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                                                                    EXHIBIT 10.3

                                  DIGITAS INC.

                      2000 STOCK OPTION AND INCENTIVE PLAN

SECTION 1.   GENERAL PURPOSE OF THE PLAN; DEFINITIONS
             ----------------------------------------

         The name of the plan is the Digitas Inc. 2000 Stock Option and
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees, Independent Directors and other key persons (including
consultants) of Digitas Inc. (the "Company") and its Subsidiaries upon whose
judgment, initiative and efforts the Company largely depends for the successful
conduct of its business to acquire a proprietary interest in the Company. It is
anticipated that providing such persons with a direct stake in the Company's
welfare will assure a closer identification of their interests with those of the
Company, thereby stimulating their efforts on the Company's behalf and
strengthening their desire to remain with the Company.

         The following terms shall be defined as set forth below:

         "Act" means the Securities Exchange Act of 1934, as amended.

         "Administrator" is defined in Section 2(a).

         "Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock
Awards, Unrestricted Stock Awards, Performance Share Awards and Dividend
Equivalent Rights.

         "Board" means the Board of Directors of the Company.

         "Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

         "Committee" means the Committee of the Board referred to in Section 2.

         "Covered Employee" means an employee who is a "Covered Employee" within
the meaning of Section 162(m) of the Code.

         "Deferred Stock Award" means Awards granted pursuant to Section 8.

         "Dividend Equivalent Right" means Awards granted pursuant to
Section 12.

         "Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 18.
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         "Fair Market Value" of the Stock on any given date means the fair
market value of the Stock determined in good faith by the Administrator;
provided, however, that (i) if the Stock is admitted to quotation on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"), NASDAQ National System or a national securities exchange, the
determination shall be made by reference to market quotations. If there are no
market quotations for such date, the determination shall be made by reference to
the last date preceding such date for which there are market quotations.

         "Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.

         "Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.

         "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

         "Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.

         "Performance Share Award" means Awards granted pursuant to Section 10.

         "Performance Cycle" means one or more periods of time, which may be of
varying and overlapping durations, as the Administrator may select, over which
the attainment of one or more performance criteria will be measured for the
purpose of determining a participant's right to and the payment of a Performance
Share Award, Restricted Stock Award or Deferred Stock Award.

         "Restricted Stock Award" means Awards granted pursuant to Section 7.

         "Stock" means the Common Stock, par value $0.01 per share, of the
Company, subject to adjustments pursuant to Section 3.

         "Stock Appreciation Right" means any Award granted pursuant to
Section 6.

         "Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities beginning with
the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50 percent or more of the economic interest or the total combined
voting power of all classes of stock or other interests in one of the other
corporations or entities in the chain.

         "Unrestricted Stock Award" means any Award granted pursuant to
Section 9.

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SECTION 2.   ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO
             --------------------------------------------------
             SELECT PARTICIPANTS AND DETERMINE AWARDS
             ----------------------------------------

         (a)      Committee.  The Plan shall be administered by either the Board
                  ---------
or a committee of not less than two Independent Directors (in either case, the
"Administrator").

         (b)      Powers of Administrator. The Administrator shall have the
                  -----------------------
         power and authority to grant Awards consistent with the terms of the
         Plan, including the power and authority:

                  (i)    to select the individuals to whom Awards may from time
         to time be granted;

                  (ii)   to determine the time or times of grant, and the
         extent, if any, of Incentive Stock Options, Non-Qualified Stock
         Options, Stock Appreciation Rights, Restricted Stock Awards, Deferred
         Stock Awards, Unrestricted Stock Awards, Performance Share Awards and
         Dividend Equivalent Rights, or any combination of the foregoing,
         granted to any one or more participants;

                  (iii)  to determine the number of shares of Stock to be
         covered by any Award;

                  (iv)   to determine and modify from time to time the terms and
         conditions, including restrictions, not inconsistent with the terms of
         the Plan, of any Award, which terms and conditions may differ among
         individual Awards and participants, and to approve the form of written
         instruments evidencing the Awards;

                  (v)    to accelerate at any time the exercisability or vesting
         of all or any portion of any Award;

                  (vi)   subject to the provisions of Section 5(a)(ii), to
         extend at any time the period in which Stock Options may be exercised;

                  (vii)  to determine at any time whether, to what extent, and
         under what circumstances distribution or the receipt of Stock and other
         amounts payable with respect to an Award shall be deferred either
         automatically or at the election of the participant and whether and to
         what extent the Company shall pay or credit amounts constituting
         interest (at rates determined by the Administrator) or dividends or
         deemed dividends on such deferrals; and

                  (viii) at any time to adopt, alter and repeal such rules,
         guidelines and practices for administration of the Plan and for its own
         acts and proceedings as it shall deem advisable; to interpret the terms
         and provisions of the Plan and any Award (including related written
         instruments); to make all determinations it deems advisable for the
         administration of the Plan; to decide all disputes arising in
         connection with the Plan; and to otherwise supervise the administration
         of the Plan.

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         All decisions and interpretations of the Administrator shall be binding
on all persons, including the Company and Plan participants.

         (c)      Delegation of Authority to Grant Awards. The Administrator, in
                  ---------------------------------------
its discretion, may delegate to the Chief Executive Officer of the Company all
or part of the Administrator's authority and duties with respect to the granting
of Awards at Fair Market Value, to individuals who are not subject to the
reporting and other provisions of Section 16 of the Act or "covered employees"
within the meaning of Section 162(m) of the Code. Any such delegation by the
Administrator shall include a limitation as to the amount of Awards that may be
granted during the period of the delegation and shall contain guidelines as to
the determination of the exercise price of any Stock Option or Stock
Appreciation Right, the conversion ratio or price of other Awards and the
vesting criteria. The Administrator may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Administrator's delegate or delegates that were consistent with the terms of
the Plan.

SECTION 3.   STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
             ----------------------------------------------------

         (a)      Stock Issuable. The maximum number of shares of Stock reserved
                  --------------
and available for issuance under the Plan shall be 3,859,100 shares. For
purposes of this limitation, the shares of Stock underlying any Awards under
this Plan which are forfeited, canceled, reacquired by the Company, satisfied
without the issuance of Stock or otherwise terminated (other than by exercise)
shall be added back to the shares of Stock available for issuance under the
Plan. In addition, the shares of Stock underlying any awards under the Bronner
Slosberg Humphrey Co. 1998 Option Plan and the Bronner Slosberg Humphrey Co.
1999 Stock Option Plan which are forfeited, canceled, reacquired, satisfied
without the issuance of Stock or otherwise terminated (other than by exercise)
shall be added to the shares of Stock available for issuance under the Plan,
thereby increasing the maximum number of shares of Stock reserved and available
for issuance under the Plan set forth above. Subject to such overall limitation,
shares of Stock may be issued up to such maximum number pursuant to any type or
types of Award; provided, however, that from and after the date grants under
this Plan become subject to Section 162(m) of the Code, that Stock Options or
Stock Appreciation Rights with respect to no more than 1,000,000 shares of Stock
may be granted to any one individual participant during any one year period. The
shares available for issuance under the Plan may be authorized but unissued
shares of Stock or shares of Stock reacquired by the Company and held in its
treasury.

         (b)      Changes in Stock. If, as a result of any reorganization,
                  ----------------
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Company's capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non- cash assets are distributed with respect to such shares of Stock or other
securities, the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum

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number of shares reserved for issuance under the Plan, (ii) the number of Stock
Options or Stock Appreciation Rights that can be granted to any one individual
participant, (iii) the number and kind of shares or other securities subject to
any then outstanding Awards under the Plan, and (iv) the price for each share
subject to any then outstanding Stock Options and Stock Appreciation Rights
under the Plan, without changing the aggregate exercise price (i.e., the
exercise price multiplied by the number of Stock Options and Stock Appreciation
Rights) as to which such Stock Options and Stock Appreciation Rights remain
exercisable. The adjustment by the Administrator shall be final, binding and
conclusive. No fractional shares of Stock shall be issued under the Plan
resulting from any such adjustment, but the Administrator in its discretion may
make a cash payment in lieu of fractional shares.

         The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Administrator that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an Incentive Stock Option, without
the consent of the participant, if it would constitute a modification, extension
or renewal of the Option within the meaning of Section 424(h) of the Code.

         (c)      Mergers and Other Sale Events. Unless otherwise provided in
                  -----------------------------
any individual Award, in the case of and subject to the consummation of (i) the
dissolution or liquidation of the Company, (ii) the sale of all or substantially
all of the assets of the Company on a consolidated basis to an unrelated person
or entity, (iii) a merger, reorganization, consolidation or other transaction in
which the holders of the Company's outstanding voting power immediately prior to
such transaction do not own a majority of the outstanding voting power of the
surviving or resulting entity immediately upon completion of such transaction,
or (iv) the sale of all of the Stock of the Company to an unrelated person or
entity (in each case, regardless of the form thereof, a "Sale Event"), the
Awards issued hereunder shall terminate upon the effectiveness of any such Sale
Event, unless provision is made in connection with such transaction in the sole
discretion of the parties to such Sale Event for the assumption of Awards
theretofore granted, or the substitution for such Awards of new Awards of the
successor entity or a parent or subsidiary thereof, with such adjustment as to
the number and kind of shares and the per share exercise prices as may be
necessary in order that each original Award and substitute Award shall be of
equal value. In the event that parties to the Sale Event do not agree to
assumption or substitution of the Awards, all Awards outstanding shall
accelerate and become exercisable, and each grantee shall be permitted, within a
specified period of time prior to the consummation of the Sale Event as
determined by the Administrator, to exercise all outstanding Awards held by such
grantee which are then exercisable or will become exercisable upon the
effectiveness of the Sale Event; provided, however, that such acceleration of
unvested Awards and such exercise of the Awards so accelerated shall be subject
to the effectiveness of the Sale Event.

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         (d)      Substitute Awards. The Administrator may grant Awards under
                  -----------------
the Plan in substitution for stock and stock based awards held by employees of
another corporation who become employees of the Company or a Subsidiary as the
result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Administrator may direct
that the substitute awards be granted on such terms and conditions as the
Administrator considers appropriate in the circumstances. Any substitute Awards
granted under the Plan shall not count against the share limitation set forth in
Section 3(a).

SECTION 4.   ELIGIBILITY
             -----------

         Participants in the Plan will be such full or part-time officers and
other employees, Independent Directors and key persons (including consultants
and prospective employees) of the Company and its Subsidiaries as are selected
from time to time by the Administrator in its sole discretion.

SECTION 5.   STOCK OPTIONS
             -------------

         Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.

         Stock Options granted under the Plan may be either Incentive Stock
Options or Non- Qualified Stock Options. Incentive Stock Options may be granted
only to employees of the Company or any Subsidiary that is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code. To the extent
that any Option does not qualify as an Incentive Stock Option, it shall be
deemed a Non-Qualified Stock Option.

         No Incentive Stock Option shall be granted under the Plan after
February 17, 2010.

         (a)      Stock Options Granted to Employees and Key Persons. The
                  --------------------------------------------------
Administrator in its discretion may grant Stock Options to eligible employees
and key persons of the Company or any Subsidiary. Stock Options granted pursuant
to this Section 5(a) shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
terms of the Plan, as the Administrator shall deem desirable. If the
Administrator so determines, Stock Options may be granted in lieu of cash
compensation at the participant's election, subject to such terms and conditions
as the Administrator may establish.

                  (i)    Exercise Price. The exercise price per share for the
                         --------------
         Stock covered by a Stock Option granted pursuant to this Section 5(a)
         shall be determined by the Administrator at the time of grant but shall
         not be less than 100 percent of the Fair Market Value on the date of
         grant in the case of Incentive Stock Options, or 85 percent of the Fair
         Market Value on the date of grant, in the case of Non-Qualified Stock
         Options (other than options granted in lieu of cash compensation). If
         an employee owns or is deemed to own (by reason of the attribution
         rules of Section 424(d) of the

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         Code) more than 10 percent of the combined voting power of all classes
         of stock of the Company or any parent or subsidiary corporation and an
         Incentive Stock Option is granted to such employee, the option price of
         such Incentive Stock Option shall be not less than 110 percent of the
         Fair Market Value on the grant date.

                  (ii)   Option Term. The term of each Stock Option shall be
                         -----------
         fixed by the Administrator, but no Stock Option shall be exercisable
         more than ten years after the date the option is granted. If an
         employee owns or is deemed to own (by reason of the attribution rules
         of Section 424(d) of the Code) more than 10 percent of the combined
         voting power of all classes of stock of the Company or any parent or
         subsidiary corporation and an Incentive Stock Option is granted to such
         employee, the term of such option shall be no more than five years from
         the date of grant.

                  (iii)  Exercisability; Rights of a Stockholder. Stock Options
                         ---------------------------------------
         shall become exercisable at such time or times, whether or not in
         installments, as shall be determined by the Administrator at or after
         the grant date; provided, however, that Stock Options granted in lieu
         of compensation shall be exercisable in full as of the grant date. The
         Administrator may at any time accelerate the exercisability of all or
         any portion of any Stock Option. An optionee shall have the rights of a
         stockholder only as to shares acquired upon the exercise of a Stock
         Option and not as to unexercised Stock Options.

                  (iv)   Method of Exercise. Stock Options may be exercised in
                         ------------------
         whole or in part, by giving written notice of exercise to the Company,
         specifying the number of shares to be purchased. Payment of the
         purchase price may be made by one or more of the following methods to
         the extent provided in the Option Award agreement:

                         (A) In cash, by certified or bank check or other
                  instrument acceptable to the Administrator;

                         (B) Through the delivery (or attestation to the
                  ownership) of shares of Stock that have been purchased by the
                  optionee on the open market or that have been beneficially
                  owned by the optionee for at least six months and are not then
                  subject to restrictions under any Company plan. Such
                  surrendered shares shall be valued at Fair Market Value on the
                  exercise date;

                         (C) By the optionee delivering to the Company a
                  properly executed exercise notice together with irrevocable
                  instructions to a broker to promptly deliver to the Company
                  cash or a check payable and acceptable to the Company for the
                  purchase price; provided that in the event the optionee
                  chooses to pay the purchase price as so provided, the optionee
                  and the broker shall comply with such procedures and enter
                  into such agreements of indemnity and other agreements as the
                  Administrator shall prescribe as a condition of such payment
                  procedure; or

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                         (D) By the optionee delivering to the Company a
                  promissory note if the Board has expressly authorized the loan
                  of funds to the optionee for the purpose of enabling or
                  assisting the optionee to effect the exercise of his Stock
                  Option; provided that at least so much of the exercise price
                  as represents the par value of the Stock shall be paid other
                  than with a promissory note.

         Payment instruments will be received subject to collection. The
         delivery of certificates representing the shares of Stock to be
         purchased pursuant to the exercise of a Stock Option will be contingent
         upon receipt from the optionee (or a purchaser acting in his stead in
         accordance with the provisions of the Stock Option) by the Company of
         the full purchase price for such shares and the fulfillment of any
         other requirements contained in the Stock Option or applicable
         provisions of laws. In the event an optionee chooses to pay the
         purchase price by previously-owned shares of Stock through the
         attestation method, the number of shares of Stock transferred to the
         optionee upon the exercise of the Stock Option shall be net of the
         number of shares attested to.

                  (v)    Annual Limit on Incentive Stock Options. To the extent
                         ---------------------------------------
         required for "incentive stock option" treatment under Section 422 of
         the Code, the aggregate Fair Market Value (determined as of the time of
         grant) of the shares of Stock with respect to which Incentive Stock
         Options granted under this Plan and any other plan of the Company or
         its parent and subsidiary corporations become exercisable for the first
         time by an optionee during any calendar year shall not exceed $100,000.
         To the extent that any Stock Option exceeds this limit, it shall
         constitute a Non-Qualified Stock Option.

         (b)      Stock Options Granted to Independent Directors.
                  ----------------------------------------------

                  (i)    Grant of Options.
                         ----------------

                         (A) Each Independent Director, within the fifth
                  business day following the annual meeting of the Company,
                  shall automatically be granted by such day a Non-Qualified
                  Stock Option to acquire 78,000 shares of Stock.

                         (B) The exercise price per share for the Stock covered
                  by a Stock Option granted under this Section 5(b) shall be
                  equal to the Fair Market Value of the Stock on the date the
                  Stock Option is granted.

                         (C) The Administrator, in its discretion, may grant
                  additional Non- Qualified Stock Options to Independent
                  Directors. Any such grant may vary among individual
                  Independent Directors.

                  (ii)   Exercise; Termination.
                         ---------------------

                         (A) Unless otherwise determined by the Administrator,
                  an Option granted under Section 5(b) shall be exercisable as
                  follows: 25% at the first

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             anniversary of the grant date and an additional 6.25% on the first
             day of each calendar quarter thereafter until fully exercisable. An
             Option issued under this Section 5(b) shall not be exercisable
             after the expiration of ten years from the date of grant.

                  (B) Options granted under this Section 5(b) may be exercised
             only by written notice to the Company specifying the number of
             shares to be purchased. Payment of the full purchase price of the
             shares to be purchased may be made by one or more of the methods
             specified in Section 5(a)(iv). An optionee shall have the rights of
             a stockholder only as to shares acquired upon the exercise of a
             Stock Option and not as to unexercised Stock Options.

         (c) Non-transferability of Options. No Stock Option shall be trans-
             ------------------------------
ferable by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee, or by the optionee's legal representative or
guardian in the event of the optionee's incapacity. Notwithstanding the
foregoing, the Administrator, in its sole discretion, may provide in the Award
agreement regarding a given Option that the optionee may transfer his
Non-Qualified Stock Options to members of his immediate family, to trusts for
the benefit of such family members, or to partnerships in which such family
members are the only partners, provided that the transferee agrees in writing
with the Company to be bound by all of the terms and conditions of this Plan and
the applicable Option.

SECTION 6.   STOCK APPRECIATION RIGHTS.
             -------------------------

         (a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is
             -----------------------------------
an Award entitling the recipient to receive an amount in cash or shares of Stock
or a combination thereof having a value equal to the excess of the Fair Market
Value of the Stock on the date of exercise over the exercise price Stock
Appreciation Right, which price shall not be less than 85 percent of the Fair
Market Value of the Stock on the date of grant (or more than the option exercise
price per share, if the Stock Appreciation Right was granted in tandem with a
Stock Option) multiplied by the number of shares of Stock with respect to which
the Stock Appreciation Right shall have been exercised, with the Administrator
having the right to determine the form of payment.

         (b) Grant and Exercise of Stock Appreciation Rights. Stock Appreciation
             -----------------------------------------------
Rights may be granted by the Administrator in tandem with, or independently of,
any Stock Option granted pursuant to Section 5 of the Plan. In the case of a
Stock Appreciation Right granted in tandem with a Non-Qualified Stock Option,
such Stock Appreciation Right may be granted either at or after the time of the
grant of such Option. In the case of a Stock Appreciation Right granted in
tandem with an Incentive Stock Option, such Stock Appreciation Right may be
granted only at the time of the grant of the Option.

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         A Stock Appreciation Right or applicable portion thereof granted in
tandem with a Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option.

         (c) Terms and Conditions of Stock Appreciation Rights.  Stock
             -------------------------------------------------
Appreciation Rights shall be subject to such terms and conditions as shall be
determined from time to time by the Administrator, subject to the following:

             (i)   Stock Appreciation Rights granted in tandem with Options
         shall be exercisable at such time or times and to the extent that the
         related Stock Options shall be exercisable.

             ii)   Upon exercise of a Stock Appreciation Right, the applicable
         portion of any related Option shall be surrendered.

             (iii) All Stock Appreciation Rights shall be exercisable during the
         participant's lifetime only by the participant or the participant's
         legal representative.

SECTION 7.   RESTRICTED STOCK AWARDS
             -----------------------

         (a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
             ---------------------------------
Award entitling the recipient to acquire, at par value or such other higher
purchase price determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of
grant ("Restricted Stock"). Conditions may be based on continuing employment (or
other business relationship) and/or achievement of pre-established performance
goals and objectives. The grant of a Restricted Stock Award is contingent on the
participant executing the Restricted Stock Award agreement. The terms and
conditions of each such agreement shall be determined by the Administrator, and
such terms and conditions may differ among individual Awards and participants.

         (b) Rights as a Stockholder. Upon execution of a written instrument
             -----------------------
setting forth the Restricted Stock Award and payment of any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the
Administrator shall otherwise determine, certificates evidencing the Restricted
Stock shall remain in the possession of the Company until such Restricted Stock
is vested as provided in Section 7(d) below, and the participant shall be
required, as a condition of the grant, to deliver to the Company a stock power
endorsed in blank.

         (c) Restrictions. Restricted Stock may not be sold, assigned, trans-
             ------------
ferred, pledged or otherwise encumbered or disposed of except as specifically
provided herein or in the Restricted Stock Award agreement. If a participant's
employment (or other business relationship) with the Company and its
Subsidiaries terminates for any reason, the Company

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shall have the right to repurchase Restricted Stock that has not vested at the
time of termination at its original purchase price, from the participant or the
participant's legal representative.

         (d) Vesting of Restricted Stock. The Administrator at the time of
             ---------------------------
grant shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the
non-transferability of the Restricted Stock and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such pre-established performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer be
Restricted Stock and shall be deemed "vested." Except as may otherwise be
provided by the Administrator either in the Award agreement or, subject to
Section 15 below, in writing after the Award agreement is issued, a
participant's rights in any shares of Restricted Stock that have not vested
shall automatically terminate upon the participant's termination of employment
(or other business relationship) with the Company and its Subsidiaries and such
shares shall be subject to the Company's right of repurchase as provided in
Section 7(c) above.

         (e) Waiver, Deferral and Reinvestment of Dividends. The Restricted
             ----------------------------------------------
Stock Award agreement may require or permit the immediate payment, waiver,
deferral or investment of dividends paid on the Restricted Stock.

SECTION 8.   DEFERRED STOCK AWARDS
             ---------------------

         (a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award
             -------------------------------
of phantom stock units to a participant, subject to restrictions and conditions
as the Administrator may determine at the time of grant. Conditions may be based
on continuing employment (or other business relationship) and/or achievement of
pre-established performance goals and objectives. The grant of a Deferred Stock
Award is contingent on the participant executing the Deferred Stock Award
agreement. The terms and conditions of each such agreement shall be determined
by the Administrator, and such terms and conditions may differ among individual
Awards and participants. At the end of the deferral period, the Deferred Stock
Award, to the extent vested, shall be paid to the participant in the form of
shares of Stock.

         (b) Election to Receive Deferred Stock Awards in Lieu of Compensation.
             -----------------------------------------------------------------
The Administrator may, in its sole discretion, permit a participant to elect to
receive a portion of the cash compensation or Restricted Stock Award otherwise
due to such participant in the form of a Deferred Stock Award. Any such election
shall be made in writing and shall be delivered to the Company no later than the
date specified by the Administrator and in accordance with rules and procedures
established by the Administrator. The Administrator shall have the sole right to
determine whether and under what circumstances to permit such elections and to
impose such limitations and other terms and conditions thereon as the
Administrator deems appropriate.

         (c) Rights as a Stockholder.  During the deferral period, a participant
             -----------------------
shall have no rights as a stockholder; provided, however, that the participant
may be credited with Dividend

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Equivalent Rights with respect to the phantom stock units underlying his
Deferred Stock Award, subject to such terms and conditions as the Administrator
may determine.

         (d) Restrictions.  A Deferred Stock Award may not be sold, assigned,
             ------------
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.

         (e) Termination. Except as may otherwise be provided by the
             -----------
Administrator either in the Award agreement or, subject to Section 15 below, in
writing after the Award agreement is issued, a participant's right in all
Deferred Stock Awards that have not vested shall automatically terminate upon
the participant's termination of employment (or cessation of business
relationship) with the Company and its Subsidiaries for any reason.

SECTION 9.   UNRESTRICTED STOCK AWARDS
             -------------------------

         Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
         -----------------------------------
discretion, grant (or sell at par value or such higher purchase price determined
by the Administrator) an Unrestricted Stock Award to any participant pursuant to
which such participant may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
or sold as described in the preceding sentence in respect of past services or
other valid consideration, or in lieu of cash compensation due to such
participant.

SECTION 10.  PERFORMANCE SHARE AWARDS
             ------------------------

         (a) Nature of Performance Share Awards. A Performance Share Award is an
             ----------------------------------
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Administrator may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. The Administrator in its sole discretion shall determine whether and to
whom Performance Share Awards shall be made, the performance goals, the periods
during which performance is to be measured, and all other limitations and
conditions.

         (b) Rights as a Stockholder. A participant receiving a Performance
             -----------------------
Share Award shall have the rights of a stockholder only as to shares actually
received by the participant under the Plan and not with respect to shares
subject to the Award but not actually received by the participant. A participant
shall be entitled to receive a stock certificate evidencing the acquisition of
shares of Stock under a Performance Share Award only upon satisfaction of all
conditions specified in the Performance Share Award agreement (or in a
performance plan adopted by the Administrator).

         (c) Termination. Except as may otherwise be provided by the
             -----------
Administrator either in the Award agreement or, subject to Section 15 below, in
writing after the Award agreement is issued, a participant's rights in all
Performance Share Awards shall automatically terminate upon the participant's
termination of employment (or cessation of business relationship) with the
Company and its Subsidiaries for any reason.

                                       12
<PAGE>

         (d) Acceleration, Waiver, Etc. At any time prior to the participant's
             -------------------------
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate, waive
or, subject to Section 15, amend any or all of the goals, restrictions or
conditions applicable to a Performance Share Award.

SECTION 11.  PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
             ---------------------------------------------

         Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award, Deferred Stock Award or Performance Share Award granted
to a Covered Employee is intended to qualify as "Performance-based Compensation"
under Section 162(m) of the Code and the regulations promulgated thereunder (a
"Performance-based Award"), such Award shall comply with the provisions set
forth below:

         (a) Performance Criteria. The performance criteria used in performance
             --------------------
goals governing Performance-based Awards granted to Covered Employees may
include any or all of the following: (i) the Company's return on equity, assets,
capital or investment, (ii) pre-tax or after-tax profit levels of the Company or
any Subsidiary, a division, an operating unit or a business segment of the
Company, or any combination of the foregoing; (iii) cash flow, funds from
operations or similar measure; (iv) total shareholder return; (v) changes in the
market price of the Stock; (vi) sales or market share; or (vii) earnings per
share.

         (b) Grant of Performance-based Awards. With respect to each
             ---------------------------------
Performance-based Award granted to a Covered Employee, the Committee shall
select, within the first 90 days of a Performance Cycle (or, if shorter, within
the maximum period allowed under Section 162(m) of the Code) the performance
criteria for such grant, and the achievement targets with respect to each
performance criterion (including a threshold level of performance below which no
amount will become payable with respect to such Award). Each Performance-based
Award will specify the amount payable, or the formula for determining the amount
payable, upon achievement of the various applicable performance targets. The
performance criteria established by the Committee may be (but need not be)
different for each Performance Cycle and different goals may be applicable to
Performance-based Awards to different Covered Employees.

         (c) Payment of Performance-based Awards. Following the completion of a
             -----------------------------------
Performance Cycle, the Committee shall meet to review and certify in writing
whether, and to what extent, the performance criteria for the Performance Cycle
have been achieved and, if so, to also calculate and certify in writing the
amount of the Performance-based Awards earned for the Performance Cycle. The
Committee shall then determine the actual size of each Covered Employee's
Performance-based Award, and, in doing so, may reduce or eliminate the amount of
the Performance-based Award for a Covered Employee if, in its sole judgment,
such reduction or elimination is appropriate.

                                       13
<PAGE>

         (d) Maximum Award Payable.  The maximum Performance-based Award payable
             ---------------------
to any one Covered Employee under the Plan for a Performance Cycle is 850,000
shares of Stock (subject to adjustment as provided in Section 3(b) hereof).

SECTION 12.  DIVIDEND EQUIVALENT RIGHTS
             --------------------------

         (a) Dividend Equivalent Rights. A Dividend Equivalent Right is an Award
             --------------------------
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other award to which it relates) if such shares had been issued to and held
by the recipient. A Dividend Equivalent Right may be granted hereunder to any
participant as a component of another Award or as a freestanding award. The
terms and conditions of Dividend Equivalent Rights shall be specified in the
grant. Dividend equivalents credited to the holder of a Dividend Equivalent
Right may be paid currently or may be deemed to be reinvested in additional
shares of Stock, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any. Dividend Equivalent Rights may be settled in cash or shares
of Stock or a combination thereof, in a single installment or installments. A
Dividend Equivalent Right granted as a component of another Award may provide
that such Dividend Equivalent Right shall be settled upon exercise, settlement,
or payment of, or lapse of restrictions on, such other award, and that such
Dividend Equivalent Right shall expire or be forfeited or annulled under the
same conditions as such other award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other award.

