently any Default or Event of
37
Default, and so long as the Lender has actual physical possession of all
documents that were required to be delivered under the appropriate Exhibit
-------
D (including the original Mortgage Note), any Borrower may assign its
-
rights in a Pledged Mortgage to any other Borrower without repaying the
Advance outstanding against it, in the following manner:
3.7(a) The assignment shall not cause the Borrowers to be
otherwise in violation of this Agreement.
3.7(b) If the Borrower is assigning all of its right, title and
interest in the Pledged Mortgage to another Borrower, or the assignee
Borrower is intended to become the legal owner of the Mortgage Note,
then the Borrowers shall give the Lender prior Notice of the proposed
assignment, and along with that Notice, shall send the Lender all of
the following documents:
(1) A detailed schedule, describing the loans to be assigned
from that assignor Borrower to that assignee Borrower.
(2) An allonge to the Mortgage Note, signed by the assignee
Borrower, endorsing the Mortgage Note in blank.
(3) A copy of the recorded assignment (or the assignment, as
sent for recording) of the Mortgage to the assignee Borrower.
(4) An unrecorded assignment of the Mortgage from the
assignee Borrower to the Lender.
If all of the documents meet with the approval of Lender (which may
withhold its approval for any reason or for no reason), the Lender
shall fill in the Mortgage Note's previous blank endorsement (the
blank endorsement from the assignor Borrower that was given to the
Lender at the time that the Pledged Mortgage was pledged or previously
assigned under this Section 0) in the name of the assignee Borrower.
38
3.7(c) Any assignment under this Section 0 shall be subject to
Lender's security interest in that Pledged Mortgage and all related
rights that are assigned.
3.7(d) The assignment of Pledged Mortgages is intended not to
have any effect on the expiration of the applicable Warehouse Period
or other time-related provisions. Therefore, any Advance outstanding
against a Pledged Mortgage that is assigned under this Section 0 shall
be deemed to have been made at the time that the Advance was made to
the assignor Borrower (or the initial assignor Borrower, if more than
one assignment under this Section 0 has taken place). Similarly, the
pledge of the Pledged Mortgage shall be deemed to have taken place
when the assignor Borrower (or the initial Borrower) pledged the
Pledged Mortgage.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to make the initial
---------------
Advance under this Agreement is subject to the satisfaction, in the sole
discretion of the Lender, on or before the date thereof of the following
conditions precedent:
4.1(a) The Lender shall have received the following, all of
which must be satisfactory in form and content to the Lender, in its
sole discretion:
(1) The Note and this Agreement duly executed by the
Borrowers.
(2) NFI's articles or certificate of incorporation as
certified by the Secretary of State of NFI's incorporation,
bylaws certified by the corporate secretary of NFI, and
certificates of good standing dated no less recently than 90 days
prior to the date of this Agreement.
(3) A resolution of the board of directors of NFI,
certified as of the date of this Agreement by its corporate
secretary, authorizing the
39
execution, delivery and performance of this Agreement and the
other Loan Documents, and all other instruments or documents to
be delivered by NFI pursuant to this Agreement.
(4) A certificate of NFI's corporate secretary as to the
incumbency and authenticity of the signatures of the officers of
NFI executing this Agreement and the other Loan Documents and
each Advance Request and all other instruments or documents to be
delivered pursuant hereto (the Lender being entitled to rely
thereon until a new such certificate has been furnished to the
Lender).
(5) Financial statements of NFI (and, if applicable, its
Subsidiaries, on a consolidated basis) containing a balance sheet
as of December 31, 1998, and related statements of income and
changes in stockholders' equity for the fiscal year ended on such
date, all prepared in accordance with GAAP applied on a basis
consistent with prior periods and audited by independent
certified public accountants of recognized standing acceptable to
the Lender, together with an unqualified auditor's opinion
regarding the financial statements.
(6) Financial statements of NFI (and, if applicable, its
Subsidiaries, on a consolidated basis) containing a balance sheet
as of October 31, 1999, related statements of income and changes
in stockholders' equity for the period ended on such date
prepared in accordance with GAAP applied on a basis consistent
with NFI's most recent audited financial statements.
(7) NMI's articles or certificate of incorporation as
certified by the Secretary of State of NMI's incorporation,
bylaws certified by the corporate secretary of NMI, and
certificates of good standing dated no less recently than 90 days
prior to the date of this Agreement.
40
(8) A resolution of the board of directors of NMI,
certified as of the date of this Agreement by its corporate
secretary, authorizing the execution, delivery and performance of
this Agreement and the other Loan Documents, and all other
instruments or documents to be delivered by NMI pursuant to this
Agreement.
(9) A certificate of NMI's corporate secretary as to the
incumbency and authenticity of the signatures of the officers of
NMI executing this Agreement and the other Loan Documents and
each Advance Request and all other instruments or documents to be
delivered pursuant hereto (the Lender being entitled to rely
thereon until a new such certificate has been furnished to the
Lender).
(10) Financial statements of NMI (and, if applicable, its
Subsidiaries, on a consolidated basis) containing a balance sheet
as of December 31, 1998, and related statements of income,
changes in stockholders' equity and cash flows for the fiscal
year ended on such date, all prepared in accordance with GAAP
applied on a basis consistent with prior periods and audited by
independent certified public accountants of recognized standing
acceptable to the Lender, together with an unqualified auditor's
opinion regarding the financial statements.
(11) Financial statements of NMI (and, if applicable, its
Subsidiaries, on a consolidated basis) containing a balance sheet
as of October 31, 1999, related statements of income and changes
in stockholders' equity other than income or loss for the period
ended on such date prepared in accordance with GAAP applied on a
basis consistent with NMI's most recent audited financial
statements.
(12) NCI's articles or certificate of incorporation as
certified by the Secretary of State of NCI's incorporation,
bylaws certified by
41
the corporate secretary of NCI, and certificates of good standing
dated no less recently than 90 days prior to the date of this
Agreement.
(13) A resolution of the board of directors of NCI,
certified as of the date of this Agreement by its corporate
secretary, authorizing the execution, delivery and performance of
this Agreement and the other Loan Documents, and all other
instruments or documents to be delivered by NCI pursuant to this
Agreement.
(14) A certificate of NCI's corporate secretary as to the
incumbency and authenticity of the signatures of the officers of
NCI executing this Agreement and the other Loan Documents and
each Advance Request and all other instruments or documents to be
delivered pursuant hereto (the Lender being entitled to rely
thereon until a new such certificate has been furnished to the
Lender).
(15) Financial statements of NCI (and, if applicable, its
Subsidiaries, on a consolidated basis) containing a balance sheet
as of December 31, 1998, and related statements of income and
changes in stockholders' equity other than income or loss for the
fiscal year ended on such date, all prepared in accordance with
GAAP applied on a basis consistent with prior periods.
(16) Financial statements of NCI (and, if applicable, its
Subsidiaries, on a consolidated basis) containing a balance sheet
as of October 31, 1999, related statements of income and changes
in stockholders' equity other than income or loss for the period
ended on such date prepared in accordance with GAAP applied on a
basis consistent with NCI's most recent audited financial
statements.
(17) The Guaranty, in the form attached hereto as Exhibit B,
---------
duly executed by the Guarantor.
42
(18) Copies of the Guarantor's articles or certificate of
incorporation as certified by the Secretary of State of the State
of Guarantor's incorporation and bylaws, and certificates of good
standing issued by the Secretary of State dated no less recently
than 90 days prior to the date of this Agreement.
(19) A resolution of the board of directors of the
Guarantor, certified as of the date of the Agreement by its
corporate secretary, authorizing the execution, delivery and
performance of the Guaranty, and all other instruments or
documents to be delivered by the Guarantor pursuant to this
Agreement.
(20) A certificate of the Guarantor's corporate secretary as
to the incumbency and authenticity of the signatures of the
officers of the Guarantor executing the Guaranty and all other
instruments or documents to be delivered pursuant hereto (the
Lender being entitled to rely thereon until a new such
certificate has been furnished to the Lender).
(21) Financial statements of the Guarantor containing a
balance sheet as of December 31, 1998, and related statements of
income, changes in stockholders' equity and cash flows for the
period ended on the above date, all prepared in accordance with
GAAP applied on a basis consistent with prior periods.
(22) A favorable written opinion of counsel to the Borrowers
and the Guarantor (or of separate counsel at the option of the
Borrowers and the Guarantor), dated as of the date of this
Agreement substantially in the form of Exhibit H attached hereto,
---------
addressed to the Lender.
(23) Uniform Commercial Code, tax lien and judgment searches
of the appropriate public records
43
for Borrowers and the Guarantor, which searches shall not have
disclosed the existence of any prior Lien on the Collateral other
than in favor of the Lender or as permitted hereunder.
(24) Copies of the certificates, documents or other written
instruments which evidence the Borrowers' eligibility described
in Section 0 hereof, all in form and substance satisfactory to
the Lender.
(25) Copies of the Borrowers' errors and omissions insurance
policy or mortgage impairment insurance policy and blanket bond
coverage policy, or certificates in lieu of policies, all in form
and content satisfactory to the Lender, showing compliance by the
Borrowers as of the date of this Agreement with the related
provisions of Section 0 hereof.
(26) Executed financing statements in recordable form
covering the Collateral and ready for filing in all jurisdictions
required by the Lender.
(27) Receipt by the Lender of any fees due on the date
hereof, including, but not limited to, Commitment Fees and
document production fees.
(28) Evidence that all accounts necessary into which
Advances will be funded have been established at the Funding Bank
and receipt of a fully executed Funding Bank Agreement.
(29) Assumed Name Certificate dated no less recently than 90
days prior to the date of this Agreement for any assumed name
used by the Borrowers in the conduct of its business.
(30) Before any Advance is requested for Xxxxxx Mae-
committed Mortgage Loans, an agreement among NMI, the Lender and
Xxxxxx Xxx, pursuant to which Xxxxxx Mae agrees to send all cash
proceeds
44
of Mortgage Loans sold by NMI to Xxxxxx Xxx to the Cash
Collateral Account.
4.1(b) Except for indebtedness between or among the Borrowers,
the Parent or their consolidated Subsidiaries or indebtedness to First
Union Corporation or its consolidated Subsidiaries under existing
lines of credit, all directors, officers and shareholders of the
Borrowers, all Affiliates of the Borrowers or of any Subsidiary of the
Borrowers, and the Guarantor, to whom or to any of whom the Borrowers
shall be indebted as of the date of this Agreement, which indebtedness
has a term of more than 1 year or is in excess of $25,000 shall have
subordinated such indebtedness to the Obligations, by executing a
Subordination of Debt Agreement, in the form of Exhibit F hereto; and
---------
the Lender shall have received an executed copy of any such
Subordination of Debt Agreement, certified by the corporate secretary
of the Borrowers to be true and complete and in full force and effect
as of the date of the Advance.
4.2 Each Advance. The obligation of the Lender to make the
------------
initial and each subsequent Advance under this Agreement is subject to the
satisfaction, in the sole discretion of the Lender, as of the date of each
such Advance, of the following additional conditions precedent:
4.2(a) The Borrowers shall have delivered to the Lender the
Advance Request and Collateral Documents, called for under, and
shall have satisfied the procedures set forth in, Section 0 hereof
and the applicable Exhibits hereto described in that Section,
according to the type of the requested Advance. All items
delivered to the Lender shall be satisfactory to the Lender in
form and content, and the Lender may reject such of them as do not
meet the requirements of this Agreement or of the related Purchase
Commitment, if any.
4.2(b) The Lender shall have received evidence satisfactory
to it as to the making and/or continuation of any book entry or
the due filing and recording in all
45
appropriate offices of all financing statements and other
instruments as may be necessary to perfect the security interest
of the Lender in the Collateral under the Uniform Commercial Code
or other applicable law.
4.2(c) The representations and warranties of the Borrowers
contained in Article 5 hereof shall be accurate and complete in
all material respects as if made on and as of the date of each
Advance.
4.2(d) The Borrowers shall have performed all agreements to
be performed by it hereunder, and after giving effect to the
requested Advance, there shall exist no Default or Event of
Default hereunder.
4.2(e) The Guarantor shall have performed all agreements to
be performed by the Guarantor under the Guaranty.
4.2(f) The Borrowers shall not have incurred any material
liabilities, direct or contingent, other than in the ordinary
course of its business, since the Statement Date.
4.2(g) The Lender shall have received from counsel for the
Borrowers or for the Guarantor or both, if requested by the Lender
in its sole discretion, an updated opinion, in form and substance
satisfactory to the Lender, addressed to the Lender and dated as
of the date of such Advance, covering such of the matters as the
Lender may reasonably request.
Delivery of an Advance Request by the Borrowers shall be deemed a
representation by the Borrowers that all conditions set forth in this
Section 0 shall have been satisfied as of the date of such Advance.
46
5. REPRESENTATIONS AND WARRANTIES.
The Borrowers hereby represent and warrant to the Lender, as of the
date of this Agreement and as of the date of each Advance Request and the
making of each Advance, that:
5.1 Organization; Good Standing; Subsidiaries. Each of the Borrowers
-----------------------------------------
and each Subsidiary of the Borrowers is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, has the full legal power and authority to own its
property and to carry on its business as currently conducted and is duly
qualified as a foreign corporation to do business and is in good standing
in each jurisdiction in which the transaction of its business makes such
qualification necessary, except in jurisdictions, if any, where a failure
to be in good standing has no material adverse effect on the business,
operations, assets or financial condition of the Borrowers or any such
Subsidiary. For the purposes hereof, good standing shall include
qualification for any and all licenses and payment of any and all taxes
required in the jurisdiction of its incorporation and in each jurisdiction
in which the Borrowers transact business. The Borrowers have no
Subsidiaries except as set forth on Exhibit G hereto. Exhibit G sets forth
--------- ---------
with respect to each such Subsidiary, its name, address, place of
incorporation, each state in which it is qualified as a foreign
corporation, and the percentage ownership of its capital stock by the
Borrowers. NFI holds 99% of the economic interest in the Parent, such
holdings being reflected in NFI's financial statements.
