**Exhibit10.4**

 

**SECOND AMENDED AND RESTATED**

**WAREHOUSING CREDIT AGREEMENT**

 

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| LIST OF EXHIBITS       |
|------------------------|
| ** **             | ** ** | ** ** |
| **Exhibit A**     | ** ** | **-** Warehouse  Borrowing Base Formula |
|                   |   |   |
| **Exhibit B**     |   | - Covenant Compliance  Certificate |
|                   |   |   |
| **Exhibit C-1**   | ** ** | **-** National City Amended and Restated  Warehouse Promissory Note |
|                   |   |   |
| **Exhibit C-2**   |   | - Comerica Amended and  Restated Warehouse Promissory Note |
|                   |   |   |
| **Exhibit C-3**   |   | - Colonial Warehouse  Promissory Note |
|                   |   |   |
| **Exhibit D**     |   | - Second Amended and  Restated Pledge, Security and Collateral Agency Agreement |
|                   |   |   |
| **Exhibit E**     |   | - Amended and Restated  Swing Promissory Note |
|                   |   |   |
| **Exhibit F**     |   | - Form of Opinion  of Counsel |
|                   |   |   |
| **Exhibit G**     |   | - Form of  Additional Lender Agreement |
|                   |   |   |
| **Exhibit H**     |   | - Form of  Commitment Schedule and Allocation Notice |
|                   |   |   |
| **Exhibit I**     | ** ** | **-**  Form of Monthly Servicing Portfolio Report |
|                   |   |   |
| SCHEDULES              |
|                   |   |   |
| **Schedule 1.1**  |   | - Approved Investor  List |
|                   |   |   |
| **Schedule 2.1**  |   | - Warehouse Pro Rata  Shares and Warehouse Line Commitments |
|                   |   |   |
| **Schedule 6.1**  |   | - Information Relating  to Company Representations and Warranties |
|                   |   |   |
| **Schedule 6.13** |   | - Affiliates |
|                   |   |   |

 

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# **SECOND AMENDED ANDRESTATED WAREHOUSING CREDIT AGREEMENT**

 

**THISSECOND AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT** (asamended, modified and restated from time to time, this “Credit Agreement”) ismade and effective as of the 30th day of August, 2004, by and among (i) **WASHTENAW MORTGAGE COMPANY,**a Michigan corporation with itsprincipal place of business located at 3767 Ranchero Drive, Ann Arbor, Michigan48108 (the “Company”), (ii)(a) **NATIONAL CITY BANK OFKENTUCKY**, a national banking association with a place of businesslocated at 101 South Fifth Street, Louisville, Kentucky 40202 (“National City”),(b) **COMERICA BANK,**a Michigan bankingcorporation with its principal place of business located at 500 WoodwardAvenue, MC:3256, Detroit, Michigan 48226 (“Comerica”), and **COLONIAL BANK, N.A.**, a national bankingassociation with its principal place of business located at 201 East PineStreet, Suite 730, Orlando, Florida 32801 (“Colonial”) (National City,Comerica and Colonial are hereinafter referred to individually as a “Bank” andcollectively as the “Banks”), and (iii) **NATIONALCITY BANK OF KENTUCKY**, in its capacity as Agent for the Banks partyhereto from time to time (in such capacity, the “Agent”).

 

PRELIMINARY   STATEMENT :

 

WHEREAS, the Company hasheretofore obtained from National City and Comerica a warehouse line of creditin the current maximum principal amount of Eighty Million Dollars($80,000,000.00), and the Banks now desire to renew and increase such warehouseline of credit in the maximum principal amount of One Hundred Million Dollars($100,000,000.00), subject to the terms and conditions set forth in this CreditAgreement, including without limitation, the right of the Company and the Agentin their sole, joint discretion to increase such maximum principal amount(without amendment to this Credit Agreement or any of the other Loan Documents)by adding one or more additional lenders, each as a “Bank” hereunder, byapproving each such additional lender as an Applicant Financial Institutionpursuant to **Section 11.1** hereof (the “WarehouseLine”);

 

WHEREAS, the Banks desireto establish the Warehouse Line in favor of the Company upon the terms andconditions set forth in this Credit Agreement; and

 

NOW, THEREFORE, inconsideration of the premises and the mutual agreements herein contained, theparties hereto agree as follows:

 

**ARTICLE 1**

 

DEFINITIONS ANDACCOUNTING TERMS

 

1.1                                 Definitions.  In addition to the definitions set forth inthe opening paragraph and the preliminary statement of this Credit Agreement,the following terms shall have the meanings set forth below (such meanings tobe equally applicable to both the singular and plural form of the termsdefined):

 

“Additional LenderAgreement” shall have the meaning assigned thereto in **Section 11.1**hereof.

 

“Adjusted Tangible NetWorth” shall mean, as of any date of determination, GAAP Net Worth minusthe sum of: (i) capitalized mortgage servicing rights of the Company, (ii) capitalizedexcess servicing fees of the Company, (iii) the aggregate book value ofthe intangible assets of the Company, (iv) all assets pledged to secure thedebts of Affiliates or other entities, (v) the aggregate amount ofadvances

 

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and loans by the Companyto its owners, officers, directors, employees or Affiliates, (vi) investmentsin Affiliates, (vii) any other asset designated by the Agent in writing tothe Company to be unacceptable; provided, the Company shall have ten (10) calendardays from receipt of such written designation to respond thereto, and (viii) anyrecorded gains of the Company related to adjustments required under FASB 133for accrued hedging gains or losses that have not been realized as actualcontractual gains, and plus the sum of: (a)  the lesser of [I] oneand one-quarter of one percent (1.25%) of the unpaid principal balance of theNet Servicing Portfolio or [II] the appraised value of the Pledged ServicingRights which are not designated as either Servicing Under Contract for Sale orServicing Held for Bulk Sale, (b) eighty percent (80%) of the sales priceof Servicing Under Contract for Sale (as calculated under the terms of theContract for Sale) not to exceed one and six-tenths of one percent (1.60%) ofthe unpaid balance of the residential mortgages being serviced under thedesignated Servicing Under Contract for Sale, and (c) any recorded lossesof the Company related to adjustments required under FASB 133 for accruedhedging gains or losses that have not been realized as actual contractuallosses.

 

“Adjusted TotalIndebtedness” shall mean, as of any date of determination, the Company’sTotal Indebtedness minus the sum of (i) Notes and Drafts payable bythe Company pursuant to the various Loan Documents, and (ii) any accruedliabilities related to FASB 140 adjustments for loans not actually repurchasedor required to be repurchased from the agencies.

 

“Adjustment Date”shall have the meaning assigned thereto in **Section 11.1**hereof.

 

“Advance” shallmean, as applicable, a Warehouse Advance, a Swing Advance or an Excess Advance.

 

“Affiliate” shallmean (i) any Person that, directly or indirectly, is in control of, iscontrolled by, or is under common control with, the Company, including withoutlimitation, , or (ii) any Person who is a director or officer of theCompany or of any Person described in clause (i) above.  For purposes of this definition, control of aPerson shall mean the power, direct or indirect, to vote ten percent (10%) ormore of the securities having ordinary voting power for the election ofdirectors of such Person or to direct the management or policies of suchPerson, whether through the ownership of voting securities, or otherwise.

 

“Aged Loan” shallmean, as of any date:

 

(a)                                  AnyLoan, which is not a Wet Loan, an Extended Wet Loan, a Jumbo Loan or anAlternative Lending Loan, which has been pledged as Collateral for more thanone hundred eighty (180) calendar days (calculated from the date upon which theAdvance relating to such Loan is made hereunder);

 

(b)                                 AnyServicing Under Contract for Sale or Servicing Held for Bulk Sale, which hasbeen pledged as Collateral for more than one hundred fifty (150) calendar days(calculated from the date upon which the Advance relating to such Loan is madehereunder);

 

(c)                                  Any Alternative Lending Loan which hasbeen pledged as Collateral for more than ninety (90) calendar days (calculatedfrom the date upon which the Advance relating to such Loan is made hereunder);

 

(d)                                 Any Jumbo Loan which has been pledged asCollateral for more than one hundred twenty (120) calendar days (calculatedfrom the date upon which the Advance relating to such Loan is

 

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made hereunder);

 

(e)                                  AnyExtended Wet Loan which has been pledged as Collateral for more than fifteen (15)calendar days (calculated from the date upon which the Advance relating to suchLoan is made hereunder); and

 

(f)                                    AnyWet Loan which has been pledged as Collateral for more than ten (10) calendardays (calculated from the date upon which the Advance relating to such Loan ismade hereunder).

 

“Aged Security”shall mean a Mortgage-backed Security which has been pledged as Collateral formore than forty-five (45) calendar days (calculated from the first date uponwhich the Agent obtained a security interest therein).

 

“Agency Qualified AMinus Advance” shall mean a Warehouse Advance requested to fund an AgencyQualified A Minus Loan.

 

“Agency QualifiedA Minus Advance Sublimit” shall mean an amount equal to fourand two-tenths of one percent (4.2%) of the Total Warehouse Line Commitment;provided, however, that said sublimit shall be subject to the following furtherlimitations: (i) each Advance requested to fund Agency Qualified A MinusLoans shall not exceed the maximum loan amount under applicable agency underwritingcriteria for loans which are commonly referred to in the secondary market as “AMinus” loans; and (ii) all Agency Qualified A Minus Loans to the sameborrower shall be aggregated by the Company as a single Agency Qualified AMinus Loan for purposes of this sublimit.

 

“Agency Qualified AMinus Collateral Usage” shall mean that percentage of Eligible Collateralcalculated by dividing the aggregate Collateral Value of all Agency Qualified AMinus Loans by the sum of the aggregate Collateral Value of all EligibleCollateral less the aggregate Collateral Value of all Servicing UnderContract for Sale and all other Pledged Servicing Rights.

 

“Agency Qualified AMinus Loan” shall mean a Loan: (i) the entire interest of which isowned by the Company and which is secured by a First Mortgage; (ii) whichis not an FHA or VA; (iii) which conforms to the underwriting criteria ofany or both of Fannie Mae or FHLMC for loans which are commonly referred to inthe secondary market as “A Minus” loans, as defined by the Agent in its solejudgment and discretion, and (iv) which is subject to a Firm Commitment orStandby Commitment, provided such Loan is not a Jumbo Loan.

 

“Agent” shall havethe meaning assigned to that term in the introduction of this Credit Agreement,and includes any successor Agent under **Section 10.12**hereof.

 

“Agent Fee” shallhave the meaning assigned thereto in **Section 2.14B**hereof.

 

“Agent’s Main Office”shall mean those offices of the Agent located at 101 South Fifth Street,Louisville, Kentucky.

 

“Aggregate OutstandingBalance” shall mean the sum of the Aggregate Outstanding Warehouse Balance plusthe Aggregate Outstanding Excess Balance.

 

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“Aggregate OutstandingExcess Balance” shall mean the aggregate unpaid principal balance of allExcess Advances, if any.

 

“Aggregate OutstandingWarehouse Balance” shall mean the aggregate unpaid principal balance of allWarehouse Advances and Swing Advances.

 

“Alternative LendingAdvance” shall mean an Advance requested to fund an Alternative LendingLoan.

 

“Alternative LendingAdvance Sublimit” shall mean an amount equal to twelve and one-half of onepercent (12.5%) of the Total Warehouse Line Commitment.

 

“Alternative LendingCollateral Usage” shall mean that percentage of Eligible Collateralcalculated by dividing the aggregate Collateral Value of all AlternativeLending Loans by the sum of the aggregate Collateral Value of all EligibleCollateral less the aggregate Collateral Value of all Servicing Under Contractfor Sale, Servicing Held for Bulk Sale and all other Pledged Servicing Rights.

 

“Alternative LendingLoan” shall mean a Loan the entire interest of which is owned by theCompany and which is one of the following: (i) a Second Mortgage Loan, or (ii) a HELOC Loan, providedsuch Loan is not a Jumbo Loan.

 

“Applicant FinancialInstitution” shall have the meaning assigned thereto in **Section 11.1**hereof.

 

“Appraisal of PledgedServicing Rights” shall mean an appraisal of the Pledged Servicing Rightsas determined in accordance with accepted methods of appraising by a qualifiedappraiser who is reasonably acceptable to the Agent.

 

“Appraised Value”shall mean, with respect to an interest in real estate, the then current fairmarket value thereof as of a recent date satisfactory to the Agent, asdetermined by the FHA or the VA, if applicable, or, if there is no suchdetermination, then as determined in accordance with accepted methods ofappraising by a qualified appraiser who is a member of the American Instituteof Real Estate Appraisers or other group of professional appraisers and who isreasonably acceptable to the Agent.

 

“Approved Investors”shall mean the financial institutions approved for the shipment of EligibleCollateral by the Agent and listed on **Schedule 1.1**attached hereto and made a part hereof by this reference, which listing shallinclude the address of each such Approved Investor, the name of the contactperson for such Approved Investor and the telephone number of such contactperson.  The Agent may from time to time,at its sole and absolute discretion, agree to add financial institutions to thelist of Approved Investors provided that a financial institution shall not bedeemed to be an Approved Investor until such time as the Agent has notified theCompany that such financial institution has been approved by the Agent.  The Agent may from time to time remove anyfinancial institution from the list set forth in **Schedule 1.1**for cause by giving the Company prior notice of such removal; provided,however, the Agent agrees to honor any commitment for delivery of Loans forpurchase by any removed investor if (i) such commitment was entered intoprior to the Company’s receipt of the related removal notification or (ii) suchcommitment was entered into after the Company’s receipt of the related removalnotification but such commitment involved a rate lock decision made by theCompany prior to the Company’s receipt of such notification.  From and after the Company’s receipt ofnotice removing an investor from the Approved Investor list, the

 

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Company shall not enter into any additional commitments for delivery ofLoans for purchase by that investor.

 

“Approved ServicingPurchaser” shall mean NationsBank, Chase Manhattan Mortgage Corporation orsuch other purchaser of servicing rights approved in writing by the Agent.

 

“Average MonthlyAvailable Deposits” shall mean the monthly average of free collectedbalances maintained in non-interest bearing accounts in the name the Company(or held by the Company in trust for third parties) with a Bank, afterdeducting any unpaid service charges or float required by such Bank under itsnormal practices to compensate such Bank for the maintenance of such accounts andtaking into consideration reserve requirements and the other costs of complyingwith applicable law (including but not limited to any FDIC premium applicableto such accounts).

 

“Balance Funded Bank”shall mean National City.

 

“Balance Funded BaseRate” shall mean the per annum rate of one and one-quarter of one percent(1.25%).

 

“Bank” and “Banks”shall mean each of Comerica, Colonial and National City in its respectiveindividual capacity and any other Applicant Financial Institution which isadded as a Bank hereunder by the Company and the Agent.

 

“Bankruptcy Code”shall mean Title 11 of the United States Code entitled “Bankruptcy” as now andhereafter in effect, or any successor statute.

 

“Base Rate” shallmean the variable per annum rate equal to the Federal Funds Effective Rate plusone and one-quarter of one percent (1.25%).

 

“Billing Statement”shall have the meaning assigned thereto in **Section 2.9**hereof.

 

“Borrowing Base Report”shall mean the report prepared by the Agent to calculate the WarehouseBorrowing Base in accordance with the formula set forth in **Exhibit A**to this Credit Agreement.

 

“Business Day”shall mean for all purposes any day excluding Saturday, Sunday and any daywhich is a legal holiday under the laws of the state in which the Agent’s MainOffice for purposes of performing its obligations under this Credit Agreementas set forth on the signature pages of this Credit Agreement or is a dayon which (i) banking institutions located in such state are authorized orrequired by law or other governmental action to close, or (ii) the UnitedStates Federal Reserve Bank is closed.

 

“Closing Date”shall mean the date on which the initial Advance is made to the Company and theconditions set forth in **Article 4**hereof are satisfied.

 

“Collateral” shallmean the assets of the Company, as more particularly described in **Section 2.1** of the Security Agreement in which theAgent, for the benefit of the Banks in proportion to their Pro Rata Shares, hasa Security Interest.

 

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“Collateral Documents”shall mean the Security Agreement and all other agreements, instruments,documents, and other papers creating, evidencing, or representing theCollateral or the Security Interests therein.

 

“Collateral HandlingFees” shall have the meaning assigned thereto in **Section 2.14B** hereof.

 

“Collateral MortgageDocuments” shall have the meaning assigned thereto in the SecurityAgreement.

 

“Collateral ProceedsAccount” shall mean the “no access” deposit account maintained by the Agentat the main office of the Agent in the name of the Agent for the benefit of theCompany and to which the Company shall have no access, for the purposes ofreceiving the proceeds of the Collateral and other funds as provided in thisCredit Agreement and the Security Agreement.

 

“Collateral Value”shall mean as of any date:

 

(a)                                  Withrespect to a Loan which constitutes Eligible Collateral on such date and whichis not an Alternative Lending Loan, ninety-eight percent (98%) of the least of (i) thenet amount paid by the Company for such Loan, (ii) the unpaid principalbalance of such Loan less all discounts collected by the Company in connectionwith such Loan, and (iii) if available, the purchase price under theCommitment to which such Loan has been assigned;

 

(b)                                 Withrespect to a Loan which constitutes Eligible Collateral on such date and whichis an Alternative Lending Loan, ninety-five percent (95%) of the least of (i) thenet amount paid by the Company for such Loan, (ii) the unpaid principalbalance of such Loan less all discount points collected by the Company inconnection with such Loan, and (iii) the purchase price under theCommitment to which such Loan has been assigned;

 

(c)                                  Withrespect to Pledged Servicing Rights which are not designated as Servicing UnderContract for Sale or Servicing Held for Bulk Sale and which constitute EligibleCollateral on such date, an amount equal to the amount by which the lesser of (i) sixty-fivepercent (65%) of the appraised value of the Pledged Servicing Rights or (ii) onepercent (1.0%) of the unpaid principal balance of the residential mortgagesrelating to such Pledged Servicing Rights. For the purposes of this subparagraph, the term “appraised value” shallmean the then current market valuation of the Pledged Servicing Rightsperformed by a valuation firm acceptable to the Agent, such valuation to bedone semi-annually and dated during September and March of eachcalendar year and delivered to the Agent by December 31 and June 30,respectively, of such calendar year.  Ifsuch valuation provides a range of economic value, the Borrowing Basecalculation shall be based upon the midpoint of such range; and

 

(d)                                 Withrespect to Servicing Under Contract for Sale which constitutes EligibleCollateral on such date, and the contract sales price is provided by theCompany at the time of the Advance, an amount equal to the lesser of (i) eightypercent (80%) of the sale price under the Contract for Sale (as calculatedunder the terms of the Contract for Sale) or (ii) one and three-quartersof one percent (1.75%) of the unpaid principal balance of the residentialmortgages relating to the Servicing Under Contract for Sale, and withrespect to Servicing Held for Bulk Sale which constitutes Eligible Collateralon such date, or   Servicing UnderContract for Sale which constitutes Eligible Collateral on such date, and thecontract sales price is not provided by the Company at the time of theAdvance,  an amount equal to the lesserof

 

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(i) sixty-five percent (65%) of the appraised value of the PledgedServicing Rights which are not designated as Servicing Under Contract for Sale,(ii) one percent (1.0%) of the unpaid principal balance of the residualmortgages related to the Pledged Servicing Rights after subtracting any pledgedservicing designated as Servicing Under Contract for Sale.

 

Notwithstanding anythingcontained in (a) through (d) above to the contrary:

 

A.                                   TheCollateral Value of all Wet Loans and Extended Wet Loans shall not exceed, inthe aggregate, the Wet Advance Sublimit;

 

B.                                     TheCollateral Value of All Extended Wet Loans shall not exceed, in the aggregate,the Extended Wet Advance Sublimit;

 

C.                                     TheCollateral Value of all Jumbo Loans shall not exceed, in the aggregate, theJumbo Advance Sublimit;

 

D.                                    TheCollateral Value of all Alternative Lending Loans shall not exceed, in theaggregate, the Alternative Lending Advance Sublimit;

 

E.                                      TheCollateral Value of all Pledged Servicing Rights (excluding the Servicing UnderContract for Sale and Servicing Held for Bulk Sale) shall not exceed, in theaggregate, the Working Capital Advance Sublimit;

 

F.                                      Theaggregate Collateral Value of all Servicing Under Contract for Sale andServicing Held for Bulk Sale shall not exceed, in the aggregate, the ServicingAdvance Sublimit; provided, further, that the Collateral Value of all ServicingUnder Contract for Sale shall not exceed the Servicing Under Contract AdvanceSublimit and the Collateral Value of all Servicing Held for Bulk Saleshall not exceed the Servicing Held for Bulk Sale Advance Sublimit;

 

G.                                     EachWet Loan which the Agent determines has not been funded by the Company on thedate the Advance in respect of such Wet Loan is made by the Banks to theCompany, shall have a Collateral Value of zero (0);

 

H.                                    EachExtended Wet Loan in respect of which the Company shall not have delivered allof the Collateral Documents to the Agent within fifteen (15) calendar daysafter the Advance in respect of such Loan is made by the Banks to the Company,shall have a Collateral Value of zero (0);

 

I.                                         EachExtended Wet Loan, which has been designated by the Company to be funded underthe Fannie Mae ASAP Programs and in respect of which repayment-in-full has notbeen received by the Agent within fifteen (15) calendar days after the Advancein respect of such Loan is made by the Banks to the Company, shall have aCollateral Value of zero (0);

 

J.                                        EachExtended Wet Loan which the Agent determines has not been funded by the Companyon the date the Advance in respect of such Extended Wet Loan is made by theBanks to the Company, shall have a Collateral Value of zero (0);

 

K.                                    Ifthe Agent shall reasonably determine that the Collateral Value otherwise

 

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assigned to an item ofEligible Collateral does not accurately reflect the value thereof, then, uponnotice to the Company such item of Collateral (i) if it is a Loan whichconstitutes Eligible Collateral which is not an Alternative Lending Loan, shallinstead have a collateral value equal to ninety-eight percent (98%) of themarket value as determined by the Agent, (ii) if it is a Loan whichconstitutes Eligible Collateral which is an Alternative Lending Loan, shallinstead have a Collateral Value equal to ninety-five percent (95%) of themarket value as determined by the Agent, (iii) if it is a Servicing UnderContract for Sale  which constitutesEligible Collateral, it shall instead have a Collateral Value equal to eightypercent (80%) of the sale price as determined by the Agent, and if it isa Servicing Held for Bulk Sale which constitutes Eligible Collateral, it shallinstead have a Collateral Value equal to sixty-five (65%) of the anticipatedsale price as determined by the Agent in its sole discretion based uponinformation provided by the Company, and (iv) if it is Pledged ServicingRights which constitute Eligible Collateral but which are not Servicing UnderContract for Sale or Servicing Held for Bulk Sale, it shall instead have aCollateral Value equal to sixty-five percent (65%) of the market value of suchPledged Servicing Rights as determined by the Agent; provided, however, that inno event shall any mark to market with respect to any item of EligibleCollateral under this subsection result in such item of EligibleCollateral having a higher Collateral Value than such item would otherwisehave;

 

L.                                      AllAged Loans shall have a Collateral Value of zero (0);

 

M.                                 AllLoans which are under trust receipt in accordance with the terms of the SecurityAgreement which are not returned to the Agent within the time specified in theSecurity Agreement shall have a Collateral Value of zero (0);

 

N.                                    TheCollateral Value of all Loans which are under trust receipt in accordance withthe terms of the Security Agreement shall not exceed, in the aggregate, theprincipal amount permitted under the Security Agreement; and

 

O.                                    TheCollateral Value of any Jumbo Loan constituting Eligible Collateral shall notexceed One Million Two Hundred Thousand Dollars ($1,200,000.00).

 

“Commitment” shallmean a Firm Commitment or a Standby Commitment.

 

“Commitment Fee”shall have the meaning assigned thereto in **Section 2.14A**hereof.