         (b) Interest Equivalents. Any Award under this Plan that is settled in
             --------------------
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.

         (c) Termination. Except as may otherwise be provided by the
             -----------
Administrator either in the Award agreement or, subject to Section 15 below, in
writing after the Award agreement is issued, a participant's rights in all
Dividend Equivalent Rights or interest equivalents shall automatically terminate
upon the participant's termination of employment (or cessation of business
relationship) with the Company and its Subsidiaries for any reason.

SECTION 13.  TAX WITHHOLDING
             ---------------

         (a) Payment by Participant. Each participant shall, no later than the
             ----------------------
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to such
income. The Company and its Subsidiaries shall, to the extent permitted by law,
have the

                                       14
<PAGE>

right to deduct any such taxes from any payment of any kind otherwise due to the
participant. The Company's obligation to deliver stock certificates to any
participant is subject to and conditioned on tax obligations being satisfied by
the participant.

         (b) Payment in Stock. Subject to approval by the Administrator, a
             ----------------
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.

SECTION 14.  TRANSFER, LEAVE OF ABSENCE, ETC.
             -------------------------------

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or

         (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.

SECTION 15.  AMENDMENTS AND TERMINATION
             --------------------------

         The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. If and to the extent determined by the Administrator to be
required by the Code to ensure that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code or to ensure that compensation
earned under Awards qualifies as performance-based compensation under Section
162(m) of the Code, if and to the extent intended to so qualify, Plan amendments
shall be subject to approval by the Company stockholders entitled to vote at a
meeting of stockholders. Nothing in this Section 15 shall limit the
Administrator's authority to take any action permitted pursuant to Section 3(c).

SECTION 16.  STATUS OF PLAN
             --------------

         With respect to the portion of any Award that has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Administrator shall otherwise expressly
determine in connection with any Award or Awards. In its sole discretion,

                                       15
<PAGE>

the Administrator may authorize the creation of trusts or other arrangements to
meet the Company's obligations to deliver Stock or make payments with respect to
Awards hereunder, provided that the existence of such trusts or other
arrangements is consistent with the foregoing sentence.

SECTION 17.  GENERAL PROVISIONS
             ------------------

         (a) No Distribution; Compliance with Legal Requirements. The
             ---------------------------------------------------
Administrator may require each person acquiring Stock pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring
the shares without a view to distribution thereof.

         No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing of
such stop-orders and restrictive legends on certificates for Stock and Awards as
it deems appropriate.

         (b) Delivery of Stock Certificates. Stock certificates to participants
             ------------------------------
under this Plan shall be deemed delivered for all purposes when the Company or a
stock transfer agent of the Company shall have mailed such certificates in the
United States mail, addressed to the participant, at the participant's last
known address on file with the Company.

         (c) Other Compensation Arrangements; No Employment Rights. Nothing
             -----------------------------------------------------
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.

         (d) Trading Policy Restrictions.  Option exercises and other Awards
             ---------------------------
under the Plan shall be subject to such Company's insider trading policy, as in
effect from time to time.

SECTION 18.  EFFECTIVE DATE OF PLAN
             ----------------------

         This Plan shall become effective upon approval by the holders of a
majority of the votes cast at a meeting of stockholders at which a quorum is
present. Subject to such approval by the stockholders and to the requirement
that no Stock may be issued hereunder prior to such approval, Stock Options and
other Awards may be granted hereunder on and after adoption of this Plan by the
Board.

                                       16
<PAGE>

SECTION 19.  GOVERNING LAW
             -------------

         This Plan and all Awards and actions taken thereunder shall be governed
by, and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.

DATE APPROVED BY BOARD OF DIRECTORS: February 18, 2000

DATE APPROVED BY STOCKHOLDERS: February 18, 2000

                                       17<PAGE>

                                                                    EXHIBIT 10.6

                                LOAN AGREEMENT

                                     among

                          NVR MORTGAGE FINANCE, INC.
                            a Virginia corporation,

                        U.S. BANK NATIONAL ASSOCIATION,
                                   as Agent,

                                      and

                           The Lenders Party Hereto

                               September 7, 1999
                               -----------

                            Initially $225,000,000

             ($200,000,000 Committed and $25,000,000 Uncommitted)
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                     Page
<S>                                                                  <C>
SECTION 1. DEFINITIONS AND REFERENCES                                  1
     1.1   Definitions                                                 1
     1.2   Time References                                            26
     1.3   Other References                                           26

SECTION 2. AMOUNT AND TERMS OF CREDITS                                26
     2.1   Commitment                                                 26
     2.2   Notes                                                      31
     2.3   Notice and  Manner of Obtaining Borrowings                 31
     2.4   Fees                                                       35
     2.5   Mandatory Repayments                                       35
     2.6   Business Days                                              35
     2.7   Payment Procedure                                          35
     2.8   Payments Not in Full                                       37
     2.9   Sharing of Payments, Etc                                   37
     2.10  Requirements of Law                                        37
     2.11  Interest                                                   41
     2.12                                                             42

SECTION 3. COLLATERAL                                                 43
     3.1   Collateral                                                 43
     3.2   Delivery of Collateral                                     43
     3.3   Power of Attorney                                          43
     3.4   Disposition of Collateral                                  44
     3.5   Concerning the Collateral Account and the Good Funds Wire
           Clearing Account                                           45
     3.6   Borrower Appointed Agent                                   45

SECTION 4. CONDITIONS PRECEDENT                                       45
     4.1   Initial Borrowing                                          45
     4.2   All Borrowings                                             46

SECTION 5. BORROWER REPRESENTATIONS AND WARRANTIES                    47
     5.1   Organization and Good Standing                             47
     5.2   Authorization and Power                                    47
     5.3   No Conflicts or Consents                                   47
     5.4   Enforceable Obligations                                    48
     5.5   Priority of Liens                                          48
     5.6   No Liens                                                   48
     5.7   Financial Condition                                        48
     5.8   Full Disclosure                                            49
     5.9   No Default                                                 49
     5.10  No Litigation                                              49
</TABLE>
<PAGE>

<TABLE>
<S>                                                                        <C>
     5.11  Taxes                                                           49
     5.12  Principal Office, etc                                           49
     5.13  Compliance with ERISA                                           49
     5.14  Ownership                                                       51
     5.15  Subsidiaries                                                    51
     5.16  Indebtedness                                                    51
     5.17  Permits, Patents, Trademarks, etc.                              51
     5.18  Status Under Certain Federal Statutes                           51
     5.19  Securities Acts and Securities Credit Transaction Regulations   52
     5.20  Pollution Control                                               52
     5.21  No Approvals Required                                           52
     5.22  Material Agreements with Affiliates                             52
     5.23  Taxpayer Identification                                         52
     5.24  Not an Insider                                                  52
     5.25  Survival of Representations                                     52
     5.26  Year 2000 Compliance                                            53

SECTION 6. AFFIRMATIVE COVENANTS                                           53
     6.1   Financial Statements and Reports                                53
     6.2   Taxes and Other Liens                                           54
     6.3   Maintenance                                                     55
     6.4   Further Assurances                                              55
     6.5   Reimbursement of Expenses                                       55
     6.6   Insurance                                                       56
     6.7   Accounts and Records; Servicing Records                         56
     6.8   Appraisals                                                      56
     6.9   Right of Inspection                                             57
     6.10  Notice of Certain Events                                        57
     6.11  Performance of Certain Obligations                              57
     6.12  Use of Proceeds; Margin Stock                                   57
     6.13  Notice of Default                                               58
     6.14  Compliance with Loan Documents                                  58
     6.15  Compliance with Material Agreements                             58
     6.16  Operations and Properties                                       58
     6.17  ERISA and Plans                                                 58
     6.18  Environmental Matters                                           59
     6.19  Take-Out Commitments; Coverage                                  59
     6.20  Failure to Close a Wet Mortgage Loan                            60
     6.21  Year 2000 Compliance                                            60

SECTION 7. NEGATIVE COVENANTS                                              60
     7.1   No Merger                                                       60
     7.2   Limitation on Indebtedness                                      60
     7.3   Fiscal Year, Method of Accounting                               61
     7.4   Business                                                        61
     7.5   Liquidations, Consolidations and Dispositions of Substantial
           Assets                                                          61
</TABLE>

                                       ii
<PAGE>

<TABLE>
<S>                                                                        <C>
     7.6    Loans, Advances and Investments                                61
     7.7    Use of Proceeds                                                62
     7.8    Actions with Respect to Collateral                             62
     7.9    Adjusted Tangible Net Worth                                    62
     7.10   Liabilities to Adjusted Tangible Net Worth Ratios              62
     7.11   Restrictions on Dividends, Returns of Capital and Servicing
            Proceeds Distributions                                         63
     7.12   Transactions with Affiliates                                   63
     7.13   Liens                                                          63
     7.14   Compliance with ERISA                                          63
     7.15   Change of Principal Office                                     64
     7.16   Tax Payments                                                   64
     7.17   Tax Allocation Agreement                                       64
     7.18   Permitted Subordinated Indebtedness                            64

SECTION 8. EVENTS OF DEFAULT                                               64
     8.1    Nature of Event                                                64
     8.2    Default Remedies                                               67

SECTION 9. AGENT                                                           67
     9.1    Authorization and Action                                       67
     9.2    Agent's Reliance, Etc                                          68
     9.3    Agent and Affiliates                                           68
     9.4    Lender Credit Decision                                         68
     9.5    Indemnification                                                69
     9.6    Successor Agent                                                69
     9.7    Right of Inspection                                            70
     9.8    Reports                                                        70

SECTION 10. INDEMNIFICATION OF LENDERS                                     70
     10.1   Indemnification                                                70
     10.2   Limitation of Liability                                        71

SECTION 11. MISCELLANEOUS                                                  71
     11.1   Notices                                                        71
     11.2   Amendments, Etc                                                72
     11.3   Invalidity                                                     74
     11.4   Survival of Agreements                                         74
     11.5   Renewal, Extension or Rearrangement                            74
     11.6   Waivers                                                        74
     11.7   Cumulative Rights                                              74
     11.8   Construction                                                   74
     11.9   Interest                                                       75
     11.10  Right of Offset                                                76
     11.11  Assignments, Additional Lenders, etc                           76
     11.12  Lender Covenants, Representations and Warranties               77
</TABLE>

                                      iii
<PAGE>

<TABLE>
<S>                                                         <C>
     11.13  Consent to Jurisdiction                         77
     11.14  Exhibits                                        78
     11.15  Titles of Articles and Sections                 78
     11.16  Counterparts                                    78
     11.17  Rights of Individual Lenders to Take Action     78
     11.18  Entire Agreement                                78
     11.19  Agreement Regarding Effective Date              79
</TABLE>

                                       iv
<PAGE>

                            SCHEDULES AND EXHIBITS
                            ----------------------

Schedule 1.1(a)  Addresses of Lenders and Amount of Commitments
Schedule 1.1(b)  Investors
Schedule 1.1(c)  Determination of Weighted Average Take-Out Price
Schedule 1.1(d)  Lot Loan Program Description
Schedule 4.1     Other Conditions of Lenders
Schedule 5.10    Litigation
Schedule 5.22    Material Agreements with Affiliates
Exhibit A-1      Form of Committed Warehouse Promissory Note
Exhibit A-2      Form of Uncommitted Warehouse Promissory Note
Exhibit A-3      Form of Swing Promissory Note
Exhibit B        Form of Confirmation of Borrowing, Paydown or Conversion
                         ---------------            ---------------------
Exhibit C        Form of Borrowing Notice
Exhibit D        [Reserved]
Exhibit E-1      Form of Pool Shipping Instruction
Exhibit E-2      Form of Pool Transmittal Letter
Exhibit F        [Reserved]
Exhibit G        Form of Borrowing Base Report
Exhibit H        Form of Take-Out Report
Exhibit I        Form of NVR Mortgage Finance, Inc. Officer's Certificate
Exhibit J        Form of  Lender Addition Agreement
                          ------
Exhibit K        Form of Security Agreement
Exhibit L        Form of Tax Allocation Agreement
Exhibit M        Form of Subordinated Demand Revolving Credit Note
Exhibit N        Form of Payoff Schedule

                                       v
<PAGE>

                                LOAN AGREEMENT
                                --------------

THIS AGREEMENT ("this Agreement") is made and entered into as of September 7,
1999, between NVR MORTGAGE FINANCE, INC., a Virginia corporation (the
"Borrower"), the several Persons listed on the signature pages to this Agreement
as Lenders, whether as original signatories or pursuant to Section 11.11(c)
hereto (collectively, the "Lenders" and each individually a "Lender"), and U.S.
BANK NATIONAL ASSOCIATION, a national banking association ("Agent"), as agent
for Lenders hereunder.

A.   Borrower, Chase Bank of Texas, National Association as agent and certain
Lenders (including U.S. Bank National Association) are parties to that certain
Loan Agreement dated as of July 10, 1998 (as modified and amended, the "Existing
Loan Agreement").

B.   Borrower, Agent, and Lenders wish to replace the Existing Loan Agreement in
its entirety.

Accordingly, for adequate and sufficient consideration, Borrower, Lenders, and
Agent entirely replace the Existing Loan Agreement as follows:

SECTION 1. DEFINITIONS AND REFERENCES. Unless stated otherwise, the following
---------  --------------------------
provisions apply to each Loan Document and annexes, exhibits, and schedules to
them and certificates, reports, and other writings delivered under them.

1.1  Definitions.
     -----------

          Additional Lender means any Person party to this Agreement as a Lender
     which was not a Lender on the Agreement Date.

          Adjusted Cash Flow of Borrower for the twelve-month period ending on
     the date of determination means the amount equal to (a) the Cash Flow of
     Borrower for such period plus (b) the amount of any non-cash additions
     included in the Net Income of Borrower for such period which were
     subtracted from such Net Income in determining the Cash Flow of Borrower
     for such Period plus (c) 1% of the amount, if any, by which the aggregate
     outstanding principal balance of the Mortgage Loans included in the
     Servicing Portfolio of Borrower as of the last day of such period exceeds
     the aggregate outstanding principal balance of the Mortgage Loans included
     in the Servicing Portfolio of Borrower as of the last day of the twelve-
     month period ending on the date one year prior to such date of
     determination.

          Adjusted Tangible Net Worth of Borrower means, as of any date of
     determination, the sum of (a) the Tangible Net Worth of Borrower determined
     as of such date in accordance with GAAP and (b) the outstanding principal
     amount of Permitted Subordinated Indebtedness on such date.

          Advance means a Warehouse Advance, an L/C Advance, or a Swing Advance.
<PAGE>

          Affiliate of any Person means any other Person which, directly or
     indirectly, controls, is controlled by, or is under common control with,
     such Person.  For purposes of this definition, the term "control" (and the
     terms "controlled by" and "under common control with"), as used with
     respect to any Person, means the possession or ownership, directly or
     indirectly, of the power either to (i) direct or cause the direction of the
     management and policies of such Person, whether by contract or otherwise,
     or (ii) vote 10% or more of the securities having ordinary power for the
     election of directors of such Person.

          Agency means FNMA, FHLMC or GNMA.

          Agency Commitment means a binding and enforceable agreement on the
     part of (a) FNMA or FHLMC to issue Mortgage-Backed Securities in exchange
     for Mortgage Loans or (b) GNMA to guarantee Mortgage-Backed Securities to
     be issued by Borrower.  Agency Commitment includes the FNMA Guide, the
     FHLMC Guide or the GNMA Guide, as applicable, pursuant to which such Agency
     Commitment was issued.

          Agency Custodian means U.S. Bank Trust National Association in its
     capacity as document custodian on behalf of an Agency.

          Agency Servicing Agreements means Servicing Agreements between
     Borrower and FNMA, FHLMC, or GNMA pursuant to which Borrower undertakes to
     service Mortgage Loans or pools of Mortgage Loans owned, insured or
     guaranteed by FNMA, FHLMC or GNMA.

          Agency Servicing Rights means all of Borrower's right, title and
     interest in and under the Agency Servicing Agreements, including, without
     limitation, the rights of Borrower to income and reimbursement thereunder.

          Agent means, at any time, U.S. Bank National Association, or its
     successor appointed under Section 9, acting as agent for Lenders under the
     Loan Documents.  References to Agent in respect of Swing Advances mean that
     institution in its individual capacity.  Agent is the representative of
     Lenders within the meaning of (S)9.105(a)(13) of the UCC for purposes of
     the Loan Documents and the UCC.

          Agent Fee Letter means that certain letter from Agent to Borrower
     dated as of the date of this Agreement, as agreed to by Borrower and
     amended, modified, or supplemented from time to time.

          Agreement Date means the date set forth as such on the counterpart
     signature page of Agent for this Loan Agreement.

                                       2
<PAGE>

          Agreement to Pledge has the meaning specified in the Security
     Agreement.

          Appraisal means a written statement as to the market value of the
     property in which a Lien is granted pursuant to a mortgage to secure a
     mortgage loan.

          Appraisal Laws and Regulations means laws set forth in Title XI of the
     Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the
     Federal Deposit Insurance Corporation Improvement Act of 1991 and
     regulations promulgated by the OCC or any other Governmental Authority in
     connection therewith regarding Appraisals with respect to loans made by
     Persons regulated by the OCC.

          Bailee Letter has the meaning specified in the Security Agreement.

          Balance Funded Rate Agreement has the meaning specified in Section
     2.11(f).

          Balance Funded Rate Segment means that portion of a Tranche which
     bears interest at the applicable rate set forth in Section 2.11(b).

          Borrower has the meaning specified in the preamble of this Agreement.

          Borrowing means a borrowing consisting of (a) Advances (other than a
     Swing Advance) by Lenders in connection with a Borrowing Request, (b) a
     Swing Advance by Agent in connection with a Borrowing Request, or (c) an
     L/C Advance.

          Borrowing Base as of any time of determination means the sum of:

          (a) the aggregate Collateral Value of all Eligible Gestation Mortgage
              Loans;

          (b) the aggregate Collateral Value of all Eligible Mortgage Loans; and

          (c) the aggregate Collateral Value of all Eligible Mortgage-Backed
              Securities;

     provided, that for purposes of determining the Borrowing Base, the maximum
     Collateral Value at any time attributable to

               (i)   Mortgage Loans the Mortgage Note and/or other Principal
          Mortgage Document for which has been delivered to Borrower for
          correction under a Trust Receipt pursuant to the Security Agreement
          shall be $5,000,000,

               (ii)  Second Lien Loans shall be 5% of the then Total
          Commitment,

               (iii) Construction Loans and Lot Loans, in the aggregate, shall
          be 5% of the then Total Commitment,

                                       3
<PAGE>

               (iv)   Jumbo Loans (without regard to Face Amount) shall be 20%
          of the then Total Commitment,

               (v)    Super Jumbo Loans (without regard to Face Amount) shall be
          25% of the then Total Commitment available for Jumbo Loans pursuant to
          clause (iv) above,

               (vi)   Wet Mortgage Loans shall be (A) during the period
          commencing on the third to last Business Day of any calender month and
          continuing through and including the fourth Business Day of the
          following calendar month, 50% of the then Total Commitment, and (B) at
          any other time, 30% of the then Total Commitment, and

               (viii) Investment Mortgage Loans shall be 5% of the then
          Total Commitment, $1,000,000 of which may be used to finance REO.

          Borrowing Base Report means a report substantially in the form of
          Exhibit G.

          Borrowing Date means the date on which the Advance or Advances in
     respect of a Borrowing are to be made, as identified by Borrower in the
     relevant Borrowing Request and by Agent in the relevant Borrowing Notice.

Borrowing Notice means a notice, substantially in the form of Exhibit C or such
other form as to which Agent and Lenders may agree.

Borrowing Request means a telephonic request by Borrower to Agent for a
Borrowing pursuant to Section 2, promptly confirmed by delivery by Borrower to
Agent of a duly completed and executed Confirmation.  Each Borrowing Request
shall include the information called for with respect to a Borrowing by the form
of Confirmation.

          Business Day means any day other than Saturdays, Sundays and other
     days on which commercial banks are authorized or required by law to close
     in  the State of Minnesota.

          Cash Equivalents means Eligible Deposits, Eligible Commercial Paper,
     and U.S. Government Securities.

          Cash Flow of Borrower for the twelve-month period ending on the date
     of determination means the amount equal to the Net Income of Borrower for
     such period plus all non-cash charges against income (such as deferred
     taxes, depreciation and amortization of goodwill and acquisition of
     servicing rights) and minus all non-cash additions to income included in
     the Net Income of Borrower for such period.

          Category refers to the category of Collateral Value which is deemed to
     support a Tranche for interest rate pricing purposes under this Agreement.
     The Categories of Tranches available with respect to the Notes under this
     Agreement are Construction/Lot

                                       4
<PAGE>

     Loan Tranches, Gestation Loan Tranches and Regular Tranches.
     -----------------------------------------------------------

          Code means the Internal Revenue Code of 1986, as amended from time to
     time.

          Collateral has meaning specified in the Security Agreement.

Collateral Account means account number 104756234357 of Borrower with Agent,
which shall be under the sole dominion and control of Agent and to which
Borrower shall have no access.

     Collateral Value means:

          (a)  with respect to a pool of Eligible Gestation Mortgage Loans, an
     amount equal to 99% of the Take-Out Price for such pool of Eligible
     Gestation Mortgage Loans; provided, that to the extent that the aggregate
     Collateral Value for all pools of Eligible Gestation Mortgage Loans is
     greater than 33% of the then Total Commitment, such pools of Eligible
     Gestation Mortgage Loans in excess of 33% of the then Total Commitment
     shall be attributed Collateral Value as if they consisted of Eligible
     Mortgage Loans rather than Eligible Gestation Mortgage Loans;

          (b)  with respect to an Eligible Mortgage Loan ( other than Investment
     Mortgage Loans, REO, Lot Loans, and Construction Loans), an amount equal to
     98% of the least of (i) the Cost of such Eligible Mortgage Loan, (ii) the
     Weighted Average Take-Out Price of such Eligible Mortgage Loan, (iii) the
     Face Amount of such Eligible Mortgage Loan, and (iv) if Agent or the
     Required Lenders shall so require, the Market Value of such Eligible
     Mortgage Loan;

          (c)   with respect to an Investment Mortgage Loan, an amount equal to
     80% of the unpaid principal balance of such Investment Mortgage Loan,
     unless such Mortgage Loan has become REO, in which case, an amount equal to
     75% of the lesser of the unpaid principal balance of such Investment
     Mortgage Loan or the Appraisal of such REO;

          (d)   with respect to a Construction Loan, an amount equal to 90% of
     the Face Amount of such Construction Loan, to the extent that such amount
     does not exceed (i) 80% of the contract price of the subject property or
     (ii) 90% of hard cost;

          (e)  with respect to a Lot Loan, 100% of the sales price of the
     related lot less the down payment attributed to such sales price; and

          (f)  with respect to an Eligible Mortgage-Backed Security, an amount
     equal to 99% of the Take-Out Price for such Eligible Mortgage-Backed
     Security.

     Any item of Collateral which ceases to be or is not an Eligible  Gestation
     Mortgage Loan,  Eligible Mortgage Loan or an Eligible Mortgage-Backed
     Security shall have a Collateral Value of zero.

                                       5
<PAGE>

          Commitment as to a Lender means the obligation of such Lender to make
     Advances to Borrower pursuant to Section 2.1.

          Commitment Amount as to a Lender means the amount set forth on
     Schedule 1.1(a) as such Lender's Commitment Amount.

          Commitment Percentage means the proportion to which any Lender's
     Commitment Amount bears to the Total Commitment.

          Committed Warehouse Promissory Notes means the promissory notes
     delivered by Borrower to Lenders pursuant to Section 2.2 each in the form
     attached hereto as Exhibit A-1 and all renewals, extensions, modifications
     and rearrangements thereof.

          Confirmation means a Confirmation of Borrowing, Paydown or Conversion
     in the form attached hereto as Exhibit B.

          Conforming Loan means a loan,  including conventional, FHA Loans and
     VA Loans, which complies with all applicable requirements for purchase
     under the FNMA or FHLMC standard form of conventional mortgage purchase
     contract then in effect.

          Construction Loan means a Mortgage Loan that is otherwise an Eligible
     Mortgage Loan but (i) which may be partially funded if fewer than four
     Advances have been made with respect to the promissory note for the subject
     property and (ii) for which Borrower has delivered Construction Loan
     Documents.

          Construction Loan Documents means, in addition to Principal Mortgage
     Documents and Other Mortgage Documents, (i) a copy of an Appraisal on the
     subject property, (ii) a copy of the contract for sale on the subject
     property, and (iii) a copy of the builder's draw request/non-start of
     construction affidavit.

          Construction/Lot Loan Tranche means, with respect to any Note at any
     time, that portion of the then outstanding principal balance of such Note
     which is deemed to be supported by the Collateral Value of Construction
     Loans and Lot Loans included in the Collateral held by Agent at that time,
     as specified from time to time by Borrower in the Borrowing Requests and
     Conversion Requests received by Agent from Borrower, provided, that (a) the
     aggregate principal amount of all Construction/Lot Loan Tranches
     outstanding under the Notes of all Lenders at any time shall not exceed the
     aggregate Collateral Value of Construction Loans and Lot Loans included in
     the Collateral held by Agent at such time, and (b) the aggregate principal
     amount of all Construction/Lot Loan Tranches outstanding under any Lender's
     Notes at any time shall not exceed the product of the aggregate Collateral
     Value of Construction Loans and Lot Loans included in the Collateral held
     by Agent at such time multiplied by a fraction the numerator of which is
     the aggregate principal balance outstanding under such Lender's Notes at
     such time and the denominator of which is the aggregate principal balance
     outstanding under all Lenders' Notes at such time.

                                       6
<PAGE>

          Conversion Request means a telephonic request by Borrower to Agent for
     a conversion of Tranches and/or Borrowings pursuant to Section 2.12,
     promptly confirmed by delivery by Borrower to Agent of a duly completed and
     executed Confirmation.  Each Borrowing Request shall include the
     information called for with respect to a conversion by the form of
     Confirmation.

          Cost with respect to any Mortgage Loan means, as applicable, the
     actual out-of-pocket cost to Borrower of such Mortgage Loan, if purchased,
     or, if such Mortgage Loan was originated by Borrower, the original
     principal amount of such Mortgage Loan minus any discount points paid to
     Borrower in respect of such Mortgage Loan.

          Custodial Fee Letter means that certain letter from Agent to Borrower
     dated as of the date of this Agreement, as agreed to by Borrower and
     amended, modified, or supplemented from time to time.

          Debtor Laws means all applicable liquidation, conservatorship,
     bankruptcy, moratorium, arrangement, receivership, insolvency,
     reorganization, fraudulent conveyance or similar laws from time to time in
     effect affecting the rights of creditors generally.

          Default means any condition or event which, with the giving of notice
     or lapse of time or both and unless cured or waived, would constitute an
     Event of Default.

          Delinquent with respect to any Mortgage Loan means that any payment in
     respect of such Mortgage Loan is more than 30 days past due.

          Deposit Holding Lenders means Lenders  which both (a) hold deposits in
     accounts in the name of Borrower and (b) have entered into  a Balance
     Funded Rate Agreement with Borrower.

          Dividends means:  (a) Cash distributions or any other distributions
     on, or in respect of, any class of equity security of Borrower, except for
     (i) distributions made solely in shares of securities of the same class and
     (ii) Permitted Returns of Capital and Permitted Servicing Proceeds
     Distributions; and (b) any and all funds, cash or other payments made in
     respect of the redemption, repurchase or acquisition of (i) such securities
     or (ii) any option, warrant, or other right to purchase any of such
     securities.

          Dollars means lawful money of the United States of America.

          Eligible Commercial Paper means commercial paper and other short-term
     money market instruments which are rated at least A-1 or the equivalent
     thereof by Standard & Poors and P-1 or the equivalent thereof by Moody's.

                                       7
<PAGE>

          Eligible Deposits means time deposits and certificates of deposit of
     any Lender or of any domestic commercial bank or savings bank having
     capital and surplus in excess of $200,000,000, in all such cases which has
     a short-term certificate of deposit rating of at least A-1 or the
     equivalent thereof by Standard & Poors and a short-term bank deposit rating
     of least P-1 or the equivalent thereof by Moody's, or (ii) a rating of C or
     better from Thompson Bank Watch, Inc. or 75 or better from I.D.C. Financial
     Publishing, as applicable.

