-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CFPKtiR/vCZeRaoB8eb+nbggoWovDDoMliXbNkKHU//Aoddq6pCfspHyDHAJfRC3 HpnVsLA6w98S2gIn0hHRTA== 0000060150-94-000014.txt : 19940517 0000060150-94-000014.hdr.sgml : 19940517 ACCESSION NUMBER: 0000060150-94-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19940331 FILED AS OF DATE: 19940516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOMAS FINANCIAL CORP CENTRAL INDEX KEY: 0000060150 STANDARD INDUSTRIAL CLASSIFICATION: 6162 IRS NUMBER: 751043392 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06868 FILM NUMBER: 94528964 BUSINESS ADDRESS: STREET 1: 1600 VICEROY DR, 8TH FLOOR CITY: DALLAS STATE: TX ZIP: 75235 BUSINESS PHONE: 2148794000 FORMER COMPANY: FORMER CONFORMED NAME: LOMAS & NETTLETON FINANCIAL CORP DATE OF NAME CHANGE: 19881030 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 1-6868 LOMAS FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 75-1043392 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1600 Viceroy Drive Dallas, Texas 75235 (Address of principal executive offices) (Zip Code) (214) 879-4000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES X NO ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of each of the issuer's classes of common stock as of May 10, 1994: Common Stock, $1 par value-- 20,099,531 shares. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1994 LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES INDEX Page No. -------- PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (Unaudited) Consolidated Balance Sheet -- March 31, 1994 and June 30, 1993 3 Statement of Consolidated Operations -- Quarter and Nine Months Ended March 31, 1994 and 1993 4 Statement of Consolidated Cash Flows -- Nine Months Ended March 31, 1994 and 1993 5 Notes to Consolidated Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations 11 Liquidity and Capital Resources 16 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19 SIGNATURES 20 INDEX TO EXHIBITS 21 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEET LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES (in thousands) March 31, 1994 June 30, 1993 -------------- ------------- (Unaudited) (Note) Assets Cash and cash equivalents $ 27,096 $ 34,369 First mortgage loans held for sale 364,440 368,266 Investments 196,210 245,860 Receivables 89,037 87,689 Foreclosed real estate 11,394 18,550 ---------- ---------- 661,081 720,365 Allowance for losses (10,056) (10,895) ---------- ---------- 651,025 709,470 Purchased future mortgage servicing income rights 386,367 436,487 Fixed assets--net 86,361 70,254 Capitalized computer software--net 58,150 62,805 Prepaid expenses and other assets 33,862 35,115 Net assets of discontinued operations 97,754 110,393 ---------- ---------- $1,340,615 $1,458,893 ========== ========== Escrow, agency and fiduciary funds--see contra $ 863,097 $1,082,591 ========== ========== Liabilities and Stockholders' Equity Liabilities: Accounts payable and accrued expenses $ 85,383 $ 87,296 Notes payable 520,911 416,180 Repurchase agreements -- 99,140 Term notes payable 385,676 392,280 Senior convertible notes payable 139,918 139,918 ---------- ---------- 1,131,888 1,134,814 ---------- ---------- Stockholders' Equity: Common stock 20,100 20,097 Other paid-in capital 309,429 309,410 Retained earnings (deficit) (120,802) (5,428) ---------- ---------- 208,727 324,079 ---------- ---------- $1,340,615 $1,458,893 ========== ========== Liability for escrow, agency and fiduciary funds-- see contra $ 863,097 $1,082,591 ========== ========== Note: The balance sheet at June 30, 1993 as presented is derived from the audited financial statements at that date as adjusted for comparative purposes. See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED OPERATIONS (Unaudited) LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES (in thousands, except per share amounts) Quarter Ended Nine Months Ended March 31 March 31 ------------------ -------------------- 1994 1993 1994 1993 -------- ------- --------- -------- Revenues Mortgage servicing $ 35,303 $36,367 $ 110,838 $108,877 Commissions and fees 11,436 10,159 33,499 30,841 Interest 9,413 9,836 26,922 31,343 Gain on sales 7,445 3,247 19,483 9,404 Investment 4,516 9,018 17,649 23,781 Management fees--affiliates -- 2,700 2,952 8,282 Other--affiliates -- 4,750 5,028 10,287 Other 352 444 5,837 4,595 -------- ------- --------- -------- 68,465 76,521 222,208 227,410 -------- ------- --------- -------- Expenses Interest 19,463 16,976 61,048 55,654 Personnel 21,991 21,657 76,744 62,612 Depreciation and amortization 21,083 19,817 143,936 57,403 Other operating 13,459 12,434 38,386 34,309 Provision for losses 3,138 1,318 6,468 3,720 -------- ------- --------- -------- 79,134 72,202 326,582 213,698 -------- ------- --------- -------- Income (loss) from continuing operations before federal income tax equivalent provision (10,669) 4,319 (104,374) 13,712 Federal income tax equivalent provision -- 800 -- 2,657 -------- ------- --------- -------- Income (loss) from continuing operations (10,669) 3,519 (104,374) 11,055 Income (loss) from discontinued operations net of federal income tax equivalent provision (7,000) (16) (11,000) 167 -------- ------- --------- -------- Net income (loss) $(17,669) $ 3,503 $(115,374) $ 11,222 ======== ======= ========= ======== Earnings (loss) per share: Income (loss) from continuing operations $(.53) $.17 $(5.18) $.55 Net income (loss) $(.88) $.17 $(5.73) $.56 Average number of shares 20,135 20,114 20,131 20,117 Note: Reclassifications have been made to March 31, 1993 financial statements for comparative purposes. See notes to consolidated financial statements. STATEMENT OF CONSOLIDATED CASH FLOWS (Unaudited) LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES (in thousands) Nine Months Ended March 31 -------------------- 1994 1993 --------- -------- Operating activities: Income (loss) from continuing operations $(104,374) $ 11,055 Noncash items included in the determination of income (loss) from continuing operations: Depreciation and amortization 143,936 57,403 Provision for losses 6,468 3,720 Federal income tax equivalent provision -- 2,657 --------- -------- Cash provided by operations before working capital changes 46,030 74,835 Net change in first mortgage loans held for sale 21,107 50,837 Net change in sundry receivables, payables, and other assets (37,274) (45,842) Net cash used by discontinued operations (6,003) (14,262) --------- -------- Net cash provided by operating activities 23,860 65,568 --------- -------- Investing activities: Purchases of investments (12,692) (28,069) Sales of investments 65,627 267,883 Expenditures on foreclosed real estate (1,685) (922) Sales of foreclosed real estate 15,411 11,369 Net purchases of fixed assets (21,387) (6,462) Net additions to capitalized computer software (1,738) (4,405) Purchases of future mortgage servicing income rights (90,962) (47,652) Sales of future mortgage servicing income rights 11,694 6,696 Other (2,031) -- Net cash provided by discontinued operations 67,402 95,985 --------- -------- Net cash provided by investing activities 29,639 294,423 --------- -------- Financing activities: Net borrowings of notes payable 104,730 (139,976) Net borrowings (repayments) of repurchase agreements (99,140) (121,116) Term debt borrowings -- 340,000 Term debt repayments (6,603) (330,822) Net cash used by discontinued operations (60,005) (88,006) --------- -------- Net cash used by financing activities (61,018) (339,920) --------- -------- Net increase (decrease) in cash and cash equivalents (7,519) 20,071 Net change in cash of discontinued operations 246 907 Cash and cash equivalents at beginning of period 34,369 23,472 --------- -------- Cash and cash equivalents at end of period $ 27,096 $ 44,450 ========= ======== See notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES March 31, 1994 NOTE A -- BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited consolidated financial statements of Lomas Financial Corporation ("LFC") and its subsidiaries (collectively, the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all of the information or footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation at March 31, 1994 have been included. Operating results for the nine months ended March 31, 1994 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 1994. For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report on Form 10-K of the Company for the fiscal year ended June 30, 1993. NOTE B -- EARNINGS PER SHARE Primary earnings (loss) per share data for the quarter and nine months ended March 31, 1994 and 1993 is computed using the weighted average number of shares of common and, when dilutive, common stock equivalents outstanding during the period. Common stock equivalents include units and shares granted under the Lomas Financial Corporation 1991 Long Term Incentive Plan for Nonemployee Directors, the 1991 Stock Incentive Program and the 1993 Intermediate and Long Term Incentive Plan. Common stock equivalents also include the assumed exercise of dilutive stock options. Fully diluted per share data is computed on the same basis as primary, but it also assumes (if dilutive) the conversion of senior convertible notes with the related adjustments for interest and federal income tax expenses. For the quarter and nine months ended March 31, 1994 and 1993, the fully diluted per share data is antidilutive. NOTE C -- REVERSE INTEREST RATE SWAPS The Company, through its wholly-owned subsidiary, Lomas Mortgage USA, Inc. ("Lomas Mortgage"), enters into interest rate swap agreements as a means of managing its exposure to changes in interest rates. Interest rate swaps that reduce the exposure of the Company, as a whole, to changes in interest rates are designated as hedges of the Company's fixed rate debt and treated as a hedge of the debt. Swap agreements that do not reduce the Company's exposure to changes in interest rates are not considered to be hedges. The interest differential to be paid or received on swap agreements that are treated as hedges is accrued over the life of the agreements as an adjustment to the interest expense of the related debt. Gains or losses on early termination of interest rate swap agreements designated as hedges are recognized over the remaining term of the swap agreement. Interest rate swaps that are not considered hedges are marked to market quarterly with the unrealized gain or loss, together with the accrued interest differential, treated as a gain or loss on such swaps. Under the terms of the swap agreements in existence at March 31, 1994, the Company receives an annual fixed rate of interest and pays a floating rate of interest based on the 30- day average A1/P1 commercial paper rate. The swaps reduced the Company's net interest expense during the quarter and nine months ended March 31, 1994 by $3.6 million and $12.0 million, respectively. For the quarter and nine months ended March 31, 1993, the swaps resulted in total interest savings of $8.4 million and $13.5 million, respectively, including a $4.8 million gain on the termination of a swap which was accounted for as speculative. At March 31, 1994 interest rate swaps in the aggregate notional amount of $800 million were outstanding, all of which were designated as hedges. The terms of the swaps provide that the counterparty, under certain circumstances, can demand collateral from the Company to protect against mark-to-market exposure attributable to the agreements. In April 1994, as a result of increases in interest rates, the Company, at the request of the counterparty, pledged servicing rights related to approximately $2.0 billion of mortgage loans. As a result of further increases in interest rates after March 31, 1994, and in anticipation of the possibility of further increases, the Company is currently negotiating with the counterparty to provide additional servicing rights related to up to a maximum of $4.8 billion of mortgage loans as collateral. The swap agreements contain certain default and termination provisions whereby the counterparty can terminate the agreements prior to their maturity, including a provision which permits the counterparty to terminate if, in its reasonable business judgment, there has been a material adverse change in the business, assets, operations or financial condition of the Company. The Company estimates that if the swap agreements had been terminated as of March 31, 1994, the Company would have incurred a liability, net of related deferred income, of approximately $46 million. As a result of increases in interest rates since that date, if it had terminated as of May 13, 1994, the Company would have incurred a liability, net of the related deferred income, of approximately $62 million. Since its inception in July 1992 and through March 31, 1994, the swap program has resulted in aggregate reductions in past and future net interest expense of $42 million, including $12.3 million of deferred income which currently is being amortized as an offset to future interest expense at the rate of $821,000 per quarter. Based on interest rates at May 13, 1994, the swap program was continuing to reduce the Company's net interest expense at the rate of an additional $1.9 million per quarter. As short term interest rates rise, the Company's yield on its investible fiduciary funds (which currently exceed the aggregate notional amount of the swaps) will increase, thereby offsetting any increase in the floating interest rate paid by the Company under the swap agreements. NOTE D -- PURCHASED FUTURE MORTGAGE SERVICING INCOME RIGHTS ("PMSRs") During the nine months ended March 31, 1994, the Company established provisions of $80.0 million related to impairment in the carrying value of PMSRs. This provision results from the unprecedented prepayments that the Company has experienced and the related revision of estimated future prepayment speeds. PMSRs at March 31, 1994 consisted of the following (in thousands): Cost of PMSRs $ 523,521 Capitalized excess servicing fees 3,140 --------- 526,661 Less: Accumulated amortization (140,294) --------- $ 386,367 ========= Changes in PMSRs were as follows (in thousands): Beginning balance at July 1, 1993 $ 436,487 Additions 93,952 Sales and writeoffs (11,891) Amortization (52,181) Impairment provision (80,000) --------- Ending balance at March 31, 1994 $ 386,367 ========= NOTE E -- REVERSE REPURCHASE AGREEMENTS The Company enters into reverse repurchase agreements with financially responsible parties. Mortgage assets purchased under agreements to resell are carried at the amounts of the original purchase price which is calculated at a percentage of the market price. The reverse repurchase agreements generally mature within 60 days and are covered 100 percent by binding purchase commitments issued by responsible financial institutions. The other party is obligated to repurchase the underlying mortgage assets at the Company's purchase price plus interest differential. The Company finances the reverse repurchase agreements primarily through a third party based on a percentage of the repurchase commitments. At March 31, 1994 the Company had outstanding reverse repurchase agreements of $30.1 million which was included in first mortgage loans held for sale and related notes payable totaling $29.6 million. NOTE F -- REDUCTION IN FORCE In January 1994 the Company announced a plan to restructure its operations, with a view to decreasing expenses and enhancing productivity. Under the plan, the Company's workforce was reduced by approximately 10 percent. In connection with the plan, the Company's continuing operations recorded a charge of $5.6 million effective December 31, 1993. NOTE G -- TRANSACTION WITH AFFILIATES Lomas Mortgage is a partner and manager of Lomas Mortgage Partnership (the "Partnership"). The Company owns one-third of the Partnership. On January 1, 1994 the Company sold PMSRs with a carrying value of approximately $9.8 million to the Partnership for approximately $8.5 million. The PMSRs sold had been recently acquired and were expected to yield the Company an annual return of approximately 13.6%. NOTE H -- DISCONTINUED OPERATIONS Discontinued operations include the Company's short-term lending operations, which are conducted through a wholly-owned subsidiary, ST Lending, Inc. ("STL"), and certain other real estate operations. In fiscal 1992 and 1993, the Company provided $15.4 million of reserves to cover future operating losses of STL and an additional $11.0 million during the nine months ended March 31, 1994. For the quarters and nine months ended March 31, 1994 and 1993, operating losses of $3.2 million, $1.8 million, $8.7 million and $7.9 million, respectively, were charged to these reserves. The Company completed its review of the operations of STL through December 1995, which is the projected liquidation date of its term notes. The analysis projected operating losses on a net basis of approximately $7 million, which has been provided for in the March 1994 quarter and is carried on the Company's corporate accounts. Operating losses for the quarters ended March 31, 1994 and 1993 included, respectively, $1.2 million and $0.2 million provisions for losses on loans and foreclosed real estate. For the nine months ended March 31, 1994 and 1993, these provisions totaled $3.4 million and $3.6 million, respectively. Net assets of discontinued operations at March 31, 1994 were as follows (in thousands): Mortgage notes receivable and foreclosed real estate, net of allowance for losses of $24,585 $154,549 Cash and cash equivalents 9,369 Other assets 2,048 -------- 165,966 Less: Secured notes payable (61,987) Accrued interest payable and other (2,390) Reserves for estimated future operating losses (3,835) -------- Net assets $ 97,754 ======== The yield on STL's earning loans ($49.4 million) at March 31, 1994 was approximately 7.60 percent, on its earning real estate ($36.2 million) was approximately 11.4 percent, and on its cash (invested primarily in high-grade commercial paper) was approximately 3.5 percent. The interest rate on STL's debt outstanding at that date was 5.25 percent. During the nine months ended March 31, 1994, STL made principal payments aggregating $60.0 million on its secured notes, thereby reducing the balance thereof to $62.0 million. The secured notes are without recourse to the Company or any subsidiary other than STL. Subsequent to March 31, 1994, STL, under the terms of the reinstated liquidity support agreement, advanced $6.2 million to LFC for the interest payment in the total amount of $6.3 million due April 30, 1994 on LFC's $140 million of convertible notes due 2003. Loan commitments are made to accommodate the financial needs of the Company's borrowers and are subject to the Company's normal credit policies. Guarantees and other commitments include standby letters of credit, financial guarantees and performance guarantees made by the Company to third parties on behalf of borrowers in connection with the Company's short term lending operations. Even though this segment of business is discontinued, the guarantees remain in effect. The credit risk of these arrangements essentially is the same as that involved in extending loans. Outstanding commitments and guarantees at March 31, 1994 were as follows (in thousands): Loan commitments on existing short term construction, acquisition and development loans $3,504 Guarantees and other commitments $1,196 NOTE I -- CONTINGENT LIABILITIES On September 17, 1990 plaintiffs purporting to represent a class of single-family mortgagors having escrow deposits computed by Lomas Mortgage filed a class-action complaint in Illinois. The complaint alleges that Lomas Mortgage is in breach of mortgage contracts and is assessing excessive and unlawful escrow deposits and, in addition, the complaint asks for punitive damages. On October 4, 1990 this lawsuit was removed to the United States District Court for the Northern District of Illinois. Mortgagors have filed similar class-actions in California and Minnesota and class-action counterclaims in two pending Illinois foreclosure actions. The state court actions were removed to federal court and transferred to the Northern District of Illinois where they are currently pending before the same judge as the original action. The state court counterclaims are stayed. Management believes that the Company's calculation of escrow balances is in accordance with mortgage contracts and Real Estate Settlement Procedures Act ("RESPA") regulations. Similar lawsuits based on escrow balances have also been brought against other mortgage banking companies. The ultimate liability with respect to this contingency is not presently determinable but an adverse settlement or judgment may require the Company to repay escrow monies to mortgagors or otherwise reduce the Company's escrow balances which would also result in a higher cost of funds to the Company, potentially negatively impacting the Company's results of operations. Assessment of punitive damages in this litigation could also potentially negatively impact the Company's results of operations. Management does not believe that any losses incurred as a result of this litigation will have a material adverse effect on the financial condition of Lomas Mortgage or the Company. The Company is also involved in a number of other lawsuits considered to be in the normal course of business. In management's opinion, the resolution of these other disputes will not have a material adverse effect on the financial condition of the Company. NOTE J -- SUPPLEMENTAL CASH FLOW INFORMATION The following table provides certain cash and noncash information (in thousands): Nine Months Ended March 31 ------------------- 1994 1993 -------- -------- Interest paid: Continuing operations $56,986 $41,466 Discontinued operations 4,189 9,343 NOTE K -- LIQUIDITY See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" for a discussion regarding the Company's loan covenants and liquidity. NOTE L -- SUBSEQUENT EVENT On May 13, 1994 the Company announced that in response to indications of interest from a number of parties it hopes to enter into an agreement related to the sale of its information systems unit within the next 90 days. Pending such possible sale, the Company intends to continue its review with an investment banker of various strategic options concerning its mortgage banking unit. The Company had previously announced that it had retained an investment banker to assist it in evaluating strategic alternatives to maximize stockholder values and is considering various options including the possibility of merging with or being acquired by another institution. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The Company's consolidated operations resulted in a net loss for the quarter ended March 31, 1994 of $17.7 million compared to net income of $3.5 million for the March 31, 1993 quarter. For the nine months ended March 31, 1994, the net loss was $115.4 million compared to net income of $11.2 million for the nine months ended March 31, 1993. The operating results of the Company during the quarters and nine months ended March 31, 1994 and 1993 were as follows (in thousands): Quarter Ended Nine Months Ended March 31 March 31 ------------------ ------------------- 1994 1993 1994 1993 -------- ------- --------- -------- Continuing operations: Mortgage banking $ 209 $11,907 $ 9,431 $ 28,076 Information systems (5,923) (4,061) (17,427) (11,465) Other 303 1,500 5,275 11,634 -------- ------- --------- -------- (5,411) 9,346 (2,721) 28,245 General and administrative (2,058) (1,729) (6,345) (5,386) Corporate interest (3,200) (3,298) (9,738) (9,147) -------- ------- --------- -------- Income (loss) from continuing operations before special provisions (10,669) 4,319 (18,804) 13,712 Provision for reduction in force -- -- (5,570) -- Provision related to impairment of PMSRs -- -- (80,000) -- -------- ------- --------- -------- Income (loss) from continuing operations before federal income tax equivalent provision (10,669) 4,319 (104,374) 13,712 Federal income tax equivalent provision -- 800 -- 2,657 -------- ------- --------- -------- Income (loss) from continuing operations (10,669) 3,519 (104,374) 11,055 Income (loss) from discontinued operations (7,000) (16) (11,000) 167 -------- ------- --------- -------- Net income (loss) $(17,669) $ 3,503 $(115,374) $ 11,222 ======== ======= ========= ======== Mortgage Banking The mortgage banking division's operations during the March 1994 quarter generated $67.2 million in revenues, down from $74.5 million in the same quarter last year. The Company's mortgage banking continuing operations produced pretax income during the March 1994 quarter of $0.2 million compared to pretax income of $11.9 million in the same quarter last year. For the nine months ended March 31, 1994, the operating loss, after the special provisions, was $75.7 million compared to income of $28.1 million for the nine months ended March 31, 1993. The mortgage banking division's revenues, expenses, and net contributions from continuing operations for the quarters and nine months ended March 31, 1994 and 1993 were derived from the following sources (in millions):
