EXHIBIT 10.1


 




 





CREDIT AGREEMENT


 


 


by and among


 


BEAZER MORTGAGE CORPORATION,


 


as Borrower


 


 


the Lenders party hereto,


 


GUARANTY BANK,

as Agent


 


 


JPMORGAN CHASE BANK, N.A.,

as Syndication Agent


 


 


and


 


 


U.S. BANK NATIONAL ASSOCIATION,

as Documentation Agent


 


 










 


 


January 11, 2006




 





 





















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I                                   GENERAL TERMS

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 1.1

  	
  Certain
  Definitions

  	
  1

  
	
  Section 1.2

  	
  Exhibits and
  Schedules

  	
  19

  
	
  Section 1.3

  	
  Calculations
  and Determinations

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE II                               AMOUNT AND TERMS OF LOANS

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 2.1

  	
  Commitment
  and Loans

  	
  20

  
	
  Section 2.2

  	
  Promissory
  Notes; Interest on the Notes

  	
  22

  
	
  Section 2.3

  	
  Notice and
  Manner of Obtaining Loans

  	
  22

  
	
  Section 2.4

  	
  Fees

  	
  24

  
	
  Section 2.5

  	
  Mandatory
  Repayments

  	
  24

  
	
  Section 2.6

  	
  Payments to
  Lenders

  	
  24

  
	
  Section 2.7

  	
  Notification
  by the Agent

  	
  25

  
	
  Section 2.8

  	
  Non-Receipt
  of Funds by the Agent

  	
  25

  
	
  Section 2.9

  	
  Increased
  Cost and Reduced Return

  	
  26

  
	
  Section 2.10

  	
  Settlement
  Account

  	
  26

  
	
  Section 2.11

  	
  Approved
  Letter of Credit

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE III                           CONDITIONS PRECEDENT

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 3.1

  	
  Initial Loan

  	
  27

  
	
  Section 3.2

  	
  All Loans

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV                          BORROWER REPRESENTATIONS AND WARRANTIES

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 4.1

  	
  Organization
  and Good Standing

  	
  29

  
	
  Section 4.2

  	
  Authorization
  and Power

  	
  29

  
	
  Section 4.3

  	
  No Conflicts
  or Consents

  	
  29

  
	
  Section 4.4

  	
  Enforceable
  Obligations

  	
  30

  
	
  Section 4.5

  	
  Priority of
  Liens

  	
  30

  
	
  Section 4.6

  	
  No Liens

  	
  30

  
	
  Section 4.7

  	
  Financial
  Condition of Borrower

  	
  30

  
	
  Section 4.8

  	
  Full
  Disclosure

  	
  30

  
	
  Section 4.9

  	
  No Default

  	
  30

  
	
  Section 4.10

  	
  No
  Litigation

  	
  30

  
	
  Section 4.11

  	
  Taxes

  	
  31

  
	
  Section 4.12

  	
  Principal
  Office, etc

  	
  31

  
	
  Section 4.13

  	
  Compliance
  with ERISA

  	
  31

  
	
  Section 4.14

  	
  Subsidiaries

  	
  31

  
	
  Section 4.15

  	
  Indebtedness

  	
  31

  
	
  Section 4.16

  	
  Permits,
  Patents, Trademarks, etc

  	
  31

  
	
  Section 4.17

  	
  Status Under
  Certain Federal Statutes

  	
  31

  
	
  Section 4.18

  	
  Securities
  Act

  	
  32

  
	
  Section 4.19

  	
  No Approvals
  Required

  	
  32

  
	
  Section 4.20

  	
  Survival of
  Representations

  	
  32

  



 


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  Page

  
	
   

  	
   

  	
   

  
	
  Section 4.21

  	
  Compliance
  with Laws

  	
  32

  
	
  Section 4.22

  	
  Payment of
  Obligations

  	
  32

  
	
  Section 4.23

  	
  Individual
  Mortgage Loans

  	
  32

  
	
  Section 4.24

  	
  Environmental
  Matters

  	
  34

  
	
  Section 4.25

  	
  Status as
  Approved Seller/Servicer

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE V                              AFFIRMATIVE COVENANTS

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 5.1

  	
  Financial
  Statements and Reports

  	
  34

  
	
  Section 5.2

  	
  Taxes and
  Other Liens

  	
  35

  
	
  Section 5.3

  	
  Maintenance

  	
  36

  
	
  Section 5.4

  	
  Further
  Assurances

  	
  36

  
	
  Section 5.5

  	
  Reimbursement
  of Expenses

  	
  36

  
	
  Section 5.6

  	
  Insurance

  	
  37

  
	
  Section 5.7

  	
  Accounts and
  Records: Servicing Records

  	
  37

  
	
  Section 5.8

  	
  Right of
  Inspection

  	
  37

  
	
  Section 5.9

  	
  Notice of
  Certain Events

  	
  38

  
	
  Section 5.10

  	
  Performance
  of Certain Obligations and Information Regarding Investors

  	
  38

  
	
  Section 5.11

  	
  Use of
  Proceeds: Margin Stock

  	
  38

  
	
  Section 5.12

  	
  Notice of
  Default

  	
  38

  
	
  Section 5.13

  	
  Compliance
  with Loan Documents

  	
  39

  
	
  Section 5.14

  	
  Operations
  and Properties

  	
  39

  
	
  Section 5.15

  	
  Environmental
  Matters

  	
  39

  
	
  Section 5.16

  	
  Compliance
  with Laws

  	
  39

  
	
  Section 5.17

  	
  MERS Status

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI                          NEGATIVE COVENANTS

  	
  40

  
	
   

  	
   

  	
   

  
	
  Section 6.1

  	
  No Merger;
  Limitation on Issuance of Securities

  	
  40

  
	
  Section 6.2

  	
  Limitation
  on Indebtedness

  	
  40

  
	
  Section 6.3

  	
  Fiscal Year,
  Method of Accounting

  	
  41

  
	
  Section 6.4

  	
  Business

  	
  41

  
	
  Section 6.5

  	
  Liquidations,
  Consolidations and Dispositions of Substantial Assets

  	
  41

  
	
  Section 6.6

  	
  Loans,
  Advances, and Investments

  	
  41

  
	
  Section 6.7

  	
  Use of
  Proceeds

  	
  41

  
	
  Section 6.8

  	
  Actions with
  Respect to Mortgage Collateral

  	
  42

  
	
  Section 6.9

  	
  Transactions
  with Affiliates

  	
  42

  
	
  Section 6.10

  	
  Liens

  	
  42

  
	
  Section 6.11

  	
  ERISA Plans

  	
  43

  
	
  Section 6.12

  	
  Change of
  Principal Office

  	
  43

  
	
  Section 6.13

  	
  Consolidated
  Tangible Net Worth

  	
  43

  
	
  Section 6.14

  	
  Consolidated
  Adjusted Tangible Net Worth

  	
  43

  
	
  Section 6.15

  	
  Total Debt
  to Adjusted Tangible Net Worth Ratio

  	
  43

  



 


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  Page

  
	
   

  	
   

  	
   

  
	
  Section 6.16

  	
  Profitability

  	
  43

  
	
  Section 6.17

  	
  Dividends

  	
  43

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII                      EVENTS OF DEFAULT

  	
  43

  
	
   

  	
   

  	
   

  
	
  Section 7.1

  	
  Nature of
  Event

  	
  43

  
	
  Section 7.2

  	
  Default
  Remedies

  	
  46

  
	
  Section 7.3

  	
  Application
  of Proceeds

  	
  46

  
	
  Section 7.4

  	
  Preservation
  of Rights

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII                  INDEMNIFICATION

  	
  47

  
	
   

  	
   

  	
   

  
	
  Section 8.1

  	
  Indemnification

  	
  47

  
	
  Section 8.2

  	
  Limitation
  of Liability

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX                          THE AGENT

  	
  48

  
	
   

  	
   

  	
   

  
	
  Section 9.1

  	
  Appointment

  	
  48

  
	
  Section 9.2

  	
  Delegation
  of Duties

  	
  48

  
	
  Section 9.3

  	
  Exculpatory
  Provisions

  	
  48

  
	
  Section 9.4

  	
  Reliance by
  Agent

  	
  49

  
	
  Section 9.5

  	
  Notice of
  Default

  	
  49

  
	
  Section 9.6

  	
  Non-Reliance
  on Agent and Other Lenders

  	
  49

  
	
  Section 9.7

  	
  Indemnification

  	
  50

  
	
  Section 9.8

  	
  Agent in Its
  Individual Capacity

  	
  50

  
	
  Section 9.9

  	
  Successor
  Agent

  	
  51

  
	
  Section 9.10

  	
  Agent’s
  Discretionary Authority

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE X                              TAXES AND YIELD PROTECTION

  	
  51

  
	
   

  	
   

  	
   

  
	
  Section 10.1

  	
  Taxes

  	
  51

  
	
  Section 10.2

  	
  Increased
  Costs

  	
  53

  
	
  Section 10.3

  	
  Mitigation
  Obligations; Replacement of Lenders

  	
  54

  
	
  Section 10.4

  	
  Survival

  	
  55

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI                          MISCELLANEOUS

  	
  55

  
	
   

  	
   

  	
   

  
	
  Section 11.1

  	
  Notices

  	
  55

  
	
  Section 11.2

  	
  Amendments,
  Etc

  	
  56

  
	
  Section 11.3

  	
  CHOICE OF
  LAW; VENUE

  	
  57

  
	
  Section 11.4

  	
  Invalidity

  	
  57

  
	
  Section 11.5

  	
  Survival of
  Agreements

  	
  58

  
	
  Section 11.6

  	
  Renewal,
  Extension or Rearrangement

  	
  58

  
	
  Section 11.7

  	
  Waivers

  	
  58

  
	
  Section 11.8

  	
  Cumulative
  Rights

  	
  58

  
	
  Section 11.9

  	
  Limitation
  on Interest

  	
  58

  
	
  Section 11.10

  	
  Bank
  Accounts; Offset

  	
  59

  
	
  Section 11.11

  	
  Assignments

  	
  59

  
	
  Section 11.12

  	
  Exhibits

  	
  61

  



 


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  Page

  
	
   

  	
   

  	
   

  
	
  Section 11.13

  	
  Titles of
  Articles, Sections and Subsections

  	
  61

  
	
  Section 11.14

  	
  Counterparts;
  Fax

  	
  61

  
	
  Section 11.15

  	
  Termination:
  Limited Survival

  	
  61

  
	
  Section 11.16

  	
  Joint and
  Several Liability

  	
  62

  
	
  Section 11.17

  	
  Disclosures

  	
  62

  
	
  Section 11.18

  	
  Time is of
  the Essence

  	
  62

  
	
  Section 11.19

  	
  USA Patriot
  Act Notice

  	
  62

  
	
  Section 11.20

  	
  Electronic
  Transactions

  	
  62

  
	
  Section 11.21

  	
  No Reliance

  	
  62

  
	
  Section 11.22

  	
  WAIVER OF
  JURY TRIAL

  	
  62

  
	
  Section 11.23

  	
  CONSEQUENTIAL
  DAMAGES

  	
  63

  
	
  Section 11.24

  	
  ENTIRE
  AGREEMENT

  	
  63

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1.1   -
  Commitments and Commitment Percentages

  	
   

  
	
  Schedule 6.10 -
  Existing Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A    - Form of Note

  	
   

  
	
  Exhibit B      - Form of Borrowing
  Request

  	
   

  
	
  Exhibit C      - Investors

  	
   

  
	
  Exhibit D     - Subsidiaries

  	
   

  
	
  Exhibit E       - Certificate
  Accompanying Financial Statement

  	
   

  
	
  Exhibit F       - Approved Letter of
  Credit Form

  	
   

  
	
  Exhibit G      - Borrowing Base
  Certificate

  	
   

  



 


iv





















 


CREDIT AGREEMENT


 


THIS CREDIT AGREEMENT is made and entered into as of January 11,
2006 by and among BEAZER MORTGAGE CORPORATION, a Delaware corporation (“Borrower”), the banks
identified on the signature pages hereof (together with any successors and
assigns thereof, hereinafter referred to individually as a “Lender” and collectively as the “Lenders”), GUARANTY BANK, as
administrative and collateral agent for the Lenders (“Agent”), JPMORGAN
CHASE BANK, N.A. as syndication agent, and U.S. BANK NATIONAL ASSOCIATION, as
documentation agent.


 


The parties hereto hereby agree as follows:


 


ARTICLE I


 


GENERAL TERMS


 


Section 1.1                            Certain
Definitions.  As used in this
Agreement, the following terms have the following meanings:


 


“Adjusted Tangible Net Worth”
means, as of any date, the Tangible Net Worth of Borrower plus the
available undrawn amount of any Approved Letter of Credit.


 


“Affiliate”
means, as to any Person, each other Person that directly or indirectly (through
one or more intermediaries or otherwise) controls, is controlled by, or is
under common control with, such Person.


 


“Aged Loan”
means an Eligible Mortgage Loan which has been included in the Borrowing Base
for more than ninety (90) days but less than or equal to one hundred twenty
(120) days.


 


“Agent” means Guaranty Bank,
in its capacity as the administrative and collateral agent for the Lenders
under this Agreement and the other Loan Documents and not in its individual
capacity as a Lender, and any successor agent appointed pursuant to Article IX.


 


“Agreement”
means this Credit Agreement, as the same may from time to time be amended,
supplemented or restated.


 


“Agreement to
Pledge” means each agreement by Borrower set forth in a
Borrowing Request for Wet Mortgage Loans, to deliver Required Mortgage
Documents to Agent.


 


“Alt-A Loan” means a Single
Family Mortgage Loan which (a) is secured by a first-lien Mortgage, (ii) is
not a Conforming Mortgage Loan, FHA Loan or VA Loan, (iii) has an original
principal balance of less than or equal to the current FNMA/FHLMC loan size
limit, (iv) is a Limited Documentation Mortgage Loan, (v) has a FICO
score greater than or equal to 620, and (vi) has a LTV less than or equal
to 100%.


 





















 


“Applicable Advance Rate Percentage” means ninety-eight percent
(98%), provided, however, if an Approved Letter of Credit exists,
the Applicable Advance Rate Percentage means ninety-nine percent (99%).


 


“Applicable Margin” means one
percent (1%).


 


“Applicable
Sublimit” means, for each Mortgage Loan classification listed
below, the percentage of the total Commitments listed opposite such Mortgage
Loan classification:


 




	
  Wet Loans

  	
   

  	
  30

  	
  %*

  
	
  Prime Loans

  	
   

  	
  100

  	
  %

  
	
  Jumbo Loans

  	
   

  	
  30

  	
  %

  
	
  Second
  Lien/HELOC Loans

  	
   

  	
  25

  	
  %

  
	
  Nonprime-A
  Loans

  	
   

  	
  10

  	
  %}**

  
	
  Nonprime-B
  Loans

  	
   

  	
  5

  	
  %}**

  
	
  Alt-A Loans

  	
   

  	
  30

  	
  %

  






 


* provided, however,
that in the last five (5) and first five (5) Business Days of every
calendar month, the Applicable Sublimit for Wet Loans shall be forty percent
(40%) of the total Commitments; and


 


** provided further, however, that the Unit Collateral Value of
all Nonprime-A Loans when added to the Unit Collateral Value of all Nonprime-B
Loans shall not exceed ten percent (10%) of the total Commitments.


 


“Appraised Value”
means, for any Mortgage Loan, the current appraised value of the property
secured by the Mortgage as determined by an appraisal performed in full
compliance with FNMA/FHLMC appraisal requirements and on an appraisal form
approved by FNMA or FHLMC, and performed by a state licensed or state-certified
real estate appraiser (in accordance with the provisions of Title XI of
FIRREA).


 


“Approved Letter of Credit”
means an irrevocable, unconditional standby letter of credit issued for the
account of Parent to the Agent for the benefit of the Lenders, as additional security
and as an additional source of repayment of the Obligations, in the form of Exhibit F, and in an amount
not less than $3,500,000.


 


“Borrower”
shall have the meaning assigned to such term in the preamble hereof.


 


“Borrowing”
means a borrowing of a Loan.


 


“Borrowing Base”
means at any date all Eligible Mortgage Loans which have been delivered to and
held by Agent or otherwise identified as Mortgage Collateral.


 


“Borrowing Base
Certificate” means a certificate describing the Eligible
Mortgage Loans to be included in the Borrowing Base substantially in the form
of Exhibit G.


 


“Borrowing
Request” means a request, in the form of Exhibit B,
for a Loan pursuant to Article II.


 


2





















 


“Business Day”
means a day, other than a Saturday or Sunday, on which commercial banks are
open for business with the public in Dallas, Texas.


 


“Cash
Equivalents” means (i) securities issued or directly and
fully guaranteed or insured by the United States Government or any agency or instrumentality
thereof which mature within ninety (90) days from the date of acquisition, and (ii) time
deposits and certificates of deposit, which mature within ninety (90) days from
the date of acquisition, of any Lender or any other domestic commercial bank
having capital and surplus in excess of $200,000,000, which has, or the holding
company of which has, a commercial paper rating of at least A-1 or the
equivalent thereof by Standard & Poors Corporation or P-1 or the
equivalent thereof by Moody’s Investors Service, Inc., (iii) commercial
paper having ratings at least equal to those described in the preceding clause
(ii), and (iv) overnight investments in money market mutual funds
registered under the 1940 Investment Company Act.


 


“Change of
Control” means Parent ceases to own, directly or indirectly, one
hundred percent (100%) of the voting power of the voting stock of Borrower.


 


“Change in Law” means the
occurrence, after the date of this Agreement, of any of the following: (a) the
adoption or taking effect of any law, rule, regulation or treaty, (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority or (c) the
making or issuance of any guideline or directive (whether or not having the
force of law) by any Governmental Authority.


 


“Code”
means the Internal Revenue Code of 1986, as amended.


 


“Collateral”
has the meaning given to it in the Security Agreement.


 


“Collateral
Value of the Borrowing Base” means, on any day, the sum of the
Unit Collateral Values of all Eligible Mortgage Loans included in the Borrowing
Base on such day as determined by Agent based upon information then available
to Agent.


 


“Combined Loan
to Value” or “CLTV” means, as to any Mortgage Loan, the ratio
expressed as a percentage determined by dividing (i) the total amount
owing and outstanding on all loans secured by the residential real property and
improvements serving as collateral for the Mortgage Loan, by (ii) the
Appraised Value of the residential real property and improvements serving as
collateral for the Mortgage Loan.


 


“Commitment”
means, as to any Lender, the obligation of such Lender to make Committed Loans
(or purchase participations in Swingline Loans as set forth in Section 2.1(b)(ii))
to Borrower pursuant to Section 2.1 hereof in an aggregate amount
not to exceed the amount set forth under the heading “Commitment” opposite such
Lender’s name on Schedule 1.1
hereof, provided, however, that during the following thirty (30)
day periods during any calendar year: (i) March 15 through April 14,
(ii) June 15 through July 14, (iii) September 15
through October 14, and (iv) December 15 through January 14,
the obligation of such Lender to make Committed Loans to Borrower pursuant to Section 2.1
hereof shall automatically increase to an aggregate amount not to exceed the
amount set forth under the heading “Maximum Commitment” opposite such Lender’s
name on Schedule 1.1 hereof.  The original aggregate amount of all Lenders’
Commitments is $250,000,000.00, provided, however, that during
each of


 


3





















 


the thirty
(30) day periods listed above, the aggregate amount of all Lenders’ Commitments
shall be $350,000,000.00; provided further, however, that notwithstanding
the aggregate amount of the Lenders’ Commitments, at all times the aggregate
amount advanced by the Lenders hereunder shall not exceed the lesser of (i) the
aggregate amount of the Lenders’ Commitments, or (ii) the Collateral Value
of the Borrowing Base.


 


“Committed Loan”
has the meaning given such term in Section 2.1.


 


“Commitment Percentage” means,
for each Lender as of any date, the percentage of the total Commitments of all
Lenders represented by such Lender’s Commitment, as it may be amended from time
to time, which initially shall be as set forth on Schedule 1.1.


 


“Conforming
Mortgage Loan” means a Mortgage Loan which (i) receives one
of the following responses from Fannie Mae Desktop Underwriter: (a) Approve/Eligible,
(b) Approve/Ineligible, (c) Refer/Eligible, or (d) EA-I,-II,-III/Eligible,
or (ii) receives one of the following responses from Freddie Mac Loan
Prospector: (x) Accept/Accept, or (y) A-Minus.  Mortgage Loans receiving a “Refer/Eligible”
response are Conforming Mortgage Loans only if accompanied by the Investor’s
approval to the exception.  Mortgage
Loans receiving approval under the “Expanded Approval” (“EA”) criteria
or “A-Minus” criteria are Conforming Mortgage Loans only if Borrower provides
Agent with a copy of the Fannie Mae or Freddie Mac contract which allows
delivery by Borrower for this loan type.