5.2 Authorization and Enforceability. The Borrowers have the power and
--------------------------------
authority to execute, deliver and perform this Agreement, the Note and all
other Loan Documents to which the Borrowers are party and to make the
borrowings hereunder. The Guarantor has the power and legal capacity to
execute, deliver and perform the Guaranty. The execution, delivery and
performance by the Borrowers of this Agreement, the Note and all other Loan
Documents to which the Borrowers are party
47
and the making of the borrowings hereunder and thereunder, have been duly
and validly authorized by all necessary corporate action on the part of the
Borrowers (none of which actions has been modified or rescinded, and all of
which actions are in full force and effect) and do not and will not
conflict with or violate any provision of law, of any judgments binding
upon the Borrowers, or of the articles of incorporation or by-laws of each
of the Borrowers, conflict with or result in a breach of or constitute a
default or require any consent under, or result in the creation of any Lien
upon any property or assets of the Borrowers other than the Lien on the
Collateral granted hereunder, or result in or require the acceleration of
any indebtedness of the Borrowers pursuant to any agreement, instrument or
indenture to which the Borrowers are a party or by which the Borrowers or
their property may be bound or affected. This Agreement, the Note and all
other Loan Documents contemplated hereby or thereby constitute legal,
valid, and binding obligations of the Borrowers or of the Guarantor,
respectively, enforceable in accordance with their respective terms, except
as limited by bankruptcy, insolvency or other such laws affecting the
enforcement of creditors' rights and by general principles of equity.
5.3 Approvals. The execution and delivery of this Agreement, the Note
---------
and all other Loan Documents and the performance of the Borrowers'
obligations hereunder and thereunder and the validity and enforceability
hereof and thereof do not require any license, consent, approval or other
action of any state or federal agency or governmental or regulatory
authority other than those which have been obtained and remain in full
force and effect.
5.4 Financial Condition. The balance sheet of NFI, the balance sheet
-------------------
of NMI and the balance sheet of NCI (and, if applicable, its Subsidiaries,
on a consolidated basis) as of the Statement Date, and the related
statements of income and changes in the respective stockholders' equity for
the fiscal period ended on the Statement Date, heretofore furnished to the
Lender, fairly present the financial condition of the related corporation
(and any Subsidiaries) as of the Statement Date and the results of its
operations for the fiscal period ended on the
48
Statement Date. The Borrowers had, on the Statement Date, no known material
liabilities, direct or indirect, fixed or contingent, matured or unmatured,
or liabilities for taxes, long-term leases or unusual forward or long-term
commitments not disclosed by, or reserved against in, said balance sheet
and related statements, and at the date of this representation, there are
no material (in excess of $2,000,000 in the aggregate, for purposes of this
clause only) unrealized or anticipated losses from any loans, advances or
other commitments of the Borrowers except as heretofore disclosed to the
Lender in writing or reflected in the financial statements. Said financial
statements were prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved. Since the Statement Date, there has
been no material adverse change in the business, operations, assets or
financial condition of the Borrowers (and their Subsidiaries) and Guarantor
as a whole, nor are the Borrowers aware of any state of facts which (with
or without notice or lapse of time or both) would or could result in any
such material adverse change.
5.5 Litigation. There are no actions, claims, suits or proceedings
----------
pending or, to the knowledge of the Borrowers, threatened or reasonably
anticipated against or affecting the Borrowers or any Subsidiary of the
Borrowers in any court or before any arbitrator or before any government
commission, board, bureau or other administrative agency which, if
adversely determined, may reasonably be expected to result in any material
and adverse change in the business, operations, assets or financial
condition of the Borrowers as a whole, or which would affect the validity
or enforceability of this Agreement, the Note or any other Loan Document.
5.6 Compliance with Laws. None of the Borrowers nor any Subsidiary of
--------------------
the Borrowers are in violation of any provision of any law, or of any
judgment, award, rule, regulation, order, decree, writ or injunction of any
court or public regulatory body or authority which might have a material
adverse effect on the business, operations, assets or financial condition
of the Borrowers and Guarantor as a whole or which would affect the
validity or
49
enforceability of this Agreement, the Note or any other Loan Document.
5.7 Regulation U. The Borrowers are not engaged principally, or as one
------------
of its important activities, in the business of extending credit for the
purpose of purchasing or carrying Margin Stock, and no part of the proceeds
of any Advances made hereunder will be used to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock.
5.8 Investment Company Act. The Borrowers are not an "investment
-----------------------
company" or controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
5.9 Payment of Taxes. The Borrowers and their Subsidiaries, if any,
----------------
have filed or caused to be filed all federal, state and local income,
excise, property and other tax returns with respect to the operations of
the Borrowers and their Subsidiaries which are required to be filed, all
such returns are true and correct, and the Borrowers and each of their
Subsidiaries has paid or caused to be paid all taxes as shown on such
returns or on any assessment, to the extent that such taxes have become
due, including, but not limited to, all FICA payments and withholding
taxes, if appropriate. The amounts reserved, as a liability for income and
other taxes payable, in the financial statements described in Section 0
hereof are sufficient for payment of all unpaid federal, state and local
income, excise, property and other taxes, whether or not disputed, of the
Borrowers, the Parent and their Subsidiaries accrued for or applicable to
the period and on the dates of such financial statements and all years and
periods prior thereto and for which any of the Borrowers, the Parent or
their Subsidiaries may be liable in its own right or as transferee of the
assets of, or as successor to, any other Person. No tax Liens have been
filed and no material claims are being asserted with respect to any such
taxes, fees or charges.
50
5.10 Agreements. None of the Borrowers nor any Subsidiary of the
----------
Borrowers are a party to any agreement, instrument or indenture or subject
to any restriction materially and adversely affecting its business,
operations, assets or financial condition, except as disclosed in the
financial statements described in Section 0 hereof. None of the Borrowers
nor any Subsidiary of the Borrowers are in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement, instrument, or indenture which
default could have a material adverse effect on the business, operations,
properties or financial condition of the Borrowers as a whole. No holder of
any indebtedness of the Borrowers or of any of their Subsidiaries has given
notice of any asserted default thereunder, and no liquidation or
dissolution of the Borrowers or of any of their Subsidiaries and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to the Borrowers or of any of their Subsidiaries or
any of their properties is pending, or to the knowledge of the Borrowers,
threatened.
5.11 Title to Properties. The Borrowers and each Subsidiary of the
-------------------
Borrowers has good, valid, insurable (in the case of real property) and
marketable title to all of its properties and assets (whether real or
personal, tangible or intangible) reflected on the financial statements
described in Section 0 hereof, except for such properties and assets as
have been disposed of since the date of such financial statements as no
longer used or useful in the conduct of its business or as have been
disposed of in the ordinary course of business, and all such properties and
assets are free and clear of all Liens except as disclosed in such
financial statements.
5.12 ERISA. All plans ("Plans") of a type described in Section 3(3) of
-----
ERISA in respect of which the Borrowers or any Subsidiary of the Borrowers
is an "Employer," as defined in Section 3(5) of ERISA, are in substantial
compliance with ERISA, and none of such Plans is insolvent or in
reorganization, has an accumulated or waived funding deficiency within the
meaning of Section 412 of the Internal Revenue Code, and none of the
Borrowers nor any
51
Subsidiary of the Borrowers have incurred any material liability (including
any material contingent liability) to or on account of any such Plan
pursuant to Sections 4062, 4063, 4064, 4201 or 4204 of ERISA; and no
proceedings have been instituted to terminate any such Plan, and no
condition exists which presents a material risk to the Borrowers or any
Subsidiary of the Borrowers of incurring a liability to or on account of
any such Plan pursuant to any of the foregoing Sections of ERISA. No Plan
or trust forming a part thereof has been terminated since September 1,
1974.
5.13 Eligibility. The Borrowers are approved and qualified and in
-----------
good standing as a lender or seller/servicer, as set forth below, and meet
all requirements applicable to their status as such:
5.13(a) NMI is a Xxxxxx Xxx approved seller/servicer of Mortgage
Loans, eligible to originate, purchase, hold, sell, and service
Mortgage Loans to be sold to Xxxxxx Mae.
5.13(b) NMI is a Xxxxxxx Mac approved seller/servicer of Mortgage
Loans, eligible to originate, purchase, hold, sell and service
Mortgage Loans to be sold to Xxxxxxx Mac.
5.13(c) NMI is a Lender in good standing under the VA loan
guarantee program eligible to originate, purchase, hold, sell and
service VA-guaranteed Mortgage Loans.
5.13(d) NMI is a HUD approved mortgagee, eligible to originate,
purchase, hold, sell and service FHA fully insured Mortgage Loans.
5.13(e) NMI is an RFC approved seller/servicer of Mortgage Loans,
eligible to originate, purchase, hold, sell and service Mortgage Loans
to be sold to RFC.
5.14 Place of Business. The principal place of business of the
------------------
Borrowers is 0000 Xxxx 00xx Xxxxx, Xxxxx 000, Xxxxxxxx, XX 00000.
52
5.15 Special Representations Concerning Collateral. The Borrowers
---------------------------------------------
hereby represent and warrant to the Lender, as of the date of this
Agreement and as of the date of each Advance Request and the making of each
Advance, that:
5.15(a) The Borrowers are the legal and equitable owner and
holder, free and clear of all Liens (other than Liens granted
hereunder), of the Pledged Mortgages and the Pledged Securities. All
Pledged Mortgages, Pledged Securities and Purchase Commitments have
been duly authorized and validly issued to the Borrowers, and all of
the foregoing items of Collateral comply with all of the requirements
of this Agreement, and have been and will continue to be validly
pledged or assigned to the Lender, subject to no other Liens.
5.15(b) The Borrowers have, and will continue to have, the full
right, power and authority to pledge the Collateral pledged and to be
pledged by it hereunder.
5.15(c) Any Mortgage Loan and any related document included in
the Pledged Mortgages (1) (except for Seasoned Mortgage Loans) has
been duly executed and delivered by the parties thereto at a closing
held not more than 90 days prior to the date of the Advance Request
for such Mortgage Loan, (2) has been made in compliance with all
requirements of the Real Estate Settlement Procedures Act, Equal
Credit Opportunity Act, the federal Truth-In-Lending Act and all other
applicable laws and regulations, (3) is and will continue to be valid
and enforceable in accordance with its terms, without defense or
offset, (4) has not been modified or amended except in writing, which
writing is part of the Collateral Documents, nor any requirements
thereof waived, (5) has been evaluated or appraised in accordance with
Title XI of FIRREA, and (6) complies and will continue to comply with
the terms of this Agreement and, if applicable, with the related
Purchase Commitment held by the Borrowers. Each Mortgage Loan, other
than an open-ended Pledged Loan secured by a Second Mortgage, has been
fully advanced in the face amount thereof, each First Mortgage is a
first Lien on the premises described therein and each Second Mortgage
is secured by a second Lien on the premises described therein, and has
or will have a title insurance policy, in American Land Title
Association form or equivalent thereof, from a recognized title
insurance company, insuring the priority of the Lien of the Mortgage
and meeting the
53
usual requirements of Investors purchasing such Mortgage Loans.
5.15(d) No default has occurred and is continuing for more than
60 days under any Mortgage Loan included in the Pledged Mortgages
without the Advance against such Pledged Mortgage having been repaid
in accordance with Section 0 hereof, provided, however, that with
respect to Pledged Mortgages which have already been pledged as
Collateral hereunder, if any default has occurred, the Borrowers will
promptly notify the Lender.
5.15(e) The Borrowers have complied and will continue to comply
with all laws, rules and regulations in respect of the FHA insurance
or VA guaranty of each Mortgage Loan included in the Pledged Mortgages
designated by the Borrowers as an FHA insured or VA guaranteed
Mortgage Loan, and such insurance or guarantee is and will continue to
be in full force and effect.
5.15(f) All fire and casualty policies covering the premises
encumbered by each Mortgage included in the Pledged Mortgages (1) name
and will continue to name the Borrowers and their successors and
assigns as the insured under a standard mortgagee clause, (2) are and
will continue to be in full force and effect, and (3) afford and will
continue to afford insurance against fire and such other risks as are
usually insured against in the broad form of extended coverage
insurance from time to time available.
5.15(g) Pledged Mortgages secured by premises located in a
special flood hazard area designated as such by the Director of the
Federal Emergency Management Agency are and shall continue to be
covered by special flood insurance under the National Flood Insurance
Program.
5.15(h) Each Pledged Mortgage, against which an Advance is made
on the basis of a Purchase Commitment, meets all requirements of such
Purchase Commitment. The
54
Borrowers shall assure that Pledged Mortgages which are intended to be
used in the formation of Mortgage-backed Securities shall comply or,
prior to the formation of any such Mortgage-backed Security, shall
comply with the requirements of the governmental instrumentality,
department, agency or other Person issuing or guaranteeing such
Mortgage-backed Security. The Borrowers shall assure that Uncommitted
Mortgage Loans pledged hereunder meet all requirements of one or more
Investors with which the Borrowers have agreements or other
arrangements to sell similar Mortgage Loans.
5.15(i) For Pledged Mortgages which will be used to back Xxxxxx
Mae Mortgage-backed Securities, the Borrowers have received from
Xxxxxx Xxx a Confirmation Notice or Confirmation Notices for Request
Additional Commitment Authority and for Request Pool Numbers, and
there remains available thereunder a commitment on the part of Xxxxxx
Mae sufficient to permit the issuance of Xxxxxx Xxx Mortgage-backed
Securities in an amount at least equal to the amount of such Pledged
Mortgages designated by the Borrowers as the Mortgage Loans to be used
to back such Xxxxxx Mae Mortgage-backed Securities; each such
Confirmation Notice is in full force and effect; each of such Pledged
Mortgages has been assigned by the Borrowers to one of such Pool
Numbers and a portion of the available Xxxxxx Xxx Commitment has been
allocated thereto by the Borrowers, in an amount at least equal to
such Pledged Mortgages; and each such assignment and allocation has
been reflected in the books and records of the Borrowers.
5.15(j) Each Pledged Mortgage secured by real property to which a
Manufactured Home is affixed will create a valid Lien on such
Manufactured Home that will have priority over any other Lien on such
Manufactured Home, whether or not arising under applicable real
property law.
5.16 Servicing. Attached hereto as Exhibit E is a true and complete
--------- ---------
list of the Borrowers' Servicing Portfolio. All of the Borrowers' Servicing
Contracts are in full force and effect and, except as
55
otherwise indicated, are unencumbered by Liens. No default or event which,
with notice or lapse of time or both, would become a default, exists under
any such Servicing Contract.
