EXHIBIT 10.34
________________________________________________________________________________
GESTATION FINANCING AGREEMENT
between
NVR MORTGAGE FINANCE, INC.
a Virginia corporation
and
BANC ONE INVESTMENT ADVISORS CORPORATION
an Ohio corporation,
acting as agent on behalf of its customers and not individually
August 15, 1997
________________________________________________________________________________
TABLE OF CONTENTS
PAGE
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ARTICLE I GENERAL TERMS................................................................... 1
Section 1.1 Definitions............................................................ 1
Section 1.2 Other Definitional Provisions.......................................... 12
ARTICLE II AMOUNT AND TERMS OF CREDIT..................................................... 13
Section 2.1 Credit Facility........................................................ 13
Section 2.2 Note................................................................... 13
Section 2.3 Manner of Requesting and Obtaining Borrowings.......................... 13
Section 2.4 Mandatory Repayments................................................... 13
Section 2.5 Business Days.......................................................... 13
Section 2.6 Payment Procedure...................................................... 14
Section 2.7 Requirements of Law.................................................... 14
Section 2.8 Interest............................................................... 15
ARTICLE III COLLATERAL.................................................................... 15
Section 3.1 Granting Clause........................................................ 15
Section 3.2 Borrowing Requests..................................................... 16
Section 3.3 Power of Attorney...................................................... 16
Section 3.4 Disposition of Collateral.............................................. 17
Section 3.5 Representations and Warranties Regarding Collateral.................... 18
Section 3.6 Borrower Appointed Agent............................................... 19
Section 3.7 Settlement Account..................................................... 19
Section 3.8 Correction of Mortgage Notes........................................... 19
Section 3.9 Borrowing Base Reports................................................. 20
Section 3.10 Take-Out Commitments................................................... 20
ARTICLE IV CONDITIONS PRECEDENT........................................................... 20
Section 4.1 Initial Borrowing Request.............................................. 20
Section 4.2 All Borrowing Requests................................................. 21
ARTICLE V BORROWER REPRESENTATIONS AND WARRANTIES......................................... 21
Section 5.1 Organization and Good Standing......................................... 21
Section 5.2 Authorization and Power................................................ 21
Section 5.3 No Conflicts or Consents............................................... 22
Section 5.4 Enforceable Obligations................................................ 22
Section 5.5 Priority of Liens...................................................... 22
Section 5.6 No Liens............................................................... 22
Section 5.7 Financial Condition.................................................... 22
Section 5.8 Full Disclosure........................................................ 22
Section 5.9 No Default............................................................. 23
Section 5.10 No Litigation.......................................................... 23
Section 5.11 Taxes.................................................................. 23
Section 5.12 Principal Office, etc.................................................. 23
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Section 5.13 Compliance with ERISA.................................................. 23
Section 5.14 Ownership.............................................................. 24
Section 5.15 Subsidiaries........................................................... 24
Section 5.16 Indebtedness........................................................... 24
Section 5.17 Permits, Patents, Trademarks, etc...................................... 24
Section 5.18 Status Under Certain Federal Statutes.................................. 25
Section 5.19 Securities Act and Securities Credit Transaction Regulations........... 25
Section 5.20 Pollution Control...................................................... 25
Section 5.21 No Approvals Required.................................................. 25
Section 5.22 Material Agreements with Affiliates.................................... 25
Section 5.23 Taxpayer Identification................................................ 25
Section 5.24 Not an Insider......................................................... 25
Section 5.25 Survival of Representations............................................ 25
ARTICLE VI AFFIRMATIVE COVENANTS.......................................................... 26
Section 6.1 Financial Statements and Reports....................................... 26
Section 6.2 Taxes and Other Liens.................................................. 27
Section 6.3 Maintenance............................................................ 27
Section 6.4 Further Assurances..................................................... 27
Section 6.5 Reimbursement of Expenses.............................................. 27
Section 6.6 Insurance.............................................................. 27
Section 6.7 Accounts and Records................................................... 28
Section 6.8 Appraisals............................................................. 28
Section 6.9 Right of Inspection.................................................... 28
Section 6.10 Notice of Certain Events............................................... 28
Section 6.11 Performance of Certain Obligations..................................... 29
Section 6.12 Use of Proceeds; Margin Stock.......................................... 29
Section 6.13 Notice of Default...................................................... 29
Section 6.14 Compliance with Loan Documents......................................... 29
Section 6.15 Compliance with Material Agreements.................................... 29
Section 6.16 Operations and Properties.............................................. 29
Section 6.17 ERISA and Plans........................................................ 29
Section 6.18 Benefit Plan Obligations............................................... 30
Section 6.19 Environmental Matters.................................................. 30
Section 6.20 Take-Out Commitments; Coverage......................................... 30
Section 6.21 Maintenance of Backup Gestation Agreement.............................. 31
ARTICLE VII NEGATIVE COVENANTS............................................................ 31
Section 7.1 No Merger.............................................................. 31
Section 7.2 Limitation on Indebtedness............................................. 31
Section 7.3 Fiscal Year, Method of Accounting...................................... 31
Section 7.4 Business............................................................... 31
Section 7.5 Liquidations, Consolidations and Dispositions of Substantial Assets.... 31
Section 7.6 Loans, Advances and Investments........................................ 32
Section 7.7 Use of Proceeds........................................................ 32
Section 7.8 Actions with Respect to Collateral..................................... 32
Section 7.9 Net Worth.............................................................. 33
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PAGE
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Section 7.10 Adjusted Current Ratio................................................. 33
Section 7.11 Liabilities to Net Worth Ratio......................................... 33
Section 7.12 [Intentionally Omitted]................................................ 33
Section 7.13 Restrictions on Dividends and Returns of Capital....................... 33
Section 7.14 Transactions with Affiliates........................................... 33
Section 7.15 Liens.................................................................. 33
Section 7.16 Compliance with ERISA.................................................. 33
Section 7.17 Change of Principal Office............................................. 34
Section 7.18 Tax Payments........................................................... 34
Section 7.19 Tax Allocation Agreement............................................... 34
Section 7.20 Permitted Subordinated Indebtedness.................................... 34
ARTICLE VIII EVENTS OF DEFAULT............................................................ 34
Section 8.1 Nature of Event........................................................ 34
Section 8.2 Default Remedies....................................................... 36
Section 8.3 Exercise of Default Remedies by BOIA Customers......................... 37
ARTICLE IX CONCERNING BOIA................................................................ 37
Section 9.1 Indemnification........................................................ 37
Section 9.2 Limitation of Liability................................................ 38
ARTICLE X MISCELLANEOUS................................................................... 38
Section 10.1 Notices................................................................ 38
Section 10.2 Amendments, Etc........................................................ 39
Section 10.3 Invalidity............................................................. 39
Section 10.4 Survival of Agreements................................................. 39
Section 10.5 Renewal, Extension or Rearrangement.................................... 39
Section 10.6 Waivers................................................................ 39
Section 10.7 Cumulative Rights...................................................... 40
Section 10.8 Construction........................................................... 40
Section 10.9 Interest............................................................... 40
Section 10.10 Right of Offset........................................................ 41
Section 10.11 Successors and Assigns; Confidentiality................................ 41
Section 10.12 Consent to Jurisdiction................................................ 41
Section 10.13 Exhibits............................................................... 41
Section 10.14 Titles of Articles and Sections........................................ 41
Section 10.15 Counterparts........................................................... 42
Section 10.16 ENTIRE AGREEMENT....................................................... 42
Section 10.17 BOIA Representation.................................................... 42
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GESTATION FINANCING AGREEMENT
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THIS GESTATION FINANCING AGREEMENT is made and entered into as of
August 15, 1997 between NVR Mortgage Finance, Inc., a Virginia corporation (the
"Borrower"), and Banc One Investment Advisors Corporation, an Ohio corporation,
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acting as agent on behalf of its customers and not individually ("BOIA").
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PRELIMINARY MATTERS
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The Borrower and BOIA wish to set forth their agreement regarding the terms
upon which BOIA will extend certain credit to Borrower pursuant to this
Agreement.
AGREEMENT
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The parties hereto hereby agree as follows:
ARTICLE I
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GENERAL TERMS
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Section 1.1 Definitions. As used in this Agreement, the following terms
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have the meanings specified:
"Adjusted Current Ratio" is the ratio referred to in Section 7.10.
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"Advance" means an advance by BOIA pursuant to Section 2.1.
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"Affiliate" of any Person means any other Person which, directly or
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indirectly, controls, is controlled by, or is under common control with, such
Person. For purposes of this definition, the term "control" (and the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession or ownership, directly or indirectly, of the power
either to (i) direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise, or (ii) vote or direct the voting
of 25% or more of the securities having ordinary power for the election of
directors of such Person.
"Affiliate Note" means that certain subordinated revolving credit note
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issued by Borrower payable on demand to the order of NVR Financial Services,
Inc., dated as of the date indicated thereon, a true and correct copy of which
is attached as Exhibit "M".
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"Agency" means FNMA, FHLMC or GNMA.
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"Agency Commitment" means a binding and enforceable agreement on the
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part of (a) FNMA or FHLMC to issue Mortgage Backed Securities in exchange for
Mortgage Loans or (b) GNMA to guarantee Mortgage Backed Securities to be issued
by the Borrower. Agency
Commitment includes the FNMA Guide, the FHLMC Guide or the GNMA Guide, as
applicable, pursuant to which such Agency Commitment was issued.
"Agency Forms" means forms promulgated by an Agency for use in
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connection with the delivery of Mortgage Loans and the issuance or guaranty of a
Mortgage Backed Security pursuant to an Agency Commitment.
"Agent" means Bank One, Texas in its capacity as agent for BOIA under
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the Custody Agreement.
"Agreement" means this Gestation Financing Agreement, as amended,
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modified or supplemented from time to time.
"Allocated" has the meaning specified in Section 3.2.
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"Appraisal" means a written statement as to the market value of the
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property in which a Lien is granted pursuant to a Mortgage to secure a Mortgage
Loan.
"Appraisal Laws and Regulations" means laws set forth in Title XI of
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the Financial Institutions, Reform, Recovery and Enforcement Act of 1989 and the
Federal Deposit Insurance Corporation Improvement Act of 1991 and regulations
promulgated by the OCC or any other Governmental Authority in connection
therewith regarding Appraisals with respect to loans made by Persons regulated
by the OCC.
"Average Advances" for a particular Computation Period means the
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amount equal to (a) the sum of the outstanding Advances for each day in such
Computation Period divided by (b) the number of days in such Computation Period.
"Average Borrowing Base" for a particular Computation Period means the
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amount equal to (a) the sum of the Borrowing Base for each day in such
Computation Period divided by (b) the number of days in such Computation Period.
"Average MBS Collateral Value" for a particular Computation Period
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means the amount equal to (a) the sum of the Collateral Value attributable to
Eligible Mortgage Backed Securities for each day in such Computation Period
divided by (b) the number of days in such Computation Period.
"Backup Gestation Agreement" means that certain $50,000,000 Standby
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Gestation Financing Agreement by and between the Borrower and Lender
substantially in the form of Exhibit "E"
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166
"Bailee Letter" means bailee letter and trust receipts substantially
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in the forms of Exhibits "G-1" and "G-2" or such other forms, including any form
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required by an Agency and acceptable to BOIA, as to which Borrower and BOIA may
agree.
"Bank One, Texas" means Bank One, Texas, National Association.
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"Base Rate" for a particular Computation Period means the per annum
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rate of interest equal to the sum of (a) the Federal Funds Rate and (b) thirty
one-hundredths of one percent (0.30%).
"BOIA" has the meaning specified in the preamble of this Agreement.
----
"Borrower" has the meaning specified in the preamble of this
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Agreement.
"Borrowing" means a borrowing consisting of an Advance by BOIA.
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"Borrowing Base" as of any time of determination means the aggregate
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Collateral Value of all Eligible Mortgage Backed Securities.
"Borrowing Base Report" means a report substantially in the form of
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Exhibit "N".
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"Borrowing Request" means a request, in the form of Exhibit "B", for a
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Borrowing pursuant to Article II.
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"Business Day" means any day other than Saturdays, Sundays and other
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days on which commercial banks are authorized or required by law to close in the
State of Texas or Ohio.
"Cash Equivalents" means Eligible Commercial Paper, Eligible Deposits,
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and U.S. Government Securities.
"Code" means the Internal Revenue Code of 1986, as amended from time
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to time.
"Collateral" means all right, title and interest of the Borrower in
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and to the "Collateral" as such term is defined in the Security Agreement.
"Collateral Value" means:
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(a) With respect to a pool of Eligible Mortgage Loans, an amount equal
to ninety-nine percent (99%) of the Take-Out Price for such pool of Eligible
Mortgage Loans; and
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(b) with respect to an Eligible Mortgage Backed Security, an amount
equal to ninety-nine percent (99%) of the Take-Out Price for such Eligible
Mortgage Backed Security.
Any item of Collateral which ceases to be or is not an Eligible Mortgage Loan or
an Eligible Mortgage Backed Security shall have a Collateral Value of zero.
"Computation Period" means the period during which one or more
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Advances is outstanding.
"Custody Agreement" means that certain Custodian Agreement among
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Borrower, BOIA and the Agent, substantially in the form of Exhibit "I".
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"Debtor Laws" means all applicable liquidation, conservatorship,
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bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization,
fraudulent conveyance or similar laws from time to time in effect affecting the
rights of creditors generally.
"Default" means any condition or event which, with the giving of
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notice or lapse of time or both and unless cured or waived, would constitute an
Event of Default.
"Dividends" means: (a) cash distributions or any other distributions
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on, or in respect of, any class of equity security of Borrower, except for (i)
distributions made solely in shares of securities of the same class and (ii)
permitted Returns of Capital; and (b) any and all funds, cash or other payments
made in respect of the redemption, repurchase or acquisition of (i) such
securities or (ii) any option, warrant, or other right to purchase any of such
securities.
"Eligible Commercial Paper" means commercial paper and other short-
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term money market instruments which are rated at least A-1 or the equivalent
thereof by Standard & Poor's Rating Services ("Standard & Poors") and P-1 or the
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equivalent thereof by Xxxxx'x Investor Services ("Moody's").
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"Eligible Deposits" means time deposits and certificates of deposit of
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any domestic commercial bank or savings bank having capital and surplus in
excess of $200,000,000, in all such cases which has a short-term certificate of
deposit rating of at least A-1 or the equivalent thereof by Standard & Poors and
a short-term bank deposit rating of least P-1 or the equivalent thereof by
Moody's, or (ii) a rating of C or better from Xxxxxxxx Bank Watch, Inc. or 75 or
better from I.D.C. Financial Publishing, as applicable.
"Eligible Mortgage Backed Security" means a Mortgage Backed Security:
---------------------------------
(a) in which BOIA has a perfected first-priority security interest to secure the
Obligations; (b) which constitutes Proceeds of Pledged Mortgage Loans and which
satisfies all requirements for purchase under the Pledged Take-Out Commitment to
which it has been allocated; (c) which has not been owned by the Borrower for
more than five Business Days; (d) with respect to
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which the Investor under the Pledged Take-Out Commitment to which such Mortgage
Backed Security has been Allocated is not in default of its obligations under
such Pledged Take-Out Commitment; and (e) with respect to which such Pledged
Take-Out Commitment is not subject to any Lien other than a Permitted Lien.
"Eligible Mortgage Loan" means a Pledged Mortgage Loan: (a) in which
----------------------
BOIA has a perfected first-priority security interest to secure the Obligations;
(b) which satisfies all requirements for delivery under the Pledged Agency
Commitment to which it has been Allocated; (c) which is a part of a pool with
respect to which the Agent has notified BOIA that such pool has been certified
(or initially certified) to the Agency obligated under such Pledged Agency
Commitment and (d) with respect to which such Pledged Agency Commitment is not
subject to any Lien other than a Permitted Lien.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended from time to time.
"Event of Default" has the meaning specified in Section 8.1.
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"Excess Advances" for a particular Computation Period means the amount
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equal to the Average Advances for such Computation Period minus the MBS Advances
for such Computation Period.
"Face Amount" means: (a) in the case of a Mortgage Loan, the stated
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principal amount of the Mortgage Note which evidences such Mortgage Loan,
without giving effect to any payments thereon; and (b) in the case of a Mortgage
Backed Security, the par value of such Mortgage Backed Security.