 

“Commitment Schedule andAllocation Notice” shall mean a notice in the form of the Commitment Schedule andAllocation Notice in effect on the Effective Date attached hereto as **Exhibit H**.

 

“Company” shallhave the meaning assigned thereto in the introduction to this Credit Agreement.

 

“Conforming Loan”shall mean a Loan secured by a Conforming Mortgage.

 

“Conforming Mortgage”shall mean a mortgage securing a Loan which is eligible for purchase by any orall of Fannie Mae or FHLMC or such other investors acceptable to the Agent,which mortgage must be a First Mortgage.

 

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“Contract for Sale”shall mean any loan servicing purchaser and sale agreement between the Company,as seller, and an Approved Servicing Purchaser, as buyer, in form acceptable tothe Agent.

 

“Covenant ComplianceCertificate” shall mean the certificate to be furnished to the Agent onbehalf of the Banks in accordance with **Sections 4.2(a) and7.3(b) **hereof and in the form of **Exhibit B**attached to this Credit Agreement, together with a spreadsheet or other workingpapers showing the calculations used to prepare such certificate.

 

“Credit Agreement”shall have the meaning assigned thereto in the introduction of this CreditAgreement.

 

“Default Rate”shall mean: (i) with respect to the then or thereafter outstandingprincipal balance of the Swing Note and the Notes bearing interest at the BaseRate, a rate per annum equal to the sum of (a) three percent (3%) perannum, plus (b) the Base Rate, or (ii) with respect to then orthereafter outstanding principal balance of the Notes bearing interest at theBalance Funded Base Rate, a rate per annum equal to the sum of (a) threepercent (3%) per annum, plus (b) the Balance Funded Base Rate.

 

“Document Custodian”shall mean National City acting as the custodian of the Loans for purposes offacilitating the pool certification and issuance of Mortgage-backed Securities.

 

“Drafts” shallmean those instruments drawn on National City for funding of mortgage closingswhich have not yet been received by National City for payment but which arereported as liabilities on the Company’s financial statements.

 

“Dry Balances”shall mean that portion of the aggregate outstanding principal balance ofAdvances made to fund Loans for which the documentation identified in **Section 4.1** of the Security Agreement has been deliveredto the Agent.

 

“Dry Collateral Usage”shall mean that percentage of Eligible Collateral calculated by dividing theaggregate Collateral Value of all Dry Loans by the sum of the aggregateCollateral Value of all Eligible Collateral less the aggregateCollateral Value of all Servicing Under Contract for Sale, Servicing Held forBulk Sale and all other Pledged Servicing Rights.

 

“Dry Loan” shallmean a Loan the Collateral Documents for which have been delivered to the Agentand the entire interest of which Loan is owned by the Company.

 

“Electronic TrackingAgreement” shall mean that certain Electronic Tracking Agreement by andamong the Company, the Agent, MERS and MERSCORP, in the form attached hereto as**Exhibit K** and made a parthereof by this reference.

 

“ElectronicTransmittals” shall mean the electronic delivery to the Agent of collateraldata and collateral transaction data in the format prescribed by the Agent.

 

“Eligible Collateral”shall mean, collectively and as of any date, the following:

 

(a)                                  EachMortgage-backed Security (i) which shall have been and remains pledged tothe Agent as collateral agent (for the benefit of the Banks) under and pursuantto the Security Agreement,

 

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(ii) which is not an Aged Security, and (iii) in respect ofwhich the representations, warranties and agreements contained in this CreditAgreement and the Security Agreement are true and correct;

 

(b)                                 EachLoan (i) which is a Dry Loan, a Wet Loan, Jumbo Loan, an AlternativeLending Loan, an Agency Qualified A Minus Loan or an Extended Wet Loan, withoutduplication, (ii) which constitutes Collateral, (iii) which is not anAged Loan, (iv) which has not been shipped to an Approved Investor formore than the maximum number of days allowed under the Security Agreement andno purchase proceeds have been received by the Agent, (v) in respect ofwhich the representations, warranties and agreements contained in this CreditAgreement, the Security Agreement and each of the other Loan Documents are trueand correct, and (vi) no default has occurred and is continuing on suchLoan;

 

(c)                                  EachLoan (i) that is a Discretionary Loan (as defined in **Section 9.20** hereof) withoutduplication, (ii) that constitutes Collateral, and (iii) that is notsubject to any lien or security interest other than that granted under the LoanDocuments; and

 

(d)                                 PledgedServicing Rights, including all Servicing Advances.

 

“ERISA” shall havethe meaning assigned thereto in **Section 6.12**hereof.

 

“Event of Default”shall mean any of the events set forth in **Section 8.1**hereof.

 

“Excess Advances”shall mean the cash amount advanced under the terms of **Section 2.2**hereof.

 

“Excess Pro Rata Share”shall mean the entire outstanding principal amount of the Excess Advances, allas held by the Agent.

 

“Extended Wet Advance”shall mean a Warehouse Advance requested to fund an Extended Wet Loan.

 

“Extended Wet AdvanceSublimit” shall mean an amount equal to five percent (5.0%) of the TotalWarehouse Line Commitment.

 

“Extended Wet Balances”shall mean that portion of the aggregate outstanding principal balance ofAdvances made to fund Extended Wet Loans.

 

“Extended Wet Loan”shall mean a Loan the entire interest of which is owned by the Company and theCollateral Documents relating to such Loan have not been delivered to the Agentin more than ten (10) calendar days but no more than fifteen (15) calendardays have elapsed since the day the Advance relating to such Loan is made bythe Banks.

 

“Extended WetCollateral Usage” shall mean that percentage of Eligible Collateralcalculated by dividing the aggregate Collateral Value of all Extended Loans bythe sum of the aggregate Collateral Value of all Eligible Collateral lessthe aggregate Collateral Value of all Servicing Under Contract for Sale,Servicing Held for Bulk Sale and all other Pledged Servicing Rights.

 

“Fannie Mae “shall mean the Fannie Mae.

 

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“Fannie Mae ASAPPrograms” shall mean, collectively, all of the relevant Fannie Mae earlyfunding programs set forth in the Fannie Mae Tri-Party Agreement.

 

“Fannie Mae Tri-PartyAgreement” shall mean that certain letter agreement dated as of November 1,1996 among the Company, the Agent and Fannie Mae pursuant to which Fannie Mae hasagreed to wire transfer to the Collateral Proceeds Account all cash proceedsfor each Early Funding Transaction defined therein.

 

“FDIC” shall meanthe Federal Deposit Insurance Corporation.

 

“Federal FundsEffective Rate” shall mean, for any period, a fluctuating interest rateequal for each day during such period to the weighted average of the rates onovernight federal funds transactions with members of the Federal Reserve Systemarranged by federal funds brokers, as published for such day (or, if such dayis not a Business Day, for the next preceding Business Day) by the FederalReserve Bank of New York, or, if such rate is not so published for any daywhich is a Business Day, the average of the quotations for such day on suchtransactions received by the Agent from three (3) federal funds brokers ofrecognized standing selected by the Agent in its sole discretion.

 

“FHA” shall meanthe Federal Housing Administration.

 

“FHA Loan” shallmean a Loan secured by a FHA Mortgage.

 

“FHA Mortgage”shall mean a first mortgage securing a FHA Loan which is guaranteed by, or iseligible to be guaranteed by, the FHA pursuant to the provisions of theNational Housing Act, as amended.

 

“FHLMC” shall meanthe Federal Home Loan Mortgage Corporation.

 

“FICO Score” shallmean the credit score obtained by using the credit score methodology providedby Fair Isaac Corporation.

 

“Firm Commitment”shall mean a commitment from a substantial and reputable lending institution,investor, or security dealer, reasonably satisfactory to the Agent, to purchasefrom the Company a Loan or Loans or a Mortgage-backed Security or Securitiesunder which commitment the Company is obligated to sell such Loan, Loans, orMortgage-backed Security or Securities.

 

“First Mortgage”shall mean a mortgage, deed of trust, or other security deed in land and otherinterests in real property (including, without limitation, leasehold interests)and the structures, improvements, fixtures, and buildings located thereon, orin other rights and interests in real property which secures a Loan and, whichmortgage, deed of trust, or other security deed is subject to no prior orsuperior mortgage, deed of trust or security deed in the land and otherinterests in real property encumbered by such mortgage, deed of trust, or othersecurity deed.

 

“Funding Account”shall mean the “no access” deposit account in the name of the Agent for thebenefit of the Company and maintained by the Agent at the main office of theAgent into which each Bank’s Warehouse Advance or Swing Advance is to befunded.

 

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“Funding Date”shall have the meaning assigned thereto in **Section 2.4C**hereof.

 

“GAAP” shall meanthose generally accepted accounting principles set forth in the opinions andpronouncements of the Financial Accounting Standards Board and its predecessorsand the American Institute of Certified Public Accountants or those generallyaccepted principles of accounting which have other substantial authoritativesupport and are applicable in the circumstances as of the date of application,as such principles are from time to time supplemented and amended.

 

“GAAP Net Worth”shall mean, as of any date of determination, the Company’s net worth asdetermined in conformity with GAAP.

 

“GNMA” shall meanthe Government National Mortgage Association.

 

“HELOC Loan” shallmean an Alternative Lending Loan secured by a Home Equity Mortgage.

 

“Highest Lawful Rate”shall have the meaning assigned thereto in **Section 2.8B**hereof.

 

“Home Equity Mortgage”shall mean a mortgage, deed of trust or other security deed in land and otherinterests in real property (including, without limitation, leasehold interests)and the structures, improvements, fixtures and buildings located thereon, andin other rights and interests in real property, which secures a Loan, and whichmortgage, deed of trust or other security deed which may be subject to a prioror superior mortgage, deed of trust or other security deed in the land andother interest in real property encumbered by such mortgage, deed of trust orother security deed.

 

“Jumbo Advance”shall mean an Advance requested to fund a Jumbo Loan, which advance shall notexceed One Million Two Hundred Thousand Dollars ($1,200,000.00).

 

“Jumbo AdvanceSublimit” shall mean an amount equal to twenty percent (20%) of the TotalWarehouse Line Commitment; provided, however, that said sublimit shall besubject to the following further limitations: (i) Advances requested tofund Jumbo Loans with an original principal amount in excess of Seven HundredFifty Thousand Dollars ($750,000.00) shall be limited to twenty-four percent(24%) of the Jumbo Advance Sublimit; and (ii) Advances requested to fundJumbo Loans that are also Wet Loans or Extended Wet Loans shall be limited tothirty percent (30%) of the Jumbo Advance Sublimit.

 

“Jumbo Balances”shall mean that portion of the aggregate outstanding principal balance ofAdvances made to fund Loans for which the documentation identified in **Section 4.1** of the Security Agreement has not been deliveredto the Agent.

 

“Jumbo CollateralUsage” shall mean that percentage of Eligible Collateral calculated bydividing the aggregate Collateral Value of all Jumbo Loans by the sum of theaggregate Collateral Value of all Eligible Collateral less the aggregateCollateral Value of all Servicing Under Contract for Sale, Servicing Held forBulk Sale and all other Pledged Servicing Rights.

 

“Jumbo Loan” shallmean a Loan, the amount of which exceeds Fannie Mae or FHLMC guidelines formaximum eligible amount and the entire interest of which is owned by theCompany and which is secured by a Jumbo Mortgage covering a completedone-to-four family residential property which

 

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is underwritten to be eligible for purchase by an Approved Investor,provided that such Loan does not have a loan-to-value ratio greater than onehundred percent (100%).

 

“Jumbo Mortgage”shall mean a First Mortgage securing a Loan which meets all of the requirementsof a Conforming Mortgage except that the principal amount of such Loan exceedsthe maximum amount eligible for purchase by either Fannie Mae or FHLMC.

 

“Kentucky UniformCommercial Code” shall mean the Uniform Commercial Code from time to timein effect in the Commonwealth of Kentucky, as the same is revised, amended,modified and supplemented from time to time.

 

“Loan” shall meana residential real estate mortgage loan purchased, refinanced or made by theCompany, evidenced by a promissory note, and secured by a mortgage or deed of trustor similar instrument creating an enforceable first or second lien upon acompleted one-to-four family residential property which was financed with theproceeds of such loan.

 

“Loan Documents”shall mean, collectively, this Credit Agreement, the Notes, the SecurityAgreement, the Electronic Tracking Agreement, the other Collateral Documentsand any and all other documents executed in connection therewith, each as maybe amended, modified, supplemented and restated from time to time.

 

“MERS” shall meanthe Mortgage Electronic Registration System, Inc.

 

“MERSCORP” shallmean MERSCORP, Inc.

 

“MERS Loan” shallmean any Loan made by the Company that is secured by a MERS Mortgage.

 

“MERS Member”shall mean any entity which is a member of MERS, in good standing and incompliance with all rules, regulations, procedures and requirements set forthby MERS, including, but not limited to the payment of membership dues.

 

“MERS Mortgage”shall mean any first mortgage or second mortgage registered by the Company onthe MERS System.

 

“MERS System”shall mean the Mortgage Electronic Registration System established by MERS.

 

“Net Income” shallmean, for the period in question, the net income (or loss) of the Company forsuch period taken as a single accounting period determined in accordance withGAAP.

 

“Net ServicingPortfolio” shall mean the Servicing Portfolio less (i) all loans thatare more than sixty (60) days past due, (ii) loans pledged to secure thedebts of Affiliates and (iii) servicing designated as Servicing UnderContract for Sale or Servicing Held for Bulk Sale.

 

“Non-recourseServicing Portfolio” shall mean the Servicing Portfolio minus allRecourse Servicing Obligations included in the Servicing Portfolio.

 

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“Notes” shallmean, collectively, the Warehouse Notes and the Swing Note.

 

“Obligor” shallmean a person or other entity who now or hereafter is or becomes liable to theCompany with respect to any of the Collateral.

 

“Person” shallmean any individual, sole proprietorship, partnership, joint venture, trust,unincorporated organization, association, corporation, limited liabilitycompany, institution, entity, party, or government (whether national, federal,state, county, city, municipal, or otherwise, and including, withoutlimitation, any instrumentality, division, agency, body, or departmentthereof), whether acting in an individual, fiduciary, or other capacity,including, without limitation, any Affiliate.

 

“Plan” shall havethe meaning assigned thereto in **Section 7.12**hereof.

 

“Pledged ServicingRights” shall mean that portion of the Servicing Portfolio pledged to theAgent, for the benefits of the Banks, as Collateral.

 

“PrevailingTime” shall mean the prevailing time in Louisville, Kentucky.

 

“Pro Rata Share”shall mean, as appropriate, a Bank’s Warehouse Pro Rata Share or Excess ProRata Share.

 

“Recourse ServicingObligation” shall mean any Fannie Mae, FHLMC, GNMA or private investorrecourse servicing obligation which specifically provides that the Company mustrepurchase a Loan upon the occurrence of a default under such Loan or any otherprogram which specifically provides that the Company must repurchase a Loanupon the occurrence of a default under such Loan.

 

“Regulation D”shall mean Regulation D of the Board of Governors of the Federal ReserveSystem as in effect from time to time.

 

“Request for Advance”shall mean a Request for Warehouse Advance or a Request for Swing Advance, asappropriate.

 

“Request for ExcessAdvance” shall mean a written request for an Excess Advance by the Companyin a form acceptable to the Agent in its sole discretion.

 

“Request for SwingAdvance” shall mean a written request for a Swing Advance by the Company ina form acceptable to the Agent in its sole discretion.

 

“Request for WarehouseAdvance” shall mean a written request for a Warehouse Advance by theCompany in the form prescribed from time to time by the Agent in its sole discretion.

 

“Requisite Banks”shall mean either (i) when an Event of Default does not exist, Banksholding more than sixty-six and sixty-seven hundredths of one percent (66.67%)of the sum of the Total Warehouse Line Commitment, or (ii) when an Eventof Default does exist, Banks holding more than sixty-six and sixty-sevenhundredths of one percent (66.67%) of the sum of the Aggregate OutstandingWarehouse Balance, as of the date of determination of the Requisite Banks.

 

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“Second Mortgage”shall mean a mortgage which is subject to only one prior or superior mortgage,deed of trust, or other security deed in the land and other interests in realproperty encumbered by such mortgage.

 

“Second Mortgage Loan”shall mean a Loan made by the Company, the interest of which is owned by theCompany and which is secured by a Second Mortgage.

 

“Secured Obligations”shall have the meaning assigned thereto in the Security Agreement.

 

“Security Agreement”shall mean the Second Amended and Restated Pledge, Security and CollateralAgency Agreement of even date herewith by and between the Company and the Agentfor the benefit of the Banks in proportion to their Pro Rata Share andsubstantially in the form of **Exhibit D**attached to this Credit Agreement, as amended, modified, supplemented andrestated from time to time.

 

“Security Interest”shall mean every security interest, pledge, lien, hypothecation, and otherencumbrance on or in any of the assets of the Company now or hereafter grantedby the Company to the Agent (for the ratable benefit of the Banks) or any Bank,whether pursuant to this Credit Agreement, the Security Agreement, orotherwise.

 

“Servicing Advance”shall mean an Advance requested to fund either a Servicing Under ContractAdvance or a Servicing Held for Bulk Sale Advance, as applicable.

 

“Servicing AdvanceSublimit” shall mean an amount equal to thirteen percent (13%) of the TotalWarehouse Commitment; provided, however, that said sublimit shall be subject tothe Servicing Held for Bulk Sale Advance Sublimit and the Servicing UnderContract Advance Sublimit.

 

“Servicing Held forBulk Sale” shall mean a portion of the Servicing Portfolio designated bythe Seller as being accumulated for future bulk sale under a Contract for Salebetween the Company, as seller, and an Approved Servicing Purchaser.

 

“Servicing Held forBulk Sale Advance” shall mean an Advance requested to fund that portion ofthe Servicing Portfolio that has been designated by the Company to beaccumulated for future sale to an Approved Servicing Purchaser under a Contractfor Sale.

 

“Servicing Held forBulk Sale Advance Sublimit” shall mean an amount equal to the least of (i) sixty-fivepercent (65%) of the appraised value of the Pledged Servicing Rights which arenot designated as Servicing Under Contract for Sale, (ii) one percent(1.0%) of the unpaid principal balance of the residual mortgages related to thePledged Servicing Rights after subtracting any pledged servicing designated asServicing Under Contract for Sale, or (iii) the amount of the overallServicing Advance Sublimit less the aggregate amount of all outstandingServicing Under Contract Advances.

 

“Servicing Portfolio”shall mean, as of any particular date, the then aggregate unpaid principalbalance of the one-to-four family residential real estate mortgage loans whichare then being serviced by the Company pursuant to mortgage selling andservicing contracts and mortgage pool purchasing contracts entered into withFannie Mae, GNMA, the FHLMC, or other investors acceptable to the Agent.

 

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“Servicing Report”shall mean that certain monthly report prepared by the Company showing, amongother things, (i) the purchase price and sale date for the Company’sServicing Under Contract for Sale which are the subject of a Contract for Salewith an Approved Servicing Purchaser, and (ii) the anticipated sale dateand purchase price for the Company’s Servicing Held for Bulk Sale which in thefuture are to be the subject of a Contract for Sale with an Approved ServicingPurchaser, such report to be in a form prescribed by the Agent from time totime.

 

“Servicing UnderContract Advance” shall mean an Advance requested to fund that portion ofthe Servicing Portfolio that has been designated to be sold to an ApprovedServicing Purchaser under a Contract for Sale.

 

“Servicing UnderContract Advance Sublimit” shall mean an amount equal to the least of (i) eightypercent (80%) of the purchase price for the Servicing Under Contract for Saleas set forth in the most recent Servicing Report delivered by the Company toAgent, as calculated based upon the current Contract for Sale for the relatedservicing rights designated by the Company to be delivered to the relatedApproved Servicing Purchaser, (ii) one and three-quarters of one percent(1.75%) of the unpaid principal balance of the residential mortgages beingserviced under the designated Servicing Under Contract for Sale, or (iii) theamount of the overall Servicing Advance Sublimit less the aggregateprincipal amount of all outstanding Servicing Held for Bulk Sale Advances.

 

“Servicing UnderContract for Sale” shall mean a portion of the Servicing Portfoliospecifically designated by the Seller as being delivered subject to a current,executed Contract for Sale between the Company, as seller, and an ApprovedServicing Purchaser.

 

“Standby Commitment”shall mean a commitment from a substantial and reputable lending institution,investor, or security dealer, reasonably satisfactory to the Agent, to purchasefrom the Company within a specified time period a Loan or Loans, or aMortgage-backed Security or Securities, in an aggregate principal amount whichconforms to the criteria set forth therein, under which commitment the Companyhas the right, but is not obligated, to sell such Loan, Loans, or Mortgage-backedSecurity or Securities.

 

“Swing Advance”shall mean the cash amount advanced under the Warehouse Line by the Agent to orfor the account of the Company under the terms of **Section 2.2A**of this Credit Agreement.

 

“Swing AdvanceLimitations” shall have the meaning assigned thereto in **Section 2.2A** hereof.

 

“Swing Line” shallmean the swing line of credit established by the Agent pursuant to **Article 2** hereof and in the maximumprincipal amount determined by the Agent in its sole discretion.

 

“Swing Note” shallmean the Amended and Restated Swing Promissory Note in substantially the formof **Exhibit E** attached hereto, andwhich shall evidence all Swing Advances.

 

“Tangible Net Worth”shall mean, as of any date of determination, the sum of the total shareholders’equity in the Company (including capitalized servicing rights and capitalizedexcess servicing fees and retained earnings) less the aggregate book value ofall intangible assets (as determined in accordance with GAAP) including,without limitation, goodwill, trademarks,trade names, service marks,

 

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copyrights, patents, licenses, franchises and unamortized debt discountand expenses, but excluding in any event, servicing rights of the Company.

 

“Termination Date”shall mean the earlier of: (i) the date set forth in **Section 9.11**below; or (ii) the date the Agent declares this Credit Agreement to beterminated, pursuant to **Section 8.3**below; or (iii) such earlier date as may be selected by the Company upon (a) atleast forty-five (45) days prior written notice to the Agent and each of theother Banks and (b) prepayment by the Company of all amounts due and owingby the Company under this Credit Agreement and each of the other LoanDocuments.

 

“Total Indebtedness”shall mean, as of the date of any determination, all indebtedness of theCompany, as determined in accordance with GAAP, including, without limitation,all unpaid Secured Obligations, all amounts due under all capital leases, allaccounts and trade payables, and all other liabilities and obligations of theCompany, excluding, however, all repurchase obligations.

 

“Total Warehouse LineCommitment” shall mean the total aggregate principal amount of allWarehouse Line Commitments as determined from time to time in accordance withthe provisions of **Article 2**and**Article 11** of this CreditAgreement and shall be equal to One Hundred Million Dollars ($100,000,000.00),unless such amount is increased pursuant to **Section 11.1**of this Credit Agreement.

 

“Unmatured Event ofDefault” shall mean any event which, with the lapse of time, or with noticeto the Company, or both, would constitute an Event of Default.

 

“Unqualified Amount”shall have the meaning assigned thereto in **Section 2.8B**hereof.

 

“Usage Fee” shallhave the meaning assigned thereto in **Section 2.14C**hereof.

 

“VA” shall meanthe Veterans Administration.

 

“VA Loan” shallmean a Loan secured by a VA Mortgage.

 

“VA Mortgage”shall mean a First Mortgage securing a VA Loan which is guaranteed by, or is eligibleto be guaranteed by, the VA pursuant to the provisions of the Servicemen’sReadjustment Act of 1944, as amended.

 

“Warehouse Advance”shall mean the cash amount advanced under the Warehouse Line by the Banks to orfor the account of the Company under the terms of **Section 2.1**of this Credit Agreement.

 

“Warehouse BorrowingBase” shall mean that amount which is determined according to the formulaset forth in **Exhibit A** to this CreditAgreement.