Quarter Ended March 31 Nine Months Ended March 31 ------------------------------- --------------------------------- 1994 1993 1994 1993 -------------- -------------- --------------- --------------- Loan administration Primary servicing $ 33.0 $ 33.1 $102.4 $100.9 Master servicing 2.6 3.7 9.3 9.6 Expenses (17.0) (16.6) (50.3) (48.9) Amortization (excluding impairment provision) (17.0) $ 1.6 (15.7) $ 4.5 (52.2) $ 9.2 (45.9) $ 15.7 ------ ------- ------ ------ Insurance Agency 2.0 2.0 6.1 5.9 Mortgage plans 1.2 1.1 3.7 3.3 Expenses (1.2) 2.0 (1.2) 1.9 (3.5) 6.3 (3.5) 5.7 ------ ------- ------ ------ Banking (including warehousing and investment income and interest expense) Revenues 10.6 14.9 34.9 37.9 Expenses (16.1) (5.5) (14.3) 0.6 (51.0) (16.1) (48.0) (10.1) ------ ------- ------ ------ Portfolio production Revenues 14.2 7.2 37.4 22.6 Expenses (7.4) 6.8 (3.9) 3.3 (20.9) 16.5 (9.3) 13.3 ------ ------- ------ ------ Field services Revenues 3.4 3.9 10.9 11.6 Expenses (3.2) 0.2 (3.5) 0.4 (10.0) 0.9 (10.6) 1.0 ------ ------- ------ ------ Fund and asset management Revenues -- 7.7 8.3 19.8 Expenses -- -- (1.7) 6.0 (2.1) 6.2 (4.1) 15.7 ------ ------- ------ ------ Other departments Revenues 0.2 0.9 1.2 2.8 Expenses (0.9) (0.7) (1.8) (0.9) (2.5) (1.3) (6.2) (3.4) ------ ------- ------ ------ General and administrative expense (4.2) (3.9) (12.3) (9.8) ----- ------ ------ ------- Operating income before special provisions 0.2 11.9 9.4 28.1 Provision for reduction in force -- -- (5.1) -- Provision related to PMSR impairment -- -- (80.0) -- ----- ------ ------ ------- $ 0.2 $11.9 $(75.7) $ 28.1 ===== ====== ====== ======= Note: Certain reclassifications have been made to the March 31, 1993 financial statement for comparative purposes.
Loan administration operating income at March 31, 1994 was $1.6 million, down from $4.5 million for the same quarter last year principally because portfolio amortization at $17.0 million in the March 1994 quarter was $1.3 million higher than in the March 1993 quarter and master servicing revenues at $2.6 million in the March 1994 quarter were $1.1 million lower than in the March 1993 quarter. The decrease in master servicing revenues was principally a result of the decline in the master servicing portfolio to $8.9 billion during the March 1994 quarter, down from $13.7 billion at March 31, 1993, which was caused by unusually high rates of runoff (particularly of Capstead Mortgage Corporation related mortgages) and the cessation of additions of new Capstead related loans to the Company's master servicing portfolio. For the nine months ended March 31, 1994 and 1993, loan administration operating income before the $80 million provision in the 1994 period for PMSR impairment was $9.2 million and $15.7 million, respectively. This $6.5 million decline was attributable principally to the fact that portfolio amortization expense was $6.6 million higher in the 1994 period than in the 1993 period. Significantly, the rate of mortgage refinancings declined during the March 1994 quarter, and, as a result, the Company's portfolio runoff rate on an annualized basis dropped from 45.3 percent in the December 1993 quarter to 29.3 percent during the March 1994 quarter. The Company's booked investment in its $34.4 billion primary mortgage servicing portfolio was $386.4 million at March 31, 1994. The following is an analysis of servicing fee income for the quarters and nine months ended March 31, 1994 and 1993 (in thousands). Quarter Ended Nine Months Ended March 31 March 31 ----------------- ------------------- 1994 1993 1994 1993 ------- ------- -------- -------- Servicing fee income: Primary: Directly owned $31,308 $32,268 $ 98,093 $ 98,915 Subservicing for others 1,630 851 4,307 1,971 ------- ------- -------- -------- 32,938 33,119 102,400 100,886 Master servicing portfolio 2,643 3,651 9,296 9,587 ------- ------- -------- -------- Total $35,581 $36,770 $111,696 $110,473 ======= ======= ======== ======== The following table sets forth certain information regarding the Company's servicing portfolio (dollars in millions): March 31, 1994 June 30, 1993 -------------- ------------- Portfolio principal balances: Primary: Directly owned $27,354 $27,760 Subservicing for others 7,085 4,917 ------- ------- 34,439 32,677 Master servicing portfolio 8,901 12,539 ------- ------- $43,340 $45,216 ======= ======= Portfolio loan count: Primary: Directly owned 486,815 530,706 Subservicing for others 93,606 74,949 ------- ------- 580,421 605,655 Master servicing portfolio 142,999 169,302 ------- ------- 723,420 774,957 ======= ======= Weighted average interest rate 8.3% 8.8% Compared to the $0.6 million of net income reported for the quarter ended March 31, 1993, the banking unit's operations resulted in a net expense of $5.5 million for the quarter ended March 31, 1994. Paid-in-full ("PIF") interest, which is incurred when loans securing payment of mortgage-backed securities in the Company's primary servicing portfolio are prepaid prior to the end of a given month, at $4.0 million for the quarter ended March 31, 1994 was $0.7 million higher than the $3.3 million in the same quarter last year. However, this is a $2.5 million decrease from the prior quarter ended December 31, 1993. Net interest savings from the Company's interest rate swap agreements was $3.6 million for the quarter ended March 31, 1994, compared to $8.4 million for the March 31, 1993 quarter; and for the comparable nine- month periods ended March 31, such savings decreased from $13.5 million in 1993 to $12.0 million in 1994. Net income from portfolio production for the quarter ended March 31, 1994 was $6.8 million, a $3.5 million increase over the $3.3 million reported for the same period last year. Revenues were $7 million higher in the 1994 quarter than in 1993. Portfolio production during the March 1994 quarter totaled $4.4 billion, up from $2.3 billion in the March 1993 quarter, and exceeded the quarter's portfolio runoff by $1.7 billion. There was no income from the fund and asset management unit in the March 1994 quarter because the Company's management agreement with Capstead Mortgage Corporation ("Capstead") terminated on September 30, 1993. Compared to the nine-month period ended March 31, 1993, the mortgage banking division's general and administrative costs increased during the 1994 nine-month period principally as a result of increased legal expenses and other external professional fees. The Company established provisions of $30.0 million and $80 million, respectively, for the quarter and six months ended December 31, 1993 for impairment in the carrying value of its PMSRs in response to the unprecedented level of mortgage prepayments in such periods. In addition, the Company's mortgage banking division also established at December 31, 1993 a $5.1 million provision to cover the cost of the reduction-in-force that occurred in January 1994. Interest Rate Fluctuations and Market Factors Lower long term interest rates normally increase new mortgage loan production volume, which in turn increases fee income and the net interest spread as a result of the higher average volume of mortgages held for sale. Lower long term rates also increase prepayment speeds of mortgages on which PMSRs are currently held, which lowers yields realized on the Company's investment in PMSRs. Increased prepayment speeds also accelerate PIF interest expense owed to certain investors. PIF interest is the partial monthly interest in the month of payoff that is not payable by the mortgagor, but is receivable by the mortgage security holder. Higher long term interest rates normally decrease the general volume of new mortgage originations, decreasing the volume of mortgages held for sale. These conditions result in reduced fee income and reduced net interest income. However, the Company's average net yield as a percentage of the balance held may increase if short term rates do not change by a corresponding degree. Higher long term rates also decrease the prepayment speed of mortgages on which PMSRs are currently held, which in turn would increase the yield on the Company's investment in PMSRs. Decreased prepayment speeds will also decrease PIF interest expense due to loans which payoff. Lower short term interest rates increase the Company's net interest spread on mortgages held for sale and higher short term interest rates decrease the net yield on mortgages held for sale unless there is a corresponding increase in long term interest rates. The value of the Company's loan servicing portfolio may be adversely affected if mortgage interest rates decline and loan prepayments increase. Periods of accelerated prepayments may result in future declines of income generated from the Company's loan servicing portfolio. During periods of declining interest rates, mortgage loan prepayment speeds tend to increase, which decreases the expected cash flow from the servicing portfolio and reduces the yield and the value of PMSRs. Conversely, if mortgage interest rates increase, the value of the Company's loan servicing portfolio may be positively affected (see NOTE C -- REVERSE INTEREST RATE SWAPS regarding the impact of changes in interest rates on the market value of the Company's reverse interest rate swaps). Information Systems The following table presents a summary of Lomas Information Systems ("LIS") revenues, expense and net operating results during the quarters and nine-month periods ended March 31, 1994 and 1993 (in thousands): Quarter Ended Nine Months Ended March 31 March 31 ------------------- ------------------ 1993 1992 1993 1992 -------- -------- -------- -------- Revenues: External $ 4,632 $ 3,030 $ 12,550 $ 9,558 Internal 5,237 5,343 15,545 15,815 -------- -------- -------- -------- 9,869 8,373 28,095 25,373 -------- -------- -------- -------- Cash expenses: Personnel and contract labor (5,166) (5,071) (15,140) (16,391) Equipment/software rent and maintenance (4,609) (4,445) (13,609) (13,350) Voice communications (1,332) (854) (3,609) (2,798) General and administrative (2,527) (2,792) (7,018) (7,876) -------- -------- -------- -------- (13,634) (13,162) (39,376) (40,415) -------- -------- -------- -------- Net cash requirement (3,765) (4,789) (11,281) (15,042) Noncash items: Depreciation and amortization (2,278) (2,194) (6,691) (6,427) Enhancement capitalization 213 980 661 3,324 Charges to conversion reserves -- 1,942 -- 6,596 Provision for losses (93) -- (116) 84 -------- -------- -------- -------- Net pretax loss $ (5,923) $ (4,061) $(17,427) $(11,465) ======== ======== ======== ======== LIS recorded a pretax loss in the quarter ended March 31, 1994 of $5.9 million compared to $4.1 million for the same quarter last year. During the quarter ended March 31, 1993, $1.9 million of expenses incurred relating to the conversion of existing customers to the MLS system were charged to previously provided conversion reserves and costs incurred relating to enhancement of the MLS system of $1.0 million were capitalized. On a net cash basis, LIS' loss in the March 31, 1994 quarter was $3.8 million or $1.0 million less than the $4.8 million cash loss reported for the same quarter in 1993. Other The other operations of the Company produced pretax income of $0.3 million for the quarter ended March 31, 1994 compared to $1.5 million for the quarter ended March 31, 1993. For the nine months ended March 31, 1994 and 1993, other income was $5.3 million and $11.6 million, respectively. During the quarter and nine months ended March 31, 1994, the other operating results included a loss of $0.9 million and $2.4 million, respectively, from Intellifile, the Company's image-processing operations. During the nine months ended March 31, 1994, the Company recorded a gain of $1.4 million on the sale of a promissory note, which had been received by the Company in connection with the sale of its life insurance operations. Amendments to certain contractual provisions related to the Company's 1991 sale of ELLCO Leasing Corporation added $3.9 million in other income in the nine months ended March 31, 1994. Also, amendments to the Company's relationship with Capstead contributed $3.0 million in other income for the nine months ended March 31, 1993. Discontinued Operations In fiscal 1992 and 1993, the Company provided $15.4 million of reserves to cover future operating losses of STL and an additional $11.0 million during the nine months ended March 31, 1994. For the quarters and nine months ended March 31, 1994 and 1993, operating losses of $3.2 million, $1.8 million, $8.7 million and $7.9 million, respectively, were charged to these reserves. The Company completed its review of the operations of STL through December 1995, which is the projected liquidation date of its term notes. The analysis projected operating losses on a net basis of approximately $7 million, which has been provided for in the March 1994 quarter and is carried on the Company's corporate accounts. Operating losses for the quarters ended March 31, 1994 and 1993 included, respectively, $1.2 million and $0.2 million provisions for losses on loans and foreclosed real estate. For the nine months ended March 31, 1994 and 1993, these provisions totaled $3.4 million and $3.6 million, respectively. At March 31, 1994, STL's allowance for losses (excluding the $7 million corporate provision) totalled $21.4 million. Liquidity and Capital Resources The capital and credit resources of the Company at March 31, 1994 included (in millions): Short term debt of Lomas Mortgage: --Secured by first mortgage loans pending delivery to permanent investors $ 316.3 --Secured by reverse repurchase agreements 29.6 --Secured by high quality short term investments 152.1 --Borrowings under working capital lines of credit 22.0 --Other short term debt 0.9 -------- 520.9 -------- Term debt of Lomas Mortgage: --Notes due in 1997 150.0 --Notes due in 2002 190.0 --Other 45.7 -------- 385.7 -------- Term notes of STL due in 1996 62.0 Convertible notes of LFC due in 2003 139.9 Stockholders' equity 208.7 -------- $1,317.2 ======== Short term debt was $520.9 million at March 31, 1994, including $152.1 million principal amount borrowed under investment lines of credit and $316.3 million principal amount of warehouse debt secured by single-family mortgage loans pending delivery to permanent investors. Investment lines of credit were secured by high quality short term investments purchased with the proceeds of such lines of credit. The short term notes payable under reverse repurchase agreements are secured by single-family mortgage loans which, at that date, were committed for sale to institutional investors. Such short term notes (and therefore the related warehouse indebtedness) normally revolve every 30 to 60 days. Thus, the short term notes and notes payable under reverse repurchase agreements are self-liquidating and require no supplemental liquidity support from LFC or any of its subsidiaries. The Company's aggregate warehouse line of credit was increased to $580 million from $317.5 million during the nine months ended March 31, 1994, and total short term warehouse credit availability was increased to $780 million. Commercial paper and bank certificates of deposit of non-affiliated commercial banks are funded with proceeds from, and are pledged as collateral for, investment lines of credit. The commercial paper and bank certificates of deposit have fixed rates of interest and generally mature within 31 days, at which time the investment lines of credit are paid down. As a result, all short term indebtedness is self-liquidating and none of it constitutes any burden on operating cash flow. Lomas Mortgage had outstanding at March 31, 1994 interest rate swaps in the aggregate notional amount of $800 million, all of which were designated as hedges. For more information on the interest rate swaps, see NOTE C -- REVERSE INTEREST RATE SWAPS. Coverage for the term notes payable of Lomas Mortgage is provided by cash internally generated by that subsidiary. Lomas Mortgage's operations during the nine months ended March 31, 1994, after paying interest on its short term debt, generated $89.2 million in cash available for (i) payment of interest on the subsidiary's $385.7 million of term debt, (ii) investment in portfolio maintenance and growth, (iii) intercompany advances or payment of dividends to LFC (subject to restricted payment limitations described below), and (iv) addition to Lomas Mortgage's working capital. Under the terms of the warehouse and investment lines of credit that contain the most restrictive covenants, Lomas Mortgage is restricted from making any intercompany advances or dividend payments to LFC if, after giving effect thereto, the aggregate amount of such payments should exceed the sum of (i) $25 million (less any intercompany advances); plus (ii) 50 percent of Lomas Mortgage's accumulated consolidated income before tax since October 1, 1992; or reduced by 100 percent of consolidated loss before income taxes; plus (iii) the aggregate net cash proceeds received from the issuance or sale after November 30, 1993, of capital stock and warrants, options and rights to purchase its capital stock. The maximum amount available for dividends or intercompany advances from Lomas Mortgage to LFC as of March 31, 1994 was $0.2 million. Effective March 31, 1994, the minimum net worth requirement of Lomas Mortgage is $200 million under the most restrictive covenants of Lomas Mortgage's warehouse and investment lines of credit. Lomas Mortgage's net worth, determined in accordance with such lines of credit, was $213.9 million at March 31, 1994. Coverage for (i) interest payments on LFC's $140 million of convertible notes due 2003, (ii) general corporate expenses and (iii) additional advances to LIS to date have been and in the future are expected to be provided by (a) LFC's current cash resources, (b) dividends or intercompany advances from Lomas Mortgage, (c) cash dividends and interest income on other investments, (d) reinstated liquidity support trust that is provided by STL, and (e) periodic liquidations of other assets. Subsequent to March 31, 1994, STL, under the terms of the reinstated liquidity support agreement, advanced $6.2 million to LFC for the interest payment in the total amount of $6.3 million due April 30, 1994 on LFC's $140 million of convertible notes due 2003. As of March 31, 1994, the Company's failure to meet certain ratio requirements contained in the covenants of the Company's $140 million senior convertible note indenture, while not an event of default, limits the Company's ability to issue additional term debt. STL's term notes are related to the Company's discontinued short term lending operations and are without recourse to the general credit and resources of LFC or its other subsidiaries. The STL notes are secured by STL's investments in short term real estate loans and related assets and will be self-liquidating as the collateral is retired or otherwise liquidated over the next two years. At March 31, 1994 collateral securing payments of STL's notes included $49.4 million of earning short term real estate loans, $36.2 million of earning REO, $76.8 million of other REO and approximately $9.3 million of cash. The collateral securing the STL Notes, net of reserves of $21.4 million and including other assets of $1.0 million, was carried at March 31, 1994 on STL's books at $151.3 million. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On September 17, 1990 the plaintiffs purporting to represent a class of single-family mortgagors having escrow deposits computed by Lomas Mortgage filed a class-action complaint in Illinois. The complaint alleges that Lomas Mortgage is in breach of mortgage contracts and is assessing excessive and unlawful escrow deposits and in addition the complaint asks for punitive damages. On October 4, 1990 this lawsuit was removed to the United States District Court for the Northern District of Illinois. Mortgagors have filed similar class-actions in California and Minnesota and class-action counterclaims in two pending Illinois foreclosure actions. The state court actions were removed to federal court and transferred to the Northern District of Illinois where they are currently pending before the same judge as the original action. The state court counterclaims are stayed. Management believes that the calculation of escrow balances is in accordance with mortgage contracts and RESPA regulations. Similar lawsuits based on escrow balances have also been brought against other mortgage banking companies. The ultimate liability with respect to this contingency is not presently determinable but an adverse settlement or judgment may require the Company to repay escrow monies to mortgagors or otherwise reduce the Company's escrow balances which would also result in a higher cost of funds to the Company, potentially negatively impacting the Company's results of operations. Assessment of punitive damages in connection with the litigation could also potentially negatively impact the Company's results of operations. Management does not believe that any losses incurred as a result of this litigation will have a material adverse effect on the financial condition of Lomas Mortgage or the Company. The Company is involved from time to time in litigation incidental to its business. Management believes that the outcome of current litigation will not have a material adverse effect upon the financial condition of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit Number ------- (10.1) Ninth Amendment to Servicing Payments Loan and Security Agreement dated January 18, 1994 among Lomas Mortgage USA, Inc., the bank signatories thereto and Bank One, Texas, N.A. as agent. (10.2) Tenth Amendment to Servicing Payments Loan and Security Agreement dated March 31, 1994 among Lomas Mortgage USA, Inc., the bank signatories thereto and Bank One, Texas, N.A. as agent. (10.3) Fifth Amendment to Restated Loan and Security Agreement dated March 31, 1994 among Lomas Mortgage USA, Inc., the bank signatories thereto and Bank One, Texas, N.A., as administrative agent, and Texas Commerce Bank National Association, as syndication agent. (10.4) Amended and Restated Master Pledge Agreement dated April 8, 1994 between Lomas Mortgage USA, Inc. and Lehman Brothers Special Financing Inc. (10.5) Master Repurchase Agreement dated April 11, 1994 between Lomas Mortgage USA, Inc. and DLJ Mortgage Capital, Inc. (10.6) First Amendment to Master Repurchase Agreement dated April 11, 1994 between Lomas Mortgage USA, Inc. and DLJ Mortgage Capital, Inc. (10.7) Liquidity Support Trust Agreement dated April 12, 1994 among the registrant and ST Lending, Inc., Bank One, Texas, N.A., as trustee, and Wilmington Trust Company, as Liquidity Support Trustee. (10.8) 3/94 Senior Secured Working Capital Credit Agreement dated March 21, 1994 between Lomas Mortgage USA, Inc. and Texas Commerce Bank National Association. (10.9) Employment Agreement dated March 1, 1994 between the registrant and David L. Chapman II. (10.10) Employment Agreement dated March 1, 1994 between the registrant and Gary H. Kell. (10.11) Amended and Restated Severance Agreement dated March 31, 1994 between the registrant and Michael E. Patrick. (10.12) 3/94 (second) Amendment to 6/93 Servicing Purchase Loan Agreement dated March 31, 1994 between Lomas Mortgage USA, Inc. and Texas Commerce Bank National Association. (10.13) 3/31/94 Amendment to 3/94 Senior Secured Working Capital Credit Agreement dated March 31, 1994 between Lomas Mortgage USA, Inc. and Texas Commerce Bank National Association. (11) Computation of Earnings Per Share. (b) Reports on Form 8-K: Form 8-K dated March 22, 1994 reporting the Company's retaining Salomon Brothers, Inc. to assist in evaluating strategic alternatives to maximize stockholder values. Options being considered include the possibility of merging with or being acquired by another institution. No financial statements were filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LOMAS FINANCIAL CORPORATION Date: May 16, 1994 By: /s/JESS HAY -------------------------- Jess Hay Chairman and Chief Executive Officer Date: May 16, 1994 By: /s/GARY WHITE -------------------------- Gary White Senior Vice President and Controller LOMAS FINANCIAL CORPORATION INDEX TO EXHIBITS Sequentially Numbered Exhibit No. Page - ----------- ------------ (10.1) Ninth Amendment to Servicing Payments Loan 21 and Security Agreement dated January 18, 1994 among Lomas Mortgage USA, Inc., the bank signatories thereto and Bank One, Texas, N.A., as agent. (10.2) Tenth Amendment to Servicing Payments Loan 26 and Security Agreement dated March 31, 1994 among Lomas Mortgage USA, Inc., the bank signatories thereto and Bank One, Texas, N.A., as agent. (10.3) Fifth Amendment to Restated Loan and 29 Security Agreement dated March 31, 1994 among Lomas Mortgage USA, Inc., the bank signatories thereto and Bank One, Texas, N.A., as administrative agent, and Texas Commerce Bank National Association, as syndication agent. (10.4) Amended and Restated Master Pledge Agreement 36 dated April 8, 1994 between Lomas Mortgage USA, Inc. and Lehman Brothers Special Financing Inc. (10.5) Master Repurchase Agreement dated April 11, 51 1994 between Lomas Mortgage USA, Inc. and DLJ Mortgage Capital, Inc. (10.6) First Amendment to Master Repurchase 72 Agreement dated April 11, 1994 between Lomas Mortgage USA, Inc. and DLJ Mortgage Capital, Inc. (10.7) Liquidity Support Trust Agreement dated 73 April 12, 1994 among the registrant and ST Lending, Inc., Bank One, Texas, N.A., as trustee, and Wilmington Trust Company, as Liquidity Support Trustee. (10.8) 3/94 Senior Secured Working Capital Credit 95 Agreement dated March 21, 1994 between Lomas Mortgage USA, Inc. and Texas Commerce Bank National Association. (10.9) Employment Agreement dated March 1, 1994 144 between the registrant and David L. Chapman II. (10.10) Employment Agreement dated March 1, 1994 146 between the registrant and Gary H. Kell. (10.11) Amended and Restated Severance Agreement 149 dated March 31, 1994 between the registrant and Michael E. Patrick. (10.12) 3/94 (second) Amendment to 6/93 Servicing 156 Purchase Loan Agreement dated March 31, 1994 between Lomas Mortgage USA, Inc. and Texas Commerce Bank National Association. (10.13) 3/31/94 Amendment to 3/94 Senior Secured 158 Working Capital Credit Agreement dated March 31, 1994 between Lomas Mortgage USA, Inc. and Texas Commerce Bank National Association. (11) Computation of Earnings Per Share. 