5.17 No Adverse Selection. The Borrowers have not selected the
---------------------
Collateral in a manner so as to affect adversely the Lender's interests.
5.18 Year 2000 Compliance. Each of the Borrowers have conducted a
--------------------
comprehensive review and assessment of each of the Borrower's computer
applications and made inquiry of each of the Borrower's key suppliers,
vendors, customers, and Investors with respect to the "Year 2000 Problem"
and, based on that review and inquiry, the Borrowers do not believe the
Year 2000 Problem will result in a material adverse change in the
Borrowers' business condition (financial or otherwise), operations,
properties or prospects, or ability to repay the credit.
5.19 Assumed Names. The Borrowers do not originate Mortgage Loans or
-------------
otherwise conduct business under any names other than its legal name and the
assumed name(s) set forth on Exhibit O attached hereto and made a part hereof.
The Borrowers have made all filings and taken all other action as may be
required under the laws of any jurisdiction in which it originates Mortgage
Loans or otherwise conducts business under any assumed name. The Borrowers' use
of assumed name(s) set forth herein does not conflict with any other Person's
legal rights to any such name(s), nor otherwise give rise to any liability by
the Borrowers to any other Person.
6. AFFIRMATIVE COVENANTS.
The Borrowers hereby covenant and agree that, so long as the
Commitment is outstanding or there remain any Obligations to be paid or
performed under this Agreement or under any other Loan Document, the
Borrowers shall:
6.1 Payment of Note. Punctually pay or cause to be paid all
---------------
Obligations payable hereunder and under the Note in accordance with the
terms hereof and thereof.
56
6.2 Financial Statements and Other Reports. Deliver to the Lender:
--------------------------------------
6.2(a) As soon as available and in any event within 45 days after
the end of each calendar month of each of the Borrowers, statements of
income and changes in stockholders' equity of each of the Borrowers
and the Parent (and, if applicable, their Subsidiaries, on a
consolidated basis) for the immediately preceding month and for the
period from the beginning of the fiscal year to the end of such
calendar month, and the related balance sheet as of the end of the
immediately preceding month, all in reasonable detail and certified as
to the fairness of presentation by the chief financial officer or
another financial officer appointed by the board of directors of the
respective Borrower, subject, however, to year-end audit adjustments.
6.2(b) As soon as available and in any event within 90 days after
the end of each fiscal year of the Borrowers, statements of income,
changes in stockholders' equity and cash flow of each of the Borrowers
(and, if applicable, their Subsidiaries, on a consolidated basis) for
such year, and the related balance sheet as of the end of such year
(setting forth in comparative form the corresponding figures for the
preceding fiscal year), all in reasonable detail and accompanied by an
opinion (which opinion shall not be qualified due to possible failure
to take all appropriate steps to successfully address Year 2000
Problem) in form and substance satisfactory to the Lender and prepared
by an accounting firm reasonably satisfactory to the Lender, or other
independent certified public accountants of recognized standing
selected by each of the Borrowers and acceptable to the Lender, as to
said financial statements and a certificate signed by the chief
financial officer of the respective Borrower stating that said
financial statements fairly present the financial condition and
results of operations of the respective Borrower (and, if applicable,
their Subsidiaries) as of the end of, and for, such year.
57
6.2(c) Together with each delivery of financial statements
required in this Section 0, an Officer's Certificate substantially in
the form of Exhibit I-SF hereto: (1) setting forth in reasonable
------------
detail all calculations necessary to show that the Borrowers are in
compliance with the requirements of Sections 0, 0, 0 and 0 hereof as
of the end of such month or year (or, if the Borrowers are not in
compliance, showing the extent of non-compliance and specifying the
period of non-compliance and what actions the Borrowers have taken,
are taking or propose to take with respect thereto); (2) certifying
that each of the Borrowers was, as of the end of the period, in
compliance and in good standing with applicable HUD, Xxxxxx Mae, or
Investor net worth requirements; (3) certifying that the
representation set forth in Section 0 hereof is true and correct as of
the date of such certificate or, if such representation is not true
and correct as of such date, specifying the nature of the problem and
what action the Borrowers have taken, are taking and propose to take
with request thereto, and (4) stating that the signers have reviewed
the terms of this Agreement and have made, or caused to be made under
their supervision, a review in reasonable detail of the transactions
and conditions of the Borrowers (and, if applicable, their
Subsidiaries) during the accounting period covered by such financial
statements and that such review has not disclosed the existence during
or at the end of such accounting period, and that the signers do not
have knowledge of the existence as of the date of the Officer's
Certificate, of any Default or Event of Default, or if any Default or
Event of Default existed or exists, specifying the nature and period
of the existence thereof and what action the Borrowers have taken, are
taking and propose to take with respect thereto.
6.2(d) As soon as available and in any event within 45 days after
the end of each calendar month, statements of income and changes in
stockholders' equity (other than income or loss) of the Parent (and,
if applicable, its Subsidiaries, on a consolidated basis) for the
immediately preceding quarter and for the period
58
from the beginning of the fiscal year to the end of such calendar
month, and the related balance sheet as at the end of the immediately
preceding month, all in reasonable detail and certified as to the
fairness of presentation by the chief financial officer of the
Guarantor or other financial officer appointed by its board of
directors, subject, however, to year-end audit adjustments and the
absence of footnotes.
6.2(e) Within 15 days of filing of any effective disclosure form
with the Securities and Exchange Commission for any Borrower or its
subsidiaries, either a copy of that form or the exact World Wide Web
address for the XXXXX edition of that form (example: the address for
NFI's 10-Q disclosure form for the quarter ended September 30, 1999 is
http:// xxx.xxx.xxx/ Archives/xxxxx/ data/ 1025953/ 0000950131-99-
------------------------------------------------------------------
006291.txt).
----------
6.2(f) As soon as available and in any event within 90 days after
the end of each fiscal year of the Borrowers, statements of income,
changes in stockholders' equity and cash flows of the Guarantor for
the most recent fiscal year, the related balance sheet as of the end
of such year (setting forth in comparative form the corresponding
figures for the preceding fiscal year), all in reasonable detail and
accompanied by an opinion in form and substance satisfactory to the
Lender of an accounting firm reasonably satisfactory to the Lender, or
other independent certified public accountants of recognized standing
selected by the Guarantor and acceptable to the Lender, as to said
financial statements.
6.2(g) As soon as available and in any event within 45 days after
the end of each calendar month, a consolidated report (the "Servicing
Portfolio Report") as of the end of the calendar month detailing, as
to all Mortgage Loans the servicing rights to which are owned by each
of the Borrowers (specified by investor type, recourse and non-
recourse) regardless of whether such Mortgage Loans are Pledged
Mortgages and which report shall indicate Mortgage Loans which (A) are
current and
59
in good standing, (B) are more than 30, 60 or 90 days past due,
respectively, (C) are, for Mortgage Loans serviced with recourse, more
than 360 days past due, (D) are the subject of pending bankruptcy or
foreclosure proceedings, or (E) have been converted (through
foreclosure or other proceedings in lieu thereof) by each of the
Borrowers into real estate owned by the Borrowers.
6.2(h) As soon as available and in any event within 45 days after
the end of each calendar month, a consolidated report (the "Loan
Production Report") as of the end of such month, presenting the total
dollar volume and the number of Mortgage Loans originated or purchased
during such month and the fiscal year to date, specified by property
type and loan type.
6.2(i) Copies of all regular or periodic financial and other
reports, if any, which the Borrowers shall file with the Securities
and Exchange Commission or any governmental agency successor thereto
within 15 days of filing, copies of any audits completed by Xxxxxx
Mae, Xxxxxx Xxx or Xxxxxxx Mac and copies of the Mortgage Bankers'
Financial Reporting Forms (Xxxxxxx Mac Form 1055/Xxxxxx Xxx Form 1002)
which the Borrowers are required to have filed, as the Lender may
reasonably request.
6.2(j) As soon as available and in any event within 45 days after
the end of each calendar month, a consolidated report (the
"Delinquency Report") as of the end of the immediately preceding month
summarizing, as to all Mortgage Loans the servicing rights to which
are owned by each of the Borrowers (specified by investor, type,
recourse and non-recourse) regardless of whether such Mortgage Loans
are Pledged Mortgages (but in greater detail for Pledged Mortgages),
which report shall indicate Loans which (1) are current and in good
standing, (2) are more than 30, 60 or 90 days past due, respectively,
(3) are more than 360 days past due, (4) are the subject of pending
bankruptcy or foreclosure proceedings, or (5) have been converted
(through foreclosure or other proceedings in lieu thereof) by the
60
Borrowers into real estate owned by the Borrowers. The Delinquency
Report must segregate the information relating to the Pledged Mortgage
Loans from other information.
6.2(k) As soon as available and in any event within 45 days after
the end of each calendar month, a report detailing all requests that
the Borrowers repurchase Mortgage Loans from an Investor or out of an
Eligible Mortgage Pool, the status of each such request, and any
indemnification or similar agreement entered into by the Borrowers in
connection with any such request.
6.2(l) As soon as available and in any event within 15 days after
the Investor distribution date of each security, reports detailing the
performance as well as the actual cash flows of each outstanding
residential mortgage securitization transaction for the Borrowers and
the Parent, and their Affiliates, partnerships and Subsidiaries. Such
reports must be sent directly to the Lender by the applicable servicer
and/or applicable trustee.
6.2(m) As soon as available and in any event within 15 days of
receipt by the Borrowers and the Guarantor, any and all reports,
notices and correspondence from regulatory agencies (except for
redundant, routine, advance reminders) pertaining to any Borrower's
compliance with applicable state and/or federal laws.
6.2(n) Reports in respect of the Pledged Mortgages and Pledged
Securities, in such detail and at such times as the Lender in its sole
discretion may request at any time or from time to time.
6.2(o) From time to time, with reasonable promptness, such
further information regarding the business, operations, properties or
financial condition of the Borrowers as the Lender may reasonably
request.
61
6.3 Maintenance of Existence; Conduct of Business. Preserve and
---------------------------------------------
maintain its corporate existence in good standing and all of its rights,
privileges, licenses and franchises necessary or desirable in the normal
conduct of its business, including, without limitation, its eligibility as
lender, seller/servicer and issuer described under Section 0 hereof;
conduct its business in an orderly and efficient manner; maintain a net
worth of acceptable assets as required for maintaining each of the
Borrowers' eligibility as lender, seller/servicer and issuer described
under Section 5.13 hereof; not engage in any business other than
residential mortgage banking; and not change its name, state of
incorporation or principal place of business, except to a location or
jurisdiction within the United States, and only after Notice to the Lender.
6.4 Compliance with Applicable Laws. Comply with the requirements of
-------------------------------
all applicable laws, rules, regulations and orders of any governmental
authority, a breach of which could materially adversely affect its
business, operations, assets, or financial condition, except where
contested in good faith and by appropriate proceedings.
6.5 Inspection of Properties and Books. Permit authorized
----------------------------------
representatives of the Lender or any Participant to discuss the business,
operations, assets and financial condition of each of the Borrowers and
their Subsidiaries with its officers and employees and to examine its books
of account and make copies or extracts thereof, all at such reasonable
times as the Lender or any Participant may request. The Borrowers will
provide their respective accountants with a copy of this Agreement promptly
after the execution hereof and will instruct its accountants to answer
candidly any and all questions that the officers of the Lender or any
Participant or any authorized representatives of the Lender or any
Participant may address to them in reference to the financial condition or
affairs of the Borrowers and their Subsidiaries. The Lender or Participant
shall give the Borrowers Notice of any meeting held in accordance with this
authorization and an opportunity to have their representatives in
attendance;
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provided, that the Lender shall not be liable for failure to give such
Notice if any officer or director of any Borrower had actual knowledge of
such meeting.
6.6 Notice. Give prompt Notice to the Lender of (a) any action, suit
------
or proceeding instituted by or against any of the Borrowers or any of their
Subsidiaries in any federal or state court or before any commission or
other regulatory body (federal, state or local, domestic or foreign) which
action, suit or proceeding has at issue in excess of $25,000, or any such
proceedings threatened against the Borrowers, the Parent or any of their
Subsidiaries in a writing containing the details thereof, (b) the filing,
recording or assessment of any federal, state or local tax Lien against the
Borrowers, or any of their assets or any of their Subsidiaries, (c) the
occurrence of any Event of Default hereunder or the occurrence of any
Default and continuation thereof for 5 days, (d) the suspension, revocation
or termination of the Borrowers' eligibility, in any respect, as approved
lender, seller/servicer or issuer as described under Section 0 hereof, (e)
the transfer, loss or termination of any Servicing Contract to which any of
the Borrowers are a party, or which is held for the benefit of the
Borrowers, and the reason for such transfer, loss or termination, if known
to the Borrowers, and (f) any other action, event or condition of any
nature which may lead to or result in a material adverse effect upon the
business, operations, assets, or financial condition of the Borrowers and
their Subsidiaries or which, with or without notice or lapse of time or
both, would constitute a default under any other agreement, instrument or
indenture to which the Borrowers or any of their Subsidiaries is a party or
to which the Borrowers or any of their Subsidiaries, their properties, or
assets may be subject.
6.7 Payment of Debt, Taxes, etc. Pay and perform all obligations and
---------------------------
indebtedness of the Borrowers, and cause to be paid and performed all
obligations and indebtedness of their Subsidiaries, promptly and in
accordance with the terms thereof and pay and discharge or cause to be paid
and discharged promptly all taxes, assessments and governmental charges or
levies imposed upon the Borrowers or their
63
Subsidiaries or upon their respective income, receipts or properties before
the same shall become past due, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a Lien
or charge upon such properties or any part thereof; provided, however, that
the Borrowers and their Subsidiaries shall not be required to pay taxes,
assessments or governmental charges or levies or claims for labor,
materials or supplies for which the Borrowers or their Subsidiaries shall
have obtained an adequate bond or adequate insurance or which are being
contested in good faith and by proper proceedings which are being
reasonably and diligently pursued and for which proper reserves have been
created.
6.8 Insurance. Maintain (a) errors and omissions insurance or mortgage
---------
impairment insurance and blanket bond coverage, with such companies and in
such amounts as satisfy prevailing requirements applicable to a lender,
seller/servicer and issuer described under Section 5.13 hereof, and (b)
liability insurance and fire and other hazard insurance on its properties,
with responsible insurance companies rated "A" or better by A.M. Best
Company, in such amounts and against such risks as is customarily carried
by similar businesses operating in the same vicinity; and (c) within 30
days after Notice from the Lender, obtain such additional insurance as the
Lender shall reasonably require, all at the sole expense of the Borrowers.