 

“Warehouse CommitmentPro Rata Share” shall mean with respect to each Bank, the percentage setforth opposite that Bank’s name on **Schedule 2.1**to this Credit Agreement, as the same shall be amended from time to time asprovided herein.

 

“Warehouse Line”shall have the meaning assigned thereto in the Preliminary Statement.

 

“Warehouse LineCommitment” or “Warehouse Line Commitments” shall mean thecommitment of each Bank to maintain or make Warehouse Advances as set forth in **Section 2.1** hereof.

 

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“Warehouse Notes”shall mean, collectively, (i) that certain Amended and Restated WarehousePromissory Note of even date herewith, made by the Company, payable to theorder of National City, and in the face principal amount of Forty-Five MillionDollars ($45,000,000.00), a form of which is annexed hereto as **Exhibit C-1**, as the same may hereafter be amended,modified, renewed, replaced and/or restated from time to time, (ii) thatcertain Amended and Restated Warehouse Promissory Note of even date herewith,made by the Company, payable to the order of Comerica, and in the faceprincipal amount of Thirty-Five Million Dollars ($35,000,000.00), a form ofwhich is annexed hereto as **Exhibit C-2**,as the same may hereafter be amended, modified, renewed, replaced and/orrestated from time to time, (iii) that certain Warehouse Promissory Noteof even date herewith, made by the Company, payable to the order of Colonial,and in the face principal amount of Twenty Million Dollars ($20,000,000.00), aform of which is annexed hereto as **Exhibit C-3**,as the same may hereafter be amended, modified, renewed, replaced and/orrestated from time to time, and (iv) when executed and delivered, any suchadditional Warehouse Promissory Note, substantially in the form annexed heretoas **Exhibit C-1** made by the Company,payable to the order of any respective Applicant Financial Institution as shallbe added as a “Bank” hereunder, and in the face principal amount of suchApplicant Financial Institution’s Warehouse Line Commitment, as the same maythereafter be amended, modified, renewed, replaced and/or restated from time totime.

 

“Warehouse Pro RataShare” shall mean, with respect to each Bank, the percentage calculated bydividing the average monthly sum of the Aggregate Outstanding Warehouse Balanceplus the Aggregate Outstanding Excess Balance attributable to such Bankby the average monthly total of the Aggregate Outstanding Warehouse Balance plusthe Aggregate Outstanding Excess Balance.

 

“Wet Advance”shall mean an Advance requested to fund a Wet Loan.

 

“Wet Advance Sublimit”shall mean, as applicable, (i) during the first five (5) BusinessDays and the last five (5) Business Days of each calendar month, an amountequal to fifty-five percent (55%) of the Total Warehouse Line Commitment, and (ii) duringall other periods of time in any calendar month, an amount equal to fiftypercent (50%) of the Total Warehouse Line Commitment.

 

“Wet Balances”shall mean that portion of the aggregate outstanding principal balance ofAdvances made to fund Loans for which the documentation identified in **Section 4.1** of the Security Agreement has not beendelivered to the Agent.

 

“Wet Collateral Usage”shall mean that percentage of Eligible Collateral calculated by dividing theaggregate Collateral Value of all Wet Loans by the sum of the aggregateCollateral Value of all Eligible Collateral less the aggregateCollateral Value of all Servicing Under Contract for Sale, Servicing Held forBulk Sale and all other Pledged Servicing Rights.

 

“Wet Loan” shallmean a Loan the entire interest of which is owned by the Company and theCollateral Documents relating to such Loan have not been delivered to the Agentand not more than ten (10) calendar days have elapsed since the day theAdvance relating to such Loan is made by the Banks.

 

“Working CapitalAdvance” shall mean an Advance requested to fund the general operatingneeds of the Company in the normal course of business.

 

“Working CapitalAdvance Sublimit” shall mean the lesser of: (i) sixty-five percent(65%) of the appraised value of the Pledged Servicing Rights which are notdesignated as Servicing Under Contract for Sale or Servicing Held for BulkSale, (ii) one percent (1.0%) of the unpaid principal balance of

 

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the residential mortgages related to the Pledged Servicing Rights aftersubtracting any pledged servicing designated as Servicing Under Contract forSale or Servicing Held for Bulk Sale, or (iii) an amount equal to sevenand two-tenths of one percent (7.2%) of the Total Warehouse Line Commitment.

 

1.2                                 AccountingTerms.  All accounting terms, exceptas their meanings may be modified by this Credit Agreement, shall have themeanings given them in accordance with GAAP.

 

### **ARTICLE 2**

 

THE WAREHOUSE LINE

 

2.1                                 WarehouseAdvances. Each Bank severally agrees to lend to the Company, and theCompany agrees to borrow from each Bank, on the terms and conditions of thisCredit Agreement, an aggregate amount not exceeding such Bank’s respectiveWarehouse Line Commitment, and the aggregate amount of all such Warehouse LineCommitments shall equal the Total Warehouse Line Commitment; provided, howeverthe Total Warehouse Line Commitment includes a Wet Advance Sublimit, anExtended Wet Advance Sublimit, a Working Capital Advance Sublimit, a JumboAdvance Sublimit, an Alternative Lending Advance Sublimit, a Sublimit, aServicing Held for Bulk Sale Advance Sublimit and a Servicing Under ContractAdvance Sublimit. Subject to the terms and conditions contained herein,Warehouse Advances may be repaid and reborrowed until the Termination Date.Each Bank’s commitment to make Warehouse Advances under this **Section 2.1** is herein called its “Warehouse LineCommitment” and such commitments of all Banks in the aggregate are hereincalled the “Total Warehouse Line Commitment”. The Total Warehouse LineCommitment is equal to One Hundred Million Dollars ($100,000,000.00) to anduntil the Termination Date, and shall be available to the Company as Advances,subject to the right of the Agent and the Company in their sole, jointdiscretion to increase such amount by adding one or more Applicant FinancialInstitutions as a “Bank” or “Banks” hereunder pursuant to the provisions of **Section 11.1** hereof.  The principal amount set forth above (as thesame may be increased pursuant to the terms hereof) shall be available to theCompany as Warehouse Advances, Excess Advances and Swing Advances, subject tothe terms and conditions hereof, at such times prior to the Termination Dateand in such sums, as the Company may request.

 

Notwithstanding theforegoing, the Banks shall not be obligated to make a Warehouse Advance which, (a) whenadded to the sum of the Aggregate Outstanding Warehouse Balance plus theAggregate Outstanding Excess Balance, would cause the Aggregate OutstandingWarehouse Balance plus the Aggregate Outstanding Excess Balance toexceed the Warehouse Borrowing Base at such time; (b) when added to thesum of the Aggregate Outstanding Warehouse Balance plus the AggregateOutstanding Excess Balance, would cause or result in a violation of thefinancial covenants set forth in **Article 6**hereof;(c) if such Advance is a Wet Advance, when added to the aggregateoutstanding balance of all Wet Advances and Extended Wet Advances would causeor result in a violation of the Wet Advance Sublimit; (d) if such Advanceis an Extended Wet Advance, when added to the outstanding balance of allExtended Wet Advances would cause or result in a violation of the Wet AdvanceSublimit or the Extended Wet Advance Sublimit; (e) if such Advance is aWorking Capital Advance, when added to the outstanding balance of all WorkingCapital Advances would cause or result in a violation of the Working CapitalAdvance Sublimit; (f) if such Advance is a, when added to the outstandingbalance of all s would cause or result in a violation of the Sublimit; (g) ifsuch Advance is a Jumbo Advance, when added to the outstanding of all JumboAdvances would cause or result in a violation of the Jumbo Advance Sublimit; (h) ifsuch Advance is an Alternative Lending Advance, when added to the outstandingbalance of all Alternative Lending Advances would cause or result in aviolation of the Alternative Lending Advance Sublimit; (i) if such Advanceis a

 

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Servicing Under Contract Advance or a Servicing Held for Bulk SaleAdvance, when added to the outstanding balance of all Servicing Under ContractAdvances or Servicing Held for Bulk Sale Advances, respectively, would cause orresult in a violation of any or all of the Servicing Under Contract AdvanceSublimit, the Servicing Held for Bulk Sale Advance Sublimit or the ServicingAdvance Sublimit; (j) if such Advance would cause or result in the AggregateOutstanding Warehouse Balance plus the Aggregate Outstanding Excess Balanceto exceed the Total Warehouse Line Commitment; or (k) if such Advance is anAgency Qualified A Minus Advance, when added to the outstanding balance of allAgency Qualified A Minus Advances, would cause or result in a violation of theAgency Qualified A Minus Advance Sublimit. The Banks shall not be obligated tohonor any Request for Warehouse Advance if the disbursement of funds thereunderwould occur on or after the Termination Date, or if an Event of Default hasoccurred and has not been cured within the specified grace period, or if suchdisbursement would cause or result in an Event of Default or an Unmatured Eventof Default.

 

2.2                                 SwingAdvances and Excess Advances by Agent.

 

A.                                   SwingAdvances.  Upon the terms and subjectto the conditions contained in this Credit Agreement, the Agent may for its ownaccount and at its own discretion, make one or more Swing Advances to theCompany, the aggregate unpaid principal amount of which at any time, includingthose then to be made, shall not exceed the least of (i) the sum of theTotal Warehouse Line Commitment at such time less the sum of theAggregate Outstanding Warehouse Balance plus the Aggregate OutstandingExcess Balance at such time, (ii) the sum of the Agent’s Warehouse LineCommitment at such time less the amount of the Aggregate OutstandingWarehouse Balance plus the Aggregate Outstanding Excess Balance thenallocated to the Agent, and (iii) Twenty Million Dollars ($20,000,000.00);provided, that, the sum of the Aggregate Outstanding Warehouse Balance plusthe Aggregate Outstanding Excess Balance plus the Swing Advance to bemade by the Agent, shall not exceed the Warehouse Borrowing Base as set forthin the most recent Borrowing Base Report prepared by the Agent on the day ofthe making of such Swing Advance plus the Collateral Value of theEligible Collateral delivered to the Agent on that day and which is notincluded in the most recent Borrowing Base Report (the “Swing AdvanceLimitations”).  Subsequent to a SwingAdvance being made by the Agent, the Agent may at any time (and in any eventshall no less frequently than one (1) time each week) in its sole andabsolute discretion, demand the Banks (including the Bank serving as the Agent)to advance under their respective Warehouse Notes and pay the Agent an amountequal to their respective Warehouse Commitment Pro Rata Share of the WarehouseAdvance necessary to repay the then current aggregate outstanding balance ofall Swing Advances.  On each day on whichthe Agent makes a demand for payment before 2:00 p.m. Prevailing Time, onany particular Business Day, whether before or after the occurrence of an Eventof Default, each Bank shall irrevocably and unconditionally purchase from theAgent, without recourse or warranty, an undivided interest and participation inthe Swing Advances then outstanding, by paying to the Agent, in same day fundsavailable to the Agent at the Agent’s Main Office, in an amount equal to suchBank’s Warehouse Commitment Pro Rata Share of all Swing Advances thenoutstanding, and thereafter, the Banks’ respective interest in such SwingAdvance, shall in all respects be treated as a Warehouse Advance, but suchAdvance shall continue to be evidenced by the Swing Note.  In the event the Agent makes such demand ofthe Banks after 2:00 p.m. Prevailing Time on any particular Business Day,the Banks shall be required to make their respective payments to the Agentbefore 12:00 noon Prevailing Time on the immediately succeeding Business Day.

 

B.                                     ExcessAdvances by Agent.  Upon the termsand subject to the conditions contained in this Credit Agreement, in the eventthe Agent is prevented from making a Swing Advance hereunder as a result of theapplication of the Swing Advance Limitations outlined above the Agent may for

 

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its own account and at its sole discretion, make one or more ExcessAdvances to the Company, the aggregate unpaid principal amount of which at anytime, including those to be made, shall not exceed the lesser of (i) the sumof the Total Warehouse Line Commitment at such time minus the sum of theAggregate Outstanding Warehouse Balance plus the Aggregate OutstandingExcess Balance at such time, and (ii) the amount of the Agent’s WarehouseLine Commitment at such time minus the sum of the Agent’s Pro Rata Shareof the Aggregate Outstanding Warehouse Balance plus the AggregateOutstanding Excess Balance at such time; provided, that, the sum of theAggregate Outstanding Warehouse Balance plus the Aggregate OutstandingExcess Balance plus the Excess Advance to be made by the Agent, shallnot exceed the Warehouse Borrowing Base as set forth in the most recentBorrowing Base Report prepared by the Agent on the day of the making of theExcess Advance plus the Collateral Value of the Eligible Collateraldelivered to the Agent on that day and which is not included in the most recentBorrowing Base Report.  Subsequent to anExcess Advance being made by the Agent, the Agent may at any time (and in anyevent no less frequently than one (1) time each week) in its sole andabsolute discretion request the other Banks to pay their Warehouse CommitmentPro Rata Share of the Warehouse Advance necessary to repay all or any portionof the Excess Advances then outstanding. On each Business Day on which the Agent makes a demand for paymentbefore 2:00 p.m. Prevailing Time, whether before or after the occurrenceof an Event of Default, each Bank shall pay to the Agent its WarehouseCommitment Pro Rata Share of the Warehouse Advance necessary to pay the ExcessAdvances designated by the Agent to be reallocated and paid by the Banks, suchpayments shall be wired to the Agent, in same day funds available to the Agentat the Agent’s Main Office, in an amount equal to such Bank’s WarehouseCommitment Pro Rata Share of all Excess Advances then designated by the Agentto be reallocated and paid by the Banks. In the event the Agent makes such demand of the Banks after 2:00 p.m.Prevailing Time on any particular Business Day, the Banks shall be required tomake their respective payments to the Agent before 12:00 noon Prevailing Timeon the immediately succeeding Business Day.

 

2.3                                 Notes.

 

A.                                   WarehouseAdvances. The lending described above, to be made through WarehouseAdvances made by the Banks in accordance with the terms set forth herein, shallbe evidenced by the Warehouse Notes of the Company substantially in the form of**Exhibits C-1, C-2 and C-3**to thisCredit Agreement.  The aggregate amountof the Warehouse Advances made under the Warehouse Notes, less repayments ofprincipal, shall be the principal amount owing and unpaid on such WarehouseNotes. The Warehouse Notes shall be payable in the manner, and shall bearinterest at the rates, specified therein and in this Credit Agreement.

 

B.                                     SwingAdvances.  The lending describedabove, to be made through Swing Advances made by the Agent for its own accountin accordance with the terms set forth herein, shall be evidenced by the SwingNote made by the Company payable to the order of the Agent substantially in theform of **Exhibit E** to this CreditAgreement.  The aggregate amount of SwingAdvances made under the Swing Note, less repayments of principal, shall be theprincipal amount owing and unpaid on the Swing Note.  The Swing Note shall be payable in themanner, and shall bear interest at the rates, specified in this CreditAgreement.

 

C.                                     ExcessAdvances.  The lending describedabove, to be made through Excess Advances by the Agent for its own account inaccordance with the terms set forth herein, shall be evidenced by the WarehouseNote made by the Company made payable to National City substantially in theform of **Exhibit C-1** to this CreditAgreement.  The aggregate amount of theWarehouse Advances plus

 

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Excess Advances made under the Warehouse Note referenced above, lessrepayments of principal, shall be the principal amount owing and unpaid on suchWarehouse Note.

 

2.4                                 Mannerof Borrowing.

 

A.                                   Requestfor Advance.  The Company shalldeliver to the Agent, not later than 1:00 p.m. Prevailing Time on theBusiness Day on which the Company desires to obtain an Advance, an original (orfacsimile copy) executed Request for Advance (which shall be irrevocable)specifying the amount of the Advance which it desires to borrow.  Agent in its sole discretion can treat anyRequest for Advance as either (i) a Request for Advance, (ii) aRequest for Swing Advance, or (iii) a Request for Excess Advance, asapplicable.  On the date of the Agent’sreceipt of a Request for Advance if: (a) no Event of Default or UnmaturedEvent of Default has occurred and is then existing; (b) all terms andconditions of this Credit Agreement required to be satisfied prior to themaking of the particular type of Advance, including without limitation, allconditions precedent specified in **Article 4**hereof, are in fact satisfied; (c) all terms and conditions of theSecurity Agreement required to be satisfied prior to the making of a WarehouseAdvance are in fact satisfied; and (d) the making of such Advance shallnot cause or result in either a violation of any of the terms of this CreditAgreement or of the Security Agreement, an Event of Default, or an UnmaturedEvent of Default, the Agent shall (xx) in the case of a Warehouse Advance,credit each Bank’s Pro Rata Share of such Warehouse Advance received by theAgent to the Company in accordance with the terms set forth below, (yy) in thecase of a Swing Advance, credit the amount of such Swing Advance to theCompany, and (zz) in the case of an Excess Advance, credit the amount of suchExcess Advance to the Company.  Requestsfor a Warehouse Advance received by the Agent after 1:00 p.m. PrevailingTime will not be processed as a Warehouse Advance, but may be treated, at theAgent’s sole discretion, as a Swing Advance. Requests for Advance received by the Agent after 4:00 p.m.Prevailing Time will not be processed by the Agent as a Request for WarehouseAdvance until the immediately succeeding Business Day.

 

B.                                     Disbursementof Bank’s Warehouse Pro Rata Share. All Warehouse Advances requested by the Agent under this CreditAgreement shall be made by the Banks simultaneously and proportionately totheir respective Warehouse Pro Rata Shares of each such Warehouse Advance, itbeing understood that, except as provided in **Section 2.4C**below, no Bank shall be responsible for any default by any other Bank of thatother Bank’s obligation to fund its Warehouse Pro Rata Share of a WarehouseAdvance requested hereunder nor shall the Warehouse Line Commitment of any Bankbe increased or decreased as a result of the default by any other Bank of thatother Bank’s obligation to fund its Warehouse Pro Rata Share of a WarehouseAdvance requested hereunder.  Promptlyafter receipt by the Agent of a Request for Advance pursuant to this **Section 2.4**, the Agent shall notify each Bank of theWarehouse Advance requested by the Company pursuant thereto and each Bank’sWarehouse Pro Rata Share of such Warehouse Advance.  Each Bank shall make its Warehouse Pro RataShare of each Warehouse Advance (other than a Swing Advance or an ExcessAdvance) to be made to the Company available to the Agent, in same day funds,at the Agent’s Main Office not later than 3:00 p.m. Prevailing Time on thedate the Request for Advance from the Company is received by the Agent.  The time of the Agent’s receipt of same dayfunds from the Banks which are wire transferred through the Federal ReserveSystem shall be based upon the Federal Reference Number and the “time out” forany such wire transfer.  Upon satisfactionor waiver of the conditions precedent specified in **Section 4.1**hereof in the case of the initial Advance and **Section 4.2**hereof in the case of any subsequent Advance, the Agent shall make the proceedsof each Advance requested by the Company available to the Company on the datespecified above by causing an amount of same day funds equal to the proceeds ofthe Banks’ respective Pro Rata Shares of such Warehouse Advance received by theAgent at its office located at the address set forth in the preceding

 

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sentence to be credited to the Company; provided, however, with respectto each Wet Advance or Extended Wet Advance (whether in the Form of aWarehouse Advance, Swing Advance or Excess Advance), the proceeds thereof shallbe deposited into the Funding Account, and at the option of the Agent, be (i) transferredto the Company’s operating account to be wire transfers initiated by theCompany via the Agent’s mechanism for accessing the Federal Reserve WireTransfer System directly to the Company’s agent responsible for closing therelated Wet Loan, or if the Company closes its own Wet Loan, then directly tothe Company or the Company’s agent, (ii) funded by a draft or check on theAgent or one of its affiliates, which draft or check shall be made payable tothe Company’s agent responsible for closing the related Wet Loan, or if theCompany closes its own Wet Loan, then directly to the Company or the Company’sagent, (iii) funded by an cashiers check issued by the Agent on behalf ofthe Company and made payable to the Company’s agent responsible for closing therelated Wet Loan or Extended Wet Loan, or (iv) disbursed in such othermanner as is acceptable to the Company and the Agent.

 

C.                                     Assumptionsby Agent for Advances; Failure to Fund by a Bank.  Unless the Agent shall have been notified byany Bank prior to the date that such Bank’s Warehouse Pro Rata Share of aWarehouse Advance is to be made (the “Funding Date”) that such Bank does notintend to make available to the Agent such Bank’s Warehouse Pro Rata Share ofsuch Warehouse Advance requested on such Funding Date, the Agent may assumethat such Bank has made such amount available to the Agent on such Funding Dateand the Agent may, in its sole discretion, but shall not be obligated to, makeavailable to the Company a corresponding amount on such Funding Date.  If such corresponding amount is not in factmade available to the Agent by such Bank, the Agent shall be entitled torecover a Two Hundred Dollar ($200.00) processing fee plus suchcorresponding amount owed on demand from such Bank together with interestthereon, for each day from such Funding Date until the date such amount is paidto the Agent, at the customary rate set by the Agent for the correction oferrors among banks for three (3) Business Days and thereafter at theDefault Rate. If such Bank does not pay such corresponding amount forthwithupon the Agent’s demand therefor, the Agent shall notify the other Banks andeach of the other Banks shall immediately pay to the Agent a pro rata share(excluding in such calculation the Bank which failed to fund) of such amountnot funded by a Bank; provided, however, no Bank shall be obligated to fund anyamount under this Credit Agreement in excess of that Bank’s Warehouse LineCommitment, as applicable.  If anyportion of the amount not funded by a Bank is not paid to the Agent by theother Banks in accordance with the immediately preceding sentence, the Agentshall promptly notify the Company and the Company shall immediately pay suchcorresponding amount to the Agent and shall pay interest on such amount foreach day from such Funding Date until the date such amount is paid to theAgent, at the applicable interest rate borne by the particular Advance, whichamount shall be paid to the Agent at the next monthly billing.  Nothing in this **Section 2.4**shall be deemed to relieve any Bank from its obligation to fulfill itsWarehouse Line Commitment hereunder or to prejudice any rights that the Companymay have against any Bank as a result of any default by such Bankhereunder.  In the event any Bank givesnotice to the Agent that such Bank does not intend to fund its Pro Rata Shareof any Warehouse Advance to be made to the Company or in the event any Bank otherwisefails to fund its Pro Rata Share of any Warehouse Advance to be made to theCompany, the Agent shall promptly notify the other Banks of the occurrence ofany such event and the other Banks shall each fund a pro rata share (excludingin the calculation the nonfunding Bank) of the nonfunding Bank’s Warehouse ProRata Share of each Advance not funded by such Bank; provided, however, no Bankshall be obligated to fund any amount under this Credit Agreement in excess ofits Warehouse Line Commitment.  In theevent any Bank gives notice to the Agent that such Bank does not intend to fundits Pro Rata Share of any Warehouse Advance to be made to the Company or in theevent any Bank otherwise fails to fund its Pro Rata Share of any Advance to bemade to the Company, the Agent shall telephonically notify the Company of theoccurrence of any such event.  TheWarehouse Pro Rata Share of principal payments (from any source whatsoever)payable hereunder to a Bank which fails to fund

 

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its Pro Rata Share of any Warehouse Advance, Swing Advance or ExcessAdvance, shall be paid on a pro rata basis to the Banks which funded that Bank’sPro Rata Share of such Warehouse Advance, Swing Advance or Excess Advance, asapplicable until the amount which those Banks funded for the Bank which failedto fund, has been repaid in full (the “Repayment Date”).  Notwithstanding anything contained hereuntothe contrary, in the event that any Bank fails to fund its Pro Rata Share ofany Warehouse Advance on a Funding Date, on such Funding Date all conditionsprecedent to such Warehouse Advance have been satisfied, such Bank shallforfeit all consent and voting rights for all purposes hereunder and under theother Loan Documents for the entire period of time commencing upon its failureto fund on the Funding Date and ending on the Repayment Date; provided,however, such forfeiture shall not apply to the right of a Bank to consent toany amendment or modification of this Credit Agreement or any other LoanDocuments which require the consent of the Agent and all of the Banks pursuantto the terms of **Section 9.20**hereof.

