WAREHOUSING CREDIT AGREEMENT

 

 

LIST OF EXHIBITS

 

Exhibit A		- Warehouse Borrowing Base Formula
Exhibit B		- Covenant Compliance Certificate
Exhibit C-1		- Warehouse Note (National City)
Exhibit D		- Pledge, Security and Collateral Agency Agreement
Exhibit E		- Form of Swing Note
Exhibit G		- Form of Additional Lender Agreement
Exhibit H		- Form of Commitment Schedule and Allocation Notice
Exhibit I		- Form of Request for Warehouse Advance
Exhibit J		- Authorized Signer Letter
SCHEDULES
Schedule 1.1		- Approved Investor List
Schedule 2.1		- Warehouse Pro Rata Shares and Warehouse Line Commitments
Schedule 6.1		- Information Relating to Company Representations and Warranties

 

 

WAREHOUSING CREDIT AGREEMENT

 

THIS WAREHOUSING CREDIT AGREEMENT (this “Credit Agreement”) is made and entered into as of this 26th day of November, 2007, by and among (i)  HOME LOAN CENTER, INC. D/B/A LENDINGTREE LOANS, a California corporation with its principal place of business located at 163 Technology Drive, Irvine, California 92618 (the “Company”), (ii)  NATIONAL CITY BANK, a national banking association, with a place of business located at 101 South Fifth Street, Louisville, Kentucky 40202 (“National City” or the “Bank”), and (iii)  NATIONAL CITY BANK, a national banking association, with a place of business located at 101 South Fifth Street, Louisville, Kentucky 40202, its capacity as Agent for the hereinafter defined Banks (in such capacity, the “Agent”).

 

P R E L I M I N A R Y   S T A T E M E N T

 

WHEREAS, the Company desires to obtain from the Bank a warehouse line of credit in the original maximum principal amount as of the date hereof of Fifty Million Dollars ($50,000,000.00) (the “Warehouse Line”), subject to the terms and conditions set forth in this Credit Agreement.

 

WHEREAS, the Bank desires to establish the Warehouse Line in favor of the Company upon the terms and conditions set forth in this Credit Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows:

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements herein contained, the parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS AND ACCOUNTING TERMS

 

1.1            Definitions . In addition to the definitions set forth in the introduction and the preliminary statement of this Credit Agreement, the following terms shall have the meanings set forth below (such meanings to be equally applicable to both the singular and plural form of the terms defined):

 

“ Additional Lender Agreement ” shall have the meaning assigned to such term in Section 11.1 hereof.

 

“ Adjustment Date ” shall have the meaning assigned to such term in Section 11.1 hereof.

 

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

 

“ Affiliate ” shall mean (i) any Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, the Company, including without limitation LendingTree or (ii) any Person who is a director or officer of the Company or of any Person described in clause (i) above. For purposes of this definition, control of a Person shall mean the power, direct or indirect, to vote ten percent (10%) or more of the securities having ordinary voting power for the election of directors of such Person or to direct the management or policies of such Person, whether through the ownership of voting securities, or otherwise.

 

 

“ Aged Loan ” shall mean, as of any date:

 

(a)            Any Loan, which is not a Wet Loan, which has been pledged as Collateral for more than ninety (90) calendar days (calculated from the date upon which the Advance relating to such Loan is made hereunder); and

 

(b)            Any Wet Loan which has been pledged as Collateral for more than ten (10) calendar days (calculated from the date upon which the Advance relating to such Loan is made hereunder).

 

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

 

“ Aggregate Amount Due ” shall have the meaning assigned to such term in Section 9.18 hereof.

 

“ Aggregate Outstanding Balance ” shall mean, as of any particular date, the sum of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance.

 

“ Aggregate Outstanding Excess Balance ” shall mean, as of any particular date, the aggregate unpaid principal balance of all Excess Advances, if any.

 

“ Aggregate Outstanding Warehouse Balance ” shall mean, as of any particular date, the aggregate unpaid principal balance of all Warehouse Advances and Swing Advances, if any.

 

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

 

“ Alt A Advance Sublimit ” shall mean an amount equal to ten percent (10%) of the Total Warehouse Line Commitment; provided, however, not more than five percent (5%) of the Total Warehouse Line Commitment may be used for Advances supported by Alt A Loans satisfying parts (i), (ii) and (iii) (B) of the definition of Alt A Loan set forth herein.

 

“ Alt A Loan ” shall mean a Loan: (i) the entire interest of which is owned by the Company and which is secured by a First Trust Deed, (ii) which is not a Conforming Loan, and (iii) either (A)(1) such Loan shall have a FICO Score equal to or in excess of six hundred sixty (660), (2) such Loan shall be a “Limited Documentation Mortgage Loan”, and (3) such Loan shall have a loan-to-value ratio at origination of not more than ninety-five percent (95%), or (B)(1) such Loan shall have a FICO Score equal to or in excess of six hundred twenty (620) but less than or equal to six hundred fifty-nine (659), and (2) such Loan shall have a loan-to-value ratio at origination of not more than ninety percent (90%).

 

“ Applicant Financial Institution ” shall have the meaning assigned to such term in Section 11.1 hereof.

 

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

 

 

“ Approved Investors ” shall mean the financial institutions approved for the shipment of Eligible Collateral by the Agent and listed on Schedule 1.1 attached hereto and made a part hereof by this reference, which listing shall include the address of each such Approved Investor, the name of the contact person for such Approved Investor and the telephone number of such contact person. The Agent may from time to time, at its sole and absolute discretion, upon the written request of the Company, agree to add financial institutions to the list of Approved Investors provided that a financial institution shall not be deemed to be an Approved Investor until such time as the Agent has notified the Company that such financial institution has been approved by the Agent. The Agent may from time to time, at its sole and absolute discretion, remove any financial institution from the list set forth in Schedule 1.1 by giving the Company prior notice of such removal. From and after the Company’s receipt of notice removing an investor from the Approved Investor list, the Company shall not enter into any additional commitments for delivery of Loans for purchase by that investor, which will be the subject of an Advance or a Firm Commitment hereunder; provided, however, that the Company may deliver to an investor so removed from the Approved Investor list those Loans, which are the subject of an Advance hereunder, and only those Loans, which are scheduled to be, or in the process of being, delivered to that investor as of the date Company’s receipt of such notice from the Agent.

 

“ Average Monthly Available Deposits ” shall mean the monthly average of free collected balances maintained in non-interest bearing accounts in the name the Company (or held by the Company in trust for third parties) with a Bank, after deducting any unpaid service charges or float required by such Bank under its normal practices to compensate such Bank for the maintenance of such accounts and taking into consideration reserve requirements and the other costs of complying with applicable law (including but not limited to any FDIC premium applicable to such accounts).

 

“ Balance Funded Bank ” shall mean National City Bank.

 

“ Bank ” and “ Banks ” shall have the meaning assigned to such terms in the introduction to this Credit Agreement and shall include each of National City and any other Applicant Financial which is added as a Bank hereunder by the Company and the Agent.

 

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

 

“ Billing Statement ” shall have the meaning assigned to such term in Section 2.9 hereof.

 

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

 

“ Business Day ” shall mean for all purposes, any day excluding Saturday, Sunday and any day which is (a) a legal holiday under the laws of the state in which the Agent maintains its office for purposes of performing its obligations under this Credit Agreement as set forth on the signature pages of this Credit Agreement, or (b) a day on which (i) banking institutions located in such state are authorized or required by law or other governmental action to close and/or (ii) the United States Federal Reserve Bank is closed.

 

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

 

 

“ Collateral ” shall mean the assets of the Company, as more particularly described in Section 2.1 of the Security Agreement in which the Agent, for the benefit of the Banks in proportion to their Pro Rata Shares, has a Security Interest.

 

“ Collateral Documents ” shall mean the Security Agreement, any Intercreditor Agreement executed pursuant to Section 7.2(a)  of this Credit Agreement and all other agreements, instruments, documents, and other papers creating, evidencing, or representing the Collateral or the Security Interests therein, each as may be amended, modified, supplemented and restated from time to time.

