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EXHIBIT 10.6
FIRST AMENDMENT TO
CREDIT AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this
"Amendment") is entered into as of this 8th day of August, 1996 by and between
WASHINGTON MORTGAGE FINANCIAL GROUP, LTD., a Delaware corporation
("Washington") and WMF/XXXXXXX, XXXXX ASSOCIATES LIMITED, a Delaware
corporation ("Xxxxxxx", Washington and Xxxxxxx are hereinafter collectively
referred to as the "Borrowers") and RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation (the "Lender").
WHEREAS, the Borrowers and the Lender have entered into a revolving
warehouse, term loan and servicing facility with a present Commitment Amount of
One Hundred Seventy Million ($170,000,000), to finance the origination and
acquisition of Mortgage Loans as evidenced by a Warehousing Promissory Note in
the principal sum of One Hundred Fifty Million Dollars ($150,000,000), a Term
Loan Promissory Note in the principal sum of Ten Million Dollars ($10,000,000)
and a Servicing Facility Promissory Note in the principal sum of Ten Million
Dollars ($10,000,000), each dated as of June 14, 1996 and by a Credit and
Security Agreement dated as of June 14, 1996, as the same may have been amended
or supplemented (the "Agreement");
WHEREAS, the Borrowers have requested the Lender to amend certain
terms of the Agreement and the Lender has agreed to such amendment of the
Agreement subject to the terms and conditions of this Amendment;
NOW, THEREFORE, for and in consideration of the foregoing and of the
mutual covenants, agreements and conditions hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined
shall have their respective meanings set forth in the Agreement.
2. The effective date ("Effective Date") of this Amendment shall
be August 8th, 1996, the date on which the Borrowers have complied with all the
terms and conditions of this Amendment.
3. Section 1.1 of the Agreement shall be amended to delete the
definition of "Adjusted Tangible Net Worth" in its entirety, replacing it with
the following definition:
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"Adjusted Tangible Net Worth" means with respect to any Person
at any date, the Tangible Net Worth of such Person at such date,
excluding capitalized excess servicing fees and capitalized servicing
rights, plus one percent (1%) of the Adjusted Servicing Portfolio, and
plus deferred taxes arising from capitalized excess servicing fees and
capitalized servicing rights.
4. Exhibit I-SF to the Agreement is deleted in its entirety and
replaced with the new Exhibit I-SF attached to this Amendment. All references
in this Amendment and the Agreement to Exhibit I-SF shall be deemed to refer to
the new Exhibit I-SF.
5. The Borrowrs shall deliver to the Lender (a) an executed
original of this Amendment; (b) an executed Certificate of Secretary with
corporate resolutions; and (c) a Two Hundred Fifty Dollar ($250) document
production fee.
6. The Borrowers represent, warrant and agree that (a) there
exists no Default or Event of Default under the Loan Documents, (b) the Loan
Documents continue to be the legal, valid and binding agreements and
obligations of the Company enforceable in accordance with their terms, as
modified herein, (c) the Lender is not in default under any of the Loan
Documents and the Borrowers have no offset or defense to its performance or
obligations under any of the Loan Documents, (d) the representations contained
in the Loan Documents remain true and accurate in all respects, and (e) there
has been no material adverse change in the financial condition of Washington on
the date of the Agreement to the date of this Amendment.
7. Except as hereby expressly modified, the Agreement shall
otherwise be unchanged and shall remain in full force and effect, and the
Borrowers ratify and reaffirm all of their obligations thereunder.
8. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
together constitute one and the same instrument.
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IN WITNESS WHEREOF, the Borrowers and the Lender have caused this
Amendment to be duly executed on their behalf by their duly authorized officers
as of the day and year above written.