"Federal Funds Rate" means for any day, the federal fund effective
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rate as set forth in the weekly statistical release designated as H.15(519) (or
any successor publication) published by the Board of Governors of the Federal
Reserve Bank of New York. In the event such rate is no longer published in
H.15(519) (or any successor publication), the Borrower and BOIA shall mutually
agree upon a comparable rate. Any change in the Federal Funds Rate shall become
effective as of 12:01 a.m. on the Business Day on which such change is so
presented.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any
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successor thereto.
"FHLMC Guide" means the FHLMC Sellers' & Servicers' Guide as amended,
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modified, or supplemented from time to time.
"FHLMC Securities" means securities issued or guaranteed by FHLMC,
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including, without limitation, participation certificates representing undivided
interests in
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mortgage loans purchased by FHLMC pursuant to the Emergency Home Finance Act of
1970, as amended.
"FNMA" means the Federal National Mortgage Association, or any
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successor thereto.
"FNMA Guide" means the FNMA Selling Guide and the FNMA Servicing
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Guide as amended, modified or supplemented from time to time.
"FNMA Securities" means securities issued or guaranteed by FNMA,
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including, without limitation, modified pass-through mortgage-backed
certificates guaranteed by FNMA pursuant to the National Housing Act, as
amended.
"GAAP" means generally accepted accounting principles in effect in the
----
United States on the date hereof.
"General Intangible" has the meaning given to such term in Article 9
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of the UCC.
"GNMA" means the Government National Mortgage Association, or any
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successor thereto.
"GNMA Guide" means the GNMA I and GNMA II Mortgage Backed Securities
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Guides, GNMA Handbooks 5500.1 and 5500.2 as amended, modified or supplemented
from time to time.
"GNMA Securities" means securities issued or guaranteed by GNMA,
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including, without limitation, modified pass-through mortgage-backed
certificates guaranteed by GNMA pursuant to Section 306(g) of the National
Housing Act, as amended.
"Governmental Authority" means any nation or government, any agency,
----------------------
department, state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranty Obligations" of any Person means any contract, agreement or
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understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness, lease, dividend or other obligation,
including any Mortgage Loan (the "Primary Obligation") of any other Person (the
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"Primary Obligor") in any manner, whether directly or indirectly, contingently
---------------
or absolutely, in whole or in part, including without limitation, agreements:
(a) to purchase (or repurchase) such Primary Obligation or any
property constituting direct or indirect security therefor;
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(b) to advance or supply funds (x) for the purchase or payment of any
such Primary Obligation, or (y) to maintain working capital or other balance
sheet conditions of the Primary Obligor or otherwise to maintain the net worth
or solvency of the Primary Obligor;
(c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such Primary Obligation of the ability of
the Primary Obligor to make payment of such Primary Obligation; or
(d) otherwise to assure or hold harmless the owner of any such Primary
Obligation against loss in respect thereof;
provided, that Guaranty Obligations shall not include (x) endorsements in the
ordinary course of business of negotiable instruments or documents for deposit
or collection, or (y) obligations under the FNMA Guide, the FHLMC Guide, the
GNMA Guide to make payments due to the holders of Mortgage Backed Securities
from the Primary Obligors on the Mortgage Loans to which such Mortgage Backed
Securities relate prior to the receipt of such payments from such Primary
Obligors. The amount of any Guaranty Obligation shall be deemed to be the
maximum amount for which the guarantor may be liable pursuant to the agreement
that governs such Guaranty Obligation, unless such maximum amount is not stated
or determinable, in which case the amount of such obligation shall be the
maximum reasonably anticipated liability thereon, as determined by such
guarantor in good faith.
"Indebtedness" of any Person means, without duplication, (i)
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indebtedness of such person for borrowed money; (ii) obligations of such Person
(a) evidenced by a note, bond, debenture, or similar instrument, (b) to pay the
deferred purchase price of Property or services (other than trade payables
incurred and timely paid in the ordinary course of business), (c) created or
arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person, (d) as lessee under any lease which
has been or, in accordance with GAAP, should be classified as a capital lease,
(e) upon which interest is paid or accrued, or (f) in respect of letters of
credit, acceptances, or similar obligations issued or created for the account of
such Person, (iii) Guaranty Obligations of such Person, (iv) liabilities secured
by any Lien on any Property owned by such Person, whether or not such Person has
assumed or otherwise become liable for the payment thereof, (v) liabilities of
such Person or any related Person in respect of unfunded vested benefits under a
Plan as determined in accordance with ERISA and (vi) obligations of such Person
in respect of interest rate protection agreements entered into in connection
with any of the items described in clauses (i), (ii), (iii), (iv) or (v) of this
definition; provided, that (x) Indebtedness does not include any Ordinary
Recourse Obligations, (y) the amount of Indebtedness attributable to any
Guaranty Obligation shall be determined as set forth in the definition of
Guaranty Obligation and (z) the amount of Indebtedness attributed to liabilities
secured by any Lien on any Property owned by any Person which liabilities are
non-recourse to such Person shall be the lesser of (i) the market
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value of such Property, as determined by such Person in good faith, and (ii) the
outstanding amount of the liabilities so secured.
"Instrument" has the meaning given to such term in Article 9 of the
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UCC.
"Intangible Assets" of Borrower means those assets of Borrower which
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are (i) deferred assets, (ii) contract rights to service mortgage loans,
capitalized excess servicing, patents, copyrights, trademarks, trade names,
franchises, goodwill, experimental expenses, and other similar assets which
would be classified as intangible on a balance sheet of Borrower prepared in
accordance with GAAP, (iii) unamortized debt discount and expense, and (iv)
assets located, and notes and receivables due from obligors domiciled, outside
of the United States of America.
"Investment" has the meaning specified in Section 7.6.
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"Investor" means each Person listed on Schedule 1.2, as the same may
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be amended or supplemented from time to time pursuant to Section 10.2(b).
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"Lender" means Bank One, Texas (or any other commercial bank or
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savings bank organized under the laws of the United States of America or any
state thereof which has a capital and surplus in excess of $200,000,000) in its
capacity as lender under the Backup Gestation Agreement.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
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arrangement, encumbrance, lien (whether statutory, consensual or otherwise), or
other security arrangement of any kind (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and any
financing statement filed under the UCC or comparable law of any jurisdiction in
respect of any of the foregoing).
"Loan Document" means any and "Loan Documents" means the collective
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reference to each of this Agreement, the Note, the Security Instruments and any
and all other agreements or instruments now or hereafter executed and delivered
by or on behalf of the Borrower in connection with, or as security for the
payment or performance of, any or all of the Obligations, as any of such
documents may be renewed, amended or supplemented from time to time.
"Material Adverse Effect" means any material adverse effect on (i) the
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validity or enforceability of this Agreement, the Note, the Security Agreement
or any other Loan Document, (ii) the business, operations, total Property or
financial condition of the Borrower, (iii) the collateral under any Security
Instrument, (iv) the enforceability or priority of the Lien in
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favor of BOIA on the collateral under any Security Instrument, or (v) the
ability of the Borrower timely to perform the Obligations.
"Maximum Credit Amount" means FIFTY MILLION DOLLARS ($50,000,000).
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"Maximum Rate" has the meaning specified in Section 10.9.
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"MBS Advances" for a particular Computation Period means the amount
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equal to (a) the product of the MBS Factor for such Computation Period times (b)
the lesser of (i) the Average Advances for such Computation Period and (ii) the
Average Borrowing Base for such Computation Period.
"MBS Factor" for a particular Computation Period means the amount
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equal to the ratio of (a) the Average MBS Collateral Value for such Computation
Period to (b) the Average Borrowing Base for such Computation Period.
"MBS Rate" for a particular Computation Period means the per annum
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rate of interest equal to the sum of (a) the Federal Funds Rate for such
Computation Period and (b) thirty one-hundredths of one percent (0.30%).
"Mortgage" means a mortgage or deed of trust which grants or purports
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to grant, as security for a Mortgage Loan, a Lien on real property.
"Mortgage Backed Securities" means FHLMC Securities, FNMA Securities
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and GNMA Securities.
"Mortgage Collateral" means, at any time, Mortgage Loans and Mortgage
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Backed Securities then subject to a Lien in favor of BOIA.
"Mortgage Document Delivery Request (Correction)" means a request
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substantially in the form of Exhibit "F" or such other form as to which Borrower
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and BOIA may agree.
"Mortgage Documents" means, for any Pledged Mortgage Loan, the
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Principal Mortgage Documents and the Other Mortgage Documents.
"Mortgage Loan" means a loan which is secured by a Mortgage.
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"Mortgage Note" means a promissory note which evidences a Mortgage
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Loan.
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"Multiemployer Plan" means a "multiemployer plan," as defined in
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Section 4001(a)(3) or Section 3(37) of ERISA or Section 414 of the Code, which
is maintained for the benefit of employees of Borrower or any Related Person.
"Net Worth" of Borrower means, as of any date of determination, the
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sum of (a) the total stock holder's equity which would appear on a balance sheet
of Borrower prepared as of such date in accordance with GAAP and (b) the
outstanding principal amount of Permitted Subordinated Indebtedness on such
date.
"Note" means the Gestation Financing Promissory Note delivered by the
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Borrower to BOIA pursuant to Section 2.2 in the form of Exhibit "A" and all
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renewals, extensions, modifications and rearrangements thereof.
"Obligations" means all present and future indebtedness, obligations,
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and liabilities of the Borrower to BOIA, and all renewals, rearrangements and
extensions thereof, or any part thereof, arising pursuant to this Agreement or
any other Loan Document, and all interest accrued thereon, and reasonable
attorneys' fees and other costs incurred in the drafting, negotiation,
enforcement or collection thereof, regardless of whether such indebtedness,
obligations and liabilities are direct, indirect, fixed, contingent, joint,
several or joint and several.
"OCC" means the Office of the Comptroller of the Currency of the
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United States of America and any Governmental Authority succeeding to the
functions of such office.
"Other Mortgage Documents" with respect to a Pledged Mortgage Loan
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means the original recorded Mortgage relating to such Mortgage Loan, a mortgagee
policy of title insurance with respect to title to the real property covered by
such Mortgage (or a binding and unexpired commitment to issue such insurance),
any appraisals and any insurance policies which relate to such Mortgage Loan,
and all other documents executed in connection with such Mortgage Loan, other
than the Principal Mortgage Documents.
"Parent" means NVR, Inc., a Virginia corporation.
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"PBGC" means the Pension Benefit Guaranty Corporation or any successor
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thereto.
"Permitted Dividends" means Dividends the declaration and payment of
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which is permitted under Section 7.13.
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"Permitted Intercompany Payables" means amounts due to Affiliates of
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Borrower in respect of Permitted Intercompany Transactions and the Permitted
Subordinated Indebtedness.
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"Permitted Intercompany Transactions" means transactions with
-----------------------------------
Affiliates of Borrower (a) which comply in all respects with Section 7.14 and
------------
are identified on Schedule 5.22 and (b) with respect to which the aggregate
-------------
consideration paid by Borrower in any month does not exceed the amount for each
type of transaction set forth on Schedule 5.22.
-------------
"Permitted Investment" means an Investment permitted pursuant to
--------------------
Section 7.6.
-----------
175
"Permitted Liens" means:
---------------
(a) Liens on the Collateral which secure payment of the Obligations;
(b) tax and other Liens permitted under Section 6.2;
-----------
(c) Liens to secure obligations of the Borrower in respect of workers
compensation and other labor laws; and
(d) financing statements of record which name BOIA as "secured party."
"Permitted Returns of Capital" means Returns of Capital which are
----------------------------
permitted under Section 7.13.
------------
"Permitted Subordinated Indebtedness" means Indebtedness under the
-----------------------------------
Affiliate Note.
"Permitted Subsidiaries" means Subsidiaries which are engaged in some
----------------------
aspect of the mortgage banking business, including without limitation, title
companies and with respect to which the aggregate capital contributed by
Borrower to all such Subsidiaries does not exceed $400,000.
"Permitted Tax Payments" means payments to or on behalf of the Parent
----------------------
or any Affiliate in respect of taxes, which payments are permitted under Section
-------
7.18.
----
"Person" means any individual, corporation, partnership, joint
------
venture, association, joint stock company, trust, unincorporated organization,
Governmental Authority, or other form of entity.
"Plan" means an "employee pension benefit plan" (as defined in Section
----
3(2) of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by Borrower or any of its Related Persons,
or an employee pension benefit plan as to which Borrower or any of its Related
Persons would be treated as a contributory sponsor under Title IV of ERISA if it
were to be terminated.
"Pledged Agency Commitment" means an Agency Commitment identified on a
-------------------------
Borrowing Request as an Agency Commitment in which the Borrower has granted or
will xxxxx XXXX a security interest to secure the Obligations.
"Pledged Mortgage Loan" means a Mortgage Loan identified on a
---------------------
Borrowing Request as a Mortgage Loan in which the Borrower has granted or will
xxxxx XXXX a security interest to secure the Obligations.
176
"Pledged Take-Out Commitment" means a Take-Out Commitment identified
---------------------------
on a Borrowing Request as a Take-Out Commitment in which the Borrower has
granted or will xxxxx XXXX a security interest to secure the Obligations.
"Principal Mortgage Documents" with respect to a Pledged Mortgage Loan
----------------------------
means the Mortgage Note which evidences such Pledged Mortgage Loan, the Mortgage
which secures such Pledged Mortgage Loan, an assignment in blank of such
Mortgage Note and such Mortgage, and if the Borrower is not named payee on the
face of such Mortgage Note, all intervening assignments of such Mortgage Note
and such Mortgage.
"Proceeds" means all "proceeds" as such term is defined in Section 9-
--------
306(a) of the UCC, and, in any event, shall include all interest or other income
received by the Borrower in respect of any item of Collateral.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, tangible or intangible.
"Related Person" means any Person that is a member of the same
--------------
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as Borrower or is under common control (within the meaning of Section
414(c) of the Code or Section 4001 of ERISA) with Borrower or is a member of any
affiliated service group (within the meaning of Section 414(m) of the Code)
which includes Borrower or is otherwise treated as part of the controlled group
which includes Borrower (within the meaning of Section 414(o) of the Code).
"Release of Lien" means a release of lien in the form of Exhibit "C".
--------------- -----------
"Repurchase Agreement" means an agreement with an Investor pursuant to
--------------------
which Borrower sells and agrees to repurchase interests in Mortgage Loans.
"Request for Release of Security Interest" means a request for release
----------------------------------------
of security interest substantially in the form of Exhibit "D" or such other form
-----------
as to which Borrower and BOIA may agree.
"Requested Borrowing Date" means the date on which an Advance in
------------------------
respect of a Borrowing is to be made, as identified by the Borrower in the
relevant Borrowing Request.
"Required Mortgage Documents" means, with respect to a Pledged
---------------------------
Mortgage Loan, any Mortgage Documents not then in the possession of the Agent
which must be certified to the Agency under the Agency Commitment to which such
Pledged Mortgage Loan has been Allocated.
177
"Requirement of Law" means as to any Person the articles of
------------------
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, statute, code, ordinance, order, rule, regulation,
judgment, decree, injunction, franchise, permit, certificate, license,
authorization or other determination, direction or requirement (including
without limitation, any of the foregoing which relate to energy regulations and
occupation, safety and health standards or controls and environmental, hazardous
materials use or disposal and pollution standards or controls) of any
Governmental Authority, in each case applicable to or binding upon such Person
or any of its Property or to which such Person or any of its Property is
subject.
"Returns of Capital" means any and all payments made by Borrower to
------------------
NVR Financial Services, Inc. or the Parent which represent a return of cash
capital contributions made by such Person to Borrower at any time on or after
the date hereof.
"Scheduled Termination Date" means July 31, 1998.
--------------------------
"Securities Credit Transaction Regulations" means Regulations G, T, U
-----------------------------------------
and X issued by the Board of Governors of the Federal Reserve System as in
effect from time to time.
"Security Agreement" means that certain Security Agreement dated as of
------------------
August 15, 1997 between Borrower and BOIA in the form of Exhibit "J", as
-----------
amended, modified or supplemented from time to time.