          Eligible Gestation Mortgage Loan means a Mortgage Loan: (a)  in which
     Agent has a perfected first-priority security interest for the benefit of
     Lenders to secure the Obligations; (b) which (i) has been  allocated to an
     Agency Commitment; (ii) is part of a pool which the Agency Custodian has
     certified (or initially certified) to the Agency obligated under such
     Agency Commitment; and (iii) together with the other Mortgage Loans which
     have been  allocated to such Agency Commitment, satisfies all requirements
     for delivery under such Agency Commitment; (c) with respect to which the
     Mortgage-Backed Security to be issued or guaranteed pursuant to such Agency
     Commitment will, upon the issuance thereof, constitute an Eligible
     Mortgage-Backed Security; and (d)  to which Borrower has  allocated
     Gestation Loan status in accordance with Section 3.4(b)

          Eligible Mortgage-Backed Security means a Mortgage-Backed Security:
     (a) in which Agent has a perfected first-priority security interest for the
     benefit of Lenders to secure the Obligations; (b) which (i) evidences an
     undivided interest in a pool of Mortgage Loans which constituted Eligible
     Gestation Mortgage Loans or Eligible Mortgage Loans immediately prior to
     the issuance of such Mortgage-Backed Security; (ii) has been  allocated to
     a Take-Out Commitment; (iii) satisfies all requirements for delivery under
     such Take-Out Commitment and (iv) has not been owned by Borrower for more
     than five (5) Business Days; and (c) with respect to which the Investor
     under the Take-Out Commitment to which such Mortgage-Backed Security has
     been  allocated is not in default or in breach of its obligations under
     such Take-Out Commitment.

          Eligible Mortgage Loan means a Mortgage Loan (other than an Eligible
     Gestation Mortgage Loan):

          (a)  in which Agent has been granted and continues to hold a perfected
     first-priority security interest for the benefit of Lenders;

          (b)  which  has been fully funded except in the case of Construction
     Loans;

          (c)  which is "covered" (within the meaning given to such term in
     Section  6.19) by a Take-Out Commitment, except in the case of Investment
     Mortgage Loans, Lot Loans, and Construction Loans;

          (d)  which, in the case of an Eligible Mortgage Loan other than a
     Construction Loan, an Investment Loan or a Lot Loan, has not been included
     as an Eligible Mortgage

                                       8
<PAGE>

     Loan in the Collateral held by Agent for more than 120 days;

            (e)  which, in the case of a Construction Loan, has not been
     included in the Collateral held by Agent (i) for more than 270 days as a
     Construction Loan or (ii) more than 360 days as an Eligible Mortgage Loan;

            (f)  which, in the case of an Investment Loan, has not been included
     as an Eligible Mortgage Loan in the Collateral held by Agent for more than
     364 days;

            (g)  which, in the case of a Lot Loan, has not been included as an
     Eligible Mortgage Loan in the Collateral held by Agent for more than 270
     days;

            (h)  which has not previously been sold to an Investor and
     repurchased by Borrower ;

            (i)  which, except in the case of an Investment Mortgage Loan, is
     not Delinquent or, to Borrower's knowledge, otherwise in default;

            (j)  which, in the case of a Lot Loan, has not been without a
     construction contract on the lot at any time for more than 5 days;

            (k)  with respect to which  no more than 180 days have elapsed since
     the original funding of such Mortgage Loan to the Mortgagor;

            (l)  with respect to which there is an Appraisal which complies
     with all applicable Appraisal Laws and Regulations ;

            (m)  with respect to which Agent has received the Principal
     Mortgage Documents and, if applicable, the Construction Loan Documents or
     Lot Loan Documents, as the case may be;

            (n)  with respect to which, if any Mortgage Note has been delivered
     to an Investor under a Bailee Letter pursuant to the Security Agreement, no
     more than 45 days have elapsed since the delivery of such Mortgage
     Document without the Agent having received from such Investor either (i)
     the Warehouse Purchase Price specified in such Bailee Letter or (ii) such
     Mortgage Note and any related Mortgage Documents delivered to such Investor
     therewith;

            (o)  with respect to which, if Agent shall have delivered a Mortgage
     Note and/or any other Mortgage Document to Borrower for correction under a
     Trust Receipt pursuant to the Security Agreement, no more than 21 days have
     elapsed since the delivery of such Mortgage Note and/or other Mortgage
     Document without such Mortgage Note and/or other Mortgage Document having
     been returned to Agent; and

            (p)  with respect to a Wet Mortgage Loan, no more than 7 Business
     Days have elapsed since the date on which such Wet Mortgage Loan was
     funded.

                                       9
<PAGE>

          ERISA means the Employee Retirement Income Security Act of 1974, as
     amended from time to time.

          Event of Default has the meaning specified in Section 8.1.

          Existing Loan Agreement has the meaning specified in the preamble.

          Face Amount means:  (a) in the case of a Mortgage Loan, the stated
     principal amount of the Mortgage Note which evidences such Mortgage Loan,
     without giving effect to any payments thereon; and (b) in the case of a
     Mortgage-Backed Security, the par value of such Mortgage-Backed Security.

          FHA means the Federal Housing Administration, or any successor
     thereto.

          FHA Loan means a loan, payment of which is partially or completely
     insured by the FHA or with respect to which there is a current, binding and
     enforceable commitment for such insurance issued by the FHA.

          FHLMC means the Federal Home Loan Mortgage Corporation, or any
     successor thereto.

          FHLMC Guide means the FHLMC Sellers' & Servicers' Guide as amended,
     modified, or supplemented from time to time.

          FHLMC Securities means participation certificates representing
     undivided interests in mortgage loans purchased by FHLMC pursuant to the
     Emergency Home Finance Act of 1970, as amended.

          FNMA means the Federal National Mortgage Association, or any successor
     thereto.

          FNMA Guide means the FNMA Selling Guide and the FNMA Servicing Guide
     as amended, modified or supplemented from time to time.

          FNMA Securities means modified pass-through mortgage-backed
     certificates guaranteed by FNMA pursuant to the National Housing Act, as
     amended

          GAAP means generally accepted accounting principles in effect in the
     United States on the Agreement Date.

          Gestation Loan Tranche means, with respect to any Note at any time,
     that portion of the then outstanding principal balance of such Note which
     is deemed to be

                                       10
<PAGE>

     supported by the Collateral Value of Eligible Gestation Mortgage Loans
     included in the Collateral held by Agent at that time, as specified from
     time to time by Borrower in the Borrowing Requests and Conversion Requests
     received by Agent from Borrower, provided, that (a) the aggregate principal
     amount of all Gestation Loan Tranches outstanding under the Notes of all
     Lenders at any time shall not exceed the aggregate Collateral Value of
     Eligible Gestation Mortgage Loans included in the Collateral held by Agent
     at such time, and (b) the aggregate principal amount of all Gestation Loan
     Tranches outstanding under any Lender's Notes at any time shall not exceed
     the product of the aggregate Collateral Value of Eligible Gestation
     Mortgage Loans included in the Collateral held by Agent at such time
     multiplied by a fraction the numerator of which is the aggregate principal
     balance outstanding under such Lender's Notes at such time and the
     denominator of which is the aggregate principal balance outstanding under
     all Lenders' Notes at such time.

          GNMA means the Government National Mortgage Association, or any
     successor thereto.

          GNMA Guide means the GNMA I and GNMA II Mortgage-Backed Securities
     Guides, GNMA Handbooks 5500.1 and 5500.2, as amended, modified or
     supplemented from time to time.

          GNMA Securities means modified pass through mortgage backed
     certificates guaranteed by GNMA pursuant to Section 306(g) of the National
     Housing Act, as amended.

          Good Funds Wire Clearing Account means account number 104756234332
     of Borrower with Agent, which shall be in the sole dominion and control of
     the Agent and to which Borrower shall have no access.

          Governmental Authority means any nation or government, any agency,
     department, state or other political subdivision thereof, and any entity
     exercising executive, legislative, judicial, regulatory or administrative
     functions of or pertaining to government.

          Guaranty Obligation of any Person means any contract, agreement or
     understanding of such Person pursuant to which such Person guarantees, or
     in effect guarantees, any Indebtedness, lease, dividend or other
     obligation, including any Mortgage Loan (the "Primary Obligation") of any
     other Person (the "Primary Obligor") in any manner, whether directly or
     indirectly, contingently or absolutely, in whole or in part, including,
     without limitation, agreements:

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

          (b)  to advance or supply funds (x) for the purchase or payment of any
     such Primary Obligation, or (y) to maintain working capital or other
     balance sheet conditions

                                       11
<PAGE>

     of the Primary Obligor or otherwise to maintain the net worth or solvency
     of the Primary Obligor;

          (c)  to purchase property, securities or services primarily for the
     purpose of assuring the owner of any such Primary Obligation of the ability
     of the Primary Obligor to make payment of such Primary Obligation; or

          (d)  otherwise to assure or hold harmless the owner of any such
     Primary Obligation against loss in respect thereof;

     provided, that Guaranty Obligation shall not include (x) endorsements in
     the ordinary course of business of negotiable instruments or documents for
     deposit or collection, (y) obligations under the FNMA Guide, the FHLMC
     Guide, the GNMA Guide and the related Servicing Agreements to make payments
     due to the holders of Mortgage-Backed Securities from the Primary Obligors
     on the Mortgage Loans to which such Mortgage-Backed Securities relate prior
     to the receipt of such payments from such Primary Obligors, or (z) Ordinary
     Recourse Obligations.  The amount of any Guaranty Obligation shall be
     deemed to be the maximum amount for which the guarantor may be liable
     pursuant to the agreement that governs such Guaranty Obligation, unless
     such maximum amount is not stated or determinable, in which case the amount
     of such obligation shall be the maximum reasonably anticipated liability
     thereon, as determined by such guarantor in good faith.

          Guidance Line means, for any Lender, the amount stated beside its name
     and so designated on Schedule 1.1(a) as it may be amended under this
     Agreement), as that amount may be canceled or terminated under this
     Agreement.

          Indebtedness of any Person means, without duplication, (i)
     indebtedness of such Person for borrowed money; (ii) obligations of such
     Person (a) evidenced by a note, bond, debenture, or similar instrument, (b)
     to pay the deferred purchase price of property or services (other than
     trade payables incurred and timely paid in the ordinary course of
     business), (c) created or arising under any conditional sale or other title
     retention agreement with respect to Property acquired by such Person, (d)
     as lessee under any lease which has been or, in accordance with GAAP,
     should be classified as a capital lease, (e) upon which interest is paid or
     accrued, or (f) in respect of letters of  credit, acceptances, or similar
     obligations issued or created for the account of such Person, (iii)
     Guaranty Obligations of such Person, (iv) liabilities secured by any Lien
     on any property owned by such Person, whether or not such Person has
     assumed or otherwise become liable for the payment thereof, (v) liabilities
     of such Person or any related Person in respect of unfunded vested benefits
     under a Plan as determined in accordance with ERISA and (vi) obligations of
     such Person in respect of interest rate protection agreements entered into
     in connection with any of the items described in clauses (i), (ii), (iii),
     (iv) or (v) of this definition; provided, that (x) Indebtedness does not
     include any Ordinary Recourse Obligations, (y) the amount of Indebtedness
     attributable to any Guaranty Obligation shall be determined as set forth in
     the definition of Guaranty Obligation and (z) the amount of Indebtedness
     attributed to liabilities secured by any Lien on any property owned by any

                                       12
<PAGE>

     Person which liabilities are non-recourse to such Person shall be the
     lesser of (i) the market value of such property, as determined by such
     Person in good faith, and (ii) the outstanding amount of the liabilities so
     secured.

          Investment has the meaning specified in Section 7.6.

          Investment Line of Credit Indebtedness means Indebtedness of Borrower
     which satisfies each of the following criteria:

               (i)   the payee with respect thereto is a Lender;

               (ii)  the proceeds thereof are used solely to purchase Cash
          Equivalents with a current maturity of 31 days or less;

               (iii) the repayment of such Indebtedness is secured by a Lien on
          the Cash Equivalents purchased with the proceeds thereof and by no
          other Lien on the Property of Borrower;

               (iv)  the aggregate principal amount of such Indebtedness at any
          one time outstanding to all Lenders does not exceed the amount equal
          to the Total Commitment at such time; and

               (v)   that is on terms and pricing agreed upon at the time of
          utilizing this Indebtedness.

          Investment Mortgage Loan means a Mortgage Loan that is otherwise an
     Eligible Mortgage Loan but  for which there is no applicable Take-Out
     Commitment.

          Investor means each Person listed on Schedule 1.1(b), as the same may
     be amended or supplemented from time to time pursuant to Section 11.2(b).

          Jumbo Loan means a Mortgage Loan, the original principal amount of
     which is greater than the Maximum Conforming Amount but no greater than
     $1,000,000, which complies with all applicable requirements for purchase
     under either (a) the FNMA or FHLMC standard form of conventional mortgage
     purchase contract then in effect, except that the amount of such loan is
     greater than the maximum loan amount under such requirements, or (b) a
     Take-Out Commitment.

          L/C means a standby letter of credit (a) relating to seller contracts
     or other needs of Borrower acceptable to Agent, (b) having a maturity prior
     to the Scheduled Termination Date, (c) issued by Agent for Borrower's
     account under Section 2.1(e) and an L/C Agreement, and (d) subject to the
     L/C Advance Limit.

          L/C Advance means the issuance of an L/C pursuant to Section 2.1(e)
     and any advance by a Lender under its Commitment Amount to refinance L/C
     Obligations pursuant  to Section 2.1(f).

                                       13
<PAGE>

          L/C Advance Limit means $5,000,000.

          L/C Agreement means, at any time, a letter of credit application and
     agreement, in substantially the standard form customarily used by Agent at
     that time, executed and delivered by Borrower for the issuance of an L/C
     for Borrower's account.

          L/C Exposure means, at any time and without duplication, the sum of
     (a) the total undrawn and uncancelled face amount of all L/Cs plus (b) the
     L/C Obligation.

          L/C Obligation means, at any time, Borrower's total unpaid
     reimbursement obligations to Agent for drafts or drawings paid under any
     L/C.

          Lender and Lenders shall have the meanings specified in the preamble
     of this Agreement.

          Lender Addition Agreement means a Lender Addition Agreement in the
     form attached hereto as Exhibit J, together with such changes as Agent and
     Lenders executing a particular Lender Addition Agreement may require.
     Lender Addition Agreement with respect to a particular Additional Lender
     means the Lender Addition Agreement by which such Additional Lender became
     a Lender.

          LIBOR means, on any date of determination, the average offered rate
     for one month deposits in  Dollars, which rate appears on the Reuters
     Screen LIBO page as of 11:00 a.m., London time (or such other time as of
     which such rate appears) on such date of determination, or the rate for
     such deposits determined by  Agent at such time based on such other
     published service of general application as shall be selected by  Agent for
     such purpose; provided, that in lieu of determining the rate in the
     foregoing manner, if not so determinable on such date, at the option of
     Agent, Agent may determine the rate based on rates at which one month
     Dollar deposits are offered to Agent in the interbank Eurodollar market at
     such time  in an amount approximately equal to the  aggregate principal
     amount of the LIBOR Rate Segments to which such rate is to apply.  "Reuters
     Screen LIBO page" means the display designated as page "LIBO" on the
     Reuters Monitor Money Rate Screen (or such other page as may replace the
     LIBO page on such service for the purpose of displaying London interbank
     offered rates of major banks for  Dollar deposits).  For purposes of
     determining any interest  rate hereunder or under any other Loan Document
     which is based on LIBOR, such interest rate shall change as and when LIBOR
     shall change.

LIBOR Segment means any that portion of any Tranche which bears interest at the
applicable rate set forth in Section 2.11(c).

          Lien means any mortgage, pledge hypothecation, assignment, deposit
     arrangement, encumbrance, lien (whether statutory, consensual or
     otherwise), or other security arrangement of any kind (including, without
     limitation, any conditional sale or other title retention agreement, any
     financing lease having substantially the same

                                       14
<PAGE>

     economic effect as any of the foregoing, and any financing statement filed
     under the uniform commercial code or comparable law of any jurisdiction in
     respect of any of the foregoing).

          Loan Document means any and Loan Documents means the collective
     reference to each of this Agreement, the Notes, the Security Instruments
     and any and all other agreements or instruments now or hereafter executed
     and delivered by or on behalf of Borrower in connection with, or as
     security for the payment or performance of any or all of the Obligations,
     as any of such documents may be renewed, amended or supplemented from time
     to time.

          Loan to Value Ratio means, with respect to any Mortgage Loan as of any
     date, a fraction, expressed as a percentage, the numerator of which is the
     outstanding principal balance of such Mortgage Loan at the date of
     determination and the related denominator of which is the value of the
     related mortgaged property as set forth in the Appraisal.  For purposes of
     calculating the Loan to Value Ratio for a Mortgage Loan secured by a second
     Mortgage, the outstanding principal balance of the related first Mortgage
     as well as the second Mortgage shall be included in the numerator.

          Lot Loan means a Mortgage Loan that is otherwise an Eligible Mortgage
     Loan but (i) which may not exceed a Face Amount of $150,000, (ii)  for
     which Borrower also has delivered Lot Loan Documents, (iii) that otherwise
     complies with the program set forth on Schedule 1.1(e),  and (iv) that
     covers property located in Pennsylvania, upon which a home is being
     constructed by  the Parent or its subsidiaries.

          Lot Loan Documents means, in addition to the applicable Principal
     Mortgage Documents and Other Mortgage Documents, (i) a deed of conveyance,
     (ii) a coal clause for deed, (iii) a receipt evidencing down payment
     amount, (iv) a lot sales agreement, (v) a Construction Agreement, and (vi)
     any other documents reasonably requested by Agent or any of the Lenders.

          Market Value means, at any time  for Mortgage Loans,  a market value
     based upon the then most recent posted net yield for 30-day mandatory
     future delivery furnished by FNMA and published and distributed by Telerate
     Mortgage Services or Knight-Ridder or (if that posted net yield is not
     available from these services) obtained by the Agent from FNMA.

          Material Adverse Effect means any material adverse effect on (i) the
     validity or enforceability of this Agreement, any Note or any other Loan
     Document, (ii) the business, operations, total Property or financial
     condition of Borrower, (iii) the collateral, taken as a whole, under any
     Security Instrument, (iv) the enforceability or priority of the Lien in
     favor of Agent for the benefit of Lenders on the collateral, taken as a
     whole, under any Security Instrument, or (v) the ability of Borrower timely
     to perform the Obligations.

          Maximum Conforming Amount for a particular Mortgage Loan means the

                                       15
<PAGE>

     maximum principal amount for any Mortgage Loan which is eligible for
     purchase by whichever of FNMA or FHLMC has the higher maximum principal
     amount for Mortgage Loans secured by Mortgages on property located in the
     state or region where the property covered by the Mortgage related to the
     Mortgage Loan in question is located.

          Maximum Rate has the meaning specified in Section 11.9.

          Moody's means Moody's Investors Service, Inc.

          Mortgage means a mortgage or deed of trust, on a standard form
     approved by VA, FHA, FNMA or FHLMC , which grants, as security for a
     Mortgage Loan, a perfected first-priority lien (or, in the case of Second
     Lien Loans, second-priority lien) on residential real property consisting
     of land and a one-to-four family dwelling thereon which is completed and
     ready for occupancy.

          Mortgage-Backed Securities means FNMA Securities, FHLMC Securities and
     GNMA Securities.

          Mortgage Collateral means, at any time, Mortgage Loans and Mortgage-
     Backed Securities then subject to a Lien in favor of Agent for the benefit
     of Lenders.

          Mortgage Documents means, for any Mortgage Loan, the Principal
     Mortgage Documents, the Other Mortgage Documents, and, if applicable, the
     Construction Loan Documents and/or Lot Loan Documents relevant thereto.

          Mortgage Loan means an FHA Loan, VA Loan, Conforming Loan, Investment
     Mortgage Loan, Second Lien Loan, Construction Loan, Lot Loan, Jumbo Loan or
     Super Jumbo Loan (i) which is secured by a Mortgage and has a maximum term
     to maturity of thirty years and (ii) is not a commercial loan or, except as
     otherwise permitted by this Agreement, a construction loan.

          Mortgage Note means a promissory note, on a standard form approved by
     VA, FHA, FNMA or FHLMC or other form approved in writing by the Required
     Lenders, which evidences a Mortgage Loan.

          Multiemployer Plan means a "multiemployer plan," as defined in Section
     4001(a)(3) or Section 3(37) of ERISA or Section 414 of the Code, which is
     maintained for the benefit of employees of Borrower or any Related Person.

          Net Income of Borrower for any period means the net income (after
     taxes) which would appear on an income statement of Borrower for such
     period prepared in accordance with GAAP.

                                       16
<PAGE>

          Notes means the Committed Warehouse Promissory Notes, the Uncommitted
     Warehouse Promissory Notes, and the Swing Promissory Note.

          Obligations means all of the present and future indebtedness,
     obligations, and liabilities of Borrower to Agent and Lenders, and all
     renewals, rearrangements and extensions thereof, or any part thereof,
     arising pursuant to this Agreement or any other Loan Document, and all
     interest accrued thereon, and reasonable attorneys' fees and other
     reasonable costs incurred in the drafting, negotiation, enforcement or
     collection thereof, regardless of whether such indebtedness, obligations,
     and liabilities are direct, indirect, fixed, contingent, joint, several or
     joint and several.

          OCC means the Office of the Comptroller of the Currency of the United
     States of America and any Governmental Authority succeeding to the
     functions of such office.

          Ordinary Recourse Obligation means an obligation of Borrower to
     purchase a Mortgage Loan serviced by Borrower pursuant to a Servicing
     Agreement in the event that:

               (a) a material representation or warranty given by Borrower at
          the time of the sale of such Mortgage Loans proves to have been false
          or incorrect in any material respect when given;

               (b) Borrower fails timely to perform its servicing obligations
          with respect thereto;

               (c) such Mortgage Loan is being serviced on behalf of FNMA or
          FHLMC and the obligor on such Mortgage Loan fails timely to make any
          payment due in connection therewith in the four-month period
          commencing on the date of funding of such Mortgage Loan;

               (d) such Mortgage Loan is an adjustable rate Mortgage Loan which
          is being serviced on behalf of FNMA and the obligor on such Mortgage
          Loan is exercising its right to convert the interest rate on such
          Mortgage Loan to a fixed rate; or

               (e) such Mortgage Loan is being serviced on behalf of GNMA and
          the obligor on such Mortgage Loan fails timely to make any payment due
          in connection therewith in the four-month period commencing on the
          date of issuance of the GNMA Security backed by such Mortgage Loan.

          Other Mortgage Documents has the meaning specified in the Security
     Agreement.

                                       17
<PAGE>

          Parent means NVR, Inc., a Virginia corporation.

          Parent Note means that certain subordinated demand revolving credit
     note issued by Borrower to the order of the Parent a true and correct copy
     of which is attached as Exhibit M.

          PBGC means the Pension Benefit Guaranty Corporation or any successor
     thereto.

          Permitted Dividends means Dividends the declaration and payment of
     which is permitted under Section  7.11.

          Permitted Intercompany Payables means amounts due to Affiliates of
     Borrower in respect of Permitted Intercompany Transactions and the
     Permitted Subordinated Indebtedness.

          Permitted Intercompany Transactions means transactions with Affiliates
     of Borrower (a) which comply in all respects with Section  7.12 without
     regard to the proviso to such Section, and are identified on Schedule 5.22,
     and (b) with respect to which the aggregate consideration paid by Borrower
     in any month does not exceed the amount for each type of transaction set
     forth on Schedule 5.22.

          Permitted Investment means an Investment permitted pursuant to Section
     7.6.

          Permitted Liens means:

               (a) Liens on the Collateral which secure payment of the
          Obligations (including Liens granted on the Collateral pursuant to the
          Security Agreement in connection with the Existing Loan Agreement);

               (b) Liens on the Collateral permitted under Section 7.8(d) and
          Liens on Take-Out Commitments no longer included in the Collateral
          permitted under  Section 7.8(c);

               (c) rights of FNMA, FHLMC and GNMA in each case in the Agency
          Servicing Rights in connection with the Agency Servicing Agreements
          under which Borrower services Mortgage Loans on behalf of such Person,
          arising under the FNMA Guide, the FHLMC Guide or the GNMA Guide, as
          applicable, and rights of any Person counterpart to a Servicing
          Agreement other than an Agency Servicing Agreement in the Servicing
          Rights arising thereunder;

               (d) tax and other Liens permitted under Section 6.2;

               (e) Liens in respect of office equipment (including without
          limitation computers) leased or purchased by Borrower for an aggregate
          amount no greater than  $3,000,000;

               (f) Liens in respect of claims regarding labor, materials,
          services and

                                       18
<PAGE>

          supplies provided in connection with REO;

               (g) Liens on REO of the type permitted as exceptions under Part
          IV, Section 105.05 of the FNMA Guide (Selling) and Section 1704 of the
          FHLMC Guide;

               (h) Liens to secure obligations of Borrower in respect of workers
          compensation and other labor laws;

               (i) Liens in respect of appeal or performance bond reimbursement
          obligations of Borrower undertaken in the ordinary course of business;

               (j) Repurchase Agreement Liens; and

               (k) Liens on Property not included in the Collateral which secure
          Investment Line of Credit Indebtedness incurred to finance the
          acquisition of such Property.

     provided, that Liens described in clauses (f), (h) and (i) of this
     definition shall not constitute Permitted Liens to the extent that the
     failure of Borrower timely to perform the underlying obligations,
     individually or in the aggregate, would constitute a Material Adverse
     Effect.

          Permitted Returns of Capital means Returns of Capital which are
     permitted under Section 7.11.

          Permitted Subordinated Indebtedness means Indebtedness under the

     Parent Note.

          Permitted Subsidiaries means Subsidiaries which are engaged in some
     aspect of the mortgage banking business, including, without limitation,
     title companies and with respect to which the aggregate capital contributed
     by Borrower to all such Subsidiaries does not exceed $1,000,000.

          Permitted Tax Payments means payments to or on behalf of the Parent or
     any Affiliate in respect of taxes, which payments are permitted under
     Section 7.16.

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

          Plan means an "employee pension benefit plan" (as defined in Section
     3(2) of ERISA) which is or has been established or maintained, or to which
     contributions are or have been made, by Borrower or any of its Related
     Persons, or an employee pension benefit plan as to which Borrower or any of
     its Related Persons would be treated as a contributory sponsor under Title
     IV of ERISA if it were to be terminated.

                                       19
<PAGE>

          Pledged Mortgage Loan has the meaning specified in the Security
     Agreement.

          Principal Mortgage Documents has the meaning specified in the Security
     Agreement.

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

          Reference Rate means the rate of interest from time to time publicly
     announced by Agent as its "reference rate."  Agent may lend to its
     customers at rates that are at, above or below the Reference Rate.  For
     purposes of determining any interest  rate hereunder or under any other
     Loan Document which is based on the Reference Rate, such interest rate
     shall change as and when the Reference Rate shall change.

          Reference Rate Segment means that portion of a Tranche which bears
     interest at the Reference Rate.

          Regular Tranche means, with respect to any Note at any time, that
     portion of the then outstanding principal balance of such Note which is
     deemed to be supported by the Collateral Value of Collateral which is other
     than Construction Loans, Lot Loans or Eligible Gestation Mortgage Loans, as
     specified from time to time by Borrower in the Borrowing Requests and
     Conversion Requests received by Agent from Borrower, provided, that (a) the
     aggregate principal amount of all Regular Tranches outstanding under the
     Notes of all Lenders at any time shall not exceed the remainder (the
     "Remainder Collateral Value") of (i) the aggregate Collateral Value of all
     Collateral held by Agent at that time minus (ii) the aggregate Collateral
     Value of all Construction Loans, Lot Loans and Eligible Gestation Mortgage
     Loans included in the Collateral held by the Agent at such time, and (b)
     the aggregate principal amount of all Regular Tranches outstanding under
     any Lender's Notes at any time shall not exceed the product of the
     Remainder Collateral Value at such time multiplied by a fraction the
     numerator of which is the aggregate principal balance outstanding under
     such Lender's Notes at such time and the denominator of which is the
     aggregate principal balance outstanding under all Lenders' Notes at such
     time.