WASHINGTON MORTGAGE FINANCIAL GROUP,
LTD., a Delaware corporation
By: /s/ XXXXXX XXXXXXXXXX
---------------------------------
Its: President & CEO
--------------------------------
WMF/XXXXXXX, XXXXX ASSOCIATES
LIMITED, a Delaware corporation
By: /s/ XXXXXX XXXXXXXXXX
--------------------------------
Its: Chairman
--------------------------------
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: /s/ X.X. XXXX, III
--------------------------------
Its: Managing Director
--------------------------------
STATE OF VIRGINIA )
) ss
COUNTY OF FAIRFAX )
On August 9, 1996, before me, a Notary Public, personally appeared
XXXXXX XXXXXXXXXX,the President/CEO of WASHINGTON MORTGAGE FINANCIAL GROUP,
LTD., a Delaware corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to
the within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument
the person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ XXXXXX X. XXXX
--------------------------------
Notary Public
(SEAL) My Commission Expires: 2/28/99
---------
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STATE OF VIRGINIA )
) ss
COUNTY OF FAIRFAX )
On August 9, 1996, before me, a Notary Public, personally appeared
[NAME], the Chairman of WMF/XXXXXXX, XXXXX ASSOCIATES LIMITED, a Delaware
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ XXXXXX X. XXXX
--------------------------------
Notary Public
(SEAL) My Commission Expires: 2/28/99
---------
STATE OF MARYLAND )
) ss
COUNTY OF XXXXXXXXXX )
On August 16th, 1996, before me, a Notary Public, personally appeared
Xxxx X. Xxxx, III, the Director of RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ XXXXXX X. XXXXX
--------------------------------
Notary Public
(SEAL) My Commission Expires: 11/23/96
---------
XXXXXX X. XXXXX
NOTARY PUBLIC STATE OF MARYLAND
My Commission Expires November 23,1996
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EXHIBIT I-MF
OFFICER'S CERTIFICATE
Reference is made to that certain Credit and Security Agreement
between WASHINGTON MORTGAGE FINANCIAL GROUP, LTD., a Delaware corporation
("Washington"), and WMF/XXXXXXX, XXXXX ASSOCIATES LIMITED, a Delaware
corporation ("Xxxxxxx," Washington and Xxxxxxx are hereinafter collectively
referred to as the "Borrowers"), and RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation (the "Lender"), dated as of June 14, 1996 (as the same may
be amended, modified, supplemented, renewed or restated from time to time, the
"Agreement"). All capitalized terms used herein and all Section numbers given
herein refer to those terms and Sections set forth in the Agreement. This
Officer's Certificate is submitted to the Lender pursuant to Section 6.2(c) of
the Agreement.
The undersigned hereby certifies to the Lender that as of the close of
business on ______________________, 19_____ ("Statement Date",) and with
respect to the Borrowers and their Subsidiaries on a consolidated basis:
1. As illustrated in the attached calculations supporting this Officer's
Certificate, the Borrowers met the covenants set forth in Sections
7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12 and 7.13, or if the Borrowers did
not meet any of such covenants, a detailed explanation is attached
setting forth the nature and period of the existence of the Default
and the action the Borrowers have taken, are taking, and propose to
take with respect thereto.
2. No Servicing Contracts have been sold or pledged by the Borrowers
except as permitted under the terms of the Agreement.
3. No payments in advance of the scheduled maturity date have been made
with respect to any Subordinated Debt. The Borrowers have incurred no
Debt required to be subordinated pursuant to Section 6.10.
4. The Borrowers were in compliance with the applicable HUD, GNMA, and
Investor net worth requirements, and in good standing with VA, HUD,
GNMA, and each Investor.
5. I have reviewed the terms of the Agreement and have made, or caused to
be made under my supervision, a review in reasonable detail of the
transactions and conditions of the Borrowers (and, if applicable,
their Subsidiaries) and such review has not disclosed the existence,
and I have no knowledge of the existence, of any Default or Event of
Default, or if any
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Default or Event of Default existed or exists, a detailed explanation
is attached specifying the nature and period of the existence of the
Default and the action the Borrowers have taken, are taking and
propose to take with respect thereto.
6. Pursuant to Section 6.2 of the Agreement, enclosed are the financial
statements of the Borrowers as of the Statement Date. The financial
statements for the period ending on the Statement Date fairly present
the financial condition and results of operations of the Borrowers
(and, if applicable, its Subsidiaries) as at the Statement Date.