 

2.5                                 Records.

 

A.                                   Advances.  The Agent shall record the names andaddresses of the Banks and the Warehouse Pro Rata Shares of the Advances ofeach Bank from time to time in the records of the Agent.  The Company, the Agent and the Banks maytreat each Person whose name is so recorded in the records of the Agent as aBank hereunder for all purposes of this Credit Agreement.  The Agent’s records maintained pursuant tothis **Section 2.5** shall be available forinspection by the Company or any Bank at any reasonable time and from time totime upon reasonable prior notice to the Agent.

 

B.                                     Payments.  The Agent shall record each repayment orprepayment in respect of the principal amount of the Banks’ Warehouse Pro RataShares in the Advances in the Agent’s records. Any such recordation in accordance with the terms of this CreditAgreement shall be conclusive and binding on the Company absent demonstrableerror; provided, that failure to make any such recordation, or any errorin such recordation, shall not affect the Company’s obligation to repay allAdvances to the Banks in accordance with this Credit Agreement, the WarehouseNotes and the Swing Note.

 

C.                                     Bank’sRecords.  Each Bank shall record onits internal records its Warehouse Pro Rata Share of each Advance made by it tothe Company and each payment in respect thereof.  Any such recordation in accordance with theterms of this Credit Agreement shall be conclusive and binding on the Companyabsent demonstrable error; provided, that failure to make any suchrecordation, or any error in such recordation, shall not affect the Company’sobligation to repay all Warehouse Advances to the Banks in accordance with thisCredit Agreement, the Warehouse Notes and the Swing Note; provided further,that in the event of any inconsistency between the Agent’s records and any Bank’srecords, the Agent’s records shall govern in the absence of demonstrable ordemonstrable error.

 

2.6                                 CertainRepresentations.  Each Request forAdvance shall be deemed to be the representation of the Company and of theofficer making such request that: (a) all conditions precedent set forthin **Article 4** hereof have been satisfied;(b) the Company is in compliance with all financial covenants set forth in**Article 5** hereof; (c) therepresentations and warranties contained in **Article 6**hereof remain true and correct; and (d) no Event of Default and noUnmatured Event of Default has occurred and is then existing, or will existupon completion of the requested Advance.

 

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2.7                                 Paymentof the Warehouse Notes.

 

A.                                   TerminationDate.  On the Termination Date,without necessity of notice or demand, the Company shall pay to the Agent forthe account of the Banks the full amount of the outstanding principal balanceof, and all accrued but unpaid interest on, the Warehouse Notes and the SwingNote.

 

B.                                     BorrowingBase Deficiency.  If, at any time,and for any reason, including without limitation a reduction in the CollateralValue or any part thereof by virtue of such value being marked to market, thesum of the Aggregate Outstanding Warehouse Balance plus the AggregateOutstanding Excess Balance exceeds the Warehouse Borrowing Base, as determinedby the Agent, then the Company shall immediately pay to the Agent an amountequal to the amount by which the sum of the Aggregate Outstanding WarehouseBalance plus the Aggregate Outstanding Excess Balance exceeds theWarehouse Borrowing Base.

 

C.                                     Proceedsof Collateral.  The proceeds from theCollateral shall be payable to the Agent for application to the Warehouse Notesand other Secured Obligations under and in accordance with the terms of theSecurity Agreement.

 

2.8                                 Ratesof Interest.

 

A.                                   ApplicableRates of Interest.  Each Advanceshall bear interest on the unpaid principal amount thereof from the date madethrough maturity (whether by acceleration or otherwise) at a rate determined byreference to the Base Rate or the Balance Funded Base Rate, as the case maybe.  The outstanding principal balance ofthe Swing Note and each Warehouse Note shall bear interest as follows: (i) atthe Balance Funded Base Rate for that portion of the average monthly aggregateprincipal balance of a Balance Funded Bank’s Warehouse Note which does notexceed the Average Monthly Available Deposits maintained by the Company withsuch Bank, and (ii) at the Base Rate for that portion of the averagemonthly aggregate principal balance of a Bank’s Warehouse Note which exceedssuch Average Monthly Available Deposits maintained by the Company with suchBank.

 

B.                                     HighestLawful Rate.  Notwithstandinganything to the contrary contained in this Credit Agreement or the Notes, at notime shall the interest rate payable on the Warehouse Advances, together withall fees and other amounts payable hereunder to the extent the same constituteor are deemed to constitute interest, exceed the maximum rate of interestallowed by applicable law (the “Highest Lawful Rate”).  In respect of any period during the term ofthis Credit Agreement, any amount paid to any Bank, to the extent the sameshall (but for the provisions of this **Section 2.8B**)constitute or be deemed to constitute interest, would exceed the maximum amountof interest permitted by the Highest Lawful Rate during such period (suchamount being hereinafter referred to as an “Unqualified Amount”), then,notwithstanding anything to the contrary contained in this **Section 2.8**,such Unqualified Amount shall be applied or shall be deemed to have beenapplied as a prepayment on the Advances.

 

2.9                                 InterestPayments.  As soon as reasonablypossible subsequent to the availability of the account analysis statement, theAgent shall deliver to the Company and each Bank an interest billing statement(the “Billing Statement”), which Billing Statement shall set forth the interestaccrued with respect to the outstanding principal balance of the WarehouseNotes and the Swing Note bearing interest from and including the first day ofthe preceding month through the last day of such month computed in the mannerset forth in **Section 2.8A**;provided, that any failure or delay in delivering such interest billingstatement or any inaccuracy therein shall not affect any of the Company’sobligations and liabilities hereunder. Interest shall be payable, (i) in the case of the outstandingprincipal balance of the Warehouse Notes and the Swing

 

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Note on the fifth (5th) calendar day after receipt of theBilling Statement referred to above and (ii) upon repayment of any of theoutstanding principal balance of the Warehouse Notes and the Swing Note atmaturity (by reason of acceleration or otherwise).  Any interest accruing at the Default Rateshall be payable on demand.

 

2.10                           Post-MaturityInterest.  Any principal payments onthe Swing Note and the Warehouse Notes not paid when due and, to the extentpermitted by applicable law, any interest payments on the Swing Note andWarehouse Notes or any fees or other amounts owed hereunder not paid when due,in each case whether at stated maturity, by notice of prepayment, byacceleration or otherwise, shall thereafter bear interest (includingpost-petition interest in any proceeding under the Bankruptcy Code or otherapplicable bankruptcy laws) payable on demand at a rate equal to the applicableDefault Rate.  Payment or acceptance ofthe increased rates of interest provided for in this **Section 2.10**is not a permitted alternative to timely payment and shall not constitute awaiver of any Event of Default or otherwise prejudice or limit any rights orremedies of the Agent or any Bank.

 

2.11                           Computationof Interest.  Interest on the Notesshall be computed on the basis of a 360-day year, in each case for the actualnumber of calendar days elapsed in the period during which it accrues.

 

2.12                           GeneralProvisions Regarding Prepayments and Payments.

 

A.                                   Prepayments.  The Company may, at any time and from time totime, prepay all or any portion of the outstanding principal balance of theNotes without premium or penalty.  Allprepayments (whether voluntary or involuntary, at maturity, by acceleration orotherwise) of the outstanding principal balance of the Notes shall be applied, first,to the repayment of the accrued and unpaid interest on and outstandingprincipal balance of the Swing Note to the full extent thereof, second,to any delinquent fees, costs or expenses, third, to the repayment ofthe accrued and unpaid interest on and outstanding principal balance of allExcess Advances, and fourth, to the repayment of the outstandingprincipal balance of all Warehouse Advances. All prepayments of the outstanding principal balance of the WarehouseNotes shall be applied first to principal bearing interest at the Base Rate tothe full extent thereof, then to principal bearing interest at the BalanceFunded Base Rate to the full extent thereof, in a manner which minimizes theamount of any payments required to be made by the Company pursuant to **Section 2.12** hereof.

 

B.                                     Mannerand Time of Payment.  All payments ofprincipal, interest and fees hereunder, under the Swing Note and under theWarehouse Notes by the Company shall be made without defense, setoff andcounterclaim and upon the Agent’s receipt of notice from the Company, whichnotice shall not be given later than the fifth (5th) calendar day after theCompany’s receipt of the Billing Statement under **Section 2.9**hereof, the Agent shall be authorized to charge the Company’s “DDA Account”maintained at National City (Account #71435776) to pay all principal (to theextent that the funds in the Collateral Proceeds Account are not sufficient tomake a payment of principal), interest and fees due hereunder, provided thereare sufficient funds available in such account for that purpose.  If there are not sufficient funds availablein such account for that purpose or if the Agent has not received notice fromthe Company authorizing the Agent to charge the Company’s “DDA Account”, theCompany shall make such payments in same day funds and delivered to the Agentnot later than 1:00 p.m. Prevailing Time on the date due at the Agent’sMain Office, for the account of the Banks; funds received by the Agent afterthat time shall be deemed to have been paid by the Company on the nextsucceeding Business Day.

 

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C.                                     Apportionmentof Payments.  Except as otherwiseprovided herein, the Agent shall apportion all principal and interest paymentson the Warehouse Notes, in each case proportionately to the Banks’ respectiveWarehouse Pro Rata Shares.  The Agentshall promptly distribute to each Bank at its primary address set forth belowits name on the appropriate signature page hereof or such other address asany Bank may request, its Warehouse Pro Rata Share of (i) all suchpayments when received by the Agent, and (ii) the usage fees andcommitment fees under **Section 2.14**hereof when received by the Agent.

 

D.                                    Paymentson a Business Day.  Whenever anypayment to be made hereunder or under the Warehouse Notes or the Swing Noteshall be stated to be due on a day that is not a Business Day, such paymentshall be made on the next succeeding Business Day and such extension of timeshall be included in the computation of the payment of interest on theunderlying principal payment due hereunder, under the Swing Note or under theWarehouse Notes or of the fees hereunder, as the case may be.

 

2.13                           Set-Off.  The Company hereby irrevocably authorizeseach Bank, upon the occurrence of an Event of Default to set off the liabilityof the Company on the Warehouse Notes and the Swing Note, without notice,against all deposits and credits of the Company with, and any and all claims ofthe Company against, such Bank at any time outstanding provided, however, thatthe Banks shall not offset against deposits and credits of the Company held intrust or in a custodial capacity for third parties.

 

2.14                           Fees.

 

A.                                   Commitment.  The Company agrees to pay to each of theBanks, a monthly commitment fee (the “Commitment Fee”), in arrears, computed atthe rate of one-eighth of one percent (0.125%) per annum on the amount of suchBank’s Warehouse Line Commitment.

 

B.                                     CollateralHandling/Agent’s Fee.  The Companyagrees to pay to the Agent such collateral handling fees (collectively, the “CollateralHandling Fees”) and the agent fee (the “Agent Fee”) in the amounts and at thetimes set forth in the fee letter issued by the Agent to the Company.  As provided in such fee letter, the fullamount of the applicable Agent Fee shall be due and payable in advance.

 

C.                                     Usage Fee.  Inaddition to the Base Rates paid by the Company on the Notes, the Company agreesto pay the following usage fees (the “Usage Fees”):

 

(i)                                     Ausage fee computed at the rate of one-quarter of one percent (.25%) per annumtimes the Extended Wet Collateral Usage multiplied by the sum of the aggregateunpaid principal balance of all Warehouse Advances less the aggregateunpaid principal balance of all Working Capital Advances, Servicing Held forBulk Sale Advances and Servicing Under Contract Advances;

 

(ii)                                  Ausage fee computed at the rate of one-quarter of one percent (.25%) per annum timesthe Wet Collateral Usage multiplied by the sum of the aggregate unpaidprincipal balance of all Warehouse Advances less the aggregate unpaidprincipal balance of all Working Capital Advances, Servicing Held for Bulk SaleAdvances and Servicing Under Contract Advances;

 

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(iii)                               Ausage fee computed at the rate of one percent (1.00%) per annum multiplied bythe aggregate unpaid principal balance of all Working Capital Advances;

 

(iv)                              Ausage fee computed at the rate of one-half of one percent (.50%) per annumtimes the Alternative Lending Collateral Usage multiplied by the sum of theaggregate unpaid principal balance of all Warehouse Advances less theaggregate unpaid principal balance of all Working Capital Advances, ServicingHeld for Bulk Sale Advances and Servicing Under Contract Advances; and

 

(v)                                 Ausage fee computed at the rate of fifty-five one hundredths of one percent(.55%) per annum multiplied by the aggregate unpaid principal balance of all ServicingUnder Contract Advances and Servicing Held for Bulk Sale Advances.

 

There shall be no usagefee payable on Agency Qualified A Minus Advances.

 

D.                                    AmendmentFees; Documentation Review Fees.  TheCompany agrees to (i) reimburse the Agent for all legal fees reasonablyincurred in connection with any amendment to the Loan Documents and (ii) payto each of the Banks and the Agent an amendment fee equal to Three HundredSeventy Five Dollars ($375.00) for each amendment to the Loan Documents;provided, however, the Company shall not be required to pay such $375.00amendment fee to any of the Banks in connection with any amendment of the LoanDocuments which is executed (either individually or as part of a series ofamendments) for the sole purpose of extending the Termination Date for not morethan an aggregate of one hundred twenty (120) days.  Nothing contained in this **Section 2.14** shall compel the Agent or the Banks toauthorize or execute any amendment to the Loan Documents, all such amendmentsbeing subject to the compete discretion of the Agent and the Banks. Further,the Company agrees to pay to each of the Banks and the Agent a document reviewfee equal to Seven Hundred Fifty Dollars ($750.00) for reasonable expensesincurred in reviewing the initial documentation required to add any ApplicantFinancial Institution as a “Bank” hereunder.

 

E.                                      Paymentof Fees.  The Usage Fees and theCollateral Handling Fees shall be payable in arrears each month and all suchfees together with the Agent fee shall be computed on the basis of a 360-dayyear, in each case for the actual number of calendar days elapsed during theperiod during which it accrues.  TheAgent shall compute the amounts of the Usage Fees and the Collateral HandlingFees and include such fees on the Billing Statement to be delivered to theCompany each month under **Section 2.9**hereof.  The Company shall pay to theAgent the Usage Fees and the Collateral Handling Fees set forth in such BillingStatement within five (5) calendar days of its receipt of a BillingStatement.

 

F.                                      FeesNon-Refundable.  The fees payableunder this **Section 2.14** once paid shallbe non-refundable, in whole or in part under any circumstances, absentdemonstrable error in the calculation of such fees.

 

2.15                           Commitments.  The Company shall obtain and maintainCommitments which, in the aggregate, equal or exceed the aggregate amount ofthe Advances for all Pledged Loans financed and outstanding under this CreditAgreement. If an Event of Default shall occur hereunder or under the other LoanDocuments, at the option of the Agent or the Requisite Banks, such Commitmentsshall be assigned by the Company to the Agent, for the benefit of the Banks inproportion to their Pro Rata Shares.

 

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2.16                           SpecialProvisions Governing Rates.

 

(a)                                  Notwithstandingany other provision of this Credit Agreement to the contrary, the Agent’sdetermination of LIBOR shall be final, conclusive and binding upon all partiesin the absence of manifest error.  In theevent that (i) it becomes unlawful for Agent or any Bank to make ormaintain LIBOR loans, or (ii) by reasons of circumstances occurring afterthe date of this Credit Agreement affecting the London Interbank Market,adequate and fair means do not exist for ascertaining LIBOR on the basisprovided for in the definition thereof, the Agent or such Banks shall promptlynotify Company, and during such time, the Agent’s and such Bank’s obligation tooffer the base rates set forth in **Section 2.8**hereof shall be suspended during such period of time.

 

(b)                                 Inthe event any applicable law, order, regulation, treaty or directive issued byany central bank or other governmental authority, or in the governmental orjudicial interpretation thereof, or compliance by the Agent with any request ordirective (whether or not having the force of law) issued subsequent to thedate hereof by any central bank or other governmental authority:

 

(i)                                     doesor shall subject the Agent or any Bank to any tax of any kind whatsoever withrespect to this Credit Agreement or any Advances made hereunder, or change thebasis of taxation of payments to the Agent or any Bank of principal, fee,interest or any other amount payable hereunder except for the change in therate of tax on the overall net income of the Agent or any Bank imposed by thejurisdiction in which Agent or any Bank maintains its principal office; or

 

(ii)                                  doesor shall impose on the Agent or any Bank any other condition;

 

and the result of any of the foregoing is to increasethe cost to the Agent or any Bank of making any Advance or  renewing or maintaining this Credit Agreementor reduce any amount receivable in respect thereof or to reduce the rate ofreturn on the capital of the Agent or any Bank or any Person controlling theAgent or any Bank, then in any such case, the Company shall promptly pay to theAgent or any Bank upon its written demand any additional amounts necessary tocompensate the Agent or any Bank for such additional cost or reduced amountsreceivable or rate of return as reasonably determined by Agent with respect tothis Credit Agreement or Advances made hereunder.  If the Agent or any Bank becomes entitled toclaim any additional amounts pursuant to this section, it shall promptly notifythe Company of the event by reason of which it has become so entitled andprovide the Company with a certificate specifying any additional amountspayable and how they are calculated.  Theprovisions of this section shall survive the termination of this CreditAgreement and payment of all other Secured Obligations.

 

**ARTICLE 3**

 

COLLATERAL SECURITY

 

3.1                                 Collateral.  To secure the payment of the Warehouse Notes,the Swing Note and all other Secured Obligations, the Company shall grant tothe Agent for the ratable benefit of the Banks in proportion to their Pro RataShares, Security Interests in such of its Loans, Mortgage-backed Securities,and other assets constituting Collateral as may be required under the terms ofthe Security Agreement.

 

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3.2                                 SecurityAgreement.  The Company shall executeand deliver to the Agent for the ratable benefit of the Banks in proportion totheir Pro Rata Shares, the Security Agreement.

 

3.3                                 Priorityof Security Interests.  The SecurityInterests shall be first and prior security interests subject to thelimitations set forth in the Loan Documents. The Company, the Agent and the Banks hereby acknowledge and agree thatthe Agent, on behalf of and for the ratable benefit of the Banks, now has, andshall continue to have, a first and prior pledge and security interest in andto the Collateral, as collateral security for the Advances, the other SecuredObligations, and any other obligations and/or liabilities due and owing by theCompany pursuant to this Credit Agreement and each of the other Loan Documents,without priority, distinction or preference of any kind whatsoever.

 

3.4                                 Releaseof Security Interest.  If no Event ofDefault or Unmatured Event of Default has occurred and is then continuing, theAgent, for and on behalf of the Banks, at the request of the Company, shallrelease its Security Interest in any item of Collateral so long as after givingeffect to any such requested release the Warehouse Borrowing Base shall not beless than the sum of the Aggregate Outstanding Warehouse Balance plusthe Aggregate Outstanding Excess Balance, and provided that any such release ofCollateral shall occur only if expressly permitted by the terms of the SecurityAgreement, and then only strictly in compliance with the terms thereof.

 

### **ARTICLE 4**

### ** **

CONDITIONS PRECEDENT

 

4.1                                 Closing;Initial Advance.  The obligation ofthe Agent and the Banks to close the financing contemplated hereunder and makethe initial Warehouse Advance under this Credit Agreement shall be subject to thesatisfaction of the following conditions precedent:

 

(a)                                  Evidenceof Corporate Existence of the Company. The Company shall have furnished the Agent with a copy of the Company’sArticles of Incorporation and all amendments thereto, certified by the Secretaryof State of Michigan, together with an original certificate from said Secretaryof State, dated not more than fifteen (15) calendar days prior to the date ofthis Credit Agreement, stating that the Company is a corporation dulyorganized, validly existing, and in good standing under the laws of such state,and a copy of the Bylaws of the Company and all amendments thereto, certifiedby the secretary of the Company to be true, accurate and complete.  The Company shall also provide the Agent witha Certificate of Qualification and a Certificate of Good Standing/Existencefrom each state where the Company is required to be qualified as a foreigncorporation.

 

(b)                                 CorporateResolutions.  The Company shall havefurnished to the Agent copies of resolutions reflecting all necessary corporateaction taken by the Company to authorize the execution, delivery, andperformance of this Credit Agreement, the Warehouse Notes and all other LoanDocuments to which the Company is a party, certified by the secretary of theCompany to be true, correct, and in full force and effect as of the date ofthis Credit Agreement.

 

(c)                                  IncumbencyCertificate.  The Company shall havefurnished the Agent with incumbency certificates with respect to the officersof the Company, as applicable, authorized to execute and deliver this CreditAgreement and each of the other Loan Documents to which the Company is a partyon behalf of the Company.

 

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(d)                                 CreditAgreement.  This Credit Agreementshall have been duly executed by the Company, the Agent and the Banks anddelivered to the Agent.

 

(e)                                  Loan Documents.  Eachof the other Loan Documents not otherwise specifically referenced in this **Section 4.1** shall have been dulyexecuted by the Company and delivered to the Agent.

 

(f)                                    WarehouseNotes and the Swing Note.  TheWarehouse Notes and the Swing Note shall have been duly executed by the Companyand delivered to the Banks or the Agent, as applicable.

 

(g)                                 FinancingStatements.  The Company shall haveexecuted and delivered, in appropriate form for filing in all appropriategovernmental offices, such Uniform Commercial Code financing statements withrespect to the Collateral as the Agent shall reasonably request.

 

(h)                                 Evidenceof Insurance.  The Company shall havefurnished the Agent with evidence of the insurance coverage required to bemaintained by the Company pursuant to **Section 7.1(i) **hereof.

 

(i)                                     FinancialStatements.  The Company shall havefurnished the Banks with a copy of its audited financial statements as of December 31,2003, and a copy of its unaudited financial statements as of June 30,2004.

 

(j)                                     TerminationStatements and Releases.  All UniformCommercial Code Termination Statements and mortgage releases necessary torelease of record all existing liens and security interests encumbering any ofthe Collateral other than those in favor of the Agent on behalf of and for thebenefit of the Banks, shall have been duly executed and delivered by allappropriate or necessary parties.

 

(k)                                  UCCSearch Reports.  UCC Search Reportsin the name of the Company obtained from all appropriate government offices.

 

(l)                                     AgencyAudits.  The Company shall havefurnished the Agent with a copy of the results of any field audit of theCompany’s business and/or records performed by GNMA, Fannie Mae, FHLMC, for theDepartment of Housing and Urban Development within two (2) years prior tothe date of this Credit Agreement, together with a copy of all subsequentcorrespondence relating to such audit between the Company and such agency, tothe extent copies of such field audits have not been heretofore delivered tothe Agent.

 

(m)                               FannieMae Tri-Party Agreement.  The FannieMae Tri-Party Agreement shall be duly executed and delivered by the Company,the Agent and Fannie Mae.

 

(n)                                 OtherDocuments.  Such other documents orinstruments or reports as the Agent, at the request and direction of theRequisite Banks, may reasonably request.

 

(o)                                 OtherLoans.  The Company shall furnish theAgent with a summary description of any and all existing loan agreements foramounts of One Hundred Thousand Dollars

 

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($100,000.00) or more towhich the Company is a party, such summary shall be provided as a part of **Schedule 6.1**.

 

(p)                                 LoanFees.  The Company shall pay ThreeHundred Seventy Five Dollars ($375.00) to each of the Banks other than Colonialand Seven Hundred Fifty Dollars ($750.00) to Colonial as compensation for theBanks for consummation of closing of the financing and as full reimbursementfor all costs and expenses incurred by each Bank in connection therewith, whichcosts and expenses shall not otherwise be reimbursable hereunder.

 

(q)                                 AuthorizedSigner Letter.  The Authorized SignerLetter in form acceptable to the Agent in its sole discretion.

 

(r)                                    Powerof Attorney.  The Power of Attorney,substantially in the form of Exhibit D to the Security Agreement, shallhave been duly executed and delivered by the Company.