 

“ Collateral Handling Fees ” shall have the meaning assigned to such term in Section 2.14(b) hereof.

 

“ Collateral Mortgage Documents ” shall have the meaning assigned to such term in the Security Agreement.

 

“ Collateral Proceeds Account ” shall mean the “no access” deposit account maintained by the Agent at the main office of the Agent in the name of the Agent for the benefit of the Company and to which the Company shall have no access, for the purposes of receiving the proceeds of the Collateral and other funds as provided in this Credit Agreement and the Security Agreement.

 

“ Collateral Value ” shall mean as of any date:

 

(a)            With respect to a Loan which constitutes Eligible Collateral on such date, and which is not an Alt A Loan, a Jumbo Loan, a HELOC Loan or a Second Trust Deed Loan, ninety-nine percent (99%) of the lesser of (i) the face amount of the promissory note evidencing such Loan, or (ii) the purchase price under the Commitment to which the applicable Loan has been assigned;

 

(b)            With respect to a Loan which constitutes Eligible Collateral on such date, and which is a Jumbo Loan, ninety-seven percent (97%) of the lesser of (i) the purchase price under the Commitment to which such Loan has been assigned, or (ii) the face amount of the promissory note evidencing such Loan;

 

(c)            With respect to a Loan which constitutes Eligible Collateral on such date, and which is a HELOC Loan or Second Trust Deed Loan, ninety-five percent (95%) of the lesser of (i) the unpaid principal balance of the applicable Loan, or (ii) the purchase price under the Commitment to which the applicable Loan has been assigned; and

 

(d)            With respect to a Loan which constitutes Eligible Collateral on such date, and which is an Alt A Loan, ninety-six percent (96%) of the lesser of (i) the purchase price under the Commitment to which such Loan has been assigned, or (ii) the face amount of the promissory note evidencing such Loan.

 

Notwithstanding anything contained in (a), (b), (c) or (d) to the contrary:

 

A.             The Collateral Value of all Wet Loans shall not exceed, in the aggregate, the Wet Advance Sublimit;

 

B.             The Collateral Value of all Jumbo Loans shall not exceed, in the aggregate, the Jumbo Advance Sublimit;

 

C.             The Collateral Value of all HELOC Loans and Second Trust Deed Loans

 

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shall not exceed, in the aggregate, the HELOC/Second Trust Deed Advance Sublimit;

 

D.             The Collateral Value of all Alt A Loans shall not exceed, in the aggregate, the Alt A Advance Sublimit;

 

E.              Each Wet Loan in respect to which the Company shall not have delivered all of the Collateral Documents to the Agent within the number of days required by the Security Agreement, shall have a Collateral Value of zero;

 

F.              Each Wet Loan which the Agent determines has not been funded by the Company on the date the Advance in respect of such Wet Loan is made by the Banks to the Company, shall have a Collateral Value of zero;

 

G.             If the Agent shall reasonably determine that the Collateral Value otherwise assigned to an item of Eligible Collateral does not accurately reflect the value thereof, then, upon notice to the Company, the Agent may mark an item of collateral to market at any time to determine the fair market value thereof; provided, however, in no event shall any mark to market with respect to any item of Eligible Collateral under this subsection result in such item of Eligible Collateral having a Collateral Value higher than such item would otherwise have;

 

H.             In the event that a Loan shall have been delivered by the Agent to a purchaser under a Commitment as provided in the Security Agreement, or in the event that such Loan was delivered by the Agent to an Approved Investor and more than the maximum number of days allowed by the Security Agreement shall have elapsed since the date of such delivery and no purchase has taken place or the proceeds thereof have not been received by the Agent, such Loan shall have a Collateral Value of zero;

 

I.               All Aged Loans which do not constitute Eligible Collateral shall have a Collateral Value of zero;

 

J.              All Loans which are under Trust Receipt in accordance with the terms of the Security Agreement which are not returned to the Agent within the required number of days specified in the Security Agreement, shall have a Collateral Value of zero;

 

K.             The Collateral Value of each HELOC Loan and Second Trust Deed Loan shall not exceed Three Hundred Fifty Thousand Dollars ($350,000.00); and

 

L.              The Collateral Value of all Loans which are under Trust Receipt in accordance with the terms of the Security Agreement shall not exceed, in the aggregate, Two Million Five Hundred Thousand Dollars ($2,500,000.00).

 

“ Commitment ” shall mean a Firm Commitment or a Standby Commitment.

 

“ Commitment Fee ” shall have the meaning assigned to such term in Section 2.14(b)  hereof.

 

“ Commitment Pro Rata Share ” shall mean a Bank’s Warehouse Commitment Pro Rata Share.

 

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“ Commitment Schedule and Allocation Notice ” shall mean a notice in the form of the Commitment Schedule and Allocation Notice attached hereto as Exhibit H and made a part hereof by this reference.

 

“ Company ” shall have the meaning assigned to that term in the introduction of this Credit Agreement.

 

“ Confirmation of Electronic Request for Advance ” shall have the meaning ascribed to such term in Section  2.4(a)  hereof.

 

“ Conforming Loan ” shall mean a Loan secured by a Conforming Mortgage or Government Mortgage, and which may be a “Stated Asset Loan”, “Stated Income Loan” or “Option ARM Loan”.

 

“ Conforming Mortgage ” shall mean a First Trust Deed securing a Loan which is not an Alt A Loan and which meets all Fannie Mae or FHLMC underwriting standards and received a favorable eligibility response from any of Fannie Mae Desktop Underwriter, FHLMC Loan Prospector or other proprietary underwriting system, as may be approved by the Agent in its sole discretion.

 

“ Covenant Compliance Certificate ” shall mean the certificate to be furnished to the Agent on behalf of the Banks in accordance with Sections 4.2(a)  and 7.3(b)  hereof and in the form of Exhibit B attached to this Credit Agreement and made a part hereof by this reference, together with a spreadsheet or other working papers showing the calculations used to prepare such certificate.

 

“ Credit Agreement ” shall mean this Warehousing Credit Agreement, as amended, modified, supplemented and restated from time to time.

 

“ Default Rate ” means, upon the occurrence and during the continuation of any Event of Default with respect to the then or thereafter outstanding principal balance of any Note, a rate per annum equal to the sum of three percent (3%) per annum plus the per annum rate of interest then applicable to such Note pursuant to Section 2.8 hereof.

 

“ Document Custodian ” shall mean National City acting as the custodian of the Loans (or such other custodian acceptable to the Company and the Banks).

 

“ Dry Loan ” shall mean a Loan the Collateral Mortgage Documents for which have been delivered to the Agent and the entire interest of which Loan is owned by the Company.

 

“ Electronic Request for Advance ” shall mean an electronic data transmission made in such manner and in accordance with such procedures as may be established by the Agent from time to time.

 

“ Electronic Tracking Agreement ” shall mean an Electronic Tracking Agreement by and among the Company, the Agent, MERS MERSCORP, in form acceptable to Agent in its sole discretion.