160 EX-10.1 2 EXHIBIT 10.1 EXHIBIT 10.1 NINTH AMENDMENT TO SERVICING PAYMENTS LOAN AND SECURITY AGREEMENT THIS AMENDMENT is entered into as of January 18, 1994, between LOMAS MORTGAGE USA, INC., a Connecticut corporation (the "Company"), the banks listed on the signature pages of this amendment ("Banks"), and BANK ONE, TEXAS, N.A., as agent for Banks (in that capacity "Agent"). The Company, Banks, and Agent have entered into the Servicing Payments Loan and Security Agreement dated as of February 11, 1992 (as amended through the date of this amendment and as further renewed, extended, amended, and restated, the "Loan Agreement"), providing for loans to the Company on a revolving basis up to $25,000,000 outstanding at any time. The Company has requested an amendment to the Loan Agreement in order to add a new Private Servicing Agreement to Schedule 1.3 of the Loan Agreement. Accordingly, for valuable and acknowledged consideration, the Company, Banks, and Agent agree as follows: 1. Certain Definitions. Unless otherwise stated in this amendment (a) terms defined in the Loan Agreement have the same meanings when used in this amendment and (b) references to "Sections" and "Schedules" are to sections and schedules of or to the Loan Agreement. 2. Amendment. Schedule 1.3 is entirely amended in the form of -- and all references in the Loan Papers to it are changed to -- the attached Amended Schedule 1.3. 3. Conditions Precedent. Paragraph 2 above is not effective until Agent and Banks (a) receive counterparts of this amendment executed by each party listed below and (b) each document and other item listed on the attached Annex A. 4. Ratifications. This amendment modifies and supersedes all inconsistent terms and provisions of the Loan Papers, and, except as expressly modified and superseded by this amendment, the Loan Papers are ratified and confirmed and continue in full force and effect. The Company, Banks, and Agent agree that the Loan Papers as amended by this amendment continue to be legal, valid, binding, and enforceable in accordance with their respective terms. Without limiting the generality of the foregoing, the Company ratifies and confirms that all Liens (except as amended by this amendment) heretofore granted to Agent, on behalf of Banks, were intended to, do, and continue to secure the full payment and performance of the Obligations, and the Company agrees to perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional assignments, security agreements, modifications or amendments to any of the foregoing, and such other agreements, documents, and instruments as Agent or any Bank may reasonably request in order to perfect and protect those Liens and preserve and protect the rights of Agent and Banks in respect of all present and future Collateral. 5. Representations and Warranties. The Company represents and warrants to Banks and Agent that (a) this amendment and the Loan Papers to be delivered under this amendment have been duly executed and delivered by the Company, (b) no action of, or filing with, any Tribunal is required to authorize, or is otherwise required in connection with, the execution, delivery, and performance by the Company of this amendment and the Loan Papers to be delivered under this amendment, (c) this amendment and the Loan Papers to be delivered under this amendment are valid and binding upon the Company and are enforceable against the Company in accordance with their respective terms, except as limited by the Bankruptcy Code of the United States of America and all other similar Laws affecting the rights of creditors generally, (d) the execution, delivery and performance by the Company of this amendment and the Loan Papers to be delivered under this amendment do not require the consent of any other Person and do not and will not constitute a violation of any laws, agreement, or understanding to which the Company is a party or by which the Company is bound, (e) the representations and warranties contained in the Loan Agreement, as amended by this amendment, are true and correct in all material respects except to the extent that (i) the representations and warranties speak to a specific date or (ii) the facts on which the representations and warranties were based have been changed by transactions contemplated or permitted by the Loan Agreement as of the date of this amendment, (f) as of the date of this amendment, no Event of Default or Potential Default has occurred and is continuing, and (g) no change in the financial condition or prospect of the Company which could reasonably be expected to be a Material Adverse Event has or will have occurred. 6. References. All references in the Loan Papers to the "Loan Agreement" refer to the Loan Agreement as amended by this amendment, and, because this amendment is a "Loan Paper" referred to in the Loan Agreement, then the provisions relating to Loan Papers in Section 10 are incorporated in this amendment by reference, the same as if set forth verbatim in this amendment. 7. Counterparts. This amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document. All counterparts must be construed together to constitute one and the same instrument. 8. Parties Bound. This amendment binds and inures to the Company, Agent, each Bank, and, subject to Section 10.10, their respective successors and assigns. 9. ENTIRETY. THIS AMENDMENT, THE LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES FOR THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [REST OF PAGE INTENTIONALLY LEFT BLANK] EXECUTED as of the date first stated in this amendment. LOMAS MORTGAGE USA, INC., as the Company BANK ONE, TEXAS, N.A., as Agent and a Bank By /s/ROBERT E. BYERLEY, JR. By /s/KATHLEEN C. STEWART ----------------------------------- ------------------------- Robert E. Byerley, Jr., Kathleen C. Stewart, Senior Vice President & Treasurer Vice President GUARANTY FEDERAL BANK, F.S.B., as a Bank TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as a Bank By /s/JAMES E. ROBERTSON By /s/ABBIE TIDMORE ----------------------------------- ------------------------- James E. Robertson, Vice President Abbie Tidmore, Vice President ANNEX A CLOSING CONDITIONS (All dated as of January 18, 1994, unless otherwise stated) J&G [1.] NINTH AMENDMENT TO CREDIT AGREEMENT (the "Ninth Amendment") executed by LOMAS MORTGAGE USA, INC. (the "Company"), certain lenders ("Banks"), and BANK ONE, TEXAS, N.A., as agent for itself and the other Banks ("Agent"), to which must be attached: Annex A - Closing Conditions Amended Schedule 1.3 - Private Servicing Agreement 2. PROSPECTUS dated February 19, 1993, for DLJ Mortgage Acceptance Corp. Mortgage Pass-Through Certificates (Issuable in Series). 3. POOLING AND SERVICING AGREEMENT dated as of August 1, 1993, between DLJ Mortgage Acceptance Corp. as Depositor, the Company as Master Servicer, and Bankers Trust Company as Trustee, for certain Mortgage Pass-Through Certificates. J&G [4.] AMENDMENTS TO FINANCING STATEMENTS executed by the Company as Debtor and Agent as Secured Party, filed in the following jurisdictions with respect to the following Financing Statements, for the purpose of amending the Schedule 1.3 attached to those Financing Statements to be the Amended Schedule 1.3 attached to the Ninth Amendment: Original Original Jurisdiction File No. File Date -------------- -------- --------- Sec. State, CT 969751 06/15/92 Sec. State, CT 956434 02/21/92 Sec. State, TX 116774 06/12/92 Sec. State, TX 031203 02/21/92 J&G [5.] POWER OF ATTORNEY executed by the Company in favor of Agent on behalf of Banks, for the agreement described in Item 3 above. LM [6.] OFFICERS' CERTIFICATE executed by the Assistant Secretary of the Company, certifying resolutions adopted by the Company's directors, incumbency of certain officers of the Company, and changes, if any, to the Company's corporate charter and bylaws since November 30, 1993, to which must be attached: Annex A - Resolutions Annex B - Changes to Corporate Charter, if any Annex C - Changes to Bylaws, if any [7.] Such other documents or items as Agent may require, in form and substance satisfactory to Agent. - ---------- [ ] denote items not complete or furnished when this version of this annex was prepared, and the responsibility for those items are noted by initials or names of parties or counsel. AMENDED SCHEDULE 1.3 PRIVATE SERVICING AGREEMENTS 1. Amended and Restated Participant Agreement (Sale and Servicing) dated as of February 13, 1992 between California Public Employee's Retirement System, Lomas Mortgage USA, Inc., as Manager, and Lomas Mortgage USA, Inc., as Participant, for the California PERS Member Home Loan Conduit Program, as the same may be renewed, extended, amended, modified, restated, or replaced from time to time. 2. Servicing Agreement dated as of August 1, 1992, between Lomas Mortgage USA, Inc. as Master Servicer, Lomas Mortgage USA, Inc., as Servicer, Capstead Mortgage Corporation, and the other Owners named therein, as the same may be renewed, extended, amended, modified, restated, or replaced from time to time. 3. Pooling and Servicing Agreement dated as of August 1, 1993, between DLJ Mortgage Acceptance Corp. as Depositor, Lomas Mortgage USA, Inc., as Master Servicer, and Bankers Trust Company as Trustee, for certain Mortgage Pass-Through Certificates, as the same may be renewed, extended, amended, modified, restated, or replaced from time to time. EX-10.2 3 EXHIBIT 10.2 EXHIBIT 10.2 TENTH AMENDMENT TO SERVICING PAYMENTS LOAN AND SECURITY AGREEMENT THIS AMENDMENT is entered into as of March 31, 1994, between LOMAS MORTGAGE USA, INC., a Connecticut corporation (the "Company"), the banks listed on the signature pages of this amendment ("Banks"), and BANK ONE, TEXAS, N.A., as agent for Banks (in that capacity "Agent"). The Company, Banks, and Agent have entered into the Servicing Payments Loan and Security Agreement dated as of February 11, 1992 (as amended through the date of this amendment and as further renewed, extended, amended, and restated, the "Loan Agreement"), providing for loans to the Company on a revolving basis up to $25,000,000 outstanding at any time. The Company has requested an amendment to the Loan Agreement in order to amend the minimum- net-worth covenant under the Loan Agreement. Accordingly, for adequate and sufficient consideration, the parties agree as follows: 1. Certain Definitions. Unless otherwise stated in this amendment (a) terms defined in the Loan Agreement have the same meanings when used in this amendment and (b) references to "Sections" and "Schedules" are to sections and schedules of or to the Loan Agreement. 2. Amendment. Section 7.4 is entirely amended as follows: 7.4 Consolidated Net Worth. Permit its Consolidated Net Worth to be less than the greater of either (i) the amount required by FHA, FHLMC, FNMA, VA, and GNMA at any and all times for maintaining the Company's status as an approved mortgagee, seller/servicer, or issuer, or (ii) $200,000,000. 3. Conditions Precedent. The foregoing is not effective until Agent and Banks receive counterparts of this amendment executed by the Company, Agent, and all Banks. 4. Ratifications. This amendment modifies and supersedes all inconsistent terms and provisions of the Loan Papers, and, except as expressly modified and superseded by this amendment, the Loan Papers are ratified and confirmed and continue in full force and effect. The Company, Banks, and Agent agree that the Loan Papers as amended by this amendment continue to be legal, valid, binding, and enforceable in accordance with their respective terms. Without limiting the generality of the foregoing, the Company ratifies and confirms that all Liens (except as amended by this amendment) heretofore granted to Agent, on behalf of Banks, were intended to, do, and continue to secure the full payment and performance of the Obligations, and the Company agrees to perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional assignments, security agreements, modifications or amendments to any of the foregoing, and such other agreements, documents, and instruments as Agent or any Bank may reasonably request in order to perfect and protect those Liens and preserve and protect the rights of Agent and Banks in respect of all present and future Collateral. 5. Representations and Warranties. The Company represents and warrants to Banks and Agent that (a) this amendment and the Loan Papers to be delivered under this amendment have been duly executed and delivered by the Company, (b) no action of, or filing with, any Tribunal is required to authorize, or is otherwise required in connection with, the execution, delivery, and performance by the Company of this amendment and the Loan Papers to be delivered under this amendment, (c) this amendment and the Loan Papers to be delivered under this amendment are valid and binding upon the Company and are enforceable against the Company in accordance with their respective terms, except as limited by the Bankruptcy Code of the United States of America and all other similar Laws affecting the rights of creditors generally, (d) the execution, delivery and performance by the Company of this amendment and the Loan Papers to be delivered under this amendment do not require the consent of any other Person and do not and will not constitute a violation of any laws, agreement, or understanding to which the Company is a party or by which the Company is bound, (e) the representations and warranties contained in the Loan Agreement, as amended by this amendment, are true and correct in all material respects except to the extent that (i) the representations and warranties speak to a specific date or (ii) the facts on which the representations and warranties were based have been changed by transactions contemplated or permitted by the Loan Agreement as of the date of this amendment, (f) as of the date of this amendment, no Event of Default or Potential Default has occurred and is continuing, and (g) no change in the financial condition or prospect of the Company which could reasonably be expected to be a Material Adverse Event has or will have occurred. 6. References. All references in the Loan Papers to the "Loan Agreement" refer to the Loan Agreement as amended by this amendment, and, because this amendment is a "Loan Paper" referred to in the Loan Agreement, then the provisions relating to Loan Papers in Section 10 are incorporated in this amendment by reference, the same as if set forth verbatim in this amendment. 7. Counterparts. This amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document. All counterparts must be construed together to constitute one and the same instrument. 8. Parties Bound. This amendment binds and inures to the Company, Agent, each Bank, and, subject to Section 10.10, their respective successors and assigns. 9. ENTIRETY. THIS AMENDMENT, THE LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES FOR THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [REST OF PAGE INTENTIONALLY LEFT BLANK] EXECUTED as of the date first stated in this amendment. LOMAS MORTGAGE USA, INC., as the Company BANK ONE, TEXAS, N.A., as Agent and a Bank By /s/ROBERT E. BYERLEY, JR. By /s/KATHLEEN C. STEWART ----------------------------------- ------------------------- Robert E. Byerley, Jr., Kathleen C. Stewart, Senior Vice President & Treasurer Vice President GUARANTY FEDERAL BANK, F.S.B., as a Bank TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as a Bank By /s/ABBIE Y. TIDMORE By /s/CARLOTTA M. HUDLER ----------------------------------- ------------------------- Abbie Y. Tidmore, Vice President Carlotta M. Hudler, Vice President EX-10.3 4 EXHIBIT 10.3 EXHIBIT 10.3 FIFTH AMENDMENT TO RESTATED LOAN AND SECURITY AGREEMENT THIS AMENDMENT is entered into as of March 31, 1994, between LOMAS MORTGAGE USA, INC., a Connecticut corporation (the "Company"), the banks listed on the signature pages below ("Lenders"), BANK ONE, TEXAS, N.A., as Administrative Agent (in that capacity "Administrative Agent"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Syndication Agent (together with Administrative Agent "Agents"). The Company, Lenders, and Agents have entered into the Restated Loan and Security Agreement dated as of July 8, 1993 (as amended through the date of this amendment and as further renewed, extended, amended, and restated, the "Loan Agreement"), providing for loans to the Company on a revolving basis. The Company has requested an amendment to the Loan Agreement in order to amend the minimum-net-worth covenant under the Loan Agreement. Accordingly, for adequate and sufficient consideration, the parties agree as follows: 1. Certain Definitions. Unless otherwise specified in this amendment (a) all terms defined in the Loan Agreement have the same meanings when used in this amendment and (b) all references to "Sections" and "Schedules" are references to the Loan Agreement's sections and schedules. 2. Amendments. (a) Section 2.18(b) is entirely amended as follows: (b) The Company shall pay to each Lender a facility fee payable in advance on a quarterly basis, that is equal to percentage of that Lender's Commitment in effect on the date the payment is due, which percentage is 0.125% per annum through March 30, 1994, and 0.150% per annum after that date. (b) Section 7.4 is entirely amended as follows: 7.4 Consolidated Net Worth. Permit its Consolidated Net Worth to be less than the greater of either (i) the amount required by FHA, FHLMC, FNMA, VA, and GNMA at any and all times for maintaining the Company's status as an approved mortgagee, seller/servicer, or issuer, or (ii) $200,000,000. 3. Conditions Precedent. The foregoing is not effective unless (a) Agents have received counterparts of this amendment executed by the Company, by Agents, and all Lenders and (b) all of the representations and warranties -- in this amendment and in all other Loan Papers are true and correct as of -- as if made on -- the date of this amendment. 4. Ratifications. This amendment modifies and supersedes all inconsistent terms and provisions of the other Loan Papers. Except as expressly modified and superseded by this amendment, the terms and provisions of the other Loan Papers are ratified and confirmed and continue in full force and effect. The Company, Determining Lenders, and Agents agree that the Loan Papers, as amended by this amendment, continue to be legal, valid, binding, and enforceable in accordance with their respective terms. The Company ratifies and confirms that all Liens granted to Agents, on behalf of Lenders, were intended to, do, and continue to secure the full payment and performance of the Obligations. The Company shall perform such acts and duly authorize, execute, acknowledge, deliver, file, and record such additional documents as either Agent or any Lender may reasonably request in order to perfect and protect such Liens and preserve and protect the rights of Agents and Lenders in respect of all present and future Collateral. 5. Representations and Warranties. The Company represents and warrants to Lenders and Agents that (a) this amendment and the other Loan Papers to be delivered under this amendment have been duly authorized, executed, and delivered by the Company, (b) no action of, or filing with, any Tribunal is required to authorize, or is otherwise required in connection with, the execution, delivery, and performance by the Company of this amendment and those other Loan Papers (c) this amendment and those other Loan Papers are valid and binding upon the Company and are enforceable against the Company in accordance with their respective terms, except as limited by the Bankruptcy Code of the United States of America and all other similar Laws affecting the rights of creditors generally, (d) the execution, delivery, and performance by the Company of this amendment and those other Loan Papers do not require the consent of any other Person and do not and will not constitute a violation of any Laws, agreement, or understanding to which the Company is a party or by which the Company is bound, (e) the representations and warranties in the Loan Agreement, as amended by this amendment, and each other Loan Paper are true and correct in all material respects on and as of the date of this amendment as though made as of the date of this amendment, and (f) as of the date of this amendment, no Default or Potential Default exists. 6. References. All references in the Loan Papers to the "Loan Agreement" refer to the Loan Agreement as amended by this amendment. Because this amendment is a "Loan Paper" referred to in the Loan Agreement, then the provisions relating to Loan Papers in Section 10 are incorporated in this amendment by reference, the same as if included in this amendment verbatim. 7. Counterparts. This amendment may be executed in any number of counterparts with the same effect as if all signatories had signed the same document, and all of those counterparts must be construed together to constitute one and the same document. 8. Parties Bound. This amendment binds and inures to the Company, Agents, each Lender, and (subject to Section 10.10) their respective successors and assigns. 9. ENTIRETY. THIS AMENDMENT, THE LOAN AGREEMENT AS AMENDED BY IT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES FOR THE TRANSACTIONS THEREIN, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] EXECUTED as of the date first stated. Lomas Mortgage USA, Inc. LOMAS MORTGAGE USA, INC., as the Company 1600 Viceroy Drive Dallas, Texas 75235 Attn: Robert E. Byerley, Jr., Senior Vice President & By /s/ROBERT E. BYERLEY, JR. Treasurer ----------------------------------- Telecopy: 214/879-7018 Robert E. Byerley, Jr., Senior Vice President and Treasurer Third Floor, 1717 Main Street BANK ONE, TEXAS, N.A., Mortgage Finance Group as Administrative Agent and a Lender Dallas, Texas 75201 Attn: Kathleen C. Stewart, Vice President Telecopy: 214/290-2275 By /s/KATHLEEN C. STEWART ----------------------------------- Kathleen C. Stewart, Vice President Texas Commerce Bank National TEXAS COMMERCE BANK NATIONAL Association ASSOCIATION, as Syndication Agent and 717 Travis Street a Lender Houston, Texas 77002 Attn: Carlotta M. Hudler, Vice President Telecopy: 713/216-2082 By /s/CARLOTTA M. HUDLER ----------------------------------- Carlotta M. Hudler, Vice President First Bank Place FIRST BANK NATIONAL ASSOCIATION, 601 2nd Ave. S., as a Lender 2nd Floor MPFP0801 Minneapolis, Minnesota 55402-4302 Attn: Kathlyn Slater, Vice President Telecopy: 612/973-0826 By /s/KATHLYN SLATER ----------------------------------- Kathlyn Slater, Vice President 8333 Douglas Avenue GUARANTY FEDERAL BANK, F.S.B., Dallas, Texas 75255 as a Lender Attn: Abbie Y. Tidmore, Vice President Telecopy: 214/360-1660 By /s/ABBIE Y. TIDMORE ----------------------------------- Abbie Y. Tidmore, Vice President 280 Park Avenue, 23 West BANKERS TRUST COMPANY, as a Lender New York, New York 10017 Attn: Matthew C. Bernstein Vice President Telecopy: 212/454-3821 By /s/MATTHEW C. BERNSTEIN ----------------------------------- Matthew C. Bernstein, Vice President 313 Carondelet HIBERNIA NATIONAL BANK, as a Lender Suite 1400 New Orleans, Louisiana 70130 Attn: Mark L. Freeman Banking Officer By /s/MARK L. FREEMAN Telecopy: 504/584-2042 ----------------------------------- Mark L. Freeman, Banking Officer 6222 Wilshire Blvd. BANK HAPOALIM, B.M., Los Angeles, California 90048 LOS ANGELES BRANCH, as a Lender Attn: Robert Pollak, Vice President Telecopy: 213/937-1439 By /s/ROBERT POLLAK ----------------------------------- Robert Pollak, Vice President By ---------------------------------- Name ---------------------------------- Title --------------------------------- 75 Wall Street DRESDNER BANK, AG, NEW YORK BRANCH, New York, New York 10005-2889 as a Lender Attn: Charles H. Hill, Vice President Telecopy: 212/574-0129 By ---------------------------------- Name ---------------------------------- Title --------------------------------- 100 Federal Street 01-32-041 THE FIRST NATIONAL BANK OF BOSTON, Boston, MA 02110 as a Lender Attn: Corinne M. Barrett, Vice President Telecopy: (617) 434-7108 By /s/CORINNE M. BARRETT ----------------------------------- Corinne M. Barrett, Vice President One Marine Midland Center, MARINE MIDLAND BANK, N.A., as a Lender 15th Floor Buffalo, New York 14203 Attn: William F. Dentinger Vice President Telecopy: 716/841-2707 By /s/WILLIAM F. DENTINGER ----------------------------------- William F. Dentinger, Vice President 66th Floor, NationsBank Plaza NATIONSBANK OF TEXAS, N.A., as a Lender 901 Main Street Dallas, Texas 75202 Attn: Shelley Harper, Vice President By /s/SHELLEY HARPER Telecopy: 214/508-0604 ----------------------------------- Shelley Harper, Vice President 380 Madison Avenue BANK OF SCOTLAND, as a Lender New York, New York 10017 Attn: Catherine Oniffrey, Vice President Telecopy: 713/651-9714 By /s/CATHERINE ONIFFREY ----------------------------------- Catherine Oniffrey, Vice President 1601 Elm Street, 2nd Floor COMERICA BANK - TEXAS, as a Lender Dallas, Texas 75201 Attn: W. James Meintjes, Banking Officer Telecopy: 214/979-8344 By /s/W. JAMES MEINTJES ----------------------------------- W. James Meintjes, Banking Officer 1230 Peachtree Street NE, COMMERZBANK AKTIENGESELLSCHAFT, Suite 3500 ATLANTA AGENCY, as a Lender Atlanta, Georgia 30309 Attn: Harry P. Yergey, Vice President Telecopy: 404/888-6539 By /s/ANDREAS BREMER ----------------------------------- Andreas Bremer, Senior Vice President By /s/HARRY P. YERGEY ----------------------------------- Harry P. Yergey, Vice President 499 Thornall Street MIDLANTIC NATIONAL BANK, as a Lender Edson, New Jersey 08837 Attn: Glenn Hedde, Vice President Telecopy: 908/321-2094 By /s/GLENN HEDDE ----------------------------------- Glenn Hedde, Vice President 7485 New Horizon Way THE PRUDENTIAL HOME MORTGAGE Frederick, Maryland 21701 COMPANY, INC., as a Lender Attn: Russell R. Anderson, Vice President Telecopy: 301/696-7405 By /s/RUSSELL R. ANDERSON ----------------------------------- Russell R. Anderson, Vice President 640 Fifth Avenue, 15th Floor BANK OF IRELAND GRAND CAYMAN BRANCH, New York, New York 10019 as a Lender Attn: Roger Burns, Vice President Telecopy: 212/586-7752 By /s/ROGER BURNS ----------------------------------- Roger Burns, Vice President 15 South 20th Street, 15th Floor COMPASS BANK, as a Lender Birmingham, Alabama 35233 Attn: John D. West, Mortgage Banking Officer Telecopy: 205/715-7994 By /s/JOHN D. WEST ----------------------------------- John D. West, Mortgage Banking Officer 1 Mercantile Center