 

(s)                                  Representationand Warranty Disclosures.  TheCompany shall have provided the Agent with the representation and warrantydisclosures to be attached as **Schedule 6.1**hereof.

 

(t)                                    Reimbursementfor Closing Expenses.  The Companyshall have reimbursed the Agent for all costs incurred by the Agent inconnection with the implementation of the Warehouse Line, including withoutlimitation, reasonable costs and expenses of Agent’s legal counsel and the costof any field exam ordered by Agent.

 

4.2                                 AllAdvances.  The obligation of theBanks to make their Pro Rata Share of any Warehouse Advance (including theinitial Warehouse Advance), and the Agent’s election to make any Swing Advanceor Excess Advance hereunder shall be subject to each of the followingconditions precedent:

 

(a)                                  Covenant Compliance Certificate.  Inaccordance with the provisions of **Section 7.3(b) **below,the Company shall have executed and delivered to the Agent a completed CovenantCompliance Certificate, together with a spread sheet or other working papersshowing the calculations used to prepare such certificate.

 

(b)                                 NoDefault or Unmatured Event of Default. As of the date of the making of such Advance, no Event of Default orUnmatured Event of Default shall have occurred and be then existing.

 

(c)                                  Compliancewith Loan Documents.  The Companyshall be in full compliance with all conditions and provisions of this CreditAgreement, the other Loan Documents, and all related instruments and documents.

 

(d)                                 NoAdverse Change.  No material adversechange shall have occurred in the condition of the Company, financial orotherwise, or in the earnings, affairs, or business prospects of the Company,since the date of this Credit Agreement.

 

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(e)                                  Representationsand Warranties.  The representationsand warranties contained in **Article 6**of this Credit Agreement and in the Security Agreement shall be true in allmaterial respects on the date of such Advance with the same force and effect asthough made on and as of that date.

 

**ARTICLE 5**

 

FINANCIAL COVENANTS

 

So long as any portion ofthe Advances made under this Credit Agreement remains unpaid or this CreditAgreement continues in effect, unless all of the Banks otherwise consent inwriting, the Company shall abide by each of the following covenants:

 

5.1                                 BorrowingBases.  The sum of the AggregateOutstanding Warehouse Balance plus the Aggregate Outstanding ExcessBalance shall not exceed the Warehouse Borrowing Base.

 

5.2                                 AdjustedTangible Net Worth. The Adjusted Tangible Net Worth of the Company shall atall times be greater than the sum of Seventeen Million Five Hundred ThousandDollars ($17,500,000.00) plus fifty percent (50%) of the cumulative sumof GAAP net income after January 1, 2004; provided, however, in no eventshall the Company be required to maintain a minimum Adjusted Tangible Net Worthin excess of Twenty Million Dollars ($20,000,000.00).

 

5.3                                 LeverageRatio.  The ratio of TotalIndebtedness to Adjusted Tangible Net Worth shall not exceed 12 to 1.

 

5.4                                 ServicingPortfolio.  The Company’sNon-recourse Servicing Portfolio shall at all times be greater than One BillionDollars ($1,000,000,000.00).

 

5.5                                 AdjustedLeverage Ratio.  The ratio ofAdjusted Total Indebtedness to Adjusted Tangible Net Worth shall not exceed oneto one.

 

5.6                                 GAAPNet Worth.   The GAAP Net Worth ofthe Company shall at all times be greater than the sum of Fourteen MillionDollars ($14,000,000.00) plus fifty percent (50%) of the cumulative sumof GAAP net income after January 1, 2004; provided, however, in no eventshall the Company be required to maintain a minimum GAAP Net Worth in excess ofSixteen Million Dollars ($16,000,000.00).

 

The parties heretoacknowledge and agree that in the event that any of the foregoing covenants arematerially changed as a result of a change in GAAP, the Banks, the Agent andthe Company will amend the terms of this **Article 5**to accurately reflect the agreement between the Banks and the Company withrespect to such financial covenants.

 

**ARTICLE 6**

 

REPRESENTATIONS ANDWARRANTIES

 

To induce the Agent andthe Banks to enter into this Credit Agreement and to make Advances pursuantthereto, the Company represents and warrants to the Agent and Banks as follows,which

 

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representations and warranties shall survive the execution and deliveryof this Credit Agreement and shall be deemed to be continuing representationsand warranties until the Warehouse Notes, the Swing Note, and the otherobligations herein have been respectively paid in full to the Banks and this CreditAgreement has been fully terminated:

 

6.1                                 CorporateOrganization and Good Standing.  TheCompany is a corporation duly organized, validly existing, and in good standingunder the laws of its state of incorporation, and it has the requisite powerand authority to own its properties and to conduct its business in the mannerin which such business is presently conducted. The correct legal name of theCompany, its state of incorporation, and the correct address of its principalplace of business are set forth in **Schedule 6.1**to this Credit Agreement.

 

6.2                                 Qualification.  The Company is duly qualified to transactbusiness and is in good standing as a foreign corporation in every foreignjurisdiction where the failure to so qualify would materially and adverselyaffect the Company’s business or its properties.

 

6.3                                 Powerand Authority.  The Company has therequisite power and authority, corporate and otherwise, to enter into thisCredit Agreement, to make the borrowings herein contemplated, to execute anddeliver the Loan Documents to which it is a party, and to perform itsobligations hereunder and thereunder, all of which have been duly authorized byall proper and necessary corporate action, and the same do not and will not:

 

(a)                                  violateor conflict with any provision of the articles of incorporation or bylaws ofthe Company;

 

(b)                                 violateor conflict with the provisions of any agreement, law, rule, regulation, order,writ, judgment, injunction, decree, determination or award to which the Companyis a party or by which it or its property is bound;

 

(c)                                  resultin, or require the creation or imposition of, any lien, pledge, securityinterest, charge or encumbrance of any nature upon or with respect to anyproperty now or hereafter owned by the Company, other than such liens andsecurity interests as contemplated by the Security Agreement;

 

(d)                                 conflictwith, result in a breach of, or constitute a default under, any indenture, loanagreement, credit agreement, or any other agreement or instrument to which theCompany is a party or by which it or its property is bound.

 

6.4                                 BindingEffect.  This Credit Agreement andthe other Loan Documents to which the Company is a party are valid, binding,and legally enforceable obligations of the Company in accordance with theirrespective terms (subject only to limitations as to enforceability which mightresult from bankruptcy, reorganization, insolvency, or similar laws affectingcreditors’ rights generally).

 

6.5                                 FinancialCondition.  The Company’s auditedfinancial statements as of December 31, 2003 (which have been prepared inconformity with GAAP applied on a basis consistent with that of the precedingfiscal year), and its unaudited financial statements as of June 30, 2004,copies of which have been furnished to the Banks, pursuant to **Section 4.1(j)** of this Credit Agreement, present fairlythe financial condition of the Company as at such date and the results of theiroperations for the period then ended. There has been no material adverse changein said financial condition except as disclosed in **Schedule 6.1**

 

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to this Credit Agreement. The Company does not have any contingentobligations, liabilities, taxes, or other outstanding financial obligationswhich are material in the aggregate, except as described in **Schedule 6.1** to this Credit Agreement.

 

6.6                                 Properties.  The Company has good and marketable title toall of its properties and assets, and none of its assets are subject to anymortgage, pledge, title retention lien, security interest, or encumbrance,except for those permitted by **Section 7.2(i) **hereofand those described in **Schedule 6.1**to this Credit Agreement.

 

6.7                                 Litigation.  No litigation, tax claim, proceeding,dispute, or governmental proceeding is pending or, to its knowledge, threatenedagainst the Company, which (a) involves an uninsured claim of over TwoHundred Fifty Thousand Dollars ($250,000.00) against the Company, or (b) inthe opinion of the Company, may have a material adverse effect on the businessor condition (financial or other), affairs, or operations of the Company, or (c) involvesor may affect the validity or enforceability of any Loan Document or theperfection or priority of any lien created thereby, except those mattersdescribed in **Schedule 6.1** to this CreditAgreement.

 

6.8                                 RegulationsU and X.   No part of the proceeds ofthe borrowings hereunder will be used for any purpose other than financingLoans.  No part of the proceeds of theborrowings hereunder will be used to purchase or carry any margin stock (withinthe meaning of Regulation U of the Board of Governors of the Federal ReserveSystem) or to extend credit to others for the purpose of purchasing or carryingany margin stock, and the Company is not engaged principally, or as one of itsimportant activities, in the business of extending credit for the purpose ofpurchasing or carrying any such margin stock. If requested by the Agent or any Bank, the Company will furnish theAgent or such Bank with a statement in conformity with the requirements ofFederal Reserve Form U-1 referred to in said Regulation.  The Company also warrants that no part of theproceeds of the borrowings hereunder will be used by it for any purpose whichviolates, or which is inconsistent with, the provisions of Regulation X of saidBoard of Governors.

 

6.9                                 InvestmentCompany Act.  The Company is not aninvestment company or a company controlled by an investment company within themeaning of the Investment Company Act of 1940, as amended.

 

6.10                           SecuritiesAct.  The Company has not issued anyunregistered securities in violation of the registration requirements of theSecurities Act of 1933, as amended, or of any other law, and is not violatingany rule, regulation, or requirement under the Securities Act of 1933, asamended, or the Securities and Exchange Act of 1934, as amended. The Company isnot required to qualify an indenture under the Trust Indenture Act of 1939, asamended, in connection with its execution and delivery of the Warehouse Notesor the Swing Note.

 

6.11                           Permits; Consents, Etc6.11Permits; Consents, etc.;Compliance.  The Company has all necessarycertificates, licenses, authorizations, registrations, permits and approvalsnecessary to own and operate its property and to conduct its business as it iscurrently being conducted.  No consent,approval or authorization of, or registration, declaration, or filing with, anygovernmental authority is required on the part of the Company or eitherGuarantor in connection with the execution and delivery of this CreditAgreement or the other Loan Documents (other than filings to perfect theSecurity Interests), or in connection with the performance of or compliancewith the terms, provisions, and conditions hereof except for those that havebeen obtained.  The Company and eachAffiliate is in compliance with all applicable statutes, regulations and ordersof,

 

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and all applicable restrictions imposed by, all governmental bodies andagencies in respect of the conduct of its or his business and the ownership ofits or his property.  Each Loan at thetime it was originated complied in all material respects with applicable local,state and federal laws, including, but not limited to, all applicable predatoryand abusive lending laws.  None of theLoans are “high cost”, “high rate”, “high fee” or “predatory” as defined by theapplicable predatory and abusive lending laws.

 

6.12                           ERISA.  No fact or circumstance, including but notlimited to any Reportable Event within the meaning of the Employee RetirementIncome Security Act of 1974, as amended (“ERISA”), exists in connection withany Plan of the Company (“Plan” shall mean an employee pension benefit plan orpension covered by ERISA which is guaranteed by the Pension Benefit GuarantyCorporation or any successor thereto which might constitute grounds for thetermination of any such Plan by the Pension Benefit Guaranty Corporation or anysuccessor thereto or for the appointment of a trustee to administer any suchPlan. For purposes of this representation and warranty, the Company shall bedeemed to have knowledge of all facts attributable to any administrator of anysuch Plan.

 

6.13                           Affiliates.  The correct legal name of each Affiliate, thestate of its organization (or, if a natural person, of his or her domicile),and the percentage of its capital stock or equity that is directly orindirectly owned by the Company, where the percentage of the Company’s stockwhich is directly or indirectly owned by each Affiliate, are set forth in **Schedule 6.13** to this Credit Agreement.

 

6.14                           TaxReturns and Payments.  The Companyhas filed all tax returns required by law to be filed by it and has paid alltaxes, assessments and other governmental charges levied upon its properties,assets, income and franchisees, other than those not yet delinquent and those,not substantial in aggregate amount, which are being contested in good faith bythe Company.  The charges, accruals andreserves on the books of the Company in respect of their taxes are adequate inthe opinion of the Company.  The Companyknows of no material unpaid assessment for additional taxes or any basis forsuch assessment.

 

6.15                           NoDefaults.  The Company is not indefault in the payment or performance of any of its obligations or in theperformance of any mortgage, indenture, lease, contract or other agreement,instrument or undertaking to which it is a party or by which it or any of itsassets may be bound, which default would have a material adverse effect on thebusiness, operations, assets or condition, financial or otherwise, of theCompany, taken as a whole.  No Event ofDefault or Unmatured Event of Default hereunder or under the other LoanDocuments has occurred and is continuing. The Company is not in default under any order, award or decree of anycourt, arbitrator or governmental authority binding upon or affecting it or bywhich any of its assets may be bound or affected which default would have amaterial adverse effect on the business of the Company.  The Company is not subject to any order,award or decree which is likely to materially adversely affect the ability ofthe Company to carry on its business as currently conducted or the ability ofthe Company to perform its obligations under this Credit Agreement, the Notesor the other Loan Documents to which it is a party.

 

6.16                           HoldingCompany.  The Company is not a “holdingcompany” or a “subsidiary company” of a “holding company”, within the meaningof the Public Utility Holding Company Act of 1935, as amended.

 

6.17                           ContingentObligations.  The Company does nothave on the date hereof any material contingent obligations, materialliabilities for taxes, material long-term leases or unusual material forward orlong-term commitments, which have not been disclosed to the Agent in writingprior to the date

 

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of this Credit Agreement.

 

6.18                           NoViolations.  The Company is not aparty to any contract or agreement or subject to any charter or other corporaterestriction which materially and adversely affects its business, property orfinancial condition.  The execution,delivery and performance of this Credit Agreement, the Notes and the other LoanDocuments to which the Company is a party will not result in the violation ofor be in conflict with or constitute a default under the Articles ofIncorporation or Bylaws of the Company or any term or provision of anymortgage, loan agreement or other instrument, or any judgment, decree,governmental order, statute, rule or regulation, by which the Company isbound or to which any of its assets is subject and will not result in thecreation or imposition of any lien on the assets of the Company except ascontemplated by this Credit Agreement. The Company is not a party to, or otherwise subject to any provisioncontained in, any instrument evidencing indebtedness of the Company, anyagreement relating thereto or any other contract or agreement (including itsArticles of Incorporation) which restricts or otherwise limits the incurring ofthe indebtedness to be represented by this Credit Agreement, the Notes and theother Loan Documents.

 

6.19                           Disclosure;Solvency.  Neither this CreditAgreement nor any other document furnished to the Agent or any Bank by or onbehalf of the Company in connection with the credit facilities contemplatedherein contains any statement of any material fact which is untrue or misstatesa material fact necessary in order to make the statements contained herein ortherein not misleading.  There is no factknown to the Company which materially adversely affects or in the future will(so far as the Company can now foresee) materially adversely affect thebusiness, operations, affairs or condition of the Company or any of itsproperties which has not been set forth in this Credit Agreement or in theother documents furnished to the Agent or any Bank by or on behalf of theCompany in connection with the credit facilities contemplated herein.  The Company is currently solvent; and neitherthe issuance and delivery of the Warehouse Notes, or the Swing Note, nor theperformance of the transactions contemplated hereunder or thereunder, willrender the Company insolvent, inadequately capitalized to undertake thetransactions contemplated hereunder or to undertake the businesses in which itis presently engaged or about to engage or render the Company unable to pay itsdebts as they become due; the Company is not contemplating either the filing ofa petition by it or the commencement of a case by it under any state or federalbankruptcy or insolvency laws or the liquidation of all or a major portion ofits property; and the Company has no knowledge of any Person contemplating thefiling of any such petition or commencement of any such case against theCompany.

 

**ARTICLE 7**

 

COVENANTS

 

7.1                                 Affirmative Covenants.  Solong as any portion of the Secured Obligations under this Credit Agreement,including the Notes, remains unpaid or this Credit Agreement continues ineffect, unless the Agent and all of the Banks otherwise consent in writing, theCompany shall abide by each of the following covenants and agreements:

 

(a)                                  Paymentand Performance of Obligations.  TheCompany will pay all principal, interest, fees, and other charges with respectto the Notes and any other obligations when and as the same become due andpayable, will strictly observe and perform all covenants, agreements, terms,conditions, and limitations contained in this Credit Agreement and the otherLoan Documents, and will do all things necessary to prevent any forfeiture orimpairment of a

 

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Bank’s rights hereunderor thereunder, and to prevent the occurrence of any Event of Default or anUnmatured Event of Default.

 

(b)                                 Noticeof Default.  The Company shallpromptly notify the Agent in writing of the occurrence of any Event of Defaultor Unmatured Event of Default, specifying in connection with such notificationall actions proposed to be taken to remedy such circumstance.

 

(c)                                  Noticeof Non-Payment.  The Company shall notifythe Agent in writing of the occurrence of any failure or refusal by the Companyto pay any amount in excess of Two Hundred Fifty Thousand Dollars ($250,000.00)payable under any agreement to which it is a party (other than trade payablesless than sixty (60) calendar days past due), within ten (10) calendardays of such failure or refusal, unless the Company is diligently and in goodfaith contesting its obligations to make such payment by appropriate action.

 

(d)                                 Noticeof Legal Proceedings.  The Companyshall, promptly upon becoming aware of the existence thereof, notify the Agentin writing of the institution of any litigation, legal proceeding, or disputewith any person or tribunal, that might materially and adversely affect thecondition, financial or otherwise, or the earnings, affairs, businessprospects, or properties of the Company, or that involves or may affect thevalidity of enforceability of any Loan Document or the perfection or priorityof any lien created thereby.

 

(e)                                  Continuationof Primary Business.  The Companyshall continue to maintain the character of its primary business as currentlyconducted.

 

(f)                                    Maintenanceof Corporate Existence, Qualification and Assets.  The Company shall at all times maintain (i) itslegal existence as a corporation; (ii) its qualification to transactbusiness and good standing as a foreign corporation in all jurisdictions wherethe failure to so qualify would materially and adversely affect the nature ofits properties or the conduct of its businesses; and (iii) all franchises,licenses, rights, and privileges necessary for the proper conduct of itsbusinesses.

 

(g)                                 Maintenanceof Security.  The Company shallexecute and deliver to the Agent for the benefit of the Banks all mortgages,security agreements, financing statements, assignments, and such otherdocuments and instruments, and all supplements thereto, and continuationstatements thereof, and take such other actions as the Agent deems reasonablynecessary in order to maintain as the valid, enforceable, and first priorityliens and Security Interests granted to the Agent for the ratable benefit ofthe Banks.

 

(h)                                 Paymentof Taxes and Claims.  The Companyshall pay all taxes imposed upon it or upon any of its properties or withrespect to its franchises, business, income, or profits before any materialpenalty or interest accrues thereon. The Company shall also pay all materialclaims (including without limitation claims for labor, services, materials, andsupplies) for sums which have or shall become due and payable and which by lawhave or might become a vendor’s lien or a mechanics’, laborers’, materialmen’s,statutory, or other lien affecting any of its properties; provided, however,that the Company shall not be required to pay any such taxes or claims if (i) theamount, applicability, or validity thereof is being contested in good faith byappropriate legal proceedings promptly initiated and diligently conducted; and (ii) theCompany

 

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shall have set aside onits books reserves (segregated to the extent required by generally acceptedaccounting principles) adequate with respect thereto.

 

(i)                                     Maintenanceof Insurance.  The Company shall atall times maintain, or cause to be maintained, insurance covering such risks asis customarily carried by prudent businesses similarly situated, including,without limitation, hazard and general liability coverages, and fidelity bondand mortgagee errors and omissions coverages in conformity with therequirements set forth in Section 2.7 if the GNMA Mortgage-backedSecurities Guide, Handbook 5500.3. All such insurance shall be written by suchinsurers and in such form, amount, and coverage as may be satisfactory to theAgent, naming the Agent, for the benefit of the Banks, as additional insured orloss payee, as applicable.  The Companyshall provide the Agent with a certificate from one or more reputable insurancecompanies setting forth the amount or amounts of coverage and containing anagreement from each such insurance company that no termination, expiration,cancellation, or lapse of any such insurance policy shall occur without atleast thirty (30) calendar days advance written notice to the Agent.

 

(j)                                     Compliancewith Laws and Agreements.  TheCompany shall comply with the provisions of any laws and the provisions of anyagreements material to its businesses and operations and shall maintain itsabilities to perform its obligations under all agreements material to itsbusinesses and operations.

 

(k)                                  Inspections.  The Company shall, at any reasonable time andfrom time to time upon prior notice, permit any agents or representatives ofthe Agent and/or Banks to inspect, examine, and make copies of and abstractsfrom its records and books of account, and to discuss its affairs, finances,and accounts with any of its officers, management employees, or independentpublic accountants (and by this provision the Company hereby authorizes saidaccountants to discuss with the Agent and/or Banks and their respective agentsor representatives the Company’s affairs, finances, and accounts).  The Company shall have the right to have arepresentative present at any of the inspections, examinations or discussionsconducted by the Agent and/or Banks; provided, however, the Agent and/or Banksshall not be required to delay any of such inspections, examinations ordiscussions to accommodate the presence of such representative orrepresentatives.

 

(l)                                     Records.  The Company shall keep accurate records andbooks of account reflecting all of its financial transactions, in whichcomplete entries shall be made in accordance with GAAP consistently applied.

 

(m)                               ERISA.  With respect to any Plan maintained oradopted by the Company, the Company shall (i) at all times make promptpayments of contributions required to be made to meet the minimum fundingstandards of ERISA; (ii) promptly, after the filing thereof, furnish tothe Agent copies of all reports of prohibited transactions and accumulatedfunding deficiencies required to be made pursuant to the provisions of ERISA;and (iii) notify the Agent promptly of the occurrence of any ReportableEvent (as defined in ERISA).

 

(n)                                 FurtherAssurances.  The Company shallexecute and deliver such other and further instruments, documents, orassurances as in the judgment of the Agent or the Banks may be reasonablyrequired to more effectively create or perfect the Security Interests or toconfirm

 

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or evidence theobligations imposed by the terms and provisions of this Credit Agreement andthe other Loan Documents.

 

(o)                                 Changein Name or Location.  The Companyshall notify the Agent in writing at least thirty (30) calendar days in advanceof any change in location of its principal place of business, chief executiveoffice, or place where records are kept, or of any proposed change of corporatename. To the extent not in the physical possession of the Agent, the Collateraland all books and records pertaining thereto shall be maintained and stored atthe location specified on **Schedule 6.1**to this Credit Agreement, and the Company shall not remove any part of theCollateral from such location, other than temporarily in the ordinary course ofbusiness, unless the Company shall have provided the Agent with prior writtennotification of such change in location in accordance with the terms of this section andshall have assisted the Agent in filing such security agreements, financingstatements, or other notices deemed necessary by the Agent to preserve andmaintain the continued validity, enforceability, and priority of the Banks’lien on and Security Interest in the Collateral.

 

(p)                                 OtherLoan Agreements.  The Company shallgive written notice to the Agent at least five (5) calendar days prior toentering into any other loan agreement similar in purpose or effect to thisCredit Agreement.

 

(q)                                 SeniorManagement.  The Company shall notifythe Agent in writing requesting Agent’s consent at least thirty (30) calendardays prior to any proposed change in the Company’s senior management, i.e., thechief financial officer and any other officers of the Company who holdpositions at or above senior vice president.

 

(r)                                    Changeof Ownership.  The Company shallnotify the Agent in writing at least thirty (30) days prior to any proposedchange of control in the ownership of the capital stock of the Company promptlyupon obtaining knowledge of the same.

 

(s)                                  Saleof Servicing Rights.  The Companyshall give the Agent written notice at least thirty (30) calendar days prior toconsummating any sale, transfer, or other disposition of any servicing rights,or any interest in its Servicing Portfolio which is not prohibited by **Section 7.2(h) **hereof.

 

(t)                                    InsuredClosing Letters.  The Company shallcause all Loans financed with the proceeds of an Advance to be closed under aninsured closing letter issued by a major nationally recognized title companyacceptable to the Agent.