          Regulation D means Regulation D of the Board of Governors of the
     Federal Reserve System.

          Related Person means any Person that is (a) a member of the same
     controlled group of corporations (within the meaning of Section 414(b) of
     the Code) as Borrower, (b) under common control (within the meaning of
     Section 414(c) of the Code or Section 4001 of ERISA) with Borrower, (c) a
     member of any affiliated service group (within the meaning of Section
     414(m) of the Code) which includes Borrower, or (d) otherwise treated as
     part of the controlled group which includes Borrower (within the

                                       20
<PAGE>

     meaning of Section 414(o) of the Code).

          Remainder Collateral Value has the meaning given such term in the
     definition of the term "Regular Tranche" set forth in this Section 1.1.

          REO means real estate owned by Borrower as the result of foreclosure
     or other process in lieu of foreclosure on a Mortgage which secured a
     Mortgage Loan.

          Repurchase Agreement means an agreement with an Investor pursuant to
     which Borrower sells and agrees to repurchase interests in Mortgage Loans.

          Repurchase Agreement Liens means Liens granted pursuant to a
     Repurchase Agreement on Mortgage Loans (and the proceeds thereof) sold by
     Borrower thereunder and on no other property of Borrower.

          Required Lenders means at any time Lenders whose Commitment Amounts
     represent at least 66 and 2/3% of the then Total Commitment; provided, that
     for purposes of determining Required Lenders when some but not all
     Commitments have terminated, any Lender with outstanding Advances whose
     Commitment has terminated shall be deemed to have a Commitment Amount equal
     to its outstanding Advances.

          Requirement of Law as to any Person means the articles of
     incorporation and by-laws or other organizational or governing documents of
     such Person, and any law, statute, code, ordinance, order, rule,
     regulation, judgment, decree, injunction, franchise, permit, certificate,
     license, authorization or other determination, direction or requirement
     (including, without limitation, any of the foregoing which relate to energy
     regulations and occupational, safety and health standards or controls and
     environmental, hazardous materials use or disposal and pollution standards
     or controls) of any Governmental Authority, in each case applicable to or
     binding upon such Person or any of its Property or to which such Person or
     any of its Property is subject.

          Returns of Capital means any and all payments made by Borrower to  the
     Parent which represent a return of cash capital contributions made by  the
     Parent to Borrower at any time on or after the Agreement Date.

          Scheduled Termination Date means  September 4, 2000.

          Second Lien Loan means a Mortgage Loan that is otherwise an Eligible
     Mortgage Loan but is secured by a second-priority security interest in the
     property (but a first priority security interest in the Mortgage Loan) and
     whose Loan to Value Ratio does not exceed 100%.

                                       21
<PAGE>

          Securities Credit Transaction Regulations means Regulations T, U and X
     issued by the Board of Governors of the Federal Reserve System as in effect
     from time to time.

          Security Agreement means that certain Pledge and Security Agreement
     dated as of the date of this Agreement, as amended, between Borrower and
     Agent in substantially the form of Exhibit K attached,  as the same may
     from time to time be amended, modified or supplemented.

          Security Instruments means (i) the Security Agreement and (ii) such
     other executed documents as are or may be necessary to grant to Agent a
     perfected first, prior and continuing security interest in and to the
     collateral described in the definition of "Collateral" set forth in the
     Security Agreement, and any and all other agreements or instruments now or
     hereafter executed and delivered by or on behalf of Borrower in connection
     with, or as security for the payment or performance of, all or any of the
     Obligations, including Borrower's obligations under the Notes and this
     Agreement, as such documents may be amended, modified or supplemented from
     time to time.

          Servicing Agreements means all agreements between Borrower and Persons
     other than Borrower pursuant to which Borrower undertakes to service
     Mortgage Loans or pools of Mortgage Loans owned, insured or guaranteed by
     such Persons; "Servicing Agreements" does not include any subservicing
     agreements.

          Servicing Portfolio of Borrower means at any time all Mortgage Loans
     with respect to which Borrower acts as servicer pursuant to Servicing
     Agreements.

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

          Servicing Rights means all of Borrower's right, title and interest in
     and under the Servicing Agreements, including, without limitation, the
     rights of Borrower to income and reimbursement thereunder.

Segment means a Balance Funded Rate Segment, a LIBOR Segment or a Reference Rate
Segment.

          Standard & Poors means Standard & Poor's Ratings Services.

          Subsidiary of any Person (the "first Person") means any Person which
     is properly treated as a subsidiary of the first Person under GAAP.

          Super Jumbo Loan means a Mortgage Loan, the original principal amount
     of which is greater than $1,000,000 but no greater than $1,500,000 (or such
     greater amount as Agent, in its sole discretion, may permit on a case-by-
     case basis, but no greater than $1,750,000), which complies with all
     applicable requirements for purchase under either (a) the FNMA or FHLMC
     standard form of conventional mortgage purchase contract

                                       22
<PAGE>

     then in effect, except that the amount of such loan is greater than the
     maximum loan amount under such requirements, or (b) a Take-Out Commitment.

          Swing Advance means an advance by Agent to Borrower pursuant to
     Section 2.1(c).

          Swing Advance Limit means $50,000,000.

          Swing Promissory Note means the promissory note delivered by Borrower
     to Agent pursuant to the second sentence of Section 2.2 in the form
     attached hereto as Exhibit A-3 and all renewals, extensions, modifications
     and rearrangements thereof.

          Take-Out Commitment means a current, valid, binding and enforceable
     written commitment by an Investor to purchase from Borrower Mortgage Loans
     or Mortgage-Backed Securities of specific characteristics within a specific
     period at a specific price or yield.

          Take-Out Price means:

               (a) With respect to a pool of Eligible Gestation Mortgage Loans,
          the Take-Out Price of the Mortgage-Backed Security to be issued or
          guaranteed pursuant to the Agency Commitment to which such pool has
          been Allocated; and

               (b) with respect to an Eligible Mortgage-Backed Security, the
          price for such Eligible Mortgage-Backed Security under the Take-Out
          Commitment to which such Eligible Mortgage-Backed Security has been
          Allocated.

          Take-Out Report means the report substantially in the form of Exhibit
     H hereto (or such other forms as to which Borrower and Agent may agree),
     delivered by Borrower pursuant to Section 6.1(f).

          Tangible Net Worth of Borrower means, as of any date of determination,
     the sum of the amounts set forth on the balance sheet of Borrower as the
     sum of the common stock, preferred stock, additional paid-in capital and
     retained earnings of Borrower (excluding treasury stock), less the book
     value of all intangible assets of  Borrower, including all such items as
     goodwill, trademarks, trade names, service marks, copyrights, patents,
     licenses, unamortized debt discount and expenses and the excess of the
     purchase price of the assets of any business acquired by the Borrower over
     the book value of such assets.

          Tax Allocation Agreement means that certain Amended and Restated Tax
     Allocation Agreement dated as of March 7, 1996, among the Parent, Borrower
     and certain Affiliates of Borrower, a true and correct copy of which is
     attached as Exhibit L.

          Termination Date means the Scheduled Termination Date or the earlier
     date of termination in whole of the Commitments pursuant to Section 8.2.

                                       23
<PAGE>

          Total Commitment at any time means the sum of the Commitment Amounts
     in effect at such time.

          Total Liabilities of Borrower means, as of any date of determination,
     all amounts which would be included as liabilities on a balance sheet of
     Borrower as of such date prepared in accordance with GAAP.

          Tranche means a Construction/Lot Loan Tranche, a Gestation Loan
     Tranche or a Regular Tranche.

          Trust Receipt has the meaning specified in the Security Agreement.

          Type refers to the type of interest rate option applicable to a
     Segment of a Tranche.  The Types of Segments available under Agreement are
     Balance Funded Rate Segments, LIBOR Segments and Reference Rate Segments.

          UCC means the Uniform Commercial Code as adopted in the State of
     Minnesota, as amended from time to time.

          Uncommitted Warehouse Promissory Notes means the promissory notes
     delivered by Borrower to Lenders pursuant to Section 2.2 each in the form
     attached hereto as Exhibit A-2 and all renewals, extensions, modifications
     and rearrangements thereof.

          U.S. Government Securities means securities of the United States
     government or any agency thereof which are backed by the full faith and
     credit of the United States and have a current maturity of ninety days or
     less.

          VA means the Department of Veterans Affairs, or any successor thereto.

          VA Loan means a Mortgage Loan the payment of which is partially or
     completely guaranteed by the VA under the Servicemen's Readjustment Act of
     1944, as amended, or Chapter 37 of Title 38 of the United States Code or
     with respect to which there is a current binding and enforceable commitment
     for such a guaranty issued by the VA.

          Warehouse Advance means an advance by a Lender to Borrower pursuant to
     Section 2.1(b) or 2.1(d).

          Weighted Average Take-Out Price means, with respect to a Mortgage
     Loan, the weighted average Take-Out Commitment price, expressed as a
     percentage, determined as set forth on Schedule 1.1(c).

          Welfare Plan means an employee welfare benefit plan (as defined in
     Section 3(1)

                                       24
<PAGE>

     of ERISA) or a group health plan (as defined in Section 4980B(g)(2) of the
     Code) which is or has been established or maintained, or to which
     contributions are or have been made, by Borrower or any of its Related
     Persons.

          Wet Mortgage Loan means a Mortgage Loan (other than a Construction
     Loan, a Lot Loan or REO) the Principal Mortgage Documents for which have
     not been delivered to the Agent.

     1.2  Time References. Time references (e.g., 9:30 a.m.) are to time in
          ---------------
Minneapolis, Minnesota. In calculating a period from one date to another, the
word "from" means "from and including" and the word "to" or "until" means "to
but excluding."

     1.3  Other References. Where appropriate, the singular includes the plural
          ----------------
and vice versa, and words of any gender include each other gender. Heading and
caption references may not be construed in interpreting provisions. Monetary
references are to currency of the United States of America. Section, paragraph,
annex, schedule, exhibit, and similar references are to the particular Loan
Document in which they are used. References to "telecopy," "facsimile," "fax,"
or similar terms are to facsimile or telecopy transmissions. References to any
Person include that Person's heirs, personal representatives, successors,
trustees, receivers, and permitted assigns. References to any Requirement of Law
include every amendment or supplement to it, rule and regulation adopted under
it, and successor or replacement for it. References to any Loan Document or
other document include every renewal and extension of it, amendment and
supplement to it, and replacement or substitution for it. The words "hereof,"
"herein," "hereunder" and similar terms when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement.

                                       25
<PAGE>

SECTION 2.  AMOUNT AND TERMS OF CREDITS
            ---------------------------

2.1  Commitment.
     ----------

          (a)  Advances in General.  Subject to the terms and conditions
               -------------------
     contained in this Agreement, each Lender severally agrees to make Warehouse
     Advances (including Warehouse Advances to refinance Swing Advances) to or
     for the account of Borrower on a revolving credit basis from time to time
     on any Business Day from the Agreement Date through the earlier to occur of
     the Termination Date and the Business Day preceding the Scheduled
     Termination Date in an amount not to exceed at any one time outstanding the
     Commitment Amount of such Lender.  Subject to the terms and conditions
     contained in this Agreement, Agent may elect to fund Swing Advances and L/C
     Advances on a revolving credit basis from time to time on any Business Day
     from the Agreement Date through the earlier to occur of the Termination
     Date and the Business Day preceding the Scheduled Termination Date in an
     amount not to exceed at any one time outstanding the Swing Advance Limit or
     the L/C Advance Limit respectively.  Subject to the terms and conditions
     contained in this Agreement, any Lender may elect to fund under the
     Guidance Line on a revolving credit basis from time to time on any Business
     Day, so long as no Default or Event of Default exists, from the Agreement
     Date through the earlier to occur of the Termination Date and the Business
     Day preceding the Scheduled Termination Date in an amount not to exceed at
     any one time outstanding the Guidance Line.  Subject to the other terms and
     conditions of this Agreement, Warehouse Advances  made under each Lenders
     Notes shall be allocated to Construction/Lot Loan Tranches, Gestation
     Tranches and/or Regular Tranches under such Notes, which Tranches shall, at
     the election of Borrower, bear interest as Balance Funded Rate Segments,
     LIBOR Segments, Reference Rate Segments, or any combination thereof.

          (b)  Warehouse Advances.  Each Borrowing under this Section 2.1(b)
               ------------------
     shall be in an aggregate amount of not less than $100,000 and shall consist
     of Warehouse Advances made on the Borrowing Date by Lenders ratably
     according to their respective Commitment Amounts, provided, that:

               (i)   the aggregate amount of Warehouse Advances at any time
          outstanding shall not exceed the amount equal to the sum of (A) the
          Total Commitment plus (B) the total Guidance Line minus (x) the
          aggregate amount of Swing Advances plus (y) the amount of the L/C
          Exposure.

               (ii)  the sum of the aggregate amount of Warehouse Advances
          (committed and Guidance Line) outstanding and the aggregate amount of
          Swing Advances and L/C Advances outstanding shall not at any time
          exceed the Borrowing Base; and

               (iii) the aggregate amount of Guidance Line Advances at any time
          outstanding shall not exceed the lesser of either (a) the total
          Guidance Line or (b) the sum  of the Borrowing Base minus the Total
          Commitment.

                                       26
<PAGE>

     Within the limits of each Lender's Commitment together with each Lender's
     Guidance Line, and subject to the other terms and conditions hereof,
     Borrower may borrow, repay (whether pursuant to Section 2.5 of this
     Agreement or otherwise), and reborrow under this Section 2.1(b).

          (c) Swing Advances.  Each Borrowing under this Section 2.1(c) shall be
              --------------
     funded solely by Agent and shall consist of a Swing Advance by Agent on the
     Borrowing Date, provided, that notwithstanding anything to the contrary in
     this Agreement or any other Loan Document, Agent shall have no obligation,
     whether to Borrower, any Lender or any other Person, to fund any Swing
     Advance, the funding of any Swing Advance being entirely in the discretion
     of Agent subject only to the limitations that Agent shall not fund any
     Swing Advance if:

              (i)   The aggregate amount of Swing Advances outstanding after
          giving effect to such Swing Advance would exceed the lesser of:

                    (A)  The Swing Advance Limit; and

                    (B)  the amount equal to the Total Commitment plus the
               Guidance Line minus the aggregate amount of Warehouse Advances
               and L/C Advances then outstanding;

              (ii)  the sum of the aggregate amount of Warehouse Advances
          outstanding plus the aggregate amount of Swing Advances and L/C
          Advances outstanding after giving effect to such Swing Advance would
          exceed the Borrowing Base;

              (iii) Agent has not received a  Borrowing Request;

              (iv)  Agent has received written notice from Borrower or any
          Lender that a Default or Event of Default  exists and such Default or
          Event of Default  has not been waived or cured in accordance with this
          Agreement; or

              (v)   the employee of Agent authorizing such Swing Advance has
          actual knowledge that a Default or Event of Default  exists or would
          result from the funding thereof.

     Notwithstanding the provisions of Section 4.2(a) regarding the timing of
     delivery of Borrowing Requests, Borrower may request a Swing Advance at any
     time on any Business Day by delivering a Borrowing Request at such time;
     provided, that Agent shall have no obligation to receive or consider any
     Borrowing Request which is delivered after 3:00 p.m.  on the Borrowing Date
     stated therein.  In the event that Agent receives a Borrowing Request which
     seeks a Swing Advance prior to 11:00 a.m.  on the Borrowing Date stated
     therein and Agent elects not to make the requested Swing Advance, such
     Borrowing Request shall be deemed to constitute a request for Warehouse
     Advances on

                                       27
<PAGE>

     such Borrowing Date in an aggregate amount equal to the Swing Advance
     requested and Agent shall notify each Lender of such Borrowing Request no
     later than 1:00 p.m.on such Borrowing Date.

          (d)  Mandatory Refinancing or Purchase of Participations in Swing
               ------------------------------------------------------------
     Advances.  Subject only to compliance by Agent with the provisions of
     --------
     clauses (i) through (v) of Section 2.1(c) and the further proviso that no
     Lender shall be required to make Warehouse Advances to refinance Swing
     Advances if the sum of such Warehouse Advances and the outstanding
     Warehouse Advances of such Lender would exceed such Lender's Commitment
     Amount, and notwithstanding the termination of such Lender's Commitment
     pursuant to Section 8.2, the existence or imminence of any Default or Event
     of Default or any other fact or circumstance, upon the request of Agent
     (which request shall be given no less frequently than once in each calendar
     week) each Lender absolutely, irrevocably and unconditionally agrees to
     make Warehouse Advances ratably according to its share of the Total
     Commitment in an amount (assuming funding by each Lender of its ratable
     share) sufficient to repay any Swing Advances then outstanding.  Borrower
     and each Lender hereby irrevocably authorize (i) Agent to request Warehouse
     Advances on behalf of Borrower for the purpose of refinancing Swing
     Advances as contemplated by this Section 2.1(d) and (ii) Agent to disburse
     the proceeds of any Warehouse Advances so requested and funded to Agent for
     payment of the Swing Advances then outstanding.  Notwithstanding the
     foregoing provisions of this Section 2.1(d), if Agent shall request that
     each Lender purchase participations in the outstanding Swing Advances in
     lieu of making Warehouse Advances to refinance such Swing Advances, each
     Lender absolutely, irrevocably and unconditionally agrees to purchase from
     Agent such participations in the Swing Advances owing as shall be necessary
     to cause such purchasing Lender to share in the Swing Advances ratably
     (according to its share of the Total Commitment) with each of Lenders.
     Borrower agrees that any Lender so purchasing a participation from Agent
     pursuant to this Section 2.1(d) may, to the fullest extent permitted by
     law, exercise all its rights of payment (including the right of set-off)
     with respect to such participation as fully as if such Lender were the
     direct creditor of Borrower in the amount of such participation.

          (e)  L/C Advances. Each L/C Advance under this Section 2.1(e) shall be
               ------------
     made solely by Agent (in its individual capacity) on the Borrowing Date,
     provided, that notwithstanding anything to the contrary in this Agreement
     or any other Loan Document, Agent shall have no obligation to make any L/C
     Advance if:

               (i)  The aggregate amount of L/C Exposure after giving effect to
          such L/C Advance would exceed the lesser of:

                    (A)  The L/C Advance Limit; and

                    (B)  the amount equal to the Total Commitment minus the
               aggregate amount of Warehouse Advances and Swing Advances then
               outstanding;

                                       28
<PAGE>

               (ii)  the sum of the aggregate amount of Warehouse Advances
          outstanding plus the aggregate amount of Swing Advances and L/C
          Advances outstanding after giving effect to such L/C Advance would
          exceed the Borrowing Base;

               (iii) Agent has not received a  Borrowing Request;

               (iv)  Agent has received written notice from Borrower or any
          Lender that a Default or Event of Default exists and such Default or
          Event of Default has not been waived or cured in accordance with this
          Agreement; or

               (v)   the employee of Agent authorizing such L/C Advance has
          actual knowledge that a Default or Event of Default exists or would
          result from the funding thereof.

          (f)  Refinancing of L/C. Obligations.  Provided that there is no
               -------------------------------
     Default, each L/C Obligation may be refinanced (and not otherwise paid on
     demand pursuant to Section 2.3(d)) as a Borrowing, such Borrowing to be
     advanced by each Lender pro rata in accordance with its Commitment
     Percentage, upon the Borrower's request for such refinance and delivery to
     the Agent of an appropriate Borrowing Request for such Borrowing, provided
     that (i) the sum of such Borrowings under this Section 2.1(f), together
     with all other L/C Exposure, shall not at any time exceed the L/C Advance
     Limit, (ii) at the time of such Borrowing Request, the Borrower shall have
     satisfied the conditions set forth in clauses (i) through (v) of Section
     2.1(e), and (iii) after giving effect to such Borrowing, the total of all
     Advances of any Lender would not exceed such Lender's Commitment Amount.
     All advances made by the Lenders under this Section 2.1(f) or pursuant to
     Section 2.3(c)(ii) shall constitute Advances under this Agreement, shall be
     evidenced by the Notes, and shall be payable to the Lenders pursuant to
     Section 2.7.

          (g)  Increases. Borrower may from time to time request any one or more
               ---------
     Lenders to increase their respective Guidance Line or Commitment so that
     the total Guidance Line may be increased to no more than $50,000,000, or so
     that the total Commitment may be increased to no more than $250,000,000.
     That increase must be effected by an amendment executed by Borrower, Agent,
     and the increasing Lender. Borrower shall execute and deliver to each such
     Lender a Committed or an Uncommitted Warehouse Note in the stated amount of
     its new Commitment or Guidance Line increase. No Lender is obligated to
     increase its Commitment under any circumstances, and no Lender's Commitment
     may be increased except by its execution of an amendment as stated above.
     Each new Lender providing such additional Commitment or Guidance Line
     increase shall be a "Lender" hereunder, entitled to the rights and
     benefits, and subject to the duties, of a Lender under the Credit
     Documents. All amounts advanced hereunder pursuant to any such additional
     Commitment shall be secured by the Collateral on a pari passu basis with
     all other amounts advanced hereunder. In the event the total Commitments
     are increased, Borrower shall execute a new Committed Warehouse Note in
     favor of the Lender extending such additional Commitment in a stated amount
     of its

                                       29
<PAGE>

     new Commitment and shall notify each Lender in writing of such additional
     Commitment. In such case, each Lender's Commitment Percentage shall be
     recalculated to reflect the new proportionate share of the revised total
     Commitments and the Lender responsible for the additional Commitment shall,
     immediately upon receiving notice from Agent, pay to each Lender an amount
     equal to its pro rata share of the Borrowings outstanding as of such date.
     All such payments shall reduce the outstanding principal balance of the
     Committed Warehouse Note of each Lender receiving such payments and shall
     represent Borrowings to Borrower under the purchasing Lender's Committed
     Warehouse Note. The purchasing Lender shall be entitled to share ratably in
     interest accruing on the balances purchased, at the rates provided herein
     for such balances, from and after the date of purchase. All new Borrowings
     occurring after an increase of the total Commitments shall be funded in
     accordance with each Lender's revised Commitment Percentage.

2.2 Notes. The Warehouse Advances made by each Lender pursuant to Section 2.1(b)
    -----
and 2.1(d) and the L/C Advances made by Agent pursuant to Section 2.1(e) shall
be evidenced by a Committed Warehouse Promissory Note payable to such Lender in
the principal amount of the Commitment Amount of such Lender and an Uncommitted
Warehouse Promissory Note payable to such Lender in the principal amount of the
Guidance Line of such Lender. Such Swing Advances as may be made by Agent in its
sole discretion (subject only to the limitations on such discretion set forth in
clauses (i) through (v) of Section 2.1(c)) shall be evidenced by the Swing
Promissory Note payable to Agent in the principal amount of the Swing Advance
Limit. Each Note shall be payable and bear interest as set forth in Sections
2.5, 2.11, and 11.9.

2.3  Notice and Manner of Obtaining Borrowings.
     -----------------------------------------

          (a)  Borrowings Generally.
               --------------------

               (i)  Borrower shall request each Borrowing by making a Borrowing
          Request upon Agent in accordance with the provisions of Section 4.2.
          If such Borrowing Request is not for a Swing Advance (or if such
          Borrowing Request is for a Swing Advance but Agent has elected not to
          fund the requested Swing Advance), then not later than 1:00 p.m.
          following receipt by it of such Borrowing Request, Agent shall notify
          each Lender of the Warehouse Advance to be made by such Lender in
          connection with such Borrowing Request by telecopying a Borrowing
          Notice to such Lender.  Not later than 3:00 p.m. on the Borrowing
          Date specified in the Borrowing Notice, and subject to the terms and
          conditions of this Agreement, each Lender shall make available to
          Agent at the office of Agent set forth in Section 11.1, in immediately
          available funds, such Lender's Warehouse Advance by wire transfer of
          federal funds or deposit of other immediately available funds to the
          Collateral Account.

               (ii) Notwithstanding the foregoing, unless Agent shall have
          received notice from a Lender prior to 3:00 p.m. on the Borrowing
          Date that such Lender will not make available to Agent such Lender's
          Advance, Agent may assume that such Lender has made the full amount of
          its Advance available to Agent in

                                       30
<PAGE>

          accordance with this Section 2.3(a) and Agent may, in reliance upon
          such assumption, make available to Borrower at such time such amount
          in same day funds. If and to the extent that such Lender shall have
          not so made the requested Advance available to Agent and Agent, in
          reliance upon such assumption, has made available to Borrower the
          amount of such Advance, such Lender and Borrower severally agree to
          repay Agent forthwith on demand such amount together with interest
          thereon (provided, that Agent shall only be entitled to repayment of
          the amount so funded by it plus interest on such amount), for each day
          from the date such amount is made available to Borrower until the date
          such amount is repaid to Agent, at (i) for so much of such amount as
          is repaid by Borrower, the interest rate at the time applicable
          hereunder if such amount had been an additional Advance by U.S. Bank
          National Association in its capacity as a Lender hereunder and (ii)
          for so much of such amount as is repaid by such Lender, Average
          Adjusted LIBOR. To the extent that such Lender repays Agent the amount
          of the requested Advance, such amount so repaid shall constitute such
          Lender's Advance as part of such Borrowing as of the applicable
          Borrowing Date for purposes of this Agreement and all interest on such
          Advance shall accrue to and be payable to such Lender.

               (iii) The failure of any Lender to make the Advance to be made
          by it as part of any Borrowing shall not relieve any other Lender of
          its obligation, if any, hereunder to make its Advance on the Borrowing
          Date, but neither Agent nor any Lender shall be responsible for the
          failure of any other Lender to make the Advance to be made by such
          other Lender on the Borrowing Date.

               (iv)  If a Borrowing Request is for a Swing Advance and Agent
          elects to fund the Swing Advance so requested, Agent shall, as soon as
          practicable after such election, notify Borrower and deposit the Swing
          Advance in immediately available funds in the  Collateral Account.

(b)  L/C Advances.  The following conditions and procedures apply to L/Cs:
     ------------

               (i)   Borrowing Request and L/C Agreement.  Borrower may only
                     -----------------------------------
          request a L/C by delivering to Agent a related Borrowing Request and
          L/C Agreement before 11:30 a.m. on the second Business Day before the
          L/C is to be issued.

               (ii)  Participations.  Immediately upon Agent's issuance of any
                     --------------
          L/C, Agent is deemed to have sold and transferred to each other
          Lender, and each other Lender is deemed irrevocably and
          unconditionally to have purchased and received from Agent, without
          recourse or warranty, an undivided interest and participation in the
          L/C and Agent's obligations under it to the extent of that Lender's
          Commitment Percentage of the face amount of that L/C, which
          participation must be paid for on Agent's demand if there is ever any
          L/C Obligation outstanding in connection with it.  Agent shall provide
          a copy of each L/C to each other Lender promptly after issuance.

                                       31
<PAGE>

               (iii) Reimbursement Obligation.  To induce Agent to issue and
                     ------------------------
          maintain L/Cs and Lenders to participate in issued L/Cs, Borrower
          agrees to reimburse Agent (i) on demand, on or after the date when any
          draft or draw request is presented under any L/C, the amount paid by
          Agent and (ii) promptly, upon demand, the amount of any additional
          fees Agent customarily charges for the application and issuance of a
          letter of credit, amending letter of credit applications and
          agreements, honoring drafts and draw requests, and taking similar
          action in connection with letters of credit.  Until repaid by Borrower
          by a payment or a Borrowing under Section 2.1, the L/C Obligation is a
          demand obligation and bears interest at the  Reference Rate while
          outstanding.  Borrower's obligations in respect of the L/C Obligation
          are absolute and unconditional under any and all circumstances and
          irrespective of any setoff, counterclaim, or defense to payment that
          Borrower may have at any time against Agent or any other Person.

               (iv)  Payments Under L/Cs.  Agent shall promptly notify Borrower
                     -------------------
          of the date and amount of any draft or draw request presented for
          honor under any L/C.  Agent's failure to give that notice will not
          affect Borrower's obligations under this Agreement.  Agent shall pay
          the requested amount upon presentment of a draft or draw request
          unless presentment on its face does not comply with the terms of the
          applicable L/C.  When making payment, Agent may disregard (i) any
          default or potential default that exists under any other agreement and
          (ii) obligations under any other agreement that have or have not been
          performed by the beneficiary or any other Person.  Agent is not liable
          for any of those obligations.