"Security Instruments" means (i) this Agreement, (ii) the Security
--------------------
Agreement, and (iii) such other executed documents as are or may be necessary to
grant to BOIA a perfected first, prior and continuing security interest in and
to the Collateral, and any and all other agreements or instruments now or
hereafter executed and delivered by or on behalf of the Borrower in connection
with, or as security for the payment or performance of, all or any of the
Obligations, including the Borrower's obligations under the Note and this
Agreement, as such documents may be amended, modified or supplemented from time
to time.
"Settlement Account" means the non-interest bearing demand deposit
------------------
account 1825167537 (Bank One, Texas, N.A., ABA 000000000 for credit to the
account of NVR Mortgage Finance, Inc. for the benefit of Banc One Investment
Advisors Corporation) established by the Borrower with the Agent which, subject
to the terms of the Custody Agreement, shall be used for (i) the deposit of the
proceeds from the sale of Mortgage Backed Securities; (ii) disbursements on
behalf of the Borrower in accordance with Section 3.7; and (iii) the payment of
-----------
the Obligations.
"Subsidiary" of any Person (the "First Person") means any Person which
---------- ------------
is properly treated as a subsidiary of the First Person under GAAP.
178
"Take-Out Commitment" means an agreement of the Borrower with a third
-------------------
party pursuant to which such third party agrees to purchase Mortgage Loans or
Mortgage Backed Securities of specified characteristics within a specific period
at a specific price or yield.
"Take-Out Price" means:
--------------
(a) with respect to a pool of Eligible Mortgage Loans which has been
Allocated to an Agency Commitment, the Take-Out Price of the Mortgage Backed
Security to be issued or guaranteed pursuant to such Agency Commitment; and
(b) with respect to an Eligible Mortgage Backed Security, the price
for such Eligible Mortgage Backed Security under the Take-Out Commitment to
which such Eligible Mortgage Backed Security has been Allocated.
"Tax Allocation Agreement" means that certain Amended and Restated Tax
------------------------
Allocation Agreement dated as of March 7, 1996, among the Parent, Borrower and
certain Affiliates of Borrower, a true and correct copy of which is attached as
Exhibit "L".
-----------
"Termination Date" means the Scheduled Termination Date or the date,
----------------
if any, on which the maturity of the Obligations is accelerated pursuant to
Section 8.2.
-----------
"Total Liabilities" of Borrower means, as of any date of
-----------------
determination, all amounts which would be included as liabilities on a balance
sheet of Borrower as of such date prepared in accordance with GAAP.
"UCC" means the Uniform Commercial Code as adopted in the State of
---
Texas, TEX. BUS. & COM. CODE XXX. (S)1.101 ET SEQ. (Xxxxxx 1968 and Supp. 1997),
as amended from time to time.
"U.S. Government Securities" means securities of the United States
--------------------------
government or any agency thereof which are backed by the full faith and credit
of the United States and have a current maturity of ninety days or less.
"Warehouse Agreement" means the Second Amended and Restated Loan
-------------------
Agreement among NVR Mortgage Finance, Inc., Bank One, Texas, N.A. (as Agent),
and The Lenders Party Thereto, dated June 13, 1996, as amended through June 12,
1997, as the same may be further amended from time to time.
"Warehouse Permitted Lien" means:
------------------------
(a) Liens to secure obligations of Borrower under the Warehouse
Agreement; and
179
(b) all Liens permitted under the Warehouse Agreement.
"Welfare Plan" means an employee welfare benefit plan (as defined in
------------
Section 3(1) of ERISA) or a group health plan (as defined in Section 4980B(g)(2)
of the Code) which is or has been established or maintained, or to which
contributions are or have been made, by Borrower or any of its Related Persons.
Section 1.2 Other Definitional Provisions.
-----------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement have the above-defined meanings when used in the Note or any other
Loan Document, certificate, report or other document made or delivered pursuant
hereto.
(b) Each term defined in the singular form in this Agreement shall mean
the plural thereof when the plural form of such term is used in this Agreement,
the Note or any other Loan Document, certificate, report or other document made
or delivered pursuant hereto, and each term defined in the plural form in this
Agreement shall mean the singular thereof when the singular form of such term is
used herein or therein.
(c) The words "hereof," "herein," "hereunder" and similar terms when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and section, schedule and exhibit
references herein are references to sections, schedules and exhibits to this
Agreement unless otherwise specified.
(d) As used herein, in the Note or in any other Loan Document,
certificate, report or other document made or delivered pursuant hereto,
accounting terms relating to any Person and not specifically defined in this
Agreement or therein shall have the respective meanings given to them under
GAAP.
(e) Unless otherwise specified herein, all times set forth herein are
Dallas, Texas time.
(f) Unless otherwise specified herein, all Section references are to
Sections in this Agreement.
180
ARTICLE II
----------
AMOUNT AND TERMS OF CREDIT
--------------------------
Section 2.1 Credit Facility. Commencing on the date of this Agreement
---------------
through the earlier to occur of the Termination Date and the Business Day
preceding the Scheduled Termination Date, and subject to all of the terms and
conditions of this Agreement, BOIA agrees to make Advances to or for the account
of Borrower on a revolving credit basis from time to time on any Business Day in
an amount not to exceed at any one time outstanding the Maximum Credit Amount.
Each Borrowing funded shall be in an aggregate amount of not less than $100,000
and shall consist of an Advance made on the Requested Borrowing Date by BOIA;
provided, that the aggregate amount of Advances at any time outstanding shall
--------
not exceed the lesser of (i) the Maximum Credit Amount and (ii) the Borrowing
Base. Subject to the other terms and conditions hereof, the Borrower may
borrow, repay (whether pursuant to Section 2.4, Section 3.4, or otherwise),and
----------- -----------
reborrow under this Section 2.1.
-----------
Section 2.2 Note. The Advances made by BOIA pursuant to Section 2.1
---- -----------
shall be evidenced by a Note payable to BOIA in the principal amount of the
Maximum Credit Amount. The Note shall be payable and bear interest as set forth
in Sections 2.4, 2.8 and 10.9.
--------------------------
Section 2.3 Manner of Requesting and Obtaining Borrowings. The Borrower
---------------------------------------------
shall request each Borrowing as follows: Not later than 11:59 p.m. on the
Business Day prior to the Requested Borrowing Date, the Borrower shall deliver a
Borrowing Request and all supporting documentation to BOIA and the Agent by
telecopy; the Borrower also shall deliver a hard copy of such Borrowing Request
and all supporting documentation to the Agent by overnight courier service for
receipt on the Requested Borrowing Date. Not later than 1:00 p.m. on the
Requested Borrowing Date specified in the Borrowing Request, BOIA shall verify
the accuracy and completeness of such Borrowing Request and all supporting
documentation with the Agent and the satisfaction of the provisions of Section
4.2 hereof; subject to such verification and the other terms and conditions of
this Agreement, BOIA shall initiate the Advance in respect of such Borrowing in
accordance with the deposit or wire instructions of the Borrower set forth in
such Borrowing Request.
Section 2.4 Mandatory Repayments. The Borrower shall repay the
---------------------
principal amount of each outstanding Advance on the earlier of: (i) the
scheduled settlement date for the sale of the Mortgage Backed Securities in
respect of which such Advance was made (as set forth in the relevant Borrowing
Request), which scheduled settlement date shall not, in any event, be later than
the Scheduled Termination Date; (ii) the date of any mandatory redemption
required pursuant to the terms of Section 3.4(c); and (iii) the Termination
--------------
Date. If at any time the aggregate amount of Advances outstanding exceeds
either the Maximum Credit Amount or the Borrowing Base, the Borrower, without
further notice or demand (which the Borrower hereby waives), shall immediately
repay so much of the outstanding Advances as may be
181
necessary to eliminate such excess by borrowing such amount from the Lender
pursuant to the Backup Gestation Agreement, or from any other source.
Section 2.5 Business Days. If the scheduled date for any payment
-------------
hereunder falls on a day which is not a Business Day, then for all purposes of
the Note and this Agreement the same shall be deemed to have fallen on the next
following Business Day, and such extension of time shall be included in the
computation of payments of interest.
182
Section 2.6 Payment Procedure. All payments of the principal of and
-----------------
interest upon the Note shall be made by the Borrower to the Settlement Account
pursuant to the terms of Section 12 of the Custody Agreement before 2:00 p.m. on
the respective dates when due in federal or other immediately available funds.
Payments received on any day which is not a Business Day and payments received
after 2:00 p.m. on any Business Day shall be treated for all purposes as having
been received on the Business Day next following receipt of such payment. If no
Event of Default exists or would result therefrom, payments in respect of the
Obligations shall be applied to specific types of obligations (e.g., fees,
expenses, principal and interest) as the Borrower directs. At any time when an
Event of Default exists of would result from following the payment directions of
the Borrower, payments in respect of the Obligations shall be applied to
specific types of Obligations in such order as BOIA may elect.
Section 2.7 Requirements of Law. (a) In the event that the adoption of
-------------------
any new Requirement of Law or any change in any existing Requirement of Law
(other than any change in the articles of incorporation, by-laws or other
organizational or governing documents of BOIA) or in the interpretation or
application thereof or compliance by BOIA with any report or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority issued after August 15, 1997:
(i) shall subject BOIA to any tax of any kind whatsoever with
respect to this Agreement, the Note or any Advance made by it, or change the
basis of taxation of payments to BOIA of principal, interest or any other amount
payable hereunder (except for changes in the rate of tax on the overall net
income of BOIA and changes in the computation of the overall net income of BOIA
that do not specifically involve payments to BOIA under this Agreement, the
Note, or any Advance, even though such changes have the effect of increasing the
effective rate of tax imposed on income of BOIA);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, commitments, advances or
loans by, or other credit extended by, or any other acquisition of funds by, any
office of BOIA which are not otherwise included in the determination of any
interest rate under the Note; or
(iii) shall impose on BOIA any other condition
and the result of any of the foregoing is to increase the cost to BOIA, by any
amount which BOIA deems to be material, of making, renewing or maintaining this
Agreement or any Advances or to reduce any amount receivable hereunder, in each
case, in respect of its Advances, then, the Borrower shall, within two (2)
Business Days, pay BOIA, upon its written demand setting forth the basis for
such demand, any additional amounts necessary to compensate BOIA for such
additional cost or reduced amount receivable. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by BOIA
to the
183
Borrower shall be conclusive in the absence of manifest error. This covenant
shall survive the termination of this Agreement and payment of the Note.
(b) In the event that BOIA shall have determined that the adoption of any
new law, rule, regulation or guideline regarding capital adequacy, or any change
therein or in the interpretation or application thereof or compliance by BOIA or
any corporation controlling it with any request or directive regarding capital
adequacy (whether or not having the force of law) from any central bank or
Governmental Authority issued after August 15, 1997, including, without
limitation, the issuance of any final rule, regulation or guideline, does or
shall have the effect of reducing the rate of return on BOIA's or such
corporation's capital to a level below that which BOIA or such corporation could
have achieved but for such adoption, change or compliance (taking into
consideration BOIA's or such corporation's policies with respect to capital
adequacy) by an amount deemed by BOIA to be material, then the Borrower shall
promptly pay BOIA, upon its written demand setting forth the basis for such
demand, any additional amounts necessary to compensate BOIA or such corporation
for such reduced rate of return. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by BOIA to the Borrower
shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Agreement and payment of the Note.
Section 2.8 Interest.
--------
(a) In General. Interest on an Advance shall accrue during the time that
----------
such Advance is outstanding and shall be payable on the earlier of: (i) the
scheduled settlement date for the sale of the Mortgage Backed Securities in
respect of which such Advance was made (as set forth in the relevant Borrowing
Request), which scheduled settlement date shall not, in any event, be later than
the Scheduled Termination Date; (ii) the date of any mandatory redemption
required pursuant to the terms of Section 3.4(c); and (iii) the Termination
--------------
Date. BOIA shall use its best efforts to give the Borrower written notice of
the interest due hereunder no later than one (1) Business Day prior to such
required interest payment date, but the failure to give such notice shall not
affect the Borrower's obligation to make such payment.
(b) MBS Advances. The MBS Advances for each Computation Period shall bear
------------
interest at the per annum rate of interest equal to the lesser of (i) the
applicable MBS Rate for such Computation Period and (ii) the Maximum Rate.
(c) Excess Advances; Overdue Amounts. The Excess Advances for each
--------------------------------
Computation Period shall bear interest at the per annum rate of interest equal
to the lesser of (i) the sum of four percent (4.00%) and the Base Rate and (ii)
the Maximum Rate. Overdue principal, interest and other amounts shall bear
interest for each day such amounts are overdue at the per annum rate of interest
equal to the lesser of (i) the sum of four percent (4.00%) and the Base Rate and
(ii) the Maximum Rate; all such interest shall be payable upon demand.
184
(d) 360 Day Year; Maximum Rate. For purposes of calculating any interest
--------------------------
rate which is based on the Base Rate or the Federal Funds Rate, interest shall
be calculated on the basis of the actual number of days elapsed over a 360-day
year. For purposes of calculating interest at the Maximum Rate, interest shall
be calculated on the basis of the actual number of days elapsed over whichever
of a 365-day or a 366-day year is applicable. Reference is made to Section 10.9
------------
for certain provisions limiting the rate of interest which may be charged under
this Agreement and the other Loan Documents. The provisions of Section 10.9
------------
shall be controlling in the event of any conflict between such provisions and
(i) the provisions of this Section 2.8, (ii) any other provision of this
-----------
Agreement, or (iii) any provision of any other Loan Document.
ARTICLE III
-----------
COLLATERAL
----------
Section 3.1 Granting Clause.
---------------
(a) To secure the punctual payment and performance of the Obligations, the
Borrower hereby grants BOIA (acting as agent on behalf of its customers and not
individually) a security interest in the Collateral.
(b) From time to time Borrower may xxxxx XXXX (acting as agent on behalf
of its customers and not individually) a security interest in additional
Collateral pursuant to this Agreement and the Security Agreement. Borrower
hereby agrees to execute all documents and instruments, and perform all other
acts reasonably deemed necessary by BOIA, to perfect the security interest of
BOIA in and to the Collateral identified in the granting clause of the Security
Agreement.
Section 3.2 Borrowing Requests. Each Borrowing Request shall identify
------------------
the Agency Commitment pursuant to which the Mortgage Backed Securities to be
backed by such Mortgage Loans are to be issued by FNMA or FHLMC or guaranteed by
GNMA (such Agency Commitment being the Agency Commitment to which such Mortgage
Loans have been "Allocated") and the Take-Out Commitment pursuant to which such
---------
Mortgage Backed Securities are to be sold (such Take-Out Commitment being the
Take-Out Commitment to which such Mortgage Backed Securities have been
"Allocated") and shall be accompanied by:
---------
(a) any Required Mortgage Documents with respect to such Mortgage Loans
not then in the possession of the Agent;
(b) a Release of Lien for such Agency Commitment and such Take-Out
Commitment, duly executed by the Borrower and the Agent; and
185
(c) a Bailee Letter in the form of Exhibit "G-1", duly executed by the
-------------
Borrower, the Agent and the applicable Investor; or
(d) the relevant Agency Forms, duly completed (but for certification by
the Agent where applicable) and in sufficient quantity to satisfy applicable
Agency requirements.
The Borrower shall (x) hold in trust for BOIA, with respect to each such
Mortgage Loan, the original recorded Mortgage relating to such Mortgage Loan, a
mortgagee policy of title insurance (or binding and unexpired commitment to
issue such insurance if the policy has not yet been delivered to the Borrower)
insuring the Borrower's perfected, first-priority Lien created by the Mortgage
securing such Mortgage Loan (subject only to exceptions permitted by the Agency
obligated under the Agency Commitment to which such Mortgage Loan has been
Allocated), any Appraisals and any insurance policies which relate to such
Mortgage Loan, and all other original documents executed in connection with such
Mortgage Loan and not delivered to the Agent and (y) upon request of BOIA or the
Agent, immediately deliver to the Agent such documents, together with an index
specifically identifying each such document. BOIA or the Agent, in their
reasonable discretion, may reject as unsatisfactory any items so delivered by
written notice to the Borrower specifying the reasons therefor, whereupon the
Borrower agrees promptly to use all reasonable efforts to correct any defects
therein identified by BOIA or the Agent and whereupon any Pledged Mortgage Loan
with respect to which any such defect which may be corrected but for which such
defect is not corrected within fifteen (15) days after the request for such
correction by BOIA or the Agent shall have a Collateral Value of zero.