 

(u)                                 Appraisals.  The Company shall obtain not less than on asemi-annual basis an appraisal of the Servicing Portfolio from an independentappraiser acceptable to the Agent and shall provide a copy thereof to the Agentwithin thirty (30) days following the minimum appraisal dates of December 31and June 30 of each calendar year.

 

(v)                                 Changein Laws; Increased Costs.  In theevent that any applicable law, order, regulation, treaty or directive issued byany central bank or any other applicable governmental authority, or in thegovernmental or judicial interpretation or application thereof, or complianceby any Bank with any request or directive (whether or not having the force oflaw) issued subsequent to the date hereof by any central bank or otherapplicable governmental

 

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authority:  (i) does or shall subject any Bank toany tax of any kind whatsoever with respect to this Credit Agreement or anyAdvances made hereunder, or change the basis of taxation of payments to suchBank of principal, fee, interest or any other amount payable hereunder (exceptfor change in the rate of tax on the overall net income of such Bank imposed bythe jurisdiction in which such Bank maintains its principal office); (ii) doesor shall impose, modify or hold applicable any reserve, capital requirement,special deposit, compulsory loan or similar requirements against assets heldby, or deposits or other liabilities in or for the account of, advances orloans by, or other credit extended by, or any other acquisition of funds by,any office of such Bank which are not otherwise included in the determinationof the Base Rate; or (iii) does or shall impose on such Bank any othercondition; and the result of any of the foregoing is to increase the cost tosuch Bank of making, renewing or maintaining any Advance hereunder ormaintaining its respective Warehouse Line Commitment, or to reduce any amountreceivable in respect thereof or to reduce the rate of return on the capital ofsuch Bank or any Person controlling such Bank, then, in any such case, theCompany shall promptly pay to the Agent for remittance to such Bank, upon itswritten demand made through the Agent, any additional amounts necessary tocompensate such Bank for such additional cost or reduced amounts receivable orrate of return as reasonably determined by such Bank with respect to this CreditAgreement or the Advances made hereunder. If a Bank becomes entitled to claim any additional amounts pursuant tothis **Section 7.1(v)**, it shall promptlynotify the Company through the Agent of the event by reason of which it hasbecome so entitled.  In conjunction withsuch notification, such Bank shall provide the Company with a certificatespecifying any additional amounts payable pursuant to the foregoing sentence,which certificate shall set forth a calculation of such amounts in sufficientdetail and according to reasonable and customary computation methods.  The provisions of this **Section 7.1(w)**shall survive the termination of this Credit Agreement and the payment of allSecured Obligations hereunder.

 

(w)                               MERS.  During any time during which the Company isusing the MERS System, the Company shall (a) at all times, maintain itsstatus as a MERS Member, (b) at all times, employ officers who have theauthority, pursuant to a corporate resolution from MERS, to execute assignmentsof mortgage in the name of MERS in the event deregistration from the MERSSystem is necessary or desirable, (c) at all times remain in fullcompliance all terms and conditions of membership in MERS, including theMERSCORP, Inc. “Rules of Membership” most recently promulgated byMERSCORP, Inc., the “MERS Procedures Manual” most recently promulgated byMERS, and any and all other guidelines or requirements set forth by MERS orMERSCORP, as each of the foregoing may be modified from time to time,including, but in no way limited to compliance with guidelines and proceduresset forth with respect to technological capabilities, drafting and recordationof mortgages, registration of mortgages on the MERS System, includingregistration of the interest of the Agent in such mortgages and membershiprequirements, (d) promptly, upon the request of the Agent, execute anddeliver to the Agent an assignment of mortgage, in blank, with respect to anyMERS Mortgage that the Agent determines shall be removed from the MERS System, (e) immediatelyprovide to Agent a copy of any notice received from MERS or MERSCORP pursuantto Section 4(a) of the Electronic tracking Agreement, and (f) atall times maintain an Electronic Tracking Agreement in full force andeffect.  The Company shall notde-register or attempt to de-register any mortgage from the MERS System unlessthe Company has complied with the requirements set forth in the ElectronicTracking Agreement and the requirements hereof and the Security Agreementrelating to a release of Collateral.

 

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7.2                                 NegativeCovenants.  So long as any portion ofthe Secured Obligations remains unpaid or this Credit Agreement continues ineffect, unless the Agent and all of the Banks otherwise consent in writing, theCompany shall not violate any of the following covenants and agreements:

 

(a)                                  Limitationon Indebtedness.  The Company shallnot incur, create, assume, or otherwise be or become directly or indirectlyliable with respect to any indebtedness if, as a result thereof, the Company isin violation of any of the covenants set forth in this Credit Agreement.

 

(b)                                 Amendmentof Corporate Documents.  The Companyshall not cause or permit any amendment of its Articles of Incorporation or anymaterial change in its Bylaws in effect as of the date hereof.

 

(c)                                  Redemptionand Distributions.  Except aspermitted under **Section 7.2(n)** hereof,Company shall not: (i) apply any of its property to the purchase,redemption, or other retirement of any shares of any class of its capitalstock; (ii) set apart any sum for the payment of or for any dividends on,or for the purchase, redemption, or other retirement of any shares of any classof its capital stock; or (iii) make any other distribution, by reductionof capital or otherwise, in respect of any shares of any class of its capitalstock.

 

(d)                                 Mergers,Sales, Transfers or Other Disposition of Assets.  The Company shall not: (i) dissolve orotherwise dispose of all or any material portion of its assets, or acquire allor any material portion of the assets or outstanding capital stock of any otherbusiness entity; (ii) sell, lease, or otherwise transfer or dispose of anymaterial assets for less than the higher of book value or fair market value(except assets no longer usable in Company’s business); (iii) consolidatewith or merge into another corporation or other legal entity or permit one ormore other such entities to consolidate with or merge into it; (iv) effectany material change in its capitalization; or (v) sell, lease, transfer,lend, or convey any of its material assets to an Affiliate.

 

(e)                                  VAGuaranties and FHA Insurance. The Company shall not commit or suffer to becommitted any act which would invalidate the guarantee of the VA or insuranceby the FHA or cause any impairment to the validity of or priority of themortgage lien which secures any of the Loans, pledged to the Agent for theratable benefit of the Banks hereunder and under the Security Agreement.  In the event that any such guarantee orinsurance should lapse or otherwise be invalidated, the Company shall, withinfifteen (15) days of such lapse or invalidation, cause the Loan affected bysuch lapse or invalidation to be removed from Collateral, with either (i) substitutionof such other property constituting Collateral hereunder of at least equalvalue, or (ii) payment of the Advance made by the Banks with respect tosuch Loan.

 

(f)                                    Maintenanceof Qualifications.  The Company shallnot commit or suffer to be committed any act which would adversely affect (i) itseligibility to participate as an FHA approved mortgagee, as an approved lenderunder the VA guarantee program, as an approved seller-servicer by GNMA, as anapproved seller-servicer of mortgage notes to Fannie Mae and to FHLMC in theFHLMC regions in which it operates, or (ii) its eligibility to issueMortgage-backed Securities or to service the mortgage pools formed with respectto Mortgage-backed Securities.

 

(g)                                 ServicingPortfolio.  The Company shall notcommit or suffer to be committed any act which would constitute a materialbreach of any contract to which the Company

 

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now is or hereafterbecomes a party under which the Company is obligated to service Loans foranother Person. The Company shall not pledge, assign, grant a security interestin, or otherwise encumber any servicing rights or any other interest in itsServicing Portfolio except as permitted in **Section 7.2(i) **below.The Company shall not permit the Servicing Portfolio to include any RecourseServicing Obligations except those Recourse Servicing Obligations included inthe Servicing Portfolio at time of closing, without first obtaining the consentof the Agent and the Requisite Banks, which will not be unreasonably withheld.

 

(h)                                 Saleof Servicing Rights.  Without theprior written consent of all the Banks, the Company shall not sell, transfer,or otherwise dispose of any servicing rights, or any other interest in itsServicing Portfolio if, as a result of any such sale, transfer or otherdisposition, (i) the Aggregate Outstanding Warehouse Balance plusAggregate Outstanding Excess Balance would exceed the Warehouse Borrowing Base,(ii) an Event of Default would result hereunder, or (iii) theServicing Portfolio would be smaller than the amount specified in **Section 5.4** of this Credit Agreement.

 

(i)                                     Liens.  The Company shall not create or permit toexist, any mortgage, pledge, title retention, lien, lease purchase, or otherencumbrance or security interest, with respect to any assets now owned orhereafter acquired by the Company except: (i) the Security Interests andthe liens and security interests created under the Collateral Documents; (ii) materialmen’s,mechanics’, suppliers’, tax, or warehousemen’s liens, statutory liens oflandlords and other like liens arising in the ordinary course of business whichare not yet due or which are being contested in good faith by appropriateproceedings; (iii) liens incurred or deposits made in the ordinary courseof business in connection with workers’ compensation, unemploymentcompensation, and other types of social security, or to secure the performanceof other statutory obligations; (iv) encumbrances consisting of zoningregulations, easements, rights of way, survey exceptions, and other similar restrictionson the use of real property, and minor irregularities in titles thereto whichdo not materially impair their use in the operation of its business; (v) lienson Mortgage-backed Securities which are not pledged to the Banks and liens onsuch Mortgage-backed Securities which secure the repurchase obligations of theCompany with respect to such Mortgage-backed Securities; (vi) liens andsecurity interests incurred or made in the purchase of property or equipment inthe ordinary course of business; (vii) existing liens and securityinterests described in **Schedule 6.1**to this Credit Agreement; and (viii) the liens and security interestsgranted to Fannie Mae, GNMA and FHLMC with respect to the Servicing Portfolio.

 

(j)                                     Guaranties.  The Company shall not guaranty, endorse,assume, become surety for, indemnify, or otherwise become or be responsible forthe obligations of any Person except: (i) endorsements of negotiableinstruments for deposit or collection in the ordinary course of business and (ii) obligationsincurred in connection with the sale of Loans and servicing rights owned by theCompany in the ordinary course of business of the Company.

 

(k)                                  Useof Funds.  The Company shall not useany funds provided by the Agent and the Banks under this Credit Agreement, orby any Advance for any purpose other than funding or purchasing Loans.  The Company shall not use the proceeds of anyWorking Capital Advance, Dry Advance, Extended Wet Advance, Wet Advance, JumboAdvance, Servicing Held for Bulk Sale Advance, Servicing Under ContractAdvance, Agency Qualified A Minus Advance or Alternative Lending Advance forany purpose other than the purposes encompassed by the definition of thoseterms in **Article 1** of this CreditAgreement.  In addition to the foregoing,the

 

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Company shall not use anyfunds provided by the Banks under this Credit Agreement or by any WarehouseAdvance for the purpose of making any Loan that would be subject to theprovisions of the Home Ownership and Equity Protection Act of 1994 or otherfederal or state legislation relating to “high cost” mortgage lending.

 

(l)                                     CapitalExpenditures.  The Company shall notmake, or incur obligations for, any capital expenditures in any fiscal year,including, without limitation, capitalized lease obligations, in excess of FiveHundred Thousand Dollars ($500,000.00) for the Company determined on anon-cumulative basis.

 

(m)                               Loansand Advances.  Other than existingloans to shareholders, the Company shall not, other than in the ordinary courseof its business, make any loan or advance to any Person (including withoutlimitation Affiliates) if such loan or advance would cause the aggregate amountof all such loans and advances to all such Persons to be in excess of FiveHundred Thousand Dollars ($500,000.00), exclusive, however, of the amount ofall reasonable salaries, benefits, and occupational expenses that havetraditionally been borne by the Company.

 

(n)                                 Dividends,Redemption and Distributions. The Company shall not do any of thefollowing, if an Event of Default or an Unmatured Event of Default then existshereunder, or, if as a result of such action or actions, an Event of Default oran Unmatured Event of Default would exist hereunder: (i) declare or pay inany fiscal year cash dividends; (ii) declare or pay any dividends payablein its capital stock on any shares of any class of its capital stock; (iii) applyany of its property to the purchase, redemption, or other retirement of anyshares of any class of its capital stock; (iv) set apart any sum for thepayment of any dividends on, or for the purchase, redemption, or otherretirement of, any shares of any class of its capital stock; or (v) makeany other distribution, by reduction of capital or otherwise, in respect of anyshares of any class its capital stock.

 

(o)                                 MortgageLoan Early Purchase and Sale/Repurchase Facilities.  The Company shall not, without the priorwritten consent of the Agent thereto, enter into any agreement providingfacilities for the early purchase or the sale and repurchase of mortgage loansand/or mortgage backed securities. Notwithstanding the foregoing, in the eventthe Agent consents to the Company entering into agreements for such facilities,at the Agent’s request, the Company covenants and agrees to execute and deliveran Intercreditor Agreement, fully executed by all of the Company’s then currentand proposed mortgage warehouse lenders and parties to such early purchase andsale/repurchase facilities, substantially in a form prescribed by the Agent, onor before the date of implementation of such facilities.

 

7.3                                 ReportingRequirements.  So long as any portionof the Secured Obligations, including the Notes, remains unpaid or this CreditAgreement remains in effect, unless the Agent and the Requisite Banks otherwiseconsent in writing, the Company shall furnish to the Agent and the Banks thefollowing reports:

 

(a)                                  AnnualReports.  As soon as available, andin any event within ninety (90) calendar days after the end of each fiscal yearof the Company, the Company shall furnish to each of the Banks (i) acomplete annual audited financial statement of the Company with consolidatingstatements showing the annual financial statements of the Company, with allnotes thereto, prepared in reasonable detail in accordance with GAAP and indetail reasonably satisfactory to the

 

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Agent, which shallcontain at least a balance sheet, a statement of profit and loss andstockholder’s equity, and a statement of cash flows, set forth in each case incomparative form with corresponding figures from the preceding fiscal year forand (ii) to the extent the same is prepared for, the management letterprepared by the firm of independent certified public accountants in connectionwith the certification of the annual audited financial statements of.  Each annual audited financial statement ofshall be duly certified by a firm of independent certified public accountantsof recognized national standing or otherwise acceptable to the RequisiteBanks.  The certified report of such firmshall include a statement to the effect that the examination made in preparingand certifying such annual audited financial statement has not disclosed theexistence of a condition or event at the end of the fiscal year whichconstitutes an Event of Default or Unmatured Event of Default hereunder, or astatement specifying the nature and period of existence of any such conditionor event disclosed by such examination.

 

(b)                                 OperationalReports.  As soon as available, andin any event within forty-five (45) calendar days after the end of eachquarter, shall furnish to each of the Banks financial statements for thepreceding quarter, prepared on a basis consistent with prior periods and inaccordance with generally accepted accounting principles, such quarterlyfinancial statements shall contain at least a balance sheet of as of the end ofsuch quarter and a statement of profit and loss for such quarter and for thefiscal year to date.  As soon asavailable, and in any event within forty-five (45) calendar days after the endof each month, the Company shall furnish to each of the Banks (i) financialstatements for the preceding month, prepared on a basis consistent withprior periods and in accordance with generally accepted accounting principles,such monthly statements shall contain at least a balance sheet of the Companyas of the end of such month and a statement of profit and loss for such monthand for the fiscal year to date, (ii) a duly executed CovenantCompliance Certificate, (iii) production numbers for thequarter and year-to-date, (iv) a duly executed and completed pledgedservicing report, and (v) a servicing portfolio report andanalysis, including the servicing rights of the Company, which shall show thestatus of all mortgages which are a part of the Servicing Portfolio, includingthose which are delinquent, all in substantially the same form and detail asset forth in **Exhibit I**attachedhereto and made a part hereof by this reference.

 

(c)                                  ServicingReport; Mortgage Position Report.  Assoon as available and in any event within fifteen (15) calendar days after theend of each month, or more frequently if requested by the Agent, the ServicingReport and a mortgage position report which details the Company’s market andcommitment positions relative to Loans in pipeline and closed Loans ininventory, such mortgage position report to be in form as is reasonablyacceptable to the Agent.

 

(d)                                 AgencyAudits.  Promptly upon delivery tothe Company, the Company shall furnish to the Agent a copy of the results ofany field audit of the Company’s business and/or records performed by GNMA,Fannie Mae, FHLMC or the Department of Housing and Urban Development, togetherwith a copy of all subsequent correspondence relating to such audit between theCompany and such agency.

 

(e)                                  UpdatedList of Approved Investors.  TheCompany shall deliver or cause to be delivered to the Agent an updated list ofall Approved Investors, immediately upon any change in the same, which listmust include the (a) investor name, (b) contact person, (c) address,(d) phone number, and (e) and upon request by the Agent, thefinancial statements for such Approved Investor.

 

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(f)                                    OtherReports and Information.  The Companyshall deliver or cause to be delivered to the Agent and/or the Banks suchinformation (not otherwise required to be furnished under this Credit Agreementor the other Loan Documents) respecting its business, affairs, assets, andliabilities, and such statements, lists of property and accounts, reports,opinions, certifications, and documents as the Agent may from time to timereasonably request.

 

**ARTICLE 8**

 

EVENTS OF DEFAULT

 

8.1                                 Eventsof Default. The occurrence of one or more of the following events shallconstitute an “Event of Default” hereunder immediately upon the expiration ofany grace or cure period which is specifically set forth herein as beingapplicable with respect to such event:

 

(a)                                  Defaultunder any Loan Documents.  Theoccurrence of an Event of Default under this Credit Agreement or any other ofthe Loan Documents.

 

(b)                                 Payments.  The Company shall fail to make any payment ofprincipal, interest, fees, or other amounts with respect to the obligations orliabilities of the Company to the Agent or any Bank, whether under this CreditAgreement or any other Loan Document, including without limitation theobligations set forth in the Notes, or otherwise, on or before the date suchpayment is due, and such failure shall continue for a period of ten (10) calendardays.

 

(c)                                  Covenant Defaults.  TheCompany shall fail to perform or observe any covenant, agreement, or provisioncontained in this Credit Agreement or the other Loan Documents by it to be performedor observed, including without limitation the covenants set forth in **Articles 5 and 7** of this Credit Agreement and such failurewith respect thereto shall continue for a period of thirty (30) calendar days,except for the covenants contained in **Article 5**and**Sections 7.l (a), (b), (c), (e), (f), (g), (i), (k), (o)**and**(s)**and**Section 7.2**ofthis Credit Agreement, for which there shall be no grace period except asspecified in **Section 8.l(b) **hereof.

 

(d)                                 Representationsand Warranties.  Any representationor warranty made or deemed made by the Company herein or in any other LoanDocument, including without limitation the representations and warranties setforth in **Article 6** of this CreditAgreement, or in any certificate, schedule, statement, report, notice orwriting furnished by or on behalf of the Company to the Agent or any Bank,whether furnished prior to, contemporaneously with, or subsequent to theexecution of this Credit Agreement, is untrue or is breached in any materialrespect.

 

(e)                                  Defaulton Indebtedness.  Any creditor or anyrepresentative of any creditor of the Company declares, or is or becomesentitled to declare, any indebtedness of the Company which exceeds One HundredThousand Dollars ($100,000.00), to be due and payable prior to its expressedmaturity by reason of any default by the Company in the performance orobservance of any obligation or condition, or any such indebtedness becomes dueby its terms and is not promptly paid or extended.

 

(f)                                    Insolvency.  The Company becomes insolvent or generallydoes not or admits in writing its inability to pay its debts as they becomedue, or applies for, consents to, or

 

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acquiesces in theappointment of a trustee or receiver of the Company or its property; or in theabsence of such application, consent, or acquiescence, a trustee or receiver isappointed for the Company or for a substantial part of its property and is notdischarged within forty-five (45) calendar days; or any bankruptcy, reorganization,debt arrangement, or other proceeding under any bankruptcy or insolvency law isinstituted by or against the Company and, if instituted against the Company, isconsented to or acquiesced in by the Company, or remains for thirty (30) calendardays undismissed.

 

(g)                                 Dissolution or Liquidation.  Anydissolution or liquidation proceeding is instituted by or against the Companyand, if instituted against the Company, is consented to or acquiesced in by theCompany, or remains for thirty (30) calendar days undismissed.

 

(h)                                 Terminationor Suspension of Business.  Thetransaction of the usual business of the Company is terminated or suspended.

 

(i)                                     Judgments.  The entry of a single uninsured moneyjudgment or multiple judgments against the Company which, either singularly orin the aggregate, are in excess of One Hundred Thousand Dollars ($100,000.00),unless such judgment shall be satisfied, discharged, or stayed within thirty(30) calendar days after the entry thereof, and if stayed, within ten (10) calendardays after the expiration or lapse of any such stay.

 

(j)                                     MaterialAdverse Change.  The occurrence ofany material adverse change in the condition of the Company, financial orotherwise.

 

(k)                                  ERISA.  The occurrence of any Reportable Event (as definedin ERISA) or any other fact or circumstance which constitutes grounds for thetermination of any Plan, as defined in **Section 6.12**hereof, of the Company by the Pension Benefit Guaranty Corporation or anysuccessor thereto or for the appointment by an appropriate United StatesDistrict Court of a trustee to administer any such Plan shall have occurred andbe continuing for thirty (30) calendar days; or any Plan of the Company shallbe terminated within the meaning of ERISA; or a trustee shall be appointed bythe appropriate United States District Court to administer any Plan of theCompany; or the Pension Benefit Guaranty Corporation or any successor theretoshall institute proceedings to terminate any Plan of the Company or to appointa trustee to administer any such Plan; and, upon the occurrence of any of theforegoing, the aggregate amount of the vested unfunded liability under all suchPlans exceeds ten percent (10%) of the stockholders’ equity of the Company, andsuch liability is not covered by insurance.

 

(l)                                     Changeof Management or Ownership.  TheCompany implements any change in the senior management or ownership of theCompany without obtaining Agent’s prior written consent.

 

8.2                                 RemediesNot Exclusive.  The rights andremedies provided in this Credit Agreement, the Notes, the Collateral Documentsand all other Loan Documents are cumulative, may be exercised in such sequenceor combination as the Requisite Banks (or all of the Banks if the context sorequires pursuant to **Section 9.20**hereof) may elect, and are not exclusive of any rights or remedies otherwiseprovided by law.

 

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8.3                                 RemediesUpon Event of Default.  If an Eventof Default shall have occurred, subject to the provisions of **Section 9.20** hereof, the Agent shall, at the request ofall of the Banks, and may, with the consent of the Requisite Banks, exerciseany one or more of the other rights and remedies, and any other remediesprovided in any of the Loan Documents, as the Requisite Banks in their solediscretion may deem necessary or appropriate; (provided, however, that if anyEvent of Default specified in **Sections 7.1(a), 7.1(f) **or**7.1(g) **hereof shall occur, theprincipal of, and all interest on, the Notes and other liabilities hereundershall thereupon become due and payable concurrently therewith and the Banks’obligations to make Advances hereunder shall immediately terminate, without anyfurther action by the Agent or any Bank and without presentment, demand,protest, notice of default, notice of acceleration or of intention toaccelerate or other notice of any kind, all of which the Company herebyexpressly waives:

 

(a)                                  Acceleration.  Declare the unpaid balance of the Notes,including principal, interest, and any fees or other obligations, or any partthereof, to be immediately due and payable, without demand, presentment, orfurther notice of any kind, the same being hereby expressly waived by theCompany, whereupon it shall be due and payable.

 

(b)                                 Advances;Termination.  Refuse to make anyfurther Advances or readvances under any of the Notes, and terminate theWarehouse Line Commitments under this Credit Agreement and the other LoanDocuments.

 

(c)                                  Judgment.  Reduce any claim to judgment.

 

(d)                                 Offset.  Exercise the rights of offset and/or banker’slien against the interests of the Company in and to every property of theCompany (other than escrow deposits or custodial trust accounts managed by theCompany) which is in the possession of a Bank to the extent of the full amountof the Company’s obligations to such Bank.