Copies of such policies shall be furnished to the Lender without charge
upon request of the Lender.
6.9 Closing Instructions. Indemnify and hold the Lender harmless from
--------------------
and against any loss, including reasonable attorneys' fees and costs,
attributable to the failure of a title insurance company, agent or approved
attorney to comply with the disbursement or instruction letter or letters
of the Borrowers relating to any Mortgage Loan. The Lender shall have the
right to pre-approve the closing instructions of the Borrowers to the title
insurance company, agent or attorney in any case where the Mortgage Loan to
be created at settlement is intended to be warehoused by the Borrowers to
be included as Collateral pursuant hereto.
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6.10 Subordination of Certain Indebtedness. For any indebtedness of
-------------------------------------
any of the Borrowers, that is incurred after the date of this Agreement, to
any shareholder, director or officer of any of the Borrowers, or to any
Affiliate of the Borrowers, of any Subsidiary of the Borrowers, or of the
Parent (other than indebtedness to the Borrowers, the Parent or one of
their consolidated Subsidiaries or indebtedness to First Union Corporation
or its consolidated Subsidiaries, so long as they do not become an
Affiliate of any Borrower or the Parent), and that has a term of more than
1 year or is in excess of $25,000, cause that indebtedness to be
subordinated to all Obligations by the execution of a Subordination of Debt
Agreement in the form of Exhibit F hereto and deliver to the Lender an
---------
executed copy of said Agreement, certified by the corporate secretary of
the respective Borrower to be true, complete and in full force and effect.
6.11 Other Loan Obligations. Perform all material obligations under
----------------------
the terms of each loan agreement, note, mortgage, security agreement or
debt instrument by which the Borrowers are bound or to which any of their
property is subject, and promptly notify the Lender in writing of a
declared default under or the termination, cancellation, reduction or
nonrenewal of any of its other lines of credit or agreements with any other
lender. Exhibit J hereto is a true and complete list of all such lines of
---------
credit or agreements as of the date hereof and the Borrowers hereby agree
to give the Lender at least 20 days Notice before entering into any
additional lines of credit or agreements.
6.12 Use of Proceeds of Advances. Use the proceeds of each Advance
---------------------------
solely for the purpose set forth in Section 2.1(b) for Advances of that
type.
65
6.13 Special Affirmative Covenants Concerning Collateral.
---------------------------------------------------
6.13(a) Warrant and defend the right, title and interest of the
Lender in and to the Collateral against the claims and demands of all
Persons whomsoever.
6.13(b) Service or cause to be serviced all Mortgage Loans in
accordance with the standard requirements of the issuers of Purchase
Commitments covering the same and all applicable FHA and VA
requirements, including without limitation taking all actions
necessary to enforce the obligations of the obligors under such
Mortgage Loans. The Borrowers shall service or cause to be serviced
all Mortgage Loans backing Pledged Securities in accordance with
applicable governmental requirements and requirements of issuers of
Purchase Commitments covering the same. The Borrowers shall hold all
escrow funds collected in respect of Pledged Mortgages and Mortgage
Loans backing Pledged Securities in trust, without commingling the
same with non-custodial funds, and apply the same for the purposes for
which such funds were collected.
6.13(c) Execute and deliver to the Lender such Uniform Commercial
Code financing statements with respect to the Collateral as the Lender
may request. The Borrowers shall also execute and deliver to the
Lender such further instruments of sale, pledge or assignment or
transfer, and such powers of attorney, as required by the Lender, and
shall do and perform all matters and things necessary or desirable to
be done or observed, for the purpose of effectively creating,
maintaining and preserving the security and benefits intended to be
afforded the Lender under this Agreement. The Lender shall have all
the rights and remedies of a secured party under the Uniform
Commercial Code of Minnesota, or any other applicable law, in addition
to all rights provided for herein.
6.13(d) Notify the Lender within 2 Business Days of any default
under, or of the termination of, any
66
Purchase Commitment relating to any Pledged Mortgage, Eligible
Mortgage Pool or Pledged Security.
6.13(e) Promptly comply in all respects with the terms and
conditions of all Purchase Commitments, and all extensions, renewals
and modifications or substitutions thereof or thereto. The Borrowers
will cause to be delivered to the Investor the Pledged Mortgages and
Pledged Securities to be sold under each Purchase Commitment not later
than 3 Business Days prior to the mandatory delivery date thereof.
6.13(f) Maintain, at its principal office or in a regional office
approved by the Lender, or in the office of a computer service bureau
engaged by the Borrowers and approved by the Lender, and, upon
request, make available to the Lender the originals, or copies in any
case where the originals have been delivered to the Lender or to an
Investor, of its Mortgage Notes and Mortgages included in Pledged
Mortgages, Mortgage-backed Securities delivered to the Lender as
Pledged Securities, Purchase Commitments, and all related Mortgage
Loan documents and instruments, and all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records and other information and data relating to the
Collateral.
6.14 Xxxxxx Xxx Tri-Party Agreement. Prior to the origination by the
------------------------------
Borrowers of any Mortgage Loans for sale to Xxxxxx Mae, enter into an
agreement among any of the Borrowers, the Lender and Xxxxxx Xxx, pursuant
to which Xxxxxx Mae agrees to send all cash proceeds of Mortgage Loans sold
by the Borrowers to Xxxxxx Xxx to the Cash Collateral Account.
7. NEGATIVE COVENANTS.
The Borrowers hereby covenant and agree that, so long as the
Commitment is outstanding or there remain any Obligations to be paid or
performed, the Borrowers shall not, either directly or indirectly, without
the prior written consent of the Lender:
67
7.1 Contingent Liabilities. Assume, guarantee, endorse, or otherwise
----------------------
become contingently liable for the obligation of any Person, except for
guaranties related to the sale or financing of Mortgage Loans or existing
on the Closing Date and disclosed to the Lender by that Closing Date by
endorsement of negotiable instruments for deposit or collection in the
ordinary course of business.
7.2 Sale or Pledge of Servicing Contracts. Sell, pledge or grant a
-------------------------------------
security interest in any existing or future Servicing Contracts of the
Borrowers other than to the Lender, except as otherwise expressly permitted
in this Agreement, or omit to take any reasonable action required to keep
substantially all of such Servicing Contracts in full force and effect;
provided, however, that if no Default or Event of Default has occurred and
is continuing, servicing on Mortgage Loans that are not Pledged Mortgages
may be sold or pledged as collateral, subject to the other terms and
conditions of this Agreement.
7.3 Merger; Sale of Assets; Acquisitions. Liquidate, dissolve,
------------------------------------
consolidate or merge, reorganize or sell any substantial part of their
assets, or acquire any substantial part of the assets (other than Mortgage
Loans and Mortgage-backed Securities) of another.
7.4 Deferral of Subordinated Debt. Pay in advance of the stated
-----------------------------
maturity thereof any Subordinated Debt of the Borrowers or, if a Default or
Event of Default hereunder shall have occurred, make any payment of any
kind thereafter on such Subordinated Debt until all Obligations have been
paid and performed in full and any applicable preference period has
expired.
7.5 Loss of Eligibility. Take any action that would cause the
-------------------
Borrowers to lose all or any part of their status as an eligible lender,
seller/servicer and issuer as described under Section 0 hereof.
68
7.6 Required Equity Ratio. Permit the ratio at any date of
---------------------
Shareholder Equity to Required Equity to be less than 1.0 to 1.0.
7.7 Minimum Adjusted Tangible Net Worth. Permit Adjusted Tangible Net
-----------------------------------
Worth as of the last day of any month to be less than the sum of (i)
$75,000,000, plus (ii) eighty percent (80%) of the purchase price for all
capital stock issued by NFI and all contributions (by Persons other than
NFI, its consolidated Subsidiaries or its unconsolidated Affiliates) to
equity capital of NFI, its consolidated Subsidiaries or its unconsolidated
Affiliates after February 11, 1999.
7.8 Quarterly Losses and Negative Cash. So long as any Advances are
----------------------------------
outstanding, permit NFI, the Parent and their Subsidiaries, when calculated
on a consolidated basis, to have total losses or negative cash net income
(GAAP net income adjusted for noncash revenue and expenses) in 2
consecutive Calendar Quarters, beginning with the Calendar Quarter of
January through March, 2000.
7.9 Transactions with Affiliates. Directly or indirectly (a) make any
----------------------------
loan, advance, extension of credit or capital contribution to any Affiliate
that is not a Borrower, the Parent, or one of their consolidated
Subsidiaries, (b) transfer, sell, pledge, assign or otherwise dispose of
any of its assets to or on behalf of any such Affiliate, (c) merge or
consolidate with or purchase or acquire assets from any such Affiliate, or
(d) pay management fees to or on behalf of any such Affiliate.
7.10 Acquisition of Recourse Servicing Contracts. Acquire Servicing
-------------------------------------------
Contracts under which the Borrowers are obligated to repurchase or
indemnify the holder of the Mortgage Loans as a result of defaults on the
Mortgage Loans at any time during the term of such Mortgage Loans.
69
7.11 Gestation Facilities. Directly or indirectly sell or finance
--------------------
Pledged Mortgages under any Gestation Agreements.
7.12 Special Negative Covenants Concerning Collateral
------------------------------------------------
7.12(a) Amend, modify, or waive any of the terms and conditions
of, or settle or compromise any claim in respect of, any Pledged
Mortgages or Pledged Securities.
7.12(b) Assign, transfer or otherwise dispose of, or grant any
option with respect to, or pledge or otherwise encumber (except
pursuant to this Agreement or as permitted herein) any of the
Collateral or any interest therein.
7.12(c) Make any compromise, adjustment or settlement in respect
of any of the Collateral or accept other than cash in payment or
liquidation of the Collateral.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the following
-----------------
conditions or events shall be an event of default ("Event of Default"):
8.1(a) Failure to pay the principal of any Advance when due,
whether at stated maturity, by acceleration, or otherwise; or failure
to pay any installment of interest on any Advance or any other amount
due under this Agreement within 10 days after the due date; or failure
to pay, within any applicable grace period, any other Obligations of
the Borrowers due the Lender; or
8.1(b) Failure of the Borrowers, the Guarantor or any of their
Subsidiaries to pay, or any default in the payment of any principal or
interest on, any other indebtedness or in the payment of any
contingent obligation within any period of grace provided; breach or
default with respect to any other material term of
70
any other indebtedness or of any loan agreement, mortgage, indenture
or other agreement relating thereto, if the effect of such breach or
default is to cause, or to permit the holder or holders thereof (or a
trustee on behalf of such holder or holders) to cause, indebtedness of
the Borrowers, the Guarantor or their Subsidiaries in the aggregate
amount of $500,000 or more to become or be declared due prior to its
stated maturity (upon the giving or receiving of notice, lapse of
time, both, or otherwise); or
8.1(c) Failure of the Borrowers to perform or comply with any
term or condition applicable to it contained in Sections 0, 0, 0 and
6.14 or in any Section of Article 7 of this Agreement; or
8.1(d) Any of the Borrowers' representations or warranties made
or deemed made herein or in any other Loan Document (other than the
representations and warranties set forth in Section 5.15 hereof), or
in any statement or certificate at any time given by the Borrowers in
writing pursuant hereto or thereto shall be inaccurate or incomplete
in any material respect on the date as of which made or deemed made;
or
8.1(e) The Borrowers shall default in the performance of or
compliance with any term contained in this Agreement or any other Loan
Document other than those referred to above in Subsections 0, 0 or 0
and such default shall not have been remedied or waived within 30 days
after the earliest of (i) receipt by the Borrowers of Notice from the
Lender of such default, (ii) receipt by the Lender of Notice from the
Borrowers of such default, or (iii) the date the Borrowers should have
notified the Lender of such default pursuant to Section 0(c); or
8.1(f) (1) A court having jurisdiction shall enter a decree or
order for relief in respect of the Borrowers, any Subsidiary of the
Borrowers or the Guarantor in an involuntary case under any applicable
bankruptcy, insolvency or other similar law in respect of the
Borrowers, any Subsidiary of the Borrowers or the
71
Guarantor now or hereafter in effect, which decree or order is not
stayed; the Borrowers, any Subsidiary of the Borrowers or the
Guarantor shall consent to the entry of any such decree or order; or a
filing of a voluntary case under any applicable bankruptcy, insolvency
or other similar law in respect of the Borrowers, any Subsidiary of
the Borrowers or the Guarantor has occurred; or any other similar
relief shall be granted under any applicable federal or state law; or
(2) the filing of an involuntary case in respect of the Borrowers, any
Subsidiary of the Borrowers or the Guarantor under any applicable
bankruptcy, insolvency or other similar law; or a decree or order of a
court having jurisdiction for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having
similar powers over the Borrowers, any Subsidiary of the Borrowers or
of the Guarantor, or over all or a substantial part of their
respective property, shall have been entered; or the involuntary
appointment of an interim or permanent receiver, trustee or other
custodian of the Borrowers, any Subsidiary of the Borrowers or the
Guarantor for all or a substantial part of their respective property;
or the issuance of a warrant of attachment, execution or similar
process against any substantial part of the property of the Borrowers,
any Subsidiary of the Borrowers or the Guarantor, and the continuance
of any such events in Subsection (2) above for 60 days unless
dismissed, bonded off or discharged; or
8.1(g) The Borrowers, any Subsidiary of the Borrowers or the
Guarantor shall consent to the appointment of or taking possession by
a receiver, trustee or other custodian for all or a substantial part
of its property; the making by the Borrowers, any Subsidiary of the
Borrowers or the Guarantor of any assignment for the benefit of
creditors; or the inability or failure of the Borrowers, any
Subsidiary of the Borrowers or the Guarantor, or the admission by the
Borrowers, any Subsidiary of the Borrowers or the Guarantor in writing
of its inability, to pay its debts as such debts become due; or
72
8.1(h) Failure of the Borrowers to perform any contractual
obligations which it may have to repurchase Mortgage Loans, if such
obligations in the aggregate exceed $1,000,000; or
8.1(i) Any money judgment, writ or warrant of attachment, or
similar process involving in any case an amount in excess of $100,000
shall be entered or filed against the Borrowers or any of their
Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of 30 days
or in any event later than 5 days prior to the date of any proposed
sale thereunder; or
8.1(j) Any order, judgment or decree shall be entered against the
Borrowers decreeing the dissolution or split up of the Borrowers and
such order shall remain undischarged or unstayed for a period in
excess of 20 days; or
8.1(k) Any Plan maintained by the Borrowers or any of their
Subsidiaries shall be terminated within the meaning of Title IV of
ERISA or a trustee shall be appointed by an appropriate United States
District Court to administer any Plan, or the Pension Benefit Guaranty
Corporation (or any successor thereto) shall institute proceedings to
terminate any Plan or to appoint a trustee to administer any Plan if
as of the date thereof the Borrowers' liability or any such
Subsidiary's liability (after giving effect to the tax consequences
thereof) to the Pension Benefit Guaranty Corporation (or any successor
thereto) for unfunded guaranteed vested benefits under the Plan
exceeds the then current value of assets accumulated in such Plan by
more than $100,000 (or in the case of a termination involving the
Borrowers or any of their Subsidiaries as a "substantial employer" (as
defined in Section 4001(a)(2) of ERISA) the withdrawing employer's
proportionate share of such excess shall exceed such amount); or
8.1(l) The Borrowers or any of their Subsidiaries as employer
under a Multiemployer Plan shall have made a complete or partial
withdrawal from
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such Multiemployer Plan and the plan sponsor of such Multiemployer Plan
shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability in an annual amount exceeding $100,000; or
8.1(m) The Borrowers or the Guarantor shall purport to disavow its
obligations hereunder or under the Guaranty, as the case may be, or shall
contest the validity or enforceability hereof or of the Guaranty; or the
Lender's security interest on any portion of the Collateral shall become
unenforceable or otherwise impaired; provided that, subject to the Lender's
approval, no Event of Default shall occur as a result of such impairment if
all Advances made against any such Collateral shall be paid in full within
10 days of the date of such impairment; or
8.1(n) (a) The Parent shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Parent or of or relating to all or substantially all of its
property, or (b) a decree or order of a court or agency or supervisory
authority having jurisdiction over the Parent for the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings, or the
winding up or liquidation of its affairs, shall have been entered against
the Parent, or (c) the Parent shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make any assignment
for the benefit of its creditors or voluntarily suspend payment of its
obligations; or
8.1(o) Any change in the control of NFI, any material change in
ownership of NCI and NMI as wholly-owned Subsidiaries of the Parent and any
change in ownership of the Parent with respect to the current ownership by
W. Xxxxx Xxxxxxxx, Xxxxx X. Xxxxxxx and
74
NFI, without the Lender's prior consent, which it may withhold for any
reason or for no reason; or
8.1(p) Xxxxx X. Xxxxxxx shall cease to be the Chairman of the Board
of Directors and CEO of NFI, and W. Xxxxx Xxxxxxxx shall cease to be the
President and COO of NFI; or
8.1(q) Any Lien for any taxes, assessments or other governmental
charges (i) is filed against the Borrowers or any of their property, or is
otherwise enforced against the Borrowers or any of their property, or (ii)
obtains priority that is equal or greater than the priority of the Lender's
security interest in any of the Collateral; or
8.1(r) A material adverse change occurs in the business condition
(financial or otherwise), operations, properties or prospects of the
Borrowers and Guarantor, as a whole, or in the ability of the Borrowers to
repay the Obligations.