               (v)   Absolute Obligations.  Borrower's reimbursement obligations
                     --------------------
          to Agent and Lenders, and each Lender's obligations to Agent, under
          this Section 2.3(c) are absolute and unconditional irrespective of,
          and Agent is not responsible for, (i) the validity, enforceability,
          sufficiency, accuracy, or genuineness of documents or endorsements
          (even if they are in any respect invalid, unenforceable, insufficient,
          inaccurate, fraudulent, or forged), (ii) any dispute by Borrower with,
          or any claims, setoffs, defenses, counterclaims, or other rights by
          Borrower against, Agent, any Lender, or any other Person, or (iii) the
          occurrence of any Default or Event of Default.  However, nothing in
          this Agreement constitutes a waiver of Borrower's or any Lender's
          rights to assert any claim or defense based upon the gross negligence
          or willful misconduct of Agent.

               (vi)  Issuance and Cancellation.  Each L/C is deemed issued upon
                     -------------------------
          delivery to the beneficiary of Borrower.  If Borrower requests any L/C
          be delivered to Borrower rather than the beneficiary and later cancels
          that L/C, then Borrower shall return it to Agent together with
          Borrower's written certification that it has never been delivered to
          the beneficiary.  If any L/C is delivered to the beneficiary under
          Borrower's instructions, Borrower's cancellation is ineffective
          without Agent's receipt of the beneficiary's written consent and the
          L/C.

                                       32
<PAGE>

          Borrower shall indemnify Agent and each Lender for all losses, costs,
          damages, expenses, and reasonable attorneys' fees suffered or incurred
          by Agent or any Lender resulting from any dispute concerning
          Borrower's cancellation of any L/C.

               (vii)  Agent's Responsibilities.  Agent shall exercise and give
                      ------------------------
          the same care and attention to each L/C as it gives to its other
          letters of credit.  In paying any draft or draw under any L/C, Agent
          has no responsibility to obtain any document (other than any documents
          expressly required by the respective L/C) or to ascertain or inquire
          as to any document's validity, enforceability, sufficiency, accuracy,
          or genuineness or the authority of any Person delivering it.  Neither
          Agent nor its representatives will be liable to any Lender or Borrower
          for any L/C's use or for any beneficiary's acts or omissions.  Any
          action, inaction, error, delay, or omission taken or suffered by Agent
          or any of its representatives in connection with any L/C, applicable
          draws, drafts, or documents, or the transmission, dispatch, or
          delivery of any related message or advice, if in good faith and in
          conformity with applicable Laws and in accordance with the standards
          of care specified in the Uniform Customs and Practices for Documentary
          Credits (1993 Revision), International Chamber of Commerce Publication
          No. 500 is binding upon the Company and Lenders and does not place
          Agent or any of its representatives under any resulting liability to
          either Company or any Lender.  Agent is not liable to the Company or
          any Lender for any action taken or omitted, in the absence of gross
          negligence or willful misconduct, by Agent or its Representative in
          connection with any L/C.

               (viii) Cash Collateral.  On the Termination Date, during the
                      ---------------
          continuance of any Default under Section 8.1(f), (g), or (h) or upon
          any demand by Agent while any other Default exists, Borrower shall
          provide to Agent, for the benefit of Lenders, cash collateral in an
          amount equal to the then-existing L/C Exposure or other collateral
          acceptable to Agent in its sole discretion.

               (ix)   Other Agreements. Although referenced in any L/C, terms of
                      ----------------
          any particular agreement or other obligation to the beneficiary are
          not incorporated into this Agreement in any manner.

                                       33
<PAGE>

               (x)  Governing Provisions.  The fees and other amounts payable
                    --------------------
          with respect to each L/C are as provided in this Agreement, drafts and
          draws under each L/C are part of the Obligation, and the terms of this
          Agreement control any conflict between the terms of this Agreement and
          any L/C Agreement.

2.4  Fees.
     ----

          (a)  Facility Fees. Borrower agrees to pay to Agent for the account of
               -------------
     each Lender a facility fee for each calendar quarter in an amount equal to
     0.125% per annum of (i) such Lender's average Commitment Amount and (ii) on
     such Lender's advanced portion of the Guidance Line.  Facility fees accrued
     through the last day of any calendar quarter shall be payable on the fifth
     day of the following calendar quarter.  Facility fees shall be computed on
     the basis of actual days elapsed and a year of 360 days.

          (b)  L/C Issuance and Fronting Fee.  In consideration of Agent serving
               -----------------------------
     as L/C issuer under this Agreement and the other Loan Documents, Borrower
     agrees to pay Agent L/C fees as set forth in a separate Agent Fee Letter.

          (c)  Standby L/C Fee.  Borrower shall pay to Agent, for the ratable
               ---------------
     benefit of Lenders, a fee for each L/C equal to the product of (i) 1.00%
     multiplied by (ii) the face amount of each L/C, payable at the issuance of
     each L/C.

          (d)  Deficiency Fees.  Borrower shall pay to each Deposit Holding
               ---------------
     Lender from time to time for the account of  such Deposit Holding Lender
     any deficiency fees payable to such Deposit Holding Lender under its
     Balance Funded Rate Agreement.

2.5  Mandatory Repayments. Borrower shall repay all outstanding Advances on the
     --------------------
Termination Date. If at any time the aggregate amount of Advances outstanding
exceeds either the Total Commitment plus the Guidance Line or the Borrowing
Base, Borrower, upon the demand of Agent or any Lender, shall repay so much of
the outstanding Advances as may be necessary to eliminate such excess

2.6  Business Days. If the scheduled date for any payment hereunder falls on a
     -------------
day which is not a Business Day, then for all purposes of the Notes and this
Agreement the same shall be deemed to have fallen on the next following Business
Day, and, except for such payments as to which interest had ceased to accrue
prior to the scheduled date for payment, such extension of times shall be
included in the computation of payments of interest.

2.7  Payment Procedure.
     -----------------

          (a)  In General.  All payments of the principal of and interest and
               ----------
     fees upon the Notes shall be made by Borrower to Agent before 1:00 p.m.  on
     the respective dates when due in federal or other immediately available
     funds at Agent's address set forth in Section 11.1.  Agent will promptly
     thereafter cause to be distributed like funds relating to the payment of
     principal or interest or fees ratably to Lenders according to their
     interests therein and like funds relating to the payment of any other
     amount payable to any Lender

                                       34
<PAGE>

     to such Lender, in each case to be applied in accordance with terms of this
     Agreement. Funds received after 1:00 p.m. shall be treated for all purposes
     as having been received by Agent on the Business Day next following the
     date of receipt of such funds.

          (b)  Order and Notice of Payments.  Contemporaneously with the making
               ----------------------------
     of any payments in respect of the Advances, Borrower shall give Agent
     telephonic notice of the amount being repaid and shall promptly confirm
     such payment by a delivering a Confirmation to Agent, duly completed and
     executed by Borrower.  If no Event of Default exists and is continuing,
     Borrower shall repay all Advances in the following order:

First, Warehouse Advances outstanding under the Uncommitted Warehouse Promissory
Notes,

          Second, L/C Advances,

          Third, Swing Advances,

          Fourth, Warehouse Advances outstanding under the Committed Warehouse
          Promissory Notes;

provided, that at the election of Agent, Warehouse Advances outstanding under
the Committed Warehouse Promissory Notes shall be repaid prior to repayment of
Swing Advances.

Subject to the preceding sentence, if no Event of Default exists and is
continuing, payments in respect of the Obligations shall be applied to specific
types of Obligations (e.g., fees, expenses, principal and interest) as Borrower
directs. At any time when an Event of Default exists and is continuing, all
payments in respect of the Obligations shall (unless Agent and Lenders shall
otherwise unanimously agree) be applied first to all reasonable costs, expenses,
fees and reasonable attorneys' fees incurred by, and agency or custodian fees
due to, Agent arising out of or in connection with this Agreement, the Notes or
the other Loan Documents, including, without limitation, all reasonable costs,
expenses, fees and reasonable attorneys' fees arising out of or in connection
with the negotiation, preparation and enforcement of such documents; second, to
the payment of all expenses due and payable under Section 6.5 ratably among
Lenders in accordance with such amounts; third, to the payment of fees due and
payable under Section 2.4(a) and 2.4(b), ratably in accordance with such
amounts; fourth, to the payment of interest then due and payable under the
Notes, ratably in accordance with the amount of interest owed to each Lender;
and fifth, to the payment of principal of the Notes ratably in accordance with
the outstanding Advances of each Lender; provided, that (x) payments due under
the preceding clause fourth to any Lender which has failed to make any Advance
or purchase any participation required to be made or purchased by such Lender
under Section 2.1(d) shall be allocated first to the payment of interest then
due and payable under the L/C Advances, then under the Swing Promissory Note,
and then to such Lender and (y) payments due under the preceding clause fifth to
any Lender which has failed to make any Advance or purchase any participation
required to be made or purchased by such Lender under Section 2.1(d) shall be
allocated first to the payment of principal of the L/C Advances, then under the
Swing Promissory Note, and then to such Lender. Agent shall promptly notify
Borrower and each of Lenders of the

                                       35
<PAGE>

application of any payment to anything other than the principal of or interest
on the Notes.

2.8  Payments Not in Full. Unless Agent shall have received notice from Borrower
     --------------------
prior to the date on which any payment is to be made to Agent for the account of
Lenders hereunder that Borrower will not make such payment in full, Agent may
assume that Borrower has made such payment in full to Agent on such date and
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent that Borrower shall have not so made such payment in full to
Agent and Agent, in reliance on such assumption, has distributed such amounts to
Lenders, each Lender shall repay to Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to Agent, at Average Adjusted Libor.

2.9  Sharing of Payments, Etc. If any Lender shall obtain any payment (whether
     ------------------------
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) on account of the Advances owing to it (other than pursuant to
Sections 2.4(d), 2.7, or 2.10) in excess of its ratable portion of payments on
account of the Advances obtained by all Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Advances owing to
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratable with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, each
such purchase shall be rescinded, and each Lender from which such a purchase was
made shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered.  Borrower agrees that any Lender so purchasing
a participation from another Lender pursuant to this Section 2.9 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of Borrower in the amount of such participation.

2.10 Requirements of Law.
     -------------------

          (a) General.  In the event that the adoption of any new Requirement of
              -------
     Law or any change in any existing Requirement of Law (other than any change
     in the articles of incorporation, by-laws or other organizational or
     governing documents of the relevant Lender) or in the interpretation or
     application thereof or compliance by any Lender with any request or
     directive (whether or not having the force of law) from any central bank or
     other Governmental Authority issued after the Agreement Date:

              (i)  shall subject any Lender to any tax of any kind whatsoever
          with respect to this Agreement, any Note or any Advance made by it, or
          change the basis of taxation of payments to such Lender of principal,
          facility fee, interest or any other amount payable hereunder (except
          for changes in the rate of tax on the overall net income of such
          Lender and changes in the computation of the overall net income of
          such Lender that do not specifically involve payments to Lender

                                       36
<PAGE>

          under this Agreement, any Note, or any Advance, even though such
          changes have the effect of increasing the effective rate of tax
          imposed on income of such Lender);

               (ii)  shall impose, modify or hold applicable any reserve,
          special deposit, compulsory loan or similar requirement against assets
          held by, or deposits or other liabilities in or for the account of,
          commitments, advances or loans by, or other credit extended by, or any
          other acquisition of funds by, any office of such Lender which are not
          otherwise included in the determination of any interest rate under
          such Lender's Notes;

               (iii) shall impose on such Lender any other condition;

     and the result of any of the foregoing is to increase the cost to such
     Lender, by any amount which such Lender deems to be material, of making,
     renewing or maintaining its Commitment or Advances or to reduce any amount
     receivable hereunder, in each case, in respect of its Advances, then,
     Borrower shall promptly pay such Lender, upon its written demand setting
     forth the basis for such demand, any additional amounts necessary to
     compensate such Lender for such additional cost or reduced amount
     receivable. A certificate as to any additional amounts payable pursuant to
     the foregoing sentence submitted by such Lender, through Agent, to Borrower
     shall be conclusive in the absence of manifest error. This covenant shall
     survive the termination of this Agreement and payment of the Notes.

          (b)  Capital Adequacy.  In the event that any Lender shall have
               -----------------
     determined that the adoption of any new law, rule, regulation or guideline
     regarding capital adequacy, or any change therein or in the interpretation
     or application thereof or compliance by any Lender or any corporation
     controlling such Lender with any request or directive regarding capital
     adequacy (whether or not having the force of law) from any central bank or
     Governmental Authority issued after the Agreement Date, including, without
     limitation, the issuance of any final rule, regulation or guideline, does
     or shall have the effect of reducing the rate of return on such Lender's or
     such corporation's capital as a consequence of its obligations hereunder to
     a level below that which such Lender or such corporation could have
     achieved but for such adoption, change or compliance (taking into
     consideration such Lender's or such corporation's policies with respect to
     capital adequacy) by an amount deemed by such Lender to be material, then
     Borrower shall promptly pay such Lender, upon its written demand setting
     forth the basis for such demand, any additional amounts necessary to
     compensate such Lender or such corporation for such reduced rate of return.
     A certificate as to any additional amounts payable pursuant to the
     foregoing sentence submitted by such Lender, through Agent, to Borrower
     shall be conclusive in the absence of manifest error. This covenant shall
     survive the termination of this Agreement and payment of the Notes.

          (c)  Mandatory Suspensions and Conversions of LIBOR  Segments.  A
               --------------------------------------------------------
     Lender's obligations to make Advances as, or to continue or convert
     Segments into, LIBOR  Segments shall be suspended, all such  outstanding
     Segments under such

                                       37
<PAGE>

     Lender's Notes shall be converted into, and all pending requests for the
     making of Advances as, or for continuation of or conversion of Segments
     into, LIBOR Segments by such Lender shall be deemed requests for, Reference
     Rate Segments, if:

               (i)   on or prior to the determination of an interest rate for a
          LIBOR  Segment, Agent determines that appropriate information is not
          available to it for purposes of determining  LIBOR;

               (ii)  Agent or Lenders determine that  LIBOR as determined by
          Agent would not accurately reflect the cost to such Lender of making
          an Advance as, or continuing or converting a Segment into, a LIBOR
          Segment; or

               (iii) at any time such Lender determines that any new
          Requirement of Law or any change in any Requirement of Law existing on
          the Agreement Date (other than any change in the articles of
          incorporation, by-laws or other organizational or governing documents
          of the relevant Lender) or in the interpretation or application
          thereof or compliance by any Lender with any request or directive
          (whether or not having the force of law) from any central bank or
          other Governmental Authority issued after the Agreement Date makes it
          unlawful or impossible for such Lender to make, an Advance as, or to
          continue or convert a  Segment into, a LIBOR  Segment, or to comply
          with its obligations hereunder in respect thereof.

     If, as a result of this Section 2.10(c), any  Advance of any Lender that
     would otherwise be made as a LIBOR Segment, or any Segment of any Lender
     that would otherwise be maintained as or converted into a LIBOR  Segment is
     instead made or maintained as or converted into a  Reference Rate  Segment,
     then, unless the corresponding  Advances and Segments of each of the other
     Lenders  are also to be made or maintained as or converted into Reference
     Rate Segments, such Advance and/or Segment, as the case may be, shall be
     treated as being a LIBOR  Segment for all purposes of this Agreement
     (including the timing, application and proration among Lenders of interest
     payments, conversions and prepayments) except for the calculation of the
     interest rate borne by such  Advance or Segment.  Agent shall promptly
     notify Borrower and each Lender of the existence or occurrence of any
     condition or circumstance specified in clause (i) above, and each Lender
     shall promptly notify Borrower, through Agent, and Agent of the existence
     or occurrence of any condition or circumstance specified in clause (ii) or
     (iii) above applicable to such Lender's  Advances and Segments, but the
     failure by Agent or such Lender to give any such notice shall not affect
     such Lender's rights hereunder.

          (d)  Payment of Additional Amounts.  Any additional amounts payable
               -----------------------------
     pursuant to this Section 2.10 shall be payable, in the case of those
     applicable to prior periods, within 15 days after request by such Lender
     for such payment and, in the case of those applicable to future periods, on
     the dates specified, or determined in accordance with a method specified,
     by such Lender.

          (e)  Certain Determinations; Notice.  In making the determinations
               ------------------------------

                                       38
<PAGE>

     contemplated by Sections 2.10(a), (b), and (c), each Lender may make such
     estimates, assumptions, allocations and the like that such Lender in good
     faith determines to be appropriate, and such Lender's selection thereof in
     accordance with this Section 2.10(e), and the determinations made by such
     Lender on the basis thereof, shall be final, binding and conclusive upon
     Borrower, except, in the case of such determinations, for manifest errors
     in computation or transmission.  Each Lender shall furnish to Borrower,
     through Agent, a certificate outlining in reasonable detail the computation
     of any amounts claimed by it under Section 2.10(a), (b), and (c) and the
     assumptions underlying such computations.  Each Lender will promptly notify
     Borrower, through Agent, of any determination made by it referred to in
     Section 2.10(a), (b), and (c) above, but the failure to give such notice
     shall not affect such Lender's right to compensation.

          (f)  Mitigation of Circumstances.  Each Lender shall promptly notify
               ---------------------------
     Borrower and Agent of any event of which it has knowledge which will result
     in, and will use reasonable commercial efforts available to it (and not, in
     such Lender's sole judgment, otherwise disadvantageous to such Lender) to
     mitigate or avoid, (i) any obligation by Borrower to pay any amount
     pursuant to Section 2.10(a) or Section 2.10(b) or (ii) the occurrence of
     any circumstances described in Section 2.10(c) (and, if any Lender has
     given notice of any such event described in clause (i) or (i) of this
     sentence and thereafter such event ceases to exist, such Lender shall
     promptly so notify Borrower and Agent).  Without limiting the foregoing,
     each Lender will designate a different funding office if such designation
     will avoid (or reduce the cost to Borrower of) any event described in
     clause (i) or (ii) of the preceding sentence and such designation will not,
     in such Lender's sole judgment, be otherwise disadvantageous to such
     Lender.

          (g)  Replacement of Lenders.  If Borrower becomes obligated to pay
               ----------------------
     additional amounts to an Lender pursuant to Section 2.10(a) or Section
     2.10(b), or any Lender gives notice of the occurrence of any circumstances
     described in Section 2.10(c), Borrower may designate another lender which
     is acceptable to Agent in its reasonable discretion (such other lender
     being called a "Replacement Lender") to purchase the Advances of such
     Lender and such Lender's rights hereunder, without recourse to or warranty
     by, or expense to, such Lender, for a purchase price equal to the
     outstanding principal amount of the Advances payable to such Lender plus
     any accrued but unpaid interest on such Advances and all accrued but unpaid
     fees owed to such Lender and any other amounts payable to such Lender under
     this Agreement, and to assume all the obligations of such Lender hereunder,
     and, upon such purchase and assumption (pursuant to a Lender Addition
     Agreement), such Lender shall no longer be a party hereto or have any
     rights hereunder (other than rights with respect to indemnities and similar
     rights applicable to such Lender prior to the date of such purchase and
     assumption) and shall be relieved of all obligations to Borrower hereunder,
     and the Replacement Lender shall succeed to the rights and obligations of
     such Lender hereunder.

2.11 Interest.
     --------

          (a)  In General.  Interest accrued on the Notes through the last day
               ----------
     of each calendar month shall be paid on the fifth day of the following
     calendar month. Accrued

                                       39
<PAGE>

     interest shall also be paid on the Termination Date. Interest shall be
     computed on the basis of the actual number of days elapsed and a year of
     360 days.

(b)  Balance Funded Rate Segment. A Balance Funded Rate Segment consisting of
     ---------------------------
any portion of a Construction/Lot Loan Tranche shall bear interest at the rate
of 1.75% per annum. A Balance Funded Rate Segment consisting of any portion of a
Gestation Loan Tranche shall bear interest at the rate of 0.65% per annum. A
Balance Funded Rate Segment consisting of any portion of a Regular Tranche shall
bear interest at the rate of 1.25% per annum.

          (c)  LIBOR Segments.  A LIBOR Segment consisting of any portion of a
               --------------
     Construction/Lot Loan Tranche shall bear interest at  a rate per annum
     equal to the sum of LIBOR plus 1.75% per annum.  A LIBOR Segment consisting
     of any portion of a Gestation Loan Tranche shall bear interest at a rate
     per annum equal to the sum of LIBOR plus 0.65% per annum.  A LIBOR Segment
     consisting of any portion of a Regular Tranche shall bear interest at a
     rate per annum equal to the sum of LIBOR plus  1.25% per annum.

          (d)  Reference Rate Segment.  Each Reference Rate Segment (whether
               ----------------------
     consisting of a portion of a Construction/Lot Loan Tranche, a Gestation
     Loan Tranche or a Regular Tranche) shall bear interest at a rate per annum
     equal to the Reference Rate.

          (e)  Overdue Amounts.  Overdue principal, interest and other amounts
               ---------------
     shall bear interest for each day that such amounts are overdue (after, as
     and  4.00% per annum.  Interest payable on overdue amounts shall be payable
     on demand.

(f)  Balance Funded Rate Agreements. If they so elect, Borrower and any Deposit
     ------------------------------
Holding Lender may enter into additional written agreements (each an Balance
Funded Rate Agreement) providing for the maintenance by Borrower of deposit
account balances with such Deposit Holding Lender in amounts sufficient to
support Balance Funded Rate Segments from such Lender and the payment of any
balance deficiency fees,  provided, that (i) nothing in such Balance Funded Rate
Agreement shall modify the circumstances under which interest due such Deposit
Holding Lender shall be paid to Agent for the account of such Deposit Holding
Lender, as set forth in Section 2.7(a); (ii) upon the written request of Agent
following the occurrence of any Event of Default, Borrower and each Deposit
Holding Lender shall deliver to Agent a certified copy of such Deposit Holding
Lender's  Balance Funded Rate Agreement, and Borrower and each Lender which is
not a Deposit Holding Lender shall certify to Agent the absence of any such
Balance Funded Rate Agreement; and (iii) the provisions of this Section  2.11(f)
shall be controlling in the event of any conflict between such provisions and
any such  Balance Funded Rate Agreement.

2.12 Conversions. On the terms and subject to the limitations hereof, Borrower
     -----------
shall have the option at any time and from time to time to convert all or any
portion of a Segment of one Type into a Segment or Segments of another Type or
Types and to convert all or any portion of a Tranche of one Category into a
Tranche or Tranches of another Category or Categories by making a Conversion
Request upon Agent prior to 11:00 a.m. on the date on which such conversion is
to be effective (which shall be a Business Day), which Conversion Request shall
be

                                       40
<PAGE>

promptly confirmed by Borrower by delivering to Agent a duly completed and
executed Confirmation; provided, that after giving effect to such Conversion
Request, (a) the aggregate principal amount of all Construction/Lot Loan
Tranches outstanding under the Notes of all Lenders at any time shall not exceed
the aggregate Collateral Value of Construction Loans and Lot Loans included in
the Collateral held by Agent at such time, (b) the aggregate principal amount of
all Construction/Lot Loan Tranches outstanding under any Lender's Notes at any
time shall not exceed the product of the aggregate Collateral Value of
Construction Loans and Lot Loans included in the Collateral held by Agent at
such time multiplied by a fraction the numerator of which is the aggregate
principal balance outstanding under such Lender's Notes at such time and the
denominator of which is the aggregate principal balance outstanding under all
Lenders' Notes at such time, (c) the aggregate principal amount of all Gestation
Loan Tranches outstanding under the Notes of all Lenders at any time shall not
exceed the aggregate Collateral Value of Eligible Gestation Mortgage Loans
included in the Collateral held by Agent at such time, (d) the aggregate
principal amount of all Gestation Loan Tranches outstanding under any Lender's
Notes at any time shall not exceed the product of the aggregate Collateral Value
of Eligible Gestation Mortgage Loans included in the Collateral held by Agent at
such time multiplied by a fraction the numerator of which is the aggregate
principal balance outstanding under such Lender's Notes at such time and the
denominator of which is the aggregate principal balance outstanding under all
Lenders' Notes at such time, (e) the aggregate principal amount of all Regular
Tranches outstanding under the Notes of all Lenders at any time shall not exceed
the remainder the Remainder Collateral Value at such time, and (f) the aggregate
principal amount of all Regular Tranches outstanding under any Lender's Notes at
any time shall not exceed the product of the Remainder Collateral Value at such
time multiplied by a fraction the numerator of which is the aggregate principal
balance outstanding under such Lender's Notes at such time and the denominator
of which is the aggregate principal balance outstanding under all Lenders' Notes
at such time. Any Conversion Request made Borrower under this Section shall be
irrevocable. All conversions of Segments and Tranches must be made uniformly and
ratably among Lenders.

SECTION 3.  COLLATERAL
            ----------

3.1  Collateral.
     ----------

          (a)  In General.  Pursuant to this Agreement and the Security
               ----------
     Agreement, and to secure the payment of the Obligations, Borrower grants
     Agent a security interest for the benefit of Lenders in and to certain
     "Collateral," as such term is defined in the Security Agreement.  Borrower
     hereby confirms such grant in all respects and acknowledges and agrees
     that:

               (i)   this Agreement as amended, modified, restated, or extended
          constitutes the "Loan Agreement" as defined in the Security Agreement;

               (ii)  the Obligations (as defined herein) constitute
          "Obligations" secured by the security interests granted under the
          Security Agreement; and

               (iii) each of the Lenders now or in the future party to this
          Agreement

                                       41
<PAGE>

          constitutes a "Lender" (as defined in the Security Agreement) for all
          purposes of the Security Agreement.

          (b) Additional Collateral.  From time to time Borrower may grant Agent
              ---------------------
     for the benefit of Lenders a security interest in additional collateral
     pursuant to this Agreement and the Security Agreement.  Borrower hereby
     agrees to execute all documents and instruments, and perform all other acts
     reasonably deemed necessary by Agent or the Required Lenders, to perfect
     the security interest of Agent for the benefit of Lenders in and to the
     collateral identified in the granting clause of the Security Agreement.

3.2  Delivery of Collateral. The Collateral shall be delivered to Agent for the
     ----------------------
benefit of the Lenders in accordance with the Security Agreement and the
Attachments thereto.

3.3  Power of Attorney. Effective upon the occurrence of an Event of Default,
     -----------------
Borrower hereby irrevocably appoints Agent its attorney-in-fact, with full power
of substitution, for and on behalf and in the name of Borrower, to (i) indorse
and deliver to any Person any check, instrument or other paper coming into
Agent's or any Lender's possession and representing payment made in respect of
any Mortgage Note or Mortgage-Backed Security included in the Collateral or in
respect of any other collateral for the Obligations including any Take-Out
Commitment; (ii) prepare, complete, execute, deliver and record any assignment
to Agent or to any other Person of any Mortgage relating to any Mortgage Note
included in the Collateral; (iii) indorse and deliver any Mortgage Note or
Mortgage-Backed Security included in the Collateral and do every other thing
necessary or desirable to effect transfer of all or any part of the Collateral
to Agent or to any other Person; (iv) take all necessary and appropriate action
with respect to all Obligations and the items of Collateral to be delivered to
Agent or held by Borrower in trust for Agent and Lenders including, without
limitation, instruct any title company or closing agent to deliver any Mortgage
Note or Mortgage Document held by it directly to Agent or its agent; (v)
commence, prosecute, settle, discontinue, defend, or otherwise dispose of any
claim relating to any Take-Out Commitment or any other part of the Collateral;
and (vi) sign Borrower's name wherever appropriate to effect the performance of
this Agreement. This section shall be liberally, not restrictively, construed so
as to give the greatest latitude to Agent's power, as Borrower's attorney-in-
fact, to collect, sell, and deliver any of the Collateral and all other
documents relating thereto. The powers and authorities herein conferred on Agent
may be exercised by Agent through any Person who, at the time of the execution
of a particular instrument, is an authorized officer of Agent. The power of
attorney conferred by this Section 3.3 shall become effective upon the
occurrence, and remain effective during the continuance, of an Event of Default
and is granted for a valuable consideration and is coupled with an interest and
irrevocable so long as the Obligations, or any part thereof, shall remain unpaid
or any Commitment is outstanding. All Persons dealing with Agent, any officer
thereof, or any substitute attorney, acting pursuant hereto shall be fully
protected in treating the powers and authorities conferred by this Section 3.3
as existing and continuing in full force and effect until advised by Agent that
the Obligations have been fully and finally paid and satisfied and the
Commitments have terminated.