Simultaneously with the delivery of any Borrowing Request, the Borrower may
deliver to the Agent a Request for Release of Security Interest in the form of
Exhibit "D" for processing in accordance with Section 3.10.
---------- ------------
Section 3.3 Power of Attorney. Effective upon the occurrence of an Event
-----------------
of Default, the Borrower hereby irrevocably appoints the Agent (as agent for,
and for the benefit of, BOIA) its attorney in fact, with full power of
substitution, for and on behalf and in the name of the Borrower, to (i) indorse
and deliver to any Person any check, instrument or other paper coming into the
Agent's possession and representing payment made in respect of any Mortgage Note
or Mortgage Backed Security included in the Collateral or in respect of any
other collateral for the Obligations including any Agency Commitment and any
Take-Out Commitment; (ii) prepare, complete, execute, deliver and record any
assignment to BOIA or to any other Person of any Mortgage relating to any
Mortgage Note included in the Collateral; (iii) indorse and deliver any Mortgage
Note or Mortgage Backed Security included in the Collateral and do every other
thing necessary or desirable to effect transfer of all or any part of the
Collateral to the Agent (as agent for, and for the benefit of, BOIA) or to any
other Person; (iv) take all necessary and appropriate action with respect to all
Obligations and the items of Collateral to be delivered to the Agent (as agent
for, and for the benefit of, BOIA) or held by the Borrower in trust for BOIA
including, without limitation, instruct any title company or closing agent to
deliver any Mortgage Note or Mortgage Document held by it directly to the Agent
(as agent
186
for, and for the benefit of, BOIA); (v) commence, prosecute, settle,
discontinue, defend, or otherwise dispose of any claim relating to any Agency
Commitment or any Take-Out Commitment or any other part of the Collateral; and
(vi) sign the Borrower's name wherever appropriate to effect the performance of
this Agreement. This Section 3.3 shall be liberally, not restrictively,
-----------
construed so as to give the greatest latitude to the Agent (as agent for, and
for the benefit of, BOIA), as the Borrower's attorney in fact, to collect, sell,
and deliver any of the Collateral and all other documents relating thereto. The
powers and authorities herein conferred on the Agent (as agent for, and for the
benefit of, BOIA) may be exercised by the Agent through any Person who, at the
time of the execution of a particular instrument, is an authorized officer of
the Agent. The power of attorney conferred by this Section 3.3 shall become
-----------
effective upon the occurrence, and remain effective during the continuance, of
an Event of Default and is granted for a valuable consideration and is coupled
with an interest and irrevocable so long as the Obligations, or any part
thereof, shall remain unpaid. All Persons dealing with the Agent, any officer
thereof, or any substitute attorney, acting pursuant hereto shall be fully
protected in treating the powers and authorities conferred by this Section 3.3
-----------
as existing and continuing in full force and effect until advised by BOIA that
the Obligations have been fully and finally paid.
Section 3.4 Disposition of Collateral.
-------------------------
(a) Pursuant to Agency Commitments. Subject to the provisions of this
------------------------------
Agreement and compliance with the FNMA Guide, the FHLMC Guide or the GNMA Guide,
as applicable, the Agent shall deliver the Mortgage Documents which relate to
Pledged Mortgage Loans Allocated to a particular Agency Commitment to or for the
account of the relevant Agency and shall, subject to the terms of the Custody
Agreement, release BOIA's security interest to secure the Obligations therein.
The Borrower shall complete each Agency Form such that the Mortgage Backed
Security to be issued or guaranteed pursuant to a Pledged Agency Commitment is
issued in the name of BOIA or its designee, or, if issued in the name of the
Borrower, is issued to an account subject to the sole dominion and control of
BOIA or its designee and shall take such other steps as may be requested by BOIA
to cause the security interest of BOIA in and to any Mortgage Backed Security
which constitutes Proceeds of one or more Pledged Mortgage Loans to be a
perfected, first-priority, security interest. Without limiting the generality
of the preceding sentence, unless otherwise instructed by BOIA, the Borrower
shall complete each GNMA form Schedule of Subscribers such that
"Manuf/Cust/FAO/Banc One Investment Advisors Corporation" appears as the
Subscriber/PTC Participant; complete each FNMA form Delivery Schedule such that
"Bank One, Texas as Agent/Cust" appears as the Depository Institution and
Telegraphic Abbreviation and "000000000" appears as the ABA Number and "NVR
Mortgage Finance, Inc. 310118" appears as the Owners Account Name/Account
Number; and shall complete each FHLMC form Warehouse Lender Release of Security
Interests and FHLMC form Guarantor Program; Security Settlement Information and
Delivery Authorization such that "Bank One, Texas as Agent, Cust/NVR Mortgage
Finance, Inc./310118" appears as the Depository
187
Institution/Type of Account/Beneficiary/Account Number and such that "111000614"
appears as the ABA Number. Upon completion of its review of the Required
Mortgage Documents and the Agency Forms relevant to a particular Agency
Commitment, the Agent shall deliver such Agency Forms to the applicable Agency
and shall deliver the Required Mortgage Documents to or for the account of such
Agency under a bailee letter or such other form of transmittal letter as such
agency may require; provided, that the release of the security interest in favor
--------
of BOIA in such Required Mortgage Documents and the Mortgage Loans evidenced
thereby shall be conditioned upon receipt by the Agent of Mortgage Backed
Securities in the amount specified in the relevant Agency Commitment.
(b) Pursuant to Take-Out Commitments. Mortgage Backed Securities which
--------------------------------
constitute Proceeds of Pledged Mortgage Loans shall be sold pursuant to the
Take-Out Commitments to which such Mortgage Backed Securities have been
Allocated. The Borrower agrees to take all steps necessary to satisfy the
conditions to the sale of any Mortgage Backed Security which constitutes
Proceeds of Pledged Mortgage Loans pursuant to the Take-Out Commitment to which
it has been Allocated. Mortgage Backed Securities from time to time included in
the Collateral shall be sold versus payment (and not "free"). In connection
with the sale of any Mortgage Backed Security included in the Collateral, BOIA
shall not be under any duty at any time to credit the Borrower for any amounts
due from any Person in respect of any purchase until BOIA has actually received
immediately available funds pursuant to the terms of Section 12 of the Custody
Agreement. Any funds so received will be treated as payments under and
processed and applied in accordance with Section 2.6. BOIA shall not be under
-----------
any duty at any time to collect any amounts or otherwise enforce any obligations
due from any Person in respect of any such purchase.
(c) Mandatory Redemption. In the event that the issuance of any Mortgage
--------------------
Backed Security pursuant to an Agency Commitment has not occurred within five
(5) Business Days of the scheduled date for such issuance (as set forth on the
relevant Borrowing Request), the Borrower agrees to make a prepayment of the
Advances in an aggregate amount equal to the Collateral Value (but for any event
or circumstance which caused such failure) of the Mortgage Loans intended to
back such Mortgage Backed Security. In the event the sale of a Mortgage Backed
Security pursuant to a Take-Out Commitment has not settled within five (5)
Business Days of the scheduled settlement date for such sale (as set forth in
the relevant Borrowing Request), the Borrower agrees to make a prepayment of the
Advances in an aggregate amount equal to the Collateral Value (but for any event
or circumstance which caused such failure) of such Mortgage Backed Security. In
either such case, Borrower hereby agrees to effect such prepayments by borrowing
the corresponding aggregate amount from the Lender pursuant to the Backup
Gestation Agreement, or from another source.
Section 3.5 Representations and Warranties Regarding Collateral. Each
---------------------------------------------------
Borrowing Request shall be deemed to constitute a representation and warranty by
the Borrower on the Requested Borrowing Date set forth therein that the Agency
Commitment and the Take-Out
188
Commitment identified thereon are both in full force and effect and that all
representations and warranties made or deemed made by the Borrower to the Agency
or Investor thereunder are true and correct. Upon the delivery of the Borrowing
Request by which such Pledged Mortgage Loan is identified, the Borrower
represents and warrants with respect to each Pledged Mortgage Loan that:
(a) The Borrower (and, if the Borrower did not originate such Pledged
Mortgage Loan, the originator of such Pledged Mortgage Loan) complied, and the
Principal Mortgage Documents and Other Mortgage Documents relevant to such
Pledged Mortgage Loan comply, in all material respects with all applicable
Requirements of Law, including, without limitation, (i) any usury laws, (ii) the
Real Estate Settlement Procedures Act of 1974, as amended, (iii) the Equal
Credit Opportunity Act, as amended, (iv) the Federal Truth in Lending Act, as
amended, (v) Regulation Z of the Board of Governors of the Federal Reserve
System, as amended, and (vi) any consumer protection laws;
(b) the full Face Amount of such Pledged Mortgage Loan (less any discount
points paid by or on behalf of the borrower under such Pledged Mortgage Loan)
was funded to the borrower thereunder;
(c) such Pledged Mortgage Loan was underwritten in compliance with the
requirements of the Agency under the Pledged Agency Commitment to which it has
been Allocated and the Mortgage Backed Security to be issued or guaranteed
pursuant to such Agency Commitment satisfies (or upon issuance thereof will
satisfy) all requirements for purchase under the Pledged Take-Out Commitment to
which it has been allocated;
(d) the Mortgage related to such Pledged Mortgage Loan creates a perfected
first-priority Lien (subject only to exceptions permitted by the Agency
obligated under the Agency Commitment to which such Mortgage Loan has been
Allocated) on residential real property consisting of land and a one-to-four
family dwelling thereon which is completed and ready for occupancy and such
Mortgage, the other Principal Mortgage Documents, the title policy relevant
thereto and the Other Mortgage Documents relevant thereto comply in all respects
with the requirements of the Agency under the applicable Agency Commitment;
(e) such Pledged Mortgage Loan is an Eligible Mortgage Loan; and
(f) the Borrower has all requisite power and authority to xxxxx XXXX a
security interest to secure the Obligations in such Pledged Mortgage Loan.
Section 3.6 Borrower Appointed Agent. BOIA hereby appoints the Borrower
------------------------
(and, in the case of any Pledged Mortgage Loan originated by a Person other than
the Borrower, also appoints such other Person) as its agent at the sole cost and
expense of the Borrower for
189
purposes of (a) obtaining Appraisals with respect to the property covered by the
Mortgages which relate to the Pledged Mortgage Loans and (b) otherwise complying
with Appraisal Laws and Regulations.
Section 3.7 Settlement Account. The Borrower hereby expressly acknowledges
------------------
that the Settlement Account is subject in all respects to the right of offset in
favor of the Agent (as agent for, and for the benefit of, BOIA) as granted under
Section 10.10. The Settlement Account shall be subject to the sole dominion and
-------------
control of the Agent (as agent for, and for the benefit of, BOIA) provided, that
--------
so long as no Default or Event of Default exists or would result therefrom, and
subject to the terms of the Custody Agreement, the Agent shall disburse sums on
deposit in the Settlement Account in accordance with the instructions of the
Borrower.
Section 3.8 Correction of Mortgage Notes. Subject to the terms of the
----------------------------
Custody Agreement, Borrower may from time to time request that the Agent release
a Mortgage Note (the "Released Note") that constitutes Collateral so that such
-------------
Mortgage Note may be replaced by a corrected Mortgage Note (the "Correction
----------
Note") by delivery to the Agent of a Mortgage Document Delivery Request
----
(Correction) which identifies the Released Note. Upon receipt by the Agent of
such a request, and so long as no Default or Event of Default shall be in
existence, and subject to the terms of the Custody Agreement, the Agent shall
deliver to Borrower, under a Bailee Letter and Trust Receipt (Correction) the
Released Note to be corrected, with the release of the Lien in favor of BOIA
being conditioned upon the receipt by the Agent of a Correction Note acceptable
to it; provided, that (i) at no time shall the outstanding principal balance of
all Released Notes which have not been replaced with Correction Notes exceed
$2,000,000 (the "Maximum Correction Amount") and (ii) unless the Correction Note
-------------------------
is delivered to the Agent indorsed in blank within fifteen (15) days of the
release by the Agent of the Released Note, the Collateral Value attributed to
both the Released Note and the Correction Note shall be zero.
Section 3.9 Borrowing Base Reports. No later than 11:00 a.m. on the
----------------------
first Business Day of each calendar week, BOIA shall complete the Borrowing Base
Report as of the close of business on the preceding Business Day and deliver a
copy of such Borrowing Base Report by telecopy to Borrower.
Section 3.10 Take-Out Commitments. At any time and from time to time,
--------------------
provided that no Default or Event of Default exists or would result therefrom,
and subject to the terms of the Custody Agreement, Borrower may obtain the
release of the security interest in favor of BOIA in any Take-Out Commitment or
specific commitment under a master Take-Out Commitment in connection with the
refinancing of specific Mortgage Loans upon written request to the Agent setting
forth the Mortgage Loans to be refinanced and the Take-Out Commitment(s) to be
released, demonstrating compliance with Section 6.20 and certifying that no
------------
Default or Event of Default exists or would result from the requested release.
In connection with any such release, BOIA shall, at Borrower's request and
expense, execute such form UCC-
190
3 amendments and/or terminations as may reasonably be necessary (in light of
maintaining the perfection and priority of any continuing security interests) to
release the security interest of BOIA in the relevant Take-Out Commitment(s).
ARTICLE IV
----------
CONDITIONS PRECEDENT
--------------------
The obligation of BOIA to make Advances hereunder is subject to fulfillment
of the conditions precedent stated in this Article IV.
----------
Section 4.1 Initial Borrowing Request. The obligation of BOIA to make
-------------------------
Advances hereunder shall be subject to, in addition to the conditions precedent
specified in Section 4.2, delivery to Bank One Trust Company, N.A. as custodian
-----------
for the benefit of BOIA (addressed as follows: Bank One Trust Company, N.A.,
000 X. Xxxxxxx Xxxx, Xxxxxxxxxxx, Xxxx 00000, Attention: Xxxxx Xxxxxx), of each
of the following (each of the following documents being duly executed and
delivered by each of the parties thereto and in form and substance satisfactory
to BOIA and, with the exception of the Note, each in a sufficient number of
originals that the Borrower and BOIA may have an executed original of each
document):
(a) this Agreement;
(b) the Note;
(c) the Security Agreement;
(d) the Custody Agreement;
(e) the Backup Gestation Agreement;
(f) a certificate of the Secretary or Assistant Secretary of the Borrower,
dated as of the date of this Agreement and certifying as to (i) resolutions of
the board of directors of the Borrower which authorize the execution and
delivery on behalf of the Borrower by certain officers of the Borrower of this
Agreement, the Note, the Security Agreement and the other Loan Documents to
which it is a party, (ii) the incumbency of such officers, (iii) the validity of
specimen signatures of such officers, and (iv) the articles of incorporation and
by-laws of the Borrower as in effect on the date thereof;
(g) a certificate from the Secretary of the Commonwealth of Virginia of a
date no earlier than July 1, 1997 as to (i) the good standing of Borrower and
(ii) the existence of Borrower;
191
(h) a certificate from the Secretary of the Commonwealth of Pennsylvania
of a date no earlier than July 1, 1997 as to (i) the good standing of Borrower
and (ii) the authority of Borrower to do business in Pennsylvania; and
(i) such other documents as BOIA may reasonably request at any time at or
prior to the Requested Borrowing Date of the initial Borrowing Request
hereunder, including without limitation, UCC-1 financing statements identifying
BOIA as "secured party" and the Borrower as "debtor."
Section 4.2 All Borrowing Requests. The obligation of BOIA to make any
----------------------
Advances pursuant to this Agreement is subject to the following further
conditions precedent:
(a) compliance with the terms of Section 2.3 hereof;
------- ---
(b) all Property in which the Borrower has granted a Lien to BOIA to
secure the Obligations shall have been physically delivered to the possession of
the Agent to the extent that such possession is necessary or appropriate for the
purpose of perfecting such Lien in such collateral;
(c) the representations and warranties of the Borrower contained in this
Agreement and any other Loan Document (other than those representations and
warranties which are by their terms limited to the date of the agreement in
which they are initially made) shall be true and correct in all material
respects on and as of the Requested Borrowing Date; and
(d) no Default or Event of Default shall have occurred and be continuing
and no change or event which constitutes a Material Adverse Effect shall have
occurred as of the Requested Borrowing Date set forth therein.