 

(e)                                  Foreclosure/Repurchase.  Exercise all those rights and remediesallowed to secured parties by all applicable laws, including without limitationthe Kentucky Uniform Commercial Code and the Uniform Commercial Code as enactedin any other jurisdiction in which the Collateral or any portion thereof may belocated.

 

(f)                                    Possession.  Enter upon the premises of the Company andtake immediate possession of the Collateral, with or without legal process,either personally or by means of a receiver appointed by a court of competentjurisdiction.

 

(g)                                 Collectionof Accounts.  Collect and receive allaccounts, rents, income, revenue, earnings, issues, and profits arising fromthe Collateral or any part thereof.

 

(h)                                 Exerciseof Rights.  Exercise any and allother rights afforded by any applicable laws or by this Credit Agreement andthe other Loan Documents at law, in equity, or otherwise, including, but notlimited to, the rights to bring suits or other proceedings before any tribunalof competent jurisdiction, either for specific performance of any covenant orcondition contained in the Loan Documents or in aid of the exercise of anyright granted to the Agent or a Bank in this Credit Agreement or any other LoanDocument.

 

8.4                                 Performanceby the Banks.  Should the Companyfail to observe or perform any covenant, duty, or promise by it to be observedor performed under the terms of this Credit Agreement or

 

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the other Loan Documents, the Agent or the Banks may, in theirdiscretion and without any obligation to do so, perform or attempt to perform,such covenant, duty, or promise on behalf of the Company, and, in the event theAgent or a Bank should do so, the Company shall immediately upon demandreimburse the Agent or such Bank for all its expenses, disbursements, fees, andcosts incurred in connection therewith, with interest thereon at the ratespecified in the Notes. The Agent and the Banks do not assume and shall neverhave, except by its express written consent, any liability or responsibilityfor the performance of any covenant, duty, or promise of the Company hereunder.

 

8.5                                 Attorneys;Accountants; Other Third Parties.  Inthe exercise of their rights under this Credit Agreement, the Notes, or theother Loan Documents, the Agent and the Banks may retain, consult with, andotherwise utilize the services of counsel, accountants and other third parties.Whenever attorneys or accountants are used by the Agent or a Bank in the exerciseof any of its remedies under this Credit Agreement, the Notes, or the otherLoan Documents, or otherwise, including collection or enforcement of thisCredit Agreement, the Notes, or the other Loan Documents, or to enforce,defend, declare, or adjudicate any of the Agent’s or a Bank’s rights under anyof such instruments and documents or in any of the Collateral, whether by suit,negotiation, or otherwise, such reasonable attorneys’, accountants’ and otherthird parties’ fees as are incurred by the Agent or a Bank in connectiontherewith shall be payable by the Company to the fullest extent allowed by lawprovided that an Event of Default has occurred hereunder or it is otherwisedetermined that the Company is liable to the Agent or a Bank hereunder or underthe other Loan Documents.

 

8.6                                 Appraisalof Servicing Portfolio.  In additionto any other remedies provided hereunder, if an Event of Default shall haveoccurred, the Requisite Banks may require the Company to have an independentappraisal performed on the Servicing Portfolio at the sole cost and expense ofthe Company.

 

**ARTICLE 9**

 

MISCELLANEOUS

 

9.1                                 Expenses.  As agreed upon under a separate letter, theCompany agrees to reimburse the Agent, upon demand, for reasonable attorneys’fees and legal expenses, incurred in connection with the preparation, review,and amendment of this Credit Agreement, and, if an Event of Default hasoccurred hereunder or if it is otherwise determined that the Company is liableto the Agent or a Bank, for all reasonable out-of-pocket expenses (includingreasonable attorneys’ fees and legal expenses), incurred in enforcing orattempting to enforce the obligations of the Company hereunder and under theNotes and the other Loan Documents, which obligations shall survive any terminationof this Credit Agreement.

 

9.2                                 Non-Liabilityof Banks.  The relationship betweenthe Company and the Banks is, and shall at all times remain, solely that ofdebtor and creditor, and the Banks neither undertake nor assume anyresponsibility or duty to review, inspect, supervise, pass judgment upon, orinform the Company of any matter in connection with any aspect or phase of theCompany’s businesses, operations, or condition, financial or otherwise. TheCompany shall rely entirely upon its own judgment with respect to all suchmatters, and any review of, inspection of, supervision of, exercise of judgmenton, or supply of information to, the Company by the Agent or a Bank inconnection with any such matter is for the protection and benefit of the Banks,and neither the Company nor any third party is entitled to rely thereon.

 

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9.3                                 Waivers.Etc. No failure to exercise and no delay in exercising, on the part of theBanks or the Agent or any holder of the Notes, of any power or right hereunderor under the Notes or the other Loan Documents and no course of dealing betweenthe Company and the Agent or a Bank or the holder of the Notes, shall operateas a waiver thereof; nor shall any single or partial exercise of any power orright preclude any other or further exercise thereof or the exercise of anyother power or right.

 

9.4                                 Amendments.  Except as set forth in **Section 9.20**hereof, no amendment, modification, or supplement to this Credit Agreement, theNotes, or the other Loan Documents, or to any other document or instrumentexecuted or issued by any of the parties hereto in connection with thetransactions contemplated herein, shall be binding unless executed in writingby all parties hereto; and this provision of this Credit Agreement shall not besubject to waiver by any party and shall be strictly enforced.

 

9.5                                 Taxes.  The Company agrees to pay, and save the Agentand the Banks harmless from all liability for, any stamp or other taxes(otherwise than by a change in taxation of a Bank’s overall net income) whichmay be payable with respect to the execution or delivery of this CreditAgreement, the Notes, and the other Loan Documents, which obligation of theCompany shall survive the termination of this Credit Agreement.

 

9.6                                 GoverningLaw.  This Credit Agreement shall beconstrued in accordance with and governed by the law of the Commonwealth ofKentucky, without giving effect to the conflict of laws principles thereof.  Any suit, action, or proceeding against theCompany with respect to this Credit Agreement, the Notes, the other LoanDocuments or the Collateral or any part thereof, may be brought in the courtsof the Commonwealth of Kentucky, or in the United States District Court for theWestern District of Kentucky, as the Agent and the Requisite Banks in theirsole discretion may elect, and the Company hereby consents to the jurisdictionof such courts for the purpose of any such suit, action, or proceeding.  Any suit, action, or proceeding brought by theCompany against the Agent or a Bank with respect to this Credit Agreement, theNotes, the other Loan Documents or the Collateral or any part thereof, shall bebrought in any of such courts; provided, however, that the Agent and the Banksdo not waive their right to petition for removal of any action brought in thecourts of the Commonwealth of Kentucky to a United States District Court shouldit elect to do so.  The Company herebyirrevocably waives any and all objections to the jurisdiction of said courts,including without limitation lack of personal jurisdiction, lack of venue, and forumnonconveniens.  Service ofany writ, process, summons, or complaint upon the Company may be made by mailupon it at the address stated in this Credit Agreement, upon any registeredagent for service of process, or upon the Kentucky Secretary of State, or byany other method provided by law. Service by any such method shall be conclusively deemed to be legallysufficient in all respects, and the Company hereby irrevocably waives anyobjection to the service or sufficiency of service of any writ, process,summons, or complaint which is served in accordance with the foregoing.

 

9.7                                 Section Titles;Table of Contents.  The section titlesand the table of contents contained in this Credit Agreement are inserted forconvenience only and shall not govern the interpretation of any of theprovisions of this Credit Agreement.

 

9.8                                 Relianceby the Agent and the Banks.  Allcovenants, agreements, representations, and warranties made herein by theCompany shall, notwithstanding any investigation by the Agent and the Banks, bedeemed to be material to the Agent and the Banks and to have been relied uponby the Agent and the Banks and shall survive the execution and delivery of thisCredit Agreement.

 

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9.9                                 Severability.The provisions of this Credit Agreement are severable.  If any provision hereof shall be held invalidor unenforceable in whole or in part by a court of competent jurisdiction, theremainder of this Credit Agreement shall not thereby fail or be rendered voidor unenforceable, but shall continue in full force and effect, with only theinvalid or unenforceable provision rendered a nullity and severed from thisCredit Agreement.

 

9.10                           Survivalof Representations and Warranties. All representations and warranties made by the Company in this CreditAgreement shall survive the execution hereof, the delivery of the Notes and themaking of all Advances, and the Banks and the Agent shall be entitled to relyon such representations and warranties at all times.

 

9.11                           Termination.  This Credit Agreement shall terminate on theearlier of: (i) the close of business on August 29, 2005; or (ii) thedate this Credit Agreement is terminated pursuant to **Section 8.3**above; or (iii) such earlier date as may be selected by theCompany upon (a) at least forty-five (45) days prior written notice to theAgent and each of the other Banks, and (b) prepayment by the Company ofall amounts due and owing by the Company under this Credit Agreement and eachof the other Loan Documents, at which time no further Advances can be madehereunder and all Notes then outstanding shall be immediately due and payable.

 

9.12                           Counterparts;Effectiveness.  This Credit Agreementand any amendments, waivers, consents, or supplements may be executed in anynumber of counterparts, and by different parties hereto in separatecounterparts, each of which when so executed and delivered shall be deemed anoriginal, but all such counterparts together shall constitute but one and thesame instrument. This Credit Agreement shall become effective upon the laterof: (a) the receipt by the Agent of a counterpart hereof executed by theCompany; or (b) the delivery to the Company of a counterpart hereofexecuted by the Banks and the Agent.

 

9.13                           EntireAgreement.  This Credit Agreement,the Notes, the other Loan Documents and all other documents related to any ofthe foregoing or otherwise contemplated hereunder embody the final and entireagreement between the parties hereto relating to the subject matter hereof andthereof and supersede any and all prior commitments, arrangements,representations, understandings and agreements and any and all oral agreementsbetween the parties relating to the subject matter hereof.  There are no unwritten, oral agreementsbetween the parties.

 

9.14                           Exhibitsand Schedules.  The Exhibits andSchedules to this Credit Agreement are a part hereof, and are herebyincorporated by reference as if fully set out where first mentioned herein.

 

9.15                           Indemnity.  The Company shall indemnify and hold harmlessthe Banks, the Agent, their respective successors, assigns, agents andemployees, from and against any and all claims, actions, suits, proceedings,costs, expenses, damages, fines, penalties and liabilities, including, withoutlimitation, reasonable attorneys’ fees and costs, arising out of, connectedwith or resulting from (a) this Credit Agreement or any of the other LoanDocuments, (b) the operation of the business of the Company, (c) theAgent’s and/or any Bank’s preservation or attempted preservation of theCollateral, or (d) any failure of the Liens granted to the Agent in itscapacity as agent for the Banks in the Collateral to be or to remain perfectedor to have the priority as contemplated herein and in the Collateral Documents;provided, the Company shall have no obligation to indemnify the Banks for anyloss caused in whole or in part by the Banks’ or the Agent’s gross negligenceor willful misconduct.  At the Agent’s orany Bank’s request, the Company shall, at its own cost and expense, defend orcause to be defended any and all such actions or suits that may be broughtagainst the Agent or any such Bank as a result of this Credit Agreement or anyof the other Loan Documents, unless the claim arose due to gross negligence orwillful misconduct on the part

 

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of the Agent or any such Bank and, in any event, shall satisfy, pay anddischarge any and all judgments, awards, penalties, costs and fines that may berecovered against the Agent or applicable Bank in any such action, plus allreasonable attorneys’ fees and costs related thereto to the extent permitted byapplicable law; provided, however, that the Agent or each Bank shall give theCompany, to the extent the Agent or such Bank seeks indemnification from theCompany under this **Section 9.15**,written notice of any such claim, demand or suit as soon as practicable afterthe Agent or applicable Bank has received written notice thereof, and the Agentor applicable Bank shall not settle any such claim, demand or suit, if theAgent or such Bank seeks indemnification therefor from the Company, withoutfirst giving notice to Company of the Agent’s or such Bank’s desire to settleand obtaining the consent of Company to the same, which consent Company herebyagrees not to unreasonably withhold or delay.

 

9.16                           Roleof the Banks.  Notwithstanding any ofthe terms or conditions hereof or of the other Loan Documents to the contrary,the Banks shall not have, and by their execution and acceptance of this CreditAgreement hereby expressly disclaim, any obligation or responsibility for themanagement, conduct or operation of the business and affairs of the Company.  Any term or condition hereof, or of any ofthe other Loan Documents, permitting the Banks to take or refrain from takingany action with respect to the Company or the Collateral shall be deemed solelyto permit the Banks to audit and review the management, operation and conductof the business and affairs of the Company and to maintain and preserve thesecurity given by the Company to the Agent, in its capacity as agent for theBanks, for the Secured Obligations, and may not be relied upon by any otherPerson.  Further, the Banks shall nothave, have not assumed, and by their execution and acceptance of this CreditAgreement hereby expressly disclaim, any liability or responsibility for thepayment or performance of any indebtedness or obligation of the Company, and noterm or condition hereof, or of any of the other Loan Documents, shall beconstrued otherwise.

 

9.17                           Notices.  All notices required or permitted to be givenhereunder shall be given in writing and shall be personally delivered or sentby telecopier, by express courier service or by registered or certified UnitedStates mail, return receipt requested, postage prepaid, addressed as follows(or to such other address as to which any party hereto shall have given theother written notice):

 
| If to the  Company: |   | Washtenaw Mortgage  Company |
|---------------------|--------|-----------------------------|
|                |   | 3767 Ranchero Drive         |
|                |   | Ann Arbor, Michigan  48108  |
|                |   | Attn:                       | Nathan Howard |
|                |   |                        | Controller and CFO |
|                |   | Ph:                         | 734-662-9733 (x611) |
|                |   | Fax:                        | 734-741-5663 |

 

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|                                           |   | cc:                                                                                           | Andrew J.  Broder, Esq.                |
|------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|---------------------------------------------|
|                                           |   |                                                                                          | Vicko, Lane,  Payne & Broder, P.C. |
|                                           |   |                                                                                          | 32100 Telegraph Road                        |
|                                           |   |                                                                                          | Suite 200                              |
|                                           |   |                                                                                          | Bingham Farms, Michigan  48025              |
|                                           |   |                                                                                          | Ph:                                         | (248) 642-7733 |
|                                           |   |                                                                                          | Fax:                                        | (248) 642-7557 |
|                                           |   |                                                                                          |
| If to National City as a Bank or as the Agent: |   | At the telecopy number  or address specified below the applicable signature of National City. |
|                                           |   |                                                                                          |
|                                           |   | cc:                                                                                           | Jeffrey A. Hamilton, Esq.              |
|                                           |   |                                                                                          | Reed Weitkamp  Schell & Vice PLLC  |
|                                           |   |                                                                                          | 500 West Jefferson  Street, Suite 2400 |
|                                           |   |                                                                                          | Louisville, KY 40202                        |
|                                           |   |                                                                                          | Ph:                                         | (502) 589-1000 |
|                                           |   |                                                                                          | Fax:                                        | (502) 562-2200 |
|                                           |   |                                                                                          |
| If to the other  Banks:                        |   | At the telecopy number  or address specified below the signature of the applicable Bank.      |

 

All notices hereundershall be deemed given upon the earliest of (a) actual delivery in personor by telecopier, (b) one (1) Business Day after delivery to anexpress courier service, or (c) three (3) Business Days after havingbeen deposited in the United States mails, in accordance with theforegoing.  Any notice of an Event ofDefault to the Company shall be sent by personal delivery, express courierservice or by registered or certified mail in accordance with this **Section 9.17**.

 

9.18                           RatableSharing.  Except as otherwisespecifically set forth in this Credit Agreement, including without limitation,in **Article 2** hereof and this **Section 9.18,**each Bank agrees with each other Bankthat (i) with respect to all amounts received by them which are applicableto the payment of principal of or interest on the Warehouse Advances or feesrelating thereto including, without limitation, all amounts received by suchBank pursuant to the exercise of the right of set-off pursuant to this CreditAgreement, equitable adjustment will be made so that all such amounts will beshared among the Banks proportionately to their respective Pro Rata Shareswhether received by voluntary payment, by the exercise of the right of set-offor banker’s lien, by counterclaim or cross action or by the enforcement of anyor all of the Secured Obligations owed by the Company to the Banks hereunderand under the Notes, and (ii) if any of them shall exercise any right ofcounterclaim, set-off, banker’s lien or similar right with respect to amountsowed by the Company hereunder, that Bank shall apportion the amount recoveredas a result of the exercise of such right pro rata in accordance with (a) allamounts outstanding at such time owed by the Company to it hereunder, and (b) allamounts otherwise owed by the Company to it, and (iii) if any of themshall thereby through the exercise of any right of counterclaim, set-off,banker’s lien or otherwise, or as adequate protection of a deposit treated ascash collateral under the Bankruptcy Code, receive payment or reduction of aproportion of the aggregate amount of principal and interest due with respectto the Warehouse Advances made by that Bank or any other amount payablehereunder (collectively, the

 

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“Aggregate Amount Due” to such Bank), which is greater than theproportion received by any other Bank in respect of the Aggregate Amount Due tosuch other Bank, then the Bank receiving such proportionately greater paymentshall (y) notify each other Bank and the Agent of such receipt and (z) purchaseparticipations (which it shall be deemed to have done simultaneously upon thereceipt of such payment) in the Aggregate Amount Due to the other Banks so thatall recoveries of Aggregate Amount Due shall be shared by the Banks inproportion to their respective Pro Rata Shares; provided that if all ofpart of such proportionately greater payment received by such purchasing Bankis thereafter recovered from such Bank, those purchases shall be rescinded andthe purchase prices paid for such participations shall be returned to that Bankto the extent of such recovery, but without interest.  The Company expressly consents to theforegoing arrangements and agrees that any participant in respect of anyAdvance may exercise any and all rights of banker’s lien, set-off orcounterclaim with respect to any and all rights of banker’s lien, set-off orcounterclaim with respect to any and all monies owing by the Company to thatparticipant as fully as if that participant were a Bank in the amount of suchparticipation held by that participant. Notwithstanding anything contained herein to the contrary, immediatelyupon the occurrence of an Event of Default, acceleration of the SecuredObligations and/or termination, the Banks hereby absolutely and unconditionallyagree to purchase or sell, as applicable, such participation in the WarehouseAdvances, Swing Advances and Excess Advances outstanding as shall be requiredto assure that each Bank holds its Warehouse Commitment Pro Rata Share of allsuch Advances.

 

9.19                           Assignment.  This Credit Agreement may not be assigned bythe Company without the prior written consent of the Banks.  All rights of the Banks hereunder shall inureto the benefit of their respective successors and assigns, and all obligations,covenants and agreements of the Company shall bind its successors and assigns,if any.

 

9.20                           Consentof Banks.  Any amendment ormodification of this Credit Agreement or any other Loan Document, or waiver ofany term or provision hereof or thereof, shall require the affirmative writtenconsent of the Agent and the Requisite Banks; provided, notwithstandinganything herein to the contrary, the following shall require the affirmativewritten consent of the Agent and all of the Banks:  (i) except as permitted under the termsof the Security Agreement, the release of any part of the Collateral from theliens respectively created by the Loan Documents, (ii) the termination,cancellation or release of any Loan Documents, (iii) the decrease in theinterest rate(s) borne by the Advances, other than decreases in the interestrate(s) borne by the Advances by virtue of any decreases or changes in theFederal Funds Effective Rate as expressly contemplated herein, (iv) anyreduction in the amount of the installments of principal due under this CreditAgreement or the Notes or in the aggregate principal amount of principal duethereunder, (v) any extension of the Termination Date or the due dates ofany installments of principal of and/or accrued interest on the Notes, (vi) anychange in the definition of the term Requisite Banks, (vii) any change inthe amount or the calculation of the Non-Usage Fee or the Usage Fees, (viii) anychange in the computation of (including any change in the definition of anyterm used in) the Warehouse Borrowing Base, or (ix) any amendment to **Section 2.7** hereof or this **Section 9.20**or any other section of this Credit Agreement that expresslyrequires the consent of all of the Banks. In addition to the foregoing, and notwithstanding anything in thisCredit Agreement to the contrary, no amendment, modification or waiver shallincrease a Bank’s Warehouse Line Commitment without the prior written consentof the Company, the Agent and such Bank; provided, however, the consent of theother Banks shall not be required to implement an increase to the TotalWarehouse Line Commitment whether such increase shall be on a temporary orpermanent basis. Further, notwithstanding anything to the contrary in this **Section 9.20** or elsewhere in this Credit Agreement, (y)with the approval of the Requisite Banks, the Agent may temporarily waive orsuspend one or more of this Credit Agreement’s eligibility requirements orconditions for a particular grouping of Loans to qualify as Eligible Collateralwhere their failure to so qualify is beyond

 

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the Company’s reasonable control and if the Agent and the RequisiteBanks believe at the time of such temporary waiver or suspension that thefactors which apparently caused such disqualification will be eliminated in areasonably short time, and (z) in addition to the provisions of the foregoingsubclause (y) Agent may, in its sole discretion, warehouse or continue towarehouse Loans (“Discretionary Loans”) which would otherwise fail to qualifyas Eligible Collateral or waive or temporarily suspend or delay any obligationof the Company hereunder in connection with such Discretionary Loans,including, without limitation, suspension of any mandatory prepayment due inconnection with such Discretionary Loans, so long as the aggregate Advancesoutstanding at any one time against such Discretionary Loans shall not exceedFive Million Dollars ($5,000,000.00). Each Loan which the Agent warehouses or continues to warehouse as aparticular type of Loan pursuant to subclause (y) or (z) above, shall, for theentire time such Loan is warehoused pursuant to such subclause, be treated assuch particular type of Loan for all purposes under this Credit Agreement andeach of the other Loan Documents.

 

**ARTICLE 10**

 

THE AGENT

 

10.1                           Appointment.  Each Bank hereby irrevocably designates,appoints and authorizes National City to act as Agent for such Bank under thisCredit Agreement, to act as collateral agent for such Bank under all LoanDocuments and all Uniform Commercial Code Financing Statements filed pursuantthereto and to execute and deliver or accept on behalf of each of the Banks theother Loan Documents.  Each Bank herebyirrevocably appoints, designates and authorizes the Agent to act as the Agentunder and in accordance with the provisions of the Security Agreement.  Each Bank hereby irrevocably authorizes, andeach holder of any Note by the acceptance of such Note shall be deemedirrevocably to authorize, the Agent to take such action on behalf of such Bankand such holder under the provisions of this Credit Agreement and the otherLoan Documents and any other instruments and agreements referred to herein, andto exercise such powers and to perform such duties hereunder as arespecifically delegated to or required of the Agent by the terms hereof,together with such powers as are reasonably incidental thereto.  National City agrees to act as the Agent onbehalf of the Banks to the extent provided in this Credit Agreement, andNational City expressly acknowledges and agrees that it is holding the otherLoan Documents for the benefit of the Banks to secure the payment andperformance of the Notes and the other obligations of the Company under theLoan Documents.

 

10.2                           Delegationof Duties.  The Agent may perform anyof its duties hereunder by or through agents or employees and, subject to **Sections 10.5, 10.6 and 10.7** hereof, shall be entitled toengage and pay for the advice or services of any attorneys, accountants orother experts concerning all matters pertaining to its duties hereunder and torely upon any advice so obtained.