MERCANTILE BANK OF ST. LOUIS NATIONAL 7th & Washington ASSOCIATION, as a Lender St. Louis, Missouri 63101 Attn: Michael P. Waters, Vice President Telecopy: 314/425-2162 By /s/MICHAEL P. WATERS ----------------------------------- Michael P. Waters, Vice President 7700 Wisconsin Avenue SIGNET BANK/MARYLAND, as a Lender Suite 400 Bethesda, Maryland 20814 Attn: David H. Olson, Vice President By /s/DAVID H. OLSON Telecopy: 301/652-1174 ----------------------------------- David H. Olson, Vice President 231 South LaSalle Street CONTINENTAL BANK N.A., as a Lender Chicago, Illinois 60697 Attn: Mary Jo Hoch, Vice President Telecopy: 312/987-5833 By /s/MARY JO HOCH ----------------------------------- Mary Jo Hoch, Vice President EX-10.4 5 EXHIBIT 10.4 EXHIBIT 10.4 AMENDED AND RESTATED MASTER PLEDGE AGREEMENT, dated as of April 8, 1994, made by LOMAS MORTGAGE USA, INC. ("Pledgor") to LEHMAN BROTHERS SPECIAL FINANCING INC. ("Pledgee"). Pledgor and Pledgee have entered into an Interest Rate and Currency Exchange Agreement, dated as of July 7, 1992, (the "Agreement"), pursuant to which Pledgor and Pledgee may enter into Swap Transactions from time to time. If the Agreement or any such Swap Transaction requires Pledgor to deliver collateral as security for its obligations thereunder, Pledgor agrees to pledge and deliver such collateral pursuant to the terms of this Amended and Restated Master Pledge Agreement (the "Pledge Agreement"). Each confirmation of a Swap Transaction shall constitute a supplement to, and be part of, the Agreement and the Pledge Agreement so that the Agreement (as supplemented by Confirmations of Swap Transactions) and the Pledge Agreement (as supplemented by Confirmations of Swap Transactions) will form a single agreement between Pledgor and Pledgee. Accordingly, the parties hereto agree as follows: 1. Certain Definitions. Unless otherwise defined herein, terms defined in the Agreement will have such defined meanings when used herein and terms defined in the 1991 ISDA Definitions, published by the International Swaps and Derivatives Association, Inc., shall have the meaning assigned therein when used herein. In addition, as used in this Agreement, the following terms will have the following meanings. "Aggregate Applicable Amount" means, as of an Exposure Calculation Date, the Aggregate Exposure Amount, provided, however, that the Aggregate Exposure Amount is greater than or equal to $50,000. "Aggregate Exposure Amount" means, as of an Exposure Calculation Date, a hypothetical amount, if any, that Pledgor would owe to Pledgee assuming the Exposure Calculation Date is the Early Termination Date and that Pledgor is the Defaulting Party. Such amount shall be equal to the sum of (i) the amount determined in accordance with Indemnification calculated on the basis of Aggregation, plus (ii) the Unpaid Amounts due to Pledgee minus the Unpaid Amounts due to Pledgor. If the resulting amount is a negative number, the Aggregate Exposure Amount shall be zero. "Aggregate Value of the Collateral" means the sum of the fair market value of all the Collateral held by or on behalf of Pledgee with respect to all Swap Transactions under which Pledgor shall then have any obligations to Pledgee. "Collateral" means cash, securities of the types referred to in Section 3(a), Mortgage Servicing Collateral (as defined below) and all other property as shall be agreed to jointly by Pledgee and Pledgor, which shall be pledged to and received by Pledgee hereunder, together with all collections, income, distributions and claims in respect thereof and all proceeds of any of the foregoing. "Equivalent Collateral" means, with respect to any Collateral, securities of the same class and issue, issuer, series and maturity and the same principal amount, and, in the case of Collateral in the form of mortgage-backed securities, securities backed by the same pool of mortgages as the Collateral. "Exposure Calculation Date" means any date or dates as may be selected by Pledgee, at its option and in its sole discretion, if Pledgee is the Non- affected Party under Part 5(3) of the Agreement. "Mortgage Servicing Collateral" means all of Pledgor's right, title and interest in and to the obligations, rights, remedies, powers, privileges, benefits and responsibilities of Pledgor (the "Servicing Rights") to service the mortgage notes which are described by Pool Number on Exhibit "A" hereto (the "Mortgage Notes") pursuant to and in accordance with the servicing provisions of the GNMA Guide (hereinafter, to the extent of Pledgor's rights to service the Mortgage Notes, the "Servicing Agreement"), including, without limitation, (a) the right to receive servicing fees, management fees, termination fees and net sales proceeds, (b) the right to hold and administer the escrow, impound, principal and interest, and custodial accounts relative to the Mortgage Notes (the "Escrow Accounts"), (c) the right to all loan files, insurance files, tax records, collection records, documents, ledgers, computer print-outs, computer tapes and other records, data or information relating to the Mortgage Notes, the Escrow Accounts, or the Servicing Rights or otherwise necessary or proper to perform the obligations of servicer under the Servicing Agreement, and (d) all right, title and interest of Pledgor in and to, and obligations of Pledgor under the Servicing Agreement, together with all contracts, general intangibles, accounts, margin deposits and other rights associated with the Servicing Agreement and together with all monies and claims for monies which may now or hereafter arise out of the Servicing Agreement, all claims, right, powers, privileges and remedies of Pledgor thereunder and, to the extent not included in the foregoing, any and all proceeds of any and all of the foregoing. The term "Mortgage Servicing Collateral" also means, in addition to all of the foregoing property, any accessions, additions and attachments thereto and the proceeds and products thereof, including without limitation, all cash, general intangibles, accounts, equipment, fixtures, notes, drafts, acceptances, instruments, chattel paper, insurance proceeds payable because of loss or damage, or other property, benefits or rights arising therefrom, and in and to all returned or repossessed goods arising from or relating to any of the property described herein or other proceeds of any sale or other disposition of such property. "GNMA" means the Government National Mortgage Association. "GNMA Guide" means the GNMA Mortgage-Backed Security Guide, as amended from time to time. "Pledgee" means Party A. "Pledgor" means Party B. 2. Pledge. As security for the prompt and complete payment when due (whether on a Payment Date, on an Early Termination Date or otherwise) of all Amounts payable by Pledgor to Pledgee pursuant to one or more Swap Transactions (collectively, the "Obligations"), Pledgor hereby grants to Pledgee a first lien on, and a first and prior security interest in and right of set off against, Collateral pledged by Pledgor pursuant to this Pledge Agreement. 3. Form of Collateral. (a) With respect to any of the Collateral consisting of securities or obligations issued or guaranteed by the government of the United States of America or any of its agencies or instrumentalities and available only in book-entry form by means of entries on the records of United States of America Federal Reserve Banks, Pledgor shall (i) in the case of securities, cause such securities to be transferred to such account as may be specified by Pledgee in writing. (b) With respect to any of the Collateral available in definitive, certificated form, Pledgor shall deliver (as instructed by Pledgee) to Pledgee or Lehman Brothers Inc., as agent for Pledgee, or Lehman Government Securities Inc., as agent for the Pledgee, the certificates for such collateral in suitable form for transfer or accompanied by duly executed instruments of transfer or appropriate undated powers of assignment thereof duly executed in blank. All deliveries of certificated securities shall be made to Pledgee at the Cage, One Battery Park Plaza, 2nd Floor, New York, New York 10004. 4. Distributions, etc. If, while this Agreement is in effect, Pledgor shall become entitled to receive or shall receive any debenture, other debt instrument, stock certificate (including, without limitation, any certificate representing a distribution in connection with any reclassification, increase or reduction of capital, or issued in connection with any reorganization), option, rights or other property, whether as an addition to, in substitution of, or in exchange for any of the Collateral, or otherwise, Pledgor agrees to accept the same as Pledgee's agent and to hold the same in trust on behalf of Pledgee and to deliver the same forthwith to Pledgee in the exact form received and in compliance with the terms of Section 3 hereof, as additional Collateral for the Obligations, except that cash received on account of dividends and interest and, subject to Section 9, moneys attributable to the Servicing Agreement, may be retained and held by Pledgor. Any sums paid upon or in respect of the Collateral upon the liquidation or dissolution of the issuer thereof shall be paid over to Pledgee to be held by it as additional Collateral for the Obligations; and in case any distribution shall be made on or in respect of the Collateral or any property shall be distributed upon or with respect to the Collateral pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, the property so distributed shall be delivered to Pledgee to be held by it as additional Collateral for the Obligations. All sums of money and property so paid or distributed in respect of the Collateral which are received by Pledgor shall, until paid or delivered to Pledgee, be held by Pledgor in trust as additional Collateral for the Obligations. Unless an Event of Default or Potential Event of Default, with respect to Pledgor, referred to in Section 5 of the Agreement has occurred and is continuing, Pledgor shall be entitled to receive (and to the extent the same come into possession of Pledgee or its agents, Pledgee shall promptly remit to the order of Pledgor) any dividends or interest paid in cash in respect of the Collateral which relates to such Swap Transaction and, subject to Section 9, any moneys attributable to the Servicing Agreement. Pledgee shall have no duty, however, to collect such payments. Upon the occurrence and during the continuance of such an Event of Default or Potential Event of Default Pledgee shall become entitled to receive and retain such payments. 5. Adjustment of Collateral. If the Aggregate Value of the Collateral, as of any Exposure Calculation Date, shall be less than the Aggregate Applicable Amount, then Pledgor shall, within one (1) New York Banking Day after written demand by Pledgee, deliver to Pledgee, as Collateral, sufficient additional Collateral in conformity with Sections 2 and 3 hereof, so that, immediately after delivery of such Collateral, the Aggregate Value of the Collateral shall be at least equal to the Aggregate Applicable Amount. The Aggregate Applicable Amount shall be calculated by Pledgee and the Aggregate Value of Collateral shall be determined by Pledgee on the basis of the closing sale prices for such Collateral as published in The Wall Street Journal with respect to such date (or, in the event no such quote is available, the most recent closing bid prices from a source selected, in good faith, by Pledgee) or, in the case of Mortgage Servicing Collateral, on the basis of its good faith determination of the fair market value thereof. The calculations hereunder shall be binding upon Pledgor absent manifest error. If the Aggregate Value of the Collateral as of any date, determined as set forth above, shall be greater than 110% of the Aggregate Applicable Amount for such date, then Pledgee shall, within five (5) New York Banking Days after written demand by Pledgor, return to Pledgor sufficient Collateral or Equivalent Collateral so that immediately after delivery of such Collateral or Equivalent Collateral, the Aggregate Value of the Collateral shall be equal to the Aggregate Applicable Amount. 6. Rights of Pledgee. Pledgee shall not be liable for failure to collect or realize upon the Obligations or any collateral security or guarantee therefor, or any part thereof, or for any delay in so doing, nor shall it be under any obligation to take any action whatsoever with regard thereto. Any or all of the Collateral held by Pledgee hereunder may, without notice, be registered in the name of Pledgee or its nominee. Except with respect to Mortgage Servicing Collateral, Pledgee or its nominee may thereafter, without notice, exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options with respect to such Collateral as if it were the absolute owner thereof, including, without limitation, the right to exchange at its discretion any and all of such Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof or upon the exercise by any such issuer or Pledgee of any right, privilege or option pertaining to any of such Collateral, and in connection therewith to deposit and deliver any and all of such Collateral with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as it may determine, all without liability except to account for property actually received by it, but Pledgee shall have no duty to exercise any of the aforesaid rights, privileges or options and shall not be responsible for any failure to do so or delay in so doing. Except with respect to Mortgage Servicing Collateral, Pledgor hereby agrees and acknowledges that Pledgee shall have the right, without obtaining further consent of Pledgor, to repledge, rehypothecate, reassign, as well as enter into repurchase transactions (collectively, "Repurchase Transactions") with respect to any of the Collateral, or direct Lehman Brothers Inc. and/or Lehman Government Securities, Inc., as its agent, to enter into any such Repurchase Transactions using the Collateral during any period in which this Agreement remains in effect. In the event Pledgor makes written request for substitution of any Collateral pursuant to Section 20 hereof, which at the time of such request is the subject of any Repurchase Transaction, Pledgee shall be obligated to redeliver such affected Collateral or Equivalent Collateral to Pledgor in accordance with Section 20 no later than five (5) New York Banking Days following Pledgee's receipt of such request, which redelivery shall be deemed to be the "prompt return" of Collateral required by such Section 20. Notwithstanding the foregoing, Pledgee's right to enter into Repurchase Transactions with Collateral under this Section 6, shall in no way relieve Pledgee of its obligation to redeliver such Collateral to Pledgor under the terms and in the timely manner provided for in this Pledge Agreement. 7. Remedies. In the event that any portion of the Obligations has become due and payable, and has not been paid, Pledgee may forthwith collect the Collateral, or any part thereof, or may sell, assign, give options to purchase, contract to sell or otherwise dispose of and deliver said Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at any exchange, broker's board or at any of Pledgee's offices or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk, without advertisement or demand upon Pledgor, both of which are hereby waived, except Pledgee shall provide Pledgor with notice on the day of any such sale (which may be a telex, telegram, telecopy or other similar facsimile transmission and all of which Pledgor hereby agrees is reasonable notice within the meaning of Section 9- 504(3) of the Uniform Commercial Code as in effect in New York) of Pledgee's intention to make any such sale, with the right to Pledgee upon any such sale or sales, public or private, to purchase the whole or any part of said Collateral so sold, free of any right or equity of redemption in Pledgor, which right or equity is hereby expressly waived or released. As to Mortgage Servicing Collateral and without limiting the foregoing, Pledgee is hereby authorized, at any public or private sale of the Mortgage Servicing Collateral, to restrict the prospective bidders or purchasers to persons who will represent that (a) they are GNMA-approved issuers; (b) they will execute a transfer agreement and related documentation acceptable to GNMA; and (c) they are able to satisfy and discharge, and will actually satisfy and discharge, any and all defaults and outstanding obligations (including, without limitation, mortgage repurchase obligations, recourse obligations, or repayment of shortages in custodial or buydown accounts) of Pledgor due and owing to GNMA. Pledgor agrees that any sale or disposition of the Mortgage Servicing Collateral which is limited to such a transferee shall be deemed to be a commercially reasonable sale or disposition of the Mortgage Servicing Collateral and Pledgor agrees that if Pledgee elects to become the transferee servicer of record with respect to the Servicing Agreement, Pledgee shall be entitled to apply proceeds of the Mortgage Servicing Collateral to satisfaction of any liabilities of Pledgor to GNMA that have arisen, and are unsatisfied, prior to such transfer, and that Pledgee shall incur no liability to Pledgor if any action taken by Pledgee or in its behalf in good faith pursuant to this Agreement shall prove to be in whole or in part inadequate or invalid. Pledgee shall apply the net proceeds of any such collection or sale, in the case of Mortgage Servicing Collateral, after payment to GNMA of all amounts due to GNMA under the Servicing Agreement, and in the case of all Collateral, after deducting all reasonable costs and expenses incurred therein or incidental to the care, safekeeping or otherwise of any and all of the Collateral or in any way relating to the rights of Pledgee hereunder, including reasonable attorney's fees and legal expenses, to the payment in whole or in part of the Obligations, and only after so paying over such net proceeds and after the payment by Pledgee of any other amount required by any provision of law need Pledgee account for the surplus, if any, to Pledgor. In addition to the rights and remedies granted to it in this Pledge Agreement and in any other instrument or agreement securing, evidencing or relating to any of the Obligations, Pledgee shall have all rights and remedies of a secured party under the Uniform Commercial Code of the State of New York. Pledgor shall be liable for the deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay all amounts to which Pledgee is entitled, and the fees of any attorneys employed by Pledgee to realize upon such Collateral and collect such deficiency. 8. Action Under Servicing Agreement. In addition to its rights under Section 7 hereof, Pledgee shall have the right at any time after the occurrence of an Event of Default (but Pledgee shall have no obligation) to take in its name or in the name of Pledgor or otherwise such action as Pledgee may at any time or from time to time determine to be necessary to enforce any rights of Pledgor under the Servicing Agreement, to cure any default under the Servicing Agreement or to protect the rights of Pledgor or Pledgee thereunder. 9. Receipt of Proceeds in Trust by Pledgor. From and after the occurrence and during the continuance of an Event of Default or Potential Event of Default, in the event Pledgor shall receive any moneys, income, payments or benefits attributable or accruing to the Servicing Agreement, Pledgor will hold the same in trust for Pledgee and will not commingle the same with any other property or moneys of Pledgor and will promptly deliver the same to Pledgee in the form received, and, in Pledgee's sole discretion, such sums shall be applied toward the payment of the Obligations, in the order set forth in Section 7 hereof, or held by Pledgee as additional Collateral; provided, however, that Pledgor may retain, use and dispose of any moneys received before the occurrence of an Event of Default or Potential Event of Default under the Agreement for any lawful corporate purpose and such moneys shall not constitute part of the moneys held in trust. 10. Collection of Accounts and General Intangibles. At any time after the occurrence of an Event of Default, in addition to the other rights and remedies of Pledgee, without assuming any rights or obligations under the Servicing Agreement, Pledgee shall have the right in its own name or in the name of Pledgor, to require Pledgor forthwith to transmit all proceeds of the Servicing Agreement not otherwise received in trust hereunder to Pledgee, to notify GNMA to make payments thereunder directly to Pledgee, to demand, collect, receive, receipt for, sue for, compound and give acquittances for, any and all amounts due or to become due thereunder and to endorse the name of Pledgor on all commercial paper given in payment or part payment thereof, and in Pledgee's discretion to file any claim or take any other action or proceeding that Pledgee may deem reasonably necessary or appropriate to protect and preserve and realize upon the Servicing Agreement. Pledgee shall have no duty or obligation whatsoever to collect any amounts under the Servicing Agreement, or to take any other action to preserve or protect the Servicing Agreement; however, should Pledgee elect to collect any amounts under the Servicing Agreement or take any other action to protect or preserve same, Pledgor releases Pledgee from any claim or claims for loss or damage arising from any act or omission of Pledgee (including Pledgee's ordinary negligence) in connection therewith (but excluding any act or omission of Pledgee which constitutes gross negligence or willful misconduct). 11. Assumption Upon Event of Default. Pledgor agrees that it will upon the written request of Pledgee execute and deliver such documents and instruments as Pledgee or its counsel may deem reasonably necessary or desirable to effect the assignment of the Servicing Agreement to Pledgee or its nominee; provided, however, that any assumption shall not be effective prior to the occurrence of an Event of Default. Such assumption shall relieve Pledgor of its obligations under the Servicing Agreement from and after the date of assignment, and Pledgor shall remain liable for all costs and expenses incurred in connection with the performance of its obligations under the Servicing Agreement arising prior to the date of assignment. If the Servicing Agreement is assigned to Pledgee or its nominee and if Pledgee shall pay the unpaid amounts due under the Servicing Agreement, Pledgee shall thereupon be subrogated to all the contracting party's rights against Pledgor with respect to such payment. 12. Appointment of Receiver. Pledgee, as a matter of right and to the extent permitted by law, shall be entitled to appointment of a receiver for all or any part of the Collateral, whether such receivership be incidental to a proposed sale of the Collateral or otherwise, and Pledgor hereby consents to the appointment of such a receiver and will not oppose any such appointment. The receiver at the request of Pledgee, and upon order of the court, if applicable, shall have all the powers and authority of Pledgee as provided in this Agreement. 13. Representations, Warranties and Agreements of Pledgor. Pledgor represents to and agrees with Pledgee, as to all of the Collateral, that (a) Pledgor is and will be the legal, record and beneficial owner of, and have good and marketable title to, the Collateral subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever, except the lien and security interest in favor of Pledgee created by this Pledge Agreement subject, in the case of the Mortgage Servicing Collateral, to the rights of GNMA arising under the GNMA Guide; (b) there is no financing statement or similar filing now on file in any public office covering any part of the Collateral, and Pledgor will not execute, and there will not be on file in any public office, any financing statement or similar filing except the financing statements filed or to be filed in favor of Pledgee; (c) all information furnished to Pledgee concerning Pledgor, the Collateral and the Obligations, or otherwise, is or will be at the time the same is furnished, accurate and complete in all material respects; and (d) 1600 Viceroy Drive, Dallas, Texas 75235 is Pledgor's place of business if Pledgor has only one place of business, or Pledgor's chief executive office if Pledgor has more than one place of business, and Pledgor agrees not to change such address without advance written notice to Pledgee; (e) the pledge, assignment and delivery of the Collateral pursuant to this Agreement will create a valid first lien on and a perfected first security interest in the Collateral as such Collateral is delivered to Pledgee, and the proceeds thereof, subject to no prior pledge, lien, mortgage hypothecation, security interest, charge, option or encumbrance or to any agreement purporting to grant to any third party a security interest, charge, option or encumbrance or to any agreement purporting to grant to any third party a security interest in the property or assets of any Pledgor which would include any Collateral; (f) it will defend Pledgee's right title and security interest in and to the Pledged Collateral and the proceeds thereof against the claims and demands of all persons whomever; (g) it will have like title to and right to pledge any other property at any time hereafter pledged to Pledgee as Collateral hereunder and will likewise defend Pledgee's right thereto and security interest therein; and (h) it will promptly pay when due all taxes, assessments, license fees, registration fees, and governmental charges levied or assessed against Pledgor or with respect to the Collateral or any part thereof. In addition, Pledgor represents to and agrees with Pledgee, with respect to the Mortgage Servicing Collateral, that (i) Pledgor is the lawful owner of the Servicing Rights, is custodian of the Escrow Accounts, has the sole right and authority to pledge, assign and transfer the Servicing Rights and is not contractually obligated to sell, deliver, pledge or transfer any rights to all or any part of the Mortgage Servicing Collateral to any person other than Pledgee; (ii) there are no contracts executed by Pledgor, other than the Servicing Agreement and the GNMA Guide, affecting the Servicing Rights or the Mortgage Notes; and (iii) Pledgor has not assigned or granted a security interest in any of the Mortgage Servicing Collateral to anyone other than Pledgee. The representations made herein shall be made and deemed to be repeated at the times at which the representations of Pledgor in Section 3 of the Agreement are made and deemed to be repeated. 