 

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

 

“ Eligible Collateral ” shall mean, collectively and as of any date, [A] each Loan (i) which is a Conforming Loan, Government Loan, a Wet Loan, a Jumbo Loan, a HELOC Loan, a Second Trust Deed Loan or an Alt A Loan, (ii) which is not an Aged Loan, (iii) which constitutes Collateral, (iv) which no

 

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default has occurred and is continuing on such Loan, (v) which is pledged as Collateral within thirty (30) calendar days of origination, purchase or conversation, (vi) which has no more than one (1) principal/interest payment past due, (vii) which has not been under Trust Receipt in accordance with the terms of the Security Agreement for more than the maximum number of days allowed under the Security Agreement, (viii) which has not been shipped to an Approved Investor for more than the maximum number of days allowed by the Security Agreement and no purchase proceeds have been received by the Agent, (ix) in respect of which the loan-level representations, warranties and agreements contained in the Credit Agreement and the Security Agreement are true and correct, (x) which is subject to a Firm Commitment or Standby Commitment, and (xi) in the case of a HELOC Loan or Second Trust Deed Loan, such Loan has not been determined by the Agent in its sole and absolute judgment and discretion to be ineligible for warehousing under the Warehouse Line and/or any particular Sublimit thereof as a result of the Agent’s evaluation of market conditions or other market factors without regard to whether the other specific definitional parameters for Eligible Collateral set forth in this Agreement have been met, any such determination by the Agent of ineligibility to be effective immediately upon the Agent’s determination thereof, with written notice to be provided to the Company as soon as practicable thereafter; and [B] each Loan (i) that is a Discretionary Loan (as defined in Section  9.20 hereof) without duplication, (ii) that constitutes Collateral, and (iii) that is not subject to any lien or security interest other than that granted under the Credit Agreement and the Security Agreement. Unless specifically provided for herein, “Stated Asset Loans”, “Stated Income Loans”, and “Option ARM Loans” are not permitted to be funded under the Warehouse Line and shall not constitute Eligible Collateral under this Credit Agreement.

 

“ ERISA ” shall have the meaning assigned to such term in Section  6.12 hereof.

 

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

 

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

 

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

 

“ Fannie Mae ” shall mean the Federal National Mortgage Association, or any successor thereto.

 

“ FHA ” shall mean the Federal Housing Administration, or any successor thereto.

 

“ FHLMC ” shall mean the Federal Home Loan Mortgage Corporation, or any successor thereto.

 

“ FICO Score ” shall mean the credit score obtained by using the credit score methodology provided by Fair Isaac Corporation.

 

“ Firm Commitment ” shall mean a commitment or pre-approval for a commitment from an Approved Investor or other security dealer reasonably satisfactory to the Agent, to purchase from the Company a Loan or Loans under which commitment the Company is obligated to sell such Loan or Loans. Notwithstanding anything contained herein to the contrary, any Loan which has been underwritten in accordance with the underwriting guidelines of a substantial and reputable lending institution, investor, or security dealer, reasonably satisfactory to Agent, shall be deemed to be subject to a “Firm Commitment” for all purposes hereunder.

 

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

 

“ Funding Date ” shall have the meaning assigned to such term in Section  2.4(c)  hereof.

 

“ GAAP ” shall mean those generally accepted accounting principles set forth in the opinions and pronouncements of the Financial Accounting Standards Board and its predecessors and the American Institute of Certified Public Accountants or those generally accepted principles of accounting which have other substantial authoritative support and are applicable in the circumstances as of the date of application, as such principles are from time to time supplemented and amended, each as consistently applied.

 

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

 

“ GNMA ” shall mean the Government National Mortgage Association, or any successor thereto.

 

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

 

“ Government Mortgage ” shall mean a First Mortgage securing a Loan which is eligible to be (i) insured by FHA, or (ii) guaranteed by VA or GNMA.

 

“ Hedging Program ” shall mean any program maintained by the Company to hedge certain interest rate risks associated with its mortgage banking business.

 

“ HELOC Loan ” shall mean a Loan secured by a Home Equity Mortgage, the entire interest of which is owned by the Company; provided, however, that (a) such Loan shall be subject to a Firm Commitment, (b) such Loan shall have a FICO Score equal to or in excess of six hundred sixty (660), and (c) such Loan shall have a combined loan-to-value ratio at origination of not more than ninety percent (90%).

 

“ HELOC/Second Trust Deed Advance ” shall mean an Advance requested to fund a HELOC Loan or Second Trust Deed Loan.

 

“ HELOC/Second Trust Deed Advance Sublimit ” shall mean an amount equal to ten percent (10%) of the Total Warehouse Line Commitment.

 

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

 

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

 

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“ Jumbo Advance Sublimit ” shall mean an amount equal to twenty-five percent (25%) of the Total Warehouse Line Commitment.

 

“ Jumbo Loan ” shall mean a Loan, which is not an Alt A Loan, HELOC Loan or Second Trust Deed Loan, the amount of which exceeds Fannie Mae or FHLMC guidelines for maximum eligible amount, but which Loan shall not have a face amount in excess of One Million Dollars ($1,000,000 00), except as may be otherwise pre-approved by the Agent in writing in its sole discretion after the Company has provided the Agent with written notice thereof together with a copy of the related Commitment from an Approved Investor and the applicable appraisal at least two (2) Business Days prior to the funding thereof, and the entire interest of which is owned by the Company and which is secured by a First Trust Deed covering a completed one-to-four family residential property which is subject to a Firm Commitment, provided, that: (i) such Loan shall have a FICO Score equal to or in excess of six hundred sixty (660), and (ii) such Loan shall have a combined loan-to-value ratio at origination of not more than ninety percent (90%).

 

“ LendingTree ” shall mean LendingTree, LLC, a North Carolina limited liability company with principal office mailing address of 11115 Rushmore Drive, Charlotte, North Carolina 28277, and the sole stockholder of the Company.

 

“ LIBOR ” shall mean the per annum rate equal to the thirty (30) day average of the London Interbank Offered Rate, as published by Bloomberg Financial Services or a similar service selected by the Agent during each monthly billing cycle, or as otherwise determined in good faith by the Agent.

 

“ Liquid Assets ” shall mean the sum of (i) cash and cash equivalents, plus (ii) pledged cash or security deposits with National City-Bank or other lenders, plus (iii) loans held for sale minus the sum of (y) the outstanding balance of all mortgage warehouse lines of credit plus (z) drafts payable.

 

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

 

“ Loan Documents ” shall mean, collectively, this Credit Agreement, the Warehouse Notes, the Swing Note, the Security Agreement, the other Collateral Documents and any and all other documents executed in connection therewith, including, without limitation, any inter-creditor agreements as may be required by the Agent, each as the same may be amended, modified, supplemented and restated from time to time.

 

“ Maturity Date ” shall mean October 31, 2008; provided that the Agent and the Banks shall have the option, in their absolute discretion, either one time or from time to time, to extend the Maturity Date for an additional period not to exceed three hundred and sixty four (364) days. If the Maturity Date is extended, the term Maturity Date shall mean the date of expiration of such extension.

 

“ MERS ” shall mean the Mortgage Electronic Registration System, Inc., or any successor thereto.

 

“ NIERSCORP ” shall mean MERSCORP, Inc., or any successor thereto.

 

“ MERS Loan ” shall mean any Loan made by the Company that is secured by a MERS

 

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Mortgage.

 

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

 

“ MERS Mortgage ” shall mean any First Trust Deed or Second Trust Deed registered by the Company on the MERS System.

 

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

 

“ Notes ” shall mean, collectively, the Warehouse Notes and the Swing Note.

 

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

 

“ origination ” shall mean with respect to any Loan, the date of original funding of such Loan.

 

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

 

“ Plan ” shall have the meaning assigned to such term in Section 6.12 hereof.

 

“ Pledged Loan ” shall mean any Loan made by the Company with respect to which the Banks have made an Advance, or with respect to which the Company has requested an Advance unless such Request for Advance is rejected by the Agent, or which is now or hereafter at any time pledged, assigned, transferred, or conveyed, or a security interest therein granted, to the Agent for the benefit of the Banks. If the context so requires, “Pledged Loan” shall also mean any and all instruments and documents which evidence, secure or relate to any such Loan.

 

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

 

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

 

“ Procedures Manual ” shall mean those certain operating procedures published by the Agent from time to time, a copy of which was provided to the Company in connection with this Credit Agreement.

 

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

 

“ Repayment Date ” shall have the meaning assigned to such term in Section 2.4(c)  hereof.