 

10.3                           Natureof Duties; Independent Credit Investigation.  The Agent shall have no duties orresponsibilities except those expressly set forth in this Credit Agreement andthe other Loan Documents and no implied covenants, functions, responsibilities,duties, obligations, or liabilities shall be read into this Credit Agreement orshall otherwise exist.  National Cityagrees that it shall administer its responsibilities and duties as Agenthereunder and under the other Loan Documents with at least the same degree ofcare that it customarily employs in the administration of similar creditfacilities for its own account.  Theduties of the Agent shall be mechanical and administrative in nature and shallinclude the duty to provide to each Bank an executed original of such Bank’sNote and an executed original of this Credit Agreement and a copy of the otherLoan Documents; the Agent shall not have by reason of this Credit Agreement afiduciary or trust relationship in respect of any Bank; and nothing in thisCredit

 

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Agreement, expressed or implied, is intended to or shall be soconstrued as to impose upon the Agent any obligations in respect of this CreditAgreement except as expressly set forth herein. The Agent shall provide theBanks copies of all notices and documents received by it in its capacity asAgent hereunder or under any of the other Loan Documents except as otherwisespecifically provided herein.  Each Bankexpressly acknowledges (i) that the Agent has not made any representationsor warranties to it and that no act by the Agent hereafter taken, including anyreview of the affairs of the Company shall be deemed to constitute anyrepresentation or warranty by the Agent to any Bank; (ii) that it has madeand will continue to make, without reliance upon the Agent, its own independentinvestigation of the financial condition and affairs and its own appraisal ofthe creditworthiness of the Company in connection with this Credit Agreementand the making and continuance of the Warehouse Advances hereunder; and (iii) exceptas expressly provided herein, that the Agent shall have no duty orresponsibility, either initially or on a continuing basis, to provide any Bankwith any credit or other information with respect thereto, whether coming intoits possession before the making of any Advance or at any time or timesthereafter.

 

10.4                           Actionsin Discretion of the Agent; Instructions from the Banks.  The Agent agrees, upon the written request ofthe Requisite Banks, to take or refrain from taking any action of the typespecified as being within the Agent’s rights, powers or discretion herein, providedthat the Agent shall not be required to take any action which exposes the Agentto legal liability or which is contrary to this Credit Agreement or any otherLoan Documents or applicable law.  In theabsence of a request by the Requisite Banks, the Agent shall have authority, inits sole discretion, to take or not to take any such action, unless this CreditAgreement specifically requires the consent of the Requisite Banks or all ofthe Banks.  Any action taken or failureto act pursuant to such instructions or discretion shall be binding on theBanks, subject to **Section 10.6**hereof.  Subject to the provisions of **Section 10.6** hereof, no Bank shall have any right ofaction whatsoever against the Agent as a result of the Agent acting orrefraining from acting hereunder in accordance with the instructions of theRequisite Banks or all of the Banks, as applicable, or in the absence of suchinstructions, in the absolute discretion of the Agent.

 

10.5                           Reimbursementand Indemnification of the Agent by the Company.  The Company unconditionally agrees to pay orreimburse the Agent and save the Agent harmless against (i) liability forthe payment of all reasonable and necessary out-of-pocket costs, expenses anddisbursements, including fees and expenses of counsel and consultants, incurredby the Agent (a) in connection with the development, negotiation,preparation, printing, execution, interpretation and performance of this CreditAgreement and the other Loan Documents, subject to the provisions of **Sections 9.1**and**10.7** hereof, (b) relatingto any Company requested amendments, waivers or consents pursuant to theprovisions hereof, (c) in connection with the enforcement of this CreditAgreement or any other Loan Document or collection of amounts due hereunder orthereunder or the proof and allowability of any claim arising under this CreditAgreement or any other Loan Document, whether in bankruptcy or receivershipproceedings or otherwise, and (d) in any workout or restructuring or inconnection with the protection, preservation, exercise or enforcement of any ofthe terms hereof or of any rights hereunder or under any other Loan Document orin connection with any foreclosure/repurchase, collection or bankruptcyproceedings, and (ii) all liabilities, obligations, losses, damages,penalties, actions, judgments, suits, costs, expenses or disbursements of anykind or nature whatsoever which may be imposed on, incurred by or assertedagainst the Agent, in its capacity as such, in any way relating to or arisingout of this Credit Agreement or any other Loan Document or any action taken oromitted by the Agent hereunder or thereunder; provided that the Companyshall not be liable for any portion of such liabilities, obligations, losses,damages, penalties, actions, judgments, suits, costs, expenses or disbursements(a) if the same results from the Agent’s or the Banks’ gross negligence orwillful misconduct, or (b) if the Company was not given notice of thesubject claim and the opportunity to participate in the defense thereof, at itsexpense, or (c) if the same results from a compromise or settlement

 

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agreement entered into without the consent of the Company which consentshall not be unreasonably withheld.

 

10.6                           ExculpatoryProvisions.  Neither the Agent norany of its directors, officers, employees, agents or affiliates shall (i) beliable to any Bank for any action taken or omitted to be taken by it or themhereunder, or in connection herewith including pursuant to any other LoanDocuments, including without limitation, the provision of any notice or copiesof documents to the Banks, unless caused by its or their own gross negligenceor willful misconduct, (ii) be responsible in any manner to any of theBanks for the effectiveness, enforceability, genuineness, validity or the dueexecution of this Credit Agreement or any other Loan Document or for anyrecital, representation, warranty, document, certificate, report or statementherein or made or furnished under or in connection with this Credit Agreementor any other Loan Document, or (iii) be under any obligation to any of theBanks to ascertain or to inquire as to the performance or observance of any ofthe terms, covenants or conditions hereof or thereof on the part of theCompany, or the financial condition of the Company, or the existence orpossible existence of any Event of Default or default under the Loan Documents.  Neither the Agent nor any Bank nor any oftheir respective directors, officers, employees, agents, attorneys oraffiliates shall be liable to the Company or any other Person for consequentialdamages resulting from any breach of contract, tort or other wrong in connectionwith the negotiation, documentation or administration of the Loan Documents orthe collection of the Warehouse Advances, except for those caused by orresulting from the gross negligence or willful misconduct thereof.

 

10.7                           Reimbursementand Indemnification of the Agent by the Banks.  Each Bank agrees to reimburse and indemnifythe Agent (to the extent not reimbursed by the Company and without limiting theobligation of the Company to do so) in proportion to its Warehouse Pro RataShare from and against all liabilities, obligations, losses, damages,penalties, actions, judgments, suits, costs, expenses or disbursements of anykind or nature whatsoever which may be imposed on, incurred by or assertedagainst the Agent, in its capacity as such, in any way relating to or arisingout of this Credit Agreement or any other Loan Document or any action taken oromitted by the Agent hereunder or thereunder, provided that no suchreimbursement shall be required with respect to expenses incurred by the Agentduring the time period through the date hereof and no Bank shall be liable forany portion of such liabilities, obligations, losses, damages, penalties,actions, judgments, suits, costs, expenses or disbursements if the same relatesto or arises out of the Agent’s gross negligence or willful misconduct.

 

10.8                           Relianceby the Agent.  The Agent shall beentitled to rely upon any writing, telegram, telex or teletype message,facsimile, resolution, notice, consent, certificate, letter, cablegram,statement, order or other document or conversation by telephone or otherwisebelieved by it to be genuine and correct and to have been signed, sent or madeby the proper Person or Persons, and upon the advice and opinions of counseland other professional advisers selected by the Agent.  The Agent shall be fully justified in failingor refusing to take any action hereunder unless it shall first be indemnifiedto is satisfaction by the Banks against any and all liability and expense whichmay be incurred by it by reason of taking or continuing to take any suchaction.

 

10.9                           Noticeof Default.  The Agent shall not bedeemed to have knowledge or notice of the occurrence of any default under theLoan Documents or Event of Default unless the Agent has received written noticefrom a Bank or the Company referring to this Credit Agreement, specificallydescribing such default or Event of Default and stating that such notice is a “noticeof default.”  In the event that the Agentreceives such a notice of an occurrence of an Event of Default, the Agent shallgive prompt notice thereof to the Banks. If an Event of Default shall occur, the Agent shall take such actions asshall be reasonably

 

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directed by the Requisite Banks or all of the Banks, asapplicable.  Unless and until the Agentshall have received such instructions, the Agent may (but shall not beobligated to) take such action or refrain from taking such action, as it shalldeem advisable in the best interests of the Banks.

 

10.10                     The Banksin Their Individual Capacities.  Withrespect to its Warehouse Line Commitment and the Warehouse Advances made by it,the entity which is the Agent shall have the same rights and powers hereunderas any other Bank and may exercise the same as though it were not the Agent,and the term “Banks” shall, unless the context otherwise indicates, include theentity which is the Agent in its individual capacity.  National City and its affiliates and each ofthe Banks and their respective affiliates may, without liability to account,except as prohibited herein, make loans to, accept deposits from, discountdrafts for, act as trustee under indentures of, and generally engage in anykind of banking or trust business with, the Company and its Affiliates, in thecase of the entity which is the Agent, as though it were not acting as Agenthereunder and in the case of each Bank, as though such Bank were not a Bankhereunder.

 

10.11                     Holders ofNotes.  The Agent may deem and treatany payee of any Note as the owner thereof for all purposes hereof unless anduntil written notice of the assignment or transfer thereof shall have beenfiled with the Agent.  Any request,authority or consent of any Person who at the time of making such request orgiving such authority or consent is the holder of any Note shall be conclusiveand binding on any subsequent holder, transferee or assignee of such Note or ofany Note or Notes issued in exchange therefor.

 

10.12                     SuccessorAgent.  The Agent (i) may resignas Agent with the consent of the Company, such consent not to be unreasonablywithheld, or (ii) shall resign if such resignation is requested by theRequisite Banks, in either case (i) or (ii) by giving not less thansixty (60) calendar days prior written notice to the Company and theBanks.  If the Agent shall resign underthis Credit Agreement, then either (a) the Requisite Banks shall appointfrom among the Banks a successor agent for the Banks, subject to the consent ofsuch successor agent by the Company, such consent not to be unreasonablywithheld, or (b) if a successor agent shall not be so appointed andapproved within the sixty (60) calendar day period following the Agent’s noticeto the Banks of its resignation, then the Agent shall appoint, with the consentof the Company, such consent not to be unreasonably withheld, a successor agentwho shall serve as Agent until such time as the Requisite Banks appoint, andthe Company consents, which consent shall not be unreasonably withheld, to theappointment of, a successor agent.  Uponits appointment pursuant to either clause (a) or (b) above, suchsuccessor agent shall succeed to the rights, powers and duties of the Agent andthe term “Agent” shall mean such successor agent, effective upon itsappointment, and the former Agent’s rights, powers and duties as Agent shall beterminated without any other or further act or deed on the part of such formerAgent or any of the parties to this Credit Agreement.  After the resignation of any Agent hereunder,the provisions of this **Article 10**shall not by reason of such resignation be deemed to be released from liabilityfor any actions taken or not taken by it while it was an Agent under thisCredit Agreement.  Notwithstandinganything contained herein to the contrary, during the occurrence andcontinuance of an Event of Default hereunder, all actions may be taken underthis **Section 10.12** withoutthe necessity of obtaining the consent of the Company.

 

10.13                     Calculations.  In the absence of gross negligence or willfulmisconduct, the Agent shall not be liable for any error in computing the amountpayable to any Bank whether in respect of the Warehouse Advances or the fees orother amounts due to the Banks under this Credit Agreement.  In the event an error in computing any amountpayable to any Bank is made, the Agent, the Company and each affected Bankshall, forthwith upon discovery of such error, make such adjustments as shallbe required to

 

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correct such error.  In no event,however, shall the Company be required to pay more than the amount of erroritself.

 

10.14                     Beneficiaries.  Except as set forth in **Sections10.5 and 10.12**hereof, the provisions of this **Article 10**are solely for the benefit of the Agent and the Banks, and the Company shallnot have any rights to rely on or enforce any of the provisions hereof.  In performing its functions and duties underthis Credit Agreement, the Agent shall act solely as agent of the Banks anddoes not assume and shall not be deemed to have assumed any obligation towardor relationship of agency or trust with or for the Company or any other Person.

 

**ARTICLE 11**

 

ADDITIONAL BANKS;ASSIGNMENTS AND PARTICIPATIONS

 

11.1                           AdditionalBanks.  The Agent with the consent ofthe Company may at any time propose that one or more commercial banks each ofwhich is organized under the laws of the United States or any state thereof ororganized under the laws of any other country, or a political subdivisionthereof (provided that such foreign bank is acting through a branch or agencylocated in the United States, or is organized under the laws of a country thatis a member of the Organization for Economic Cooperation and Development or apolitical subdivision of such country), is regularly engaged in the business ofmortgage warehouse lending, and has capital and surplus of at least ThreeHundred Million Dollars ($300,000,000.00) (each, an “Applicant FinancialInstitution”) become an additional Bank hereunder. At such time, the Company orthe Agent, as applicable, shall notify the other parties hereto of the identityof such Applicant Financial Institution and such Applicant FinancialInstitution’s proposed Warehouse Line Commitment (which must not be less thanTen Million Dollars ($10,000,000.00)); provided, however, notwithstandinganything contained herein to the contrary, without the prior written consent ofthe Agent and the Requisite Banks, the Total Warehouse Line Commitment shallnever exceed One Hundred Fifty Million Dollars ($150,000,000.00).  The Agent and the Company shall mutuallyagree on the effective date on which such Applicant Financial Institution shallbecome a party hereto and a Bank hereunder (the “Adjustment Date”).  On such Adjustment Date: (i) the Agentshall deliver to the Company and each of the Banks a Commitment Schedule andAllocation Notice to be effective from such Adjustment Date; (ii) suchApplicant Financial Institution shall pay to the Agent, no later than 12:00noon Prevailing Time, an amount equal to such Applicant Financial Institution’sPro Rata Share of the Aggregate Outstanding Warehouse Balance and the AggregateOutstanding Excess Balance to be funded on such Adjustment Date, as applicable,whereupon, the Agent shall thereupon remit to the Banks their respective sharesof such funds, as applicable, and following such Adjustment Date, fees andinterest accrued on Loans to but not including such Adjustment Date shall bepayable to the Banks in accordance with their respective  Pro Rata Shares prior to such Adjustment Datebefore giving effect to the readjustment thereof pursuant to the Commitment Schedule andAllocation Notice provided by the Company on such Adjustment Date; (iii) the Agent, the Company and such Applicant Financial Institution shall executeand deliver an agreement in the form of that attached hereto as **Exhibit G** (an “Additional Lender Agreement”), whichagreement shall constitute an amendment to this Credit Agreement to the extentnecessary to reflect the inclusion of such Applicant Financial Institution as aBank hereunder, and if in connection with the inclusion of such ApplicantFinancial Institution as a Bank hereunder, the Total Warehouse Line Commitmentwill be increased, the parties hereto will execute any additional amendments tothe Loan Documents as the  Agentreasonably requests to reflect such increase; (iv)  the Company shallexecute and deliver new Notes, as applicable, to such Applicant FinancialInstitution; (v) subject to the requirements described above, suchApplicant Financial Institution shall become a party hereto and a Bankhereunder and shall be entitled to all rights,

 

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benefits and privileges accorded a Bank hereunder and under the otherLoan Documents and shall be subject to all obligations of a Bank hereunder andunder the other Loan Documents; and (vi)  the Applicant FinancialInstitution shall pay to the Agent a registration fee in an amount determinedby the Agent in its sole discretion covering the admission of the ApplicantFinancial Institution into this Credit Agreement.  Notwithstanding anything contained herein tothe contrary, the Company may, with the prior written consent of the Agent andthe Requisite Banks, reduce the Total Warehouse Line Commitment in multiples ofTwo Million Five Hundred Thousand Dollars ($2,500,000.00); provided, however,any such reduction (y) shall not reduce the ratio of the Total Warehouse LineCommitment to the National City Line Commitment to less than 4:1, and (z) anysuch reduction shall be prorated as to the Banks, except reductions which occurduring the annual renewal period which shall only require the consent of theCompany and the Agent.  Furthermore, theCompany may, with the prior written consent of the Agent, remove any financialinstitution as a Bank hereunder with or without cause.  In addition to the foregoing andnotwithstanding anything contained herein to the contrary, the Agent and theCompany may in their joint discretion implement an increase in the TotalWarehouse Line Commitment, on either a temporary or permanent basis, byincreasing any particular Bank’s respective Warehouse Line Commitment;provided:  (i) no Bank’s WarehouseLine Commitment may be increased without such Bank’s prior written consent, (ii) anysuch increase must not be less than Two Million Five Hundred Thousand Dollars($2,500,000.00) and must be a multiple of Two Million Five Hundred ThousandDollars ($2,500,000.00); (iii) the Total Warehouse Line Commitment shallnever exceed One Hundred Fifty Million Dollars ($150,000,000.00) without theprior written consent of the Agent and the Requisite Banks; and (iv) theAgent, the Company and the respective Bank whose Warehouse Line Commitment isincreasing (the “Increased Bank”) shall mutually agree on the Adjustment Datefor such increase and on such Adjustment Date [a] the Agent shall deliver tothe Company and each Bank a Commitment Schedule and Allocation Notice tobe effective from such Adjustment Date, [b] the Agent, the Company and theIncreased Bank shall execute and deliver to the other Banks an amendmentdocument implementing such increase, and [c] the Company shall execute anddeliver a new Warehouse Promissory Note to such Increased Bank reflecting suchincrease.

 

11.2                           Assignments and Participations.  AnyBank may, with the prior written consent of the Agent and Company, whichconsent shall not unreasonably be withheld, assign all or any portion of itsinterests, rights and obligations under this Credit Agreement (including all ora portion of its Warehouse Line Commitment, Loans, or its Warehouse Note) toone or more banks or other financial institutions having experience as aco-bank in credit facilities similar to the Agreement (each an “Assignee”),provided, however, (a) no such consent by the Agent and Company shall berequired in the case of any assignment to another Bank or any Affiliate of suchBank or another Bank; (b) no such consent by Agent and Company shall berequired in the case of an assignment while an Event of Default exists and iscontinuing; and (c) any partial assignment shall be in an amount at leastequal to Five Million Dollars ($5,000,000.00) and integral multiples of FiveHundred Thousand Dollars ($500,000.00) in excess thereof, and (c) eachsuch assignment shall be effected by means of an assignment agreementreasonably acceptable to Agent, the assigning Bank and the Assignee (an “Assignmentand Acceptance Agreement”).  From andafter the effective date specified in the Assignment and Acceptance Agreementapproved by the Agent, the Assignee thereunder shall be a party hereto and havethe rights and obligations of the assigning Bank hereunder, the assigning Bankshall be relieved from its obligations hereunder to a corresponding extent,this Credit Agreement shall be amended to reflect such assignment, and theAgent and the Company shall make appropriate arrangements so that a new Note isissued to the Assignee and such assigning Bank, as appropriate.  In connection with any such assignment, theassigning Bank shall pay to the Agent an administration fee for processing suchassignment in the amount of One Thousand Five Hundred Dollars ($1,500.00). Each Bank may, at no additional cost to theCompany, grant participations in all or any part of the outstanding principalbalance of its Warehouse Notes and its Warehouse Line Commitment to one or

 

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more Persons provided that (i) any such disposition shall not,without the consent of the Company, require the Company to file a registrationstatement with the Securities and Exchange Commission or apply to qualify theWarehouse Advances or the Warehouse Notes under the blue sky law of any state; (ii) theholder of any such participation shall not be entitled to require such Bank totake or omit to take any action hereunder; and (iii) any Person to whomsuch disposition has been made shall not be considered a “Bank” for purposes ofthis Credit Agreement.  No Bank shall, asbetween the Company and that Bank, be relieved of any of its obligationshereunder as a result of any granting of participations in all or any part ofthe outstanding principal balance of its Warehouse Notes or its Warehouse LineCommitment of or other obligations owed to such Bank. Notwithstanding anythingcontained here and to the contrary, any Bank may at any time pledge or sign orany portion of such Bank’s rights under this Credit Agreement and the otherLoan Documents to a Federal Reserve Bank.

 

**ARTICLE 12**

 

WAIVER OF JURY TRIAL

 

THE COMPANY, THE BANKSAND THE AGENT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIMOR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS CREDIT AGREEMENT OR THEOTHER LOAN DOCUMENTS.  THE SCOPE OF THISWAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BEFILED IN ANY COURT THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTYCLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  THE COMPANY, THE BANKS AND THE AGENTACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH SUCH PARTY TOENTER INTO A BUSINESS RELATIONSHIP, THAT THE COMPANY, THE BANKS AND THE AGENTHAVE ALREADY RELIED ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS WITH THEOTHERS.  THE COMPANY, THE BANKS AND THEAGENT FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITSLEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIALRIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOTBE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANYSUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS CREDITAGREEMENT OR THE OTHER LOAN DOCUMENTS. IN THE EVENT OF LITIGATION, THIS CREDIT AGREEMENT MAY BE FILED AS AWRITTEN CONSENT TO A TRIAL BY THE COURT.

 

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IN WITNESS WHEREOF, the parties hereto have causedthis Credit Agreement to be executed as of the day and year first abovewritten.

 

 
|   | **WASHTENAW MORTGAGE COMPANY**     |
|--------|------------------------------------|
|   |                               |
|   |                               |
|   | By:                                |   |   |
|   |                               |
|   | Title:                             |   |   |
|   |                               |
|   | Address:                           | Washtenaw Mortgage  Company |
|   |                               | 3767 Ranchero Drive |
|   |                               | Ann Arbor, Michigan  48108 |
|   | Attn:                              | Howard Nathan |
|   |                               | Vice President and CFO |
|   | Fax:                               | 734-741-5663 |
|   | Ph:                                | 734-662-9733 (x611) |
|   |                               |   |
|   |                               | (the “Company”) |
|   |                               |   |
|   |                               |   |
|   | **NATIONAL CITY BANK OF KENTUCKY** |
|   |                               |
|   |                               |
|   | By:                                |   |   |
|   |                               |
|   | Title:                             |   |   |
|   |                               |
|   | Address:                           | National City Bank  of Kentucky |
|   |                               | 101 South Fifth Street |
|   |                               | Louisville, KY 40202 |
|   | Attn:                              | Gary Sieveking |
|   |                               | Senior Vice President |
|   | Fax:                               | (502) 581-4154 |
|   | Ph:                                | (502) 581-7660 |
|   |                               |   |
|   |                               | (“National City”) |
|        |                                    |  |  |  |  |

 

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|   | **COMERICA BANK**        |
|--------|--------------------------|
|   |                     |
|   |                     |
|   | By:                      |   |   |
|   |                     |
|   | Title:                   |   |   |
|   |                     |
|   | Address:                 | Comerica Bank |
|   |                     | 500 Woodward Ave., MC:  3256 |
|   |                     | Detroit, Michigan 48226 |
|   | Attn:                    | Heather Hogle |
|   |                     | Account Representative |
|   | Fax:                     | (313) 222-9295 |
|   | Ph:                      | (313) 222-5740 |
|   |                     |   |
|   |                     | (“Comerica”) |
|   |                     |   |
|   |                     |   |
|   | **COLONIAL  BANK, N.A.** |
|   |                     |
|   |                     |
|   | By:                      |   |   |
|   |                     |
|   | Title:                   |   |   |
|   |                     |
|   | Address:                 | Mortgage Warehouse  Lending Division |
|   |                     | 201 East Pine Street,  Suite 730 |
|   |                     | Orlando, Florida 32801 |
|   | Attn:                    | Jennifer Branker |
|   |                     | Vice President |
|   | Fax:                     | (407) 835-6690 |
|   | Ph:                      | (407) 835-6700 |
|   |                     |   |
|   |                     | (“Colonial”) |
|        |                          |  |  |  |  |

 

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|   | **NATIONAL CITY BANK OF KENTUCKY,  in its** |
|--------|---------------------------------------------|
|   | **capacity as Agent for the Banks**         |
|   |                                        |
|   |                                        |
|   | By:                                         |   |   |
|   |                                        |
|   | Title:                                      |   |   |
|   |                                        |
|   | Address:                                    | National City Bank  of Kentucky |
|   |                                        | 101 South Fifth Street |
|   |                                        | Louisville, KY  40202 |
|   | Attn:                                       | Gary Sieveking |
|   |                                        | Senior Vice President |
|   | Fax:                                        | (502) 581- 4154 |
|   | Ph:                                         | (502) 581-7660 |
|   |                                        |   |
|   |                                        | (the “Agent”) |
|        |                                             |  |  |  |  |

 

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