 


“Consolidated”
refers to the consolidation of any Person, in accordance with GAAP, with its
properly consolidated subsidiaries. 
References herein to a Person’s Consolidated financial statements,
financial position, financial condition, liabilities, etc. refer to the
consolidated financial statements, financial position, financial condition,
liabilities, etc. of such Person and its properly consolidated subsidiaries.


 


“Debtor Laws”
means all applicable liquidation, conservatorship, bankruptcy, moratorium,
arrangement, receivership, insolvency, reorganization or similar Laws from time
to time in effect affecting the rights of creditors generally and general
principles of equity.


 


“Default”
means any of the events specified in Section 7.1 hereof, whether or
not any requirement for notice or lapse or time or any other condition has been
satisfied.


 


“Default Rate”
means, at the time in question, with respect to all Obligations, the sum of (i) four
percent (4%) per annum, plus (ii) the per annum interest rate
otherwise payable in respect of the Obligations; provided  that in
no event shall the Default Rate ever exceed the Maximum Rate.


 


“Dividends,”
in respect of any corporation, means:  (a) cash
distributions or any other distributions on, or in respect of, any class of
equity security of such corporation, except for distributions made solely in
shares of securities of the same class; and (b) any and all funds, cash or
other payments made in respect of the redemption, repurchase or acquisition of
such securities.


 


4





















 


“Drawdown
Termination Date” means the earlier of January 10, 2007 or
the day on which the Notes first become due and payable in full in accordance
with the terms thereof or this Agreement.


 


“Dry Loan”
means an Eligible Mortgage Loan included in the Borrowing Base and for which
the Required Mortgage Documents have been delivered to Agent.


 


“Eligible
Mortgage Loan” means a Mortgage Loan with respect to which each
of the following statements is accurate and complete (and the Borrower by
including such Mortgage Loan in any computation of the Collateral Value of the
Borrowing Base shall be deemed to so represent to Agent and each Lender at and
as of the date of such computation):


 


(a)                                  Such
Mortgage Loan is a binding and valid obligation of the Obligor thereon, in full
force and effect and enforceable in accordance with its terms, except as
enforceability may be limited by Debtor Laws;


 


(b)                                 The
Mortgage Note evidencing such Mortgage Loan is genuine in all respects as
appearing on its face and as represented in the books and records of Borrower,
and all information set forth therein is true and correct;


 


(c)                                  Such
Mortgage Loan is free of any default (other than as permitted by subparagraph (d) below)
of any party thereto (including Borrower), counterclaims, offsets and defenses,
including the defense of usury, and from any rescission, cancellation or
avoidance, and all right thereof, whether by operation of law or otherwise;


 


(d)                                 No
payment under such Mortgage Loan is more than thirty (30) days past due the
payment due date set forth in the underlying Mortgage Note and Mortgage;


 


(e)                                  The
Mortgage Note and related Mortgage evidencing such Mortgage Loan contains the
entire agreement of the parties thereto with respect to the subject matter
thereof, has not been modified or amended in any respect not expressed in
writing therein and is free of concessions or understandings with the Obligor
thereon of any kind not expressed in writing therein;


 


(f)                                    Such
Mortgage Loan is in all respects in accordance with all Requirements of Law
applicable thereto, including, without limitation, the federal Consumer Credit
Protection Act and the regulations promulgated thereunder and all applicable
usury Laws and restrictions, and all notices, disclosures and other statements
or information required by Law or regulation to be given, and any other act
required by Law or regulation to be performed, in connection with such Mortgage
Loan have been given and performed as required;


 


(g)                                 All
advance payments and other deposits on such Mortgage Loan have been paid in
cash, and no part of said sums has been loaned, directly or indirectly, by
Borrower to the Obligor, and, other than as disclosed to Agent in writing,
there have been no prepayments;


 


(h)                                 At
all times such Mortgage Loan will be free and clear of all Liens, except those
Liens in favor of Agent, for the benefit of the Lenders;


 


5





















 


(i)                                     The
Property covered by such Mortgage Loan is insured against loss or damage by
fire and all other hazards normally included within standard extended coverage
in accordance with the provisions of such Mortgage Loan with Borrower named as
a loss payee thereon;


 


(j)                                     Such
Mortgage Loan is secured by a first Mortgage, or in the case of any Second Lien
Loan or HELOC, as applicable, a second Mortgage, on Single Family property;


 


(k)                                  The
date of origination of such Mortgage Loan is not more than sixty (60) days
prior to the date such Mortgage Loan was first included in the Borrowing Base;


 


(l)                                     Such
Mortgage Loan has not been included in the Borrowing Base for more than ninety
(90) days unless such Mortgage Loan is an Aged Loan;


 


(m)                               If
such Mortgage Loan is included in the Borrowing Base and has been withdrawn
from the possession of the Agent on terms and subject to conditions set forth
in the Security Agreement:


 


(i)                                     If
such Mortgage Loan was withdrawn by Borrower for purposes of correcting clerical
or other non-substantive documentation problems, the Mortgage Note and other
documents relating to such Mortgage Loan are returned to the Agent within ten (10) calendar
days from the date of withdrawal; and the Unit Collateral Value of such
Mortgage Loan when added to the Unit Collateral Value of other Mortgage Loans
which have been similarly released to Borrower and have not been returned does
not exceed ten percent (10%) of the aggregate amount of the Lenders’
Commitments;


 


(ii)                                  If
such Mortgage Loan was shipped by the Agent directly to a permanent investor
for purchase or to a custodian for the formation of a pool, (x) such investor
or custodian is in full compliance with the terms of the bailee letter under
which such Mortgage Loan was shipped, and (y) the full purchase price for such
Mortgage Loan has been received by the Agent (or such Mortgage Loan has been
returned to the Agent) within forty-five (45) calendar days from the date of
shipment by the Agent;


 


(n)                                 Such
Mortgage Loan is subject to a Take-Out Commitment which is in full force and
effect;


 


(o)                                 Such
Mortgage Loan (a) conforms to and satisfies the requirements for one of
the following Mortgage Loan classifications and has been designated by Borrower
as one (1), and only one (1), of the following: 
(i) Prime Loan (ii) Jumbo Loan, (iii) Second Lien/HELOC
Loan, (iv) Nonprime-A Loan, (v) Nonprime-B Loan or (vi) Alt-A
Loan; provided  that, within each Mortgage Loan classification
listed above, the Unit Collateral Value of such Mortgage Loan when added to the
Unit Collateral Value of all other Mortgage Loans in the same Mortgage Loan
classification does not exceed the Applicable Sublimit for such Mortgage Loan
classification;


 


(p)                                 The
Required Mortgage Documents have been delivered to Agent prior to the inclusion
of such Mortgage Loan in any computation of the Borrowing Base or, if such
items have not been delivered to Agent on or prior to the date such Mortgage
Loan is first included in any computation of the Borrowing Base, (a) Borrower
has pledged and agreed to deliver all Required Mortgage Documents pursuant to a
Borrowing Request delivered to Agent prior to


 


6





















 


such
inclusion, and (b) the Collateral Value of such Mortgage Loan when added
to the Collateral Value of all other Mortgage Loans for which Agent has not
received the Required Mortgage Documents does not exceed the Applicable
Sublimit for Wet Loans, provided that all Required Mortgage
Documents with respect to such Mortgage Loan shall be delivered to Agent within
seven (7) Business Days after the date of the Agreement to Pledge with
respect thereto;


 


(q)                                 If
such Mortgage Loan is an Investment Loan, no more than three (3) other
Investment Loans with the same Obligor or an Affiliate of such Obligor are
included in the Borrowing Base, such that no more than six (6) Eligible
Mortgage Loans with the same Obligor or an Affiliate of such Obligor are
included in the Borrowing Base at the same time, being a maximum of one (1) Principal
Residence Mortgage Loan, one (1) Second/Vacation Property Mortgage Loan,
and four (4) Investment Loans;


 


(r)                                    The
Property covered by such Mortgage Loan is located within the fifty United
States; and


 


(s)                                  Such
Mortgage Loan has been underwritten by the originator thereof in accordance
with such originator’s then current underwriting guidelines, which underwriting
guidelines have been previously approved by Agent (such approval not to be
unreasonably withheld or delayed).


 


“Environmental
Laws” means any and all Laws relating to (a) the protection
of the environment, (b) emissions, discharges or releases of pollutants,
contaminants, chemicals or hazardous or toxic substances or wastes into the
environment including ambient air, surface water, ground water or land, or (c) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes or the clean-up or other remediation
thereof.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, together with the regulations from time to time promulgated with
respect thereto.


 


“ERISA Affiliate”
means all members of the group of corporations and trades or businesses
(whether or not incorporated) which, together with Borrower, are treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code.


 


“ERISA Plan”
means any pension benefit plan subject to Title IV of ERISA or Section 412
of the Code maintained or contributed to by Borrower or any ERISA Affiliate
with respect to which Borrower has a fixed or contingent liability.


 


“E-Sign Act”
means the Electronic Signatures in Global and National Commerce Act, as amended
from time to time.


 


“Event of
Default” means any of the events specified in Section 7.1
hereof, provided that, any requirement in connection with such event for
the giving of notice or the lapse of time, or the happening of any further
condition, event or act has been satisfied.


 


7





















 


“Excluded Taxes” means, with
respect to the Agent, any Lender or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) taxes
imposed on or measured by its overall net income (however denominated), and
franchise taxes imposed on it (in lieu of net income taxes), by the
jurisdiction (or any political subdivision thereof) under the laws of which
such recipient is organized or in which its principal office is located or, in
the case of any Lender, in which its applicable lending office is located, (b) any
branch profits taxes imposed by the United States or any similar tax imposed by
any other jurisdiction in which the Borrower is located and (c) in the
case of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 10.3(b)), any withholding tax that is
imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party hereto (or designates a new lending office) or is
attributable to such Foreign Lender’s failure or inability (other than as a
result of a Change in Law) to comply with Section 10.1(e), except
to the extent that such Foreign Lender (or its assignor, if any) was entitled,
at the time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 10.1(a).


 


“Federal Funds Rate” means,
for any day, the rate per annum equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate (rounded upward, if
necessary, to a whole multiple of 1/100 of 1%) charged to Guaranty Bank on such
day on such transactions as determined by the Agent.


 


“Fee Letter” means the letter
agreement of even date herewith between Borrower and Agent.


 


“FHA”
means the Federal Housing Administration or any successor thereto.


 


“FHA Loan”
means a Mortgage Loan insured by the FHA.


 


“FHLMC”
or “Freddie Mac”
means the Federal Home Loan Mortgage Corporation, or any successor thereto.


 


“FICO”
means FICO®, a registered trademark of Fair Isaacs and Company, being the “delinquency
predictor” model established by Fair Isaacs and Company and shown on a credit
report prepared by Equifax, Experian, Trans Union, or any other authorized
national credit reporting agency.  For
all purposes hereunder, if two FICO scores are obtained for any individual, the
lower score shall be used.  If three FICO
scores are obtained for any individual, the middle score shall be used.


 


“Financing Lease”
means (i) any lease of Property if the then present value of the minimum
rental commitment thereunder should, in accordance with GAAP, be capitalized on
a


 


8





















 


balance sheet
of the lessee, and (ii) any other lease obligations which are capitalized
on a balance sheet of the lessee.


 


“FIRREA”
means the Financial Institutions Reform Recovery and Enforcement Act of 1989,
as amended from time to time, together with the regulations from time to time
promulgated with respect thereto.


 


“Fiscal Quarter”
means each period of three calendar months ending March 31, June 30, September 30
and December 31 of each year.


 


“Fiscal Year”
means each period of twelve calendar months ending September 30 of each
year.


 


“FNMA”
or “Fannie Mae”
means the Federal National Mortgage Association, or any successor thereto.


 


“Foreign Lender” means any
Lender that is organized under the laws of a jurisdiction other than that in
which the Borrower is resident for tax purposes.  For purposes of this definition, the United
States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.


 


“Full
Documentation Mortgage Loan” means a Mortgage Loan supported by
all of the customary documentation required to underwrite the Mortgage Loan,
including, without limitation, the following: 
(i) Verification of Income (“VOI”), (ii) Verification of
Assets (“VOA”), and (iii) Verification of Employment (“VOE”).


 


“Funding Account”
means the non-interest bearing demand checking account established by Borrower
with Agent to be used for (a) the initial deposit of proceeds of Loans;
and (b) the funding or purchase of a Mortgage Note by Borrower; provided
that the Funding Account shall be pledged to Agent, for the benefit of
Lenders, and the Borrower shall not be entitled to withdraw funds from the
Funding Account.


 


“GAAP”
means those generally accepted accounting principles and practices which are
recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and its
consolidated subsidiaries, are applied for all periods after the date hereof in
a manner consistent with the manner in which such principles and practices were
applied to the financial statements described in Section 4.7.  If any change in any accounting principle or
practice is required by the Financial Accounting Standards Board (or any such
successor) in order for such principle or practice to continue as a generally
accepted accounting principle or practice, all reports and financial statements
required hereunder with respect to Borrower or Parent may be prepared in
accordance with such change, but all calculations and determinations to be made
hereunder may be made in accordance with such change only after notice of such
change is given to Agent and Agent agrees to such change insofar as it affects
the accounting of Borrower.


 


“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.


 


9





















 


“Governmental
Requirement” means any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including, without
limitation, any of the foregoing which relate to environmental standards or
controls, energy regulations and occupational, safety and health standards or
controls) of any arbitrator, court or other Governmental Authority, which
exercises jurisdiction over any Related Person or any of its Property.


 


“Guaranty Obligation” of any
Person means any contract, agreement or understanding of such Person pursuant
to which such Person guarantees, or in effect guarantees, any Indebtedness,
lease, dividends or other obligations (the “Primary Obligations”) of any other
Person (the “Primary
Obligor”) in any manner, whether directly or indirectly,
contingently or absolutely, in whole or in part, including without limitation
agreements:


 


(a)                                  to
purchase such Primary Obligation or any property constituting direct or
indirect security therefor;


 


(b)                                 to
advance or supply funds (A) for the purchase or payment of any such
Primary Obligation, or (B) 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 Obligation”
shall not include endorsements that are made in the ordinary course of business
of negotiable instruments or documents for deposit or collection.  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.


 


“Hedging
Agreement” shall mean any agreement relating to a Hedging
Transaction.


 


“Hedging Transaction” means
each interest rate swap transaction, basis swap transaction, forward rate
transaction, equity transaction, equity index transaction, foreign exchange
transaction, cap transaction and floor transaction (including any option with
respect to any of these transactions and any combination of any of the
foregoing)


 


“HELOC”
means a home equity line of credit.


 


“Indebtedness”
of any Person at a particular date means the sum (without duplication) at such
date of (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services or which is evidenced by a
note, bond, debenture, or similar instrument, (b) all obligations of such
Person under any Financing Lease, (c) all obligations of


 


10





















 


such Person in
respect of letters of credit, acceptances, or similar obligations issued or
created for the account of such Person, (d) all Guaranty Obligations of
such Person, (e) all 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, (f) any liability of such Person in
respect of unfunded vested benefits under an ERISA Plan, (g) net
obligations of such Person under any Hedging Agreement, and (g) all
liabilities of such Person in respect of indemnities or repurchase obligations
(other than customary, industry-standard indemnities given in connection with
the sale of Mortgage Loans by such Person which are not of a nature which would
cause such sale to be classified as a sale on a “recourse” basis) made in
connection with the sale of Mortgage Loans.


 


“Indemnified Taxes” means
Taxes other than Excluded Taxes.


 


“Investment Loan”
means a Mortgage Loan secured by a Mortgage on an Investment Property.


 


“Investment
Property” means a Single Family dwelling which the Obligor has
represented to Borrower is not the Principal Residence or Second/Vacation
Property of the Obligor under the related Mortgage Loan.


 


“Investor”
means any Person listed on Exhibit C
or any other Person approved by Agent from time to time, such approval not to
be unreasonably withheld, with notice of such approval thereafter provided to
Lenders, which notice may be given electronically or by posting on Intralinks.


 


“Jumbo Loan”
means a Single Family Mortgage Loan which (i) is secured by a first-lien
Mortgage, (ii) has an original principal balance of greater than the
current FNMA/FHLMC loan size limit but less than or equal to $1,500,000, (iii) is
a Limited Documentation Mortgage Loan or a Full Documentation Mortgage Loan, (iv) has
a FICO score greater than or equal to 620, and (v) has a LTV less than or
equal to 100%.


 


“Law”
means any statute, law, regulation, ordinance, rule, treaty, judgment, order,
decree, permit, concession, franchise, license, agreement or other governmental
restriction of the United States or any state or political subdivision
thereof.  Any reference to a Law includes
any amendment or modification to such Law, and all regulations, rulings, and
other Laws promulgated under such Law.


 


“Lender”
and “Lenders” have the meaning assigned
to such terms in the preamble hereof.


 


“LIBOR”
means, for any day, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) equal to the rate appearing on Bloomberg Professional (or,
if not available, any other nationally recognized trading screen reporting the
British Bankers’ Association LIBOR) at 10:00 a.m. (Central time) as the
British Bankers’ Association LIBOR for deposits in U.S. Dollars with a term
equivalent to one month.  In the event
that such rate does not appear on Bloomberg Professional, “LIBOR”
for purposes of this definition shall be determined by reference to such other
comparable publicly available service for displaying London inter-bank offered
rates as may be selected by the Agent.


 


11





















 


“Lien”
means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (whether statutory or otherwise), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever intended to secure payment of any obligations or liabilities
(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 the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction in respect of any
of the foregoing).


 


“Limited
Documentation Mortgage Loan” means a Mortgage Loan supported by
all of the customary documentation required to underwrite the Mortgage Loan
except that a minimum of one (1) and a maximum of two (2) of the
following verifications were performed:  (i) Verification
of Income (“VOI”), (ii) Verification of Assets (“VOA”), and/or (iii) Verification
of Employment (“VOE”).


 


“Loan”
means a Committed Loan or a Swingline Loan and “Loans”
means all Committed Loans and all Swingline Loans.


 


“Loan Balance”
means for any day, the principal balance of the Loans outstanding on such day.


 


“Loan Document”
means any, and “Loan
Documents” shall mean all, of this Agreement, the Notes, the
Security Instruments, the Fee Letter, any Approved Letter of Credit and any and
all other agreements or instruments now or hereafter executed and delivered by
Borrower or Parent in connection with, or as security for the payment or
performance of any or all of the Obligations, as any of such may be renewed,
amended or supplemented from time to time.


 


“Loan to Value”
or “LTV”
means, as to any Mortgage Loan, the ratio expressed as a percentage determined
by dividing (i) the total principal amount owing and outstanding on the
first-lien Mortgage Loan, by (ii) the Appraised Value of the residential
real property and improvements serving as collateral for the Mortgage Loan.


 


“Market Value”
on any day shall be determined by Agent, in its reasonable discretion, based
upon (a) information then available to Agent regarding quotes to dealers
for the purchase of mortgage notes similar to the Mortgage Notes that have been
delivered to Agent pursuant to this Agreement or (b) sales prices actually
received by Borrower for mortgage notes sold by Borrower during the immediately
preceding thirty (30) day period similar to the Mortgage Notes that have been
delivered to Agent pursuant to this Agreement.


 


“Material
Adverse Effect” means any material adverse effect on (a) the
validity or enforceability of this Agreement, the Notes or any other Loan
Document, (b) the business, operations, total Property or financial
condition of the Borrower or the Borrower and the Related Persons taken as a
whole, (c) the Collateral under the Security Agreement, or (d) the
ability of Borrower to fulfill its obligations under this Agreement, the Notes,
or any other Loan Document to which it is a party.


 


“Maximum Rate”
means, with respect to each Lender, the maximum nonusurious rate of interest
that such Lender is permitted under applicable Law to contract for, take,
charge, or receive with respect to its Loans.


 


12





















 


“MERS”
means Mortgage Electronic Registration Systems, Inc., a Delaware
corporation, or any successor thereto.


 


“MERS Agreement”
means those agreements by and among Borrower, Agent, MERS and MERSCORP, Inc.,
as amended, modified, supplemented, extended, restated or replaced from time to
time, including, without limitation, the “Electronic Tracking Agreement:
Warehouse Lender Agreement” executed of even date herewith.


 


“MERS® System”
means the system of recording transfers of mortgages electronically maintained
by MERS.


 


“MIN”
means, with respect to each Mortgage Loan, the Mortgage Identification Number
for such Mortgage Loan registered with MERS on the MERS® System.


 


“Mortgage”
means a mortgage, deed of trust or deed to secure debt on standard forms
customary for transactions of such type and otherwise in form and substance
satisfactory to Agent in its reasonable discretion, securing a Mortgage Note
and granting a perfected, first or second priority lien on Single Family
property.