 

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

 

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“ Standby Commitment ”  shall mean a commitment from an Approved Investor or other security dealer reasonably satisfactory to the Agent, to purchase from the Company within a specified time period a Loan or Loans, in an aggregate principal amount which conforms to the criteria set forth therein, under which commitment the Company has the right, but is not obligated, to sell such Loan or Loans.

 

“ Swing Advance ”  shall mean the cash amount, if any, advanced under the Warehouse Line by the Agent to or for the account of the Company under the terms of Section  2.2(a)  of this Credit Agreement.

 

“ Swing Advance Limitations ” shall have the meaning assigned to such term in Section  2.2(a)  hereof.

 

“ Swing Line ”  shall mean the swing line of credit established by the Agent pursuant to Article 2 hereof.

 

“ Swing Note ”  shall mean that certain Swing Promissory Note to be made by the Company, payable to the order of the Agent, upon the addition of an Applicant Financial Institution as a “Bank” hereunder, and in a maximum principle amount to be determined by the Agent and the Company, a form of which is annexed hereto as Exhibit E, as the same may hereafter be amended, modified, renewed, replaced and/or restated from time to time, and which shall evidence all Swing Advances, if any.

 

“ Tangible Net Worth ”  shall mean, as of any date of determination, GAAP Net Worth minus the aggregate net book value of (i) all intangible assets (as determined in accordance with GAAP) of the Company including, without limitation, capitalized purchased insurance renewals, goodwill, trademarks, trade names, service marks, copyrights, patents, licenses, franchises and unamortized debt discount and expenses, (ii) all notes and accounts receivable due from officers, stockholders, employees or other Affiliates of the Company, (iii) subscribed stock, and (iv) any other assets Company deemed unacceptable by the Agent.

 

“ Termination Date ”  shall mean the earlier of (i) the Maturity Date, or (ii)  the date this Credit Agreement is terminated pursuant to Section  8.3 hereof.

 

“ Total Indebtedness ”  shall mean, as of the date of any determination, all indebtedness of the Company, as determined in accordance with GAAP, including, without limitation, all unpaid Secured Obligations, all amounts due under all capital leases, all accounts and trade payables, and all other liabilities and obligations Company, including without limitation, any guarantees made by the Company to or for the benefit of any Affiliate or any other Person.

 

“ Total Warehouse Line Commitment ”  shall mean the total aggregate principal amount of all Warehouse Line Commitments as determined from time to time in accordance with the provisions of Article  2 and Article  11 of this Credit Agreement, and shall mean the principal amount of Fifty Million Dollars ($50,000,000.00) subject to adjustment as provided in Section  11.1 hereof.

 

“ Trust Receipt ”  shall have the meaning ascribed to such term in the Security Agreement.

 

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

 

“ VA ”  shall mean the Veterans Administration, or any successor thereto.

 

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

 

“ Warehouse Borrowing Base ”  shall mean that amount which is determined according to the formula set forth in Exhibit A to this Credit Agreement and made a part hereof by this reference.

 

“ Warehouse Commitment ” or “ Warehouse Commitments ”  shall mean the Commitment of each Bank to maintain or make Warehouse Advances as set forth in Section 2.1 hereof.

 

“ Warehouse Commitment Pro Rata Share ”  shall mean with respect to each Bank’s pro rata share of the Total Warehouse Line Commitment, the percentage set forth opposite that Bank’s name on Schedule 2.1 to this Credit Agreement, as the same shall be amended from time to time as provided herein.

 

“ Warehouse Line ”  shall mean the line of credit in the maximum principal amount of Fifty Million Dollars ($50,000,000.00) established by the Agent and the Banks in favor of the Company under Article 2 of this Credit Agreement, subject to adjustment as provided in Section 11.1 hereof.

 

“ Warehouse Line Commitment ” or “ Warehouse Line Commitments ”  shall mean the commitment of each Bank to maintain or make Warehouse Advances as set forth in Section 2.1 hereof.

 

“ Warehouse Notes ”  shall mean, collectively, (i) that certain Warehouse Promissory Note dated as of November 26, 2007, made by the Company, payable to the order of National City, in the face principal amount of Fifty Million Dollars ($50,000,000.00) a form of which is attached hereto as Exhibit C-1, as the same may hereafter be amended, modified, renewed, replaced and/or restated from time to time, and (ii) when executed and delivered, any such additional Warehouse Promissory Note substantially in the form of Exhibit C-1 attached hereto, made by the Company, payable to the order of any respective Applicant Financial Institution as shall be added as a “Bank” hereunder and in the face principal amount of such Applicant Financial Institution’s Warehouse Line Commitment, as the same may thereafter be amended, modified, renewed, replaced and/or restated from time to time.

 

“ Warehouse Pro Rata Share ”  shall mean, with respect to each Bank, the percentage calculated by dividing the average monthly sum of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance attributable to such Bank by the average monthly total of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance.

 

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

 

“ Wet Advance Sublimit ”  shall mean an amount equal to forty percent (40%) of the Total Warehouse Line Commitment.

 

“ Wet Loan ”  shall mean a Loan the entire interest of which is owned by the Company and which is a Loan secured by a First or Second Trust Deed covering a one-to-four family residential property which is subject to a Firm Commitment or Standby Commitment for which the Collateral Mortgage Documents relating to such Loan have not been delivered to the Agent within the maximum number of days allowed by the Security Agreement.

 

1.2                                Accounting Terms .  All accounting terms, except as their meanings may be modified by this Credit Agreement, shall have the meanings given them in accordance with GAAP.

 

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ARTICLE 2

THE WAREHOUSE LINE

 

2.1                                  Warehouse Advances .  Each Bank severally agrees to lend to the Company, and the Company agrees to borrow from each Bank, on the terms and conditions of this Credit Agreement, an aggregate amount not exceeding such Bank’s respective Warehouse Line Commitment, and the aggregate amount of all such Warehouse Line Commitments shall equal the Total Warehouse Line Commitment; provided, however the Total Warehouse Line Commitment includes a Wet Advance Sublimit, a Jumbo Advance Sublimit, a HELOC/Second Trust Deed Advance Sublimit and an Alt A Advance Sublimit. Subject to the terms and conditions contained herein, Warehouse Advances may be repaid and reborrowed until the Termination Date. Each Bank’s commitment to make Warehouse Advances under this Section 2.1 is herein called its “Warehouse Line Commitment” and is set forth opposite its name in Schedule 2.1 attached to this Credit Agreement and the aggregate maximum amount of the Warehouse Line Commitments is herein called the “Total Warehouse Line Commitment”. The Total Warehouse Line Commitment is equal to Fifty Million Dollars ($50,000,000.00), as may be increased by the Company and the Agent in their sole, joint discretion by adding one or more Applicant Financial Institutions as a “Bank” or “Banks” hereunder and as may be decreased in accordance with the requirements of Section 11.1 hereof. The principal amount set forth above (as the same may be increased pursuant to the terms hereof) shall be available to the Company as Warehouse Advances, Excess Advances and Swing Advances, subject to the terms and conditions hereof, at such times prior to the Termination Date and in such sums, as the Company may request.

 

Notwithstanding the foregoing, the Banks shall not be obligated to make a Warehouse Advance which, (a) when added to the sum of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance, would cause the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance to exceed the Warehouse Borrowing Base at such time; (b) when added to the sum of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance, would cause or result in a violation of the financial covenants set forth in Article 5 hereof; (c) if such Warehouse Advance is a Wet Advance, when added to the aggregate outstanding balance of all Wet Advances would cause or result in a violation of the Wet Advance Sublimit; (d) if such Warehouse Advance is a Jumbo Advance, when added to the aggregate outstanding of all Jumbo Advances would cause or result in a violation of the Jumbo Advance Sublimit; (e) if such Warehouse Advance is an HELOC/Second Trust Deed Advance, when added to the aggregate outstanding balance of all HELOC Advances and Second Trust Deed Advances would cause or result in a violation of the HELOC/Second Trust Deed Advance Sublimit; (f) if such Warehouse Advance is an Alt A Advance, when added to the aggregate outstanding balance of all Alt A Advances would cause or result in a violation of the Alt A Advance Sublimit; or (g) if such Warehouse Advance would cause or result in the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance to exceed the Total Warehouse Line Commitment. The Agent and the Banks shall not be obligated to honor any Request for Advance if the disbursement of funds thereunder would occur on or after the Termination Date, or if an Event of Default has occurred and is continuing or if such disbursement would cause or result in an Event of Default or an Unmatured Event of Default.