Each Borrowing Request shall be deemed to constitute a representation and
warranty by the Borrower on the Requested Borrowing Date set forth therein as to
the facts specified in Sections 4.2(c) and (d).
-----------------------
ARTICLE V
---------
BORROWER REPRESENTATIONS AND WARRANTIES
---------------------------------------
The Borrower represents and warrants as follows:
Section 5.1 Organization and Good Standing. Borrower (a) is a corporation
------------------------------
duly incorporated and existing in good standing under the laws of the
jurisdiction of its incorporation, (b) is duly qualified as a foreign
corporation and in good standing all
192
jurisdictions in which its failure to be so qualified could have a Material
Adverse Effect, (c) has the corporate power and authority to own its properties
and assets and to transact the business in which it is engaged and is or will be
qualified in those states wherein it proposes to transact business in the future
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 5.2 Authorization and Power. The Borrower has the corporate power
-----------------------
and requisite authority to execute, deliver and perform this Agreement, the
Note, the Security Agreement and the other Loan Documents to which it is a
party; the Borrower is duly authorized to and has taken all corporate action
necessary to authorize it to, execute, deliver and perform this Agreement, the
Note, the Security Agreement and the other Loan Documents to which it is a party
and is and will continue to be duly authorized to perform this Agreement, the
Note, the Security Agreement and such other Loan Documents.
Section 5.3 No Conflicts or Consents. Neither the execution and delivery
------------------------
by the Borrower of this Agreement, the Note, the Security Agreement or the other
Loan Documents to which it is a party, nor the consummation of any of the
transactions herein or therein contemplated, nor compliance with the terms and
provisions hereof or with the terms and provisions thereof, will (a) materially
contravene or conflict with any Requirement of Law to which the Borrower is
subject, or any indenture, mortgage, deed of trust, or other agreement or
instrument to which the Borrower is a party or by which the Borrower may be
bound, or to which the Property of the Borrower may be subject, or (b) result in
the creation or imposition of any Lien, other than the Liens granted to BOIA
pursuant to the Security Agreement and this Agreement on the Property of the
Borrower.
Section 5.4 Enforceable Obligations. This Agreement, the Note, the
-----------------------
Security Agreement and the other Loan Documents to which the Borrower is a party
are the legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms.
Section 5.5 Priority of Liens. Upon making an Advance, BOIA shall have a
-----------------
valid, enforceable, perfected, first priority Lien and security interest in (i)
each Pledged Mortgage Loan, (ii) each Pledged Agency Commitment, and (iii) each
Pledged Take-Out Commitment.
Section 5.6 No Liens. The Borrower has good and indefeasible title to the
--------
Collateral. All of the Collateral is free and clear of all Liens and other
adverse claims of any nature, other than Permitted Liens.
Section 5.7 Financial Condition. Borrower has delivered to BOIA copies of
-------------------
the balance sheet of Borrower as of December 31, 1996, and the related
statements of income, stockholders' equity and cash flows for the fiscal year
ended such date; such financial statements fairly present the financial
condition of Borrower as of such date and the results of
193
operations of Borrower for the period ended on such date and have been prepared
in accordance with GAAP; except as has been disclosed in writing to BOIA, as of
the date hereof, there were no material obligations, liabilities or indebtedness
(including material contingent and indirect liabilities and obligations and
forward or long-term commitments) of Borrower which are not reflected in such
financial statements; and no change which constitutes a Material Adverse Effect
has occurred in the financial condition or business of Borrower since the date
of such financial statements. Borrower also has delivered to BOIA copies of the
balance sheet of Borrower dated as of March 31, 1997 and the related statements
of income, and the cash flows as of such date; such financial statements fairly
present the financial condition of Borrower as of such date and have been
prepared in accordance with GAAP, subject to normal year-end adjustments; except
as has been disclosed in writing to BOIA as of the date thereof, there were no
material obligations, liabilities or indebtedness (including material contingent
and indirect liabilities and obligations and forward or long-term commitments)
of Borrower which are not reflected in such financial statements; and no change
which constitutes a Material Adverse Effect has occurred in the financial
condition or business of Borrower since the date of such financial statements.
Section 5.8 Full Disclosure. There is no material fact that the Borrower
---------------
has not disclosed to BOIA which could have a Material Adverse Effect. Neither
the financial statements referred to in Section 5.7, nor any Borrowing Request,
-----------
officer's certificate or statement delivered by the Borrower to BOIA (including,
without limitation, any such item delivered to the Agent in its capacity as
agent for BOIA under the Custody Agreement), contains any untrue statement of
material fact.
Section 5.9 No Default. Borrow is not in default under any loan agreement,
----------
mortgage, security agreement or other material agreement or obligation to which
it is a party or by which any of its Property is bound.
Section 5.10 No Litigation. Except as set forth on Schedule 5.10, there
------------- -------------
are no material actions, suits or legal, equitable, arbitration or
administrative proceedings pending, or to the knowledge of Borrower threatened,
against Borrower the adverse determination of which could constitute a Material
Adverse Effect.
Section 5.11 Taxes. All tax returns required to be filed by Borrower in
-----
any jurisdiction have been filed and all taxes, assessments, fees and other
governmental charges upon Borrower or upon any of its properties, income or
franchises have been paid prior to the time that such taxes could give rise to a
Lien thereon, unless protested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been established on the
books of Borrower. Borrower has no knowledge of any proposed or threatened tax
assessment against Borrower.
194
PAGE
----
Section 5.12 Principal Office, etc. The principal office, chief
----------------------
executive office and principal place of business of Borrower is located at 0000
Xxxxxxxxxxx Xxxx, Xxxxx 000, XxXxxx, Xxxxxxxx 00000, County of Fairfax.
Section 5.13 Compliance with ERISA.
---------------------
(a) Borrower has not violated the fiduciary responsibility rules of
Subtitle B of Title I of ERISA with respect to any Plan or any Welfare Plan in a
manner that could subject Borrower to, or cause Borrower to incur, liability in
respect of an action or a suit for damages, or a penalty, under ERISA, or an
excise tax under Section 4975 of the Code, which action, suit, penalty or tax,
in any case, would be materially adverse to Borrower.
(b) Each of Borrower and each Related Person has fulfilled its obligations
under the minimum funding standards of Section 412 of the Code and Section 302
of ERISA with respect to each Plan; neither Borrower nor any Related Person has
incurred, nor are any of them aware of facts which would cause them reasonably
to conclude that any of them are likely to incur any material liability to the
PBGC, other than for the payment of premiums; and neither Borrower nor any
Related Person has incurred, nor are any of them aware of facts which would
cause them reasonably to conclude that any of them are likely to incur, any
material liability to any Plan or any Welfare Plan, other than for the payment
of contributions in the ordinary course. Each Plan and each Welfare Plan is in
compliance in all respects with, and has been operated and administered in
accordance with the applicable provisions of, ERISA, the Code and each other
applicable federal or state law except to the extent the failure to so comply,
or to so operate or administer any such Plan and any such Welfare Plan, would
not be materially adverse to Borrower. No event or condition is occurring or
exists and neither Borrower nor any Related Person is aware of any facts which
would cause them reasonably to conclude that any event or condition will likely
occur or exist with respect to any Plan concerning which Borrower would be under
an obligation to furnish a report to Agent in accordance with Section 6.17.
------------
(c) Full payment has been timely made of all amounts which Borrower or any
Related Person is required under applicable law, the terms of each Plan or any
applicable collective bargaining agreement to have paid as contributions to each
Plan and no accumulated funding deficiency under Section 412 of the Code or
Section 302 of ERISA, whether or not waived, exists or is expected to exist with
respect to any Plan. As of the most recent valuation date of each Plan, each
Plan was "fully funded." For purposes of this Section 5.13, "fully funded"
------------
means that the fair market value of the assets of each Plan (determined
separately for each Plan and not in the aggregate) is not less than the present
value of the accrued benefits of all participants in each Plan (determined
separately for each Plan and not in the aggregate), computed on a Plan
termination basis by more than $2,000,000.
195
PAGE
----
(d) Neither Borrower nor any Related Person is or has ever been obligated
to contribute to any "multiple employer plan" (within the meaning of Section
4063 of ERISA) or to any Multiemployer Plan.
(e) The present value (determined in accordance with FAS 106 and using
actuarial and other assumptions which are reasonable in respect of the benefits
provided and the participants) of the liability of Borrower and each Related
Person for post-retirement benefits under any and all Welfare Plans, whether
written or unwritten, which are or have been established or maintained, or to
which contributions are or have been made, by Borrower or any of its Related
Persons does not materially exceed the assets under all such Welfare Plans
allocable to such benefits.
(f) No failure to comply with Code Section 4908B or Part B of Title I of
ERISA exists or has occurred with respect to any Welfare Plan.
Section 5.14 Ownership. The Parent owns, beneficially, of record and
---------
either directly or indirectly, 100% of the issued and outstanding shares of
capital stock of Borrower. Neither any "person" nor any "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities and Exchange Act of
1934, as amended) is the "beneficial owner" (as defined in Rule 13d-3 under such
act) of more than 50% of the total aggregate voting power of all classes of
voting stock of the Parent and/or warrants or options to acquire such voting
stock, calculated on a fully diluted basis.
Section 5.15 Subsidiaries. Borrower has no Subsidiaries other than
------------
Permitted Subsidiaries. Neither Borrower nor any Subsidiary has any interest in
any joint venture, partnership or other Person, except to the extent that such
an interest is a Permitted Investment.
Section 5.16 Indebtedness. Borrower has no Indebtedness outstanding
------------
other than the Obligations and the other Indebtedness permitted by Section 7.2.
-----------
Section 5.17 Permits, Patents, Trademarks, etc.
----------------------------------
(a) Borrower has all permits, licenses and governmental authorization
necessary for the operation of its business. All such permits, licenses and
governmental authorizations are in good standing and Borrower is in compliance
with all material terms of such permits, licenses and governmental
authorizations.
(b) Borrower owns or possesses (or is licensed or otherwise has the
necessary right to use) all patents, trademarks, service marks, trade names
(including the name "NVR Mortgage Finance, Inc.") and copyrights, technology,
know-how and processes, and all rights with respect to the foregoing, which are
necessary for the operation of its business, without any
196
known material conflict with the rights of others. The consummation of the
transactions contemplated hereby will not alter or impair in any material
respect any of such rights of Borrower.
Section 5.18 Status Under Certain Federal Statutes. Borrower is not (a)
-------------------------------------
a "holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, (b) a "public utility," as such term is defined in the Federal
Power Act, as amended, (c) an "investment company", or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1940, as amended, or (d) a "rail carrier," or a "person controlled by or
affiliated with a rail carrier," within the meaning of Title 49 U.S.C., or a
"carrier" to which 49 U.S.C. Section 11301(b)(1) is applicable.
Section 5.19 Securities Act and Securities Credit Transaction
------------------------------------------------
Regulations. Borrower has not issued any unregistered securities in violation
-----------
of the registration requirements of the Securities Act of 1933, as amended, or
of any other Requirement of Law, and is not violating any rule, regulation, or
requirement under the Securities Act of 1933, as amended, or the Securities and
Exchange Act of 1934, as amended. Borrower is not required to qualify an
indenture under the Trust Indenture Act of 1939, as amended, in connection with
its execution and delivery of the Notes. Borrower is not a party, whether as a
customer or a creditor, to any transaction that is subject to the Securities
Credit Transaction Regulations.
Section 5.20 Pollution Control. Borrower is in compliance with, and to
-----------------
the best of Borrower's knowledge, Borrower has, at all times since its
incorporation, been in material compliance with, all Requirements of Law
relating to the environment, hazardous material or pollution control.
Section 5.21 No Approvals Required. Other than consents and approvals
---------------------
previously obtained and actions previously taken, neither the execution and
delivery of this Agreement, the Note, the Security Agreement and the other Loan
Documents to which Borrower is a party, nor the consummation of any of the
transactions contemplated hereby or thereby requires the consent or approval of,
the giving of notice to, or the registration, recording or filing by Borrower of
any document with, or the taking of any other action in respect of, any
Governmental Authority which has jurisdiction over Borrower or any of its
Property.
Section 5.22 Material Agreements with Affiliates. Except as set forth on
-----------------------------------
Schedule 5.22, Borrower is not party to any material agreement, whether written
-------------
or oral, with the Parent or any other Affiliate of Borrower. As used in the
preceding sentence, "material agreement" includes any agreement in which the
fair value of the consideration paid or performance due any party exceeds
$100,000 and "with the Parent or any other Affiliate of Borrower" includes any
direct or indirect agreement with the Parent or any other Affiliate of Borrower.
197
Section 5.23 Taxpayer Identification. The Federal tax employer
-----------------------
identification number of Borrower is 00-0000000.
Section 5.24 Not an Insider. Neither Borrower nor the Parent, or any
--------------
other Affiliate of Borrower is, and no person having "control" (as defined in 12
U.S.C. Section 375(b)(9)) of Borrower or of any of the Parent or any other
Affiliate of Borrower is, an "executive officer," "director," or "principal
shareholder" (as defined in 12 U.S.C. Section 375(b)(9)) of BOIA, of any bank
holding company of which BOIA is a Subsidiary, or of any Subsidiary of any bank
holding company of which BOIA is a Subsidiary.
Section 5.25 Survival of Representations. All representations and
---------------------------
warranties by the Borrower herein shall survive delivery of the Note and the
making of the Advances, and any investigation at any time made by or on behalf
of BOIA shall not diminish the right of BOIA to rely thereon.
ARTICLE VI
----------
AFFIRMATIVE COVENANTS
---------------------
The Borrower shall at all times comply with the covenants contained in this
Article VI, from the date hereof and for so long as any Obligation is
----------
outstanding.
Section 6.1 Financial Statements and Reports. Borrower shall furnish to
--------------------------------
BOIA the following, all in form and detail reasonably satisfactory to BOIA:
(a) Promptly after becoming available, and in any event within 90 days
after the close of each fiscal year of Borrower, the consolidated balance sheet
of Borrower and its Subsidiaries, if any, as of the end of such year, and the
related consolidated statement of income of Borrower and its Subsidiaries
accompanied by the related report of independent certified public accountants
reasonably acceptable to BOIA which report shall be unqualified and to the
effect that such statements have been prepared in accordance with GAAP applied
on a basis consistent with prior periods except for such changes in such
principles with which the independent public accountants shall have concurred,
and, if available, accompanied by audited financial statements (including
balance sheets, profit and loss statements, statements of cash flow, and any
other financial statements, reports, or information specified by Agent) of NVR
Financial Services, Inc., reflecting the corresponding figures as of the end of
and for the preceding fiscal year in comparative form, together with the related
report prepared by an independent certified public accountant reasonably
acceptable to BOIA;
(b) Promptly after becoming available, and in any event within 30 days
after the end of each month, a consolidated balance sheet of Borrower and its
Subsidiaries, if any, as of
198
the end of such month and the related consolidated statements of income,
stockholders' equity and cash flows of Borrower and its Subsidiaries, if any,
for such month and the period from the beginning of the current fiscal year of
borrower through the end of such month, (i) certified by the chief financial
officer of Borrower to have been prepared in accordance with GAAP applied on a
basis consistent with prior periods, subject to normal year-end adjustments, and
(ii) accompanied by a completed Officer's Certificate in the form of Exhibit K,
---------
executed by the president or chief financial officer of Borrower;
(c) Promptly (i) upon receipt thereof, a copy of each other report
submitted to Borrower or any affiliate of Borrower by independent accountants in
connection with an annual, interim or special audit of the books of such Person
and (ii) upon preparation thereof, a copy of each audit report regarding
Borrower submitted to FNMA, FHLMC or GNMA;
(d) Simultaneously with the delivery of the financial information set
forth in Section 6.1(b), a report in detail satisfactory to BOIA setting forth,
--------------
for the calendar month to which such financial information relates, all
Permitted Intercompany Payables, all receivables from Affiliates, all
transactions of Borrower which give rise to Permitted Intercompany Payables, all
receivables from Affiliates, all transactions of Borrower which give rise to
Permitted Intercompany Payables and all transactions of Borrower with any
Affiliate of Borrower;
(e) Promptly and in any event within 30 days after the end of each month,
management report regarding Borrower's commitment position, pipeline position
and production;
(f) Such other information concerning the business, Properties or
financial condition of Borrower, any Affiliate or any Investor as BOIA may
request.