Dated:
------------------------------
WASHINGTON MORTGAGE FINANCIAL GROUP,
LTD., a Delaware corporation
By:
---------------------------------
Its:
--------------------------------
WMF/XXXXXXX, XXXXX ASSOCIATES
LIMITED, a Delaware corporation
By:
---------------------------------
Its:
--------------------------------
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CALCULATIONS SUPPORTING OFFICER'S CERTIFICATE
Borrowers Names: WASHINGTON MORTGAGE FINANCIAL GROUP, LTD. and
WMF/XXXXXXX, XXXXX ASSOCIATES LIMITED and its
Subsidiaries
Statement Date:
-----------------------------------
All financial calculations set forth herein are as of the Statement Date.
I. TANGIBLE NET WORTH
Tangible Net Worth of Washington is:
Excess of total assets over total liabilities: $
--------
Plus: Loan loss reserves: $
--------
Plus: Subordinated Debt not due within one year
of the Statement Date (or any portion
thereof): $
--------
Minus: Advances to owners, officers or
Affiliates: $
--------
Minus: Investments in Affiliates: $
--------
Minus: Assets pledged to secure liabilities
not included in Debt: $
--------
Minus: Intangible assets: $
--------
Minus: Any other HUD nonacceptable assets: $
--------
Minus: Other assets unacceptable to the
Lender: $
--------
TANGIBLE NET WORTH $
------------
II. ADJUSTED TANGIBLE NET WORTH
A. Adjusted Tangible Net Worth of Washington is:
Tangible Net Worth (from IA above) $
--------
Minus: Capitalized excess servicing fees: $
--------
Minus: Capitalized servicing rights: $
--------
Plus: Deferred taxes arising from capitalized
excess servicing fees and capitalized
servicing rights: $
--------
Plus: 1% times Adjusted Servicing Portfolio
(from IIIA below): $
--------
ADJUSTED TANGIBLE NET WORTH $
------------
B. Requirements of Section 7.7 of the Agreement:
MINIMUM ADJUSTED TANGIBLE NET WORTH OF $15,000,000.
C. COVENANT SATISFIED:____ COVENANT NOT SATISFIED:____
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III. ADJUSTED SERVICING PORTFOLIO
A. Adjusted Servicing Portfolio of the Borrowers is:
Servicing Portfolio owned by the Borrowers is: $
--------
Minus: The unpaid principal balance of Mortgage Loans:
Past due 60 days or more: $
--------
That are Commercial, FNMA DUS,
or FHA co-insured: $
--------
Sold with recourse: $
--------
For which the Servicing Contracts
are pledged: $
--------
Serviced by Borrowers for others under
subservicing arrangements: $
--------
ADJUSTED SERVICING PORTFOLIO
$
--------------
B. Requirements of Section 7.10 of the Agreement:
ADJUSTED SERVICING PORTFOLIO OF $3,000,000,000.
C. COVENANT SATISFIED:____ COVENANT NOT SATISFIED:____
IV. DEBT OF THE BORROWERS
Total liabilities $
--------
Minus: Loan loss reserves: $
--------
Minus: Subordinated Debt not due within one year
of the Statement Date (or any portion
thereof): $
--------
Minus: Deferred taxes arising from capitalized
excess servicing fees and capitalized
servicing rights: $
--------
DEBT $
-------------
V. RATIO OF DEBT TO ADJUSTED TANGIBLE NET WORTH
A. The ratio of Debt to Adjusted Tangible Net Worth
(IV to II.A) is: ______ to 1
B. Requirements of Section 7.6 of the Agreement:
The ratio of Debt to Adjusted Tangible Net Worth shall not
exceed 15 to 1.