 


“Mortgage
Collateral” means all Mortgage Notes (a) which are made
payable to the order of Borrower or have been endorsed (without restriction or
limitation) payable to the order of Borrower, (b) in which Agent has been
granted and continues to hold a perfected first priority security interest for
the benefit of the Lenders, (c) which are in form and substance acceptable
to Agent in its reasonable discretion, (d) which are secured by Mortgages,
and (e) which conform in all respects with all the requirements for
purchase of such Mortgage Note under the Take-Out Commitments and are valid and
enforceable in accordance with their respective terms.


 


“Mortgage Loan”
means a mortgage loan which is evidenced by a Mortgage Note and secured by a
Mortgage, together with the rights and obligations of a holder thereof and
payments thereon and proceeds therefrom.


 


“Mortgage Note”
means the note or other evidence of indebtedness evidencing the indebtedness of
an Obligor under a Mortgage Loan.


 


“Net Income”
of any Person means, for any period, the net income of such Person for such
period, calculated in accordance with GAAP.


 


“Net Worth”
of any Person means, as of any date, an amount equal to all Consolidated assets
of such Person minus such Person’s Consolidated liabilities, each as
determined by GAAP.


 


“Nonprime-A Loan”
means a Single Family Mortgage Loan which (i) is secured by a first-lien
Mortgage, (ii) is not a Conforming Mortgage Loan, FHA Loan or VA Loan, (iii) has
an original principal balance of less than or equal to the current FNMA/FHLMC
loan size limit, (iv) is a Full Documentation Mortgage Loan, (v) has
a FICO score greater than or equal to 580 but less than 620, and (vi) has
a LTV less than or equal to 90%.


 


“Nonprime-B Loan”
means a Single Family Mortgage Loan which (i) is secured by a first-lien
Mortgage, (ii) is not a Conforming Mortgage Loan, FHA Loan or VA Loan, (iii) has
an


 


13





















 


original
principal balance of less than or equal to $400,000, and (iv) is either (A) a
Full Documentation Mortgage Loan with a FICO score greater than or equal to 500
but less than 580 and with a LTV less than or equal to 90%, or (B) a
Limited Documentation Mortgage Loan with a FICO score greater than or equal to
550 but less than 580 and with a LTV less than or equal to 80%.


 


“Note”
means any promissory note delivered by Borrower to any Lender pursuant to Section 2.2
in the form attached hereto as Exhibit A
and all renewals, modifications and extensions thereof.


 


“Obligations”
means all present and future Indebtedness, obligations, and liabilities of
Borrower to Lenders, and all renewals 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 reasonable
out-of-pocket costs actually 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.


 


“Obligor”
means the Person or Persons obligated to pay the Indebtedness which is the
subject of a Mortgage Loan.


 


“Operating
Account” means any non-interest bearing demand checking account (whether
one or more) established by Borrower with Agent to be used for Borrower’s
operations.  Subject to Agent’s rights
under Section 10.10 hereof, Borrower shall be entitled to withdraw
funds from the Operating Account.


 


“Other Taxes” means all
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies arising from any payment made hereunder or
under any other Loan Document or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.


 


“Parent”
means Beazer Homes USA, Inc., a Delaware corporation, and owner, directly
or indirectly, of one hundred percent (100%) of the outstanding capital stock
of Borrower.


 


“PBGC”
means the Pension Benefit Guaranty Corporation or any Governmental Authority
succeeding to any of its functions.


 


“Permitted Warehouse Debt”
means Indebtedness not in excess of $100,000,000 under other mortgage
collateralized credit facilities the terms and conditions of which shall be
customary for financings of this type and otherwise acceptable to the Agent in
its reasonable discretion, provided  that the collateral agent for
other mortgage collateralized credit facilities shall be the Agent hereunder.


 


“Person”
means any individual, corporation, partnership, joint venture, association,
joint stock company, limited liability company, trust, unincorporated
organization, Governmental Authority, or any other form of entity.


 


14





















 


“Prime Loan”
means a Single Family Mortgage Loan which (a)(i) is secured by a
first-lien Mortgage, and (ii) is a Conforming Mortgage Loan, FHA Loan or
VA Loan, or (b)(i) is secured by a first-lien Mortgage, (ii) has an
original principal balance of less than or equal to the current FNMA/FHLMC loan
size limit, (iii) is a Full Documentation Mortgage Loan, (iv) has a
FICO score greater than or equal to 620, and (v) has a LTV less than or
equal to 100%.


 


“Prime Rate” means the rate of
interest per annum then most recently established by Guaranty Bank as its
published or publicly announced prime rate, which rate may not be the lowest
rate of interest charged by Guaranty Bank to its borrowers.  Each change in any interest rate provided for
herein based upon the Prime Rate resulting from a change in the Prime Rate
shall take effect without notice to the Borrower at the time of such change in
the Prime Rate.


 


“Principal
Residence” means a Single Family dwelling that the Obligor
represents as being occupied as the Obligor’s primary residence.


 


“Property”
means any interest in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.


 


“Regulation U”
means Regulation U issued by the Board of Governors of the Federal Reserve
System as in effect from time to time.


 


“Regulation X”
means Regulation X issued by the Board of Governors of the Federal Reserve
System as in effect from time to time.


 


“Regulation Z”
means Regulation Z issued by the Board of Governors of the Federal Reserve
System as in effect from time to time.


 


“Related Persons”
means Borrower and each of Borrower’s Subsidiaries.


 


“Reportable
Event” means (1) a reportable event described in Sections
4043(c)(5) or (6) of ERISA or the regulations promulgated thereunder,
or (2) any other reportable event described in Section 4043(c) of
ERISA or the regulations promulgated thereunder other than a reportable event
not subject to the provision for 30-day notice to the PBGC pursuant to a waiver
by the PBGC under Section 4043(a) of ERISA.


 


“Required Lenders” means, at
any time, the holders of 66 2/3% or more of the total Commitments, or if at any
time, the Commitments are terminated, the holders of 66 2/3% or more of the
aggregate outstanding principal amount of all Loans; provided, however,
that if only two Lenders hold 100% of the Commitments or 100% of the aggregate
outstanding principal amount of all Loans when the Commitments are terminated,
then Required Lenders shall mean both Lenders.


 


“Required
Mortgage Documents” means, as to any Mortgage Loan, the items
described on Schedule A to the
Security Agreement.


 


“Requirement of
Law” as to any Person means the charter 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,


 


15





















 


authorization
or other determination, direction or requirement (including, without
limitation, any of the foregoing which relate to environmental standards or
controls, energy regulations and occupational, safety and health standards or
controls) of any arbitrator, court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.


 


“Second
Lien/HELOC Loan” means a Single Family Mortgage Loan which (a)(i) is
secured by a traditional closed-end second-lien Mortgage or an open-end HELOC
Mortgage, (ii) is a Limited Documentation Mortgage Loan or a Full
Documentation Mortgage Loan, (iii) has a FICO score greater than or equal
to 620, and (iv) has a CLTV less than or equal to 100%, or (b)(i) is
secured by a traditional closed-end second-lien Mortgage or an open-end HELOC
Mortgage, (ii) has a CLTV less than or equal to 100%, and (iii) is
closed concurrently with a first-lien Mortgage Loan that is also pledged as
Collateral and accepted as an Eligible Mortgage Loan hereunder.


 


“Second/Vacation
Property” means a Single Family dwelling that the Obligor has
represented to Borrower is not used for rental purposes and that the Obligor
occupies for some portion of the year.


 


“Security
Agreement” means the Security Agreement between Borrower and
Agent of even date herewith, as the same may from time to time be further
supplemented, amended or restated.


 


“Security
Instrument” means (a) the Security Agreement and (b) such
other executed documents as are or may be necessary to grant to Agent, for the
benefit of the Lenders, a perfected first prior and continuing security
interest in and to all Mortgage Collateral, and any and all other agreements or
instruments now or hereafter executed and delivered by Borrower in connection
with, or as security for the payment or performance of, all or any of the Obligations,
including Borrower’s obligations under the Notes and this Agreement, as such
agreements may be amended, modified or supplemented from time to time.


 


“Servicing
Agreements” means all agreements between the Related Persons and
Persons other than a Related Person pursuant to which a Related Person
undertakes to service Mortgage Loans.


 


“Servicing
Records” means all contracts and other documents, books, records
and other information (including without limitation, computer programs, tapes,
discs, punch cards, data processing software and related property and rights)
maintained with respect to the Servicing Rights.


 


“Servicing
Rights” means all of right, title and interest of any Related
Person in and under the Servicing Agreements, including, without limitation,
the rights of a Related Person to income and reimbursement thereunder.


 


“Settlement
Account” means the non-interest bearing demand deposit account
established by Borrower with Agent to be used for (i) the deposit of
proceeds from the sale of Mortgage Collateral, and (ii) the payment of the
Obligations; provided  that (a) the Settlement


 


16





















 


Account shall
be pledged to Agent for the benefit of the Lenders, and (b) Borrower shall
not be entitled to withdraw funds from the Settlement Account.


 


“Single Family”
means residential real property consisting a completed one-to-four unit single
family dwelling thereon (including Principal Residences, Second/Vacation
Property and Investment Property), which may be a condominium unit, and which
is fully completed and ready for occupancy, and which is not used for
commercial purposes, is not a leasehold interest, and is not a manufactured or
mobile home.


 


“Subsidiary”
means, with respect to any Person, any corporation, association, partnership,
joint venture, or other business or corporate entity, enterprise or
organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent (50%) or more by such
Person.


 


“Swingline Amount” means Fifty
Million Dollars ($50,000,000.00).


 


“Swingline Lender” means
Guaranty Bank in its capacity as Swingline Lender under this Agreement.


 


“Swingline Loan” has the
meaning ascribed to such term in Section 2.1(b).


 


“Swingline Obligations” has
the meaning ascribed to such term in Section 2.1(b).


 


“Take-Out
Commitment” means with respect to any Eligible Mortgage Loan, a
written master commitment of an Investor to purchase a pool of Mortgage Loans
or an individual commitment of an Investor to purchase an individual Mortgage
Loan under which such Eligible Mortgage Loan(s) will be delivered to such
Investor on terms customary for transactions of this type and otherwise
satisfactory to Agent, in its reasonable discretion.


 


“Tangible Net
Worth” of any Person means, as of any date, the Net Worth of
such Person minus (a) all Consolidated assets of such Person which
would be classified as intangible assets under GAAP, including but not limited
to goodwill (whether representing the excess cost over book value of assets
acquired or otherwise), patents, trademarks, trade names, copyrights,
franchises, deferred charges and capitalized servicing rights, minus (b) all
Indebtedness owing to such Person from (i) Affiliates of such Person, and (ii) shareholders,
members or partners of such Person.


 


“Taxes” means all present or
future taxes, levies, imposts, duties, deductions, withholdings, assessments,
fees or other charges imposed by any Governmental Authority, including any
interest, additions to tax or penalties applicable thereto.


 


“Termination
Event” means (a) the occurrence with respect to any ERISA
Plan of a Reportable Event, (b) the withdrawal of the Borrower or any
ERISA Affiliate from an ERISA Plan during a plan year in which it was a “substantial
employer,” as defined in Section 4001(a)(2) of ERISA, (c) the
distribution to affected parties of a notice of intent to terminate any ERISA
Plan or the treatment of any ERISA Plan amendment as a termination under Section 4041
of ERISA, (d) the institution of proceedings to terminate any ERISA Plan
by the PBGC under Section 4042 of ERISA, or (e) any other event or
condition which might


 


17





















 


constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any ERISA Plan.


 


“Total Debt”
of any Person means, as of any date, all amounts which would be included as
liabilities on a Consolidated balance sheet of such Person as of such date
prepared in accordance with GAAP.


 


“UCC”
means the Texas Uniform Commercial Code, as the same may hereafter be amended.


 


“UETA”
means the Texas Uniform Electronic Transaction Act, as amended from time to
time.


 


“Unit Collateral
Value” means, on any day, with respect to each Eligible Mortgage
Loan included in the Borrowing Base, the Applicable Advance Rate Percentage of
the least of the following:


 


(i)                                     the outstanding
principal balance of the Mortgage Note constituting such Mortgage Loan;


 


(ii)                                  the
actual out-of-pocket cost to Borrower of such Mortgage Loan minus the amount of
principal paid under such Mortgage Loan and delivered to Agent for application
to the prepayment of the Loans;


 


(iii)                               as
applicable, either (a) the amount at which an Investor has committed to
purchase an individual Mortgage Loan pursuant to a Take-Out Commitment, or (b) the
weighted average purchase price (expressed as a percentage of par) committed to
under those Take-Out-Commitments that could cover such Mortgage Loan multiplied
by the unpaid principal balance of such Mortgage Loan; or


 


(iv)                              the
Market Value of the Mortgage Note constituting such Mortgage Loan.


 


provided  that
if any such Eligible Mortgage Loan included in the Borrowing Base becomes an
Aged Loan, the Unit Collateral Value of such Mortgage Loan as determined by the
above calculation shall be reduced by five percent (5%), and Borrower shall
immediately, on such Eligible Mortgage Loan’s ninety-first (91st)
day in the Borrowing Base, make mandatory repayment required by Section 2.5;
and


 


provided  further,
that no Eligible Mortgage Loan may be included in the Borrowing Base for more
than one hundred twenty (120) days, such that on the one hundred twenty-first
(121st) day after such Eligible Mortgage Loan is first included in
the Borrowing Base, the Unit Collateral Value of such Mortgage Loan shall be
reduced to zero, and Borrower shall immediately make mandatory repayment
required by Section 2.5.  The
values described in clauses (i), (ii) and (iii) above shall be
initially determined by Borrower as of the date the applicable Eligible
Mortgage Loan is initially pledged to Agent and shall be reported by Borrower
to Agent in the Borrowing Request.


 


“VA”
means the Veterans Administration and any successor thereto.


 


18





















 


“VA Loan”
means a Mortgage Loan guaranteed by the VA.


 


“Weighted Average Commitment”
means the average amount of a Lender’s Commitment from the date hereof until
the Drawdown Termination Date, taking into account the automatic increases in
each Lender’s Commitment (as described in the definition of Commitment).  The Weighted Average Commitment for each
Lender shall be calculated by (a) multiplying the amount set forth under
the heading “Maximum Commitment” opposite such Lender’s name on Schedule 1.1
hereof by 120 days, (b) multiplying the amount set forth under the heading
“Commitment” opposite such Lender’s name on Schedule 1.1 hereof
multiplied by 244 days, and (c) adding the results in (a) and (b) above
and then dividing the sum by 364.


 


“Wet Loan”
means an Eligible Mortgage Loan which is included in the Borrowing Base, but
for which the Required Mortgage Documents have not been delivered to Agent.


 


Other Definitional Provisions.


 


(a)                                  Unless
otherwise specified therein, all terms defined in this Agreement shall have the
above-defined meanings when used in the Notes or any other Loan Document,
certificate, report or other document made or delivered pursuant hereto.


 


(b)                                 Each
term defined in the singular form in Section 1.1 shall mean the
plural thereof when the plural form of such term is used in this Agreement, the
Notes or any other Loan Document, certificate, report or other document made or
delivered pursuant hereto, and each term defined in the plural form in Section 1.1
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, subsection, schedule and exhibit
references herein are references to sections, subsections, schedules and
exhibits to this Agreement unless otherwise specified.  The word “or” is not exclusive, and the word “including”
(in its various forms) means “including without limitation.”


 


(d)                                 Unless
the context otherwise requires or unless otherwise provided herein the terms
defined in this Agreement which refer to a particular agreement, instrument or
document also refer to and include all renewals, extensions, modifications,
amendments and restatements of such agreement, instrument or document, provided
that nothing contained in this section shall be construed to authorize any
such renewal, extension, modification, amendment or restatement.


 


(e)                                  As
used herein, in any 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.


 


Section 1.2                            Exhibits
and Schedules.  All Exhibits and
Schedules attached to this Agreement are a part hereof for all purposes.


 


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Section 1.3                            Calculations
and Determinations.  All calculations
under the Loan Documents of interest and of fees shall be made on the basis of
actual days elapsed (including the first day but excluding the last) and a year
of three hundred sixty (360) days.  Each
determination by Agent of amounts to be paid hereunder shall, in the absence of
manifest error, be conclusive and binding. 
Unless otherwise expressly provided herein or unless Lenders otherwise
consent, all financial statements and reports furnished to Lenders hereunder
shall be prepared and all financial computations and determinations pursuant
hereto shall be made in accordance with GAAP. 
Agent shall deliver to Borrower an interest billing statement for each
month on or before the fifth (5th) day of the next succeeding month,
which interest billing statement shall set forth the interest accrued on the
Loans for such month; provided that any failure or delay in delivering such
interest billing or any inaccuracy therein shall not affect the Obligations.


 


ARTICLE II


 


AMOUNT AND TERMS OF LOANS


 


Section 2.1                            Commitment
and Loans.


 


(a)                        Committed
Loans.  Subject to the terms and
conditions contained in this Agreement, each Lender severally agrees to make
loans (“Committed Loans”) to Borrower, on a pro-rata
basis in accordance with such Lender’s Commitment Percentage, on a revolving
credit basis from time to time on any Business Day from the date of this
Agreement through the Drawdown Termination Date.  The aggregate amount of all Loans requested
in any Borrowing Request must be equal to the lesser of (i) an amount
greater than or equal to $25,000 or (ii) an amount equal to the unadvanced
portion of the Borrowing Base.  After
giving effect to the transactions contemplated by the Borrowing Request
pursuant to which a Loan is requested, and at all other times, the aggregate
amount of all Committed Loans and all Swingline Loans outstanding shall not
exceed the Collateral Value of the Borrowing Base.


 


(b)                       Swingline
Loans.


 


(i)                                     Swingline
Loans.  Subject to the terms and
conditions hereof, the Swingline Lender, in its sole and absolute discretion,
and in reliance upon the agreements of the other Lenders set forth in this Section 2.1(b),
may make loans (each a “Swingline Loan”
and collectively, the “Swingline Loans”)
to the Borrower from time to time during the period from and including the date
of this Agreement and through the Drawdown Termination Date, notwithstanding
the fact that such Swingline Loans, when aggregated with the outstanding
principal amount of all Committed Loans of the Lender acting as Swingline Lender,
may exceed the amount of such Lender’s Commitment, provided, however,
that at no time shall the Swingline Lender make a Swingline Loan if,
immediately after giving effect thereto, (i) the aggregate outstanding
principal amount of all Swingline
Loans would exceed the Swingline Amount, (ii) the aggregate outstanding
principal amount of all Swingline Loans and the aggregate outstanding principal
amount of all Committed Loans would exceed either (A) the total
Commitments of all Lenders, or (B) the Collateral Value of the Borrowing
Base, or (iii) the aggregate outstanding principal amount of all Committed
Loans of any Lender plus such Lender’s applicable


 


20





















 


Commitment Percentage of the aggregate
outstanding principal amount of all Swingline Loans would exceed such Lender’s
Commitment.


 


(ii)                                  Swingline
Take-Out.  By no later than 2:00 p.m.
(Central time) on any Business Day upon which the Swingline Lender shall so
demand (and in any event not more than five (5) Business Days after a
particular Swingline Loan is made or such earlier date on which the Swingline
Amount is fully funded), the Agent shall notify each Lender of the aggregate
outstanding principal balance of the Swingline Loans as of the commencement of business
of the Agent on such Business Day (the “Swingline Obligations”) and,
subject only to its receipt of such notice and regardless of whether any
Default or Event of Default shall have occurred, whether the Commitments shall
have been reduced or terminated or any other matter whatsoever, each Lender
shall (i) make a Loan to the Borrower in an amount equal to its Commitment
Percentage of such Swingline Obligations, and (ii) make the amount of such
Loan available to the Agent for the account of the Borrower not later than 3:00 p.m.
(Central time), on such Business Day, in funds immediately available to the
Agent at Agent’s office.  The funds so
made available to the Agent on such Business Day in respect of such Loans will
then be disbursed by the Agent directly to the Swingline Lender as payment in
respect of the Swingline Obligations. 
Notwithstanding anything to the contrary contained in this Agreement, to
the extent that the Swingline Lender, in its capacity as a Lender hereunder,
shall be required to fund its Commitment Percentage of any Swingline Loan
take-out under this Section 2.1(b)(ii), the Swingline Lender and
the Agent shall net out the funding thereof against the payments to be received
by the Swingline Lender in respect of such take-out.  In the event one of the events described in Section 7.1(f)(ii) shall
have occurred and be continuing with respect to the Borrower or if for any
other reason, as determined by Agent in its sole discretion, Loans may not be
made as contemplated by this Section 2.1(b)(ii), each Lender shall,
on the date such Loan was to have been made pursuant to this section, purchase
for cash an undivided participating interest in the then outstanding Swingline
Loans by paying to the Agent, for distribution to the Swingline Lender, an
amount equal to its Commitment Percentage of such Swingline Obligations.