Section 6.2 Taxes and Other Liens. Borrower shall pay and discharge
---------------------
promptly all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or upon any of its Property as well as all claims of any
kind (including claims for labor, materials, supplies and rent) which, if
unpaid, might become a Lien upon any or all of its Property; provided, however,
that Borrower shall not be required to pay any such tax, assessment, charge,
levy or claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings diligently conducted by or
on behalf of Borrower and if Borrower shall have set up reserves therefor which
are adequate under GAAP.
Section 6.3 Maintenance. Borrower shall (i) maintain its corporate
-----------
existence, rights and franchises; (ii) observe and comply in all material
respects with all Requirements of Law, and (iii) maintain its Properties (and
any Properties leased by or consigned to it or held under title retention or
conditional sales contracts) in good and workable condition at all times and
make all repairs, replacements, additions and improvements to its Properties as
are necessary
199
and proper so that the business carried on in connection therewith may be
conducted properly and efficiently at all times.
Section 6.4 Further Assurances. Borrower shall, within three (3)
------------------
Business Days (or, in the case of Mortgage Notes, such longer period as provided
under Section 3.8) after the request of BOIA, cure any defects in the execution
-----------
and delivery of the Note, this Agreement or any other Loan Document and Borrower
shall, at its expense, promptly execute and deliver to BOIA upon request all
such other and further documents, agreements and instruments in compliance with
or accomplishment of the covenants and agreements of Borrower in this Agreement
and in the other Loan Documents or to further evidence and more fully describe
the collateral intended as security for the Note, or to correct any omissions in
this Agreement or the other Loan Documents, or to perfect, protect or preserve
any Liens created (or intended to be created) pursuant to any of the other Loan
Documents, or to make any recordings, to file any notices, or obtain any
consents.
Section 6.5 Reimbursement of Expenses. The Borrower shall, within ten
-------------------------
(10) Business Days of notice of the amount thereof (which notice shall include
appropriate evidence of the amount of such reimbursable item) pay (i) all
reasonable legal fees incurred by BOIA in connection with any amendments,
consents or waivers executed in connection with this Agreement, the Note and the
other Loan Documents which are either requested by the Borrower or which are, in
BOIA's reasonable judgment, necessitated by the Borrower's business practices,
(ii) all fees, charges or taxes for the recording or filing of the Security
Instruments, (iii) all shipping, postage and transfer costs incurred by BOIA in
connection with the administration of this Agreement, the Note and the other
Loan Documents, including courier expenses incurred in connection with the
Collateral, and (iv) all amounts expended, advanced or incurred by BOIA to
satisfy any obligation of the Borrower under this Agreement or any of the other
Loan Documents or to collect the Note, or to enforce the rights of BOIA under
this Agreement or any of the other Loan Documents, which amounts shall include
all court costs, attorneys' fees (including without limitation, for trial,
appeal or other proceedings), fees of auditors and accountants, and
investigation expenses, reasonably incurred by BOIA in connection with any such
matters, together with interest at the post-maturity rate specified in Section
-------
2.8 on each item specified in clauses (i) through (iv) from thirty (30) days
---
after the date of written demand or request for reimbursement until the date of
reimbursement.
Section 6.6 Insurance. Borrower shall maintain with financially sound
---------
and reputable insurers, insurance with respect to its Properties and business
against such liabilities, casualties, risks and contingencies and in such types
and amounts as is customary in the case of Persons engaged in the same or
similar businesses and similarly situated, including, without limitation, a
fidelity bond or bonds with financially sound and reputable insurers with such
coverage and in such amounts as is customary in the case of Persons engaged in
the same or similar businesses and similarly situated. Borrower shall cause the
improvements on the land covered by each Mortgage relevant to Mortgage Loans
included in the Mortgage Collateral to
200
be kept continuously insured at all times by responsible insurance companies
against fire and extended coverage hazards under policies, binders, letters or
certificates of insurance, with a standard mortgagee clause in favor of Borrower
and its assigns. Each such policy must be in an amount no less than the lesser
of the maximum insurable value of the improvements or the original principal
amount of the relevant Mortgage Loan, without reduction by reason of any co-
insurance, reduced rate contribution, or similar clause of the policies or
binders. Upon request of BOIA, Borrower shall furnish or cause to be furnished
to BOIA from time to time a summary of the insurance coverage of Borrower in
form satisfactory to BOIA and if requested shall furnish BOIA copies of the
applicable policies.
Section 6.7 Accounts and Records. Borrower shall keep books of record
--------------------
and account in which full, true and correct entries will be made of all dealings
or transactions in relation to its business activities, in accordance with GAAP.
Section 6.8 Appraisals. The Borrower shall obtain and maintain a copy
----------
of an Appraisal with respect to the underlying property covered by the Mortgage
which relates to each Pledged Mortgage Loan, shall require that all Appraisals
delivered to it in connection with the Pledged Mortgage Loans (whether
originated by the Borrower or purchased by it) comply in all respects with the
Appraisal Laws and Regulations, shall implement and maintain administrative and
operating procedures which permit the Borrower and BOIA (or the Agent at BOIA's
election) to verify such compliance, and shall permit and shall use all
reasonable efforts to cause each Person from whom it purchases Mortgage Loans to
permit any officer, employee or agent of BOIA (or the Agent at BOIA's election)
to visit and inspect the Properties of the Borrower and such Person relevant to
such compliance, to inspect the records of the Borrower and such Person relevant
to such compliance, to take copies and extracts therefrom, and to discuss the
Appraisals relevant to the Pledged Mortgage Loans with the responsible officers,
employees and agents (including any third party appraisers) of the Borrower and
such Person, all at such reasonable times (which may include unannounced "spot"
checks) and as often as BOIA may desire.
Section 6.9 Right of Inspection. The Borrower shall permit any officer,
-------------------
employee or agent of BOIA (or the Agent at BOIA's election) to visit and inspect
any of the Properties of the Borrower, examine the Borrower's books of record
and accounts, take copies and extracts therefrom, and discuss the affairs,
finances and accounts of the Borrower with the Borrower's officers, accountants
and auditors, all at such reasonable times upon reasonable notice and as often
as BOIA may desire.
Section 6.10 Notice of Certain Events. Borrower shall promptly notify
------------------------
BOIA of (i) the receipt of any notice from, or the taking of any other action
by, the holder of any promissory note, debenture or other evidence of
Indebtedness of Borrower with respect to a claimed default, together with a
detailed statement by a responsible officer of Borrower specifying the notice
given or other action taken by such holder and the nature of the claimed default
and
201
what action Borrower is taking or proposes to take with respect thereto; (ii)
the commencement of, or any determination in, any legal, judicial or regulatory
proceedings which, if adversely determined, could have a Material Adverse
Effect; (iii) the occurrence of any dispute between Borrower and any
Governmental Authority or any other Person which, if adversely determined, could
have a Material Adverse Effect; (iv) the occurrence of any event or condition
which, if adversely determined, would have a Material Adverse Effect; or (v)
obtaining knowledge of any event or condition if the effect thereof is to cause
or permit with the giving of notice or lapse of time or both the holder of any
promissory note, debenture or other evidence of Indebtedness of Borrower to
cause such Indebtedness to become due prior to its stated maturity.
Section 6.11 Performance of Certain Obligations. Borrower shall perform
----------------------------------
and observe in all material respects each of the provisions of each Pledged
Agency Commitment and each Pledged Take-Out Commitment on its part to be
performed or observed and will cause all things to be done which are necessary
to have each item of Mortgage Collateral "covered" (within the meaning given
such term in Section 6.20) by an Agency Commitment or a Take-Out Commitment
------------
comply with the requirements thereof.
Section 6.12 Use of Proceeds; Margin Stock. The proceeds of the Advances
-----------------------------
shall be used by the Borrower solely for the purpose of paying indebtedness
outstanding under this Agreement and for general corporate purposes of the
Borrower. None of such proceeds shall be used for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U of the Board of Governors
of the Federal Reserve System, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin stock or
for any other purpose which might constitute this transaction a "purpose credit"
within the meaning of such Regulation U. Neither the Borrower nor any Person
acting on behalf of the Borrower shall (i) take any action in violation of
Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System, (ii) violate Section 7 of the Securities Exchange Act of 1934, as
amended, or any rule or regulation thereunder, or (iii) engage in any
transaction which is subject to the Securities Credit Transaction Regulations.
Section 6.13 Notice of Default. The Borrower shall furnish to BOIA
-----------------
immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of existence thereof
and the action which the Borrower is taking or proposes to take with respect
thereto.
Section 6.14 Compliance with Loan Documents. The Borrower shall promptly
------------------------------
comply with any and all covenants and provisions of this Agreement, the Note,
the Security Agreement and the other Loan Documents.
202
Section 6.15 Compliance with Material Agreements. Borrower shall comply
-----------------------------------
in all material respects with all material agreements, indentures, or documents
binding on it or affecting its Property or business.
Section 6.16 Operations and Properties. Borrower shall act prudently and
-------------------------
in accordance, in all material respects, with all Requirements of Law and
customary industry standards in managing and operating its Property.
Section 6.17 ERISA and Plans. As soon as practicable, and in any event
---------------
within 10 days after an officer of Borrower or any Related Person knows or
reasonably should know that any of the events or conditions specified below has
occurred or exists, or is expected to occur or exist, Borrower shall deliver to
BOIA an officer's certificate executed by the president or any vice president of
Borrower and setting forth details respecting such event or condition and the
action, if any, that Borrower or any Related Person proposes to take with
respect thereto (and a copy of any notice or report filed with, given to or
received from the PBGC, the Internal Revenue Service or the Department of Labor
with respect to such event or condition);
(a) any reportable event, as defined in Section 4043(b) of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which the PBGC has
not by regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event (provided that a failure
to meet the minimum funding standard of Section 412 of the Code or Section 302
of ERISA shall be a reportable event regardless of the issuance of any waivers
in accordance with Section 412(d) of the Code and shall be required to be
reported pursuant to this subsection (a));
(b) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan or the amendment of any Plan
in a manner which would be treated as a termination of such Plan under Section
4041(e) of ERISA;
(c) a substantial cessation of operations within the meaning of Section
4062(e) of ERISA under circumstances which could result in the treatment of
Borrower or any related Person as a substantial employer under a "multiple
employer Plan" or the application of the provisions of Section 4062, 4063 or
4064 of ERISA to Borrower or any Related Person;
(d) the institution by the PBGC of proceedings under Section 4062 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan,
or the receipt by Borrower or any Related Person of a notice from a
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan;
(e) the complete or partial withdrawal by Borrower or any Related Person
under Section 4063, 4203 or 4205 or ERISA from a Plan which is a "multiple
employer Plan" or a Multiemployer Plan, or the receipt by Borrower or any
Related Person of notice from a
203
Multiemployer Plan that it is in reorganization or it is insolvent pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate under Section
4041A of ERISA or from a "multiple employer Plan" that it intends to terminate;
and
(f) any event or series of events occurs or exists which could reasonably
be expected to result in (i) a material liability on the part of Borrower or any
Related Person under Title IV of ERISA, (ii) the institution of a proceeding
against Borrower or any Related Person to enforce Section 515 of ERISA, or (iii)
the imposition of a Lien on any Property of Borrower or any Related Person
pursuant to Section 4068 of ERISA or Section 412(n) of the Code.
Section 6.18 Benefit Plan Obligations. Borrower shall reduce future
------------------------
contributions or benefits to each Plan to which it has an obligation to
contribute if and to the extent necessary to avoid the occurrence of an Event of
Default hereunder, to the extent such reduction may be effected without causing
a "partial termination," as that term is used in Section 411(d) of the Code and
the regulations promulgated pursuant thereto, or may otherwise be effected
without causing the Plan to become disqualified or violating the provisions of
ERISA or the Code.
Section 6.19 Environmental Matters. Borrower shall comply in all
---------------------
material respects with all Requirements of Law relating to the environment,
hazardous materials or pollution control and shall furnish to BOIA immediately
upon becoming aware of any claim under any such Requirement of Law, a written
notice specifying the nature of such claim, the Person bringing such claim and
the action which Borrower is taking or proposes to take with respect thereto.
Section 6.20 Take-Out Commitments; Coverage. Borrower shall enter into
------------------------------
and maintain Agency Commitments and Take-Out Commitments sufficient at all times
to cover each Mortgage Loan and Mortgage Backed Security included in the
Mortgage Collateral (including any Mortgage Backed Security to be issued or
guaranteed pursuant to an Agency Commitment by which Mortgage Loans included in
the Collateral are covered). For purposes of this Agreement, a Mortgage Loan or
Mortgage Backed Security shall be "covered" by an Agency Commitment or a Take-
Out Commitment if and only if (i) such Mortgage Loan or Mortgage Backed Security
is of a type, including as to amount, maturity and rate or yield, which
satisfies the requirements of such Agency Commitment or Take-Out Commitment,
(ii) the sum of the principal amount of such Mortgage Loan or Mortgage Backed
Security and the principal amounts of the Mortgage Loans or Mortgage Backed
Securities previously assigned to such Agency Commitment or Take-Out Commitment
for purposes of determining coverage do not exceed the maximum amount thereof,
(iii) with respect to Mortgage Loans, the documentation and underwriting of each
such Mortgage Loan complies in all respects with the requirements of such Agency
Commitment or Take-Out Commitment and (iv) with respect to Mortgage Loans
covered by an Agency Commitment, any Mortgage Backed Security to be issued or
guaranteed pursuant thereto is covered by a Take-Out Commitment.
204
Section 6.21 Maintenance of Backup Gestation Agreement. Throughout the
-----------------------------------------
term of this Agreement, Borrower shall at all times maintain in effect the
Backup Gestation Agreement, or a substitute backup facility from a lender and on
terms satisfactory to BOIA.
ARTICLE VII
-----------
NEGATIVE COVENANTS
------------------
The Borrower shall at all times comply with the covenants contained in this
Article VII, from the date hereof and for so long as any Obligation is
-----------
outstanding.
Section 7.1 No Merger. Borrower shall not merge or consolidate with or
---------
into any corporation, nor shall Borrower acquire by purchase or otherwise all or
substantially all of the assets (except to the extent that such assets consist
solely of Mortgage Notes and Mortgage Backed Securities or capital stock of any
Person.
Section 7.2 Limitation on Indebtedness. Borrower shall not incur,
--------------------------
create, contract, assume, have outstanding, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness except (a)
Repurchase Agreements, (b) the Backup Gestation Agreement, (c) Permitted
Intercompany Payables, (d) Indebtedness, including the Obligations, secured
either by Permitted Liens or Warehouse Permitted Liens, and by no other Liens on
the Property of Borrower, (e) liabilities in respect of unfunded vested benefits
under a Plan as determined in accordance with ERISA, to the extent permitted
under Section 7.16, (f) liabilities as lessee under leases which have been or,
------------
in accordance with GAAP, should be classified as capitalized leases in an
aggregate amount not greater than $1,000,000, (g) Indebtedness under the
Warehouse Agreement, and (h) all other Indebtedness permitted under the
Warehouse Agreement.
Section 7.3 Fiscal Year, Method of Accounting. Borrower shall not
---------------------------------
change its fiscal year or method of accounting.
Section 7.4 Business. Borrower shall not, directly or indirectly,
--------
engage in any business other than that currently engaged in by Borrower or any
other business customarily engaged in by other Persons in the mortgage banking
business.
Section 7.5 Liquidations, Consolidations and Dispositions of Substantial
------------------------------------------------------------
Assets. Borrower shall not dissolve or liquidate or sell, transfer, lease or
------
otherwise dispose of any material portion of its property or assets or business;
provided, however, that nothing in this Section 7.5 shall be construed to
-----------
prohibit Borrower from selling Mortgage Notes or Mortgaged Backed Securities in
the ordinary course of its business.