 

2.2                                  Swing Advances and Excess Advances by Agent .

 

(a)                                   Swing Advances .  Subsequent to the addition of an Applicant Financial Institution as a “Bank” hereunder and upon the terms and subject to the conditions contained in this Credit Agreement, the Agent may for its own account and at its own discretion, make one or more Swing Advances to the Company, the aggregate unpaid principal amount of which at any time, including those then to be made, shall not exceed the least of (i) the sum of the Total Warehouse Line Commitment at such time less the sum of the Aggregate

 

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Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance at such time, (ii) the sum of the Agent’s Warehouse Line Commitment at such time less the amount of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance then allocated to the Agent, and (iii) the then current maximum principal amount of such Swing Line as determined by the Company and the Agent; provided, that, the sum of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance plus the Swing Advance to be made by the Agent, shall not exceed the Warehouse Borrowing Base as set forth in the most recent Borrowing Base Report prepared by the Agent on the day of the making of such Swing Advance plus the Collateral Value of the Eligible Collateral delivered to the Agent on that day and which is not included in the most recent Borrowing Base Report (the “Swing Advance Limitations”). Subsequent to a Swing Advance being made by the Agent, the Agent may at any time (and in any event shall no less frequently than one (1) time each week) in its sole and absolute discretion, demand the Banks to advance under their respective Warehouse Notes and pay to the Agent an amount equal to pay their Warehouse Commitment Pro Rata Share of the Warehouse Advance necessary to repay the then current aggregate outstanding balance of all Swing Advances. On each Business Day on which the Agent makes a demand for payment before 2:00 p.m. Prevailing Time, on any particular Business Day, whether before or after the occurrence of an Event of Default, each Bank shall irrevocably and unconditionally purchase from the Agent, without recourse or warranty, an undivided interest and participation in the Swing Advances then outstanding, by paying to the Agent, in same day funds available to the Agent at the main office of the Agent located at 101 South Fifth Street, Louisville, Kentucky, an amount equal to such Bank’s Warehouse Commitment Pro Rata Share of all Swing Advances then outstanding, and thereafter, the Bank’s respective interest in such Swing Advances, and the remaining interest of the Agent in such Swing Advances, shall in all respects be treated as a Warehouse Advance, but such Swing Advances shall continue to be evidenced by the Swing Note. In the event the Agent makes such demand of the Banks after 2:00 p.m. Prevailing Time on any particular Business Day, the Banks shall be required to make their respective payments to the Agent before 12:00 noon Prevailing Time on the immediately succeeding Business Day.

 

(b)                                     Excess Advances by Agent .  Subsequent to the addition of an Applicant Financial Institution as a “Bank” hereunder and upon the terms and subject to the conditions contained in this Credit Agreement, in the event the Agent is prevented from making a Swing Advance hereunder as a result of the application of the Swing Advance Limitations outlined above, the Agent may for its own account as a Bank hereunder and at its sole discretion, make one or more Excess Advances to the Company, the aggregate unpaid principal amount of which at any time, including those to be made, shall not exceed the lesser of (i) the sum of the Total Warehouse Line Commitment at such time less the sum of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance at such time, and (ii) the amount of the Agent’s Warehouse Line Commitment at such time less the sum of the Agent’s Warehouse Commitment Pro Rata Share of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance at such time; provided, that, the sum of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance (excluding the Excess Advance to be made) plus the Excess Advance to be made by the Agent, shall not exceed the Warehouse Borrowing Base as set forth in the most recent Borrowing Base Report prepared by the Agent on the day of the making of the Excess Advance plus the Collateral Value of the Eligible Collateral delivered to the Agent on that day and which is not included in the most recent Borrowing Base Report. Subsequent to an Excess Advance being made by the Agent, the Agent may at any time (and in any event no less frequently than one (1) time each week) in its sole and absolute discretion request the other Banks to pay their respective Warehouse Commitment Pro Rata Shares of the Warehouse Advance necessary to repay all or any portion of the Excess Advances then outstanding. On each day on which the Agent makes a demand for payment before 2:00 p.m. Prevailing Time, whether before or after the occurrence of an Event of Default, each Bank shall pay to the Agent its Warehouse Commitment Pro Rata Share of the Warehouse Advance necessary to pay the Excess Advances designated by the Agent to be reallocated and paid by the Banks, such payments shall be wired to the Agent, in same day funds available to

 

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the Agent at the main office of the Agent located at 101 South Fifth Street, Louisville, Kentucky, in an amount equal to such Bank’s Warehouse Commitment Pro Rata Share of all Excess Advances then designated by the Agent to be reallocated and paid by the Banks. In the event the Agent makes such demand of the Banks after 2:00 p.m. Prevailing Time on any particular day, the Banks shall be required to make their respective payments to the Agent before 12:00 noon Prevailing Time on the immediately succeeding Business Day.

 

2.3                                  Notes .

 

(a)                                   Warehouse Advances .  The lending described above, to be made through Warehouse Advances made by the Banks in accordance with the terms set forth herein, shall be evidenced by the Warehouse Notes of the Company, substantially in the form of Exhibit C-1 to this Credit Agreement. The aggregate amount of the Warehouse Advances made under the Warehouse Notes, less repayments of principal, shall be the principal amount owing and unpaid on such Warehouse Notes. The Warehouse Notes shall be payable in the manner, and shall bear interest at the rates, specified therein and in this Credit Agreement.

 

(b)                                  Swing Advances .  The lending described above, to be made through Swing Advances made by the Agent for its own account in accordance with the terms set forth herein, shall be evidenced by the Swing Note made by the Company payable to the order of the Agent substantially in the form of Exhibit E to this Credit Agreement. The aggregate amount of Swing Advances made under the Swing Note, less repayments of principal, shall be the principal amount owing and unpaid on the Swing Note. The Swing Note shall be payable in the manner, and shall bear interest at the rates, specified therein and in this Credit Agreement.

 

(c)                                   Excess Advances .  The lending described above, to be made through Excess Advances by the Agent for its own account through the National City Warehouse Promissory Note in accordance with the terms set forth herein, shall be evidenced by the Warehouse Note of the Company made payable to National City. The aggregate amount of the Warehouse Advances plus Excess Advances made under the Warehouse Note referenced above, less repayments of principal, shall be the principal amount owing and unpaid on such Warehouse Note.