 


(iii)                               Indemnification
of Swingline Lender.  The Lenders
agree to reimburse and indemnify the Swingline Lender ratably in proportion to
their Commitment Percentages (or, if the Commitments have been terminated, in
proportion to their Commitment Percentages immediately prior to such
termination) from and against any and all losses, liabilities (including
liabilities for penalties), actions, suits, judgments, demands, costs and expenses
(including, without limitation, reasonable attorneys’ fees and disbursements)
arising out of or in connection with any Swingline Loan, including
the foregoing in respect of losses, liabilities or other obligations suffered
by the Swingline Lender resulting from its own negligence or strict liability and
excluding the foregoing with respect to losses, liabilities and other
obligations resulting from its own gross negligence or willful misconduct.  If a Lender does not make available to
the Swingline Lender when due such Lender’s Commitment Percentage of any such
loss, liability, judgment, cost or expense, such Lender shall be required to
pay on demand interest thereon for the account of the Swingline Lender at a
rate of interest per annum equal to LIBOR, from the date such Lender’s payment
is due until the date such payment is received by the Swingline Lender.


 


21





















 


Section 2.2         Promissory Notes; Interest on the
Notes.  The obligation of Borrower to
repay the Loans made by Lenders, together with interest accruing in connection
therewith, shall be evidenced by a Note payable to the order of each Lender in
the amount of such Lender’s Commitment. 
Interest on the Notes shall be due and payable as provided herein and
therein.  The entire Loan Balance and all
accrued and unpaid interest thereon shall be finally due and payable on the
Drawdown Termination Date.


 


Interest on each Loan shall accrue at a rate
per annum equal to the lesser of (a) the sum of LIBOR, floating daily, plus the
Applicable Margin, or (b) the Prime Rate. 
Interest on the Notes shall be calculated on the basis of the actual
days elapsed but computed as if each year consisted of 360 days, subject to the
provisions hereof limiting interest to the Maximum Rate, which Maximum Rate
shall be calculated on the basis of actual days elapsed computed on the basis
of a 365/366 day year, as applicable. 
All accrued but unpaid interest shall be payable in arrears on the
fifteenth (15th) day of the succeeding month.


 


After an Event of Default, at the option of
Required Lenders, interest shall accrue on the outstanding principal balance of
the Notes at a rate per annum equal to the lesser of (x) the Default Rate or
(y) the Maximum Rate.  All
calculations of interest shall be on the basis of the actual days elapsed but
computed as if each year consisted of 360 days, except that calculations of
interest based on the Maximum Rate shall be computed on a 365/366 day year, as
applicable.


 


Section 2.3         Notice and Manner of Obtaining Loans.  Borrower must give written notice (which may
be sent by electronic mail) to Agent, or telephonic notice promptly confirmed
in writing, of each request for Loans. 
Each such written request or confirmation must be made in the form and
substance of the “Borrowing Request” attached hereto as Exhibit B,
duly completed.  Each such Borrowing
Request must:


 


(a)        specify the aggregate amount of any such Borrowing of new
Loans and the date on which such Loans are to be advanced; and


 


(b)        for any Committed Loan, be received by Agent not later than
2:00 p.m. (Central time) on the day on which any such Committed Loans are to be
made, and for any Swingline Loan, be received by Agent not later than 3:00 p.m.
(Central time) on the day on which any such Swingline Loans are to be made.  Notwithstanding the foregoing, Agent is
hereby authorized by the Lenders to treat any Borrowing Request as a request
for Committed Loans or a request for Swingline Loans, in its sole discretion,
regardless of the time such Borrowing Request is received by Agent.


 


With each
delivery of a Borrowing Request to Agent, Borrower represents and warrants to
Agent and Lenders the following:


 


(i)         Borrower
is entitled to receive the requested Loan under the terms and conditions of
this Agreement;


 


(ii)        all
items which Borrower is required to furnish to Agent pursuant to this Agreement
accompany the Borrowing Request (or, if Wet Loans, shall be delivered to Agent
in accordance with this Agreement and the Security Agreement);


 


22





















 


(iii)       all
Mortgage Loans offered thereby conform in all respects with the applicable
requirements set forth in the Agreement;


 


(iv)       no
Default or Event of Default has occurred and is continuing under the Agreement;


 


(v)        after
giving effect to the Loan requested thereby the aggregate amount of the
outstanding principal balance of the Loans will not exceed the lesser of (l) the
Collateral Value of the Borrowing Base and (2) the total Commitments of all
Lenders; and


 


(vi)       after
giving effect to the Loans requested thereby, no Applicable Sublimit will be
exceeded.


 


Additionally,
with each Borrowing Request, Borrower represents and warrants that, except as
permitted under this Agreement or the Security Agreement, Borrower holds with
respect to each of the Mortgage Notes offered the following:


 


(i)         unless
delivered therewith, the original filed copy of the Mortgage relating to such
Mortgage Note;


 


(ii)        mortgagee
policies of title insurance conforming to the requirements of this Agreement
and the Security Agreement or binding commitments for the issuance of same;


 


(iii)       insurance
policies insuring the mortgaged premises as required by this Agreement and the
Security Agreement; and


 


(iv)       unless
delivered therewith, an original of any executed Take-Out Commitment relating
to such Mortgage Note.


 


With the
delivery of each Borrowing Request, Borrower agrees that, unless delivered to
the Agent therewith, it holds the above referenced items in trust for Agent,
and will at any time deliver the same to Agent upon written request or, upon
written instructions from Agent, to any Person designated by Agent, promptly,
and in any event within seven (7) Business Days after such request or
instructions.  Borrower further agrees
that it will not deliver any of the above items, nor give, transfer, or assign
any interest in same, to any Person other than Agent (or the Person or Persons
designated by Agent) without the prior written consent of Agent.


 


Each such
telephonic request shall be deemed a representation, warranty, acknowledgment
and agreement by Borrower as to the matters which are required to be set out in
such written confirmation.  If all conditions
precedent to such Loan have been met, Agent will, promptly upon receipt of
funds from the Lenders or the Swingline Lender, remit to Borrower the amount of
such Loan in immediately available dollars, by crediting the Funding Account
with immediately available funds as the amount of such Loan.


 


23





















 


Section 2.4         Fees.


 


(a)        Facility Fee.  In
consideration of the Lenders’ commitment to make the Loans, Borrower will pay
to each Lender a non-refundable facility fee determined by applying a rate of
twenty two and one-half basis points (0.225%) per annum to each Lender’s Weighted
Average Commitment.  This facility fee
shall be due and payable on the date of this Agreement.


 


(b)        Agent’s Fees. 
Borrower shall pay to Agent, for its own account, a collateral handling
fee and an agency fee in the amounts and at the times set forth in the Fee Letter.


 


Section 2.5         Mandatory Repayments.  If at any time the Loan Balance exceeds the
Collateral Value of the Borrowing Base (as a result of an Applicable Sublimit
being exceeded or otherwise), Borrower shall repay the amount of such excess or
deliver sufficient Eligible Mortgage Loans to increase the Collateral Value of
the Borrowing Base by the amount of such excess Loan Balance, or a combination
of the foregoing, within one (1) Business Day after written notice thereof is
given by Agent to Borrower.


 


Section 2.6         Payments to Lenders.  All payments of interest on the Notes, all
payments of principal, including any principal payment made with proceeds of
Mortgage Collateral, and fees hereunder shall be made directly to Agent without
condition or deduction for any counterclaim, defense, recoupment, setoff, or
withholding or deduction for taxes, for the pro-rata benefit of each Lender, in
federal or other immediately available funds before 10:00 a.m. (Central time)
on the respective dates when due via wire transfer to the Settlement
Account.  The Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received, and in
any event before 3:00 p.m. on the day received.  Borrower shall send notice to Agent before 10:00
a.m. (Central time) on the day any payment of principal or interest is received
by Agent which sets forth the Loans against which such payment is to be
applied.  Any payment (or any payment
received without a notice regarding application of such payment) received by
Agent after such time will be deemed to have been made on the next following
Business Day.  Should any such payment
become due and payable on a day other than a Business Day, the maturity of such
payment shall be extended to the next succeeding Business Day, and, in the case
of a payment of principal or past due interest, interest shall accrue and be
payable thereon for the period of such extension as provided in the Loan
Document under which such payment is due. 
Each payment under a Loan Document shall be payable at the place
provided therein and, if no specific place of payment is provided, shall be
payable at the place of payment of the Notes. 
Prior to the occurrence of an Event of Default and the exercise of
remedies by Agent, when Agent collects or receives money on account of the
Obligations, Agent shall apply all such money so distributed, as follows:


 


(a)        first, to any reimbursements due Agent under Section 5.5
and to any fees due Agent under the Fee Letter;


 


(b)        second, to any reimbursements due Lenders under Section 5.5;


 


(c)        third, prior to a Default or Event of Default, to the payment
of the Loans then due, as directed by Borrower;


 


(d)        fourth, to the prepayment of principal on the Notes, together
with accrued and unpaid interest on the principal so prepaid; and


 


24





















 


(e)        last, to the payment or prepayment of any other Obligations,
and the balance, if any, after all of the Obligations have been indefeasibly
paid in full, to the Borrower or as otherwise required by law.


 


All payments
applied to principal or interest on any Note shall be applied first to any
interest then due and payable, then to principal then due and payable, and last
to any prepayment of principal.


 


Section 2.7         Notification by the Agent.  Promptly after receipt thereof, the Agent
will notify each Lender of the contents of each Borrowing Request and repayment
notice received by it hereunder.  Upon
the request of Agent, not later than 3:00 p.m. (Central time) on the day on
which any Committed Loans are to be made, each Lender shall make available its
pro rata portion of the Loan or Loans in accordance with such Lender’s
Commitment in immediately available funds to the Agent at its address specified
on Agent’s signature page hereto.


 


Section 2.8         Non-Receipt of Funds by the Agent.


 


(a)        Unless the Agent shall have been notified in writing by any
Lender prior to a Borrowing that such Lender will not make the amount that
would constitute its share of such Borrowing available to the Agent, the Agent
may assume that such Lender is making such amount available to the Agent, and
the Agent may, in its sole and absolute discretion, in reliance upon such
assumption, make available to the Borrower a corresponding amount.  If such amount is not made available to the
Agent by the required time therefor, and Agent elects to make such
corresponding amount available to the Borrower, such Lender shall pay to the
Agent, on demand, such amount with interest thereon, at a rate equal to the
Federal Funds Rate, for the period until such Lender makes such amount
immediately available to the Agent.  A
certificate of the Agent submitted to any Lender with respect to any amounts
owing under this paragraph shall be conclusive in the absence of manifest
error.  If such Lender’s share of such
borrowing is not made available to the Agent by such Lender within three (3)
Business Days after such Borrowing date, the Agent shall also be entitled to
recover such amount with interest thereon at the rate per annum applicable to
the relevant Loan, on demand, from the Borrower.  Nothing in this Section shall be deemed to
limit the rights of the Borrower against any such Lender.


 


(b)        Unless the Agent shall have been notified in writing by the
Borrower prior to the date of any payment due to be made by the Borrower
hereunder that the Borrower will not make such payment to the Agent (including
but not limited to situations in which the Borrower informs the Agent that the
Agent will be receiving proceeds of Collateral on a specific date and that the
Borrower intends to use such proceeds to make a payment of principal), the
Agent may assume that the Borrower is making such payment, and the Agent may,
but shall not be required to, in reliance upon such assumption, make available
to the Lenders their respective pro  rata shares of a
corresponding amount.  If such payment is
not made to the Agent by the Borrower within three (3) Business Days after such
due date, the Agent shall be entitled to recover, on demand, from each Lender
to which any amount which was made available pursuant to the preceding
sentence, such amount with interest thereon at the rate per annum equal to the Federal
Funds Rate.  Nothing in this Section
shall be deemed to limit the rights of the Agent or any Lender against the
Borrower.


 


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Section 2.9         Increased Cost and Reduced Return.


 


(a)        If, after the date hereof, any Lender shall have determined
that the adoption of any applicable Law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any Governmental Authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of Law)
of any such Governmental Authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender, due to the obligations of
such Lender hereunder, to a level below that which such Lender or such
corporation could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to capital
adequacy), then, within fifteen (15) days after demand by such Lender (with a
copy to the Agent), Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction, but only to the
extent that such Lender has not been compensated therefor by any increase in
the LIBOR.


 


(b)        Each Lender shall promptly notify Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle
such Lender to compensation pursuant to this Section.  In the event that any Lender claims
compensation under this Section, such Lender shall furnish to Borrower a
statement setting forth in reasonable detail the additional amount or amounts
to be paid to it hereunder which shall be conclusive in the absence of manifest
error.  In determining such amount, such
Lender shall act in good faith and may use any reasonable averaging and
attribution methods.


 


Section 2.10       Settlement Account.  Borrower shall not be entitled to withdraw
funds from the Settlement Account.  Except upon the occurrence of any Event of
Default, to the extent that on any Business Day amounts in the Settlement
Account exceed the amount needed in order to maintain the Collateral Value of
the Borrowing Base at an amount equal to or greater than the amount of the Loan
Balance, Agent shall cause such excess amount to be automatically transferred
to any Operating Account designated by Borrower or as Borrower may otherwise
direct the application of such excess amount. 
If on any Business Day the amount in the Settlement Account is less than
the amount needed to maintain the Collateral Value of the Borrowing Base in an
amount equal to or greater than the amount of the Loan Balance, and Borrower
has not made any payment as provided in Section 2.5, Agent may cause an
amount equal to such deficiency to be transferred from any Operating Account to
the Settlement Account.


 


Section 2.11       Approved Letter of Credit.  If Borrower elects to provide Agent with an
Approved Letter of Credit, then Agent, for the benefit of the Lenders, may draw
upon such Approved Letter of Credit at any time for any reason; provided,
however, that prior to making any such draw, and so long as no Event of
Default shall have occurred and then be continuing, Agent shall give Borrower
not less than three (3) Business Days’ prior written notice of its intention to
make such draw and the amount of such intended draw; and provided, further,
that if Borrower shall, within three (3) Business Days after receiving such
written notice, make or cause to be made a principal payment in respect of the
outstanding Loans in the amount of such intended draw, then Agent agrees that
no such draw shall be made by Agent under the Approved Letter of Credit.  The then available undrawn amount of any
Approved Letter of Credit shall be


 


26





















 


automatically reduced by the amount of any draws by Agent under the Approved
Letter of Credit, and by the amount of any payments made or caused to be made
by Borrower pursuant to this Section 2.11, and Agent agrees to enter
into an amendment of, or accept a replacement of, or agree to the cancellation
of, as the case may be, such Approved Letter of Credit to reflect such
reduction in the available undrawn amount. 
Notwithstanding anything to the contrary set forth in this Agreement,
the amount of any payment made or caused to be made by Borrower pursuant to
this Section 2.11, and the amount of any draw made by Agent under any
Approved Letter of Credit, shall be applied against the principal amounts
outstanding in respect of the Loans.


 


ARTICLE III



CONDITIONS PRECEDENT


 


The obligation
of Lenders to make Loans hereunder is subject to fulfillment of the conditions
precedent stated in this Article III.


 


Section 3.1         Initial Loan.  The obligation of Lenders to fund any Loan
hereunder shall be subject to, in addition to the conditions precedent
specified in Section 3.2, the following terms and conditions:


 


(a)        Borrower shall have delivered to Agent the following (each of
the following documents being duly executed and delivered and in form and
substance satisfactory to each Lender, Agent and Agent’s counsel, and, with the
exception of the Notes and any Approved Letter of Credit, each in a sufficient
number of originals that each Lender, Agent, and Agent’s counsel may have an
executed original of each document):


 


(i)         an
executed counterpart of this Agreement and of all instruments, certificates and
opinions referred to in this Article III not theretofore delivered
(except the Borrowing Request which is to be delivered at the time provided in Subsection
3.2(a) hereof);


 


(ii)        a
Note for each Lender;


 


(iii)       the
Security Agreement dated of even date herewith;


 


(iv)       a
certificate of the Secretary or Assistant Secretary of Borrower setting forth
(i) resolutions of its board of directors authorizing the execution,
delivery, and performance of the Loan Documents to which it is a party and
identifying the officers authorized to sign such instruments,
(ii) specimen signatures of the officers so authorized, and (iii) articles
of incorporation of Borrower certified by the appropriate Secretary of State as
of a recent date, and (iv)  bylaws of Borrower, certified as being
accurate and complete;


 


(v)        a
certificate of the existence and good standing for Borrower in its state of
incorporation or organization dated no earlier than fifteen days prior to the
date hereof;


 


(vi)       an
opinion of counsel for Borrower in form and substance customary for
transactions of this type and otherwise reasonably satisfactory to Agent;


 


27





















 


(vii)      a
Borrowing Request and a Borrowing Base Certificate dated as of the date of the
first Loan, certified by the chief financial officer or treasurer of Borrower;


 


(viii)     a
duly executed original of the MERS Agreement;


 


(ix)       the
Approved Letter of Credit, if any; and


 


(x)        such
other documents as Agent or any Lender or their counsel may reasonably request
at any time at or prior to the date of the initial Loan hereunder.


 


(b)        No Person, other than Agent, holds any mortgage, pledge,
lien, security interest or other charge or encumbrance in, against or to any of
the Mortgage Loans.


 


(c)        Borrower shall have paid all fees and reimbursements to be
paid to Agent or Lenders pursuant to any Loan Document, or otherwise due Agent
or Lenders, and including reasonable fees and disbursements of Agent’s
attorneys, Bracewell & Giuliani LLP.


 


Section 3.2         All Loans.  The obligation of Lenders to fund any Loan
pursuant to this Agreement is subject to the following further conditions
precedent:


 


(a)        Borrower shall have delivered to Agent a Borrowing Request
accompanied by a Borrowing Base Certificate dated as of the date of such Loan,
certified by the chief financial officer of Borrower, and the Required Mortgage
Documents for all Eligible Mortgage Loans other than Wet Loans;


 


(b)        all other Property in which Borrower has granted a Lien to
Agent, for the benefit of the Lenders, and which under the terms of this
Agreement or the Security Agreement shall have been required to have been
physically delivered to the Agent, shall have been physically delivered to the
possession of Agent, such that Agent has a valid and perfected first lien on
such Property, for the benefit of the Lenders;


 


(c)        the representations and warranties of each Related Person
contained in this Agreement or any Security Instrument (other than those
representations and warranties which are by their terms expressly limited to the
date of this Agreement) shall be true and correct in all material respects on
and as of the date of such Loan;


 


(d)        no Default or Event of Default shall have occurred and be
continuing or would result from such Borrowing, and no change or event which
constitutes a Material Adverse Effect shall have occurred as of the date of
such Loan;


 


(e)        the Funding Account, the Settlement Account and the Operating
Account shall be established and in existence;


 


(f)         the making of such Loan shall not be prohibited by any
Governmental Requirement;


 


(g)        the delivery to Agent, any Lender or its counsel of such
other documents and opinions of counsel, including such documents as may be
necessary or desirable to perfect or


 


28





















 


maintain the priority of any Lien granted or intended to be granted
hereunder or otherwise and including favorable written opinions of counsel with
respect thereto, as Agent or any Lender may reasonably request; and


 


(h)        No Person, other than Agent, for the benefit of the Lenders,
shall be listed in the field designated “interim funder” on the MERS® System.


 


Delivery to
Agent of a Borrowing Request shall be deemed to constitute a representation and
warranty by Borrower to Agent and each Lender on the date thereof and on the
date on which the Loan is made of the facts specified in Subsections (c)
and (d) of this Section.


 


ARTICLE IV



BORROWER REPRESENTATIONS AND WARRANTIES


 


Borrower
represents and warrants as follows:


 


Section 4.1         Organization and Good Standing.  Each Related Person (a) is a
corporation, limited liability company or limited partnership duly incorporated
or organized and existing in good standing under the Laws of the jurisdiction
of its incorporation or organization, (b) is duly qualified as a foreign
entity and in good standing in all jurisdictions in which its failure to be so
qualified could have a Material Adverse Effect, (c) has the corporate or
organizational 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, have a
Material Adverse Effect.


 


Section 4.2         Authorization and Power.  Each Related Person has the corporate or
organizational power and requisite authority to execute, deliver and perform
the Loan Documents to which it is a party; each Related Person is duly
authorized to and has taken all action necessary to authorize it to, execute,
deliver and perform the Loan Documents to which it is a party and is duly
authorized to perform such Loan Documents.