                                       42
<PAGE>

3.4  Disposition of Collateral.
     -------------------------

          (a) Generally.  The disposition of Collateral shall be governed by the
              ---------
     Security Agreement.

          (b) Allocation of Mortgage Loans to Agency Pools; Eligible Gestation
              ----------------------------------------------------------------
     Mortgage Loan Status.  From time to time Borrower may, and prior to the
     --------------------
     delivery of any Pledged Mortgage Loans into an Agency Commitment Borrower
     shall, by execution and delivery to Agent of a duly completed Shipping
     Instruction Letter for Pools in the form of Exhibit E-1 hereto (a "Pool
     Shipping Instruction") and duly completed a transmittal letter in the form
     of Exhibit E-2 hereto (a "Pool Transmittal Letter"), together with the
     enclosures referred to therein, instruct Agent to deliver the Mortgage
     Notes relating to specific Pledged Mortgage Loans to the Agency Custodian
     for inclusion in a pool of Mortgage Loans backing Mortgage-Backed
     Securities issued or guaranteed by an Agency and may allocate such Pledged
     Mortgage Loans to status as Eligible Gestation Mortgage Loans for purposes
     of this Agreement and the Borrowing Base.

3.5  Concerning the Collateral Account and the Good Funds Wire Clearing Account.
     --------------------------------------------------------------------------
Borrower hereby expressly acknowledges that the Collateral Account, the Good
Funds Wire Clearing Account, and any other of Borrower's accounts with any
Lender are subject in all respects to the right of offset in favor of Agent
granted under Section 11.10.

3.6  Borrower Appointed Agent. Each Lender hereby appoints Borrower (and, in the
     ------------------------
case of any Pledged Mortgage Loan originated by a Person other than Borrower
also appoints such other Person) as its agent at the sole cost and expense of
Borrower for purposes of (a) obtaining Appraisals with respect to the property
covered by the Mortgages which relate to the Pledged Mortgage Loans and (b)
otherwise complying with Appraisal Laws and Regulations.

SECTION 4.  CONDITIONS PRECEDENT
            --------------------

The obligation of each Lender to make Advances hereunder is subject to
fulfillment of the conditions precedent stated in this Section 4.

4.1  Initial Borrowing. The obligation of each Lender to make its initial
     -----------------
Advance hereunder shall be subject to, in addition to the conditions precedent
specified in Section 4.2 hereof, delivery to Agent of the following (each of the
following documents being duly executed and delivered by each of the parties
thereto and in form and substance satisfactory to Agent and Lenders, and, with
the exception of the Notes, each in a sufficient number of originals that each
Lender may have an executed original of each document):

          (a)  this Agreement;

          (b)  the Notes;

                                       43
<PAGE>

          (c)  the Security Agreement;

          (d)  a copy of the articles of incorporation of Borrower as amended
     through the Agreement Date and as certified by the Secretary of State of
     the Commonwealth of Virginia as of a date no earlier than _____, 1999;

          (e)  a certificate of the Secretary or Assistant Secretary of
     Borrower, dated as of the Agreement Date and certifying as to (i)
     resolutions of the board of directors of Borrower which authorize the
     execution and delivery on behalf of Borrower by certain officers of
     Borrower of this Agreement and the Notes, (ii) the incumbency of such
     officers, (iii) the validity of specimen signatures of such officers, (iv)
     the absence of any amendments to or rescission of the articles of
     incorporation of Borrower since _____, 1999, and since the date of the copy
     thereof certified by the Secretary of State of the Commonwealth of
     Virginia, and (v) the completeness and validity of the copy of the by-laws
     of Borrower (as amended through the Agreement Date) attached as an exhibit
     to such certificate;

          (f)  a certificate from the Secretary of State of the Commonwealth of
     Virginia as to (i) the good standing of Borrower of a date no earlier than
     _____, 1999, and (ii) the existence of Borrower as of a date no earlier
     than _____, 1999;

          (g)  a certificate from the Secretary of the Commonwealth of
     Pennsylvania as to (i) the good standing of Borrower of a date no earlier
     than _____, 1999, and (ii) the authority of Borrower to do business in
     Pennsylvania as of a date no earlier than _____, 1999;

          (h)  a written opinion of legal counsel to Borrower as to the matters
     set forth in Schedule 4.1(h) and such other matters as Agent or its counsel
     may require;

          (i)  tax, judgment and Uniform Commercial Code lien searches in the
     appropriate offices in the State of Virginia [and Uniform Commercial Code
     lien searches in the appropriate offices in the State of Pennsylvania];

          (j)  Uniform Commercial Code financing statements prepared for filing
     in the appropriate offices in the State of Virginia [and the State of
     Pennsylvania]; and

          (k)  such other documents Agent or any Lender may reasonably request
     hereunder or as referenced in Schedule  4.1(k).

In addition, the obligation of each Lender to make its initial Advance shall be
subject to the condition that Borrower shall have paid, or reimbursed Agent for,
the fees, service charges and expenses of Dorsey & Whitney LLP, Agent's legal
counsel, in connection with the preparation, negotiation, execution and delivery
of this Agreement, the Notes and the other Loan Documents, if and to the extent
that Borrower has received a statement therefor prior to the making of such

                                       44
<PAGE>

Advance.

4.2  All Borrowings. The obligation of each Lender to make any Advance and to
     --------------
fund any Borrowing pursuant to this Agreement is subject to the following
further conditions precedent:

          (a)  prior to 11:00 a.m. on the Borrowing Date, Agent shall have
     received a Borrowing Request from Borrower, which Borrowing Request shall
     be promptly confirmed by Borrower by delivering to Agent a duly completed
     and executed Confirmation;

          (b)  subject to the provisions of the Security Agreement, all Property
     in which Borrower has granted a Lien to Agent for the benefit of Lenders
     shall have been physically delivered to the possession of Agent or any
     bailee acceptable to Agent to the extent that such possession is necessary
     or appropriate for the purpose of perfecting the Lien of Agent for the
     benefit of Lenders in such collateral;

          (c)  the representations and warranties of Borrower contained in this
     Agreement or any other Loan Document (other than those representations and
     warranties which are by their terms limited to the date of the agreement in
     which they are initially made) shall be true and correct in all material
     respects on and as of the Borrowing Date;

          (d)  no Default or Event of Default  shall have occurred and be
     continuing and no change or event which constitutes a Material Adverse
     Effect shall have occurred as of the Borrowing Date; and

          (e)  the Collateral Account and the Good Funds Wire Clearing Account
     shall be established and in existence.

     Each Borrowing Request shall be deemed to constitute a representation and
     warranty by Borrower on the Borrowing Date set forth therein as to the
     facts specified in Sections 4.2(c) and (d).

SECTION 5.  BORROWER REPRESENTATIONS AND WARRANTIES
            ---------------------------------------

Borrower represents and warrants as follows:

5.1  Organization and Good Standing. Borrower (a) is a corporation duly
     ------------------------------
incorporated and existing in good standing under the laws of the jurisdiction of
its incorporation, (b) is duly qualified as a foreign corporation and in good
standing in all jurisdictions in which its failure to be so qualified could have
a Material Adverse Effect, (c) has the corporate power and authority to own its
properties and assets and to transact the business in which it is engaged and is
or will be qualified in those states wherein it proposes to transact business in
the future and (d) is in compliance with all Requirements of Law except to the
extent that the failure to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.

5.2  Authorization and Power. Borrower has the corporate power and requisite
     -----------------------
authority to execute, deliver and perform this Agreement, the Notes and the
other Loan Documents to which it is a party; Borrower is duly authorized to and
has taken all corporate action necessary to

                                       45
<PAGE>

authorize it to, execute, deliver and perform this Agreement, the Notes and the
other Loan Documents to which it is a party and is and will continue to be duly
authorized to perform this Agreement, the Notes and such other Loan Documents.

5.3  No Conflicts or Consents. Neither the execution and delivery by Borrower of
     ------------------------
this Agreement, the Notes or the other Loan Documents to which it is a party,
nor the consummation of any of the transactions herein or therein contemplated,
nor compliance with the terms and provisions hereof or with the terms and
provisions thereof, will (a) materially contravene or conflict with any
Requirement of Law to which Borrower is subject, or any indenture, mortgage,
deed of trust, or other agreement or instrument to which Borrower is a party or
by which Borrower may be bound, or to which the Property of Borrower may be
subject, or (b) result in the creation or imposition of any Lien, other than the
Liens granted to Agent for the benefit of Lenders pursuant to the Security
Agreement and this Agreement, on the Property of Borrower.

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

5.5  Priority of Liens. Agent has a valid, enforceable, perfected, first-
     -----------------
priority Lien and security interest for the benefit of Lenders in (i) each
Mortgage Loan heretofore identified on a Agreement to Pledge delivered to Agent
and not subsequently released by Agent pursuant to the Existing Loan Agreement,
or this Agreement, and (ii) each Take-Out Commitment of Borrower. Upon delivery
to Agent of a Agreement to Pledge identifying a Wet Mortgage Loan and the
funding by Lenders of the Warehouse Advances (or by Agent of the Swing Advance
or L/C Advance) requested in connection therewith, Agent will have valid,
enforceable, perfected, first priority Liens and security interests for the
benefit of Lenders in such Wet Mortgage Loan and in all Mortgage Documents
related thereto.

5.6  No Liens. Borrower has good and indefeasible title to the Collateral. All
     --------
of the Collateral is free and clear of all Liens and other adverse claims of any
nature, other than Liens of the type set forth in clauses (a), (b), (c), (d),
and (k) of the definition of Permitted Liens.

5.7  Financial Condition. Borrower has delivered to Agent and Lenders copies of
     -------------------
the balance sheet of Borrower as of December 31, 1998, and the related
statements of income, stockholders' equity and cash flows for the fiscal year
ended such date; such financial statements fairly present the financial
condition of Borrower as of such date and the results of operations of Borrower
for the period ended on such date and have been prepared in accordance with
GAAP; except as has been disclosed in writing to Agent and Lenders, as of the
date thereof, there were no material obligations, liabilities or Indebtedness
(including material contingent and indirect liabilities and obligations and
forward or long-term commitments) of Borrower which are not reflected in such
financial statements; and no change which constitutes a Material Adverse Effect
has occurred in the financial condition or business of Borrower since the date
of such financial statements. Borrower has also delivered to Agent and Lenders
copies of the balance sheet of Borrower dated as of July 31, 1999 and the
related statements of income, and cash flows as of such date; such financial
statements fairly present the financial condition of Borrower as of such date
and have been prepared in accordance with GAAP, subject to normal year-end
adjustments;

                                       46
<PAGE>

except as has been disclosed in writing to Agent and Lenders as of the date
thereof, there were no material obligations, liabilities or Indebtedness
(including material contingent and indirect liabilities and obligations and
forward or long-term commitments) of Borrower which are not reflected in such
financial statements; and no change which constitutes a Material Adverse Effect
has occurred in the financial condition or business of Borrower since the date
of such financial statements.

5.8  Full Disclosure. There is no material fact that Borrower has not disclosed
     ---------------
to Agent and Lenders which could have a Material Adverse Effect. Neither the
financial statements referred to in Section 5.7 hereof, nor any Borrowing
Request, officer's certificate or statement delivered by Borrower to Agent or
any Lender in connection with this Agreement, contains any untrue statement of
material fact.

5.9  No Default. Borrower is not in default under any loan agreement, mortgage,
     ----------
security agreement or other material agreement or obligation to which it is a
party or by which any of its Property is bound, which default could have a
Material Adverse Effect.

5.10 No Litigation. Except as set forth on Schedule 5.10, there are no material
     -------------
actions, suits or legal, equitable, arbitration or administrative proceedings
pending, or to the knowledge of Borrower threatened, against Borrower the
adverse determination of which could constitute a Material Adverse Effect and as
to which there is a reasonable likelihood of an adverse determination.

5.11 Taxes.  All tax returns required to be filed by Borrower in any
     -----
jurisdiction and which, if not filed, could have a Material Adverse Effect have
been filed and all taxes, assessments, fees and other governmental charges upon
Borrower or upon any of its properties, income or franchises  which, if not
paid, could give rise to a Lien thereon having a Material Adverse Effect, have
been paid prior to the time that such taxes could give rise to such Lien, unless
protested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been established on the books of Borrower.
Borrower has no knowledge of any proposed or threatened tax assessment against
Borrower which could have a Material Adverse Effect.

5.12 Principal Office, etc. As of the date hereof, the principal office, chief
     ---------------------
executive office and principal place of business of Borrower is located at 7601
Lewinsville Road, Suite 302, McLean, Virginia 22102, County of
Fairfax.

5.13 Compliance with ERISA.
     ---------------------

          (a) Borrower has not violated the fiduciary responsibility rules of
     Subtitle B of Title I of ERISA with respect to any Plan or any Welfare Plan
     in a manner that could subject Borrower to, or cause Borrower to incur,
     liability in respect of an action or a suit for damages, or a penalty,
     under ERISA, or an excise tax under Section 4975 of the Code, which action,
     suit, penalty or tax, in any case, would be materially adverse to Borrower.

          (b) Each of Borrower and each Related Person has fulfilled its
     obligations under the minimum funding standards of Section 412 of the Code
     and Section 302 of

                                       47
<PAGE>

     ERISA with respect to each Plan as to which a failure to fulfill such
     obligations could have a Material Adverse Effect; neither Borrower nor any
     Related Person has incurred, nor are any of them aware of facts which would
     cause them reasonably to conclude that any of them are likely to incur any
     material liability to the PBGC, other than for the payment of premiums; and
     neither Borrower nor any Related Person has incurred, nor are any of them
     aware of facts which would cause them reasonably to conclude that any of
     them are likely to incur, any material liability to any Plan or any Welfare
     Plan, other than for the payment of contributions in the ordinary course.
     Each Plan and each Welfare Plan is in compliance in all respects with, and
     has been operated and administered in accordance with the applicable
     provisions of, ERISA, the Code and each other applicable Federal or state
     law except to the extent the failure to so comply, or to so operate or
     administer any such Plan and any such Welfare Plan, would not be materially
     adverse to Borrower. No event or condition is occurring or exists and
     neither Borrower nor any Related Person is aware of any facts which would
     cause them reasonably to conclude that any event or condition will likely
     occur or exist with respect to any Plan concerning which Borrower would be
     under an obligation to furnish a report to Agent in accordance with Section
     6.17 hereof.

          (c) Full payment has been timely made of all amounts which Borrower or
     any Related Person is required under applicable law, the terms of each Plan
     or any applicable collective bargaining agreement to have paid as
     contributions to each Plan with respect  to which a failure to make such
     payment could have a Material Adverse Effect  and no accumulated funding
     deficiency under Section 412 of the Code or Section 302 of ERISA, whether
     or not waived, exists or is expected to exist with respect to any Plan
     which could have a Material Adverse Effect.  As of the most recent
     valuation date of each Plan, each Plan was "fully funded."  For purposes of
     this Section 5.13, "fully funded" means that the fair market value of the
     assets of each Plan (determined separately for each Plan and not in the
     aggregate) is not less than the present value of the accrued benefits of
     all participants in each Plan (determined separately for each Plan and not
     in the aggregate), computed on a Plan termination basis by more than
     $2,000,000.

          (d) Neither Borrower nor any Related Person is or has ever been
     obligated to contribute to any "multiple employer plan" (within the meaning
     of Section 4063 of ERISA) or to any Multiemployer Plan.

          (e) The present value (determined in accordance with FAS 106 and using
     actuarial and other assumptions which are reasonable in respect of the
     benefits provided and the participants) of the liability of Borrower and
     each Related Person for post-retirement benefits under any and all Welfare
     Plans, whether written or unwritten, which are or have been established or
     maintained, or to which contributions are or have been made, by Borrower or
     any of its Related Persons does not materially exceed the assets under all
     such Welfare Plans allocable to such benefits.

          (f) No failure to comply with Code Section 4980B or Part 6 of Title I
     of ERISA exists or has occurred with respect to any Welfare Plan.

                                       48
<PAGE>

5.14 Ownership. The Parent owns, beneficially, of record and either directly or
     ---------
indirectly, 100% of the issued and outstanding shares of capital stock of
Borrower. Neither any "person" nor any "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities and Exchange Act of 1934, as amended) is
the "beneficial owner" (as defined in Rule 13d-3 under such act) of more than
50% of the total aggregate voting power of all classes of voting stock of the
Parent and/or warrants or options to acquire such voting stock, calculated on a
fully diluted basis.

5.15 Subsidiaries. Borrower has no Subsidiaries other than Permitted
     ------------
Subsidiaries. Neither Borrower nor any Subsidiary has any interest in any joint
venture, partnership or other Person, except to the extent that such an interest
is a Permitted Investment.

5.16 Indebtedness. Borrower has no Indebtedness outstanding other than the
     ------------
Obligations and the other Indebtedness permitted by Section 7.2.

5.17 Permits, Patents, Trademarks, etc.
     ----------------------------------

          (a) Borrower has all permits, licenses and governmental authorization
     necessary for the operation of its business.  All such permits, licenses
     and governmental authorizations are in good standing and Borrower is in
     compliance with all material terms of such permits, licenses and
     governmental authorizations.

          (b) Borrower owns or possesses (or is licensed or otherwise has the
     necessary right to use) all patents, trademarks, service marks, trade names
     (including the name "NVR Mortgage Finance, Inc.") and copyrights,
     technology, know-how and processes, and all rights with respect to the
     foregoing, which are necessary for the operation of its business, without
     any known material conflict with the rights of others.  The consummation of
     the transactions contemplated hereby will not alter or impair in any
     material respect any of such rights of Borrower.

5.18 Status Under Certain Federal Statutes. Borrower is not (a) a "holding
     -------------------------------------
company" or a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended,
(b) a "public utility," as such term is defined in the Federal Power Act, as
amended, (c) an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended, or (d) a "rail carrier," or a "person controlled by or affiliated
with a rail carrier," within the meaning of Title 49, U.S.C., or a "carrier" to
which 49 U.S.C. (S)11301(b)(1) is applicable.

5.19 Securities Acts and Securities Credit Transaction Regulations. Borrower has
     -------------------------------------------------------------
not issued any unregistered securities in violation of the registration
requirements of the Securities Act of 1933, as amended, or of any other
Requirement of Law, and is not violating any rule, regulation, or requirement
under the Securities Act of 1933, as amended, or the Securities and Exchange Act
of 1934, as amended. Borrower is not required to qualify an indenture under the
Trust Indenture Act of 1939, as amended, in connection with its execution and
delivery of the Notes. Borrower is not a party, whether as a customer or a
creditor, to any transaction that is

                                       49
<PAGE>

subject to the Securities Credit Transaction Regulations.

5.20 Pollution Control. Borrower is in compliance with, and to the best of
     -----------------
Borrower's knowledge, Borrower has, at all times since its incorporation, been
in material compliance with, all Requirements of Law relating to the
environment, hazardous material or pollution control.

5.21 No Approvals Required. Other than consents and approvals previously
     ---------------------
obtained and actions previously taken, neither the execution and delivery of
this Agreement, the Notes and the other Loan Documents to which Borrower is a
party, nor the consummation of any of the transactions contemplated hereby or
thereby requires the consent or approval of, the giving of notice to, or the
registration, recording or filing by Borrower of any document with, or the
taking of any other action in respect of, any Governmental Authority which has
jurisdiction over Borrower or any of its Property.

5.22 Material Agreements with Affiliates. Except as set forth on Schedule 5.22,
     -----------------------------------
Borrower is not party to any material agreement, whether written or oral, with
the Parent or any other Affiliate of Borrower. As used in the preceding
sentence, "material agreement" includes any agreement in which the fair value of
the consideration paid or performance due any party exceeds $100,000 and "with
the Parent or any other Affiliate of Borrower" includes any direct or indirect
agreement with the Parent or any other Affiliate of Borrower.

5.23 Taxpayer Identification. The Federal tax employer identification number of
     -----------------------
Borrower is 25-1664458.

5.24 Not an Insider. Neither Borrower nor the Parent, or any other Affiliate of
     --------------
Borrower is, and no person having "control" as defined in 12 U.S.C. (S)375(b)(9)
of Borrower or of any of the Parent or any other Affiliate of Borrower is, an
"executive officer," "director," or "principal shareholder" (as such terms are
defined in 12 U.S.C. (S)375(b)(9) and the regulations promulgated pursuant
thereto) of any Lender, of any bank holding company of which any Lender is a
Subsidiary, or of any Subsidiary of any bank holding company of which any Lender
is a Subsidiary.

5.25 Survival of Representations. All representations and warranties by Borrower
     ---------------------------
herein shall survive delivery of the Notes and the making of the Advances, and
any investigation at any time made by or on behalf of Agent or any Lender shall
not diminish the right of Agent or any Lender to rely thereon.

5.26 Year 2000 Compliance. Borrower has (i) initiated a review and assessment of
     --------------------
all areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its Subsidiaries (or its suppliers
and vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to, including and after December 31,
1999), (ii) developed a plan and time line for addressing the Year 2000 Problem
on a timely basis, and (iii) implemented in all material respects that plan in
accordance with that timetable. Based on the foregoing, Borrower has no reason
to believe that the Year 2000 Problem will result in a material adverse change
in the business, condition (financial or otherwise), operations or prospects of
Borrower

                                       50
<PAGE>

and its Subsidiaries, or Borrower's ability to repay Lenders.

SECTION 6.  AFFIRMATIVE COVENANTS
            ---------------------

Borrower shall at all times comply with the covenants contained in this Section
6, from the date hereof and for so long as any part of the Obligations or any
Commitment is outstanding.

6.1  Financial Statements and Reports. Borrower shall furnish to each Lender the
     --------------------------------
following, all in form and detail reasonably satisfactory to Lenders:

          (a) Promptly after becoming available, and in any event within 90 days
     after the close of each fiscal year of Borrower, the consolidated balance
     sheet of Borrower and its Subsidiaries, if any, as of the end of such year,
     and the related consolidated statement of income of Borrower and its
     Subsidiaries accompanied by the related report of independent certified
     public accountants reasonably acceptable to the Required Lenders which
     report shall be unqualified and to the effect that such statements have
     been prepared in accordance with GAAP applied on a basis consistent with
     prior periods except for such changes in such principles with which the
     independent public accountants shall have concurred, and accompanied by
     audited financials (including balance sheets, profit and loss statements,
     statements of cash flow, and any other financial statements, reports, or
     information specified by Agent) of  the Parent reflecting the corresponding
     figures as of the end of and for the preceding fiscal year in comparative
     form, together with the related report prepared by an independent certified
     public accountant reasonably acceptable to Required Lenders;

          (b) Promptly after becoming available, and in any event within 30 days
     after the end of each month, a consolidated balance sheet of Borrower and
     its Subsidiaries, if any, as of the end of such month and the related
     consolidated statements of income, stockholders' equity and cash flows of
     Borrower and its Subsidiaries, if any, for such month and the period from
     the beginning of the current fiscal year of Borrower through the end of
     such month, (i) certified by the chief financial officer of Borrower to
     have been prepared in accordance with GAAP applied on a basis consistent
     with prior periods, subject to normal year-end adjustments, and (ii)
     accompanied by a completed Officer's Certificate in the form of Exhibit I
     hereto, executed by the president or chief financial officer of Borrower;

          (c) Promptly (i) upon receipt thereof, a copy of each other report
     submitted to Borrower or any affiliate of Borrower by independent
     accountants in connection with any annual, interim or special audit of the
     books of such Person and (ii) upon preparation thereof, a copy of each
     audit report regarding Borrower submitted to FNMA, FHLMC or GNMA;

          (d) Simultaneously with the delivery of the financial information set
     forth in Section 6.1(b), a report in detail satisfactory to Agent setting
     forth, for the calendar month to which such financial information relates,
     all Permitted Intercompany Payables, all receivables from Affiliates, all
     transactions of Borrower which give rise to Permitted

                                       51
<PAGE>

     Intercompany Payables, all receivables from affiliates, all transactions of
     Borrower which give rise to Permitted Intercompany Payables and all
     transactions of Borrower with any Affiliate of Borrower;

          (e) Promptly and in any event within 30 days after the end of each
     month, management report regarding Borrower's commitment position, pipeline
     position, mortgage servicing/delinquency and production;

          (f) No later than 11:00 a.m. on each Business Day, a Take-Out Report,
     properly completed by an officer of Borrower, setting forth, as of the
     close of business on the preceding Business Day, the Weighted Average Take-
     Out Price; and

          (g) Such other information concerning the business, Properties or
     financial condition of Borrower, any Affiliate or any Investor as Agent or
     any Lender may reasonably request.

6.2  Taxes and Other Liens. Borrower shall pay and discharge promptly all taxes,
     ---------------------
assessments and governmental charges or levies imposed upon it or upon its
income or upon any of its Property as well as all claims of any kind (including
claims for labor, materials, supplies and rent) which, if unpaid, might become a
Lien upon any or all of its Property and could have a Material Adverse Effect;
provided, however, that Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted by or on behalf of Borrower and if Borrower shall have set
up reserves therefor which are adequate under GAAP.

6.3  Maintenance. Borrower shall (i) maintain its corporate existence, rights
     -----------
and franchises; (ii) observe and comply in all material respects with all
Requirements of Law, and (iii) maintain its Properties (and any Properties
leased by or consigned to it or held under title retention or conditional sales
contracts) in good and workable condition at all times and make all repairs,
replacements, additions, betterments and improvements to its Properties as are
needful and proper so that the business carried on in connection therewith may
be conducted properly and efficiently at all times.

6.4  Further Assurances. Borrower shall, within 3 Business Days (or, in the case
     ------------------
of Mortgage Notes or other Mortgage Documents returned to Borrower under a Trust
Receipt, the period specified in such Trust Receipt), after the request of Agent
or any Lender, cure any defects in the execution and delivery of any Note, this
Agreement or any other Loan Document and Borrower shall, at its expense,
promptly execute and deliver to Agent and Lenders upon request all such other
and further documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements of Borrower in this Agreement and
in the other Loan Documents or to further evidence and more fully describe the
collateral intended as security for the Notes, or to correct any omissions in
this Agreement or the other Loan Documents, or more fully to state the security
for the Obligations set out herein or in any of the other Loan Documents, or to
perfect, protect or preserve any Liens created (or intended to be created)
pursuant to any of the other Loan Documents, or to make any recordings, to file
any

                                       52
<PAGE>

notices, or obtain any consents.

6.5  Reimbursement of Expenses. Borrower shall, within 10 Business Days of
     -------------------------
notice of the amount thereof (which notice shall include appropriate evidence of
the amount of such reimbursable item) pay (i) all reasonable legal fees incurred
by Agent (including, without limitation, the fees, service charges and expenses
of Dorsey & Whitney LLP, legal counsel to the Agent) in connection with the
preparation, negotiation, execution and delivery of this Agreement, the Notes
and the other Loan Documents and any amendments, consents or waivers executed in
connection therewith, (ii) all fees, charges or taxes for the recording or
filing of the Security Instruments, (iii) all shipping, postage and transfer
costs incurred by Agent in connection with the administration of this Agreement,
the Notes and the other Loan Documents, including courier expenses incurred in
connection with the Collateral as provided in the Custodial Fee Letter, and (iv)
all amounts expended, advanced or incurred by Agent or any Lender to satisfy any
obligation of Borrower under this Agreement or any of the other Loan Documents
or to collect any Note, or to enforce the rights of Agent or any Lender under
this Agreement or any of the other Loan Documents, which amounts shall include
all court costs, attorneys' fees (including, without limitation, for trial,
appeal or other proceedings), fees of auditors and accountants, and
investigation expenses, reasonably incurred by Agent or any Lender in connection
with any such matters, together with interest at the post-maturity rate
specified in each Note on each item specified in clauses (i) through (iv) from
30 days after the date of written demand or request for reimbursement until the
date of reimbursement; provided, however, that Borrower shall, prior to the
first Advance (if and to the extent that Borrower has received a statement
therefor, which statement shall constitute appropriate evidence of the amount
thereof), pay, or reimburse Agent for, the fees, service charges and expenses of
Dorsey & Whitney LLP, Agent's legal counsel, in connection with the preparation,
negotiation, execution and delivery of this Agreement, the Notes and the other
Loan Documents.