 

2.4                                  Manner of Borrowing .

 

(a)                                   Request for Advance .  The Company shall deliver to the Agent, not later than the Agent’s published deadlines on the Business Day on which the Company desires to obtain an Advance, an original (or facsimile copy) executed Request for Advance (which shall be irrevocable) specifying the amount of the Advance which it desires to borrow. Notwithstanding the foregoing, if approved by the Agent, any such Request for Advance under the immediately preceding sentence may be made to Agent, via an Electronic Request for Advance, prior to the date and time published by the Agent from time to time on the Business Day on which the Company desires to obtain an Advance and, if required by Agent, followed by delivery to Agent, via facsimile transmission or electronic mail, prior to the date and time published by the Agent from time to time on the date of such proposed Advance, of a written confirmation of such Electronic Request for Advance (a “Confirmation of Electronic Request for Advance”) in a form acceptable to Agent in its sole discretion (if Agent requires a Confirmation of Electronic Request for Advance and there is any discrepancy between the schedule of Loans electronically transmitted to Agent and the list of Pledged Loans attached to such Confirmation of Electronic Request for Advance, Agent shall be entitled to rely solely on the list attached to said Confirmation of Electronic Request for Advance without further investigation or inquiry; otherwise, if Agent does not receive a Confirmation of Electronic Request for Advance, Agent shall be

 

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entitled to rely solely on the scheduled of Pledged Loans electronically transmitted to Agent). Agent in its sole discretion can treat any Request for Advance as either (i) a Request for Warehouse Advance, (ii) a Request for Swing Advance, or (iii) a Request for an Excess Advance, as applicable. On the date of the Agent’s receipt of a Request for Advance if: (a) no Event of Default or Unmatured Event of Default has occurred and is then existing; (b) all material terms and conditions of this Credit Agreement required to be satisfied prior to the making of the particular type of Advance, including without limitation, all conditions precedent specified in Article 4 hereof, are in fact satisfied; (c) all material terms and conditions of the Security Agreement required to be satisfied prior to the making of an Advance are in fact satisfied; and (d) the making of such Advance shall not cause or result in either a violation of any of the terms of this Credit Agreement or of the Security Agreement, or cause or result in an Event of Default, or an Unmatured Event of Default, the Agent shall (xx) in the case of a Warehouse Advance, credit each Bank’s Pro Rata Share of such Warehouse Advance received by the Agent to the Company in accordance with the terms set forth below, (yy) in the case of a Swing Advance, credit the amount of such Swing Advance to the Company, and (zz) in the case of an Excess Advance, credit the amount of such Excess Advance to the Company; provided, however, with respect to each Wet Advance, the proceeds thereof shall, at the option of the Agent, be (i) wire transferred by the Agent through the Federal Reserve Wire Transfer System directly to the Company’s agent responsible for closing such Wet Loan, (ii) funded by a draft on the Agent, which draft shall be made payable either [a] jointly to the Company’s agent responsible for closing such Wet Loan and the Mortgagor(s) under such Wet Loan, [b] only to the Company’s closing agent if such transaction is a refinance transaction where the three (3) day right of rescission may preclude the Company from obtaining both endorsements without incurring significant additional costs, or [c] in the case of a Second Trust Deed Loan, to the mortgagor’s consumer debt creditor, or (iii) disbursed in such other manner as is acceptable to the Company and the Agent. Requests for Advance received by the Agent after 12:00 p.m. Prevailing Time will not be processed as a Request for Warehouse Advance, but may be treated, at the Agent’s sole discretion, as a Request for Swing Advance. Requests for Advance received by the Agent after the Agent’s published deadlines will not be processed by the Agent as a Request for Warehouse Advance until the next Business Day.

 

(b)                                  Disbursement of Bank’s Warehouse Pro Rata Share .  All Warehouse Advances requested by the Agent under this Credit Agreement shall be made by the Banks simultaneously and proportionately to their respective Warehouse Commitment Pro Rata Shares of each such Warehouse Advance, it being understood that, except as provided in Section  2.4(c) below, no Bank shall be responsible for any default by any other Bank of that other Bank’s obligation to fund its Warehouse Commitment Pro Rata Share of a Warehouse Advance requested hereunder nor shall the Warehouse Line Commitment of any Bank be increased or decreased as a result of the default by any other Bank of that other Bank’s obligation to fund its Warehouse Commitment Pro Rata Share of a Warehouse Advance requested hereunder. Promptly after receipt by the Agent of a Request for Advance pursuant to this Section 2.4, the Agent shall notify each Bank of the Warehouse Advance requested by the Company pursuant thereto and each Bank’s Warehouse Commitment Pro Rata Share of such Warehouse Advance. Each Bank shall make its Warehouse Commitment Pro Rata Share of each Warehouse Advance (other than a Swing Advance or an Excess Advance) to be made to the Company available to the Agent, in same day funds, at the office of the Agent located at 101 South Fifth Street, Louisville, Kentucky not later than 3:00 p.m. Prevailing Time on the date the Request for Advance from the Company is received by the Agent. The time of the Agent’s receipt of same day funds from the Banks which are wire transferred through the Federal Reserve System shall be based upon the Federal Reference Number and the “time out” for any such wire transfer. Upon satisfaction or waiver of the conditions precedent specified in Section 4.1 hereof in the case of the initial Advance and Section 4.2 hereof in the case of any subsequent Advance, the Agent shall make the proceeds of each Advance requested by the Company available to the Company on the date specified above by causing an amount of same day funds equal to the proceeds of the Banks’ respective Warehouse Commitment Pro Rata Shares of such Warehouse Advance received by the Agent at its office located at the address set forth in the

 

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preceding sentence to be credited to the Company; provided, however, with respect to each Wet Advance (whether in the form of a Warehouse Advance, Swing Advance or Excess Advance), the proceeds thereof shall be deposited into the Funding Account, and at the option of the Agent, be (i) wire transferred by the Agent through the Federal Reserve Wire Transfer System directly to the Company’s agent responsible for closing the related Wet Loan, or if the Company closes its own Wet Loan, then directly to the Company or the Company’s agent, (ii) funded by a draft or check on the Agent or one of its affiliates, which draft or check shall be made payable to the Company’s agent responsible for closing the related Wet Loan, or if the Company closes its own Wet Loan, then directly to the Company or the Company’s agent, (iii) funded by a cashier’s check issued by the Agent on behalf of the Company and made payable to the Company’s agent responsible for closing the related Wet Loan, or (iv) disbursed in such other manner as is acceptable to the Company and the Agent.

 

(c)                                   Assumptions by Agent for Advances; Failure to Fund a Bank .  Unless the Agent shall have been notified by any Bank prior to the date that such Bank’s Warehouse Commitment Pro Rata Share of a Warehouse Advance is to be made (the “Funding Date”) that such Bank does not intend to make available to the Agent such Bank’s Warehouse Commitment Pro Rata Share of such Warehouse Advance requested on such Funding Date, the Agent may assume that such Bank has made such amount available to the Agent on such Funding Date and the Agent may, in its sole discretion, but shall not be obligated to, make available to the Company a corresponding amount on such Funding Date. If such corresponding amount is not in fact made available to the Agent by such Bank, the Agent shall be entitled to recover a Two Hundred Dollar ($200.00) processing fee plus such corresponding amount owed on demand from such Bank together with interest thereon, for each day from such Funding Date until the date such amount is paid to the Agent, at the customary rate set by the Agent for the correction of errors among the Banks for three (3)  Business Days and thereafter at the Default Rate. If such Bank does not pay such corresponding amount forthwith upon the Agent’s demand therefor, the Agent shall notify the other Banks and each of the other Banks (including National City) shall immediately pay to the Agent a pro rata share (excluding in such calculation the Bank which failed to fund) of such amount not funded by a Bank; provided, however, no Bank (including National City) shall be obligated to fund any amount under this Credit Agreement in excess of that Bank’s Warehouse Line Commitment, as applicable. If any portion of the amount not funded by a Bank is not paid to the Agent by the other Banks in accordance with the immediately preceding sentence, the Agent shall promptly notify the Company and the Company shall immediately pay such corresponding amount to the Agent and shall pay interest on such amount for each day from such Funding Date until the date such amount is paid to the Agent, at the applicable interest rate borne by the particular Advance, which amount shall be paid to the Agent at the next monthly billing. Nothing in this Section 2.4 shall be deemed to relieve any Bank from its obligation to fulfill its Warehouse Line Commitment hereunder or to prejudice any rights that the Company may have against any Bank as a result of any default by such Bank hereunder. In the event any Bank gives notice to the Agent that such Bank does not intend to fund its Warehouse Commitment Pro Rata Share of any Warehouse Advance to be made to the Company or in the event any Bank otherwise fails to fund its Warehouse Commitment Pro Rata Share of any Warehouse Advance to be made to the Company, the Agent shall promptly notify the other Banks of the occurrence of any such event and the other Banks shall each fund a pro rata share (excluding in the calculation the nonfunding Bank) of the nonfunding Bank’s Warehouse Commitment Pro Rata Share of each Advance not funded by such Bank; provided, however, no Bank shall be obligated to fund any amount under this Credit Agreement in excess of its Warehouse Line Commitment. In the event any Bank gives notice to the Agent that such Bank does not intend to fund its Warehouse Commitment Pro Rata Share of any Warehouse Advance to be made to the Company or in the event any Bank otherwise fails to fund its Warehouse Commitment Pro Rata Share of any Advance to be made to the Company, the Agent shall telephonically notify the Company of the occurrence of any such event. The Warehouse Commitment Pro Rata Share of principal payments (from any source whatsoever) payable hereunder to a Bank which fails to fund its