 


Section 4.3         No Conflicts or Consents.  Neither the execution and delivery by any
Related Person of the 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 any Related Person is subject, or any indenture,
mortgage, deed of trust, deed to secure debt, or other agreement or instrument
to which any Related Person is a party or by which any Related Person may be
bound, or to which the Property of any Related Person may be subject, or
(b) result in the creation or imposition of any Lien, other than the Lien
of the Security Agreement, on the Property of any Related Person.  All actions, approvals, consents, waivers,
exemptions, variances, franchises, orders, permits, authorizations, rights and
licenses required to be taken, given or obtained, as the case may be, from any
Governmental Authority that are necessary in connection with the transactions
contemplated by the Loan Documents have been obtained.


 


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Section 4.4         Enforceable Obligations.  This Agreement, the Notes, and the other Loan
Documents to which any Related Person is a party are the legal, valid and
binding obligations of such Related Person, enforceable in accordance with
their respective terms, except as limited by Debtor Laws.


 


Section 4.5         Priority of Liens.  Upon delivery to Agent of each Borrowing
Request, Agent shall have, for the benefit of the Lenders, valid, enforceable,
perfected, first priority Liens and security interests in each Mortgage Note
identified therein.


 


Section 4.6         No Liens.  Borrower has good and indefeasible title to
the Mortgage Collateral free and clear of all Liens and other adverse claims of
any nature, except for ad valorem taxes and assessments not yet due and payable
and Liens in the Mortgage Collateral in favor of Agent, for the benefit of the
Lenders.


 


Section 4.7         Financial Condition of Borrower.  Borrower has delivered to Lenders copies of
its annual audited balance sheet as of September 30, 2005, and the related
statements of income, stockholders’ equity and cash flows for the period ended
such date; such financial statements fairly present the financial condition of
Borrower as of such date and the results of operations of Borrower for the
period ended on such date and have been prepared in accordance with GAAP, as of
the date thereof, there were no obligations, liabilities or Indebtedness
(including material contingent and indirect liabilities and obligations or
unusual forward or long-term commitments) of Borrower which were required under
GAAP to be reflected in such financial statements that were 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 September
30, 2005.  Borrower has also delivered to
Lenders its unaudited quarterly balance sheet for the period ending September 30,
2005 and management reports for September 30, 2005; such reports fairly and
accurately present Borrower’s commitment position, pipeline position, servicing
and production as of the end of such months and for the fiscal year to date for
the periods ending on such dates.


 


Section 4.8         Full Disclosure.  There is no material fact that Borrower has
not disclosed to Lenders which could have a Material Adverse Effect.  To the knowledge of Borrower, none of
(i) the financial statements referred to in Section 4.7
hereof, (ii) any Borrowing Request or officer’s certificate, or
(iii) any statement delivered by any Related Person to Agent or any Lender
in connection with this Agreement, contains any untrue statement of material fact.


 


Section 4.9         No Default.  No Related Person is 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 4.10       No Litigation.  There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings pending, or to the
knowledge of Borrower threatened, against any Related Person the adverse
determination of which could reasonably be expected to have a Material Adverse
Effect.


 


Section 4.11       Taxes.  All federal income tax returns and all other
tax returns required to be filed by each Related Person in any jurisdiction
have been filed and all taxes, assessments,


 


30





















 


fees and other governmental charges upon each Related Person 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 such Related Person.


 


Section 4.12       Principal Office, etc.  The principal office, chief executive office
and principal place of business of each Related Person is at the address set
forth on the Borrower’s signature page hereto or in a written notice given
pursuant to Section 6.12.


 


Section 4.13       Compliance with ERISA.  No Related Person currently maintains,
contributes to, is required to contribute to or has any liability, whether
absolute or contingent, with respect to an ERISA Plan.  With respect to all other employee benefit
plans maintained or contributed to by each Related Person, each Related Person
is in material compliance with ERISA.


 


Section 4.14       Subsidiaries.  No Related Person has any Subsidiary or owns
any stock in any other corporation or association except those listed in Exhibit D (as such exhibit may
be updated from time to time by Borrower and delivered to Agent).  As of the date hereof, each Related Person
owns, directly or indirectly, the equity interest in each of its Subsidiaries
which is indicated in such exhibit.


 


Section 4.15       Indebtedness.  No Related Person has any indebtedness
outstanding other than the Indebtedness permitted by Section 6.2.


 


Section 4.16       Permits, Patents, Trademarks, etc.


 


(a)        Each Related Person has all permits and licenses necessary
for the operation of its business.


 


(b)        Each Related Person owns or possesses (or is licensed or
otherwise has the necessary right to use) all patents, trademarks, service
marks, trade names 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 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 each Related Person.


 


Section 4.17       Status Under Certain Federal Statutes.  No Related Person is (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) required to register as 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., and no Related Person is a “carrier” to which
49 U.S.C. §l1301(b)(1) is applicable.


 


Section 4.18       Securities Act.  No Related Person has issued any unregistered
securities in violation of the registration requirements of the Securities Act
of 1933, as amended, or of any


 


31





















 


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.  No
Related Person is required to qualify an indenture under the Trust Indenture
Act of 1939, as amended, in connection with its execution and delivery of the
Notes.


 


Section 4.19       No Approvals Required.  Other than consents and approvals previously
obtained and actions previously taken, neither the execution and delivery of
this Agreement, the Notes and the other Loan Documents to which any Related
Person 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 any Related Person of any document
with, or the taking of any other action in respect of, any Governmental
Authority which has jurisdiction over each Related Person or any of its
Property, except for (a) the filing of the Uniform Commercial Code
financing statements and other similar filings to perfect the interest of
Lenders in the Collateral, and (b) such other consents, approvals,
notices, registrations, filings or action as may be required in the ordinary
course of business of the Related Persons in connection with the performance of
the obligations of the Related Persons hereunder.


 


Section 4.20       Survival of Representations.  All representations and warranties by
Borrower herein shall survive delivery of the Notes and the funding of the
Loans, and any investigation at any time made by or on behalf of Lenders shall
not diminish the right of Agent and the Lenders to rely thereon.


 


Section 4.21       Compliance with Laws.  Each Related Person is in compliance in all
material respects with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its business or property,
including ERISA and FIRREA, except in such instances in which (a) such
requirement of Law or order, writ, injunction or decree is being contested in
good faith by appropriate proceedings diligently conducted; or (b) the
failure to comply therewith would not reasonably be expected to have a Material
Adverse Effect.


 


Section 4.22       Payment of Obligations.  No Related Person is in default in the
payment and discharge of its material obligations and liabilities, including
all tax liabilities, assessments and governmental charges or levies upon it or
its properties or assets, unless the same are being contested in good faith by
appropriate proceedings diligently conducted and adequate reserves in
accordance with GAAP are being maintained by such Related Person.


 


Section 4.23       Individual Mortgage Loans.  Borrower hereby represents the following
matters with respect to each Mortgage Note and Mortgage Loan that is part of
the Collateral:


 


(a)        Borrower has good and marketable title to each Mortgage Note
and Mortgage, was the sole owner thereof and had full right to pledge the
Mortgage Loan to Agent, for the benefit of Lenders, free and clear of any other
Lien at the time of pledging to Agent;


 


(b)        To the knowledge of Borrower, other than any delinquency of
payments permitted in subparagraph (d) of the definition of Eligible
Mortgage Loan, there is no default, breach, violation or event of acceleration
existing under any Mortgage or the related Mortgage Note and there is no event
which, with the passage of time or with notice and/or the expiration of any


 


32





















 


grace or cure period, would constitute a default, breach, violation or
event of acceleration and no such default, breach, violation or event of
acceleration has been waived;


 


(c)        To the knowledge of Borrower, the physical condition of the
Property subject to the Mortgage has not deteriorated since the date of
origination of the related secured Mortgage Loan (normal wear and tear
excepted) and there is no proceeding pending for the total or partial
condemnation of any Property subject to the Mortgage;


 


(d)        Each Mortgage contains customary and enforceable provisions
such as to render the rights and remedies of the holder thereof adequate for
the realization against the related Property subject to the Mortgage of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee’s sale, and
(ii) otherwise, by judicial or private foreclosure;


 


(e)        Each Mortgage Loan is a first lien or second lien Single
Family loan, and has been underwritten by the originator thereof in accordance
with such originator’s then current underwriting guidelines, which guidelines
have been previously submitted to and approved by Agent;


 


(f)         Each Mortgage Note is either (i) payable in monthly
installments of principal and interest, with interest payable in arrears, and
requires a monthly payment which is sufficient to amortize the original
principal balance over the original term, not to exceed thirty (30) years, and
to pay interest at the related interest rate, or (ii) payable in monthly
installments of interest only, with interest payable in arrears, with principal
payments to begin no later than ten (10) years from closing with payments which
are sufficient to fully amortize the original principal balance over a period
not to exceed thirty (30) years; and no Mortgage Note provides for any
extension of the original term;


 


(g)        No Mortgage Loan is a loan in respect of either the purchase
of a manufactured home or mobile home or the purchase of the land on which a
manufactured home or mobile home will be placed;


 


(h)        The origination practices used by the originator of each Mortgage
Loan and the collection practices used by the Borrower with respect to each
Mortgage Loan have been in all material respects legal, proper, prudent and
customary in the loan origination and servicing business;


 


(i)         No Mortgage Loan is subject to Section 32 of Regulation Z or
is a Mortgage Loan classified as predatory under any applicable Law;


 


(j)         Each Mortgage Loan was originated in compliance with all
applicable Laws and no fraud or misrepresentation was committed by any Person
in connection therewith; and


 


(k)        For each Mortgage Loan, Borrower has obtained closing
protection letters from the underwriter for the respective title insurance
policy.


 


Section 4.24           Environmental
Matters.  In the ordinary course of
each Related Person’s business, the officers and managers of each Related
Person consider the effect of Environmental


 


33





















 


Laws on the business of such Related Person, in the course of which
they identify and evaluate potential risks and liabilities accruing to such Related
Person due to Environmental Laws.  On the
basis of this consideration, each Related Person has reasonably concluded that
neither violation of nor compliance with Environmental Laws can reasonably be
expected to have a Material Adverse Effect. 
No Related Person has received any notice from any Governmental
Authority to the effect that its operations are not in material compliance with
any of the requirements of applicable Environmental Laws or are the subject of
any federal or state investigation evaluating whether any remedial action is
needed to respond to a release of any toxic or hazardous waste or substance
into the environment, which non-compliance or remedial action could reasonably
be expected to have a Material Adverse Effect.


 


Section 4.25       Status as Approved Seller/Servicer.  Borrower is an approved seller and servicer for
FNMA and FHLMC in good standing and is an approved lender with FHA, VA and HUD.


 


ARTICLE V



AFFIRMATIVE COVENANTS


 


Each Related
Person shall at all times comply with the covenants contained in this Article V,
from the date hereof and for so long as any part of the Obligations or the
Commitment is outstanding unless Required Lenders have agreed otherwise in
writing.


 


Section 5.1         Financial Statements and Reports.


 


(a)        Borrower shall furnish to Agent (who shall deliver or
otherwise make such information available to the Lenders within five (5) days
of receipt) the following, all in form and detail reasonably satisfactory to Agent:


 


(i)         Promptly
after becoming available, and in any event within ninety (90) days after the
close of each Fiscal Year, Borrower’s audited Consolidated balance sheet as of
the end of such Fiscal Year, and the related audited Consolidated statements of
income, stockholders’ equity and cash flows of Borrower for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures for
the preceding Fiscal Year.  Such
financial statements shall be unqualified and shall be accompanied by the
related audit report of independent certified public accountants acceptable to Agent
which report shall be 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;


 


(ii)        Promptly
after becoming available, and in any event within ninety (90) days after the
close of each Fiscal Year, Parent’s audited Consolidated and consolidating
balance sheet as of the end of such Fiscal Year, and the related audited
Consolidated and consolidating statements of income, stockholders’ equity and
cash flows of Parent for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the preceding Fiscal Year, such financial
statements shall be unqualified and shall be accompanied by the related audit
report of independent certified public accountants


 


34





















 


acceptable to Agent which report shall be 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 (subject to
year-end audit adjustments and the absence of notes thereto);


 


(iii)       Promptly
after becoming available, and in any event within forty-five (45) days after
the end of each calendar month, including the twelfth calendar month in each
Fiscal Year, a Consolidated balance sheet of Borrower as of the end of such
month and the related Consolidated statements of income, stockholders’ equity
and cash flows of Borrower for such month and the period from the first day of
the then current Fiscal Year through the end of such month, prepared internally
by Borrower and certified by the chief financial officer or other executive
officer of Borrower as being fairly stated in all material respects;


 


(iv)       Promptly
and in any event within forty-five (45) days after the end of each calendar
month (except the last) in each Fiscal Year of Borrower, and within fifteen
(15) days after the completion of each year-end audit by Borrower’s independent
public accountants, a completed Officer’s Certificate in the form of Exhibit E hereto, executed by
the president or chief financial officer of Borrower;


 


(v)        Promptly
after becoming available, a monthly management report (delivered in any event within
forty-five (45) days after the end of such calendar month) in form and detail
reasonably acceptable to Agent including, without limitation detail on Borrower’s
pipeline position, commitment position, repurchase requests by investors,
production statistics and any other report reasonably requested by Agent;


 


(vi)       With
each Borrowing Request and in any event within thirty (30) days after the end
of each calendar month, a Borrowing Base Certificate;


 


(vii)      Promptly
upon receipt thereof, a copy of the results of any field or desktop audit of
the Borrower’s business and/or records performed by FNMA, FHLMC, the Department
of Housing and Urban Development or any other federal agency, together with a
copy of all subsequent correspondence relating to such audit between the
Borrower and such agency (subject, however, to any applicable legal
restrictions or limitations in respect of the disclosure of such audit results
and correspondence);


 


(viii)     Promptly
upon receipt thereof, a copy of each other report submitted to Borrower by
independent accountants in connection with any annual, interim or special audit
of the books of Borrower; and


 


(ix)       such
other information concerning the business, properties or financial condition of
any Related Person as Agent or any Lender may reasonably request.


 


Section 5.2         Taxes and Other Liens.  Each Related Person 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


 


35





















 


Property; provided, however, each Related Person 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 such
Related Person and if such Related Person shall have set up reserves therefor
adequate under GAAP.


 


Section 5.3         Maintenance.  Each Related Person shall (a) maintain
its corporate or partnership existence (as applicable) and rights and
franchises; (b) observe and comply in all material respects with all
Governmental Requirements, and (c) 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, betterments and improvements to its
Properties as are needed and proper so that the business carried on in
connection therewith may be conducted properly and efficiently at all times.  Borrower shall maintain good standing as an
approved seller and servicer for FNMA and FHLMC and as an approved lender with
FHA, VA and HUD.


 


Section 5.4         Further Assurances.  Borrower shall, within three (3) Business
Days after the request of Agent or any Lender, cure any defects in the
execution and delivery of any Note, this Agreement or any other Loan Document
and each Related Person shall, at its expense, promptly execute and deliver to
Agent or any Lender upon request all such other and further documents,
agreements and instruments in compliance with or accomplishment of the
covenants and agreements of each Related Person in this Agreement and in the
other Loan Documents or to further evidence and more fully describe the
collateral intended as security for the Notes, or to correct any omissions in
this Agreement or the other Loan Documents, or more fully to state the security
for the obligations set out herein or in any of the other Loan Documents, or to
make any recordings, to file any notices, or obtain any consents.


 


Section 5.5         Reimbursement of Expenses.  Borrower shall pay (a) all reasonable
legal fees incurred by Agent (Agent’s counsel is Bracewell & Giuliani LLP) in
connection with the preparation, negotiation, syndication, execution and
delivery of this Agreement, the Notes and the other Loan Documents and any
amendments, consents or waivers executed in connection therewith, (b) all
fees, charges or taxes for the recording or filing of the Security Instruments,
(c) all reasonable out-of-pocket expenses of Agent in connection with the
administration of this Agreement, the Notes and the other Loan Documents,
including courier expenses incurred in connection with the Mortgage Collateral,
(d) all amounts expended, advanced or incurred by Agent to satisfy any
obligation of Borrower under this Agreement or any of the other Loan Documents
or to collect the Notes, or to protect, preserve, exercise or enforce the
rights of Lenders under this Agreement or any of the other Loan Documents,
(e) all reasonable out-of-pocket costs and expenses (including
fees and disbursements of attorneys and other experts employed or retained by
Agent or any Lender) incurred in connection with, arising out of, or in any way
related to (i) consulting during a Default with respect to (A) the
protection, preservation, exercise or enforcement of any of its rights in,
under or related to the Collateral or the Loan Documents or (B) the
performance of any of its obligations under or related to the Loan Documents,
or (ii) protecting, preserving, exercising or enforcing during a Default
any of its rights in, under or related to the Collateral or the Loan Documents,
each of (a) through (e) shall include all underwriting expenses, collateral
liquidation costs, court costs, attorneys’ fees (including, without limitation,
for trial, appeal or other proceedings), fees of auditors and


 


36





















 


accountants, and investigation expenses reasonably incurred by Agent or
any Lender in connection with any such matters, together with interest at the
post-maturity rate specified in the Notes on each item specified in clause (a)
through (e) from thirty (30) days after the date of written demand or request
for reimbursement until the date of reimbursement.


 


Section 5.6         Insurance.  Each Related Person 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.  The improvements on the land
covered by each Eligible Mortgage Loan shall 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 equal
to or greater than the lesser of (a) the maximum insurable value of the
improvements, or (b) the amount of the Mortgage Loan.  Upon request of Agent, Borrower shall furnish
or cause to be furnished to Agent from time to time a summary of the insurance
coverage of Borrower in form and substance satisfactory to Agent and if
requested shall furnish Agent copies of the applicable policies.


 


Section 5.7         Accounts and Records: Servicing
Records.  Each Related Person 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 and
activities, in accordance with GAAP. 
Each Related Person shall maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate all
records pertaining to the performance of such Related Person’s obligations
under the Servicing Agreements in the event of the destruction of the originals
of such records) and keep and maintain all documents, books, records, computer
tapes and other information reasonably necessary or advisable for the
performance by each Related Person of its obligations under the Servicing
Agreements.


 


Section 5.8         Right of Inspection.  Each Related Person shall permit authorized
representatives of Agent and/or any Lender to discuss the business, operations,
assets and financial condition of such Related Person with their officers and
employees, to examine their Servicing Records and books of records and account
and make copies or extracts thereof and to visit and inspect any of the
Properties of each Related Person, all at such reasonable times during normal
business hours and as often as Agent or any Lender may request, provided
that, unless a Default or an Event of Default has occurred, such visits,
examinations and inspections shall be made not more than two (2) times during
any Fiscal Year and shall be made at the sole cost and expense of Agent and/or
any such Lender.  Each Related Person
will provide its accountants with a copy of this Agreement promptly after the
execution hereof and will instruct its accountants to meet with any designated
officers or other authorized representatives of Agent and/or such Lender to
answer candidly any and all questions that such officers or authorized
representatives may address to them in reference to the financial condition or
affairs of any Related Person as those conditions or affairs relate to this
Agreement.  Agent and/or any such Lender
shall give Borrower prior notice of the request for any such in-person or
telephonic meeting with Borrower’s accountants. 
Each Related Person may have its representatives in attendance at any


 


37





















 


meetings between the officers or other representatives of Agent or any
Lender and Borrower’s accountants held in accordance with this authorization.


 


Section 5.9         Notice of Certain Events.  Borrower shall promptly notify the Agent and
the Lenders upon (a) 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 any Related Person 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 what action Borrower is taking or proposes to take
with respect thereto; (b) the commencement of, or any determination in,
any legal, judicial or regulatory proceedings between any Related Person and
any Governmental Authority or any other Person which, if adversely determined,
could have a Material Adverse Effect; (c) any change in senior management or
ownership of Borrower; (d) any material adverse change in the business, operations,
prospects or financial condition of any Related Person, including, without
limitation, the insolvency of any Related Person; (e) any event or
condition which, if adversely determined, could have a Material Adverse Effect;
(f) the occurrence of any Termination Event, (g) the execution of any
Permitted Warehouse Debt agreement or other material financing agreement, or
(h) any default under any material Indebtedness that continues beyond any
applicable grace or cure period.


 


Section 5.10       Performance of Certain Obligations and
Information Regarding Investors. 
Borrower shall perform and observe in all material respects each of the
provisions of each Take-Out Commitment and each of the Servicing
Agreements on its part to be performed or observed and will use commercially
reasonable efforts to cause all things to be done which are necessary to have
each item of Mortgage Collateral covered by a Take-Out Commitment comply
with the requirements of such Take-Out Commitment.  Upon request by Agent, Borrower will deliver
to Agent financial information possessed by Borrower and publicly available concerning
any Person requested by Borrower to be approved as an Investor; all such
financial information must be delivered to Agent prior to any request by
Borrower for Mortgage Collateral to be delivered to such Person.