6.6  Insurance. Borrower shall maintain with financially sound and reputable
     ---------
insurers, insurance with respect to its Properties and business against such
liabilities, casualties, risks and contingencies and in such types and amounts
as is customary in the case of Persons engaged in the same or similar businesses
and similarly situated, including, without limitation, a fidelity bond or bonds
with financially sound and reputable insurers with such coverage and in such
amounts as is customary in the case of Persons engaged in the same or similar
businesses and similarly situated. Borrower shall cause the improvements on the
land covered by each Mortgage relevant to Mortgage Loans included in the
Mortgage Collateral to be kept continuously insured at all times by responsible
insurance companies against fire and extended coverage hazards under policies,
binders, letters or certificates of insurance, with a standard mortgagee clause
in favor of Borrower and its assigns. Each such policy must be in an amount no
less than the lesser of the maximum insurable value of the improvements or the
original principal amount of the relevant Mortgage Loan, without reduction by
reason of any co-insurance, reduced rate contribution, or similar clause of the
policies or binders. Upon request of Agent or any Lender, Borrower shall furnish
or cause to be furnished to Agent from time to time a summary of the insurance
coverage of Borrower in form satisfactory to the Person requesting such summary
and if requested shall furnish Agent copies of the applicable policies. Agent
shall promptly distribute copies of any summaries and policies received by it
under this Section 6.6 to any Lender which so requests.

                                       53
<PAGE>

6.7  Accounts and Records; Servicing Records. Borrower shall keep books of
     ---------------------------------------
record and account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business activities, in accordance
with GAAP. Borrower shall implement and maintain administrative and operating
procedures (including without limitation, an ability to recreate all material
records pertaining to the performance of Borrower's obligations under the
Servicing Agreements in the event of the destruction of the originals of such
records) and keep and maintain all documents, books, records, computer tapes and
other information reasonably necessary or advisable for the performance by
Borrower of its obligations under the Servicing Agreements.

6.8  Appraisals. Borrower shall obtain and maintain a copy of an Appraisal with
     ----------
respect to the underlying property covered by the Mortgage which relates to each
Pledged Mortgage Loan, shall require that all Appraisals delivered to it in
connection with the Pledged Mortgage Loans (whether originated by Borrower or
purchased by it) comply in all respects with the Appraisal Laws and Regulations,
shall implement and maintain administrative and operating procedures which
permit Borrower, Agent and Lenders to verify such compliance, and shall permit
and shall use all reasonable efforts to cause each Person from whom it purchases
Mortgage Loans to permit any officer, employee or agent of Agent or any Lender
to visit and inspect the Properties of Borrower and such Person relevant to such
compliance, to inspect the records of Borrower and such Person relevant to such
compliance, to take copies and extracts therefrom, and to discuss the Appraisals
relevant to the Mortgage Loans from time to time pledged to Agent for the
benefit of Lenders with the responsible officers, employees and agents
(including any third party appraisers) of Borrower and such Person, at all such
reasonable times (which may include unannounced "spot" checks) and as often as
Agent or any Lender may desire.

6.9  Right of Inspection. Borrower shall permit any officer, employee or agent
     -------------------
of Agent or any Lender to visit and inspect any of the Properties of Borrower,
examine Borrower's Servicing Records and books of record and accounts, take
copies and extracts therefrom, and discuss the affairs, finances and accounts of
Borrower with Borrower's officers, accountants and auditors, all at such
reasonable times upon reasonable notice and as often as Agent or any Lender may
desire.

6.10 Notice of Certain Events. Borrower shall promptly notify Agent and each
     ------------------------
Lender (i) the receipt of any notice from, or the taking of any other action by,
the holder of any promissory note, debenture or other evidence of Indebtedness
of Borrower with respect to a claimed default, together with a detailed
statement by a responsible officer of Borrower specifying the notice given or
other action taken by such holder and the nature of the claimed default and what
action Borrower is taking or proposes to take with respect thereto; (ii) the
commencement of, or any determination in, any legal, judicial or regulatory
proceedings which, if adversely determined, could have a Material Adverse
Effect; (iii) the occurrence of any dispute between Borrower and any
Governmental Authority or any other Person which, if adversely determined, could
have a Material Adverse Effect; (iv) the occurrence of any event or condition
which, if adversely determined, would have a Material Adverse Effect; or (v)
obtaining knowledge of any event or condition if the effect thereof is to cause
or permit with the giving of notice or lapse of time or both the holder of any
promissory note, debenture or other evidence of Indebtedness of Borrower

                                       54
<PAGE>

to cause such Indebtedness to become due prior to its stated maturity.

6.11   Performance of Certain Obligations.  Borrower shall perform and observe
       ----------------------------------
in all material respects each of the provisions of each Agency Commitment, each
Take-Out Commitment and each of the Servicing Agreements on its part to be
performed or observed and will cause all things to be done which are necessary
to have each item of Mortgage Collateral "covered" (within the meaning given
such term in Section 6.20) by an Agency Commitment or a Take-Out Commitment
comply with the requirements thereof.

6.12   Use of Proceeds; Margin Stock. The proceeds of the Advances shall be used
       -----------------------------
by Borrower solely for the funding and acquisition of Mortgage Loans in the
ordinary course of Borrower's business, including the refinancing of Eligible
Mortgage Loans funded or acquired by Borrower in the ordinary course of business
with its own funds. None of such proceeds shall be used for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U of the
Board of Governors of the Federal Reserve System, or for the purpose of reducing
or retiring any Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation U. Neither Borrower nor
any Person acting on behalf of Borrower shall (i) take any action in violation
of Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System, (ii) violate Section 7 of the Securities Exchange Act of 1934, as
amended, or any rule or regulation thereunder, or (iii) engage in any
transaction which is subject to the Securities Credit Transaction Regulations.

6.13   Notice of Default. Borrower shall furnish to Agent and to each Lender
       -----------------
immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of existence thereof
and the action which Borrower is taking or proposes to take with respect
thereto.

6.14   Compliance with Loan Documents. Borrower shall promptly comply with any
       ------------------------------
and all covenants and provisions of this Agreement, the Notes and the other Loan
Documents.

6.15   Compliance with Material Agreements.  Borrower shall comply in all
       -----------------------------------
material respects with all material agreements, indentures, or documents binding
on it or affecting its Property or business.

6.16   Operations and Properties. Borrower shall act in accordance, in all
       -------------------------
material respects, with all Requirements of Law and customary industry standards
in managing and operating its Property.

6.17   ERISA and Plans. As soon as practicable, and in any event within 10 days
       ---------------
after an officer of Borrower or any Related Person knows or reasonably should
know that any of the events or conditions specified below has occurred or
exists, or is expected to occur or exist, Borrower shall deliver to Agent an
officer's certificate executed by the president or any vice president of
Borrower and setting forth details respecting such event or condition and the
action, if any, that Borrower or any Related Person proposes to take with
respect thereto (and a copy of any notice or report filed with, given to or
received from the PBGC, the Internal Revenue

                                       55
<PAGE>

Service or the Department of Labor with respect to such event or condition);

          (a)  any reportable event, as defined in Section 4043(b) of ERISA and
     the regulations issued thereunder, with respect to a Plan, as to which the
     PBGC has not by regulation waived the requirement of Section 4043(a) of
     ERISA that it be notified within 30 days of the occurrence of such event
     (provided that a failure to meet the minimum funding standard of Section
     412 of the Code or Section 302 of ERISA shall be a reportable event
     regardless of the issuance of any waivers in accordance with Section 412(d)
     of the Code and shall be required to be reported pursuant to this
     subsection (a));

          (b)  the filing under Section 4041 of ERISA of a notice of intent to
     terminate any Plan or the termination of any Plan or the amendment of any
     Plan in a manner which would be treated as a termination of such Plan under
     Section 4041(e) of ERISA;

          (c)  a substantial cessation of operations within the meaning of
     Section 4062(e) of ERISA under circumstances which could result in the
     treatment of Borrower or any Related Person as a substantial employer under
     a "multiple employer Plan" or the application of the provisions of Section
     4062, 4063 or 4064 of ERISA to Borrower or any Related Person;

          (d)  the institution by the PBGC of proceedings under Section 4062 of
     ERISA for the termination of, or the appointment of a trustee to
     administer, any Plan, or the receipt by Borrower or any Related Person of a
     notice from a Multiemployer Plan that such action has been taken by the
     PBGC with respect to such Multiemployer Plan;

          (e)  the complete or partial withdrawal by Borrower or any Related
     Person under Section 4063, 4203 or 4205 or ERISA from a Plan which is a
     "multiple employer Plan" or a Multiemployer Plan, or the receipt by
     Borrower or any Related Person of notice from a Multiemployer Plan that it
     is in reorganization or it is insolvent pursuant to Section 4241 or 4245 of
     ERISA or that it intends to terminate under Section 4041A of ERISA or from
     a "multiple employer Plan" that it intends to terminate; and

          (f)  any event or series of events occurs or exists which could
     reasonably by expected to result in (i) a material liability on the part of
     Borrower or any Related Person under Title IV of ERISA, (ii) the
     institution of a proceeding against Borrower or any Related Person to
     enforce Section 515 of ERISA, or (iii) the imposition of a Lien on any
     Property of Borrower or any Related Person pursuant to Section 4068 of
     ERISA or Section 412(n) of the Code.

6.18   Environmental Matters.  Borrower shall comply in all material respects
       ---------------------
with all Requirements of Law relating to the environment, hazardous materials or
pollution control and where noncompliance could have a Material Adverse Effect
and shall furnish to Agent and to each Lender immediately upon becoming aware of
any claim under any such Requirement of Law, a written notice specifying the
nature of such claim, the Person bringing such claim and the action which
Borrower is taking or proposes to take with respect thereto.

                                       56
<PAGE>

6.19   Take-Out Commitments; Coverage. Borrower shall enter into and maintain
       ------------------------------
Agency Commitments and Take-Out Commitments sufficient at all times to cover
each Mortgage Loan (except Investment Mortgage Loans, Construction Loans, and
Lot Loans) and Mortgage-Backed Security included in the Mortgage Collateral
(including any Mortgage-Backed Security to be issued or guaranteed pursuant to
an Agency Commitment by which Mortgage Loans included in the Collateral are
covered). For purposes of this Agreement, a Mortgage Loan or Mortgage-Backed
Security shall be "covered" by an Agency Commitment or a Take-Out Commitment if
and only if (i) such Mortgage Loan or Mortgage-Backed Security is of a type,
including as to amount, maturity and rate or yield, which satisfies the
requirements of such Agency Commitment or Take-Out Commitment, (ii) the sum of
the principal amount of such Mortgage Loan or Mortgage-Backed Security and the
principal amounts of the Mortgage Loans or Mortgage-Backed Securities previously
assigned to such Agency Commitment or Take-Out Commitment for purposes of
determining coverage do not exceed the maximum amount thereof, (iii) with
respect to Mortgage Loans, the documentation and underwriting of each such
Mortgage Loan complies in all respects with the requirements of such Agency
Commitment or Take-Out Commitment and (iv) with respect to Mortgage Loans
covered by an Agency Commitment, any Mortgage-Backed Security to be issued or
guaranteed pursuant thereto is covered by a Take-Out Commitment. For purposes of
Sections 3.7 and 3.8 and any Agreement to Pledge , a Mortgage Loan shall be
"covered" by a Take-Out Commitment only if it is either (x) saleable directly
into a Take-Out Commitment as a Mortgage Loan rather than as part of a Mortgage-
Backed Security or (y) covered by both an Agency Commitment and a Take-Out
Commitment.

6.20   Failure to Close a Wet Mortgage Loan. Borrower shall make a mandatory
       ------------------------------------
repayment in an amount equal to the Collateral Value (determined as if such Wet
Mortgage Loan had closed) of any Wet Mortgage Loan listed in a Agreement to
Pledge within one (1) Business Day of the date such Mortgage Loan was to have
closed, if (i) such Wet Mortgage Loan shall not have closed before the close of
business on the Business Day after the date of delivery of such Agreement to
Pledge) and (ii) Borrower shall have received Advances to fund the payment of
the proceeds of such Mortgage Loan. Borrower shall give Agent notice of each
repayment pursuant to this Section 6.20, which notice shall identify the Wet
Mortgage Loan which has not closed, contemporaneously with the making of such
repayment.

6.21   Year 2000 Compliance. Borrower will promptly notify the Agent in the
       --------------------
event Borrower discovers or determines that any computer application (including
those of its suppliers and vendors) that is material to its or any of its
Subsidiaries' business and operations will not be Year 2000 compliant on a
timely basis, except to the extent that such failure is not reasonably expected
to cause a Material Adverse Effect.

SECTION 7.  NEGATIVE COVENANTS
            ------------------

Borrower shall at times comply with the covenants contained in this Section 7,
from the date hereof and for so long as any part of the Obligations or any
Commitment is outstanding.

7.1    No Merger. Borrower shall not merge or consolidate with or into any
       ---------
corporation, nor shall Borrower acquire by purchase or otherwise all or
substantially all of the assets (except to the extent that such assets consist
solely of Mortgage Notes, Mortgage-Backed Securities and

                                       57
<PAGE>

rights to service Mortgage Loans) or capital stock of any Person.

7.2    Limitation on Indebtedness. Borrower shall not incur, create, contract,
       --------------------------
assume, have outstanding, guarantee or otherwise be or become, directly or
indirectly, liable in respect of any Indebtedness except (a) Repurchase
Agreements, (b) Permitted Intercompany Payables, (c) Indebtedness, including the
Obligations, secured by Permitted Liens and by no other Liens on the Property of
Borrower, (d) liabilities in respect of unfunded vested benefits under a Plan as
determined in accordance with ERISA, to the extent permitted under Section 7.16,
(e) liabilities as lessee under leases which have been or, in accordance with
GAAP, should be classified as capitalized leases in an aggregate amount not
greater than $5,000,000, (f) Investment Line of Credit Indebtedness, (g) other
Indebtedness in an aggregate amount at any time outstanding not greater than
$1,000,000.

7.3    Fiscal Year, Method of Accounting. Borrower shall not change its fiscal
       ---------------------------------
year or method of accounting.

7.4    Business. Borrower shall not, directly or indirectly, engage in any
       --------
business other than that currently engaged in by Borrower or any other business
customarily engaged in by other Persons in the mortgage banking business.

7.5    Liquidations, Consolidations and Dispositions of Substantial Assets.
       -------------------------------------------------------------------
Borrower shall not dissolve or liquidate or sell, transfer, lease or otherwise
dispose of any material portion of its property or assets or business; provided,
however, that subject to the Security Agreement nothing in this Section 7.5
shall be construed to prohibit Borrower from selling Servicing Rights, Mortgage
Notes or Mortgage-Backed Securities in the ordinary course of its business.

7.6    Loans, Advances and Investments. Borrower shall not make any loan (other
       -------------------------------
than loans made in the ordinary course of its business as a mortgage company),
advance, or capital contribution to, or investment in (including any investment
in any Subsidiary, joint venture or partnership), or purchase or otherwise
acquire any of the capital stock, securities, or evidences of indebtedness of,
any Person (collectively, "Investment"), or otherwise acquire any interest in,
or control of, another Person, except for the following:

          (a)  Cash Equivalents;

          (b)  Any acquisition of securities or evidences of indebtedness of
     others when acquired by Borrower in settlement of accounts receivable or
     other debts arising in the ordinary course of its business, so long as the
     aggregate amount of any such securities or evidence of indebtedness is not
     material to the business or financial condition of Borrower;

          (c)  Mortgage-Backed Securities and Mortgage Notes acquired in the
     ordinary course of Borrower's business;

          (d)  Loans and advances to (i) employees, officers and directors of
     Borrower or any Affiliate of Borrower or (ii) the Parent and other
     Affiliates of Borrower which are

                                       58
<PAGE>

     neither Subsidiaries nor Persons which would, if organized as a corporation
     and Borrower owned a sufficient interest therein, constitute a Subsidiary
     of Borrower, in an aggregate principal amount outstanding at any one time
     not to exceed $250,000 (or such larger amount as Agent may, in its sole
     discretion, approve in writing prior to the making thereof); and

          (e)  Capital contributions to Permitted Subsidiaries, and other
     Persons which would, if organized as a corporation and Borrower owned a
     sufficient interest therein, constitute a Permitted Subsidiary in an
     aggregate amount not greater than $1,000,000.

7.7  Use of Proceeds. Borrower shall not permit the proceeds of the Advances to
     ---------------
be used for any purpose other than those permitted by Section 6.12. Borrower
shall not, directly or indirectly, use any of the proceeds of the Advances for
the purpose of engaging in any transaction which is subject to the Securities
Credit Transaction Regulations.

7.8  Actions with Respect to Collateral.  Borrower shall not:
     ----------------------------------

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

          (b)  other than pursuant to pair-offs in the ordinary course of
     business, agree to the amendment or termination of any Take-Out Commitment
     included in the Collateral or to the substitution of any Take-Out
     Commitment for such a Take-Out Commitment without the consent of Agent;

          (c)  transfer, sell, assign, or deliver any Collateral pledged to
     Agent to any Person other than Agent, except in accordance with the
     Security Agreement; or

          (d)  grant, create, incur, permit or suffer to exist any Lien upon any
     Mortgage Collateral except for (i) Liens granted to Agent for the benefit
     of Lenders to secure the Obligations, (ii) such non-consensual Liens may be
     deemed to arise as a matter of law pursuant to any Take-Out Commitment,
     (iii) Liens permitted under Section 6.2 to the extent that such Liens
     constitute Permitted Liens, (iv) Liens which constitute Permitted Liens
     under clauses (f) and (g) of the definition of Permitted Liens.

7.9  Adjusted Tangible Net Worth. The Adjusted Tangible Net Worth of Borrower at
     ---------------------------
any date shall not be less than $11,500,000.

7.10 Liabilities to Adjusted Tangible Net Worth Ratios. The ratio of (a) the
     -------------------------------------------------
Total Liabilities, excluding (i) net deferred taxes, (ii) Advances to the extent
of the aggregate Collateral Value of all Eligible Gestation Mortgage Loans, and
(iii) obligations of Borrower in respect of Repurchase Agreements, of Borrower
to (b) the Adjusted Tangible Net Worth of Borrower shall not average more than
12.0 to 1.0 at any reporting time pursuant to Section 6.1, and never, at any
time, exceed 17.5 to 1.0.

                                       59
<PAGE>

7.11 Restrictions on Dividends, Returns of Capital and Servicing Proceeds
     --------------------------------------------------------------------
Distributions.  Borrower shall not directly or indirectly declare or make, or
-------------
incur any liability to make, any Dividend, Return of Capital unless, prior
thereto, Borrower shall have submitted to Agent a certificate of its President
or Chief Financial Officer certifying that no Default or Event of Default exists
or would result therefrom and, in the case of any Return of Capital,
demonstrating the amount and source of such return or distribution.

7.12 Transactions with Affiliates.
     ----------------------------

          (a)  Borrower shall not enter into any transactions, including,
     without limitation, any purchase, sale, lease or exchange of property or
     services with or the incurring of Indebtedness to any Affiliate unless such
     transactions are otherwise permitted under this Agreement, are in the
     ordinary course of Borrower's business and are upon fair and reasonable
     terms no less favorable to Borrower than it would obtain in a comparable
     arm's length transaction with a Person not an Affiliate; and
          (b)  the aggregate amount paid or payable by Borrower to Affiliates of
     Borrower exclusive of Permitted Dividends, Permitted Tax Payments, payments
     in respect of Permitted Intercompany Payables, Permitted Returns of
     Capital, and Permitted Servicing Proceeds Distributions shall not exceed
     $250,000 in the aggregate in any twelve month period.

7.13 Liens.  Borrower shall not grant, create, incur, assume, permit or suffer
     -----
to exist any Lien which is not a Permitted Lien upon any of its Property,
including without limitation any and all of Borrower's Mortgage Loans, Mortgage-
Backed Securities (except as permitted under Section 7.8(d)) and Servicing
Rights and the proceeds from any thereof.

7.14 Compliance with ERISA.  Borrower shall not, and shall not permit any
     ---------------------
Related Person to:

          (a)  (i) engage in any transaction in connection with which Borrower
     or any Related Person could be subject to either a civil penalty assessed
     pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
     Code, (ii) fail to make full payment when due of all amounts which would be
     deductible by Borrower or any Related Person and which, under the
     provisions of any Plan, applicable law or applicable collective bargaining
     agreement, Borrower or any Related Person is required to pay as
     contributions thereto, or (iii) permit to exist any accumulated funding
     deficiency, whether or not waived, with respect to any Plan (other than a
     Multiemployer Plan or a "multiple employer Plan"), if, in the case of any
     of clause (i), (ii) or (iii) above such penalty or tax, or the failure to
     make such payment, or the existence of such deficiency, as the case may be,
     will likely have a material adverse effect on the financial position of
     Borrower;

          (b)  permit the amount of unfunded benefit liabilities (within the
     meaning of Section 4001(a)(18) of ERISA) under each Plan maintained,
     established or contributed to at such time by Borrower or any of its
     Related Persons (other than Multiemployer Plans or "multiple employer
     plans") to exceed $2,000,000; or

                                       60
<PAGE>

          (c)  permit the aggregate complete or partial withdrawal liability
     under Title IV of ERISA with respect to all Plans which are "multiple
     employer plans" and all Multiemployer Plans incurred by Borrower or any
     Related Person to exceed $50,000.

7.15 Change of Principal Office. Borrower shall not (a) change the location of
     --------------------------
its principal office, chief executive office and principal place of business
from that specified in Section 5.12 or (b) change its name, identity or
corporate structure to such an extent that any financing statement filed by
Agent in connection with this Agreement would become seriously misleading,
unless it shall have given Agent at least 30 days prior written notice thereof
and prior to effecting any such change, taken such steps as Agent or the
Required Lenders may deem necessary or desirable to continue the perfection and
priority of the Liens in favor of Agent for the benefit of Lenders granted in
connection herewith.

7.16 Tax Payments.  Except in accordance with the Tax Allocation Agreement,
     ------------
Borrower shall not make any payments to or on behalf of the Parent or any
Affiliate of Borrower in respect of taxes.

7.17 Tax Allocation Agreement. Borrower shall not permit the amendment or
     ------------------------
modification of the Tax Allocation Agreement in any way which has an adverse
effect on Borrower.

7.18 Permitted Subordinated Indebtedness.  Borrower shall not increase the
     -----------------------------------
outstanding amount of the Permitted Subordinated Indebtedness, modify or amend
the Parent Note without providing a copy of the Parent Note, as modified, to
Agent within 20 days after execution of the Parent Note, or make any payment in
respect of the Parent Note; provided, that so long as no Default or Event of
Default exists or would result therefrom, Borrower may borrow, repay and
reborrow under the Parent Note.

SECTION 8.  EVENTS OF DEFAULT
            -----------------

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

          (a)  Borrower fails to make any payment of principal of or interest on
     any Note, or payment of any fee, expense or other amount due hereunder,
     under any of the Notes or under any other Loan Document, on or before the
     date such payment is due;

          (b)  Borrower fails to observe or perform (i) any term, covenant or
     agreement set forth in Sections 2.3(b)(iii), 2.5, 6.13, 6.17, 6.19, or 6.20
     or Section 7 (other than Sections  7.11, 7.12, 7.16, 7.18, and 7.14, which
     Section 7.14 is governed by Section 8.1(i) regarding payments of
     judgments), and (ii) any term, covenant or agreement set forth in Sections
     6.22,  7.11, 7.12, 7.14, or 7.16, or 7.18 if such failure shall remain
     unremedied for 20 days, and (iii) any other term, covenant or agreement in
     this Agreement on its part to be performed or observed if the failure to
     perform or observe such other term, covenant or agreement shall remain
     unremedied for 20 days after written notice thereof shall have been given
     to Borrower by Agent or the Required Lenders;

                                       61
<PAGE>

          (c)  Borrower fails to observe or perform any of the covenants or
     agreements contained in any other Loan Document, and (unless such default
     otherwise constitutes a Default pursuant to other provisions of this
     Section 8.1) such default continues unremedied beyond the expiration of any
     applicable grace period which may be expressly allowed under such other
     Loan Document;

          (d)  any material statement, warranty or representation by or on
     behalf of Borrower contained in this Agreement, the Notes or any other Loan
     Document or any Borrowing Request, officer's certificate or other writing
     furnished in connection with this Agreement, proves to have been incorrect
     or misleading in any material respect as of the date made or deemed made;

          (e)  Borrower fails to make when due or within any applicable grace
     period any payment on any Indebtedness with an unpaid principal balance of
     over $500,000; or any event or condition occurs under any provision
     contained in any such obligation or any agreement securing or relating to
     such obligation (or any other breach or default under such obligation or
     agreement occurs) if the effect thereof is to cause or permit the holder or
     trustee of such obligation to cause such obligation to become due prior to
     its stated maturity; or any such obligation becomes due (other than by
     regularly scheduled payments) prior to its stated maturity; or any of the
     foregoing occurs with respect to any one or more items of Indebtedness of
     Borrower with unpaid principal balances exceeding, in the aggregate,
     $500,000;

          (f)  Borrower shall generally not pay its debts as they become due or
     shall admit in writing its inability to pay its debts, or shall make a
     general assignment for the benefit of creditors;

          (g)  Borrower shall (i) apply for or consent to the appointment of a
     receiver, trustee, custodian, intervenor or liquidator of it or of all or a
     substantial part of its assets, (ii) file a voluntary petition in
     bankruptcy, (iii) file a petition or answer seeking reorganization or an
     arrangement with creditors or to take advantage of any Debtor Laws, (iv)
     file an answer admitting the material allegations of, or consent to, or
     default in answering, a petition filed against it in any bankruptcy
     reorganization or insolvency proceeding, or (v) take corporate action for
     the purpose of effecting any of the foregoing;

          (h)  an involuntary petition or complaint shall be filed against
     Borrower seeking bankruptcy or reorganization of Borrower or the
     appointment of a receiver, custodian, trustee, intervenor or liquidator of
     Borrower, or all or substantially all of its assets, and such petition or
     complaint shall not have been dismissed within 60 days of the filing
     thereof; or an order, order for relief, judgment or decree shall be entered
     by any court of competent jurisdiction or other competent authority
     approving a petition or complaint seeking reorganization of Borrower or
     appointing a receiver, custodian, trustee, intervenor or liquidator of
     Borrower, or of all or substantially all of its assets;

          (i)  Borrower fails within 30 days to pay, bond or otherwise discharge
     any

                                       62
<PAGE>

     final judgment or order for payment of money in excess of $250,000 or
     Borrower fails within 30 days to pay, bond or otherwise discharge final
     judgments or orders for payment of money which exceed in the aggregate
     $250,000, or Borrower fails within 30 days to timely appeal or pay, bond or
     otherwise discharge any judgments or orders for payment of money which
     exceed, in the aggregate, $250,000 and which Borrower may appeal;

          (j)  any default or event of default occurs under any other
     Indebtedness of Borrower to any Lender;

          (k)  any Person levies on, seizes or attaches all or any material
     portion of the assets of Borrower and within 30 days thereafter Borrower
     shall not have dissolved such levy or attachment, as the case may be, and,
     if applicable, regained possession of such seized assets;

          (l)  an event or condition specified in Section 7.14 occurs or exists
     and, as a result of such event or condition, together with all other such
     events or conditions, Borrower or any Related Person incurs or is
     reasonably likely to incur a liability to a Plan, a participant or the PBGC
     (or any combination of the foregoing) that is material in relation to the
     financial position of Borrower;

          (m)  any change in the senior management of Borrower shall occur or
               any reason other than death or disability;

          (n)  Borrower shall cease to be an eligible seller or servicer under
     the FNMA Guide or the FHLMC Guide, or FNMA or FHLMC shall impose any
     sanctions upon or take any action to terminate or revoke any servicing of
     Borrower, or FNMA or FHLMC shall take any action to initiate the transfer
     of any servicing from Borrower to another Person (including, without
     limitation, the giving of notice to Borrower that it intends to terminate
     or transfer any servicing) or FNMA or FHLMC shall seek any judicial relief
     with respect to Borrower;

          (o)  GNMA shall revoke or terminate any servicing of Borrower, or GNMA
     shall issue a letter of extinguishment under any GNMA guaranty agreement or
     GNMA shall notify Borrower that it intends to revoke or terminate any
     servicing of Borrower or issue a letter of extinguishment, or GNMA shall
     seek any judicial relief with respect to Borrower;

          (p)  the Parent shall cease to own beneficially, of record and either
     directly or indirectly, 100% of the issued and outstanding shares of
     capital stock of Borrower, or any "person" or "group" (within the meaning
     of Sections 13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as
     amended) shall become the "beneficial owner" (as defined in Rule 13d-3
     under such act) of more than 50% of the total aggregate voting power of all
     classes of the voting stock of the Parent and/or warrants or options to
     acquire such stock, calculated on a fully diluted basis; or

          (q)  any provision of this Agreement, the Notes or any other Loan
     Document

                                       63
<PAGE>

     shall for any reason cease to be in full force and effect, or be declared
     null and void or unenforceable in whole or in part; or the validity or
     enforceability of any such document shall be challenged or denied.