14. Protection of Collateral. Pledgor agrees that Pledgee, at its option, upon Pledgor's failure to do so within any applicable time period in the Servicing Agreement (including any time period in which Pledgor is contesting any claim in good faith) but without any obligation whatsoever to do so, may (a) discharge taxes, claims, charges, liens, security interests, assessments or other encumbrances of any and every nature whatsoever at any time levied, placed upon or asserted against the Collateral, (b) pay any filing, recording, registration, licensing or certification fees or other fees and charges related to the Collateral, or (c) take any other action to preserve and protect the Collateral and Pledgee's rights and remedies under this Agreement as Pledgee may deem reasonably necessary or appropriate. Pledgor agrees that Pledgee shall have no duty or obligation whatsoever to take any of the foregoing action. Pledgor agrees to promptly reimburse Pledgee upon demand for any payment made or any expense incurred by Pledgee pursuant to this authorization. These payments and expenditures shall constitute additional Obligations and shall be secured by and entitled to the benefits of this Agreement. 15. Retention of Obligations. Further, Pledgor agrees that neither this assignment nor any action or actions on the part of Pledgee shall constitute an assumption of any obligation on the part of Pledgee under the Servicing Agreement and Pledgor shall continue to be liable for all obligations thereunder. Pledgor agrees to perform each and all of Pledgor's obligations under the Servicing Agreement and Pledgor agrees to indemnify and hold Pledgee free and harmless from and against any loss, costs, liability or expense (including but not limited to reasonable attorneys' fees and accountants' fees) resulting from any failure of Pledgor to so perform, unless caused by the gross negligence or willful misconduct of Pledgee. 16. Maintenance of Servicing Agreement; Notice. Pledgor shall, at its expense, perform and observe all terms and provisions of the Servicing Agreement to be performed and observed by Pledgor, maintain the Servicing Agreement in full force and effect, enforce the Servicing Agreement in accordance with its terms, and take all action to such end as may be reasonably requested from time to time by Pledgee. Pledgor shall promptly notify Pledgee of any termination or threatened termination of the Servicing Agreement, and shall furnish Pledgee with copies of any notices received by Pledgor with respect to any termination or threatened termination of the Servicing Agreement within three (3) business days after receipt of any such notice by Pledgor. At any time after receipt of such notice, and if such termination or threatened termination would constitute an Event of Default, then Pledgee may notify GNMA of Pledgee's intention to claim the net sales proceeds and/or contract termination fees, as applicable, with respect to any terminated Servicing Rights, and to receive such net sales proceeds and/or contract termination fees, as applicable, or notify GNMA of Pledgee's intention to accept a transfer of the Servicing Rights from GNMA, at Pledgee's option. Any net sales proceeds or contract termination fees received by Pledgee shall be applied in the order and manner specified in Section 7 of this Agreement, whether or not any of the Obligations are then due and payable. 17. Rights of GNMA. Pledgee and Pledgor hereby acknowledge that the security interest granted hereby in Mortgage Servicing Collateral is subject and subordinate to all claims of GNMA, whether absolute or contingent, arising out of any and all defaults and outstanding obligations of Pledgor to GNMA. Pledgor also acknowledges and agrees that notwithstanding any termination of the Servicing Agreement by GNMA, Pledgor shall not be released from the Obligations. 18. No Disposition, etc. Without the prior written consent of Pledgee, Pledgor agrees that it will not sell, assign, transfer, exchange, or otherwise dispose of or grant any option with respect to, the Collateral, nor will it create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest, charge, option or any other encumbrance with respect to any of the Collateral, or any interest therein, or any proceeds thereof, except for the lien and security interest provided for by this Pledge Agreement. 19. Specific Performance. If Pledgee shall determine to exercise its right to sell any or all of the Collateral pursuant to Section 7 hereof, Pledgor agrees to do or cause to be done all such other acts and things as may be necessary to make such sale or sales of any portion or all of the Collateral valid and binding and in compliance with any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at Pledgor's expense. Pledgor further agrees that a breach of any of the covenants contained in this Section 19 will cause irreparable injury to Pledgee, that Pledgee has no adequate remedy at law in respect of such breach and, as a consequence, agrees that the covenants contained in this paragraph shall be specifically enforceable against Pledgor and Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants. Pledgor further acknowledges the impossibility of ascertaining the amount of damages which would be suffered by Pledgee by reason of a breach of any such covenants and, consequently, agrees that, if Pledgee shall sue for damages for breach, it shall pay, as liquidated damages and not as a penalty, an amount equal to the value of the Collateral on the date Pledgee shall demand compliance with this Section 19, except to the extent such value shall exceed the Obligations. 20. Right of Substitution. Upon written request of Pledgor to return Collateral to Pledgor, so long as such request is accompanied by Collateral of the type set forth in the Swap Transaction, delivered in compliance with Sections 2, 3, and 5 hereof, as may be necessary so that the Aggregate Value of the Collateral (determined pursuant to Section 5 hereof), excluding such returned Collateral but including such substituted Collateral, shall at least be equal to the Aggregate Applicable Amount as determined pursuant to Section 5 hereof, Pledgee shall promptly return to Pledgor, subject to Section 6 hereof, such Collateral or Equivalent Collateral as may be specified in such request; provided, however, that the Pledgee shall give three New York Banking Days' prior notice of any proposed substitution involving Mortgage Servicing Collateral, and that such a substitution will be effective only at the close of business on the day on which a financing statement is filed with respect to the substituted Mortgage Servicing Collateral. Pledgee shall execute such instruments of reassignment and delivery necessary to vest in Pledgor any Collateral returned to Pledgor pursuant to this Section 20. 21. Further Assurances. Pledgor agrees that at any time and from time to time upon the written request of Pledgee, Pledgor will execute and deliver such further documents (including without limitation Uniform Commercial Code Financing Statements) and do such further acts and things as Pledgee may reasonably request in order to effect the purposes of this Agreement or to comply with the requirements of GNMA with respect to the Mortgage Servicing Collateral. Any carbon, photographic or other reproduction of this Agreement or any financing statement signed by Pledgor is sufficient as a financing statement for all purposes, including without limitation, filing in any state as may be permitted by the provisions of the Uniform Commercial Code of such state. 22. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 23. Waiver; Cumulative Remedies. Pledgee shall not by any act, delay omission or otherwise be deemed to have waived any of its rights or remedies hereunder and no waiver shall be valid unless in writing, signed by Pledgee, and then only to the extent therein set forth. A waiver by Pledgee of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Pledgee would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of Pledgee, any right, power of privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 24. Transfer. Neither this Agreement nor any interest or obligation in or under this Agreement may be transferred by either party without the prior written consent of the other party hereto; provided, however, that such consent shall not be required in connection with any transfer by Pledgee or any of its Affiliates of its interests and obligations under the Agreement which is permitted thereunder. 25. Successors; Amendments. (a) This Agreement and all obligations of Pledgor hereunder shall be binding upon the successors and assigns of Pledgor, and shall, together with the rights and remedies of Pledgee hereunder, inure to the benefit of Pledgee and its respective successors and assigns. (b) No amendment, modification or waiver in respect of this Agreement will be effective unless in writing and executed by each of the parties. 26. Governing Law; Submission to Jurisdiction. (a) This Pledge Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to choice of law doctrine. (b) With respect to any claim arising out of this Pledge Agreement (i) each party irrevocably submits for itself and its property to the nonexclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City and (ii) each party irrevocably waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any such court, irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum and further irrevocably waives the right to object, with respect to such claim, suit, action or proceeding brought in any such court, that such court does not have jurisdiction over such party. 27. Notices. Any notice hereunder will be sufficiently given if given in accordance with the provisions for notices under the Agreement and will be effective as set forth therein. Any notice or communication under this Pledge Agreement is to be addressed as follows: if to Pledgee, to Lehman Brothers Special Financing Inc., Attention: Director, Swap Finance Administration, at 200 Vesey Street, 12th Floor, New York, New York 10285 (Facsimile No. (212) 619-6668); and if to Pledgor to 1600 Viceroy Drive, Dallas, Texas 75201, Attention: Paul Fletcher (Facsimile No: (214) 879-7018); or at such other address as either party may notify to the other in writing. IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be duly executed and delivered on the day and year first above written. LOMAS MORTGAGE USA, INC. BY: /s/ROBERT E. BYERLEY, JR. ------------------------------ TITLE: Executive Vice President --------------------------- EX-10.5 6 EXHIBIT 10.5 EXHIBIT 10.5 PSA Public Securities Association 40 Broad Street, New York, NY 10004-2373 Telephone (212) 809-7000 MASTER REPURCHASE AGREEMENT Dated as of April 11, 1994 Between: DLJ Mortgage Capital, Inc. and/or Donaldson, Lufkin & Jenrette Securities Corporation, as applicable - ------------------------------------------------------------------ and Lomas Mortgage USA, Inc. - ------------------------------------------------------------------ 1. Applicability From time to time the parties hereto may enter into transactions in which one party ("Seller") agrees to transfer to the other ("Buyer") securities or financial instruments ("Securities") against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Securities at a date certain or on demand, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a "Transaction" and shall be governed by this Agreement, including any supplemental terms or conditions contained in Annex I hereto, unless otherwise agreed in writing. 2. Definitions (a) "Act of Insolvency", with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or such party seeking the appointment of a receiver, trustee, custodian or similar official for such party or any substantial part of its property, or (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 15 days, (iii) the making by a party of a general assignment for the benefit of creditors, or (iv) the admission in writing by a party of such party's inability to pay such party's debts as they become due; (b) "Additional Purchased Securities", Securities provided by Seller to Buyer pursuant to Paragraph 4(a) hereof; (c) "Buyer's Margin Amount", with respect to any Transaction as of any date, the amount obtained by application of a percentage (which may be equal to the percentage that is agreed to as the Seller's Margin Amount under subparagraph (q) of this Paragraph), agreed to by Buyer and Seller prior to entering into the Transaction, to the Repurchase Price for such Transaction as of such date; (d) "Confirmation", the meaning specified in Paragraph 3(b) hereof; (e) "Income", with respect to any Security at any time, any principal thereof then payable and all interest, dividends or other distributions thereon; (f) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof; (g) "Margin Excess", the meaning specified in Paragraph 4(b) hereof; (h) "Market Value", with respect to any Securities as of any date, the price for such Securities on such date obtained from a generally recognized source agreed to by the parties or the most recent closing bid quotation from such a source, plus accrued Income to the extent not included therein (other than any Income credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) as of such date (unless contrary to market practice for such Securities); (i) "Price Differential", with respect to any Transaction hereunder as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such transaction to the Purchase Price for such Transaction on a 360 day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction); (j) "Pricing Rate", the per annum percentage rate for determination of the Price Differential; (k) "Prime Rate", the prime rate of U.S. money center commercial banks as published in The Wall Street Journal; (l) "Purchase Date", the date on which Purchased Securities are transferred by Seller to Buyer; (m) "Purchase Price", (i) on the Purchase Date, the price at which Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter, such price increased by the amount of any cash transferred by Buyer to Seller pursuant to Paragraph 4(b) hereof and decreased by the amount of any cash transferred by Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller's obligations under clause (ii) of Paragraph 5 hereof; (n) "Purchase Securities", the Securities transferred by Seller to Buyer in a Transaction hereunder, and any Securities substituted therefor in accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect to any Transaction at any time also shall include Additional Purchase Securities delivered pursuant to Paragraph 4(a) and shall exclude Securities returned pursuant to Paragraph 4(b); (o) "Repurchase Date", the date on which Seller is to repurchase the Purchased Securities from Buyer, including any date determined by application of the provisions of Paragraphs 3(c) or 11 hereof; (p) "Repurchase Price", the price at which Purchased Securities are to be transferred from Buyer to Seller upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchased Price and the Price Differential as of the date of such determination, increased by any amount determined by the application of the provisions of Paragraph 11 hereof; (q) "Seller's Margin Amount", with respect to any Transaction as of any date, the amount obtained by application of a percentage (which may be equal to the percentage that is agreed to as the Buyer's Margin Amount under subparagraph (c) of this Paragraph), agreed to by Buyer and Seller prior to entering into the Transaction, to the Repurchase Price for such Transaction as of such date. 3. Initiation; Confirmation; Termination (a) An agreement to enter into a Transaction may be made orally or in writing at the initiation of either Buyer or Seller. On the Purchase Date for the Transaction, the Purchased Securities shall be transferred to Buyer or its agent against the transfer of the Purchase Price to an account of Seller. (b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or both), as shall be agreed, shall promptly deliver to the other party a written confirmation of each Transaction (a "Confirmation"). The Confirmation shall describe the Purchased Securities (including CUSIP number, if any), identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on demand, (iv) the Pricing Rate or Repurchase Price applicable to the Transaction, and (v) any additional terms or conditions of the Transaction not inconsistent with this Agreement. The Confirmation, together with this Agreement, shall constitute conclusive evidence of the terms agreed between Buyer and Seller with respect to the Transaction to which the Confirmation relates, unless the respect to the Confirmation specific objection is made promptly after receipt thereof. In the event of any conflict between the terms of such Confirmation and this Agreement, this Agreement shall prevail. (c) In the case of Transactions terminable upon demand, such demand shall be made by Buyer or Seller, no later than such time as is customary in accordance with market practice, by telephone or otherwise on or prior to the business day on which such termination will be effective. On the date specified in such demand, or on the date fixed for termination in the case of Transactions having a fixed term, termination of the Transaction will be effected by transfer to Seller or its agent of the Purchased Securities and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) against the transfer of the Repurchase Price to an account of Buyer. 4. Margin Maintenance (a) If at any time the aggregate Market Value of all Purchase Securities subject to all Transactions in which a particular party hereto is acting as Buyer is less than the aggregate Buyer's Margin Amount for all such Transactions (a "Margin Deficit"), then Buyer may by notice to Seller require Seller in such Transactions, at Seller's option, to transfer to Buyer cash or additional Securities reasonably acceptable to Buyer ("Additional Purchase Securities"), so that the cash and aggregate Market Value of the Purchased Securities, including any such Additional Purchased Securities, will thereupon equal or exceed such aggregate Buyer's Margin Amount (decreased by the amount of any Margin Deficit as of such date arising from any Transactions in which such Buyer is acting as Seller). (b) If at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in which a particular party hereto is acting as Seller exceeds the aggregate Seller's Margin Amount for all such Transactions at such time (a "Margin Excess"), then Seller may by notice to Buyer require Buyer in such Transactions, at Buyer's option, to transfer cash or Purchased Securities to Seller, so that the aggregate Market Value of the Purchased Securities, after deduction of any such cash or any Purchased Securities so transferred, will thereupon not exceed such aggregate Seller's Margin Amount (increased by the amount of any Margin Excess as of such date arising from any Transactions in which such Seller is acting as Buyer). (c) Any cash transferred pursuant to this Paragraph shall be attributed to such Transactions as shall be agreed upon by Buyer and Seller. (d) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer or Seller (or both) under subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin Deficit or Margin Excess exceeds a specified dollar amount or a specified percentage of the Repurchase Prices for such Transactions (which amount or percentage shall be agreed to by Buyer and Seller prior to entering into any such Transactions). (e) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer and Seller under subparagraphs (a) and (b) of this Paragraph to require the elimination of a Margin Deficit or a Margin Excess, as the case may be, may be exercised whenever such a Margin Deficit or Margin Excess exists with respect to any single Transaction hereunder (calculated without regard to any other Transaction outstanding under this Agreement). 5. Income Payments Where a particular Transaction's terms extends over an Income payment date on the Securities subject to that Transaction, Buyer shall, as the parties may agree with respect to such Transaction (or, in the absence of any agreement, as Buyer shall reasonably determine in its discretion), on the date such Income is payable either (i) transfer to or credit to the account of Seller an amount equal to such Income payment or payments with respect to any Purchased Securities subject to such Transaction or (ii) apply the Income payment or payments to reduce the amount to be transferred to Buyer by Seller upon termination of the Transaction. Buyer shall not be obligated to take any action pursuant to the preceding sentence to the extent that such action would result in the creation of a Margin Deficit, unless prior thereto or simultaneously therewith Seller transfers to Buyer cash or Additional Purchased Securities sufficient to eliminate such Margin Deficit. 6. Security Interest Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as security for the performance by Seller of its obligations under each such Transaction, and shall be deemed to have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions hereunder and all proceeds thereof. 7. Payment and Transfer Unless otherwise mutually agreed, all transfers of funds hereunder shall be in immediately available funds. All Securities transferred by one party hereto to the other party (i) shall be in suitable form for transfer or shall be accompanied by duly executed instruments of transfer or assignment in blank and such other documentation as the party receiving possession may reasonably request, (ii) shall be transferred on the book-entry system of a Federal Reserve Bank, or (iii) shall be transferred by any other method mutually acceptable to Seller and Buyer. As used herein with respect to Securities, "transfer" is intended to have the same meaning as when used in Section 8-313 of the New York Uniform Commercial Code or, where applicable, in any federal regulation governing transfers of the Securities. 8. Segregation of Purchased Securities To the extent required by applicable law, all Purchased Securities in the possession of Seller shall be segregated from other securities in its possession and shall be identified as subject to this Agreement. Segregation may be accomplished by appropriate identification on the books and records of the holder, including a financial intermediary or a clearing corporation. Title to all Purchased Securities shall pass to Buyer and, unless otherwise agreed by Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Securities or otherwise pledging or hypothecating the Purchased Securities, but no such transaction shall relieve Buyer of its obligations to transfer Purchased Securities to Seller pursuant to Paragraphs 3, 4 or 11 hereof, or of Buyer's obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Paragraph 5 hereof. Required Disclosure for Transactions in Which the Seller Retains Custody of the Purchased Securities Seller is not permitted to substitute other securities for those subject to this Agreement and therefore must keep Buyer's securities segregated at all times, unless in this Agreement Buyer grants Seller the right to substitute other securities. If Buyer grants the right to substitute, this means that Buyer's securities will likely be commingled with Seller's own securities during the trading day. Buyer is advised that, during any trading day that Buyer's securities are commingled with Seller's securities, they [will]* [may]** be subject to liens granted by Seller to [its clearing bank]* [third parties]** and may be used by Seller for deliveries on other securities transactions. Whenever the securities are commingled, Seller's ability to resegregate substitute securities for Buyer will be subject to Seller's ability to satisfy [the clearing]* [any]** lien or to obtain substitute securities. * Language to be used under 17 C.F.R. Section 403.4(e) if Seller is a government securities broker or dealer other than a financial institution. **Language to be used under 17 C.F.R. Section 403.5(d) if Seller is a financial institution. 9. Substitution (a) Seller may, subject to agreement with and acceptance by Buyer, substitute other Securities for any Purchased Securities. Such substitution shall be made by transfer to Buyer of such other Securities and transfer to Seller of such Purchased Securities. After substitution, the substituted Securities shall be deemed to be Purchased Securities. (b) In Transactions in which the Seller retains custody of Purchased Securities, the parties expressly agree that Buyer shall be deemed, for purposes of subparagraph (a) of this Paragraph, to have agreed to and accepted in this Agreement substitution by Seller of other Securities for Purchased Securities; provided, however, that such other Securities shall have a Market Value at least equal to the Market Value of the Purchased Securities for which they are substituted. 