8.2 Remedies
--------
8.2(a) Upon the occurrence of any Event of Default described in
Sections 0 or 0, the Commitment shall be terminated and the unpaid
principal amount of and accrued interest on the Note and all other
Obligations shall automatically become due and payable, without
presentment, demand or other requirements of any kind, all of which are
hereby expressly waived by the Borrowers.
8.2(b) Upon the occurrence of any Event of Default, other than those
described in Sections 0 and 0, the Lender may, by Notice to the Borrowers,
terminate the Commitment and/or declare all Obligations to be immediately
due and payable, whereupon the same shall forthwith become due and payable,
together with all accrued interest thereon, and the obligation of the
Lender to make any Advances shall thereupon terminate.
75
8.2(c) Upon the occurrence of any Event of Default, the Lender may
also do any of the following:
(1) Foreclose upon or otherwise enforce its security interest
in and Lien on the Collateral to secure all payments and performance
of the Obligations in any manner permitted by law or provided for
hereunder.
(2) Notify all obligors in respect of Collateral that the
Collateral has been assigned to the Lender and that all payments
thereon are to be made directly to the Lender or such other party as
may be designated by the Lender; settle, compromise, or release, in
whole or in part, any amounts owing on the Collateral, any such
obligor or any Investor or any portion of the Collateral, on terms
acceptable to the Lender; enforce payment and prosecute any action or
proceeding with respect to any and all Collateral; and where any such
Collateral is in default, foreclose on and enforce security interests
in such Collateral by any available judicial procedure or without
judicial process and sell property acquired as a result of any such
foreclosure.
(3) Act, or contract with a third party to act, as servicer or
subservicer of each item of Collateral requiring servicing and
perform all obligations required in connection with Servicing
Contracts and Purchase Commitments related to the Collateral, such
third party's fees to be paid by the Borrowers.
(4) Require the Borrowers to assemble the Collateral and/or
books and records relating thereto and make such available to the
Lender at a place to be designated by the Lender.
(5) Enter onto property where any Collateral or books and
records relating thereto are located and take possession thereof with
or without judicial process; and obtain access to the
76
Borrowers' data processing equipment, computer hardware and software
relating to the Collateral and to use all of the foregoing and the
information contained therein in any manner the Lender deems necessary for
the purpose of effectuating its rights under this Agreement and any other
Loan Document.
(6) Prior to the disposition of the Collateral, prepare it for
disposition in any manner and to the extent the Lender deems appropriate.
(7) Exercise all rights and remedies of a secured creditor under the
Uniform Commercial Code of Minnesota or other applicable law, including,
but not limited to, selling or otherwise disposing of the Collateral, or
any part thereof, at one or more public or private sales, whether or not
such Collateral is present at the place of sale, for cash or credit or
future delivery, on such terms and in such manner as the Lender may
determine, including, without limitation, sale pursuant to any applicable
Purchase Commitment. If notice is required under such applicable law, the
Lender will give the Borrowers not less than 10 days' notice of any such
public sale or of the date after which any private sale may be held. The
Borrowers agree that 10 days' notice shall be reasonable notice. The Lender
may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral
so sold may be retained by the Lender until the selling price is paid by
the purchaser thereof, but the Lender shall not incur any liability in case
of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold
upon like notice. The
77
Lender may, however, instead of exercising the power of sale herein
conferred upon it, proceed by a suit or suits at law or in equity to
collect all amounts due upon the Collateral or to foreclose the
pledge of and sell the Collateral or any portion thereof under a
judgment or decree of a court or courts of competent jurisdiction,
or both.
(8) Proceed against the Borrowers on the Note or against the
Guarantor under the Guaranty or both.
8.2(d) The Lender shall incur no liability as a result of the sale
or other disposition of the Collateral, or any part thereof, at any public
or private sale or disposition. The Borrowers hereby waive (to the extent
permitted by law) any claims they may have against the Lender arising by
reason of the fact that the price at which the Collateral may have been
sold at such private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
outstanding Advances and the unpaid interest accrued thereon, even if the
Lender accepts the first offer received and does not offer the Collateral
to more than one offeree. Any sale of Collateral pursuant to the terms of a
Purchase Commitment, or any other disposition of Collateral arranged by the
Borrowers, whether before or after the occurrence of an Event of Default,
shall be deemed to have been made in a commercially reasonable manner.
8.2(e) The Borrowers acknowledge that Mortgage Loans and Mortgage-
backed Securities are collateral of a type which is customarily sold on a
recognized market. The Borrowers waive any right it may have to prior
notice of the sale of any Pledged Mortgage or Pledged Security, and agrees
that the Lender may purchase any Pledged Mortgages or Pledged Securities at
a private sale of such Collateral.
8.2(f) The Borrowers specifically waive and release (to the extent
permitted by law) any equity or right of redemption, all rights of
redemption, stay or
78
appraisal which the Borrowers have or may have under any rule of law or
statute now existing or hereafter adopted, and any right to require the
Lender to (1) proceed against any Person, (2) proceed against or exhaust
any of the Collateral or pursue its rights and remedies as against the
Collateral in any particular order, or (3) pursue any other remedy in its
power. The Lender shall not be required to take any steps necessary to
preserve any rights of the Borrowers against holders of mortgages prior in
lien to the Lien of any Mortgage included in the Collateral or to preserve
rights against prior parties.
8.2(g) The Lender may, but shall not be obligated to, advance any
sums or do any act or thing necessary to uphold and enforce the Lien and
priority of, or the security intended to be afforded by, any Mortgage
included in the Collateral, including, without limitation, payment of
delinquent taxes or assessments and insurance premiums. All advances,
charges, costs and expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Lender in exercising any right,
power or remedy conferred by this Agreement, or in the enforcement hereof,
together with interest thereon, at the Default Rate, from the time of
payment until repaid, shall become a part of the principal balance
outstanding hereunder and under the Note.
8.2(h) No failure on the part of the Lender to exercise, and no delay
in exercising, any right, power or remedy provided hereunder, at law or in
equity shall operate as a waiver thereof; nor shall any single or partial
exercise by the Lender of any right, power or remedy provided hereunder, at
law or in equity preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. Without intending to limit
the foregoing, all defenses based on the statute of limitations are hereby
waived by the Borrowers to the extent permitted by law. The remedies herein
provided are cumulative and are not exclusive of any remedies provided at
law or in equity.
79
8.2(i) The Lender is hereby granted a license or other right to
use, without charge, the Borrowers' computer programs, other
programs, labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in advertising for sale and selling any Collateral, and
the Borrowers' rights under all licenses and all other agreements
related to the foregoing shall inure to the Lender's benefit until
the Obligations are paid in full.
8.3 Application of Proceeds. The proceeds of any sale, disposition or
-----------------------
other enforcement of the Lender's security interest in all or any part of
the Collateral shall be applied by the Lender to the Obligations in such
order as the Lender, in its sole and absolute discretion, will determine.
If the proceeds of any sale, disposition or other enforcement are
insufficient to cover the costs and expenses of the sale, and the payment
in full of all Obligations, the Borrowers will remain liable for any
deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby appointed
---------------------------------
the attorney-in-fact of the Borrowers, with
(END OF PAGE INTENTIONALLY LEFT BLANK)
80
full power of substitution, for the purpose of carrying out the
provisions hereof and taking any action and executing any instruments
which the Lender may deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is irrevocable
and coupled with an interest. Without limiting the generality of the
foregoing, the Lender shall have the right and power to give notices of
its security interest in the Collateral to any Person, either in the
name of the Borrowers or in its own name, to endorse all Pledged
Mortgages or Pledged Securities payable to the order of the Borrowers,
to change or cause to be changed the book-entry registration or name of
subscriber or Investor on any Pledged Security, or to receive, endorse
and collect all checks made payable to the order of the Borrowers
representing any payment on account of the principal of or interest on,
or the proceeds of sale of, any of the Pledged Mortgages or Pledged
Securities and to give full discharge for the same.
8.5 Right of Set-Off. If the Borrowers shall default in the
----------------
payment of the Note, any interest accrued thereon, or any other sums
which may become payable hereunder when due, or in the performance of
any of its other obligations or liabilities under this Agreement, the
Lender shall have the right, at any time and from time to time, without
notice, to set-off and to appropriate or apply any and all property or
indebtedness of any kind at any time held or owing by the Lender to or
for the credit or the account of the Borrowers against and on account
of the Obligations of the Borrowers under the Note and this Agreement,
irrespective of whether or not the Lender shall have made any demand
hereunder and whether or not said Obligations shall have matured.
9. NOTICES.
All notices, demands, consents, requests, disclosures and other
communications required or permitted to be given or made hereunder
(collectively, "Notices") shall, except as otherwise expressly provided
hereunder, be in writing and shall be delivered in person or telecopied or
mailed, first class or delivered by overnight courier, return receipt
requested, postage prepaid, addressed to the respective
81
parties hereto at their respective addresses hereinafter set forth or, as
to any such party, at such other address as may be designated by it in a
Notice to the other. All Notices shall be conclusively deemed to have been
properly given or made when duly delivered, in person, by telecopy or by
overnight courier, or if mailed, on the date of receipt as noted on the
return receipt, addressed as follows:
if to one or more NovaStar Financial, Inc.
of the Borrowers, NovaStar Mortgage, Inc.
a single copy sent NovaStar Capital, Inc.
to: 0000 Xxxx 00xx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
if to the Lender: Residential Funding Corporation
000 Xxxxxxxx Xxxx. Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxx, Director
Telecopier No.: (000) 000-0000
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Borrowers shall: (a) pay a documentation production fee of Ten Thousand
Dollars ($10,000) in connection with the preparation and negotiation of this
Agreement; (b) pay such additional documentation production fees as the Lender
may require and all out-of-pocket costs and expenses of the Lender, including,
without limitation, reasonable fees, service charges and disbursements of
counsel (including allocated costs of internal counsel), in connection with the
amendment, enforcement and administration of this Agreement, the Note, and other
Loan Documents and the making and repayment of the Advances and the payment of
interest thereon; (c) indemnify, pay, and hold harmless the Lender and any
holder of the Note from and against, any and all present and future stamp,
documentary and other similar taxes with respect to the foregoing matters and
save the Lender and the holder or holders of the Note harmless from and against
any and all liabilities with respect to or resulting from any delay or omission
to pay such taxes; and (d) indemnify, pay and hold harmless the Lender and any
of its officers, directors, employees
82
or agents and any subsequent holder of the Note (collectively called the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including without limitation, the reasonable fees and
disbursements of counsel of the Indemnitees (including allocated costs of
internal counsel) in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto) which may be imposed upon, incurred by or asserted against such
Indemnitees in any manner relating to or arising out of this Agreement, the
Note, or any other Loan Document or any of the transactions contemplated hereby
or thereby (the "Indemnified Liabilities"); provided, however, that the
Borrowers shall have no obligation hereunder to the extent that the Indemnified
Liabilities arise from the gross negligence or willful misconduct of any such
Indemnitees. To the extent that the undertaking to indemnify, pay and hold
harmless as set forth in the preceding sentence may be unenforceable because it
is violative of any law or public policy, the Borrowers shall contribute the
maximum portion which they are permitted to pay and satisfy under applicable
law, to the payment and satisfaction of all Indemnified Liabilities incurred by
the Indemnitees or any of them. The agreement of the Borrowers contained in this
Subsection (d) shall survive the expiration or termination of this Agreement and
the payment in full of the Note. Attorneys' fees and disbursements incurred in
enforcing, or on appeal from, a judgment pursuant hereto shall be recoverable
separately from and in addition to any other amount included in such judgment,
and this clause is intended to be severable from the other provisions of this
Agreement and to survive and not be merged into such judgment.