 


Section 5.11       Use of Proceeds: Margin Stock.  The proceeds of all Loans shall be used by
Borrower solely for the origination and purchase of Eligible Mortgage Loans
pending sale to an Investor and for payment of interest, fees, and expenses in
connection with the Obligations.  None of
such proceeds shall be used for the purpose of purchasing or carrying any “margin
stock” as defined in Regulation U, 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 Borrower nor any Person acting on
behalf of Borrower shall take any action in violation of Regulation U or
Regulation X or shall violate Section 7 of the Securities Exchange Act of
1934 or any rule or regulation thereunder, in each case as now in effect or as
the same may hereafter be in effect.


 


Section 5.12       Notice of Default.  Borrower shall furnish to Agent and Lenders
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 Borrower is taking or proposes to take with respect
thereto.


 


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Section 5.13       Compliance with Loan Documents.  Each Related Person shall promptly comply
with any and all covenants and provisions of this Agreement, the Notes and the
other Loan Documents to be complied with by such Related Person.


 


Section 5.14       Operations and Properties.  Each Related Person shall (i) comply with all
rules, regulations and guidelines applicable to it, except in such instances in
which (a) such rule, regulation or guideline is being contested in good
faith by appropriate proceedings diligently conducted; or (b) the failure
to comply therewith would not likely be expected to have a Material Adverse
Effect, and (ii) act prudently and in accordance with customary industry
standards in managing and operating its Property.


 


Section 5.15       Environmental Matters.


 


(a)        Each Related Person will comply in all material respects with
all Environmental Laws now or hereafter applicable to such Related Person and
shall obtain, at or prior to the time required by applicable Environmental
Laws, all environmental, health and safety permits, licenses and other
authorizations necessary for its operations and will maintain such
authorizations in full force and effect.


 


(b)        Borrower will promptly furnish to Agent and each Lender all
written notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by any Related Person, or of
which it has notice, pending or threatened against any Related Person, by any
Governmental Authority with respect to any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its properties or the
operation of its business.


 


Section 5.16       Compliance with Laws.  Each Related Person will at all times comply
in all material respects with the requirements of all Laws and all orders,
writs, injunctions and decrees applicable to it or to its business or property,
including ERISA and FIRREA, except in such instances in which (a) such
requirement of Law or order, writ, injunction or decree is being contested in
good faith by appropriate proceedings diligently conducted; or (b) the
failure to comply therewith would not likely be expected to have a Material
Adverse Effect.


 


Section 5.17       MERS Status.


 


(a)        Borrower will (a) at all times, maintain its status as a MERS
member in good standing, (b) at all times remain in full compliance with all
terms and conditions of membership in MERS, including the MERSCORP, Inc. “Rules
of Membership” most recently promulgated by MERSCORP, Inc., the “MERS
Procedures Manual” most recently promulgated by MERS, and any and all other
guidelines or requirements set forth by MERS or MERSCORP, Inc., as each of the
foregoing may be modified from time to time, including, but in no way limited
to compliance with guidelines and procedures set forth with respect to
technological capabilities, drafting and recordation of Mortgages, registration
of Mortgages on the MERS System, including registration of the interest of the
Agent and the Lenders in such mortgages and membership requirements, (c)
promptly, upon the request of the Agent, execute and deliver to the Agent an
assignment of mortgage, in blank, with respect to any MERS Mortgage that the


 


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Agent determines shall be removed from the MERS System and (d) at all
times maintain the Electronic Tracking Agreement executed of even date herewith
in full force and effect.


 


(b)        Borrower shall not de-register or attempt to de-register any
Mortgage from the MERS System unless Borrower has complied with the
requirements set forth in the Electronic Tracking Agreement and the
requirements hereof and of the Security Agreement relating to release of
Collateral.


 


ARTICLE VI



NEGATIVE COVENANTS


 


Each Related
Person shall at all times comply with the covenants contained in this Article VI,
from the date hereof and for so long as any part of the Obligations or the
Commitment is outstanding unless the Required Lenders have agreed otherwise in
writing:


 


Section 6.1         No Merger; Limitation on Issuance of
Securities.  No Related Person shall
merge or consolidate with or into any Person provided  that
Borrower may merge or consolidate with any wholly owned subsidiary of Borrower
if Borrower is the surviving corporation; and provided  further,
that after giving effect thereto, no Default would exist hereunder.  No Related Person shall acquire by purchase,
or otherwise, all or substantially all of the assets or capital stock of any
Person except as permitted by Section 6.6(d).  Borrower will not issue any securities other
than shares of its common stock and any options or warrants giving the holders
thereof only the right to acquire such shares. 
No Related Person will issue any additional shares of its capital stock
or other securities or any options, warrants or other rights to acquire such
additional shares or other securities except to Borrower and only to the extent
not otherwise forbidden under the terms hereof. 
No Subsidiary of Borrower which is a partnership will allow any
diminution of Borrower’s interest (direct or indirect) therein.  There shall be no Change of Control.


 


Section 6.2         Limitation on Indebtedness.  No Related Person shall incur, create,
contract, assume, have outstanding, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness or Guaranty
Obligations except:


 


(a)        the Obligations;


 


(b)        trade debt, equipment leases, office leases, equipment loans
and liens for taxes and assessments not yet due and payable owed in the
ordinary course of business;


 


(c)        any Permitted Warehouse Debt;


 


(d)        any Indebtedness secured by a Lien permitted pursuant to the
terms of Section 6.10;


 


(e)        any Indebtedness arising under any Hedging Agreement entered
into in respect of Indebtedness otherwise permitted under this Agreement and
not for speculative purposes; and


 


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(f)         any Indebtedness owing to Parent or a wholly owned
Subsidiary of Parent provided that the terms of such Indebtedness shall
not permit any payment of principal or interest to be made if any Default or
Event of Default hereunder has occurred.


 


Section 6.3         Fiscal Year, Method of Accounting.  No Related Person shall change its Fiscal
Year or make any material change in its method of accounting not required by
GAAP.


 


Section 6.4         Business.  No Related Person shall, directly or
indirectly, engage in any business which differs materially from that currently
engaged in by Borrower.


 


Section 6.5         Liquidations, Consolidations and
Dispositions of Substantial Assets. 
No Related Person shall dissolve or liquidate or sell, transfer, lease
or otherwise dispose of any material portion of their property or assets or
business; provided, however, nothing in this Section 6.5
shall be construed to prohibit (i) any Related Person from selling Mortgage
Notes or Mortgage Loans or rights to service Mortgage Loans and pools of Mortgage
Loans or Mortgage Notes in the ordinary course of its business, or (ii) any
dissolution, liquidation, or sale, transfer, lease or other disposition by any
Subsidiary of the Borrower of its property, assets or business to the Borrower
or a wholly-owned Subsidiary of the Borrower.


 


Section 6.6         Loans, Advances, and Investments.  No Related Person shall make any loan (other
than Mortgage Loans), advance, extension of credit, 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 (including, without
limitation, any employee, officer or Affiliate of any Related 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 a Related Person 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 evidences of indebtedness is not
material to the business or financial condition of such Related Person;


 


(c)        Mortgage Notes acquired by Borrower in the ordinary course of
Borrower’s business; and


 


(d)        Investments other than those described in the preceding clauses
(a) through (c), provided that the aggregate amount of all such
other Investments shall at no time exceed $500,000.00.


 


Section 6.7         Use of Proceeds.  Borrower shall not permit the proceeds of the
Loans to be used for any purpose other than those permitted by Section 5.11
hereof.  Borrower shall not, directly or
indirectly, use any of the proceeds of the Loans for the purpose, whether
immediate, incidental or ultimate, of buying any “margin stock” or of
maintaining, reducing or retiring any Indebtedness originally incurred to
purchase a stock that is currently any “margin stock,” or for any other purpose
which might constitute this transaction a “purpose credit,” in each case within


 


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the meaning of Regulation G of the Board of Governors of the Federal
Reserve System (12 C.F.R. 207, as amended), or Regulation U, or otherwise take
or permit to be taken any action which would involve a violation of such
Regulation G or Regulation U or of Regulation T (12 C.F.R. 220, as amended) or
Regulation X (12 C.F.R. 224, as amended) or any other regulation of such board.


 


Section 6.8         Actions with Respect to Mortgage
Collateral.  Borrower shall not:


 


(a)        Compromise, extend, release, or adjust payments on any
Mortgage Collateral, accept a conveyance of mortgaged property in full or
partial satisfaction of any Mortgage Collateral, or release any Mortgage
securing or underlying any Mortgage Collateral;


 


(b)        Agree to the amendment or termination of any Take-Out
Commitment in which Agent, on behalf of the Lenders, has a security interest or
to substitution of a Take-Out Commitment for a Take-Out Commitment in which
Agent, on behalf of the Lenders, has a security interest hereunder, if such
amendment, termination or substitution may reasonably be expected to have a
Material Adverse Effect;


 


(c)        Transfer, sell, assign, or deliver any Mortgage Collateral
pledged to Agent, for the benefit of the Lenders, to any Person other than
Agent, except pursuant to a Take-Out Commitment; or


 


(d)        Grant, create, incur, permit or suffer to exist any Lien upon
any Mortgage Collateral except for Liens granted to Agent, for the benefit of
the Lenders, to secure the Notes and Obligations and such non-consensual Liens
as may be deemed to arise as a matter of law pursuant to any Take-Out
Commitment.


 


Section 6.9         Transactions with Affiliates.  Borrower shall not enter into any
transactions including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transactions are not otherwise prohibited 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.


 


Section 6.10       Liens.  No Related Person shall grant, create, incur,
assume, permit or suffer to exist any Lien, upon any of its Property, including
without limitation any and all of Borrower’s Mortgage Collateral and Servicing
Rights and the proceeds from any thereof, other than (a) Liens which
secure payment of the Obligations, (b) first Liens on Property subject to
Second Lien Mortgages, so long as the aggregate amount of the Mortgage Notes
secured thereby does not exceed the Applicable Sublimit for Second Lien/HELOC
Loans, (c) to the extent not otherwise prohibited hereunder, Liens which
secure payment of the Indebtedness described in Section 6.2(b) and (c)
on Property other than Collateral, (d) Liens for taxes not yet due or which are
being contested in good faith and by appropriate proceedings diligently
conducted, if adequate reserves with respect thereto are maintained on the
books of the applicable Person in accordance with GAAP, (e) carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period
of more than 30 days or which are being contested in good faith and by
appropriate proceedings


 


42





















 


diligently conducted, if adequate reserves with respect thereto are
maintained on the books of the applicable Person, (f) easements, rights-of-way,
restrictions and other similar encumbrances affecting real property which, in
the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the applicable Person, (g)
pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation, other than any Lien imposed by ERISA, (h) Liens securing judgments
for the payment of money not constituting an Event of Default under Section
7.1(f)(iv), (i) Liens of landlords on fixtures and moveable personal
property located on the premises leased in the ordinary course of business, (j)
non-consensual Liens as described in Section 6.8(d), and (k) Liens
existing on the date of this Agreement and described on Schedule 6.10,
and any Liens existing or arising in connection with any renewal, extension,
modification, refinancing or replacement of the Indebtedness secured thereby,
provided the amount of such Indebtedness is not increased and such Liens do not
attach to any other Property not previously subject thereto.


 


Section 6.11       ERISA Plans.  No Related Person shall adopt or agree to
maintain or contribute to any ERISA Plan. 
Borrower shall promptly notify Lenders in writing in the event an ERISA
Affiliate adopts an ERISA Plan.


 


Section 6.12       Change of Principal Office.  No Related Person shall move its principal
office, executive office or principal place of business from the address set forth
on the Borrower’s signature page without prior written notice to Agent and
Lenders.


 


Section 6.13       Consolidated Tangible Net Worth.  As of any date, the Consolidated Tangible Net
Worth of Borrower shall not be less than $5,000,000.00.


 


Section 6.14       Consolidated Adjusted Tangible Net
Worth.  As of any date, the
Consolidated Adjusted Tangible Net Worth of Borrower shall not be less than
$10,000,000.00.


 


Section 6.15       Total Debt to Adjusted Tangible Net
Worth Ratio.  As of any date, the
ratio of the Consolidated Total Debt of Borrower to the Consolidated Adjusted Tangible
Net Worth of Borrower shall not be more than 12 to 1.


 


Section 6.16       Profitability.  As of the end of each Fiscal Quarter,
Borrower’s Consolidated Net Income for such Fiscal Quarter shall be a positive
number equal to or greater than $1.00.


 


Section 6.17       Dividends.  During the existence of an Event of Default,
the Borrower shall not, nor shall it permit any Subsidiary to, declare or pay
any Dividends.


 


ARTICLE VII



EVENTS OF DEFAULT


 


Section 7.1         Nature of Event.  An Event of Default shall exist if any one or
more of the following occurs:


 


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(a)        Borrower fails to make when due any payment of principal on
the Notes; or Borrower fails to make any payment of any interest, fee, expense
or other amount due hereunder, under the Notes, or under any other Loan
Document, within three (3) days after the same becomes due;


 


(b)        Default is made in the due observance or performance by any
Related Person of any covenant set forth in Article V of this Agreement
(other than Sections 5.8, 5.9 and 5.11) and such
Default continues for a period of fifteen (15) days after Agent gives Borrower
notice thereof;


 


(c)        Default is made in the due observance or performance by any
Related Person of any of the covenants or agreements contained in this
Agreement other than those described in subsections (a) or (b) immediately
above;


 


(d)        Any Related Person defaults in the due observance or
performance or any of the covenants or agreements contained in any other Loan
Document to which it is a party, and (unless such default also constitutes an
Event of Default pursuant to other provisions of this Section 7.1)
such default continues unremedied beyond the expiration of any applicable grace
period which may be expressly allowed under such other Loan Document;


 


(e)        Any material statement, warranty or representation by or on
behalf of any Related Person contained in this Agreement, the Notes or any
other Loan Document to which it is a party, or in 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 (it being understood that if any
representations and warranties made in respect of any Mortgage Loans included
as Eligible Mortgage Loans in the Borrowing Base are not true and correct in
all material respects as of any date Borrower may cure such Default by
removing, within one (1) Business Day after receipt of written notice from
Agent to Borrower, such Mortgage Loan from inclusion as an Eligible Mortgage
Loan in the Borrowing Base by making any mandatory repayment required by Section 2.5);


 


(f)         Any Related Person:


 


(i)         suffers
the entry against it of a judgment, decree or order for relief by a court of
competent jurisdiction in an involuntary proceeding commenced under any
applicable bankruptcy, insolvency or other similar law of any jurisdiction now
or hereafter in effect, including the federal Bankruptcy Code, as from time to
time amended, or has any such proceeding commenced against it which remains
undismissed for a period of sixty (60) days; or


 


(ii)        commences
a voluntary case under any applicable bankruptcy, insolvency or similar law now
or hereafter in effect, including the federal Bankruptcy Code, as from time to
time amended, or applies for or consents to the entry of an order for relief in
an involuntary case under any such law; or makes a general assignment for the
benefit of creditors; or fails generally to pay (or admits in writing its
inability to pay) its debts as such debts become due; or takes corporate or
other action to authorize any of the foregoing; or


 


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(iii)       suffers
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of all or a substantial
part of its assets or of any part of the Mortgage Collateral in a proceeding
brought against or initiated by it, and such appointment or taking possession
is neither made ineffective nor discharged within sixty (60) days after the
making thereof, or such appointment or taking possession is at any time
consented to, requested by, or acquiesced to by it; or


 


(iv)       suffers
the entry against it of a final judgment for the payment of money in excess of
$250,000.00 (not covered by insurance satisfactory to Required Lenders in its
discretion), unless the same is discharged within thirty (30) days after the
date of entry thereof or an appeal or appropriate proceeding for review thereof
is taken within such period and a stay of execution pending such appeal is obtained;
or


 


(v)        suffers
a writ or warrant of attachment or any similar process to be issued by any
court against all or any substantial part of its assets or any part of the
Mortgage Collateral.


 


(g)        Any Related Person fails to make when due or within any applicable
grace period any payment on any Indebtedness (other than the Obligations) with
an unpaid principal balance of over $250,000.00; or any event or condition
occurs under any provision contained in any agreement under which such
obligation is governed, evidenced or secured (or any other material 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 any Related Person with unpaid principal balances exceeding,
in the aggregate, $250,000.00;


 


(h)        Any default or event of default occurs under any provision
contained in any other credit facility maintained by Borrower;


 


(i)         This Agreement, any Note 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 as the result of any action initiated
by any Person other than Agent or the validity or enforceability of any such
document shall be challenged or denied by any Person other than Agent;


 


(j)         Either (i) any “accumulated funding deficiency” (as
defined in Section 412(a)) of the Code in excess of $25,000.00 exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the
Treasury or his delegate, or (ii) any Termination Event occurs with
respect to any ERISA Plan and the then current value of such ERISA Plan’s
benefits guaranteed under Title IV of ERISA exceeds the then current value
of such ERISA Plan’s assets available for the payment of such benefits by more
than $10,000.00 (or in the case of a Termination Event involving the withdrawal
of a substantial employer, the withdrawing employer’s proportionate share of
such excess exceeds such amount) or (iii) any Related Person or any ERISA
Affiliate withdraws from a multiemployer plan resulting in liability under
Title IV of ERISA of an amount in excess of $10,000.00 in the case of any
Related Person or $10,000.00 in the case of any other ERISA Affiliate;


 


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(k)        Any default or event of default (after expiration of any
applicable notice and cure period) occurs under (i) any provision contained in
any credit facility maintained by Parent with an original principal amount
greater than or equal to $10,000,000 or (ii) any other recourse obligation of
Parent greater than or equal to $10,000,000; or


 


(l)         A Change of Control occurs.


 


Section 7.2         Default Remedies.  Upon the occurrence and during the
continuance of an Event of Default, Agent may, with the consent of the Required
Lenders, or Agent, shall, upon the request of the Required Lenders, declare the
Commitments to be terminated and/or declare the entire principal and all
interest accrued on the Notes to be, and the Notes, together with all
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. 
Notwithstanding the foregoing, if an Event of Default specified in Subsections
7.1(f)(i), (ii) or (iii) above occurs with respect to Borrower, the
Commitments shall automatically and immediately terminate and the Notes and all
other Obligations shall become automatically and immediately due and payable,
both as to principal and interest, without any action by Agent or any Lender
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, in
the Notes to the contrary notwithstanding.


 


Section 7.3         Application of Proceeds.  After an Event of Default and acceleration of
the Obligations, the proceeds of any sale or enforcement of all or any part of
the Collateral pursuant to the Security Agreement and the balance of any moneys
in the Settlement Account and the Funding Account shall be applied by the
Agent:


 


FIRST, to the payment of all reasonable costs and expenses of such sale
or enforcement, including reasonable compensation to the Agent’s agents and
counsel, and all reasonable expenses, liabilities and advances made or incurred
by the Agent acting on instructions of the Required Lenders in connection
therewith, and to any reimbursements due Agent under Section 5.5;


 


SECOND, to the payment of all reasonable costs and expenses incurred by
the Agent under the Security Agreement;


 


THIRD, to any reimbursements due Lenders under Section 5.5;


 


FOURTH, to the payment of all accrued and unpaid interest on and fees
attributable to, all Loans under this Agreement, ratably according to the
amount so due to each Lender; and thereafter to the payment of the outstanding
principal balance of all Loans under this Agreement, ratably according to the
amount so due to each Lender;


 


FIFTH, to the extent proceeds remain after application under the
preceding subparagraphs, to the payment of all remaining Obligations, until
such amounts are paid in full; and


 


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SIXTH, to the
payment to the Borrower, or to its successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.


 


If the proceeds of any such sale are
insufficient to cover the costs and expenses of such sale, as aforesaid, and
the payment in full of the Obligations, the Borrower shall remain liable for
any deficiency.


 


Section 7.4         Preservation of Rights.  No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. 
Any single or partial exercise of any such right shall not preclude
other or further exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the Loan
Documents whatsoever shall be valid unless in writing signed by the Lenders
required pursuant to Section 11.2, and then only to the extent in such
writing specifically set forth.  All
remedies contained in the Loan Documents or by law afforded shall be cumulative
and all shall be available to the Agent and the Lenders until the Obligations
have been paid in full.


 


ARTICLE VIII



INDEMNIFICATION


 


Section 8.1         Indemnification.  Borrower agrees to indemnify Agent, Lenders
and each of their directors, officers, agents, attorneys, employees,
representatives and Affiliates (each an “Indemnified Party”), upon demand, from and
against any and all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors) of
any kind or nature whatsoever (in this Section 8.1 collectively
called “liabilities and costs”) which to any extent (in whole or in part) may
be imposed on, incurred by, or asserted against any Indemnified Party growing
out of, resulting from or in any other way associated with any of the Mortgage
Collateral, the Loan Documents, and the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or
contemplated therein (including any violation or noncompliance with any
Environmental Laws by any Related Person).