C. COVENANT SATISFIED:____ COVENANT NOT SATISFIED:____
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VI. LIQUID ASSETS OF THE BORROWERS
Unrestricted and Unencumbered Cash $
-------
Plus: Funds on deposit in any United States bank $
-------
Plus: Investment grade commercial paper $
-------
Plus: Money market funds $
-------
Plus: Marketable securities $
-------
Plus: Mortgage Loans and Mortgage-backed Securities
held for sale $
-------
Minus: Outstanding liabilities secured by Mortgage Loans
and Mortgage-backed Securities held for sale $
-------
LIQUID ASSETS $
------------
VII. LIQUIDITY
A. The ratio of Liquid Assets to Adjusted Tangible Net Worth
(V to II) is: ______ to 1
B. Requirements of Section 7.8 of the Agreement:
The ratio of Liquid Assets to Adjusted Tangible Net Worth
shall not be less than twenty-five percent (25%).
C. COVENANT SATISFIED:____ COVENANT NOT SATISFIED:____
VIII. MAXIMUM PASS-THROUGHS
A. The aggregate cumulative outstanding amount of advances to or
on behalf of defaulting mortgagors paid or required to have
been paid by the Borrowers on Mortgage Loans and
Mortgage-backed Securities ("Pass-throughs") is:
$
-------
B. The ratio of Pass-throughs to Adjusted Tangible Net Worth
(VII.A to II.A) is: ______ to 1
C. Requirements of Section 7.9 of the Agreement:
The ratio of Pass-throughs to Adjusted Tangible Net Worth
shall not exceed thirty-five percent (35%).
D. COVENANT SATISFIED:____ COVENANT NOT SATISFIED:____
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IX. DEBT SERVICE COVERAGE RATIO
A. Net income for the previous four quarters: $
--------
Plus: Income tax expenses: $
--------
Minus: Income taxes paid: $
--------
Plus: Depreciation, amortization and other non-cash
deductions: $
--------
Minus: Non-cash revenue: $
--------
Minus: Dividends and distributions: $
--------
Plus: Term Loan/Servicing Facility interest expenses: $
--------
FUNDS FROM OPERATIONS $
--------
B. Scheduled Term Loan/Servicing Facility principal payment
(following four quarters): $
--------
Plus: Term Loan/Servicing Facility interest expenses
(previous four quarters): $
--------
Annual debt payments $
------------
C. The ratio of XA to XB is: _______ to 1.00
D. Requirements of Section 7.11 of the Agreement:
Permit the Debt Service Coverage Ratio, measured as of the
first day of any fiscal quarter, to be less than 1.50 to 1.00.
E. COVENANT SATISFIED:______ COVENANT NOT SATISFIED:______
X. DELINQUENCY RATIO
A. Unpaid Principal Balance of Mortgage Loans Serviced that
are:
30 or more days past due: $
--------
Foreclosure: $
--------
In Bankruptcy: $
--------
TOTAL $
--------
B. Unpaid Principal Balance of all Mortgage Loans
Serviced by Borrowers: $
--------------
C. The ratio of XIA to XIB (expressed as a percentage):
_________%
D. Requirements of Section 7.12 of the Agreement:
The Delinquency Ratio shall not exceed 10%.
E. COVENANT SATISFIED:______ COVENANT NOT SATISFIED:______
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XI. TRANSACTIONS WITH AFFILIATES
A. Loans, advances, and extensions of credit made
by the Borrowers to their Affiliates total: $
--------
B. Capital contributions made by the Borrowers to
their Affiliates total: $
--------
C. Management fees paid to Affiliates during the
current fiscal year total: $
--------
D. Transfers, sales, pledges, assignments or other
dispositions of assets made by the Borrowers to
their Affiliates total: $
--------
E. Requirements of Section 7.13 of the Agreement:
1. No loans, advances or extensions of credit shall be made by the
Borrowers to Affiliates.
COVENANT SATISFIED:____ COVENANT NOT SATISFIED:____
2. No capital contributions shall be made by the Borrowers to any
Affiliate.
COVENANT SATISFIED:____ COVENANT NOT SATISFIED:____
3. No transfers, sales, pledges assignments or other dispositions of
assets by the Borrowers to Affiliates.
COVENANT SATISFIED:____ COVENANT NOT SATISFIED:____
4. No Management fees shall be paid by the Borrowers to Affiliates.
COVENANT SATISFIED:____ COVENANT NOT SATISFIED:____
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