11. FINANCIAL INFORMATION.
All financial statements and reports furnished to the Lender hereunder
shall be prepared in accordance with GAAP, applied on a basis consistent
with that applied in preparing the financial statements as at the end of
and for the last fiscal year ended (except to the extent otherwise required
to conform to good accounting practice).
12. MISCELLANEOUS.
83
12.1 Terms Binding Upon Successors; Survival of Representations.
----------------------------------------------------------
The terms and provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. All representations, warranties, covenants and agreements herein
contained on the part of the Borrowers shall survive the making of any
Advance and the execution of the Note, and shall be effective so long as
the Commitment is outstanding or there remain any Obligations to be paid or
performed.
12.2 Assignment. This Agreement cannot be assigned by the Borrowers.
----------
This Agreement and the Note, along with the Lender's security interest in
any or all of the Collateral, may, at any time, be transferred or assigned,
in whole or in part, by the Lender, and any assignee thereof may enforce
this Agreement, the Note and its security interest in the Collateral so
assigned.
12.3 Amendments. Except as otherwise provided in this Agreement,
----------
this Agreement may not be amended, modified or supplemented unless such
amendment, modification or supplement is set forth in a writing signed by
the parties hereto.
12.4 Governing Law. This Agreement and the other Loan Documents
-------------
shall be governed by the laws of the State of Minnesota, without reference
to its principles of conflicts of laws.
12.5 Participations. The Lender may at any time sell, assign or
--------------
grant participations in, or otherwise transfer to any other Person (a
"Participant"), all or part of the Obligations. Without limitation of the
exclusive right of the Lender to collect and enforce such Obligations, the
Borrowers agree that each disposition will give rise to a debtor-creditor
relationship of the Borrowers to the Participant, and the Borrowers
authorize each Participant, upon the occurrence of an Event of Default, to
proceed directly by right of setoff, banker's lien, or otherwise, against
any assets of the Borrowers which may be in the hands of such Participant.
The Borrowers authorize
84
the Lender to disclose to any prospective Participant and any Participant
any and all information in the Lender's possession concerning the
Borrowers, this Agreement and the Collateral.
12.6 Relationship of the Parties. This Agreement provides for the
---------------------------
making of Advances by the Lender, in its capacity as a lender, to the
Borrowers, in their capacity as borrowers, and for the payment of interest,
repayment of principal by the Borrowers to the Lender, and for the payment
of certain fees by the Borrowers to the Lender. The relationship between
the Lender and the Borrowers is limited to that of creditor/secured party,
on the one hand, and debtors, on the other hand. The provisions herein for
compliance with financial covenants and delivery of financial statements
are intended solely for the benefit of the Lender to protect its interests
as lender in assuring payments of interest and repayment of principal and
payment of certain fees, and nothing contained in this Agreement shall be
construed as permitting or obligating the Lender to act as a financial or
business advisor or consultant to the Borrowers, as permitting or
obligating the Lender to control the Borrowers or to conduct the Borrowers'
operations, as creating any fiduciary obligation on the part of the Lender
to the Borrowers, or as creating any joint venture, agency, or other
relationship between the parties hereto other than as explicitly and
specifically stated in this Agreement. The Borrowers acknowledge that they
have had the opportunity to obtain the advice of experienced counsel of its
own choosing in connection with the negotiation and execution of this
Agreement and to obtain the advice of such counsel with respect to all
matters contained herein. The Borrowers further acknowledge that they are
experienced with respect to financial and credit matters and have made
their own independent decisions to apply to the Lender for credit and to
execute and deliver this Agreement.
12.7 Severability. If any provision of this Agreement shall be
------------
declared to be illegal or unenforceable in any respect, such illegal or
unenforceable provision shall be and become absolutely null and void and of
no force and effect as though such provision were not in fact set forth
herein, but all other covenants,
85
terms, conditions and provisions hereof shall nevertheless continue to be
valid and enforceable.
12.8 Operational Reviews. From time to time upon request, the
-------------------
Borrowers shall permit the Lender or its representative access to its
premises and records, for the purpose of conducting a review of the
Borrowers' general mortgage business methods, policies, and procedures,
auditing loan files and reviewing financial and operational aspects of the
Borrowers' business.
12.9 Consent to Jurisdiction. The Borrowers hereby agree that any
-----------------------
action or proceeding under the Loan Documents, the Note or any document
delivered pursuant hereto may be commenced against it in any court of
competent jurisdiction within the State of Minnesota, by service of process
upon the Borrowers by first class registered or certified mail, return
receipt requested, addressed to the Borrowers at their address last known
to the Lender. The Borrowers agree that any such suit, action or proceeding
arising out of or relating to this Agreement or any other such document may
be instituted in the Hennepin County State District Court or in the United
States District Court for the District of Minnesota at the option of the
Lender; and the Borrowers hereby waive any objection to the jurisdiction or
venue of any such court with respect to, or the convenience of any court as
a forum for, any such suit, action or proceeding. Nothing herein shall
affect the right of the Lender to accomplish service of process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Borrowers in any other jurisdiction or court.
12.10 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute but one and the same instrument.
12.11 Entire Agreement. This Agreement, the Note and the other
----------------
Loan Documents represent the final agreement among the parties hereto and
thereto with respect to the subject matter hereof and thereof, and may not
be contradicted by evidence of prior or contemporaneous oral
86
agreements among such parties. There are no oral agreements among the
parties with respect to the subject matter hereof and thereof.
12.12 WAIVER OF JURY TRIAL. THE BORROWERS AND THE LENDER EACH HEREBY
--------------------
(a) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE
OF RIGHT BY A JURY, AND (b) FULLY WAIVES ANY RIGHT TO TRIAL BY JURY TO THE
EXTENT THAT ANY SUCH RIGHT NOW EXISTS OR HEREAFTER ARISES. THE LENDER AND
THE BORROWERS EACH GIVES THIS WAIVER OF RIGHT TO JURY TRIAL KNOWINGLY AND
VOLUNTARILY. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN,
KNOWINGLY AND VOLUNTARILY, BY THE BORROWERS AND THE LENDER, AND THIS WAIVER
IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE FOR
WHICH THE RIGHT OF A JURY TRIAL WOULD OTHERWISE ACCRUE. THE LENDER AND THE
BORROWERS ARE EACH HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT
TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES
HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF THE RIGHT
TO JURY TRIAL. FURTHER, THE BORROWERS AND THE LENDER EACH HEREBY CERTIFIES
THAT NO REPRESENTATIVE OR AGENT OF THE OTHER PARTY, INCLUDING THE OTHER
PARTY'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO ANY OF ITS
REPRESENTATIVES OR AGENTS THAT THE OTHER PARTY WILL NOT SEEK TO ENFORCE
THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
NOVASTAR FINANCIAL, INC.,
a Maryland corporation
By:________________________________
Its:_______________________________
NOVASTAR MORTGAGE, INC.,
a Virginia corporation
By:________________________________
87
Its:________________________________
NOVASTAR CAPITAL, INC.,
a Delaware corporation
By:_________________________________
Its:________________________________
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By:_________________________________
Its: Director
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On ______________________, 1999, before me, a Notary Public, personally
appeared __________________________________, the of NOVASTAR FINANCIAL, INC., a
Maryland corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
88
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On _______________________, 1999, before me, a Notary Public, personally
appeared ____________________________, the of NOVASTAR MORTGAGE, INC., a
Virginia corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On ______________________, 1999, before me, a Notary Public, personally
appeared _____________________________, the of NOVASTAR CAPITAL, INC., a
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
89
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On ________________________, 1999, before me, a Notary Public,
personally appeared _____________________________, the Director of RESIDENTIAL
FUNDING CORPORATION, a Delaware corporation, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
90
EXHIBIT I-SF
OFFICER'S CERTIFICATE
Reference is made to that certain Warehousing Credit and Security
Agreement (Single Family Mortgage Loans) between NOVASTAR FINANCIAL, INC., a
Maryland corporation ("NFI"), NOVASTAR MORTGAGE, INC., a Virginia corporation
("NMI"), and NOVASTAR CAPITAL, INC., a Delaware corporation ("NCI") (NFI, NMI
and NCI are hereinafter collectively referred to as the "Borrowers") and
RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the "Lender"), dated as
of December 29, 1999 (as the same may be amended, modified, supplemented,
renewed or restated from time to time, the "Agreement"). All capitalized terms
used herein and all Section numbers given herein refer to those terms and
Sections set forth in the Agreement. This Officer's Certificate is submitted to
the Lender pursuant to Section 0 of the Agreement.
The undersigned hereby certifies to the Lender that as of the close of
business on ____________________, 19______ ("Statement Date",) and with respect
to the Borrowers and their Subsidiaries on a consolidated basis:
1. I am the chief financial officer of each Borrower, and my current
title at each of Borrowers is.
-----------------------------------------------------------------------
2. As illustrated in the attached calculations supporting this Officer's
Certificate, the Borrowers met the covenants set forth in Sections 0,
0, 0 and 0, or if the Borrowers did not meet any of such covenants, a
detailed explanation is attached setting forth the nature and period of
the existence of the Default and the action the Borrowers have taken,
are taking, and propose to take with respect thereto.
3. No Servicing Contracts have been sold or pledged by the Borrowers
except as permitted under the terms of the Agreement.
4. No recourse Servicing Contracts have been acquired by the Borrowers.
5. No payments in advance of the scheduled maturity date have been made
with respect to any Subordinated Debt. The
Borrowers have incurred no Debt required to be subordinated pursuant to
Section 0.
6. The Borrowers were in compliance with the applicable HUD, Xxxxxx Xxx or
Investor net worth requirements, and in good standing with VA, HUD,
Xxxxxx Mae and each Investor.
7. The representation set forth in Section 0 of the Agreement is true and
correct as of the date of this Officer's Certificate, or, if such
representation is not true and correct as of such date, the nature of
the problem and the action the Borrowers have taken, are taking and
propose to take with respect thereto are specified in the statement
attached hereto.
8. I have reviewed the terms of the Agreement and have made, or caused to
be made under my supervision, a review in reasonable detail of the
transactions and conditions of the Borrowers (and, if applicable, their
Subsidiaries) and such review has not disclosed the existence, and I
have no knowledge of the existence, of any Default or Event of Default,
or if any Default or Event of Default existed or exists, a detailed
explanation is attached specifying the nature and period of the
existence of the Default and the action the Borrowers have taken, are
taking and propose to take with respect thereto.
9. Pursuant to Section 6.2 of the Agreement, enclosed are the financial
statements of the Borrowers as of the Statement Date. The financial
statements for the period ending on the Statement Date fairly present
the financial condition and results of operations of the Borrowers
(and, if applicable, their Subsidiaries) as of the Statement Date.
______________________________
Name:_________________________
Title:________________________
Dated:
CALCULATIONS SUPPORTING OFFICER'S CERTIFICATE
Borrower Names: NOVASTAR FINANCIAL, INC., NOVASTAR MORTGAGE, INC., and
NOVASTAR CAPITAL, INC. and its Subsidiaries
Statement Date:
All financial calculations set forth herein are as of the Statement Date.
I. MINIMUM ADJUSTED TANGIBLE NET WORTH
Adjusted Tangible Net Worth:
Shareholder equity: $
Adjustments:
Combined intangible assets - organizational costs: $
Receivables from directors, officers and shareholders: $
Combined reserve for credit losses: $
Combined deferred debt issuance costs: $
Combined net unrealized gain on available-for-sale
securities: $
Combined net unrealized loss on available-for-sale
securities: $
Any assets unacceptable to the Lender: $
Adjusted Tangible Net Worth: $
Minimum Adjusted Tangible Net Worth:* $
Adjusted Tangible Net Worth in excess of [less than] minimum: $
Certain notes to stockholders/officers are deducted directly from
stockholders' equity.
* Previous minimum adjusted tangible net worth: $ 80% of net
proceeds from stock issuance and contributions to equity
capital since February 11, 1999 or previous Officer's
Certificate, whichever is later:
$
Minimum Adjusted Tangible Net Worth: $
EXHIBIT A
PROMISSORY NOTE
---------------
$50,000,000 Date: December 29, 1999
FOR VALUE RECEIVED, the undersigned, NOVASTAR FINANCIAL, INC., a
Maryland corporation, NOVASTAR MORTGAGE, INC., a Virginia corporation, and
NOVASTAR CAPITAL, INC., a Delaware corporation (individually, a "Co-Borrower"
and collectively, hereinafter called the "Borrowers"), hereby promise to pay to
the order of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation (the
"Lender" or, together with its successors and assigns, the "Holder") whose
principal place of business is 0000 Xxxxxxxxxx Xxxx Xxxx., Xxxxx 000,
Xxxxxxxxxxx, Xxxxxxxxx 00000, or at such other place as the Holder may designate
from time to time, the principal sum of Fifty Million Dollars ($50,000,000) or
so much thereof as may be outstanding from time to time pursuant to the
Warehousing Credit and Security Agreement described below, and to pay interest
on said principal sum or such part thereof as shall remain unpaid from time to
time, from the date of each Advance until repaid in full, and all other fees and
charges due under the Agreement, at the rates and at the times set forth in the
Agreement. All payments hereunder shall be made in lawful money of the United
States and in immediately available funds.
This Note is given to evidence an actual warehouse line of credit in
the above amount and is the Note referred to in that certain Warehousing Credit
and Security Agreement (the "Agreement") dated the date hereof between the
Borrowers and the Lender, as the same may be amended or supplemented from time
to time, and is entitled to the benefits thereof. Reference is hereby made to
the Agreement (which is incorporated herein by reference as fully and with the
same effect as if set forth herein at length) for a description of the
Collateral, a statement of the covenants and agreements, a statement of the
rights and remedies and securities afforded thereby and other matters contained
therein. Capitalized terms used herein, unless otherwise defined herein, shall
have the meanings given them in the Agreement.