 


THE
FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS
ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR
THEORY OF STRICT LIABILITY, OR ARE CAUSED IN WHOLE OR PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY SUCH INDEMNIFIED PARTY,


 


provided
only that such Indemnified Party shall not be entitled under this
section to receive indemnification for that portion, if any, of any liabilities
and costs which is proximately caused by its own individual gross negligence or
willful misconduct.  All amounts payable
by Borrower shall be immediately due upon Agent or any Lender’s request for the
payment thereof.


 


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Section 8.2             Limitation
of Liability.  Neither the Agent nor
any Lender, or their directors, officers, agents, attorneys, employees,
representatives or Affiliates shall be liable for any action taken or omitted
to be taken by it or them under or in connection with this Agreement.  THE
FOREGOING EXCULPATION SHALL APPLY TO ANY NEGLIGENT ACT OR OMISSION OF ANY KIND
BY ANY SUCH PERSON, OR ANY ACT OR OMISSION WHICH CAUSES SUCH PERSON TO BE
SUBJECT TO STRICT LIABILITY, PROVIDED THAT SUCH PERSON SHALL BE LIABLE FOR ITS
OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.


 


ARTICLE IX


 


THE AGENT


 


Section 9.1             Appointment.  Each Lender hereby irrevocably designates and
appoints the Agent as the agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes the Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto.  The Agent
is hereby authorized to enter into the Security Agreement thereby appointing
Agent as collateral agent to act on behalf of Lenders and all obligations of
the Lenders under the Security Agreement shall be binding upon each Lender as
if such Lender had executed the Security Agreement.  Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.


 


Section 9.2             Delegation
of Duties.  The Agent may execute any
of its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.  The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.


 


Section 9.3             Exculpatory
Provisions.  Neither the Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable to any Lender or any other Person for any
damage, loss or injury resulting from any action taken or omitted to be taken
by Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates under or in connection with this Agreement or any other Loan
Document, whether sounding in tort, contract or otherwise, INCLUDING IN
RESPECT OF LOSSES, LIABILITIES OR OTHER OBLIGATIONS SUFFERED BY SUCH PERSON’S
OWN NEGLIGENCE OR STRICT LIABILITY but except to the extent that any
of the foregoing are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from its or such Person’s own gross
negligence or willful misconduct, (ii) responsible in any manner to any of the
Lenders for any recitals, statements, representations or warranties made by any
Related Person or any officer thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the 


 


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Agent under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or for any failure
of any Person a party thereto to perform its obligations hereunder or
thereunder, or (iii) responsible in any manner to any of the Lenders for any
fraud of any Related Person or any officer thereof in this Agreement, in the
performance of this Agreement, or in any way related to the transactions
contemplated hereby.  The Agent shall not
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Related Person.


 


Section 9.4             Reliance
by Agent.  The Agent shall be
entitled to rely, and shall be fully protected in relying, upon any instrument,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including counsel to the Borrower), independent accountants and other experts
selected by the Agent.  The Agent may
deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent.  The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Loan Document unless it shall first receive such
advice or concurrence of the Required Lenders (or, if so specified by this
Agreement, all Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense that may be incurred by it by reason of taking or continuing to
take any such action.  The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under
this Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement, all Lenders), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.  Any request, authority or consent of any
Person who, at the time of making such request of giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or endorsee, as the case may be, of
such Note or of any Note or Notes issued in exchange therefor.


 


Section 9.5             Notice
of Default.  The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default”.  In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Lenders.  The Agent shall take such action with respect
to such Default or Event of Default as shall be reasonably directed by the
Required Lenders (or, if so specified by this Agreement or all Lenders); provided
that, unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.


 


Section 9.6             Non-Reliance
on Agent and Other Lenders.  Each
Lender expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereafter
taken, including any review of the affairs of a Related Person or any affiliate



 


49





















 


of a Related Person, shall be deemed to constitute any representation
or warranty by the Agent to any Lender. 
Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Related Persons and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement.  Each Lender also
represents that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Related Persons and their affiliates.  Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Related Person or any affiliate of a Related Person
that may come into the possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.


 


Section 9.7             Indemnification.  The Lenders agree to indemnify the Agent in
its capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective percentage of the total Commitments in effect on the date on which
indemnification is sought under this Section (or, if indemnification is sought
after the date upon which the Commitments shall have terminated and the Loans
shall have been paid in full, ratably in accordance with their respective
percentage of the total Commitments immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever that may at any time (whether before or after the payment of the
Loans) be imposed on, incurred by or asserted against the Agent in any way relating
to or arising out of, the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided  that
no Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements that are found by a final and nonappealable decision
of a court of competent jurisdiction to have resulted from the Agent’s gross
negligence or willful misconduct, PROVIDED
FURTHER, HOWEVER, THAT SUCH INDEMNIFICATION SHALL COVER AGENT’S NEGLIGENCE AND
STRICT LIABILITY.  The
agreements in this Section shall survive the payment of the Loans and all other
amounts payable hereunder.


 


Section 9.8             Agent
in Its Individual Capacity.  In the
event the Agent is a Lender, the Agent shall have the same rights and powers
hereunder and under any other Loan Document with respect to its Commitment and
its Loans as any Lender and may exercise the same as though it were not the
Agent, and the terms “Lender” and “Lenders” shall, at any time when the Agent
is a Lender, unless the context otherwise indicates, include the Agent in its
individual capacity.  The Agent and its
affiliates may make loans to, accept deposits from and generally 


 


50





















 


engage in any kind of business with any Related Person as though the
Agent were not the Agent.  The Agent, in
its individual capacity, is not obligated to be or remain a Lender.


 


Section 9.9             Successor
Agent.  The Agent may resign as Agent
upon thirty (30) days’ notice to the Lenders and the Borrower.  If the Agent shall resign as Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
shall (unless an Event of Default shall have occurred and be continuing) be
subject to approval by the Borrower (which approval shall not be unreasonably
withheld or delayed), whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term “Agent” shall mean such
successor agent effective upon such appointment and approval, and the former
Agent’s rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Loans.  If no successor agent has accepted
appointment as Agent by the date that is 30 days following a retiring Agent’s
notice of resignation, the retiring Agent’s resignation shall nevertheless
thereupon become effective, and the Lenders shall assume and perform all of the
duties of the Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.  After any retiring Agent’s resignation as
Agent, the provisions of this Article IX shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement and the other Loan Documents.


 


Section 9.10           Agent’s
Discretionary Authority. 
Notwithstanding anything to the contrary, in connection with the Borrowing
Base, the Agent is hereby authorized by the Lenders to grant temporary waivers
of compliance by the Borrower with the eligibility requirements regarding
qualification of any Collateral as an Eligible Mortgage Loan or with the
Borrowing Base sublimits when the Agent deems it appropriate, in its sole
discretion, as to all matters (other than (x) any requirement that a Mortgage
Loan be covered by a Take-Out Commitment, (y) the requirements contained in
subparts (a) through (j) of the definition of “Eligible Mortgage Loan” or (z)
the requirements contained in the definition of “Single Family”), if the
aggregate amount of deviation from strict compliance, based on the Unit Collateral
Value so included in the Borrowing Base and the amount of excess permitted over
the Borrowing Base sublimits does not exceed $10,000,000.00 at any time
(provided, however, that the duration of any such temporary waiver shall not
exceed twenty (20) days with respect to any Wet Loan unless the Mortgage Note
related to such Mortgage has been delivered to the Agent).


 


ARTICLE X


 


TAXES AND YIELD PROTECTION


Section 10.1           Taxes.


 


(a)           Payments
Free of Taxes.  Any and all payments
by or on account of any obligation of the Borrower hereunder or under any other
Loan Document shall be made free and clear of and without reduction or
withholding for any Indemnified Taxes or Other Taxes, provided that if
the Borrower shall be required by applicable law to deduct any Indemnified
Taxes (including any Other Taxes) from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions 


 


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applicable to additional sums payable under this Section) the Agent or
Lender, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall timely pay the full amount deducted to
the relevant Governmental Authority in accordance with applicable law.


 


(b)           Payment
of Other Taxes by the Borrower. 
Without limiting the provisions of subsection (a) above, the
Borrower shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.


 


(c)           Indemnification
by the Borrower.  The Borrower shall
indemnify the Agent and each Lender, within 10 days after demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) paid by the Agent or such Lender, as the case may be, and
any penalties, interest and reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority.  A certificate in reasonable
detail as to the amount of such payment or liability delivered to the Borrower
by a Lender (with a copy to the Agent), or by the Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.


 


(d)           Evidence
of Payments.  As soon as practicable
after any payment of Indemnified Taxes or Other Taxes by the Borrower to a
Governmental Authority, the Borrower shall deliver to the Agent the original or
a certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Agent.


 


(e)           Status
of Lenders.  Any Foreign Lender that
is entitled to an exemption from or reduction of withholding tax under the law
of the jurisdiction in which the Borrower is resident for tax purposes, or any
treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrower (with
a copy to the Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower or the Agent, such properly completed and
executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate of
withholding.  In addition, any Lender, if
requested by the Borrower or the Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Borrower or the
Agent as will enable the Borrower or the Agent to determine whether or not such
Lender is subject to backup withholding or information reporting requirements.


 


Without limiting the generality of the foregoing, in the event that the
Borrower is resident for tax purposes in the United States, any Foreign Lender
shall deliver to the Borrower and the Agent (in such number of copies as shall
be requested by the recipient) on or prior to the date on which such Foreign
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the request of the Borrower or the Agent, but only if such Foreign Lender
is legally entitled to do so), whichever of the following is applicable:


 


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(i)            duly completed
copies of Internal Revenue Service Form W-8BEN claiming eligibility for
benefits of an income tax treaty to which the United States is a party,


 


(ii)           duly completed
copies of Internal Revenue Service Form W-8ECI,


 


(iii)          in the case of a
Foreign Lender claiming the benefits of the exemption for portfolio interest
under section 881(c) of the Code, (x) a certificate to the effect that such
Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A)
of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning
of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation”
described in section 881(c)(3)(C) of the Code and (y) duly completed copies of
Internal Revenue Service Form W-8BEN, or


 


(iv)          any other form
prescribed by applicable law as a basis for claiming exemption from or a
reduction in United States Federal withholding tax duly completed together with
such supplementary documentation as may be prescribed by applicable law to
permit the Borrower to determine the withholding or deduction required to be
made.


 


(f)            Treatment
of Certain Refunds.  If the Agent or any
Lender determines, in its good faith discretion, that it has received a refund
of any Taxes or Other Taxes as to which it has been indemnified by the Borrower
or with respect to which the Borrower has paid additional amounts pursuant to
this Section, it shall pay to the Borrower an amount equal to such refund (but
only to the extent of indemnity payments made, or additional amounts paid, by
the Borrower under this Section with respect to the Taxes or Other Taxes giving
rise to such refund), net of all reasonable out-of-pocket expenses of the Agent
or such Lender, as the case may be, and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund), provided that the Borrower, upon the request of the Agent or
such Lender, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Agent or such Lender in the event the Agent or such Lender is
required to repay such refund to such Governmental Authority.  This subsection shall not be construed to
require the Agent or any Lender to make available its tax returns (or any other
information relating to its taxes that it deems confidential) to the Borrower
or any other Person.  Agent and each
Lender agree to take such action as Borrower may reasonably request in order to
apply for and obtain any refund of such amounts as Borrower reasonably
determines to be appropriate under the circumstances, provided that any such
actions shall be at the sole cost and expense of Borrower.


 


Section 10.2           Increased
Costs.


 


(a)           Increased
Costs Generally.  If any Change in
Law shall:


 


(i)            impose, modify or
deem applicable any reserve, special deposit, compulsory loan, insurance charge
or similar requirement against assets of, deposits with or for the account of,
or credit extended or participated in by, any Lender;


 


(ii)           subject any Lender
to any tax of any kind whatsoever with respect to this Agreement, or change the
basis of taxation of payments to such Lender in respect thereof 


 


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(except for
Indemnified Taxes or Other Taxes covered by Section 10.1 and the
imposition of, or any change in the rate of, any Excluded Tax payable by such
Lender); or


 


(iii)          impose on any
Lender any other condition, cost or expense affecting this Agreement;


 


and the result
of any of the foregoing shall be to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or any
other amount) then, upon request of such Lender, the Borrower will pay to such
Lender such additional amount or amounts as will compensate such Lender for
such additional costs incurred or reduction suffered.


 


(b)           Capital
Requirements.  If any Lender
determines that any Change in Law affecting such Lender regarding capital
requirements has or would have the effect of reducing the rate of return on
such Lender’s capital or on the capital of such Lender’s holding company, if
any, as a consequence of this Agreement, the Commitment of such Lender or the
Loans made by such Lender to a level below that which such Lender or such
Lender’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s policies and the policies of such Lender’s
holding company with respect to capital adequacy), then from time to time the
Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender or such Lender’s holding company for any such reduction
suffered.


 


(c)           Certificates
for Reimbursement.  A certificate of
a Lender setting forth in reasonable detail the amount or amounts necessary to
compensate such Lender or its holding company, as the case may be, as specified
in subsection (a) or (b) of this Section and delivered to the Borrower
shall be conclusive absent manifest error. 
The Borrower shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.


 


(d)           Delay
in Requests.  Failure or delay on the
part of any Lender to demand compensation pursuant to the foregoing provisions
of this Section shall not constitute a waiver of such Lender’s right to demand
such compensation, provided that the Borrower shall not be required to
compensate a Lender pursuant to the foregoing provisions of this Section for
any increased costs incurred or reductions suffered more than nine months prior
to the date that such Lender notifies the Borrower of the Change in Law giving
rise to such increased costs or reductions and of such Lender’s intention to
claim compensation therefor (except that, if the Change in Law giving rise to
such increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect
thereof).


 


Section 10.3           Mitigation
Obligations; Replacement of Lenders.


 


(a)           Designation of a Different Lending Office.  If
any Lender requests compensation under Section 10.2, or the Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 10.1, then
such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 10.1 or 10.2,
as the case may 


 


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be, in the future, and (ii) in each case, would not subject such Lender
to any unreimbursed cost or expense and would not otherwise be disadvantageous
to such Lender.  The Borrower hereby
agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.


 


(b)           Replacement of Lenders.  If
any Lender requests compensation under Section 10.2, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 10.1,
the Borrower may at its sole expense and effort, upon notice to such
Lender and the Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 11.11), all of its interests, rights and
obligations under this Agreement and the related Loan Documents to an assignee
that shall assume such obligations (which assignee may be another Lender, if a
Lender accepts such assignment), provided that:


 


(i)            the Agent shall
have received the assignment fee specified in Section 11.11(b);


 


(ii)           such Lender shall
have received payment of an amount equal to the outstanding principal of its
Loans, accrued interest thereon, accrued fees and all other amounts payable to
it hereunder and under the other Loan Documents from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts);


 


(iii)          in the case of any
such assignment resulting from a claim for compensation under Section 10.2
or payments required to be made pursuant to Section 10.1, such
assignment will result in a reduction in such compensation or payments
thereafter; and


 


(iv)          such assignment does
not conflict with applicable Laws.


 


A Lender shall not be required to make any such assignment or
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.


 


Section 10.4           Survival.


 


All of the Borrower’s obligations under this Article X shall
survive termination of the Commitments and repayment of all other Obligations
hereunder.


 


ARTICLE XI


 


MISCELLANEOUS


 


Section 11.1           Notices.  Any notice or request required or permitted
to be given under or in connection with this Agreement, any Note 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, postage prepaid,
or sent by telex, telegram, telecopy or other similar form of rapid 


 


55





















 


transmission, confirmed by mailing (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 listed on each parties’ signature page hereto, 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,
except that Borrowing Requests, and communications related thereto shall not be
effective until actually received by Agent or Borrower, as the case may be; and
any notice so sent by rapid transmission shall be deemed to be given when
receipt of such transmission is acknowledged, and any communication so
delivered in person shall be deemed to be given when receipted for by, or
actually received by, an authorized officer of Borrower, Agent, or any Lender,
as the case may be.


 


Section 11.2           Amendments,
Etc.  Neither this Agreement, any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this Section
11.2.  The Required Lenders and each
Related Person party to the relevant Loan Document may, or, with the written
consent of the Required Lenders, the Agent and each Related Person party to the
relevant Loan Document may, from time to time, (a) enter into written
amendments, supplements or modifications hereto and to the other Loan Documents
for the purpose of adding any provisions to this Agreement or the other Loan
Documents or changing in any manner the rights of the Lenders or of the Related
Persons hereunder or thereunder or (b) waive, on such terms and conditions as
the Required Lenders or the Agent, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its consequences; provided,
however, the written consent of the Borrower, the Agent and all Lenders
shall be required to:


 


(i)            Extend the final
maturity of any Loan or postpone any regularly scheduled payment of principal
of any Loan or forgive all or any portion of the principal amount thereof, or
reduce the rate or extend the time of payment of interest or fees thereon;


 


(ii)           Reduce the
percentage specified in the definition of Required Lenders;


 


(iii)          Extend the Drawdown
Termination Date, or reduce the amount of or extend the payment date for the
mandatory payments required under Section 2.5, or increase the amount of
the total Commitments or the Commitment of any Lender hereunder;


 


(iv)          Amend this Section
11.2;


 


(v)           Except as provided
herein or in the Security Agreement, release any Collateral;


 


(vi)          Amend the definition
of “Unit Collateral Value”, “Borrowing Base”, “Applicable Margin”, “Applicable
Advance Rate Percentage”, or any provision in Section 2.2;


 


56





















 


(vii)         Permit the Borrower
to assign its rights under this Agreement or amend or waive any restriction on
the Borrower’s ability to assign its rights or obligations under any of the
Loan Documents;


 


(viii)        Amend the definition
of Applicable Sublimit;


 


(ix)           Amend or waive any
provision herein regarding the indemnification of the Agent or any Lender; or


 


(x)            Amend or waive any
provision herein regarding the allocation among the Lenders of any payments or
proceeds received by the Agent hereunder.


 


No amendment of any provision of this Agreement relating to the Agent
shall be effective without the written consent of the Agent.  Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon the Related Persons, the Lenders, the Agent and all future
holders of the Loans.  In the case of any
waiver, the Related Persons, the Lenders and the Agent shall be restored to
their former position and rights hereunder and under the other Loan Documents,
and any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.


 


Section 11.3           CHOICE OF LAW; VENUE.  THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF TEXAS.  SECTION 346 OF
THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS.  BORROWER AND LENDERS HEREBY
AGREE THAT THE OBLIGATIONS CONTAINED HEREIN ARE PERFORMABLE IN DALLAS COUNTY,
TEXAS.  ALL PARTIES HERETO AGREE THAT
(I) ANY ACTION ARISING OUT OF THIS TRANSACTION SHALL BE FILED IN DALLAS
COUNTY, TEXAS, (II) VENUE FOR ENFORCEMENT OF ANY OF THE OBLIGATIONS
CONTAINED IN THIS AGREEMENT SHALL BE IN DALLAS COUNTY, (III) PERSONAL
JURISDICTION SHALL BE IN DALLAS COUNTY, TEXAS, (IV) ANY ACTION OR
PROCEEDING UNDER THIS AGREEMENT SHALL BE COMMENCED AGAINST ANY PARTY IN DALLAS
COUNTY, (V) SUCH ACTION SHALL BE INSTITUTED IN THE COURTS OF THE STATE OF TEXAS
LOCATED IN DALLAS COUNTY, TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF TEXAS LOCATED IN DALLAS COUNTY, TEXAS, AT THE OPTION OF
AGENT AND (VI) BORROWER AND LENDERS HEREBY WAIVE ANY OBJECTION TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING AND ADDITIONALLY WAIVE ANY RIGHT EACH MAY
HAVE TO BE SUED ELSEWHERE.  NOTHING
HEREIN SHALL AFFECT THE RIGHT OF AGENT TO ACCOMPLISH SERVICE OF PROCESS IN ANY
MANNER PERMITTED BY LAW.


 


Section 11.4           Invalidity.  In the event that any one or more of the
provisions contained in any Note, this Agreement or any other Loan Document
shall, for any reason, be held invalid,


 


57





















 


illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of such document.


 


Section 11.5           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 and
termination of the Commitment.


 


Section 11.6           Renewal,
Extension or Rearrangement.  All
provisions of this Agreement and of the other Loan Documents shall apply with
equal force and effect to each promissory note hereafter executed which in whole
or in part represents a renewal, extension for any period, increase or
rearrangement of any part of the Obligations originally represented by the Notes
or of any part of such other Obligations.


 


Section 11.7           Waivers.  No course of dealing on the part of Agent or
any Lender, or any of their officers, employees, consultants or agents, nor any
failure or delay by Agent or any Lender with respect to exercising any right,
power or privilege of Lender under any Note, this Agreement or any other Loan
Document shall operate as a waiver thereof, except as otherwise provided in Section 11.2
hereof.