205
Section 7.6 Loans, Advances and Investments. Borrower shall not make
-------------------------------
any loan (other than loans made in the ordinary course of its business as a
mortgage company), advance, or capital contribution to, or investment in
(including any investment in any Subsidiary, joint venture or partnership), or
purchase or otherwise acquire any of the capital stock, securities, or evidences
of indebtedness of, any Person (collectively, "Investment"), or otherwise
----------
acquire any interest in, or control of, another Person, except for the
following:
(a) Cash Equivalents;
(b) Any acquisition of securities or evidences of indebtedness of
others when acquired by Borrower in settlement of accounts receivable or other
debts arising in the ordinary course of its business, so long as the aggregate
amount of any such securities or evidence of indebtedness is not material to the
business or financial condition of Borrower;
(c) Mortgage Backed Securities and Mortgage Notes acquired in the
ordinary course of Borrower's business;
(d) Loans and advances to (i) employees, officers and directors of
Borrower or any Affiliate of Borrower or (ii) the Parent and other Affiliates of
Borrower which are neither Subsidiaries nor Persons which would, if organized as
a corporation and Borrower owned a sufficient interest therein, constitute a
Subsidiary of Borrower, in an aggregate principal amount outstanding at any one
time not to exceed $250,000 (or such larger amount as BOIA may, in its sole
discretion, approve in writing prior to the making thereof); and
(e) Capital contributions to Permitted Subsidiaries, and other
Persons which would, if organized as a corporation and Borrower owned a
sufficient interest therein, constitute a Permitted Subsidiary in an aggregate
amount not greater than $400,000.
Section 7.7 Use of Proceeds. Borrower shall not permit the proceeds of
---------------
the Advances to be used for any purpose other than those permitted by Section
-------
6.12. Borrower shall not, directly or indirectly, use any of the proceeds of
----
the Advances for the purpose of engaging in any transaction which is subject to
the Securities Credit Transaction Regulations.
Section 7.8 Actions with Respect to Collateral. Borrower shall not:
----------------------------------
(a) Compromise, extend, release, or adjust payments on any Mortgage
Loan included in the Collateral, accept a conveyance of mortgaged property in
full or partial satisfaction of any such Mortgage Loan, or release any Mortgage
securing any Mortgage Loan;
(b) Agree to the amendment or termination of any Take-Out Commitment
included in the Collateral or to the substitution of any Pledged Take-Out
Commitment for a Pledged Take-Out Commitment without the consent of BOIA;
206
(c) Transfer, sell, assign, or deliver any Collateral pledged to BOIA
to any Person other than BOIA or the Agent, except in accordance with Article
-------
III; or
---
(d) Grant, create, incur, permit or suffer to exist any Lien upon any
Mortgage Collateral except for Permitted Liens.
Section 7.9 Net Worth. The Net Worth of Borrower at any date shall not
---------
be less than Eight Million Seven Hundred Fifty Thousand Dollars ($8,750,000).
Section 7.10 Adjusted Current Ratio. The ratio of the current assets
----------------------
(determined in accordance with GAAP) to the current liabilities (determined in
accordance with GAAP except that the amount of any Permitted Subordinated
Indebtedness shall be excluded from the determination thereof) of Borrower at
any date shall not be less than 1.02 to 1.0 at any time.
Section 7.11 Liabilities to Net Worth Ratio. The ratio of (i) the Total
------------------------------
Liabilities (excluding (x) net deferred taxes, (y) Advances to the extent of the
aggregate Collateral Value of all Eligible Mortgage Loans, and (z) obligations
of Borrower in respect of Repurchase Agreements) of Borrower to (ii) the Net
Worth of Borrower shall not be more than 12.0 to 1.0 at any time.
Section 7.12 [Intentionally Omitted]
Section 7.13 Restrictions on Dividends and Returns of Capital. Borrower
------------------------------------------------
shall not directly or indirectly declare or make, or incur any liability to
make, any Dividend or Return of Capital unless, prior thereto, Borrower shall
have submitted to BOIA a certificate of its President or Chief Financial Officer
certifying that no Default or Event of Default exists or would result therefrom
and, in the case of any Return of Capital, demonstrating the amount and source
of such return.
Section 7.14 Transactions with Affiliates.
----------------------------
(a) Borrower shall not enter into any transactions, including,
without limitation, any purchase, sale, lease or exchange of property or
services with or the incurring of Indebtedness to any Affiliate unless such
transactions are otherwise permitted under this Agreement, are in the ordinary
course of Borrower's business and are upon fair and reasonable terms no less
favorable to Borrower than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate; and
(b) The aggregate amount paid or payable by Borrower to Affiliates of
Borrower exclusive of Permitted Dividends, Permitted Tax Payments, payments in
respect of
207
Permitted Intercompany Payables and Permitted Returns of Capital shall not
exceed $250,000 in the aggregate in any twelve month period.
Section 7.15 Liens. Borrower shall not grant, create, incur, assume,
-----
permit or suffer to exist any Lien which, with respect to any Collateral, is not
a Permitted Lien (except as permitted under Section 7.8(d)), and, with respect
--------------
to any of its other Property, is not a Warehouse Permitted Lien, in either case
including any proceeds therefrom.
Section 7.16 Compliance with ERISA. Borrower shall not, and shall not
---------------------
permit any Related Person to:
(a) (i) engage in any transaction in connection with which Borrower
or any Related Person could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code, (ii) fail to make full payment when due of all amounts which would be
deductible by Borrower or any Related Person and which, under the provisions of
any Plan, applicable law or applicable collective bargaining agreement, Borrower
or any Related Person is required to pay as contributions thereto, or (iii)
permit to exist any accumulated funding deficiency, whether or not waived, with
respect to any Plan (other than a Multiemployer Plan or a "multiple employer
Plan"), if, in the case of any of clause (i), (ii) or (iii) above such penalty
or tax, or the failure to make such payment, or the existence of such
deficiency, as the case may be, will likely have a material adverse effect on
the financial position of Borrower;
(b) permit the amount of unfunded benefit liabilities (within the
meaning of Section 4001(a)(18) of ERISA) under each Plan maintained, established
or contributed to at such time by Borrower or any of its Related Persons (other
than Multiemployer Plans or "multiple employer plans") to exceed $2,000,000; or
(c) permit the aggregate complete or partial withdrawal liability
under Title IV of ERISA with respect to all Plans which are "multiple employer
plans" and all Multiemployer Plans incurred by Borrower or any Related Person to
exceed $50,000.
Section 7.17 Change of Principal Office. Borrower shall not (a) change
--------------------------
the location of its principal office, chief executive office and principal place
of business from that specified in Section 5.12 or (b) change its name, identity
------------
or corporate structure to such an extent that any financing statement filed by
BOIA in connection with this Agreement would become seriously misleading, unless
it shall have given BOIA at least 30 days prior written notice thereof and prior
to effecting any such change and taken such steps as BOIA may deem necessary or
desirable to continue the perfection and priority of the Liens in favor of BOIA
granted in connection herewith.
208
Section 7.18 Tax Payments. Except in accordance with the Tax Allocation
------------
Agreement, Borrower shall not make any payments to or on behalf of the Parent or
any Affiliate of Borrower in respect of taxes.
Section 7.19 Tax Allocation Agreement. Borrower shall not permit the
------------------------
amendment or modification of the Tax Allocation Agreement in any way which has
an adverse effect on Borrower.
Section 7.20 Permitted Subordinated Indebtedness. Borrower shall not
-----------------------------------
increase the outstanding amount of the Permitted Subordinated Indebtedness,
modify or amend the Affiliate Note or make any payment in respect of the
Affiliate Note; provided, that so long as no Default or Event of Default exists
or would result therefrom, Borrower may borrow, repay and reborrow under the
Affiliate Note.
ARTICLE VIII
------------
EVENTS OF DEFAULT
-----------------
Section 8.1 Nature of Event. An Event of Default shall exist if any one
---------------
or more of the following occurs:
(a) The Borrower fails to make any payment of principal of or
interest on the Note, or payment of any fee, expense or other amount due
hereunder, under the Note or under any other Loan Document, on or before the
date such payment is due;
(b) Borrower fails to observe or perform (i) any term, covenant
or agreement set forth in Sections 2.4, 3.4, 6.13, 6.17, 6.20, 6.21 or Section 7
----------------------------------------- ---------
(other than Sections 7.9 through 7.11, inclusive, Section 7.18 and Section 7.16,
------------ ---- ------------ ------------
which Section 7.16 is governed by Section 8.1(l)) or (ii) any term, covenant or
------------ ---------------
agreement set forth in Sections 7.9 through 7.11 or Section 7.18 if such failure
------------ ---- ------------
shall remain unremedied for 20 days, or (iii) any other term, covenant or
agreement in this Agreement on its part to be performed or observed if the
failure to perform or observe such other term, covenant or agreement shall
remain unremedied for 20 days after written notice thereof shall have been given
to Borrower by BOIA;
(c) the Borrower fails to observe or perform any of the
covenants or agreements contained in any other Loan Document, and (unless such
default otherwise constitutes a Default pursuant to other provisions of this
Section 8.1) such default continues unremedied beyond the expiration of any
-----------
applicable grace period which may be expressly allowed under such other Loan
Document;
209
(d) any material statement, warranty or representation by or on
behalf of the Borrower contained in this Agreement, the Note, the Security
Agreement or any other Loan Document or any Borrowing Request, officer's
certificate or other writing furnished in connection with this Agreement, proves
to have been incorrect or misleading in any material respect as of the date made
or deemed made; or
(e) Borrower fails to make when due or within any applicable
grace period any payment on any Indebtedness with an unpaid balance of over
$500,000.00; or any event or condition occurs under any provision contained in
any such obligation or any agreement securing or relating to such obligation (or
any other breach or default under such obligation or agreement occurs) if the
effect thereof is to cause or permit the holder or trustee of such obligation to
cause such obligation to become due prior to its stated maturity; or any such
obligation becomes due (other than by regularly scheduled payments) prior to its
stated maturity; or any of the foregoing occurs with respect to any one or more
items of Indebtedness of Borrower with unpaid principal balances exceeding, in
the aggregate, $500,000.00;
(f) Borrower shall generally not pay its debts as they become
due or shall admit in writing its inability to pay its debts, or shall make a
general assignment for the benefit of creditors;
(g) Borrower shall (i) apply for or consent to the appointment
of a receiver, trustee, custodian, intervenor or liquidator of it or of all or a
substantial part of its assets, (ii) file a voluntary petition in bankruptcy,
(iii) file a petition or answer seeking reorganization or an arrangement with
creditors or to take advantage of any Debtor Laws, (iv) file an answer admitting
the material allegations of, or consent to, or default in answering, a petition
filed against it in any bankruptcy reorganization or insolvency proceeding, or
(v) take corporate action for the purpose of effecting any of the foregoing;
(h) any involuntary petition or complaint shall be filed against
Borrower seeking bankruptcy or reorganization of Borrower or the appointment of
a receiver, custodian, trustee, intervenor or liquidator of Borrower, or all or
substantially all of its assets, and such petition or complaint shall not have
been dismissed within 60 days of the filing thereof; or an order, order for
relief, judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of Borrower or appointing a receiver, custodian, trustee,
intervenor or liquidator of Borrower, or of all or substantially all of its
assets;
(i) Borrower fails within 30 days to pay, bond or otherwise
discharge any final judgment or order for payment of money in excess of
$250,000.00 or Borrower fails within 30 days to pay, bond or otherwise discharge
final judgments or orders for payment of money which exceed in the aggregate
$250,000.00, or Borrower fails within 30 days to timely appeal or
210
pay, bond or otherwise discharge any judgments or orders for payment of money
which exceed, in the aggregate, $250,000.00 and which Borrower may appeal;
(j) any default or event of default occurs under any other
Indebtedness of Borrower to BOIA;
(k) any Person levies on, seizes or attaches all or any material
portion of the assets of Borrower and within 30 days thereafter Borrower shall
not have dissolved such levy or attachment, as the case may be, and, if
applicable, regained possession of such seized assets;
(l) an event or condition specified in Section 7.16 occurs or
------------
exists and, as a result of such event or condition, together with all other such
events or conditions, Borrower or any Related Person incurs or is reasonably
likely to incur a liability to a Plan, a participant or the PBGC (or any
combination of the foregoing) that is material in relation to the financial
position of Borrower;
(m) any change in the senior management of Borrower shall occur;
(n) the Parent shall cease to own beneficially, of record and
either directly or indirectly, 100% of the issued and outstanding shares of
capital stock of Borrower, or any "person" or "group" (within the meaning of
Sections 13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as amended)
shall become the "beneficial owner" (as defined in Rule 13d-3 under such act) of
more than 50% of the total aggregate voting power of all classes of the voting
stock of the Parent and/or warrants or options to acquire such stock, calculated
on a fully diluted basis; or
(o) any provision of this Agreement, the Note, the Security
Agreement or any other Loan Document shall for any reason cease to be in full
force and effect, or be declared null and void or unenforceable in whole or in
part; or the validity or enforceability of any such document shall be challenged
or denied.
Section 8.2 Default Remedies. Upon the occurrence of an Event of
----------------
Default and provided that such Event of Default has not previously been cured by
the Borrower, BOIA may (i) declare its commitment to make Advances hereunder to
be terminated and/or declare the entire principal of and all interest accrued on
the Note to be, and the Note, together with all other Obligations, shall
thereupon become, forthwith due and payable, without any presentment, demand,
protest, notice of protest and nonpayment, notice of acceleration or of intent
to accelerate or other notice of any kind, all of which hereby are expressly
waived, in which event Borrower shall immediately repay the entire principal
amount of all outstanding Advances, together with all accrued but unpaid
interest on the Note at the rate specified in Section 2.8(c), by borrowing such
--------------
amount from the Lender pursuant to the Backup Gestation Agreement, or from any
other source, and (ii) exercise any other right or remedy available at
211
law or pursuant to any Loan Document. Notwithstanding the foregoing, if an Event
of Default specified in Section 8.1(f), (g), (h) or (n) occurs, BOIA's
-------------------------------
commitment to make Advances hereunder shall automatically and immediately
terminate and the Note and all other Obligations shall become automatically and
immediately due and payable, both as to principal and interest, without any
action by BOIA and without presentment, demand, protest, notice of protest and
nonpayment, notice of acceleration or of intent to accelerate, or any other
notice of any kind, all of which are hereby expressly waived, anything contained
herein or in the Note to the contrary notwithstanding, and Borrower shall
immediately repay the entire principal amount of all outstanding Advances,
together with all accrued but unpaid interest on the Note at the rate specified
in Section 2.8(c), by borrowing such amount from the Lender pursuant to the
--------------
Backup Gestation Agreement, or from any other source.
Section 8.3 Exercise of Default Remedies by BOIA Customers. Borrower
----------------------------------------------
acknowledges and agrees that the customers of BOIA (for whom it is acting as
agent hereunder) shall have the right, upon the occurrence of an Event of
Default, to exercise directly all of the default remedies made available to BOIA
pursuant to this Agreement, including without limitation those set forth in
Section 8.2, subject to such customers' compliance with the conditions and
-----------
procedural requirements imposed under this Agreement.
ARTICLE IX
----------
CONCERNING BOIA
---------------
Section 9.1 Indemnification.
---------------
(A) THE BORROWER WILL INDEMNIFY AND HOLD HARMLESS BOIA, BOIA'S DIRECTORS,
OFFICERS, EMPLOYEES AND EACH PERSON, IF ANY, WHO IS DEEMED TO CONTROL BOIA (ANY
AND ALL OF WHOM ARE REFERRED TO AS THE "INDEMNIFIED PARTY") FROM AND AGAINST ANY
-----------------
AND ALL LOSSES, CLAIMS, DAMAGES AND LIABILITIES, JOINT OR SEVERAL (INCLUDING ALL
LOSSES, CLAIMS, DAMAGES AND LIABILITIES RESULTING FROM THE NEGLIGENCE, BUT NOT
THE GROSS NEGLIGENCE OF SUCH INDEMNIFIED PARTY IN CONNECTION WITH THE
PREPARATION FOR OR DEFENSE OF ANY PENDING OR THREATENED CLAIM, ACTION OR
PROCEEDING, WHETHER OR NOT RESULTING IN ANY LIABILITY), TO WHICH SUCH
INDEMNIFIED PARTY MAY BECOME SUBJECT (WHETHER OR NOT SUCH INDEMNIFIED PARTY IS A
PARTY THERETO) UNDER ANY APPLICABLE FEDERAL, STATE OR LOCAL LAW OR OTHERWISE
CAUSED BY OR ARISING OUT OF, OR ALLEGEDLY CAUSED BY OR ARISING OUT OF, THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY, INCLUDING WITHOUT LIMITATION,
ANY LIABILITY OR PENALTY ARISING OUT OF ANY FACT OR CIRCUMSTANCE WHICH CAUSES
THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 3.5 TO BE FALSE OR
-----------
INCORRECT, EXCEPTING ONLY LOSSES, CLAIMS, DAMAGES OR LIABILITIES RESULTING FROM
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OR FRAUD OF SUCH INDEMNIFIED PARTY.