This Note may be prepaid in whole or in part at any time without
premium or penalty.
Should this Note be placed in the hands of attorneys for collection,
the Borrowers agree to pay, in addition to principal and interest, fees and
charges due under the Agreement, any and all costs of collecting this Note,
including reasonable attorneys' fees and expenses.
The Borrowers hereby waive demand, notice, protest and presentment.
The promises and agreements herein shall be construed to be and are
hereby declared to be the joint and several promises and agreements of each
Co-Borrower and shall constitute the joint and several obligation of each
Co-Borrower and shall be fully binding upon and enforceable against each
Co-Borrower. The release of any party to this Note shall not affect or release
the joint and several liability of any other party. The Lender may at its option
enforce this Note against one or more of the Co-Borrowers, and the Lender shall
not be required to resort to enforcement against each Co-Borrower. Further, the
failure to proceed against or join each Co-Borrower shall not affect the joint
and several liability of each Co-Borrower.
This Note shall be construed and enforced in accordance with the laws
of the State of Minnesota, without reference to its principles of conflicts of
law.
IN WITNESS WHEREOF, the Borrowers have executed this Note as of the day
and year first above written.
NOVASTAR FINANCIAL, INC.,
a Maryland corporation
By: __________________________________
Its:__________________________________
NOVASTAR MORTGAGE, INC.,
a Virginia corporation
By:__________________________________
Its:_________________________________
NOVASTAR CAPITAL, INC.,
a Delaware corporation
By:__________________________________
Its:_________________________________
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On _____________, _____________, before me, a Notary Public, personally
appeared _____________, the __________ of NOVASTAR FINANCIAL, INC., a Maryland
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On ___________, _____________, before me, a Notary Public, personally
appeared _____________, the ______________ of NOVASTAR MORTGAGE, INC., a
Virginia corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On ____________, __________, before me, a Notary Public, personally
appeared __________________, the ____________ of NOVASTAR CAPITAL, INC., a
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
EXHIBIT B
GUARANTY
--------
THIS GUARANTY, made and entered into as of this 29th day of December
1999, by NFI HOLDING CORPORATION (the "Guarantor"), to RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation (the "Lender"), having its principal office
at 0000 Xxxxxxxxxx Xxxx Xxxx., Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxxx 00000.
RECITALS
--------
A. NOVASTAR FINANCIAL, INC., a Maryland corporation ("NFI"),
NOVASTAR MORTGAGE, INC., a Virginia corporation ("NMI"), and
NOVASTAR CAPITAL, INC., a Delaware corporation ("NCI") (NFI,
NMI and NCI are hereinafter collectively referred to as the
"Borrowers") and the Lender have agreed that the Lender will
extend a warehouse line of credit to the Borrowers in the
principal amount of Fifty Million Dollars ($50,000,000) (the
"Loan") to finance the making and purchasing of Mortgage
Loans.
B. The Loan is evidenced by a Promissory Note, dated of even date
herewith from the Borrowers to the Lender, as the same may be
amended, supplemented or otherwise modified from time to time,
including any other instruments executed and delivered in
renewal, extension, rearrangement or otherwise in replacement
of such Promissory Note (the "Note") and by a Warehousing
Credit and Security Agreement of even date herewith, as the
same may be amended, supplemented or otherwise modified from
time to time, including any other instruments executed and
delivered in renewal, extension, rearrangement or otherwise in
replacement of such agreement (the "Agreement").
C. The Guarantor is the Parent of NMI and NCI, an Affiliate of
NFI and will derive benefit from the Loan.
D. As a condition to making the Loan, the Lender has required
that the Guarantor execute and deliver this Guaranty. In order
to induce the Lender to make Advances under the Agreement, and
to accept the Notes and the Agreement, the Guarantor has
agreed to give this Guaranty.
E. The Lender has refused to make Advances under the Agreement
unless this Guaranty is executed by the Guarantor and
delivered to Lender.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the recitals and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Guarantor hereby covenants and agrees with the Lender as
follows:
1. Unless otherwise defined herein, all capitalized terms used
herein shall have the meanings ascribed to such terms in the Agreement.
2. The Guarantor hereby irrevocably, unconditionally and absolutely
guarantees to the Lender the due and prompt payment, and not just the
collectibility, of the principal of, and interest, fees and late charges and all
other indebtedness, if any, on the Notes when due, whether at maturity, by
acceleration or otherwise all at the times and places and at the rates described
in, and otherwise according to the terms of the Notes and the Agreement, whether
now existing or hereafter created or arising.
3. The Guarantor further hereby irrevocably, unconditionally and
absolutely guarantees to the Lender the due and prompt performance by the
Borrowers of all duties, agreements and obligations of the Borrowers contained
in the Note and the Agreement, and the due and prompt payment of all costs and
expenses incurred, including, without limitation, attorneys' fees, court costs
and all other litigation expenses (including but not limited to expert witness
fees, exhibit preparation, and courier, postage, communication and document
copying expenses), in enforcing the payment
and performance of the Notes and the Agreement and this Guaranty (the payment
and performance of the items set forth in Paragraphs 2 and 3 of this Guaranty
are collectively referred to as the "Guaranteed Debt").
4. In the event the Borrowers shall at any time fail to pay the Lender
any principal of or interest on or other sums constituting any Guaranteed Debt
when due, whether by acceleration or otherwise, the Guarantor promises to pay
such amount to the Lender forthwith, together with all collection costs and
expenses, including, without limitation, attorneys' fees, court costs and all
other litigation expenses (including but not limited to expert witness fees,
exhibit preparation, and courier, postage, communication and document copying
expenses). Any sum required to be paid by the Guarantor to the Lender pursuant
to this Guaranty shall bear interest from the date such sum becomes due until
paid at a per annum rate equal to the Default Rate.
5. The Guarantor hereby authorizes the Lender, following the occurrence
of an Event of Default, without notice or demand, to apply any property,
balances, credits, accounts or moneys of the Guarantor then in the possession of
Lender, or standing to the credit of the Guarantor, to the payment of such
Guaranteed Debt.
6. The Guarantor does hereby (a) agree to any modifications of any
terms or conditions of any Guaranteed Debt and/or to any extensions or renewals
of time of payment or performance by the Borrowers; (b) that it shall not be
necessary for the Lender to resort to legal remedies against the Borrowers
before proceeding hereunder, nor to take any action against any other Person
obligated (an "Obligor") for payment or performance of the Guaranteed Debt or
against any collateral for the Guaranteed Debt before proceeding against the
Guarantor; (c) agree that no release of the Borrowers or any other guarantor or
Obligor, and no release, exchange or nonperfection of any collateral for the
Guaranteed Debt, whether by operation of law or by any act or failure to act by
the Lender, with or without notice to the Guarantor, shall release the
Guarantor; (d) waive presentment, demand, notice of demand, dishonor, notice of
dishonor, protest, and notice of protest and any other notice with respect to
any Guaranteed Debt and this Guaranty, and promptness in commencing suit against
any party thereto or liable thereon and/or in giving any notice to or making any
claim or demand hereunder upon the Guarantor; (e) waive any defense arising by
reason of any disability or other defense of the Borrowers for payment of the
Guaranteed Debt or any part thereof or by reason of the cessation from any cause
whatsoever of the liability of the Borrowers therefor other than full payment of
the Guaranteed Debt; or (f) waive, to the extent permitted by law, all benefit
of valuation, appraisement, and exemptions under the laws of the State of
Minnesota or any other state or territory of the United States.
7. The obligations of the Guarantor hereunder shall be primary,
absolute and unconditional, and shall remain in full force and effect without
regard to, and shall not be impaired or affected by: (a) the genuineness,
validity, regularity or enforceability of, or any amendment or change in the
Agreement or the Notes, or any change in or extension of the manner, place or
terms of payment of, all or any portion of the Guaranteed Debt; (b) the taking
or failure to take any action to enforce the Agreement or the Notes, or the
exercise or failure to exercise any remedy, power or privilege contained therein
or available at law or otherwise, or the waiver by the Lender of any provisions
of the Agreement or the Notes; (c) any impairment, modification, change, release
or limitation in any manner of the liability of the Borrowers or their estate in
bankruptcy, or of any remedy for the enforcement of the Borrowers' liability,
resulting from the operation of any present or future provision of the
bankruptcy laws or any other statute or regulation, or the dissolution,
bankruptcy, insolvency, or reorganization of the Borrowers; (d) the merger or
consolidation of the Borrowers, or any sale or transfer by the Borrowers of all
or part of its assets or property; (e) any claim the Guarantor may have against
any other Obligor, including any claim of contribution; (f) the release, in
whole or in part, of any other guarantor (if more than one), the Borrowers or
any other Obligor; (g) any settlement or compromise with any Obligor with
respect to any Guaranteed Debt and/or the subordination of the payment of the
Guaranteed Debt or any part thereof to the payment of any other debts or claims
which may at any time be due and owing to the Lender and/or any other Person; or
(h) any other action or circumstance which (with or without notice to or
knowledge of the Guarantor) may or might in any manner or to any extent vary the
risks of the Guarantor hereunder or otherwise constitute a legal or equitable
discharge or defense, it being understood and agreed by the Guarantor that the
obligations under this Guaranty shall not be discharged except by the full
payment and performance of the Guaranteed Debt.
8. The Lender shall have the right to determine how, when and what
application of payments and credits, if any, whether derived from the Borrowers
or from any other source, shall be made on the Guaranteed Debt and any other
indebtedness owed by the Borrowers and/or any other Obligor to the Lender. The
Lender shall be under no obligation to marshal any assets in favor of the
Guarantor or in payment of all or any part of the Guaranteed Debt.
9. The obligations of the Guarantor hereunder shall continue to be
effective, or be automatically reinstated, as the case may be, if at any time
the performance or the payment, as the case may be, in whole or in part, of any
of the Guaranteed Debt is rescinded or must otherwise be restored or returned by
the Lender (as a preference, fraudulent conveyance or otherwise) upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrowers, the Guarantor or any other person or upon or as a result of the
appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to the Borrowers, the Guarantor or any other person, or any
substantial part of its property, or otherwise, all as though such payments had
not been made. If an Event of Default shall at any time have occurred and be
continuing or shall exist and declaration of default or acceleration under or
with respect to this Guaranty or any Guaranteed Debt shall at such time be
prevented by reason of the pendency against the Guarantor or the Borrowers or
any other Person of a case or proceeding under a bankruptcy or insolvency law,
the Guarantor agrees that, for purposes of this Guaranty and its obligations
hereunder, this Guaranty and such obligations shall be deemed to have been
declared in default or accelerated with the same effect as if this Guaranty and
such obligations had been declared in default and accelerated in accordance with
their respective terms and the Guarantor shall forthwith perform or pay, as the
case may be, as required hereunder in accordance with the terms hereunder
without further notice or demand.
10. The Guarantor hereby irrevocably waives any claim or other rights
that the Guarantor may now or hereafter acquire against the Borrowers that
arises from the existence, payment, performance or enforcement of the
Guarantor's obligations hereunder, including any right of subrogation,
reimbursement, exoneration, contribution or indemnification, any right to
participate in any claim or remedy of the Lender against the Borrowers or any
collateral that the Lender now has or hereafter acquires, whether or not such
claim, remedy or right arises in equity or under contract, statute or common
law, including the right to take or receive from the Borrowers directly or
indirectly, in cash or other property or by set-off or in any manner, payment or
security on account of such claim or other rights. If any amount shall be paid
to the Guarantor in violation of the preceding sentence and the Guaranteed Debt
shall not have been paid and performed in full, such amount shall be deemed to
have been paid to the Guarantor for the benefit of, and held in trust for, the
Lender and shall forthwith be paid to the Lender to be credited and applied to
the Guaranteed Debt, whether matured or unmatured. Notwithstanding the blanket
waiver of subrogation rights as set forth above, the Guarantor hereby
specifically acknowledges that any subrogation rights which the Guarantor may
have against the Borrowers or any collateral that the Lender now has or
hereafter acquires may be destroyed by a nonjudicial foreclosure of the
collateral. Without limiting the foregoing, the Guarantor waives all rights and
defenses arising out of an election of remedies by the Lender, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for any Guaranteed Debt, has destroyed the Guarantor's rights of subrogation and
reimbursement against the Borrowers by the operation of Section 580d of the
California Code of Civil Procedure or otherwise. The Guarantor acknowledges that
the Guarantor will receive direct and indirect benefits from the arrangements
contemplated by the Agreement and the Notes and that the waivers set forth in
this Section are knowingly made in contemplation of such benefits.
11. No postponement or delay on the part of the Lender in the
enforcement of any right hereunder shall constitute a waiver of such right and
all rights of the Lender hereunder shall be cumulative and not alternative and
shall be in addition to any other rights granted to the Lender in any other
agreement or by law.
12. If any provision hereof shall be or shall be declared to be illegal
or unenforceable in any respect, such illegal or unenforceable provision shall
be and become absolutely null and void and of no force and effect as though such
provision were not in fact set forth herein, but all other covenants, terms,
conditions and provisions hereof shall nevertheless continue to be valid and
enforceable and this Guaranty shall be so construed.
13. This Guaranty shall be governed in all respects by the laws of the
State of Minnesota, other than its principles of conflicts of law, and shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, personal representatives,
successors and assigns.
14. The Guarantor hereby agrees that any action or proceeding under
this Guaranty may be commenced against the Guarantor in any court of competent
jurisdiction within the State of Minnesota, by service of process upon the
Guarantor by first class registered or certified mail, return receipt requested,
addressed to the Guarantor at the Guarantor's address last known to the Lender.
The Guarantor agrees that any such suit, action or proceeding arising out of or
relating to this Guaranty may be instituted in the District Court of Hennepin
County, Minnesota or in the United States District Court for the District of
Minnesota, at the option of the Lender; and the Guarantor hereby waives any
objection to the jurisdiction or venue of any such court with respect to, or the
convenience of any such court as a forum for, any such suit, action or
proceeding. Nothing herein shall affect the right of the Lender to accomplish
service of
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Guarantor in any other jurisdiction or court.