8.2  Default Remedies.  Upon the occurrence of an Event of Default, Agent, at
     ----------------
the request of the Required Lenders, provided such Event of Default has not been
previously cured by Borrower, may (i) declare each of the Commitments to be
terminated and/or declare the entire principal of and all interest accrued on
the Notes to be, and the Notes, together with all Obligations, shall thereupon
become, forthwith due and payable, without presentment, demand, protest, notice
of protest and nonpayment, notice of acceleration or of intent to accelerate or
other notice of any kind, all of which hereby are expressly waived and (ii)
exercise any other right or remedy available at law or pursuant to any Loan
Document. Notwithstanding the foregoing, if an Event of Default specified in
Section 8.1(f), (g), (h) or (p) above occurs, the Commitment of each Lender
shall automatically and immediately terminate and the Notes and all other
Obligations shall become automatically and immediately due and payable, both as
to principal and interest, without any action by Agent or any Lender and without
presentment, demand, protest, notice of protest and nonpayment, notice of
acceleration or of intent to accelerate, or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in any Note to
the contrary notwithstanding.

SECTION 9.  AGENT.
            -----

9.1  Authorization and Action.  Each Lender hereby appoints U.S. Bank National
     ------------------------
Association, as Agent under this Agreement and the other Loan Documents and
authorizes Agent to take such action on its behalf and to exercise such powers
and perform such duties as are expressly delegated to Agent by the terms of this
Agreement and such other Loan Documents, together with such powers as are
reasonably incidental thereto. As to any matter not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of the Notes; provided, however, that Agent shall not be
required to take any action which exposes Agent to personal liability or which
is contrary to this Agreement or applicable law. Agent agrees to give to each
Lender prompt notice of each notice given to it by Borrower pursuant to the
terms of this Agreement.

9.2  Agent's Reliance, Etc.  Notwithstanding anything to the contrary in this
     ---------------------
Agreement or any other Loan Document, neither Agent nor any of its directors,
officers, agents, employees, attorneys-in-fact or Affiliates shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, Agent: (a) may treat the payee of any Note as the holder thereof;
(b) may consult with legal counsel (including counsel for Borrower), independent
public accountants and other experts selected by it or Borrower and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with this Agreement;

                                       64
<PAGE>

(d) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement on the
part of Borrower or to inspect the property (including the books and records) of
Borrower, except receipt of delivery of the items required under the Security
Agreement and Sections 4.1, 4.2, and 6.1; (e) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (f) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy) believed by it to be genuine
and signed or sent by the proper party or parties.

9.3  Agent and Affiliates.  With respect to its Commitment, the Advances made by
     --------------------
it and the Notes issued to it, Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any other Lender and may exercise
the same as though it were not Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include Agent in its individual capacity.
Agent and the Affiliates of Agent may accept deposits from, lend money to, act
as trustee under indentures of, and generally engage in any kind of business
with, Borrower, any of its Affiliates and any Person who may do business with or
own securities of Borrower or any of its Affiliates, all as if Agent were not
Agent and without any duty to account therefor to Lenders.

9.4  Lender Credit Decision.  Each Lender acknowledges that it has,
     ----------------------
independently and without reliance upon Agent or any other Lender and based on
the financial statements referred to in Sections 5.7 and 6.1 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter this Agreement. Each Lender also acknowledges
that it will, independently and without reliance upon Agent or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, to make its own credit decisions in taking or not taking action under this
Agreement.

9.5  Indemnification.  Lenders agree to indemnify Agent (to the extent not
     ---------------
reimbursed by Borrower), ratably according to their respective Commitments, from
and against any and all liabilities, obligations, losses, damages, penalties,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by Agent under this agreement (including any of same which may result
from the negligence, but not gross negligence, of Agent), provided that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, but subject to the proviso clause of the preceding
sentence, each Lender agrees to reimburse Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees) incurred by
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that Agent is not

                                       65
<PAGE>

reimbursed for such expenses by Borrower.

9.6  Successor Agent.  Agent may resign at any time by giving written notice
     ---------------
thereof to Lenders and Borrower and may be removed at any time with or without
cause by the Required Lenders. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent with the
written consent of Borrower, which consent shall not be unreasonably withheld or
delayed, provided that the consent of the Borrower shall not be required if a
Default or an Event of Default shall have occurred and is continuing. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
of notice of resignation or the Required Lenders' removal of the retiring Agent,
then the retiring Agent may, on behalf of Lenders, appoint a successor Agent,
which shall be a commercial bank or savings bank organized under the laws of the
United States of America or of any State thereof which has a combined capital
and surplus of at least $200,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from any
further duties and obligations under this Agreement. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. The appointment of a Successor Agent
shall not release the retiring Agent from any liability it may have for any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.

9.7  Right of Inspection.   Agent shall permit any officer, employee or agent of
     -------------------
Borrower or any Lender, upon written request by such party to the Agent, to
visit and inspect the premises on which the custodial duties of Agent hereunder
are performed at a time which is mutually satisfactory to Agent and such
requesting party, and allow such requesting party to examine the books and
records of Agent which pertain to such custodial duties, take copies and
extracts therefrom, and discuss the performance of such custodial duties with
the officers, accountants and auditors of Agent that are responsible therefor,
all at such reasonable times and as often as Borrower or any Lender may desire.

9.8  Reports.  On the fifth (5th) day of each calendar month (or if such day is
not a Business Day, the next succeeding Business Day), Agent shall deliver to
each Lender and Borrower (a) a report of the Pledged Mortgage Loans (noting any
document exceptions) for the month ended (a "Basic Status Report"); and (b) a
report of the Pledged Mortgage Loans shipped to Investors for which Agent has
not received the full purchase price in cash (a "Shipped Not Paid Report"). The
information on the Basic Status Report and the Shipped Not Paid Report shall be
dated as of the end of the immediately preceding month.

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<PAGE>

SECTION 10.    INDEMNIFICATION OF LENDERS
               --------------------------

     10.1   Indemnification.
            ---------------

            (a)   Borrower will indemnify and hold harmless Agent, each Lender,
     and Agent's and each Lender's directors, officers, employees and each
     Person, if any, who is deemed to control any Lender (any and all whom are
     referred to as the "Indemnified Party") from and against any and all
     losses, claims, damages and liabilities, joint or several (including all
     losses, claims, damages and liabilities resulting from the negligence, but
     not the gross negligence of such Indemnified Party, and including all legal
     fees or other expenses reasonably incurred by any Indemnified Party in
     connection with the preparation for or defense of any pending or threatened
     claim, action or proceeding, whether or not resulting in any liability), to
     which such Indemnified Party may become subject (whether or not such
     Indemnified Party is a party thereto) under any applicable Federal, state
     or local law or otherwise caused by or arising out of, or allegedly caused
     by or arising out of, this Agreement any L/C or L/C Agreement, any other
     Loan Document or any transaction contemplated hereby, including, without
     limitation, any liability or penalty arising out of any fact or
     circumstance which causes the representations or warranties set forth in
     SECTION 5 OF THE SECURITY AGREEMENT to be false or incorrect, excepting
     only losses, claims, damages or liabilities arising from the gross
     negligence or willful misconduct or fraud of such Indemnified Party.

          (b)     Promptly after receipt by an Indemnified Party of notice of
     any claim or proceeding with respect to which an Indemnified Party is
     entitled to indemnity hereunder, such Indemnified Party will notify
     Borrower of such claim or the commencement of such action or proceeding,
     provided that the failure of an Indemnified Party to give notice as
     provided herein shall not relieve Borrower of its obligations under this
     Section 10.1 with respect to such Indemnified Party, except to the extent
     that Borrower is actually prejudiced by such failure. Borrower will assume
     the defense of such claim, action or proceeding and will employ counsel
     reasonably satisfactory to the Indemnified Party and will pay the
     reasonable fees and expenses of such counsel. Notwithstanding the preceding
     sentence, the Indemnified Party will be entitled, at the expense of
     Borrower, to employ counsel separate from counsel for Borrower and for any
     other party in such action if the Indemnified Party reasonably determines
     that a conflict of interest or other reasonable basis exists which makes
     representations by counsel chosen by Borrower not advisable, provided that
     Borrower shall not be obligated to pay for the fees and expenses of more
     than one counsel for all Indemnified Parties in respect of a particular
     controversy. In the event an Indemnified Party appears as a witness in any
     action or proceeding brought against Borrower or any of its Subsidiaries
     (or any of its officers, directors or employees) in which an Indemnified
     Party is not named as a defendant, Borrower agrees to reimburse such
     Indemnified Party for all reasonable expenses

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<PAGE>

     incurred by it (including reasonable fees and expenses of counsel) in
     connection with its appearing as a witness.

10.2 Limitation of Liability.  Neither any Lender nor the directors, officers,
     -----------------------
agents or employees of any Lender shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for such actions taken or omitted to be taken as constitute gross
negligence or willful misconduct on the party of such Lender or its directors,
officers, agents or employees.

SECTION 11.    MISCELLANEOUS
               -------------

11.1 Notices.  Any notice or request required or permitted to be given under or
     -------
in connection with this Agreement, the Notes or the other Loan Documents (except
as may otherwise be expressly required therein) shall be in writing and shall be
mailed by first class or express mail or overnight messenger, postage prepaid,
or sent by telex, telegram, telecopy or other similar form of rapid
transmission, confirmed by mailing (by first class or express mail, postage
prepaid) written confirmation at substantially the same time as such rapid
transmission, or personally delivered to an officer of the receiving party. All
such communications shall be mailed, sent or delivered to the parties hereto at
their respective addresses as follows:

Borrower:      NVR Mortgage Finance, Inc.
               7601 Lewinsville Road, Suite 302
               McLean, VA  22102
               Attention:  William J. Inman
               Telecopy:  (703) 761-2030

Agent:         U.S. Bank National Association
               U.S. Bank Place
               601 Second Avenue South
               Minneapolis, MN 55402-4302
               Attention:  Kathleen M. Connor
                    Telecopy: (612) 973-0826

Lenders:       The address listed for each Lender
                    on Schedule 1.1(a)

or at such other addresses or to such individual's or department's attention as
any party may have furnished the other parties in writing.  Any communications
so addressed and mailed shall be deemed to be given when so mailed, sent or
delivered, except that communications given pursuant to Sections 2.5 and 6.13,
Borrowing Requests, Conversion Requests and Agreements to Pledge and
communications related thereto shall not be effective until actually received by
Agent, a Lender or Borrower, as the case may be, any communication mailed by
first class shall be deemed to have been given on the third day following the
day it is mailed, any communication sent by rapid transmission shall be deemed
to be given when receipt of such

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<PAGE>

transmission is confirmed, and any communication delivered in person shall be
deemed to be given when receipted for by, or actually received by, an officer of
Borrower, Agent or a Lender, as the case may be.

11.2 Amendments, Etc.
     ---------------

          (a)  In General. Neither this Agreement, any Note or any other Loan
               ----------
     Document, nor any terms hereof or thereof may be amended, supplemented or
     modified except in accordance with the provisions of  this Section 11.2.
     With the written consent of the Required Lenders, Agent and Borrower may,
     from time to time, enter into written amendments, supplements or
     modifications hereto for the purpose of adding any provisions to this
     Agreement, the Notes, or the other Loan Documents to which Borrower is a
     party or changing in any manner the rights of Lenders or of Borrower
     hereunder or thereunder or waiving, on such terms and conditions as Agent
     may specify in such instrument, any of the requirements of this Agreement
     or the Notes or the other Loan Documents to which Borrower is a party or
     any Default or Event of Default and its consequences; provided, however,
     that no such waiver and no such amendment, supplement or modification shall
     (i)(A) waive any condition set forth in Section 4, (B) extend the maturity
     of any Note or any installment thereof, or reduce the rate or extend the
     time of payment of interest thereon, or reduce the principal amount
     thereof, (C) reduce any fee payable to any Lender under this Agreement, (D)
     change any Lender's Commitment Amount, (E) amend, modify or waive any
     provision of this Section 11.2, (F) consent to the assignment or transfer
     by Borrower of any of its rights and obligations under this Agreement, (G)
     waive any Event of Default specified in Section 8.1 (f), (g), (h) or (p),
     (H) amend, supplement or modify the definition of Borrowing, Borrowing
     Base, Collateral Value, Eligible Gestation Mortgage Loan, Eligible Mortgage
     Loan,  Wet Mortgage Loan, Jumbo Loan, Super Jumbo Loan or Required Lenders
     or of any component of any thereof, or any provision of Section 2.1 or
     Section 6.12, (I) change the several nature of Lenders' obligations under
     this Agreement, (J) release any Collateral except as expressly permitted by
     the Loan Documents, or (K) change any release provision in any Loan
     Document, in each of the foregoing cases without the written consent of all
     Lenders, (ii) amend, modify or waive any provision pertaining to Swing
     Advances without the written consent of Agent, or (iii) amend, modify or
     waive any provision of Section 4 without the written consent of all Persons
     then serving or having served as Agent; and provided, further, Borrower and
     Agent may, without the approval of the Required Lenders, add Additional
     Lenders pursuant to Section 11.11(c); provided, that such addition does not
     result in the Total Commitment exceeding $250,000,000.  Any such waiver and
     any such amendment, supplement or modification shall apply equally to each
     of Lenders and shall be binding upon Borrower, Lenders, Agent and all
     future holders of the Notes.  In the case of the waiver of any Default or
     Event of Default, Borrower, Lenders and Agent shall be restored to their
     former position and rights hereunder and under the outstanding Notes, and
     any Default or Event of Default waived shall be deemed to be cured and not
     continuing; but no such waiver shall extend to any subsequent or other
     Default or Event of Default, or impair any right consequent thereon.

          (b)  Regarding Investors.  Notwithstanding anything in Section 11.2(a)
               -------------------
     to the

                                       69
<PAGE>

     contrary:

               (i)  The Required Lenders may, at any time and from time to time,
          without the consent of Borrower but effective upon thirty (30) days'
          prior written notice by Agent to Borrower, amend Schedule 1.1(b) to
          delete any Person which, in the sole discretion of the Required
          Lenders, is no longer acceptable as an Investor; provided, that (A)
          any Investor with respect to which any proceeding of the types
          described in Sections 8.1(g) and (h) has been commenced shall,
          immediately upon notice to Borrower from Agent or any Lender (with a
          copy to Agent) be automatically deleted from Schedule 1.1(b) without
          the necessity for any other action (including prior written notice of
          any duration to Borrower) by Agent or any lender and (B) upon any
          Investor being deleted from Schedule 1.1(b), Borrower shall not enter
          into any new Take-Out Commitments or Repurchase Agreements with such
          Investor; and

               (ii) At any time and from time to time at the request of Borrower
          and with the consent of Agent , Schedule 1.1(b) may be supplemented to
          include any Person not then an Investor which, in the sole discretion
          of Agent, is acceptable as an Investor.

          (c)  Commitment Amount.  Notwithstanding anything in Section 11.2(a)
               -----------------
to the contrary, Borrower, Agent and any Lender (the "Increasing Lender") may,
at any time and from time to time, without the consent of any other Lender or
Lenders but by written agreement with notice to each Lender, increase the
Commitment Amount of such Increasing Lender for up to one hundred and twenty
days; provided, that after giving effect to such increase, the Total Commitment
at such time does not exceed the Total Commitment on the Agreement Date by more
than $25,000,000.

11.3 Invalidity.  In the event that any one or more of the provisions contained
     ----------
in any Note, this Agreement or any other Loan Document shall, for any reason, be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of such
document.

11.4 Survival of Agreements.  All covenants and agreements herein and in any
     ----------------------
other Loan Document not fully performed before the date hereof or the date
thereof, and all representations and warranties herein or therein, shall survive
until payment in full of the Obligations and termination of all of the
Commitments.

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

11.6 Waivers.  No course of dealing on the part of Agent or any Lender, or any
     -------
of their officers, employees, consultants or agents, nor any failure or delay by
Agent or any Lender with

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<PAGE>

respect to exercising any right, power or privilege of Agent or any Lender under
the Notes, this Agreement or any other Loan Document shall operate as a waiver
thereof, except as otherwise provided in Section 11.2.

11.7 Cumulative Rights.  The rights and remedies of Lenders and Agent under the
     -----------------
Notes, this Agreement, and any other Loan Document shall be cumulative, and the
exercise or partial exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.

11.8 Construction.  THIS AGREEMENT, EACH NOTE AND EACH OTHER LOAN DOCUMENT IS A
     ------------
CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF MINNESOTA, AS SUCH
LAWS ARE NOW IN EFFECT, EXCEPT AS OTHERWISE SPECIFIED HEREIN OR THEREIN, AND,
WITH RESPECT TO USURY LAWS, IF ANY, APPLICABLE TO LENDERS AND TO THE EXTENT
ALLOWED THEREBY, AS SUCH LAWS MAY HEREAFTER BE IN EFFECT WHICH ALLOW A HIGHER
MAXIMUM NONUSURIOUS INTEREST RATE THAN SUCH LAWS NOW ALLOW. CHAPTER 346 OF THE
TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR ANY NOTE.

11.9 Interest.  Any provisions herein, in any Note, or in any other Loan
     --------
Document, or any other document executed or delivered in connection herewith, or
in any other agreement or commitment, whether written or oral, expressed or
implied, to the contrary notwithstanding, no Lender shall in any event be
entitled to receive or collect, nor shall or may amounts received hereunder be
credited, so that such Lender shall be paid, as interest, a sum greater than the
maximum amount permitted by applicable law to be charged to the Person primarily
obligated to pay such Note at the time in question. If any construction of this
Agreement, any Note or any other Loan Document, or any and all other papers,
agreements or commitments indicate a different right given to any Lender to ask
for, demand or receive any larger sum as interest, such is a mistake in
calculation or wording which this clause shall override and control, it being
the intention of the parties that this Agreement, each Note, and all other Loan
Documents or other documents executed or delivered in connection herewith shall
in all things comply with applicable law and proper adjustments shall
automatically be made accordingly. In the event that any Lender shall ever
receive, collect or apply as interest, any sum in excess of the maximum
nonusurious rate permitted by applicable law (the "Maximum Rate"), if any, such
excess amount shall be applied to the reduction of the unpaid principal balance
of the Note or Notes held by such Lender, and if the same be paid in full, any
remaining excess shall be paid to Borrower. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Maximum
Rate, if any, Borrower and each Lender shall, to the maximum extent permitted
under the applicable law: (a) characterize any nonprincipal payment as an
expense or fee rather than as interest, (b) exclude voluntary prepayments and
the effects thereof, and (c) "spread" the total amount of interest throughout
the entire term of such Lender's Note or Notes; provided that if a Note is paid
and performed in full prior to the end of the full contemplated term hereof, and
if the interest received for the actual period of existence thereof exceeds the
Maximum Rate, if any, the Lender holding such Note shall refund to Borrower the
amount of such excess.

                                       71
<PAGE>

If Texas Laws are applicable for purposes of determining the "Maximum Rate" or
the "Maximum Amount," then those terms mean the "weekly ceiling" from time to
time in effect under Article 5069-1D.001, et seq., Title 79, Texas Revised Civil
Statutes, as amended.  Chapter 346 of the Texas Finance Code, as amended (which
regulates certain revolving credit loan accounts and revolving triparty
accounts), does not apply to the Obligation.

11.10  Right of Offset.  Borrower hereby grants to Agent, to each Lender and to
       ---------------
any assignee or participation of any Lender a right of offset, to secure the
repayment of Obligations, upon any and all monies, securities or other property
of Borrower, and the proceeds therefrom now or hereafter held or received by or
in transit to such Person, from or for the account of Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, and also
upon any and all deposits (general or special, time or demand, provisional or
final) and credits of Borrower, and any and all claims of Borrower against such
Person at any time existing. Upon the occurrence of any Event of Default, such
Person is hereby authorized at any time and from time to time, without notice to
Borrower, to offset, appropriate, and apply any and all items hereinabove
referred to against the Obligations. Notwithstanding anything in this Section
11.10 or elsewhere in this Agreement to the contrary, Agent, Lenders and any
assignee or participant of any Lender shall not have any right to offset,
appropriate or apply any accounts of Borrower which consist of escrowed funds
(except and to the extent of any beneficial interest of Borrower in such
escrowed funds) on deposit in accounts which accounts have been identified on
the books and records of the Person with whom such accounts are maintained as
containing escrowed funds.

11.11  Assignments, Additional Lenders, etc.
       ------------------------------------

          (a)  Assignments and Participations.  All covenants and agreements by
               ------------------------------
     or on behalf of Borrower in the Notes, this Agreement, or any other Loan
     Document shall bind Borrower's successors and assigns and shall inure to
     the benefit of Agent and Lenders and their successors and assigns.
     Borrower shall not, however, have the right to assign its rights or
     obligations under this Agreement or any interest herein, without the prior
     written consent of Agent and each Lender.  Each Lender may assign to one or
     more Persons all or any part of, and may grant Participations to one or
     more Persons in all or any part of, its rights and obligations under this
     Agreement (including without limitation, its Commitment, the Advances owing
     to it and the Note or Notes held by it); provided, however, in respect of
     each such Participation, that (i) such Lender's obligations under this
     Agreement (including without limitation, its Commitment to Borrower
     hereunder) shall remain unchanged, (ii) such Lender shall remain solely
     responsible to the other parties hereto for the performance of such
     obligations, (iii) whether or not such Lender shall remain the holder of
     any such Note, such Lender shall retain all voting rights with respect to
     such Note, the Advances thereunder and the Commitment relevant thereto and
     Borrower, Agent and the other Lenders shall continue to deal solely and
     directly with such Lender in connection with such Lender's rights and
     obligations under this Agreement and in connection with any rights or
     obligation of the holder of any such Note. In the case of an assignment by
     any Lender, Borrower retains the right to approve the assignment, which
     approval may not be unreasonably withheld.

                                       72
<PAGE>

          (b)  Confidentiality.  Any Lender may, in connection with any
               ---------------
     assignment or participation or proposed assignment or participation
     pursuant to this Section 11.11, disclose to the actual or proposed assignee
     or participant any information relating to Borrower furnished to such
     Lender by or on behalf of Borrower; provided, that prior to any such
     disclosure, the actual or proposed assignee or participant shall agree to
     preserve the confidentiality of any information relating to Borrower that
     has been identified in writing by Borrower to be confidential.

          (c)  Additional Lenders.  From time to time additional lenders may be
               ------------------
     added hereto upon (i) the request of Borrower and the consent of Agent and
     (ii) execution by Borrower, Agent and such additional lenders of a Lender
     Addition Agreement. Each Lender hereby agrees to execute each Lender
     Addition Agreement for purposes of acknowledging the terms and provisions
     thereof.

11.12  Lender Covenants, Representations and Warranties.  Each Lender severally
       ------------------------------------------------
covenants to return its Note or Notes to Borrower upon receipt of its
replacement Notes. Each Lender severally represents and warrants that it:

          (a)  is either a banking association duly organized and validly
     existing under the laws of the United States of America or a State therein,
     or is a Federal savings bank duly organized and validly existing under the
     laws of the United States of America;

          (b)  has the power and authority to own its properties and assets and
     to transact the business in which it is engaged;

          (c)  has the power and requisite authority to execute, deliver and
     perform this Agreement and the other Loan Documents to which it is a party,
     and is duly authorized to, and has taken all action necessary to authorize
     it to, execute, deliver and perform this Agreement and the other Loan
     Documents to which it is a party and will continue to be authorized to so
     perform; and

          (d)  will continuously maintain all components of this Agreement and
     the other Loan Documents as an official record of such Lender.

11.13  Consent to Jurisdiction.  Borrower hereby agrees that any action or
       -----------------------
proceeding under this agreement or any other Loan Document may be commenced
against it in any court of competent jurisdiction SITTING IN HENNEPIN COUNTY OR
RAMSEY COUNTY, Minnesota, by service of process upon Borrower by first-class
registered or certified mail, return receipt requested, addressed to Borrower at
its address last known to Agent. Borrower agrees that any such suit, action, or
proceeding arising out of or relating to this agreement or any other Loan
Document may be instituted in the courts of the State of Minnesota, or in the
United States District Court for the District of Minnesota, sitting, in either
case, in Hennepin County or Ramsey County, Minnesota, at the option of any
Lender; and Borrower hereby waives any objection to the venue of any such

                                       73
<PAGE>

suit, action, or proceeding. Nothing herein shall affect the right of each
Lender to accomplish service of process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against Borrower in any other
jurisdiction or court.

11.14  Exhibits.  The exhibits attached to this Agreement are incorporated
       --------
herein and shall be considered a part of this Agreement for the purposes stated
herein, except that in the event of any conflict between any of the provisions
of such exhibits and the provisions of this Agreement, the provisions of this
Agreement shall prevail.

11.15  Titles of Articles and Sections.  All titles or headings to articles,
       -------------------------------
sections, or other divisions of this Agreement or the exhibits hereto are only
for the convenience of the parties and shall not be construed to have any effect
or meaning with respect to the other content of such articles, sections,
subsections or other divisions, such other content being controlling as to the
agreement between the parties hereto.

11.16  Counterparts. This Agreement may be executed in two or more counterparts,
       ------------
and it shall not be necessary that the signatures of each of the parties hereto
be contained on any one counterpart hereof; each counterpart shall be deemed an
original, but all counterparts together shall constitute one and the same
instrument.

11.17  Rights of Individual Lenders to Take Action.  Notwithstanding any
       -------------------------------------------
provision in the Loan Documents to the contrary, no Lender shall have any right
by virtue of (or by availing itself of) any provision of this Agreement or any
other Loan Document to institute any action or proceedings at law or in equity
or otherwise (excluding any actions in bankruptcy and the exercise of any rights
of offset) upon or under or with respect to this Agreement or any other Loan
Document or for the appointment of a receiver or for any other remedy unless
after an Event of Default has occurred and before Agent has declared in writing
that it has been cured or waived, (a) the Required Lenders have (i) made a
written request that Agent institute such action or proceeding in its own name
as agent under this Agreement and (ii) offered to Agent such reasonable
indemnity as it may require against any costs, expenses and liabilities to be
incurred therein or thereby, and (b) Agent, for 30 days after its receipt of
such request and offer of indemnity, shall have failed to institute any such
action or proceedings and no direction inconsistent with such request shall have
been given to Agent by the Required Lenders. Lenders intend and mutually
covenant that no one or more of Lenders or other holders of the Notes shall have
any right in any manner whatever to affect, disturb or prejudice the rights of
any other Lender or to obtain or seek to obtain priority over or preference to
any other Lender, or to enforce any right under this Agreement or any other Loan
Document, except in the manner provided in this Agreement and for the ratable
benefit of all Lenders. For the protection and enforcement of this Section
11.17, Agent and each Lender shall be entitled to such relief as can be given
either at law or in equity.

11.18  Entire Agreement.  The Notes, this Agreement, and the other Loan
       ----------------
Documents executed and delivered as of even date herewith represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There are no

                                       74
<PAGE>

unwritten oral agreements among the parties.

11.19  Agreement Regarding Effective Date.  Notwithstanding the date of this
       ----------------------------------
Agreement or any other Loan Document, this Agreement and the other Loan
Documents dated as of the date hereof are being executed and delivered on the
Agreement Date and each of the terms and provisions of this Agreement and of
each of the other Loan Documents shall become effective on the Agreement Date
and not prior thereto.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK
                           SIGNATURE PAGES TO FOLLOW]

                                       75
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed as of the Agreement Date below.

Agreement Date:    September 7, 1999

NVR MORTGAGE FINANCE, INC., as            U.S. BANK, NATIONAL
Borrower                                  ASSOCIATION, as Agent and Lender

By  __________________________            By  _________________________
Its________________________               Its_______________________

THE BANK OF NEW YORK, as Lender           BANK BOSTON, N.A., as Lender

By  __________________________            By  __________________________
Its________________________               Its________________________

CHASE BANK OF TEXAS, NATIONAL             GUARANTY FEDERAL BANK, F.S.B.,
-----      --------
ASSOCIATION, as Lender                    as Lender

By  __________________________            By  __________________________
Its________________________               Its________________________

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