 

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Warehouse Commitment Pro Rata Share of any Warehouse Advance, including any Warehouse Advance requested by the Agent to repay any Swing Advance or Excess Advance, shall be paid on a pro rata basis to the Banks which funded that Bank’s Warehouse Commitment Pro Rata Share of such Warehouse Advance, Swing Advance or Excess Advance, as applicable, until the amount which those Banks funded for the Bank which failed to fund, has been repaid in full (the “Repayment Date”). Notwithstanding anything contained herein to the contrary, in the event that any Bank fails to fund its Warehouse Commitment Pro Rata Share of any Warehouse Advance on a Funding Date, if on such Funding Date all conditions precedent to such Warehouse Advance have been satisfied, such Bank shall forfeit all consent and voting rights for all purposes hereunder and under the other Loan Documents for the entire period of time commencing upon its failure to fund on the Funding Date and ending on the Repayment Date; provided, however, such forfeiture shall not apply to the right of a Bank to consent to any amendment or modification of this Credit Agreement or any other Loan Documents which requires the consent of the Agent and all of the Banks pursuant to terms of Section 9.20 hereof.

 

2.5                                  Records .

 

(a)                                   Advances .  The Agent shall record the names and addresses of the Banks and the Pro Rata Shares of the Advances of each Bank from time to time in the records of the Agent. The Company, the Agent and the Banks may treat each Person whose name is so recorded in the records of the Agent as a Bank hereunder for all purposes of this Credit Agreement. The Agent’s records maintained pursuant to this Section 2.5 shall be available for inspection by the Company or any Bank at any reasonable time and from time to time upon reasonable prior notice to the Agent.

 

(b)                                  Payments .  The Agent shall record each repayment or prepayment in respect of the principal amount of the Banks’ Pro Rata Shares in the Advances in the Agent’s records. Any such recordation in accordance with the terms of this Credit Agreement shall be conclusive and binding on the Company absent manifest error; provided, that failure to make any such recordation, or any error in such recordation, shall not affect the Company’s obligation to repay all Advances to the Banks in accordance with this Credit Agreement, the Warehouse Notes and the Swing Note.

 

(c)                                   Bank’s Records .  Each Bank shall record on its internal records its Warehouse Commitment Pro Rata Share of each Warehouse Advance made by it to the Company and each payment in respect thereof. Any such recordation in accordance with the terms of this Credit Agreement shall be conclusive and binding on the Company absent manifest error; provided, that failure to make any such recordation, or any error in such recordation, shall not affect the Company’s obligation to repay all Warehouse Advances to the Banks in accordance with this Credit Agreement, the Warehouse Notes and the Swing Note; provided further , that in the event of any inconsistency between the Agent’s records and any Bank’s records, the Agent’s records shall govern in the absence of manifest or demonstrable error.

 

2.6                                  Certain Representations .  Each Request for Advance shall be deemed to be the representation of the Company and of the officer making such request that: (a) all conditions precedent set forth in Article 4 hereof have been satisfied; (b) the Company is in compliance with all financial covenants set forth in Article 5 hereof; (c) the representations and warranties contained in Article 6 hereof remain true and correct in all material respects; and (d) no Event of Default and no Unmatured Event of Default has occurred and is then existing, or will exist upon completion of the requested Advance.

 

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2.7                                  Payment of the Warehouse Notes .

 

(a)                                        Termination Date .  On the Termination Date, without necessity of notice or demand, the Company shall pay to the Agent for the account of the Banks the full amount of the outstanding principal balance of, and all accrued but unpaid interest on, the Warehouse Notes and the Swing Note.

 

(b)                                  Warehouse Borrowing Base Deficiency .  If, at any time, and for any reason, including without limitation a reduction in the Collateral Value or any part thereof by virtue of such value being marked to market, the sum of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance exceeds the Warehouse Borrowing Base, as determined by the Agent, then the Company shall immediately pay to the Agent an amount equal to the amount by which the sum of the Aggregate Outstanding Warehouse Balance plus the Aggregate Outstanding Excess Balance exceeds the Warehouse Borrowing Base.

 

(c)                                   Proceeds of Collateral .  The proceeds from the Collateral shall be payable to the Agent for application to the Warehouse Notes, the Swing Note and the other Secured Obligations under and in accordance with the terms of the Security Agreement.

 

2.8                                  Rates of Interest .

 

(a)                                   Applicable Rates of Interest .

 

(i) With respect to all Advances other than Alt A Advances and HELOC/Second Trust Deed Advances, the Swing Note and the Warehouse Notes shall bear interest at the following rates of interest, as applicable: (a) the per annum rate equal to LIBOR plus three quarters of one percent (0.75%) for that portion of the aggregate outstanding principal balance of each Warehouse Note of each Bank which is not a Balance Funded Bank and for that portion of the aggregate outstanding principal balance of the Balance Funded Bank’s Warehouse Note and the Swing Note which exceeds the Average Monthly Available Deposits maintained by the Company with the Balance Funded Bank, and (b) the per annum rate equal to one percent (1.00%) for that portion of the aggregate outstanding principal balance of the Warehouse Note payable to the Balance Funded Bank and the Swing Note which does not exceed the Average Monthly Available Deposits maintained by the Company with the Balance Funded Bank; and

 

(ii) With respect to Alt A Advances and HELOC/Second Trust Deed Advances, the Swing Note and the Warehouse Notes shall bear interest at the following rates of interest, as applicable: (a) the per annum rate equal to LIBOR plus one percent (1.00%) for that portion of the aggregate outstanding principal balance of the each Warehouse Note of each Bank which is not a Balance Funded Bank and for that portion of the aggregate outstanding principal balance of the Balance Funded Bank’s Warehouse Note and the Swing Note which exceeds the Average Monthly Available Deposits maintained by the Company with the Balance Funded Bank, and (b) the per annum rate equal to one and one-quarter of one percent (1.25%) for that portion of the aggregate outstanding principal balance of the Warehouse Note payable to the Balance Funded Bank and the Swing which does not exceed the Average Monthly Available Deposits maintained by the Company with the Balance Funded Bank.

 

2.9                                  Interest Payments .  As soon as reasonably possible subsequent to the availability of the account analysis statement, the Agent shall deliver to the Company and each Bank an interest billing statement (the “Billing Statement”), which Billing Statement shall set forth the interest accrued with respect to the outstanding principal balance of the Warehouse Notes and the Swing Note from and including the first

 

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day of the preceding month through the last day of such month, provided, that any failure or delay in delivering such interest billing statement or any inaccuracy therein shall not affect any of the Company’s obligations and liabilities hereunder. Interest shall be payable, (i) on the fifth (5th) calendar day after receipt of the Billing Statement referred to above and (ii) upon repayment of any of the outstanding principal balance of the Swing Note and the Warehouse Notes at maturity (by reason of acceleration or otherwise). Any interest accruing at the Default Rate shall be payable on demand.

 

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

 

2.11                            Computation of Interest .  Interest on the Warehouse Advances, Excess Advances and Swing Advances shall be computed on the basis of a 360-day year, in each case for the actual number of calendar days elapsed in the period during which it accrues.