15. The Guarantor hereby represents and warrants to the Lender as
follows:
(a) Organization and Qualification. The Guarantor is a corporation
duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. The Guarantor is duly
qualified to do business as a foreign corporation and in good
standing in all jurisdictions in which the ownership of its
properties or the nature of its activities, or both, makes such
qualification necessary.
(b) Authority and Authorization. The Guarantor has full corporate
power and authority to execute, deliver and carry out the
provisions of this Guaranty and to perform its obligations
hereunder, and all such action has been duly and validly
authorized by all necessary corporate proceedings on its part.
(c) Financial Statements. All financial statements and data which
have heretofore been given to the Lender with respect to the
Guarantor fairly and accurately represent the financial condition
of the Guarantor as of the date hereof, and, since the date
thereof, there has been no material adverse change in the
financial condition of the Guarantor. The Guarantor shall
promptly deliver to the Lender, or to the Borrowers in time for
the Borrowers to deliver the same to the Lender, all financial
statements and tax returns of the Guarantor required by the
Agreement.
(d) Address. The address of the Guarantor as specified below is true
and correct and until the Lender shall have actually received a
written notice specifying a change of address and specifically
requesting that notices be issued to such changed address, the
Lender may rely on the address stated as being accurate.
(e) No Default. The Guarantor is not in default with respect to any
order, writ, injunction, decree or demand of any court or other
governmental authority, in the payment of any material debt for
borrowed money or under any material agreement evidencing or
securing any such debt.
(f) Solvent. The Guarantor is now solvent, and no bankruptcy or
insolvency proceedings are pending or to the best of the
Guarantor's knowledge contemplated by or against the Guarantor.
(g) Relationship to the Borrowers. The value of the consideration
received and to be received by the Guarantor is reasonably worth
at least as much as the liability and obligation of the Guarantor
incurred or arising under this Guaranty. The Guarantor has had
full and complete access to the Agreement and the Notes and all
other loan documents relating to the Obligations and the
Guaranteed Debt, has reviewed them and is fully aware of the
meaning and effect of their contents. The Guarantor is fully
informed of all circumstances which bear upon the risks of
executing this Guaranty and which a diligent inquiry would
reveal. The Guarantor has adequate means to obtain from the
Borrowers on a continuing basis information concerning the
Borrowers' financial condition, and is not depending on the
Lender to provide such information, now or in the future. The
Guarantor agrees that the Lender shall not have any obligation to
advise or notify the Guarantor or to provide the Guarantor with
any data or information. The execution and delivery of this
Guaranty is not given in consideration of (and the Lender has not
in any way implied that the execution of this Guaranty is given
in consideration of) the Lender's making, extending or modifying
any loan to the Guarantor or to any other financial accommodation
to or for the Guarantor.
(h) Litigation. There is not now pending against or affecting the
Guarantor, nor to the knowledge of the Guarantor is there
threatened, any action, suit or proceeding at law or in equity or
by or before any administrative agency that, if adversely
determined, would materially impair or affect the financial
condition of the Guarantor.
(i) Taxes. The Guarantor has filed all federal, state, provincial,
county, municipal and other income tax returns required to have
been filed by the Guarantor and has paid all taxes that have
become due
pursuant to such returns or pursuant to any assessments received
by the Guarantor, and the Guarantor does not know of any basis
for any material additional assessment against it in respect of
such taxes.
16. Neither the death nor the release of any person or party to this
Guaranty or any other guaranties of the Agreement and the Notes shall affect or
release the liability of the Guarantor. The obligations of the Guarantor
hereunder shall be in addition to any obligations of the Guarantor under any
other guaranties of the Guaranteed Debt and/or any obligations of the Borrowers
or any other Persons heretofore given or hereafter to be given to the Lender,
and this Guaranty shall not affect or invalidate any such other guaranties. The
liability of the Guarantor to the Lender shall at all times be deemed to be the
aggregate liability of the Guarantor under the terms of this Guaranty and of any
other guaranties heretofore or hereafter given by the Guarantor to the Lender.
17. No amendment or waiver of any provision of this Guaranty nor
consent to any departure by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by the Lender, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No notice to or demand on the Guarantor
shall in any case entitle it to any other or further notice or demand in similar
or other circumstances.
18. All notices that may be required or otherwise provided for or
contemplated under the terms of this Guaranty for any party to serve upon or
give to any other shall, whether or not so state, be in writing, and if not so
in writing shall not be deemed to have been given, and be either personally
served, sent by reputable overnight courier service, or sent with return receipt
requested by registered or certified mail with postage (including registration
or certification charges) prepaid, sent to the following address:
(a) If to the Guarantor, addressed to the address indicated
immediately following the Guarantor's signature;
(b) If to the Lender, addressed to the Lender at its address at
000 Xxxxxxxx Xxxx. Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000,
Attention: Xxxx Xxxx, Director.
Such addresses may be changed from time to time by written notice to the other
parties given in the same manner. Any matter so served upon or sent to the
Guarantor or the Lender in the manner aforesaid shall be deemed sufficiently
given for all purposes hereunder (i) upon personal delivery, if personally
delivered, (ii) on the date following delivery to the courier service, if sent
by courier service, (iii) upon electronic confirmation of receipt, if sent by
facsimile, and (iv) on the date of receipt as noted on the return receipt, if
sent by registered or certified mail, except that notices of changes of address
shall not be effective until actual receipt.
19. Any indebtedness of the Borrowers now or hereafter held by the
Guarantor is hereby subordinated to the indebtedness of the Borrowers to the
Lender, and such indebtedness of the Borrowers to the Guarantor shall, if the
Lender so requests, be collected, enforced and received by the Guarantor as
trustee for the Lender and be paid over to the Lender on account of the
indebtedness of the Borrowers to the Lender, but without reducing or limiting in
any manner the liability of the Guarantor under the other provisions of the
Guaranty. The Guarantor acknowledges that, with respect to the indebtedness
guaranteed hereunder, the Guarantor has irrevocably waived all rights to
subrogation, reimbursement, and/or indemnification against the Borrowers
20. This Guaranty is intended as a final expression of this agreement
of guaranty and is intended also as a complete and exclusive statement of the
terms of this agreement. No agreement or understanding entered into prior to the
date hereof with respect to the subject matter hereof shall be binding upon the
Guarantor unless expressed herein. No course of prior dealings between the
Guarantor and the Lender, no usage of the trade, and no parole or extrinsic
evidence of any nature, shall be used or be relevant to supplement, explain,
contradict or modify the terms and/or provisions of this Guaranty.
21. Time is of the essence hereof.
22. THE GUARANTOR, BY ITS EXECUTION AND DELIVERY HEREOF, AND THE
LENDER, BY ITS ACCEPTANCE HEREOF, HEREBY (i) COVENANTS AND AGREES NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (ii) WAIVES ANY RIGHT
TO TRIAL BY JURY
FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS
WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY,
BY THE GUARANTOR AND BY THE LENDER, AND THIS WAIVER IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT OF A JURY TRIAL
WOULD OTHERWISE ACCRUE. THE LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT
THIS WAIVER TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE
PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THE FOREGOING WAIVER OF
THE RIGHT TO JURY TRIAL. FURTHER, THE GUARANTOR HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE LENDER, INCLUDING THE LENDER'S COUNSEL, HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, TO THE GUARANTOR OR ITS REPRESENTATIVES OR
AGENTS THAT THE LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY
TRIAL PROVISION.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty with the
intent to be legally bound as of the date first above written.
NFI HOLDING CORPORATION,
a Delaware corporation
By:_____________________________________
Its:____________________________________
Address:________________________________
________________________________________
Telephone No.:__________________________
Telecopier No.:_________________________
Federal Tax ID No.:_____________________
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On ___________, 19____, before me, a Notary Public, personally appeared
______________, the ____________ of NFI HOLDING CORPORATION, a Delaware
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
EXHIBIT M
ELIGIBLE LOANS
--------------
For the purposes hereof, the following terms shall have the following meanings:
"Aged Mortgage Loan" means a First Mortgage Loan which has exceeded
------------------
the maximum Warehouse Period for the type of Eligible Mortgage Loan.
"Appraised Value" means, with respect to an interest in real property
---------------
the then current fair market value of the real property and any
improvements thereon as of a recent date determined in accordance with
accepted methods of appraising by qualified appraiser who is a member of
the American Institute of Real Estate Appraisers or other group of
professional appraisers.
"Credit Score" means a mortgagor's overall consumer credit rating,
------------
represented by a single numeric credit score using the Fair, Xxxxx consumer
credit scoring system, provided by a credit repository acceptable to the
Lender and the Investor that issued the Purchase Commitment covering the
related Mortgage Loan.
"GMAC-RFC Client Guide" means the applicable loan purchase guide
---------------------
issued by RFC, as the same may be amended or replaced.
"Government Mortgage Loan" means a closed-end First Mortgage Loan that
------------------------
is either HUD/FHA insured (other than a HUD 203(K) Mortgage Loan or a Title
I Mortgage Loan) or VA guaranteed.
"Loan-to-Value Ratio" means, for any Mortgage Loan, the ratio of (a)
-------------------
the maximum amount available to be borrowed thereunder (whether or not
borrowed) at the time of origination plus the Mortgage Note Amounts of all
----
other Mortgage Loans secured by the related improved real property, to (b)
the Appraised Value of the related improved real property.
"RFC Mortgage Loan" means a Mortgage Loan covered by a Purchase
-----------------
Commitment issued by RFC.
"Seasoned Mortgage Loan" means a First Mortgage Loan which was closed
----------------------
more than 90 days prior to the date of the requested Advance, which
Mortgage Loan shall not (A) have a colorable claim of fraud made by any
Person involved in the origination, servicing or sale of such Mortgage
Loan, (B) be in the process of foreclosure, or (C) have a loan to value
ratio of greater than 90%.
"Third Party Originated" means a Mortgage Loan that was purchased by
----------------------
the Company from a third party originator.
SUBLIMITS:
----------
The following aggregate limitations shall apply to Advances against Eligible
Loans:
1. Wet Settlement Advances: 40% of the Commitment Amount.
2. Advances against Second Mortgage Loans (either closed-end or open-
end): $10,000,000. Notwithstanding
the foregoing, the maximum amount
for a Second Mortgage Loan cannot
exceed $75,000.
3. Third Party Originated: Permitted.
ELIGIBLE LOAN:
--------------
The following specified types of Loans are Eligible Loans provided they conform
in all respects with the terms of the Warehousing Agreement:
23. Prime Mortgage Loan
-------------------
a. Definition: A First Mortgage Loan or a Second Mortgage Loan with the
----------
following characteristics:
(i) For a First Mortgage Loan:
A. Underwritten substantially in accordance with Xxxxxx
Mae or Xxxxxxx Mac underwriting standards (except as to
maximum amount); and
B. Loan-to-Value Ratio not to exceed 80% or, if the
Loan-to-Value Ratio exceeds 80%, the amount by which such
Prime Mortgage Loan exceeds 80% is insured by or subject to
a commitment for mortgage insurance; or.
C. A Government Mortgage Loan.
(ii) For a Second Mortgage Loan:
A. The credit of the obligor has been underwritten
substantially in accordance with Xxxxxx Mae or Xxxxxxx Mac
underwriting standards; and
B. Loan-to-Value Ratio not more than 100%.
b. Interest Rate: 1.60% over LIBOR.
-------------
c. Prime Sublimit: No limit.
--------------
d. Committed/Uncommitted: Purchase Commitment required. Notwithstanding
----------------------
the foregoing, any Prime First Mortgage Loan that exceeds $650,000 must be
approved for funding by the Lender.
e. Wet Settlement Advances: Permitted.
-----------------------
f. Committed Mortgage Loan Advance Rate: 98% of the lesser of (i) the
------------------------------------
Mortgage Note Amount, (ii) the Committed Purchase Price or (iii) the Acquisition
Cost.
g. Committed Second Mortgage Loan Advance Rate: 95% of the lesser of (i)
-------------------------------------------
the Mortgage Note Amount, (ii) the Committed Purchase Price or (iii) the
Acquisition Cost.
h. Warehouse Period First Mortgage Loan: 90 days.
------------------------------------
i. Warehouse Period Second Mortgage Loan: 90 days.
-------------------------------------
24. Subprime Mortgage Loan
----------------------
a. Definition: A First Mortgage Loan or a Second Mortgage Loan that
----------
has a risk rating of "A-", "B" or "C" (determined using underwriting
standards that comply with industry standards in the sole judgement of
the Lender), that is made to a mortgagor with a Credit Score of no
less than 500, and which is acceptable for purchase by at least two
Investors.
b. Interest Rate: 1.60% over LIBOR.
-------------
c. Committed Subprime First Mortgage Loan Sublimit: No limit.
-----------------------------------------------
d. Uncommitted Subprime First Mortgage Loan Sublimit: No limit.
-------------------------------------------------
e. Uncommitted Aged First Mortgage Loan Sublimit: $10,000,000.
---------------------------------------------
f. Uncommitted Seasoned First Mortgage Loan Sublimit: $5,000,000.
-------------------------------------------------
g. Committed/Uncommitted: Purchase Commitment not required unless:
---------------------
(i) First Mortgage Loan exceeds $650,000 and must be approved
by the Lender.
h. Wet Settlement Advances: Permitted.
-----------------------
i. Committed First Mortgage Loan Advance Rate: 98% of the lesser of (i)
------------------------------------------
the Mortgage Note Amount or (ii) the Committed Purchase Price.
j. Uncommitted First Mortgage Loan Advance Rate: 98% of the lesser of (i)
--------------------------------------------
the Mortgage Note Amount or (ii) the Acquisition Cost.
k. Uncommitted First Aged Mortgage Loan Advance Rate: 95% of the lesser
-------------------------------------------------
of (i) the Mortgage Note Amount, (ii) the Acquisition Cost or (iii) the unpaid
principle balance.
l. Uncommitted First Seasoned Mortgage Loan Advance Rate: 95% of the
-----------------------------------------------------
lesser of (i) the Mortgage Note Amount or (ii) the Acquisition Cost.
m. Warehouse Period First Mortgage Loan (other than an Aged Mortgage
-----------------------------------------------------------------
Loan): 90 days.
-----
n. Warehouse Period Aged Mortgage Loan: 180 days.
-----------------------------------