 


Section 11.8           Cumulative
Rights.  The rights and remedies of
Agent and each Lender under the Notes, this 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 11.9           Limitation
on Interest.  Each Lender, each
Related Person and any other parties to the Loan Documents intend to contract
in strict compliance with applicable usury Law from time to time in
effect.  In furtherance thereof such
Persons stipulate and agree that none of the terms and provisions contained in
the Loan Documents shall ever be construed to create a contract to pay, for the
use, forbearance or detention of money, interest in excess of the maximum
amount of interest permitted to be charged by applicable Law from time to time
in effect.  Neither each Related Person
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under applicable Law from time
to time in effect, and the provisions of this section shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith.  Each Lender expressly
disavows any intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of any Obligation is
accelerated.  If (a) the maturity of
any Obligation is accelerated for any reason, (b) any Obligation is
prepaid and as a result any amounts held to constitute interest are determined
to be in excess of the legal maximum, or (c) any Lender or any other
holder of any or all of the Obligations shall otherwise collect moneys which
are determined to constitute interest which would otherwise increase the
interest on any or all of the Obligations to an amount in excess of that
permitted to be charged by applicable Law then in effect, then all such sums
determined to constitute interest in excess of such legal limit shall, without
penalty, be promptly applied to reduce the then outstanding principal of the
related Obligations or, at such Lender’s or such holder’s option, promptly
returned to each Related Person or the other payor 


 


58





















 


thereof upon such determination. 
In determining whether or not the interest paid or payable, under any
specific circumstance, exceeds the maximum amount permitted under applicable
Law, each Lender and each Related Persons (and any other payors thereof) shall
to the greatest extent permitted under applicable Law, (i) characterize
any non-principal payment as an expense, fee or premium rather than as
interest, (ii) exclude voluntary prepayments and the effects thereof, and
(iii) amortize, prorate, allocate, and spread the total amount of interest
throughout the entire contemplated term of the instruments evidencing the
Obligations in accordance with the amounts outstanding from time to time
thereunder and the maximum legal rate of interest from time to time in effect
under applicable Law in order to lawfully charge the maximum amount of interest
permitted under applicable Law.  In the
event applicable Law provides for an interest ceiling under Section 303 of
the Texas Finance Code, that ceiling shall be the weekly ceiling.


 


Section 11.10         Bank
Accounts; Offset.  To secure the
repayment of the Obligations, each Related Person hereby grants to each Lender
and its successors and assigns (in this section called an “Assignee”) a security
interest, a lien, and a right of offset, each of which shall be in addition to all
other interests, liens, and rights of any Lender or Assignee at common law,
under the Loan Documents, or otherwise, and each of which shall be upon and
against (a) any and all moneys, securities or other property (and the
proceeds therefrom) of any Related Person now or hereafter held or received by
or in transit to any Lender, any Lender or Assignee from or for the account any
Related Person, whether for safekeeping, custody pledge, transmission,
collection or otherwise, (b) any and all deposits (general or special,
time or demand, provisional or final) of any Related Person with any Lender or
any Assignee, and (c) any other credits and claims of any Related Person
at any time existing against any Lender or any Assignee, including claims under
certificates of deposit, excluding, however, any collateral clearly
identified and held by Agent in its capacity as collateral agent under a
Permitted Warehouse Debt facility.  During
the existence of any Event of Default, each Lender and each Assignee is hereby
authorized to foreclose upon, offset, appropriate, and apply, at any time and
from time to time, without notice to Borrower, any and all items hereinabove
referred to against the Obligations then due and payable.


 


If any Lender, whether by setoff or otherwise, has payment made to it
upon its Loans in a greater proportion than that received by any other Lender,
such Lender agrees, promptly upon demand, to purchase a portion of the Loans
held by the other Lenders so that after such purchase each Lender will hold its
ratable proportion of Loans.  If any
Lender, whether in connection with setoff or amounts which might be subject to
setoff or otherwise, receives collateral or other protection for its
Obligations or such amounts which may be subject to setoff, such Lender agrees,
promptly upon demand, to take such action necessary such that all Lenders share
in the benefits of such collateral ratably in proportion to their Loans.  In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.


 


Section 11.11         Assignments.


 


(a)           Successors
and Assigns.  The terms and
provisions of the Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lenders and their respective successors and assigns,
except that (i) the Borrower shall not have the right to assign its rights or
obligations under the Loan Documents and (ii) an assignment by any Lender must
be made in compliance with Section 11.11(c).  The parties to this Agreement acknowledge
that clause (ii) of this Section 11.11(a) relates only to absolute
assignments and does not prohibit assignments 


 


59





















 


creating security interests, including, without limitation, any pledge
or assignment by any Lender of all or any portion of its rights under this
Agreement and any Note to a Federal Reserve Bank; provided, however, that no such pledge or assignment creating a security
interest shall release the transferor Lender from its obligations hereunder
unless and until the parties hereto have complied with the provisions of Section
11.11(c).  The Agent may treat the
Person which made any Loan or which holds any Note as the owner thereof for all
purposes hereof unless and until such Person complies with Section 11.11(c),
provided, however, that
the Agent may in its discretion (but shall not be required to) follow
instructions from the Person which made any Loan or which holds any Note to
direct payments relating to such Loan or Note to another Person.  Any assignee of the rights to any Loans or
any Note agrees by acceptance of such transfer or assignment to be bound by all
the terms and provisions of the Loan Documents. 
Any request, authority or consent of any Person, who at the time of
making such request or giving such authority or consent is the owner of the rights
to any Loan (whether or not a Note has been issued in evidence thereof), shall
be conclusive and binding on any subsequent holder, or assignee of the rights
to such Loan.


 


(b)           Assignments.


 


(i)            Permitted
Assignments.  Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities (“Purchasers”) all or
any part of its rights and obligations under the Loan Documents.  The consent of the Borrower and the Agent,
which shall not be unreasonably withheld or delayed, shall be required prior to
an assignment becoming effective, provided, however, that
if a Default or Event of Default has occurred and is continuing, the consent of
the Borrower shall not be required, and provided further, however,
that the consent of neither the Borrower nor the Agent shall be required if the
Purchaser is (i) a Lender, (ii) an Affiliate of a Lender, or (iii) a successor
by merger to a Lender.  Each such
assignment shall (unless it is to a Lender or an Affiliate thereof or each of
the Borrower and the Agent otherwise consents) be in an amount not less than
the lesser of (i) $5,000,000 or (ii) the remaining amount of the assigning
Lender’s Commitment (calculated as of the date of such assignment).


 


(ii)           Effect;
Effective Date.  Upon delivery to the
Agent by the transferor Lender of a notice of assignment (the “Notice of
Assignment”), together with any consents required by Section 11.11(b)(i)
and payment of a $3,500 fee to the Agent for processing such assignment, such
assignment shall become effective on the effective date specified in such
Notice of Assignment, provided, however, that no fee shall be due
to the Agent for an assignment by a Lender to an Affiliate thereof.  The Notice of Assignment shall contain a
representation by the Purchaser to the effect that none of the consideration
used to make the purchase of the Commitment and Loans under the applicable
assignment agreement are “plan assets” as defined under ERISA and that the
rights and interests of the Purchaser in and under the Loan Documents will not
be “plan assets” under ERISA.  On and
after the effective date of such assignment, such Purchaser shall for all
purposes be a Lender party to this Agreement and any other Loan Document
executed by or on behalf of the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or action by the
Borrower, the Lenders or the Agent shall 


 


60





















 


be required to
release the transferor Lender with respect to the percentage of the Commitments
and Loans assigned to such Purchaser. 
Upon the consummation of any assignment to a Purchaser pursuant to this Section 11.11(b),
the transferor Lender, the Agent and the Borrower shall, if the transferor
Lender or the Purchaser desires that its Loans be evidenced by Notes, make
appropriate arrangements so that new Notes or, as appropriate replacement Notes
are issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in principal
amounts reflecting their respective Commitments, as adjusted pursuant to such
assignment.  In addition, within a
reasonable time after the effective date of any assignment, the Agent shall,
and is hereby authorized and directed to, revise Schedule 1.1
reflecting the revised Commitments and Commitment Percentages of each of the
Lenders and shall distribute such revised Schedule 1.1
to each of the Lenders and the Borrower, whereupon such revised Schedule shall
replace the old Schedule and become part of this Agreement.


 


(c)           Distribution
of Information.  It is understood and
agreed that Agent and each Lender may provide to assignees and prospective
assignees financial information and reports and data concerning Borrower’s
properties and operations which was provided to Agent and such Lender pursuant
to this Agreement.


 


Section 11.12         Exhibits.  The exhibits 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 the provisions of this Agreement, the
provisions of this Agreement shall prevail.


 


Section 11.13         Titles
of Articles, Sections and Subsections. 
All titles or headings to articles, sections, subsections or other
divisions of this Agreement or the exhibits 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 11.14         Counterparts;
Fax.  This Agreement may be executed
in counterparts, and it shall not be necessary that the signatures of both 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.  This Agreement
may be duly executed by facsimile or other electronic transmission.


 


Section 11.15         Termination:
Limited Survival.  In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
notice delivered to Agent and Lenders to terminate this Agreement.  Upon receipt by Agent and Lenders of such a
notice, if no Obligations are then owing, this Agreement and all other Loan
Documents shall thereupon be terminated and the parties thereto released from
all prospective obligations thereunder. 
Notwithstanding the foregoing or anything herein to the contrary, any
waivers or admissions made by any Person in any Loan Documents, any
Obligations, and any obligations which any Person may have to indemnify or
compensate Agent or any Lender shall survive any termination of this Agreement
or any other Loan Document.  At the
request and expense of Borrower, Agent


 


61





















 


and Lenders shall prepare and execute all necessary instruments to
reflect and effect such termination of the Loan Documents.


 


Section 11.16         Joint
and Several Liability.  All
obligations which are incurred by two or more Related Persons shall be their
joint and several obligations and liabilities.


 


Section 11.17         Disclosures.  Agent and any Lender may disclose to, and
exchange and discuss with, any other Person any information concerning the
Collateral of Borrower or any Subsidiary (whether received by Agent, any Lender
or any other Person) for the purpose of (a) complying with Governmental
Requirements or any legal proceedings, (b) protecting or preserving the
Collateral, (c) protecting, preserving, exercising or enforcing any of
their rights in, under or related to the Collateral or the Loan Documents,
(d) performing any of their obligations under or related to the Loan
Documents, or (e) consulting with respect to any of the foregoing matters.


 


Section 11.18         Time
is of the Essence.  Time is of the
essence with respect to the performance of the obligations contained in this
Agreement.


 


Section 11.19         USA
Patriot Act Notice.  Each Lender
hereby notifies Borrower that pursuant to the requirements of the USA Patriot
Act (Title III of Pub. L. 107-56 (signed into law October 26, 2003))
(the “Act”),
it is required to obtain, verify and record information that identifies
Borrower, which information includes the name and address of Borrower and other
information that will allow such Lender to identify Borrower in accordance with
the Act.


 


Section 11.20         Electronic
Transactions.  Borrower hereby
affirmatively consents and agrees to permit Agent and Lenders and their
successors and assigns to enter into transactions with Borrower involving “electronic
records” and “electronic means,” as those terms are defined in UETA and the
E-Sign Act.


 


Section 11.21         No
Reliance.  In executing this
Agreement, Borrower warrants and represents that Borrower is not relying on any
statement or representation other than those in this Agreement and is relying
upon its own judgment and advice of its attorneys.


 


Section 11.22         WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO WAIVES, TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ITS RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. 
EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION
SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. 
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS
TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN 


 


62





















 


PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY PROVISION
HEREOF OR THEREOF.  THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT AND ANY OTHER LOAN DOCUMENTS.


 


Section 11.23         CONSEQUENTIAL DAMAGES.  NEITHER BORROWER, AGENT NOR ANY LENDER SHALL
HAVE ANY LIABILITY WITH RESPECT TO, AND EACH SUCH PERSON HEREBY WAIVES,
RELEASES AND AGREES NOT TO SUE EACH OTHER SUCH PERSON FOR, ANY SPECIAL,
INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY SUCH OTHER PERSON IN CONNECTION
WITH ANY CLAIM RELATED TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREIN.


 


Section 11.24         ENTIRE AGREEMENT.  THE NOTES, THIS AGREEMENT, AND THE OTHER LOAN
DOCUMENTS 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.


 


[the remainder of this page is
intentionally left blank]


 


63





















 


IN WITNESS
WHEREOF, the parties hereto have caused this instrument to be duly executed as
of the date first above written.


 


	
  BORROWER:

  	
  BEAZER MORTGAGE CORPORATION,

  
	
  Borrower’s
  Address:

  	
  a Delaware corporation

  
	
  1000 Abernathy Road, Suite
  1200

  	
   

  
	
  Atlanta, GA 30328

  	
   

  
	
  Attention: Mr.
  Ron Kuhn

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Cory J. Boydston

  	
   

  
	
  With a copy of all notices
  to:

  	
  Name: 

  	
  Cory J. Boydston

  	
   

  
	
   

  	
  Title: 

  	
  Senior Vice President

  	
   

  
								



 


Mr.
Kenneth J. Gary


Executive
Vice President & General Counsel


Beazer
Homes USA, Inc.


1000
Abernathy Road


Atlanta,
GA 30328


 


 


	
  STATE OF GEORGIA

  	
  §

  	
   

  
	
   

  	
  §

  	
   

  
	
  COUNTY OF FULTON

  	
  §

  	
   

  



 


Before me, the
undersigned notary public, on this 10th day of January, 2006, personally
appeared Cory J. Boydston, Senior Vice President of Beazer Mortgage Corporation,
a Delaware corporation, known to me (or proved to me by the production of a
driver’s license as identification) to be the person whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed the same on
behalf of said corporation for the purposes and consideration therein
expressed.


 


 


	
   

  	
  /s/ Teresa
  Rose Dietz

  	
   

  
	
   

  	
  Notary
  Public - State of Georgia

  
	
   

  	
   

  
	
  My
  Commission expires:

  	
  Teresa Rose
  Dietz

  	
   

  
	
  May 5, 2007

  	
  Printed Name
  of Notary

  
				



 


64





















 


 


	
  AGENT:

  	
  GUARANTY BANK,

  
	
  Address:

  	
  a
  Federal savings bank

  
	
  8333 Douglas Avenue, 11th
  Floor

  	
   

  
	
  Dallas, Texas 75225

  	
   

  
	
  Attention: Mr. Doug Dixon

  	
   

  
	
  Fax: 214.360.4892

  	
   

  
	
  Tel: 214.360.2674

  	
  By: 

  	
  /s/ Doug Dixon

  	
   

  
	
   

  	
   

  	
  Doug Dixon

  
	
   

  	
   

  	
  Senior Vice President

  
					



 


65





















 


	
  LENDER:

  	
  GUARANTY BANK,

  
	
  Address:

  	
  a
  Federal savings bank,

  
	
  8333 Douglas Avenue, 11th
  Floor

  	
  as a Lender and as Swingline
  Lender

  
	
  Dallas, Texas 75225

  	
   

  
	
  Attention: Mr. Doug Dixon

  	
   

  
	
  Fax: 214.360.4892

  	
   

  
	
  Tel: 214.360.2674

  	
  By: 

  	
  /s/ Doug Dixon

  	
   

  
	
   

  	
   

  	
  Doug Dixon

  
	
   

  	
   

  	
  Senior Vice President

  
					



 


 


66





















 


	
  LENDER:

  	
  JPMORGAN CHASE BANK, N.A.

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ R. B. Langford

  	
   

  
	
   

  	
  Name: 

  	
  R. Britt Langford

  	
   

  
	
   

  	
  Title: 

  	
  Senior Vice President

  	
   

  
								



 


67





















 


	
  LENDER:

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ William J. Umscheid

  	
   

  
	
   

  	
  Name:

  	
   William J. Umscheid

  	
   

  
	
   

  	
  Title: 

  	
    Vice President

  	
   

  
							



 


68





















 


	
  LENDER:

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Elizabeth Kurilecz

  	
   

  
	
   

  	
  Name:

  	
  Elizabeth Kurilecz

  	
   

  
	
   

  	
  Title: 

  	
  Senior Vice President

  	
   

  
							



 


69





















 


	
  LENDER:

  	
  WASHINGTON MUTUAL BANK

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Anne D. Brehony

  	
   

  
	
   

  	
  Name:

  	
  Anne D. Brehony

  	
   

  
	
   

  	
  Title: 

  	
   Vice President

  	
   

  
							



 


70





















 


	
  LENDER:

  	
  NATIONAL CITY BANK OF KENTUCKY

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Michael A. Johnson

  	
   

  
	
   

  	
  Name:

  	
  Michael A. Johnson

  	
   

  
	
   

  	
  Title: 

  	
   Vice President

  	
   

  
							



 


71





















 


	
  LENDER:

  	
  COMERICA BANK

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Paul G. Dufault

  	
   

  
	
   

  	
  Name:

  	
  Paul G. Dufault

  	
   

  
	
   

  	
  Title: 

  	
   Vice President

  	
   

  
							



 


72





















 


	
  LENDER:

  	
  COLONIAL BANK, N.A.

  
	
  Colonial
  Bank, N.A.

  	
  as
  a Lender

  
	
  Mortgage Warehouse Lending

  	
   

  
	
  201 E. Pine Street, Suite 730

  	
   

  
	
  Orlando, FL 32801

  	
  By: 

  	
  /s/Amy J. Nunneley

  	
   

  
	
  Attn:  Jennifer Branker

  	
  Name:

  	
  Amy J. Nunneley

  	
   

  
	
  Fax: 407.835.6690

  	
  Title: 

  	
   SeniorVice President

  	
   

  
	
  Tel: 407.835.6700

  	
   

  	
   

  	
   

  
							



 


73





















 


	
  LENDER:

  	
  CALYON NEW YORK BRANCH

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Samuel L. Hill

  	
   

  
	
   

  	
  Name:

  	
  Samuel L. Hill

  	
   

  
	
   

  	
  Title: 

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ David P. Cagle

  	
   

  
	
   

  	
  Name:

  	
  David P. Cagle

  	
   

  
	
   

  	
  Title: 

  	
  Managing Director

  	
   

  
									



 


74





















 


	
  LENDER:

  	
  BNP PARIBAS

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Duane Helkowski

  	
   

  
	
   

  	
  Name:

  	
  Duane Helkowski

  	
   

  
	
   

  	
  Title: 

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Angela Arrnold

  	
   

  
	
   

  	
  Name:

  	
  Angela Bentley Arrnold

  	
   

  
	
   

  	
  Title: 

  	
  Vice President

  	
   

  
										



 


75





















 


SCHEDULE
1.1


 


COMMITMENTS AND COMMITMENT PERCENTAGES


 


	
  LENDER

  	
   

  	
  (A)

  

  

  

  COMMITMENT

  	
   

  	
  (B)

  

  

  MAXIMUM COMMITMENT

  	
   

  	
  (C)

  COMMITMENT

  PERCENTAGE

  ((A or B)÷Total

  Commitments)

  	
   

  
	
  Guaranty Bank

  	
   

  	
  $

  	
  39,285,714

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  15.7143

  	
  %

  
	
  JPMorgan Chase Bank, N.A.

  	
   

  	
  $

  	
  39,285,714

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  15.7143

  	
  %

  
	
  U.S. Bank National Association

  	
   

  	
  $

  	
  32,142,857

  	
   

  	
  $

  	
  45,000,000

  	
   

  	
  12.8571

  	
  %

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  10.0000

  	
  %

  
	
  Washington Mutual Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  10.0000

  	
  %

  
	
  National City Bank of Kentucky

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  10.0000

  	
  %

  
	
  Comerica Bank

  	
   

  	
  $

  	
  21,428,571

  	
   

  	
  $

  	
  30,000,000

  	
   

  	
  8.5714

  	
  %

  
	
  Colonial Bank, N.A.

  	
   

  	
  $

  	
  17,857,143

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  7.1429

  	
  %

  
	
  Calyon New York Branch

  	
   

  	
  $

  	
  14,285,714

  	
   

  	
  $

  	
  20,000,000

  	
   

  	
  5.7143

  	
  %

  
	
  BNP Paribas

  	
   

  	
  $

  	
  10,714,286

  	
   

  	
  $

  	
  15,000,000

  	
   

  	
  4.2857

  	
  %

  
	
  Total

  	
   

  	
  $

  	
  250,000,000.00

  	
   

  	
  $

  	
  350,000,000.00

  	
   

  	
  100

  	
  %

  



 





















 


SCHEDULE
6.10


EXISTING LIENS


 


1.             Liens
granted to HPS Office Systems on various copiers, fax machines and printers.


 


2.             Liens
granted to U.S. Bancorp on various copiers, fax machines and printers.