212
(b) Promptly after receipt by an Indemnified Party of notice of any claim,
action or proceeding with respect to which an Indemnified Party is entitled to
indemnity hereunder, such Indemnified Party will notify the Borrower of such
claim or the commencement of such action or proceeding, provided that the
--------
failure of an Indemnified Party to give notice as provided herein shall not
relieve the Borrower of its obligations under this Section 9.1 with respect to
-----------
such Indemnified Party, except to the extent that the Borrower is actually
prejudiced by such failure. The Borrower will assume the defense of such claim,
action or proceeding and will employ counsel reasonably satisfactory to the
Indemnified Party and will pay the reasonable fees and expenses of such counsel.
Notwithstanding the preceding sentence, the Indemnified Party will be entitled,
at the expense of the Borrower, to employ counsel separate from counsel for the
Borrower and for any other party in such action if the Indemnified Party
reasonably determines that a conflict of interest or other reasonable basis
exists which makes representation by counsel chosen by the Borrower not
advisable, provided, that BOIA shall have the right to review all pleadings that
--------
include the name of any Indemnified Party, provided further that the Borrower
----------------
shall not be obligated to pay for the fees and expenses of more than one counsel
for all Indemnified Parties in respect of a particular controversy. In the
event an Indemnified Party appears as a witness in any action or proceeding
brought against the Borrower or any of its Subsidiaries (or any of its officers,
directors or employees) in which an Indemnified Party is not named as a
defendant, the Borrower agrees to reimburse such Indemnified Party for all
reasonable expenses incurred by it (including reasonable fees and expenses of
counsel) in connection with its appearing as a witness.
SECTION 9.2 LIMITATION OF LIABILITY. NEITHER BOIA NOR THE DIRECTORS,
-----------------------
OFFICERS, AGENTS OR EMPLOYEES OF BOIA SHALL BE LIABLE FOR ANY ACTION TAKEN OR
OMITTED TO BE TAKEN BY IT OR THEM UNDER OR IN CONNECTION WITH THIS AGREEMENT,
EXCEPT FOR SUCH ACTIONS TAKEN OR OMITTED TO BE TAKEN AS CONSTITUTE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF BOIA OR ITS DIRECTORS, OFFICERS,
AGENTS OR EMPLOYEES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BORROWER
HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO CLAIM OR RECOVER FROM BOIA OR ITS
DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES ANY CONSEQUENTIAL, EXEMPLARY OR
PUNITIVE DAMAGES; PROVIDED, THAT THE BORROWER IS NOT HEREBY WAIVING ANY RIGHT
THAT IT MAY HAVE TO CLAIM OR RECOVER ANY ACTUAL OR DIRECT DAMAGES FROM SUCH
PARTIES.
ARTICLE X
---------
MISCELLANEOUS
-------------
Section 10.1 Notices. Any notice of request required or permitted to be
-------
given under or in connection with this Agreement, the Note, the Security
Agreement or the other Loan Documents (except as may otherwise be expressly
required therein) shall be in writing and shall be mailed by first class or
express mail or overnight messenger, postage prepaid, or sent by telex,
telegram, telecopy or other similar form of rapid transmission, confirmed by
mailing
213
(by first class or express mail, postage prepaid) written confirmation at
substantially the same time as such rapid transmission, or personally delivered
to an officer of the receiving party. All such communications shall be mailed,
sent or delivered to the parties hereto at their respective addresses as
follows:
Borrower: NVR Mortgage Finance, Inc.
0000 Xxxxxxxxxxx Xxxx; Xxxxx 000
XxXxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
BOIA: Banc One Investment Advisors Corporation, acting as agent
on behalf of its customers and not individually
0000 Xxxxxxx Xxxxxxx
X.X. Xxx 000000
Xxxxxxxx, Xxxx 00000
Attention: Securities Lending Portfolio Manager
Telecopy: (000) 000-0000
Agent: Bank One, Texas, N.A.
0000 Xxxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Xx. Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
or at such other addresses or to such individual's or department's attention as
any party may have furnished the other party in writing. Any communication so
addressed and mailed shall be deemed to be given when so mailed, sent or
delivered, except that communications given pursuant to Sections 2.4 and 6.9,
--------------------
Borrowing Requests and communications related thereto shall not be effective
until actually received by BOIA or the Borrower, as the case may be, any
communication mailed by first class mail shall be deemed to have been given on
the third day following the day it is mailed, any communication sent by rapid
transmission shall be deemed to be given when receipt of such transmission is
confirmed, and any communication delivered in person shall be deemed to be given
when receipted for, or actually received by, an officer of the Borrower or BOIA,
as the case may be.
Section 10.2 Amendments, Etc.
----------------
(a) No amendment or waiver of any provision of this Agreement, the Note,
the Security Agreement or any other Loan Document, nor consent to any departure
by the Borrower or by BOIA therefrom, shall in any event be effective unless the
same shall be in writing and signed by the party against whom enforcement of
such amendment, waiver or consent is sought, and
214
any waiver or consent given shall be effective only in the specific instance and
for the specific purpose for which it is given.
(b) Notwithstanding the terms of Section 10.2(a) to the contrary:
---------------
(i) BOIA may, at any time and from time to time, without the
consent of Borrower but effective upon thirty (30) days' prior written notice to
Borrower, amend Schedule 1.2 to delete any Person which, in the sole discretion
------------
of BOIA, is no longer acceptable as an Investor; provided, that (A) any Investor
with respect to which any proceeding of the types described in Sections 8.1(g)
---------------
and (h) has been commenced shall, immediately upon notice to Borrower from BOIA,
---
be automatically deleted from Schedule 1.2 without the necessity for any other
------------
action (including prior written notice of any duration to Borrower) by BOIA and
(B) upon any Investor being deleted from Schedule 1.2, Borrower shall not enter
------------
into any new Take-Out Commitments with such Investor;
(ii) at any time and from time to time at the request of Borrower
and with the consent of BOIA, Schedule 1.2 may be supplemented to include any
------------
Person not then an Investor which, in the sole discretion of BOIA, is acceptable
as an Investor; and
(iii) a schedule identical to Schedule 1.2 as attached to this
------------
Agreement from time to time, shall be attached to, and form a part of, the
Backup Gestation Agreement at all times.
Section 10.3 Invalidity. In the event that any one or more of the
----------
provisions contained in this Agreement, the Note, the Security Agreement or any
other Loan Document shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of such document.
Section 10.4 Survival of Agreements. All covenants and agreements herein
----------------------
and in any other Loan Document not fully performed before the date hereof or the
date thereof, and all representations and warranties herein or therein, shall
survive until payment in full of the Obligations.
Section 10.5 Renewal, Extension or Rearrangement. All provisions of this
-----------------------------------
Agreement and of the other Loan Documents shall apply with equal force and
effect to each and all promissory notes hereafter executed which in whole or in
part represent a renewal, extension for any period, increase or rearrangement of
any part of the Obligations originally represented by the Note or of any part of
such other Obligations.
Section 10.6 Waivers. No course of dealing on the part of BOIA, or any
-------
of its officers, employees, consultants or agents, nor any failure or delay by
BOIA with respect to exercising any right, power or privilege of BOIA under the
Note, this Agreement, the Security Agreement
215
or any other Loan Document shall operate as a waiver thereof, except as
otherwise provided in Section 10.2(a).
---------------
Section 10.7 Cumulative Rights. The rights and remedies of BOIA under
-----------------
the Note, this Agreement, the Security Agreement and any other Loan Document
shall be cumulative, and the exercise or partial exercise of any such right or
remedy shall not preclude the exercise of any other right or remedy.
Section 10.8 Construction. THIS AGREEMENT, THE NOTE, THE SECURITY
------------
AGREEMENT AND EACH OTHER LOAN DOCUMENT IS A CONTRACT MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES OF
AMERICA AND THE STATE OF TEXAS, AS SUCH LAWS ARE NOW IN EFFECT, EXCEPT AS
OTHERWISE SPECIFIED HEREIN OR THEREIN, AND, WITH RESPECT TO USURY LAWS, IF ANY,
APPLICABLE TO BOIA AND TO THE EXTENT ALLOWED THEREBY, AS SUCH LAWS MAY HEREAFTER
BE IN EFFECT WHICH ALLOW A HIGHER MAXIMUM NONUSURIOUS INTEREST RATE THAN SUCH
LAWS NOW ALLOW. TEX. REV. CIV. STAT. XXX. ART. 0000, XX. 15 (WHICH REGULATES
CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY
TO THIS AGREEMENT OR THE NOTE.
Section 10.9 Interest. Any provisions herein, in the Note, or in any
--------
other Loan Document, or any other document executed or delivered in connection
herewith, or in any other agreement or commitment, whether written or oral,
expressed or implied, to the contrary notwithstanding, BOIA shall not in any
event be entitled to receive or collect, nor shall or may amounts received
hereunder be credited, so that BOIA shall be paid, as interest, a sum greater
than the maximum amount permitted by applicable law to be charged to the Person
primarily obligated to pay the Note at the time in question. If any
construction of this Agreement, the Note or any other Loan Document, or any and
all other papers, agreements or commitments indicate a different right given to
BOIA to ask for, demand or receive any larger sum as interest, such is a mistake
in calculation or wording which this clause shall override and control, it being
the intention of the parties that this Agreement, the Note, and all other Loan
Documents or other documents executed or delivered in connection herewith shall
in all things comply with applicable law and proper adjustments shall
automatically be made accordingly. In the event that BOIA shall ever receive,
collect or apply as interest, any sum in excess of the maximum nonusurious rate
permitted by applicable law (the "Maximum Rate"), if any, such excess amount
------------
shall be applied to the reduction of the unpaid principal balance of the Note,
and if the same be paid in full, any remaining excess shall be paid to the
Borrower. In determining whether or not the interest paid or payable, under any
specific contingency, exceeds the Maximum Rate, if any, the Borrower and BOIA
shall, to the maximum extent permitted under applicable law: (a) characterize
any nonprincipal payment as an expense or fee rather than as interest, (b)
exclude voluntary prepayments and the effects thereof, and (c) "spread" the
total amount of interest throughout the entire term of the Note; provided that
if
216
the Note is paid and performed in full prior to the end of the full contemplated
term hereof, and if the interest received for the actual period of existence
thereof exceeds the Maximum Rate, if any, the Person holding the Note shall
refund to the Borrower the amount of such excess.
To the extent that TEX. REV. CIV. STAT. XXX. art 5069 1.04, as amended (the
"Act"), is relevant to the holder of the Note for purposes of determining the
---
Maximum Rate, each such holder elects to determine such applicable legal rate
under the Act pursuant to the "indicated rate ceiling," from time to time in
effect, as referred to and defined in article 1.04(a)(1) of the Act; subject,
however, to the limitations on such applicable ceiling referred to and defined
in article 1.04(b)(2) of the Act, and further subject to any right such holder
may have subsequently, under applicable law, to change the method of determining
the Maximum Rate.
Section 10.10 Right of Offset. The Borrower hereby grants to the Agent
---------------
(as agent for, and for the benefit of, BOIA) and to any assignee of the Agent a
right of offset, to secure the repayment of the Obligations, upon any and all
monies, securities or other property of the Borrower, and the proceeds therefrom
now or hereafter held or received by or in transit to such Person, from or for
the account of the Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special, time or demand, provisional or final) and credits of the
Borrower, and any and all claims of the Borrower against such Person at any time
existing. Upon the occurrence of any Event of Default, such Person is hereby
authorized at any time and from time to time, without notice to the Borrower, to
offset, appropriate, and apply any and all items hereinabove referred to against
the Obligations. Notwithstanding anything in this Section 10.10 or elsewhere in
-------------
this Agreement to the contrary, neither the Agent (as agent for, and for the
benefit of, BOIA) nor any assignee of the Agent shall have any right to offset,
appropriate or apply any accounts of the Borrower which consist of escrowed
funds (except and to the extent of any beneficiary interest of the Borrower in
such escrowed funds) on deposit in accounts which accounts have been identified
on the books and records of the Person with whom such accounts are maintained as
containing escrowed funds.
Section 10.11 Successors and Assigns; Confidentiality. All covenants and
---------------------------------------
agreements by or on behalf of the Borrower in this Agreement, the Note, the
Security Agreement or any other Loan Documents shall bind the Borrower's
successors and assigns and shall inure to the benefit of BOIA and its customers
and their respective successors and assigns. The Borrower shall not, however,
have the right to assign its rights under this Agreement or any interest herein,
without the prior written consent of BOIA. BOIA may, in connection with any
assignment or participation or proposed assignment or participation by BOIA,
disclose to the actual or proposed assignee or participant any information
relating to the Borrower furnished to BOIA by or on behalf of the Borrower;
provided, that prior to any such disclosure, the actual or proposed assignee or
--------
participant shall agree to preserve the confidentiality of any
217
information relating to the Borrower that has been identified in writing by the
Borrower to be confidential.
Section 10.12 Consent to Jurisdiction. The Borrower hereby agrees that
-----------------------
any action or proceeding under this Agreement or any other Loan Document may be
commenced against it in any court of competent jurisdiction within the State of
Texas, by service of process upon the Borrower by first-class registered or
certified mail, return receipt requested, addressed to the Borrower at its
address last known to BOIA. The Borrower agrees that any such suit, action, or
proceeding arising out of or relating to this Agreement or any other Loan
Document may be instituted in the courts of the State of Texas, or in the United
States District Court for the Northern District of Texas, at the option of BOIA;
and the Borrower hereby waives any objection to the venue of any such suit,
action, or proceeding. Nothing herein shall affect the right of BOIA to
accomplish service of process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Borrower in any
other jurisdiction or court.
Section 10.13 Exhibits. The exhibits and schedules attached to this
--------
Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein, except that in the event of any
conflict between any of the provisions of such exhibits and schedules and the
provisions of this Agreement, the provisions of this Agreement shall prevail.
Section 10.14 Titles of Articles and Sections. All titles or headings to
-------------------------------
articles, sections, or other divisions of this Agreement or the exhibits and
schedules hereto are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other content of
such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
Section 10.15 Counterparts. This Agreement may be executed in
------------
counterparts, and it shall not be necessary that the signatures of each of the
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all counterparts together shall constitute one
and the same instrument.
Section 10.16 ENTIRE AGREEMENT. THE NOTE, THIS AGREEMENT, THE SECURITY
----------------
AGREEMENT AND THE OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED AS OF EVEN DATE
HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.
218
Section 10.17 BOIA Representation. BOIA represents and warrants that it
-------------------
has the power and requisite authority to execute, deliver and perform this
Agreement and the other Loan Documents to which it is a party, and is duly
authorized to, and has taken all action necessary to authorize it to, execute,
deliver and perform this Agreement and the other Loan Documents to which it is a
party.
219
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
BORROWER: NVR MORTGAGE FINANCE, INC.
--------
By:_______________________________
Name:_____________________________
Title:____________________________
BOIA: BANC ONE INVESTMENT ADVISORS CORPORATION,
----
ACTING AS AGENT FOR ITS CUSTOMERS AND NOT INDIVIDUALLY
By:_______________________________
Name:_____________________________
Title:____________________________
The undersigned is a party to this Agreement solely for the purpose of
acknowledging and agreeing to its rights and responsibilities as set forth
herein.
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By:_______________________________
Name:_____________________________
Title:____________________________
Attachments:
Exhibit A Form of Note
Exhibit B Form of Borrowing Request
Exhibit C Form of Release of Lien
Exhibit D Form of Request for Release of Security Interest
Exhibit E Form of Backup Gestation Agreement
Exhibit F Form of Mortgage Document Delivery Request (Correction)
Exhibits G-1 and G-2 Form of Bailee Letter
Exhibit H [Intentionally Omitted]
Exhibit I Form of Custody Agreement
Exhibit J Form of Security Agreement
220
Exhibit K Form of Officer's Certificate
Exhibit L Tax Allocation Agreement
Exhibit M Affiliate Note
Exhibit N Borrowing Base Report
Schedule 1.2 Investors
Schedule 5.10 Litigation
Schedule 5.22 Affiliate Agreements
221