 

2.12                            General Provisions Regarding Prepayments and Payments .

 

(a)                                   Prepayments .  The Company may, at any time and from time to time, prepay all or any portion of the outstanding principal balance of the Warehouse Notes without premium or penalty. All prepayments (whether voluntary or involuntary, at maturity, by acceleration or otherwise) of the outstanding principal balance of the Notes shall be applied, first, to the repayment of the outstanding principal balance of Swing Note to the full extent thereof, second, to the repayment of this outstanding principal balance of all Excess Advances, third , to any delinquent fees, costs or expenses, fourth, to the repayment of the outstanding principal balance of all Warehouse Advances, and fifth, to the payment of the interest thereon. All prepayments of the outstanding principal balance of the Warehouse Notes shall be applied first to principal bearing interest at the applicable interest rate to the full extent thereof, in a manner which minimizes the amount of any payments required to be made by the Company pursuant to this Section 2.12 hereof.

 

(b)                                  Manner and Time of Payment .  All payments of principal, interest and fees hereunder, under the Swing Note and under the Warehouse Notes by the Company shall be made without defense, setoff and counterclaim and upon the Agent’s receipt of notice from the Company, which notice shall not be given later than the fifth (5th) calendar day after the Company’s receipt of the Billing Statement under Section 2.9 hereof, the Agent shall be authorized to charge the Company’s “DDA Account” maintained at National City (Account #986649569) to pay all principal (to the extent that the funds in the Collateral Proceeds Account are not sufficient to make a payment of principal), interest and fees due hereunder, provided there are sufficient funds available in such account for that purpose. If there are not sufficient funds available in such account for that purpose or if the Agent has not received notice from the Company authorizing the Agent to charge the Company’s “DDA Account”, the Company shall make such payments in same day funds and delivered to the Agent not later than 12:00 p.m. Prevailing Time on the day following the date due at its office located at 101 South Fifth Street, Louisville, Kentucky, for the account of the Banks; funds received by the Agent after that time shall be deemed to have been paid by the Company on the next succeeding Business Day.

 

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of Default shall occur and continue, at the option of the Agent or the Requisite Banks, such Commitments shall be assigned by the Company to the Agent, for the benefit of the Banks in proportion to their Pro Rata Shares.

 

2.16          Special Provisions Governing Base Rate .

 

(a)              Notwithstanding any other provision of this Credit Agreement to the contrary, the Agent’s determination of LIBOR shall be final, conclusive and binding upon all parties in the absence of manifest error. In the event that (i) it becomes unlawful for the Agent or any Bank to make or maintain LIBOR loans, or (ii) by reasons of circumstances occurring after the date of this Credit Agreement affecting the London Interbank Market, adequate and fair means do not exist for ascertaining LIBOR on the basis provided for in the definition thereof, the Agent or such Bank shall promptly notify Company, and Agent’s or such Bank’s obligation to offer such LIBOR loans shall be suspended during such period of time.

 

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

 

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

 

(ii)            does or shall impose on the Agent or any Bank any other condition; and the result of any of the foregoing is to materially increase the cost to the Agent or any Bank of making any Advance or renewing or maintaining this Credit Agreement or reduce any amount receivable in respect thereof or to reduce the rate of return on the capital of the Agent or any Bank or any Person controlling the Agent or any Bank, then in any such case, the Company shall promptly pay to the Agent or any Bank upon its written demand any additional amounts necessary to compensate the Agent or any Bank for such additional cost or reduced amounts receivable or rate of return as reasonably determined by Agent or any Bank with respect to this Credit Agreement or Advances made hereunder. If the Agent or any Bank becomes entitled to claim any additional amounts pursuant to this section, it shall promptly notify the Company of the event by reason of which it has become so entitled and provide the Company with a certificate specifying any additional amounts payable and how they are calculated. If the Company reasonably elects to discontinue requesting Advances hereunder and terminates the Warehouse Line as a result of any additional amounts the Company it is reasonably determined by the Agent or any Bank to owe pursuant to the provisions of this Section  2.16(b)(ii), the Agent and the Banks agree to refund a pro-rata portion of the Commitment Fee theretofore paid by the Company to the Banks for the current period. The provisions of this section shall survive the termination of this Credit Agreement and payment of all other Secured Obligations.

 

2.17          Certain Representations . Each Request for Advance shall be deemed to be the representation of the Company and of the officer making the request that: (a) all conditions precedent set forth in Article 4 hereof have been satisfied; (b) the Company is in compliance with all financial covenants set forth in Article 5 hereof; (c) the representations and warranties contained in Article 6 hereof remain true and correct in all material respects; and (d) no Event of Default and no Unmatured Event of Default has occurred and is then existing, or will exist upon completion of the requested Advance.

 

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2.18          Discretionary Loans . For each Loan that the Requisite Banks or the Agent agrees to warehouse pursuant to Section 9.20 hereof, that is not a Wet Loan, the Company agrees to pay an interest premium of one-half of one percent ( 0.50% ) in addition to the applicable rate of interest pursuant to Section 2.8(a)  hereof, as may be the case.

 

ARTICLE 3

 

COLLATERAL SECURITY

 

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

 

3.2            Security Agreement . The Company shall execute and deliver to the Agent for the ratable benefit of the Banks in proportion to their Pro Rata Shares, the Security Agreement.

 

3.3           Priority of Security Interests . The Security Interests shall be first and prior security interests subject only to the limitations set forth in the Loan Documents. The Company, the Agent and the Banks hereby acknowledge and agree that the Agent, on behalf of and for the pro rata benefit of the Banks, now has, and shall continue to have, a first and prior pledge and security interest in and to the Collateral, as collateral security for the Warehouse Advances, the other Secured Obligations, and any other obligations and/or liabilities due and owing by the Company pursuant to this Credit Agreement and each of the other Loan Documents, without priority, distinction or preference of any kind whatsoever.

 

3.4           Release of Security Interest . If no Event of Default or Unmatured Event of Default has occurred and is then continuing, the Agent, for and on behalf of the Banks, at the request of the Company, shall release its Security Interest in any item of Collateral so long as after giving effect to any such requested release the Warehouse Borrowing Base shall not be less than the sum of the Aggregate Outstanding  Warehouse Balance plus the Aggregate Outstanding Excess Balance, provided that any such release of Collateral shall occur only if expressly permitted by the terms of the Security Agreement, and then only strictly in compliance with the terms thereof.

 

ARTICLE 4

 

CONDITIONS PRECEDENT

 

4.1           Closing; Initial Advance . The obligation of the Agent and the Bank to close the financing contemplated hereunder and make the initial Advance under this Credit Agreement shall be subject to the satisfaction of the following conditions precedent:

 

(a)            Evidence of Corporate Existence and Qualification of the Company . The Company shall have furnished the Agent with a copy of the Company’s Articles of Incorporation and all amendments thereto, certified by the Secretary of State of California, together with an original certificate from said Secretary of State, dated not more than thirty (30) calendar days prior to the date of this Credit Agreement, stating that the Company is a corporation duly organized, validly existing, and in good standing under the laws of such state, and a copy of the Bylaws of the Company and all amendments thereto, certified by the secretary of the Company to be true, accurate and complete.

 

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(b)            Corporate Resolutions . The Company shall have furnished to the Agent copies of updated resolutions reflecting all necessary corporate action taken by the Company to authorize the execution, delivery, and performance of the Credit Agreement, the Warehouse Note, and the other Loan Documents to which the Company is a party on behalf of the Company, certified by the secretary of the Company to be true, correct, and in full force and effect as of the date of the Credit Agreement.

 

(c)            Incumbency Certificate . The Company shall have furnished the Agent with updated incumbency certificates with respect to the officers of the Company, as applicable, authorized to execute and deliver the Credit Agreement and the other Loan Documents to which the Company is a party on behalf of the Company.

 

(d)            Credit Agreement . This Credit Agreement shall have been duly executed and delivered by the Company, the Agent and the Banks and delivered to the Agent.

 

(e)            Notes . The Warehouse Note shall have been duly executed and delivered by the Company and delivered to the Bank.

 

(f)             Loa