10. Representations Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into the Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) it will engage in such Transactions as principal (or, if agreed in writing in advance of any Transaction by the other party hereto, as agent for a disclosed principal), (iii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of any such disclosed principal), (iv) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect and (v) the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected. On the Purchase Date for any Transaction Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it. 11. Events of Default In the event that (i) Seller fails to repurchase or Buyer fails to transfer Purchased Securities upon the applicable Repurchase Date, (ii) Seller or Buyer fails, after one business day's notice, to comply with Paragraph 4 hereof, (iii) Buyer fails to comply with Paragraph 5 hereof, (iv) an Act of Insolvency occurs with respect to Seller or Buyer, (v) any representation made by Seller or Buyer shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, or (vi) Seller or Buyer shall admit to the other its inability to, or its intention not to, perform any of its obligations hereunder (each an "Event of Default"): (a) At the option of the nondefaulting party, exercised by written notice to the defaulting party (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed immediately to occur. (b) In all Transactions in which the defaulting party is acting as Seller, if the nondefaulting party exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph, (i) the defaulting party's obligations hereunder to repurchase all Purchased Securities in such Transactions shall thereupon become immediately due and payable, (ii) to the extent permitted by applicable law, the Repurchase Price with respect to each such Transaction shall be increased by the aggregate amount obtained by daily application of (x) the greater of the Pricing Rate for such Transaction or the Prime Rate to (y) the Repurchase Price for such Transaction as of the Repurchase Date as determined pursuant to subparagraph (a) of this Paragraph (decreased as of any day by (A) any amounts retained by the nondefaulting party with respect to such Repurchase Price pursuant to clause (iii) of this subparagraph, (B) any proceeds from the sale of Purchased Securities pursuant to subparagraph (d)(i) of this Paragraph, and (C) any amounts credited to the account of the defaulting party pursuant to subparagraph (e) of this Paragraph) on a 360 day per year basis for the actual number of days during the period from and including the date of the Event of Default giving rise to such option to but excluding the date of payment of the Repurchase Price as so increased, (iii) all Income paid after such exercise or deemed exercise shall be retained by the nondefaulting party and applied to the aggregate unpaid Repurchase Prices owed by the defaulting party, and (iv) the defaulting party shall immediately deliver to the nondefaulting party any Purchased Securities subject to such Transactions then in the defaulting party's possession. (c) In all Transactions in which the defaulting party is acting as Buyer, upon tender by the nondefaulting party of payment of the aggregate Repurchase Prices for all such Transactions, the defaulting party's right, title and interest in all Purchased Securities subject to such Transactions shall be deemed transferred to the nondefaulting party, and the defaulting party shall deliver all such Purchased Securities to the nondefaulting party. (d) After one business day's notice to the defaulting party (which notice need not be given if an Act of Insolvency shall have occurred, and which may be the notice given under subparagraph (a) of this Paragraph or the notice referred to in clause (ii) of the first sentence of this Paragraph), the nondefaulting party may: (i) as to Transactions in which the defaulting party is acting as Seller, (A) immediately sell, in a recognized market at such price or prices as the nondefaulting party may reasonably deem satisfactory, any or all Purchased Securities subject to such Transactions and apply the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities, to give the defaulting party credit for such Purchased Securities in an amount equal to the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source, against the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder; and (ii) as to Transactions in which the defaulting party is acting as Buyer, (A) purchase securities ("Replacement Securities") of the same class and amount as any Purchased Securities that are not delivered by the defaulting party to the nondefaulting party as required hereunder or (B) in its sole discretion elect, in lieu of purchasing Replacement Securities, to be deemed to have purchased Replacement Securities at the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source. (e) As to Transactions in which the defaulting party is acting as Buyer, the defaulting party shall be liable to the nondefaulting party (i) with respect to Purchased Securities (other than Additional Purchased Securities), for any excess of the price paid (or deemed paid) by the nondefaulting party for Replacement Securities therefor over the Repurchase Price for such Purchased Securities and (ii) with respect to Additional Purchased Securities, for the price paid (or deemed paid) by the nondefaulting party for the Replacement Securities therefor. In addition, the defaulting party shall be liable to the nondefaulting party for interest on such remaining liability with respect to each such purchase (or deemed purchase) of Replacement Securities from the date of such purchase (or deemed purchase) until paid in full by Buyer. Such interest shall be at a rate equal to the greater of the Pricing Rate for such Transaction or the Prime Rate. (f) For purposes of this Paragraph 11, the Repurchase Price for each Transaction hereunder in respect of which the defaulting party is acting as Buyer shall not increase above the amount of such Repurchase Price for such Transaction determined as of the date of the exercise or deemed exercise by the nondefaulting party of its option under subparagraph (a) of this Paragraph. (g) The defaulting party shall be liable to the nondefaulting party for the amount of all reasonable legal or other expenses incurred by the nondefaulting party in connection with or as a consequence of an Event of Default, together with interest thereon at a rate equal to the greater of the Pricing Rate for the relevant Transaction or the Prime Rate. (h) The nondefaulting party shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law. 12. Single Agreement Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted. 13. Notices and Other Communications Unless another address is specified in writing by the respective party to whom any notice or other communication is to be given hereunder, all such notices or communications shall be in writing or confirmed in writing and delivered at the respective addresses set forth in Annex II attached hereto. 14. Entire Agreement; Severability This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. 15. Non-assignability; Termination The rights and obligations of the parties under this Agreement and under any Transaction shall not be assigned by either party without the prior written consent of the other party. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. This Agreement may be canceled by either party upon giving written notice to the other, except that this Agreement shall, notwithstanding such notice, remain applicable to any Transactions then outstanding. 16. Governing Law This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof. 17. No Waivers, Etc. No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to subparagraphs 4(a) or 4(b) hereof will not constitute a waiver of any right to do so at a later date. 18. Use of Employee Plan Assets (a) If assets of an employee benefit plan subject to any provision of the Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be used by either party hereto (the "Plan Party") in a Transaction, the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed. (b) Subject to the last sentence of subparagraph (a) of this Paragraph, any such Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition. (c) By entering into a Transaction pursuant to this Paragraph, Seller shall be deemed (i) to represent to Buyer that since the date of Seller's latest such financial statements, there has been no material adverse change in Seller's financial condition which Seller has not disclosed to Buyer, and (ii) to agree to provide Buyer with future audited and unaudited statements of its financial condition as they are issued, so long as it is a Seller in any outstanding Transaction involving a Plan Party. 19. Intent (a) The parties recognize that each Transaction is a "repurchase agreement" as that term is defined in Section 101 of Title 11 of the United States Code, as amended (except insofar as the type of Securities subject to such Transaction or the term of such Transaction would render such definition inapplicable), and a "securities contract" as that term is defined in Section 741 of Title 11 of the United States Code, as amended. (b) It is understood that either party's right to liquidate Securities delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Paragraph 11 hereof, is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended. 20. Disclosure Relating to Certain Federal Protections The parties acknowledge that they have been advised that: (a) in the case of Transactions in which one of the parties is a broker or dealer registered with the Securities and Exchange Commission ("SEC") under Section 15 of the Securities Exchange Act of 1934 ("1934 Act"), the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 ("SIPA") do not protect the other party with respect to any Transaction hereunder; (b) in the case of Transactions in which one of the parties is government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and (c) in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable. DLJ Mortgage Capital, Inc. Lomas Mortgage USA, Inc. [Name of Party] [Name of Party] By /s/ROD ENNICO By /s/ROBERT E. BYERLEY, JR. --------------------------- ------------------------------- Title Senior Vice President Title Executive Vice President ----------------------- ---------------------------- Date April 12, 1994 Date April 11, 1994 ------------------- ------------------- Donaldson, Lufkin & Jenrette Lomas Mortgage USA, Inc. Securities Corporation [Name of Party] [Name of Party] By /s/ROD ENNICO By /s/ROBERT E. BYERLEY, JR. --------------------------- ------------------------------- Title Senior Vice President Title Executive Vice President ----------------------- ---------------------------- Date April 12, 1994 Date April 11, 1994 ------------------- ------------------- ANNEX I Supplemental Terms and Conditions The MASTER REPURCHASE AGREEMENT ("Agreement"), dated April 11, 1994 between DLJ MORTGAGE CAPITAL, INC. ("Buyer") and LOMAS MORTGAGE USA, INC. ("Seller"), is amended and supplemented as set forth below. All capitalized terms used herein are defined in the Agreement except to the extent such terms are amended or supplemented herein. 1. Paragraph 1 of the Agreement is amended by adding the following after the word "instruments" and before the parenthetical "("Securities")" in the second line thereof: "or whole mortgage loans or any interests in any whole mortgage loans, including, without limitation, mortgage participation certificates and mortgage pass-through certificates". 2. Subparagraph 2(a) of the Agreement is amended by adding the following after the word "any" and before the word "bankruptcy" in the second line thereof: "conservatorship or receivership (within the meaning of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989),". 3. Subparagraph 2(a) of the Agreement is further amended by adding the following after the word "a" and before the word "receiver" in the third line thereof: "conservator,". 4. Subparagraph 2(h) of the Agreement is amended by deleting the defined term "Market Value" and replacing it with the defined term "Assumed Repurchase Value", and the term Market Value throughout the Agreement shall be deemed to refer to the Assumed Repurchase Value. 5. Subparagraph 2(h) of the Agreement is amended by adding at the end thereof: "except that the Assumed Repurchase Value of any Securities that are loans secured by mortgages or deeds of trust on residential dwellings (such loans, "Mortgage Loans") as of any date shall be the dollar amount ascribed to such Mortgage Loans on that date by Buyer in its sole discretion, and shall not include any Income on such Mortgage Loans paid to and held by Seller pursuant to Paragraph 5 hereof, and the Assumed Repurchase Value of any Additional Purchased Securities shall be the fair market value thereof as determined by Buyer in its sole discretion" 6. Subparagraph 3(b) of the Agreement is amended by adding at the end of the first sentence: "In the case of Transactions involving Securities that are Mortgage Loans, (a) the Purchased Securities shall be identified on a detailed listing to be provided by Seller to Buyer (a "Mortgage Loan Schedule") attached to the related Confirmation, (b) the documents contained in the Mortgage File (defined in Paragraph 7) shall be delivered to the entity acting as bailee of and agent for DLJ with respect to any transaction contemplated hereunder ("Custodian") and held by Custodian pursuant to a Custody Agreement ("Custody Agreement"), among Seller, Buyer and Custodian pursuant to which Custodian shall, among other things, issue Trust Receipts as defined therein ("Trust Receipts"), and (c) the Mortgage Loans shall be serviced for Buyer by Seller or Seller's agent in accordance with Accepted Servicing Practices. "Accepted Servicing Practices" shall mean those servicing practices of prudent mortgage servicers servicing mortgage loans of the same type as the Mortgage Loans in those jurisdictions in which the related Mortgage Properties (defined in Paragraph 7) are located, but in no event shall such standards or practices be lower than the standards and practices of Seller with respect to its own portfolio of similar mortgage loans. For purposes of this Agreement, Accepted Servicing Practices shall also include the use of one or more accounts maintained at an independent depository institution approved by DLJ. 7. Paragraph 3(b) of the Agreement is further amended by deleting the last sentence and replacing it with the following: "In the event of any conflict between the Confirmation and this Agreement, the terms of such Confirmation shall prevail." 8. Subparagraph 3(c) of the Agreement is amended by adding at the end of the first sentence: "In the case of Transactions involving Securities that are Mortgage Loans, such demand by Buyer or Seller shall be for a repurchase of all Purchased Securities subject to the related Transaction and such demand shall be made no later than 5:00 p.m. New York City time on the business day preceding the day on which such termination will be effective, which termination shall also be on a business day. Upon receipt of the Repurchase Price in immediately available funds, Buyer shall deliver the Trust Receipt for such Transaction to Custodian for further disposition in accordance with the terms of the Custody Agreement. 9. Paragraph 4 of the Agreement is amended by adding new subparagraphs (f) and (g) as follows: "(f) In the case of Transactions involving Securities that are Mortgage Loans, (i) the percentage used in calculating Buyer's Margin Amount for such Transaction shall be as set forth in the related Confirmation and (ii) Additional Purchased Securities shall be limited to cash, Mortgage Loans, obligations issued by the United States government, the Federal National Mortgage Association ("FNMA"), or the Federal Home Loan Mortgage Corporation ("FHLMC"), or guaranteed by the Government National Mortgage Association ("GNMA"), and (iii) the provisions of subparagraphs (b), (d) and (e) of this Paragraph shall not apply. (g) The provisions of this paragraph 4 shall not be applicable to any Transaction as to which the Buyer (or an affiliate of the Buyer) agrees to purchase the related Securities on a forward delivery basis." 10. Paragraph 5 of the Agreement is amended by adding the following at the end of the last sentence: "Notwithstanding the foregoing and except as provided in Paragraph 11 of this Agreement, in the case of Transactions involving Securities that are Mortgage Loans, Seller shall be deemed to hold for the benefit of, and in trust for, Buyer all Income (including all scheduled and unscheduled principal and interest payments) received by Seller with respect to such Mortgage Loans. Seller shall service the Mortgage Loans, or supervise the servicing of the Mortgage Loans, for the benefit of Buyer in accordance with Accepted Servicing Practices. Upon request by Buyer, Seller will provide Buyer with reports substantially identical in form to FNMA's form 2010 remittance report with respect to all Mortgage Loans subject to a Transaction. Within three business days of its receipt of each such report, Buyer either (i) shall determine that a Margin Deficit has occurred and direct Seller to pay to Buyer all Income received in the period covered by such report to the extent of such Margin Deficit, in which case Buyer shall be deemed to have released any excess Income to Seller, or (ii) shall determine that a Margin Deficit has not occurred, in which case Buyer shall be deemed to have released all such Income to Seller." 11. Paragraph 6 of the Agreement is amended by adding the following after the word "the" and before the words "Purchased Securities" in the fourth line thereof: "Seller's right (including the power to convey title thereto), title and interest in and to the". 12. Paragraph 6 of the Agreement is amended by adding the following after the words "Purchased Securities" and before the word "with" in the fourth line thereof: ", the contractual right to receive payments, including the right to payments of principal and interest and the right to enforce such payments, arising from or under any of the Purchased Securities, the contractual right to service each Mortgage Loan, any sub-servicing agreements with respect to each Mortgage Loan, and all documents in each Mortgage File,". 13. Paragraph 6 of the Agreement is amended by adding the following after the word "all" and before the word "proceeds" in the fifth line thereof: "income, payments, products and". 14. Paragraph 6 of the Agreement is amended by adding the following after the word "thereof" and before the period in the fifth line thereof: "(the "Collateral")". 15. Paragraph 6 of the Agreement is amended by adding the following at the end of the last sentence of Paragraph 6: "In such event, the parties hereto intend to create for the benefit of Buyer, as secured party, a legally valid and enforceable first priority perfected security interest in the Collateral. On or prior to each Purchase Date, Seller shall cause to be filed in the appropriate filing offices of the jurisdiction in which Seller maintains its place of business, or its chief executive office if Seller has more than one place of business, in accordance with applicable law, Uniform Commercial Code financing statements naming Seller as debtor, Buyer as secured party, and identifying the Collateral as collateral." 16. Paragraph 7 of the Agreement is amended by adding the following at the end of the last sentence of Paragraph 7: "In the case of Transactions involving Securities that are Mortgage Loans, the transfer of such Mortgage Loans for the purposes of this Paragraph 7 shall include the delivery to the Custodian of the following documents (the "Mortgage File") with respect to each Mortgage Loan, as set forth in the Custody Agreement: (i) the original note or other evidence of indebtedness ("Mortgage Note") of the obligor thereon (each obligor a "Mortgagor"), endorsed to the order of or assigned to Seller by the holder/payee thereof, without recourse, together with all intervening endorsements, and endorsed by Seller, without recourse, in blank; (ii) the original or certified copy of the mortgage, deed of trust or other instrument ("Mortgage") creating a first lien on the underlying property securing the Mortgage Loan (the "Mortgaged Property"), naming Seller as the "mortgagee" or "beneficiary" thereof, and bearing on the face thereof the address of Seller as provided in Paragraph 13 of this Agreement, or, if the Mortgage does not name Seller as the mortgagee/beneficiary, the Mortgage, together with an instrument of assignment assigning the Mortgage, individually or together with other Mortgages, to Seller and bearing on the face thereof the address of Seller as provided in Paragraph 13 of this Agreement, and, in either case, bearing evidence acceptable to Buyer that such instruments have been or are currently being submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located); (iii) an original assignment of Mortgage with assignee in blank but otherwise in recordable form, but not recorded, and all intervening assignments, if any; (iv) an original copy or a copy of any assumption, modification, extension or guaranty agreement relating to the Mortgage Loan; (v) if the Mortgage Note or Mortgage or any other material (as determined by Buyer in its reasonable discretion) document or instrument relating to the Mortgage Loan has been signed by a person on behalf of the Mortgagor, the power of attorney or other instrument that authorized and empowered such person to sign; and (vi) with respect to any Mortgage Loan subject to an existing lien, an original executed Warehouse Lender Release Letter substantially in the form attached to the Custody Agreement, duly executed by the appropriate party." 17. Paragraph 8 of the Agreement is amended by deleting the last sentence and substituting the following: "Title to all Purchased Securities (except Securities that are Mortgage Loans) shall pass to Buyer. In the case of Mortgage Loans, upon transfer of the Mortgage Loans to Buyer as set forth in Paragraph 3(a) of this Agreement and until termination of any Transactions as set forth in Paragraphs 3(c) or 11 of this Agreement, ownership of each Mortgage Loan, including each document in the related Mortgage File, is vested in Buyer and record title in the name of Seller to each Mortgage shall be retained by Seller in trust, for the benefit of Buyer, for the sole purpose of facilitating the servicing and the supervision of the servicing of the Mortgage Loans by Seller. Further, nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Securities or otherwise pledging or hypothecating the Purchased Securities, but no such transaction shall relieve Buyer of its obligations to transfer Purchased Securities to Seller pursuant to Paragraphs 3, 4 or 11 hereof. Upon termination of any Transaction as set forth in Paragraph 3(c) of this Agreement, Buyer agrees to execute promptly endorsements of the Mortgage Notes, assignments of the Mortgages and UCC-3 assignments, to the extent that such documents are prepared by Seller for Buyer's execution, are delivered to Buyer by Seller, and are necessary to reconvey without recourse to Seller. Buyer agrees to cooperate with Seller to identify documents that may be required to effect such reconveyance to Seller." 18. Subparagraph 9(b) of the Agreement is amended by adding the following after the word "substituted" and before the period in the fifth line thereof: "; provided, further, that, in the case of Transactions involving Securities that are Mortgage Loans, Seller's retention of any document in any Mortgage File shall be held by Seller in trust for Buyer for purposes of servicing the related Mortgage Loan and shall not be deemed to constitute Seller's retention of custody of the Purchased Securities for purposes of this subparagraph." 19. Paragraph 10 of the Agreement is amended by replacing the word "and" before clause (v) with a comma, and adding the following clause at the end of the first sentence of Paragraph 10 after the word "affected" and before the period: "and (vi) Seller and Buyer have executed the Confirmation contemporaneously with the sale of the Purchased Securities by Seller to Buyer and the transfer of the Purchase Price by Buyer to Seller, or, in the event that the Transaction is deemed to constitute a loan, contemporaneously with the grant of the security interest in the Collateral by Seller to Buyer pursuant to Paragraph 6 hereof and the transfer of the consideration therefor, consisting of the extension of the Purchase Price, which represents the loan proceeds, by Buyer to Seller." 20. Paragraph 10 of the Agreement is amended by deleting the second sentence of Paragraph 10 and substituting the following: "In addition to the foregoing, in the case of Transactions involving Securities that are Mortgage Loans, Seller represents and warrants to Buyer that, as to each Mortgage Loan and the related Mortgage and Mortgage Note as of the Purchase Date unless otherwise indicated: (A) The information set forth in the related Mortgage Loan Schedule and all other information or data furnished by, or on behalf of, Seller to Buyer is complete, true and correct in all material respects, and Seller acknowledges that Buyer has not verified the accuracy of such information or data. (B) Seller is the sole owner of record and holder of the Mortgage Loan. The Mortgage Loan is not assigned or pledged, and Seller has good and marketable title thereto, and has full right and authority to transfer and sell the Mortgage Loan to Buyer free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest. (C) All payments required to be made up to the Purchase Date for the Mortgage Loan under the terms of the Mortgage Note have been made and credited. No payment required under the Mortgage Loan is delinquent nor has any payment under the Mortgage Loan been delinquent at any time during the 12 month period immediately preceding the Purchase Date. (D) To Seller's knowledge there are no defaults in complying with the terms of the Mortgage, and all taxes, assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable. Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage Loan proceeds, whichever is greater, to the day which precedes by one month the Purchase Date. (E) The terms of the Mortgage Note and the Mortgage have not been impaired, waived, altered or modified in any respect, except by a written instrument which has been recorded, if necessary, to protect the interests of Buyer and which has been delivered to Buyer. The substance of any such waiver, alteration or modification has been approved by the issuer of any related primary mortgage insurance policy and the title insurer, to the extent required by the policy, and its terms are reflected on the Mortgage Loan Schedule. No Mortgagor has been released, in whole or in part, except in connection with an assumption agreement approved by the issuer of any related primary mortgage insurance policy and the title insurer, to the extent required by the policy, and which assumption agreement is part of the Mortgage Loan File delivered to Buyer and the terms of which are reflected in the Mortgage Loan Schedule. (F) The Mortgage Loan is not subject to any right of rescission, set- off, counterclaim or defense, including without limitation the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto. (G) Pursuant to the terms of the Mortgage, all buildings or other improvements upon the Mortgaged Property are insured by a generally acceptable insurer against loss by fire, hazards of extended coverage and such other hazards as are customary in the area where the Mortgaged Property is located pursuant to insurance policies conforming to the requirements of prudent lenders conducting business in the area in which the Mortgaged property is located. If, upon origination of the Mortgage Loan, the Mortgaged Property was in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration is in effect which policy conforms to the requirements of prudent lenders conducting business in the area in which the Mortgaged Property is located. All individual insurance policies contain a standard mortgagee clause naming Seller and its successors and assigns as mortgagee, and all premiums thereon have been paid. The Mortgage obligates the Mortgagor thereunder to maintain the hazard insurance policy at the Mortgagor's cost and expense, and on the Mortgagor's failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at such Mortgagor's cost and expense, and to seek reimbursement therefor from the Mortgagor. Seller has not engaged in, and has no knowledge of the Mortgagor's or any other party's having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either. (H) Any and all requirements of any federal, state or local law applicable to the Mortgage Loan have been complied with. (I) The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would effect any such release, cancellation, subordination or rescission. (J) The Mortgaged Property consists of a parcel or parcels of real property improved by one or more detached multifamily housing structures comprising five or more dwelling units and used exclusively for residential purposes ("Multifamily Property"), or a single parcel of real property with a detached single family residence erected thereon, or a two- to four-family dwelling, or an individual condominium unit in a low-rise condominium project, or an individual unit in a planned unit development, provided, however, that any condominium unit or planned unit development shall conform with the applicable FNMA and FHLMC requirements regarding such dwellings and that no residence or dwelling is a mobile home. No portion of the Mortgaged Property is used for commercial purposes. (K) The Mortgage is a valid, enforceable first lien on the Mortgaged Property, including all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing. The lien of the Mortgage is subject only to (1) the lien of current real property taxes and assessments not yet due and payable, (2) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to mortgage lending institutions generally and specifically referred to in the lender's title insurance policy delivered to the originator of the Mortgage Loan and (i) referred to or to otherwise considered in the appraisal made for the originator of the Mortgage Loan or (ii) which do not adversely affect the appraised value of the Mortgaged Property set forth in such appraisal, and (3) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property. (L) Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid and enforceable first lien and first priority security interest on the property described therein and Seller has full right to sell and assign the same to Buyer. (M) The Mortgage Note and the Mortgage are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms. All parties to the Mortgage Note and the Mortgage had legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage, and the Mortgage Note and the Mortgage have been duly and properly executed by such parties. (N) The proceeds of the Mortgage Loan have been fully disbursed and there is no requirement for future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvements and as to disbursements of any escrow funds therefor have been duly complied with. All costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage. (O) To Seller's knowledge, all parties that have had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are or, during the period in which they held and disposed of such interest, were (1) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (2) either (a) organized under the laws of such state, or (b) qualified to do business in such state, or (c) federal savings and loan associations or national banks having principal offices in such state, or (d) not doing business in such state. (P) Unless otherwise agreed to in writing by Buyer, the Mortgage Loan has a loan-to-value ratio equal to or less than 90%. Either (a) the original loan-to-value ratio of the Mortgage Loan was not more than 80% or (b) the excess over 75% is and will be insured as to payment defaults by a primary mortgage insurance policy until the loan-to-value ratio of such Mortgage Loan is reduced to 80%. All provisions of such primary mortgage insurance policy have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. Any Mortgage Loan subject to a primary mortgage insurance policy obligates the Mortgagor thereunder to maintain the primary mortgage insurance policy and to pay all premiums and charges in connection therewith. The interest rate for the Mortgage Loan as set forth on the Mortgage Loan Schedule is net of any such insurance premium. (Q) The Mortgage Loan is covered by either (1) an attorney's opinion of title and abstract of title, the form and substance of which are acceptable to mortgage lending institutions making mortgage loans in the area where the Mortgaged Property is located or (2) an ALTA lender's title insurance policy or other generally acceptable form of policy or insurance acceptable to FNMA or FHLMC, issued by a title insurer acceptable to FNMA or FHLMC and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns, as to the first priority lien of the Mortgage in the original principal amount of the Mortgage Loan, subject only to the exceptions contained in clauses (1), (2) and (3) of paragraph (K) of this Paragraph 10. Seller is the sole insured of such lender's title insurance policy, and such lender's title insurance policy is in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lender's title insurance policy, and no prior holder of the Mortgage, including Seller, has done, by act or omission, anything that would impair the coverage of such lender's title insurance policy. (R) There is no default, breach, violation or event of acceleration existing under the Mortgage or the Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither Seller nor its predecessors have waived any default, breach, violation or event of acceleration. (S) To Seller's knowledge, there are no mechanics' or similar liens or claims which have been filed for work, labor or material, and no rights are outstanding that under the law could give rise to such liens, affecting the related Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the related Mortgage. (T) All improvements which were considered in determining the appraised value of the Mortgaged Property lay wholly within the boundaries and building restriction lines of the Mortgaged Property and no improvements on adjoining properties encroach upon the Mortgaged Property. No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning law or regulation. (U) The Mortgage Loan was originated by Seller, a FNMA-, FHLMC- or HUD- approved mortgage banker, a savings and loan association, a savings bank, a commercial bank or similar banking institution which is supervised and examined by a Federal or State authority. The Mortgage Note is payable on the first day of each month in equal monthly installments of a principal and interest, with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty years from commencement of amortization. (V) The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (1) in the case of a Mortgage designated as a deed of trust, by trustee's sale, and (2) otherwise by judicial foreclosure. (W) The Mortgage Loan was underwritten in accordance with Seller's underwriting standards in effect at the time the Mortgage Loan was originated. The Mortgage Loan is in conformity with the standards of Seller under one of its home mortgage purchase or refinance programs. (X) To Seller's knowledge, the Mortgaged Property is lawfully occupied under applicable law. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities. The Mortgagor represented at the time of origination of the Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the Mortgagor's primary residence. (Y) The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in (K) above. (Z) In the event the Mortgage constitutes a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by Buyer to the trustee under the deed of trust, except in connection with a trustee's sale after default by the Mortgagor. (AA) Seller has no knowledge of any circumstances or conditions with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor's credit standing that can reasonably be expected to generally cause private institutional investors to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become delinquent, or adversely affect the value or marketability of the Mortgage Loan. (BB) The documents contained in the Mortgage File and any other documents required to be delivered under this Agreement have been delivered to Custodian. (CC) The Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located. (DD) The Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder. (EE) For Mortgage Loans which contain provisions pursuant to which monthly payments are paid or partially paid with funds deposited in any separate account established by Customer, the mortgagor or anyone on behalf of the mortgagor, which may constitute a "buydown" provision, the amount of each assistance payment shall be the sum necessary to make up the difference between the monthly principal and interest payment required by the terms of the note and the reduced monthly payment, as stated in the buydown certification. However, if for any reason the assistance payments from the escrow funds are not made by the escrow agent as contemplated, it shall be the obligation of the mortgagor to make the monthly payments required by the terms of the note. For graduated payment Mortgage Loans, the scheduled annual payment adjustments are sufficient to cover all interest due and to fully amortize the loan in 15 years. No Mortgage Loan contains a shared appreciation or other contingent interest feature. (FF) Any future advances made prior to the Purchase Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy, an endorsement to the policy insuring the mortgagee's consolidated interest or by other title evidence acceptable to FNMA and FHLMC. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan. (GG) The Mortgaged Property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to affect adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended. (HH) The origination and collection practices used with respect to the Mortgage Loan have been in accordance with generally accepted servicing practices in the industry, and have been in all respects legal and proper. With respect to escrow deposits and escrow payments, all such payments are in the possession of Seller and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. No escrow deposits or escrow payments or other charges or payments due Seller have been capitalized under the Mortgage or the Mortgage Note. On the Purchase Date for any Transaction, Seller shall be deemed to make all of the foregoing representations and warranties." 21. Paragraph 11 is amended by inserting the words ", other than any representation made by Seller as to a particular Mortgage Loan," after the words "made by Seller or Buyer" on the fourth line thereof. 22. Subparagraph 11(d) of the Agreement is amended by deleting the words that precede Subparagraph 11(d)(i) and replacing them with the words "The non-defaulting party may with concurrent immediate notice to the defaulting party:". 23. Subparagraph 11(d)(i) of the Agreement is amended by adding the following after the word "hereunder" and before the semicolon on the ninth line thereof: "and in either case upon the determination and receipt by Buyer, in a manner deemed final and complete by Buyer in its reasonable judgment, of the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party, including, without limitation, any unpaid fees, expenses or other amounts owing to the Custodian under the Custody Agreement, or to which Buyer is otherwise entitled hereunder, Buyer shall transfer the portion of the Collateral and proceeds thereof, including without limitation, any proceeds of a sale of the servicing rights to the Mortgage Loans, held by Buyer following such receipt to either (i) Seller, if in Buyer's reasonable judgment Seller is legally entitled thereto, (ii) such other party or person as is in Buyer's reasonable judgment is legally entitled thereto, or (iii) if Buyer cannot determine in its reasonable judgment the person or party entitled thereto, a court of competent jurisdiction." 24. Paragraph 11 of the Agreement is amended by adding a new Subparagraph (i) as follows: "(i) Seller acknowledges that any delay in the ability of Seller to exercise its remedies pursuant to Paragraph 11 hereof shall result in irreparable injury to Buyer." 25. Paragraph 13 of the Agreement is amended by deleting the words "in Annex II attached hereto" and replacing them with the words "at the end of this Annex I." 26. Paragraph 14 of the Agreement is amended by inserting the words "with respect to Securities that consist of Mortgage Loans" after the word "transactions" and before the period on the second line thereof. 27. Subparagraph 19(a) of the Agreement is amended by adding a new sentence at the end: "The parties also recognize that each Transaction, this Agreement and each Confirmation constitute a "qualified financial contract" as that term is defined in Section 11(e)(8)(D)(i) of the Federal Deposit Insurance Act ("FDIA"), a "repurchase agreement" as that term is defined in Section 11(e)(8)(D)(v) of the FDIA, and a "securities contract" as that term is defined in Section 11(e)(8)(D)(ii) of the FDIA. The parties further agree and acknowledge that this Agreement constitutes a "master agreement" within the meaning of Section 11(e)(8)(A)(iii) of the FDIA and The FDIC Statement of Policy on Qualified Financial Contracts, dated December 12, 1989 and The RTC Statement of Policy on Qualified Financial Contracts, dated December 12, 1989 (collectively, the "Policy Statements"), an "ancillary agreement" within the meaning of the Policy Statements and a "security arrangement" within the meaning of Sections 11(e)(8)(A)(ii) and 11(e)(8)(E)(ii) of the FDIA and the Policy Statements." 28. Subparagraph 19(b) of the Agreement is amended by adding a new sentence at the end: "It is also understood that either party's rights to liquidate Collateral delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Paragraph 11 hereof is (i) a right to cause the termination or liquidation of a qualified financial contract with an insured depository institution that arises upon the appointment of the FDIC or the Resolution Trust Corporation as receiver for such institution at any time after such appointment, as described in Section 11(e)(8)(A)(i) of the FDIA, (ii) a right under a security arrangement related to a contract or agreement described in clause (i) above, as described in Section 11(e)(8)(A)(ii) of the FDIA, (iii) a right to offset or net out any termination value, payment amount, or other transfer obligation arising under or in connection with one or more contracts and agreements described in clause (i) above, including any master agreement for such contracts or agreements, as described in Section 11(e)(8)(A)(iii) of the FDIA, (iv) a right to cause the termination, liquidation or acceleration of a qualified financial contract with a depository institution in a conservatorship based upon a default under such financial contract that is enforceable under applicable non-insolvency law, as described in Section 11(e)(8)(E)(i) of the FDIA, (v) a right under a security arrangement relating to a qualified financial contract, as described in Section 11(e)(8)(E)(ii) of the FDIA, and (vi) a right to offset or net out any termination values, payment amounts, or other transfer obligations arising under or in connection with a qualified financial contract, as described in Section 11(e)(8)(E)(iii) of the FDIA." 29. Subparagraph 20(c) is amended by deleting the words "the Federal Savings and Loan Insurance Corporation" in the third line thereof and substituting therefor the following: "through either the Bank Insurance Fund or the Savings Association Insurance Fund," 30. Seller shall promptly provide such further assurances or agreements as Buyer may request in order to effect the purposes of this Agreement, including, without limitation, the delivery of any further documents to ensure that this Agreement, each Confirmation and each Transaction constitutes a "qualified financial contract", as that term is defined in Section 11(e)(8)(D)(i) of the FDIA, and to ensure that Buyer maintains a first priority perfected security interest in the Collateral. 31. Buyer is hereby appointed the attorney-in-fact of Seller for the purpose of carrying out the provisions of this Agreement and taking any action and executing or endorsing any instruments that Buyer may deem necessary or advisable to accomplish the purposes hereof, including, without limitation, completing or correcting any endorsement of a Mortgage Note or assignment of a Mortgage, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, Buyer shall have the right and power during the occurrence and continuation of any Event of Default to receive, endorse and collect all checks made payable to the order of Seller representing any payment on account of the principal of or interest on any of the Collateral and to give full discharge for the same. 32. Seller shall pay all expenses to administer this Agreement, including the fees and expenses of legal counsel and Custodian. Seller shall promptly pay as and when payment is due all of fees relating to this Agreement. LOMAS MORTGAGE USA, INC., as Seller By: /s/ROBERT E. BYERLEY, JR. -------------------------- Name: ROBERT E. BYERLEY, JR. ------------------------ Title: Executive Vice President -------------------------- DLJ MORTGAGE CAPITAL, INC., as Buyer By: /s/ROD ENNICO ------------------- Name: Rod Ennico ----------------- Title: Senior Vice President ----------------------- 140 Broadway, 40th Floor, New York, NY 10005-1285 Attention: Whole Loan Funding/Rod Ennico Telephone: 212-504-8071 Facsimile: (212) 504-8072 ANNEX II Names and Addresses for Communications Between Parties EX-10.6 7 EXHIBIT 10.6 EXHIBIT 10.6 FIRST AMENDMENT TO MASTER REPURCHASE AGREEMENT The Master Repurchase Agreement ("Agreement") dated April 11, 1994 between DLJ Mortgage Capital, Inc. ("Buyer") and Lomas Mortgage USA, Inc. ("Seller") is amended and supplemented as set forth below. All capitalized terms used herein are defined in the Agreement except to the extent such terms are defined herein or amended or supplemented herein. 1. Subparagraph 2(h) of the Agreement is amended by adding at the end thereof: "provided however, that the Assumed Repurchase Value of any Securities that are Mortgage Loans subject to a take-out commitment from California Public Employees' Retirement System ("PERS") shall be the take-out price specified in such commitment" 2. Paragraph 7(i) of the Agreement is amended by adding the following clause after the word "blank" and before the semi-colon: "or to the order of the Custodian, unless otherwise specified by Buyer" 3. Paragraph 7(iii) of the Agreement is amended by adding the following clause after the phrase "with assignee in blank" and before the word "but": "or in the name of the Custodian, unless otherwise specified by the Buyer" 4. Paragraph 10 of the Agreement is amended by adding the following clause in the second sentence after the word "indicated" and before the colon" "either each Mortgage Loan and the related Mortgage and Mortgage Note are the subject of a take-out commitment from PERS or" Dated: April 11, 1994 Lomas Mortgage USA, Inc., as Seller By: /s/ROBERT E. BYERLEY, JR. ------------------------------- Name: Robert E. Byerley, Jr. ---------------------------- Title: Executive Vice President --------------------------- DLJ Mortgage Capital, Inc., as Buyer By: /s/ROD ENNICO ------------------------------ Name: Rod Ennico ---------------------------- Title: Senior Vice President --------------------------- EX-10.7 8 EXHIBIT 10.7 EXHIBIT 10.7 ========================================================================== ST LENDING, INC., LOMAS FINANCIAL CORPORATION, BANK ONE, TEXAS, N.A. as Indenture Trustee and WILMINGTON TRUST COMPANY as Liquidity Support Trustee LIQUIDITY SUPPORT TRUST AGREEMENT dated as of April 12, 1994 ========================================================================== TABLE OF CONTENTS* ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . 1 1.02. Indenture Definitions; Definitional Conventions . . . . . . . . . . . . . . . . . . 3 ARTICLE II DECLARATION OF TRUST; ISSUANCE OF TRUST CERTIFICATE; DUTIES OF LIQUIDITY SUPPORT TRUSTEE SECTION 2.01. Declaration of Trust. . . . . . . . . . . . . . . 4 2.02. Deposits. . . . . . . . . . . . . . . . . . . . . 4 2.03. Trust Property. . . . . . . . . . . . . . . . . . 4 2.04. Issuance and Transfer of Trust Certificate. . . . 4 2.05. Directions to Liquidity Support Trustee . . . . . 4 2.06. Collection of Moneys. . . . . . . . . . . . . . . 5 2.07. Liquidity Support Trust Account . . . . . . . . . 5 2.08. Withdrawals from Trust Account. . . . . . . . . . 5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER SECTION 3.01. Good Standing . . . . . . . . . . . . . . . . . . 6 3.02. Corporate Power . . . . . . . . . . . . . . . . . 6 3.03. Consents and Approvals. . . . . . . . . . . . . . 6 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LIQUIDITY SUPPORT TRUSTEE SECTION 4.01. Organization; Good Standing; Capital. . . . . . . 6 4.02. Corporate Power . . . . . . . . . . . . . . . . . 7 4.03. Consents and Approvals. . . . . . . . . . . . . . 7 ARTICLE V CONCERNING THE LIQUIDITY SUPPORT TRUSTEE SECTION 5.01. General Matters Relating to the Liquidity Support Trustee . . . . . . . . . . . . . . . . 7 5.02. Books and Records; Filings . . . . . . . . . . . . . . 9 5.03. Compensation and Indemnification of Liquidity Support Trustee. . . . . . . . . . . . . . . . . . . . . . . 9 5.04. Resignation, Discharge or Removal of Liquidity Support Trustee; Successor . . . . . . . . . . . . . . . . .10 5.05. Qualification of Liquidity Support Trustee . . . . . .11 5.06. Not Acting in Individual Capacity. . . . . . . . . . .11 5.07. Further Assurances . . . . . . . . . . . . . . . . . .11 - ---------------- *The Table of Contents is not part of this Agreement. ARTICLE VI MISCELLANEOUS SECTION 6.01. Benefit of Agreement. . . . . . . . . . . . . . .11 6.02. Severability. . . . . . . . . . . . . . . . . . .11 6.03. Amendments and Waivers. . . . . . . . . . . . . .12 6.04. Notices . . . . . . . . . . . . . . . . . . . . .12 6.05. Governing Law . . . . . . . . . . . . . . . . . .12 6.06. Counterparts. . . . . . . . . . . . . . . . . . .12 6.07. Termination of the Trust; No Power to Revoke or Withdraw Trust Property . . . . . . .12 6.08. Nature of Interest in Trust Property. . . . . . .13 6.09. Grantor Trust . . . . . . . . . . . . . . . . . .13 6.10. Headings. . . . . . . . . . . . . . . . . . . . .13 LIQUIDITY SUPPORT TRUST AGREEMENT, dated as of April 12, 1994 among ST LENDING, INC., a Delaware corporation, LOMAS FINANCIAL CORPORATION, a Delaware corporation, BANK ONE, TEXAS, N.A., as Trustee under the Indenture, and Wilmington Trust Company, a banking corporation under the laws of the State of Delaware. ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. Capitalized terms set forth below shall have the following meanings when used in this Agreement: "Agreement" means this Liquidity Support Trust Agreement and any amendments or modifications hereof. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City, Dallas, Texas or Wilmington, Delaware are authorized by law to close. "Cash Collateral Account" means the account opened by the Issuer pursuant to Section 12.2 of the Indenture. "Code" means the Internal Revenue Code of 1986, as amended. "Corporate Trust Office" of a Person means the principal corporate trust or other similar office of such Person. "Eligible Certificates of Deposit" means commercial bank certificates of deposit, time deposits, bankers acceptances of other debt obligations of any bank having a Thompson Bank Watch, Inc. rating of at least B/C or a Standard & Poor's long-term debt rating of at least BBB or a Moody's long-term debt rating of Baa and with capital, surplus and undivided profits aggregating at least $300 million. "Eligible Investments" means (i) U.S. Government Securities, (ii) Eligible Certificates of Deposit, (iii) commercial paper and other short-term money market instruments which are rated at least P-2 by Moody's and at least A-2 by Standard & Poor's and which have a fixed maturity of no more than 365 days from the date of their original issuance, (iv) Repurchase Agreements and Reverse Repurchase Agreements with any Person the long-term unsecured debt securities of which are rated Aa by Moody's and AA by Standard & Poor's, provided that the Liquidity Support Trustee or its agent takes immediate physical possession of the collateral for such Repurchase Agreements or Reverse Repurchase Agreements (or obtains the equivalent protection through book entries) and (v) interests in any mutual fund or investment company that invests only in cash or obligations issued or guaranteed by the United States of America or any agency thereof or in Repurchase Agreements secured by obligations issued or guaranteed by the United States of America or any agency thereof. "Income Measuring Period" means, with respect to any LFC Senior Convertible Note Payment Date, the period from and including [October 1, 1991] through the end of the last fiscal quarter ended before such LFC Senior Convertible Note Payment Date. "Indenture" means the trust indenture dated as of November 1, 1991 between the Issuer and Team Bank (the predecessor of Bank One, Texas, N.A.), as Trustee, as the same may be amended, supplemented or modified from time to time. "Indenture Payment" means any payment made by the Indenture Trustee to the Liquidity Support Trustee for deposit into the Liquidity Support Trust Account pursuant to Section 12.3 of the Indenture. "Indenture Trustee" means the Trustee under the Indenture. "Initial Deposit" has the meaning specified in Section 2.02. "Interest Shortfall Amount" means, with respect to any LFC Senior Convertible Note Payment Date, the amount by which (A) the amount of interest payable on the LFC Senior Convertible Notes during the period commencing [November 1, 1991] and ending on such LFC Senior Convertible Note Payment Date exceeds (B) an amount equal to (a) the sum of (i) 50% of (x) LMUSA's net income for the relevant Income Measuring Period, plus (y) any tax expense recorded on the books of LMUSA for such Income Measuring Period which will never be required to be paid in cash and which has arisen solely from the application of net operating loss carryforwards of the consolidated tax group of which LFC was the common parent for taxable years ending on or before January 30, 1992, (ii) all dividends received by LFC during such Income Measuring Period from any company other than LMUSA, (iii) LFC's interest income for such Income Measuring Period, (iv) an amount carried on LFC's balance sheet representing the amount of taxes which have been prepaid by LFC during the relevant Income Measuring Period, (v) all amounts withdrawn from the Trust Account pursuant to Section 2.08 (a) during such Income Measuring Period and (vi) all net income earned by any subsidiary of LFC other than LMUSA during such Income Measuring Period to the extent that (A) no legal or contractual provision prevented the distribution of such income to LFC as a dividend and (B) the distribution of such income to LFC as a dividend would not have left such subsidiary with an unduly small capital for its operations and anticipated obligations in the judgment of the board of directors of such subsidiary, less (b) the sum of (i) LFC's general and administrative expenses for the relevant Income Measuring Period and (ii) all federal, state and local income, excise, franchise, ad valorem and other taxes attributable to LFC and its activities and actually paid during such Income Measuring Period. "Issuer" means ST Lending, Inc., a Delaware corporation, and its permitted successors and assigns. "LFC" means Lomas Financial Corporation, a Delaware corporation. "LFC Liquidity Support Trust Note" means a promissory note in the form attached hereto as Annex 2 issued to the Issuer by LFC. "LFC Senior Convertible Note Payment Date" means each date for the payment of scheduled installments of interest on the LFC Senior Convertible Notes. "LFC Senior Convertible Notes" means the senior convertible notes issued pursuant to the Indenture between LFC and Texas Commerce Bank, National Association, Trustee, dated as of November 1, 1991, as the same may be amended, supplemented or modified from time to time. "Liquidity Support Trustee" means Wilmington Trust Company, a banking corporation under the laws of Delaware, acting not in its individual capacity, but solely in its capacity as trustee hereunder, and any banking corporation that shall have become its successor pursuant to Section 5.04. "LMUSA" means Lomas Mortgage USA, Inc., a corporation organized under the laws of the State of Connecticut, and its successors. "Moody's" means Moody's Investors Services, Inc. and any successor thereto. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government of political subdivision or an agency or instrumentality thereof. "Pledge Agreement" means the Pledge and Security Agreement dated as of January 30, 1992 among the Issuer, the Indenture Trustee and Bank One, Texas, N.A., as Pledge Agent, and any amendments or modifications thereto. "Repurchase Agreement" (which definition also applies to "Reverse Repurchase Agreement") means an agreement, including related terms, which provides for the transfer of Eligible Certificates of Deposit or U.S. Government Securities against the transfer of funds by the transferee of such Eligible Certificates of Deposit or U.S. Government Securities with a simultaneous agreement by such transferee to transfer to the transferor thereof Eligible Certificates of Deposit or U.S. Government Securities, at a date certain not later than one year after such transfers or on demand, against the transfer of funds. "Restricted Payment" means, with respect to any Person, (i) any dividend or other distribution on any shares of such Person's capital stock or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of such Person's capital stock or (b) any option, warrant or other right to acquire shares of such Person's capital stock. "Securities" shall mean the STL Secured Notes Due 1996 issued pursuant to the Indenture. "Standard & Poor's" means Standard & Poor's Corporation and any successor thereto. "Termination Date" means the earliest to occur of (i) the last Euro- Dollar Business Day of October 1996, (ii) the date specified in a Notice of Termination delivered by LFC in accordance with Section 6.07, (iii) the date on which LFC shall make any Restricted Payment, (iv) the date of any acceleration of the LFC Liquidity Support Trust Note, (v) the date on which the LFC Senior Convertible Notes and all amounts due and payable under the Indenture related thereto shall have been paid in full and (vi) the date on which the Securities and all amounts due and payable under the Indenture shall have been paid in full. "Trust" means the trust existing pursuant to this Agreement, designated as the "LFC Liquidity Support Trust." "Trust Account" has the meaning specified in Section 2.07(a). "Trust Certificate" means the trust certificate representing the entire undivided beneficial interest in the Trust to be issued to the Issuer pursuant to Section 2.04 and pledged to the Indenture Trustee pursuant to the Pledge Agreement. "Trust Property" means the Initial Deposit, any Indenture Payments received by the Liquidity Support Trustee and all other money, instruments and other property deposited in the Trust pursuant hereto, including all proceeds thereof. "Trust Withdrawal Certificate" means a completed certificate in the form attached hereto as Annex 3, signed by an officer of LFC. "U.S. Government Securities" means securities of the United States government or United States government agencies (other than federal farm loan banks) backed by the full faith and credit of the United States, issued after July 18, 1984 and having current maturities of one year or less. "Wilmington Trust" means Wilmington Trust Company, a Delaware banking corporation. SECTION 1.02. Indenture Definitions; Definitional Conventions. (a) Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Indenture. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section references are to this Agreement unless otherwise specified. (c) Wherever required by the context of this Agreement, the singular shall include the plural, and vice versa, and masculine and feminine genders shall include the neuter gender and vice versa. ARTICLE II DECLARATION OF TRUST; ISSUANCE OF TRUST CERTIFICATE; DUTIES OF LIQUIDITY SUPPORT TRUSTEE SECTION 2.01. Declaration of Trust. Wilmington Trust is hereby appointed to hold and agrees to hold the Trust Property as Liquidity Support Trustee in trust upon the terms and conditions and for the use and benefit of the Issuer as herein set forth. The Trust shall constitute a business trust under Title 12, Chapter 38 of the Delaware Code. The Issuer, as owner of the beneficial interest in the Trust and holder of the Trust Certificate, shall be entitled and this Agreement shall constitute the governing instrument of the Trust under Section 3803 of the Delaware Code to the same limitation of personal liability extended to stockholders of private corporations for profit. SECTION 2.02. Deposits. (a) Simultaneously with the execution and delivery of this Agreement, the Issuer hereby grants, transfers, delivers and sets over to the Liquidity Support Trustee, its successors and assigns, all right, title and interest of the Issuer in and to the sum of Two Hundred dollars ($200) (the "Initial Deposit"). (b) From time to time hereafter, Indenture Payments may be paid over to the Liquidity Support Trustee, for deposit to the Trust Account, by or for the account of the Indenture Trustee under and pursuant to the provisions of the Indenture. SECTION 2.03. Trust Property. The Liquidity Support Trustee hereby agrees to have and to hold the Trust Property until the Termination Date, in trust under and subject to the conditions and agreements herein set forth, for the use, benefit and security of the Issuer, subject to the pledge of the Trust Certificate by the Issuer on behalf of the Indenture Trustee pursuant to the Pledge Agreement. SECTION 2.04. Issuance and Transfer of Trust Certificate. (a) The Liquidity Support Trustee acknowledges receipt on the date hereof of the Initial Deposit, duly paid by the Issuer, and agrees to hold the Initial Deposit in trust in accordance with the terms hereof, and the Issuer acknowledges receipt on the date hereof of a Trust Certificate representing the entire undivided beneficial interest in the Trust, duly executed and delivered to the Issuer in exchange for the Initial Deposit in substantially the form attached hereto as Annex 1. (b) No offer, sale, transfer, assignment, pledge, hypothecation, encumbrance or other disposition of the Trust Certificate or any part thereof or interest therein, other than the pledge of the Trust Certificate on behalf of the Indenture Trustee pursuant to the Pledge Agreement, shall be made by the Issuer. If the Indenture Trustee shall, pursuant to the Pledge Agreement, succeed to the rights and benefits of the Issuer as holder of the Trust Certificate, then the Indenture Trustee, upon notice from the Indenture Trustee to the Liquidity Support Trustee of such succession, shall be treated for all purposes as the owner of the beneficial interest in the Trust represented thereby and shall be considered as the Issuer for all purposes hereof. SECTION 2.05. Directions to Liquidity Support Trustee. The Liquidity Support Trustee shall take such action or shall refrain from taking such action under this Agreement as it shall be directed pursuant to a specific provision of this Agreement or, absent such a specific provision, as it shall be directed in a notice given by (a) the Indenture Trustee, until such time as the Liquidity Support Trustee shall receive notice from the Indenture Trustee that the Securities and all amounts due and payable under the Indenture have been paid in full or (b) from and after such time, the Issuer. SECTION 2.06. Collection of Moneys. The Liquidity Support Trustee at any time may, but shall have no obligation to, demand payment or delivery of all money and other property payable to or receivable by the Liquidity Support Trustee at such time pursuant to the Indenture and this Agreement. The Liquidity Support Trustee shall hold as part of the Trust Property all such money and property received by it as part of the Trust Property and shall apply such money and property as provided in this Agreement. SECTION 2.07. Liquidity Support Trust Account. (a) On the date hereof, the Liquidity Support Trustee shall open, at the Corporate Trust Office of Wilmington Trust, an account titled "Liquidity Support Trust Account, Wilmington Trust Company, as Liquidity Support Trustee" (the "Trust Account"). The Liquidity Support Trustee shall deposit in the Trust Account, promptly upon receipt, the Initial Deposit and the full amount of all Indenture Payments received by it. All amounts so deposited in the Trust Account and all investments made with such moneys, including all income or other gain from such investments, shall be held by the Liquidity Support Trustee in the Trust Account as part of the Trust Property as herein provided and shall only be subject to withdrawal by the Liquidity Support Trustee at the times and for the purposes set forth in Section 2.08 or 5.03. (b) At the direction of the Issuer, the Liquidity Support Trustee shall invest and reinvest all or any specified portion of the Trust Account in Eligible Investments specified by the Issuer. Subject to Section 2.08(b), all income or other gain from such investments shall be credited to, and any loss resulting from such investments shall be charged to, the Trust Account. If the Issuer shall not have given any direction with respect to all or any portion of the Trust Account pursuant to this Section 2.07(b), the Trust Account or such portion thereof, as the case may be, shall not be invested by the Liquidity Support Trustee. If the Liquidity Support Trustee shall receive any amount for deposit into the Trust Account (other than any amount which the Liquidity Support Trustee is required at the time of receipt to withdraw from the Trust Account pursuant to Section 2.08) and the Issuer shall not have given any direction with respect to the investment of such amount, the Liquidity Support Trustee shall promptly notify the Issuer that it has not received any such direction with respect to such amount. (c) If the provisions of Section 2.08 or 5.03 shall require or permit the withdrawal from the Trust Account of any amounts invested as provided in Section 2.07(b), the Liquidity Support Trustee shall, to the extent practicable, cause a sufficient amount of such investments to be sold or otherwise converted to cash to permit such withdrawal. The Liquidity Support Trustee shall have no liability as a result of its inability to make any required payment from the Trust Account other than by reason of its gross negligence or willful misconduct. SECTION 2.08. Withdrawals from Trust Account. (a) So long as the Termination Date has not occurred, the Liquidity Support Trustee shall withdraw from the Trust Account and pay to LFC, in immediately available funds, on any LFC Senior Convertible Note Payment Date, upon delivery by LFC to the Liquidity Support Trustee, on the second Business Day prior to such LFC Senior Convertible Note Payment Date, of a Trust Withdrawal Certificate in substantially the form attached hereto as Annex 3 setting forth (i) such Interest Shortfall Amount, (ii) the calculation thereof and (iii) payment instructions for the wire transfer or other payment of such amount to LFC. If the amount available in the Trust Account is insufficient to pay such Interest Shortfall Amount in full, the Liquidity Support Trustee shall make such payment to the extent funds are available therefor, and shall thereafter withdraw funds and make the remainder of such payment as and to the extent that funds become available therefor. The Liquidity Support Trustee shall notify the Issuer and the Indenture Trustee of the date and amount of each withdrawal made pursuant to this Section 2.08(a). (b) Any amounts earned on the investment of the Trust Account pursuant to Section 2.07(b) from and after the Final Deposit Date shall, on the first Business Day of the second calendar week after the Final Deposit Date and the first Business Day of every second calendar week thereafter, to the extent such amounts are available for withdrawal and distribution by the Liquidity Support Trustee on each such date, be withdrawn from the Trust Account by the Liquidity Support Trustee and paid to the Indenture Trustee for deposit into the Cash Collateral Account. "Final Deposit Date" means the date on which the sum of the amounts deposited into the Trust Account in accordance with clause second of Section 12.3(a) of the Indenture and the amounts earned on the Trust Account pursuant to Section 2.07(b) shall first be equal to or greater than $20,000,000. The Issuer shall notify the Liquidity Support Trustee of the occurrence of the Final Deposit Date. (c) Notwithstanding any provision of this Agreement to the contrary, no amount shall be paid by the Liquidity Support Trustee to LFC pursuant to Section 2.08(a) if the Liquidity Support Trustee shall have been notified by the Issuer or by the Indenture Trustee that an event of default under the LFC Liquidity Support Trust Note has occurred and is continuing or that, after giving effect to such payment, an event of default under the LFC Liquidity Support Trust Note would have occurred and be continuing. (d) On the Termination Date, or as soon thereafter as practicable, the Liquidity Support Trustee shall pay the entire amount in the Trust Account to the Indenture Trustee in Federal or other immediately available funds for deposit into the Cash Collateral Account; provided that if the Indenture Trustee shall have previously notified the Liquidity Support Trustee in writing that the Securities and all amounts due and payable under the Indenture have been paid in full, the Liquidity Support Trustee shall pay such amount to the Issuer. The Issuer will notify the Liquidity Support Trustee of the occurrence of the Termination Date (unless the Liquidity Support Trustee shall have received notice of such occurrence pursuant to a Notice of Termination delivered by LFC in accordance with Section 6.07). ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER The Issuer represents and warrants that: SECTION 3.01. Good Standing. The Issuer is a corporation validly existing and in good standing under the laws of the State of Delaware. SECTION 3.02. Corporate Power. The execution, delivery and performance by the Issuer of this Agreement are within the corporate power of the Issuer, have been duly authorized by all necessary corporate action on the part of the Issuer, and do not and will not (i) violate or contravene any judgment, injunction, order or decree binding on the Issuer or (ii) violate, contravene or constitute a default under any provision of the certificate of incorporation or by-laws of the Issuer or of any material agreement, contract, mortgage or other instrument binding on the Issuer or (iii) result in the creation or imposition of any lien, mortgage, pledge, charge, security interest or incumbrance of any kind (collectively, a "Lien") attributable to the Issuer on the Trust Property. SECTION 3.03. Consents and Approvals. No consent, approval, authorization or order of, or filing with, any court or regulatory, supervisory or governmental agency or body is required in connection with the execution, delivery and performance by the Issuer of this Agreement of the consummation by the Issuer of the transactions contemplated hereby, except as provided in Section 5.02(c). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LIQUIDITY SUPPORT TRUSTEE Wilmington Trust represents and warrants that: SECTION 4.01. Organization; Good Standing; Capital. Wilmington Trust is a banking corporation organized, doing business, validly existing and in good standing, under the laws of the State of Delaware and has all corporate power and all material governmental licenses, authorizations, consents, and approvals required under the laws of the State of Delaware to carry on a trust business as now conducted and to enter into and perform its obligations under this Agreement. Wilmington Trust has an aggregate capital, surplus and undivided profits of not less than $100,000,000. SECTION 4.02. Corporate Power. The execution, delivery and performance by Wilmington Trust of this Agreement and the issuance of the Trust Certificate by the Liquidity Support Trustee pursuant to this Agreement are within the corporate power of Wilmington Trust, have been duly authorized by all necessary corporate action on the part of Wilmington Trust and do not and will not (i) violate or contravene any judgment, injunction, order or decree binding on Wilmington Trust or (ii) violate, contravene or constitute a default under any provision of the certificate of incorporation or by-laws of Wilmington Trust or of any material agreement, contract, mortgage or other instrument binding on Wilmington Trust or (iii) result in the creation or imposition of any Lien attributable to Wilmington Trust on the Trust Property except for any Lien that may be created pursuant to Section 5.03 with respect to payments to be made to the Liquidity Support Trustee out of the Trust Property. SECTION 4.03. Consents and Approvals. No consent, approval, authorization or order of, or filing with, any court or regulatory, supervisory or governmental agency or body is required to be made or obtained by Wilmington Trust under Delaware law in connection with (i) the execution and delivery of this Agreement by Wilmington Trust, (ii) the performance by Wilmington Trust, as Liquidity Support Trustee, of this Agreement or (iii) the issuance of the Trust Certificate by Wilmington Trust, as Liquidity Support Trustee, pursuant to this Agreement (except as provided in Section 5.02(c) and as may be required by the Delaware securities laws; it being understood, however, that the Issuer and LFC assume all obligations for, and Wilmington Trust shall have no obligation or liability with respect to, the making of any filings or the obtaining of any consents or approvals required by the Delaware securities laws). ARTICLE V CONCERNING THE LIQUIDITY SUPPORT TRUSTEE SECTION 5.01. General Matters Relating to the Liquidity Support Trustee. (a) Subject to the terms of Sections 2.07, 2.08 and 5.03, all moneys deposited with or received by the Liquidity Support Trustee hereunder shall be held by it without interest in trust as part of the Trust Property until distributed to LFC, the Issuer or the Indenture Trustee in accordance with Section 2.08. (b) The Liquidity Support Trustee shall be under no liability (except as provided in Section 5.01(j)) for any action taken by the Liquidity Support Trustee in good faith in reliance upon any signature, paper, order, list, demand, request, consent, affidavit, notice, opinion, direction, endorsement, assignment, resolution, draft or other document, prima facie properly executed, or for the disposition of moneys or Trust Property pursuant to this Agreement. Without limitation, the Liquidity Support Trustee shall have no duty or obligation to ascertain the correctness of any dollar amounts or other information set forth in, or calculations made pursuant to, any Trust Withdrawal Certificate or other document or instrument delivered to the Trustee under this Agreement or in connection with the transactions contemplated hereby; except that the Liquidity Support Trustee shall be obligated to verify that any Trust Withdrawal Certificate delivered to the Trustee under this Agreement is in the form required by Section 2.08 and, assuming the correctness of the amounts set forth in items (A) through (K) of the Trust Withdrawal Certificate, that the computation of the Interest Shortfall Amount set forth in such Trust Withdrawal Certificate is correct. (c) The Liquidity Support Trustee may construe any of the provisions of this Agreement, insofar as the same may appear to be ambiguous or inconsistent with any other provisions hereof, in accordance with its best judgment in order to effectuate the purposes hereof, and any such construction by the Liquidity Support Trustee made in good faith shall be binding upon the Issuer and LFC. (d) The Liquidity Support Trustee shall not be liable (except as provided in Section 5.01(j)) with respect to any action taken or omitted to be taken by the Liquidity Support Trustee in good faith in accordance with directions given to the Liquidity Support Trustee in accordance with Section 2.05. During the respective time periods in which the Indenture Trustee and the Issuer have the right to give directions to the Liquidity Support Trustee as provided in Section 2.05, the Liquidity Support Trustee may rely on, and act exclusively pursuant to, the directions of the Person then entitled to give directions, notwithstanding any contrary direction from any Person not then entitled to give directions under Section 2.05. (e) The Liquidity Support Trustee shall be entitled to rely on the accuracy of all directions given to it under Section 2.07 or 2.08 with respect to the deposit, investment or withdrawal of funds in the Trust Account and shall have no responsibility (i) for determining whether directed investments are Eligible Investments, (ii) for investigating or determining the appropriateness of maturities of directed investments or (iii) for any decline in market value of any investments made pursuant to Section 2.07. (f) The Liquidity Support Trustee shall not be responsible for or in respect of the recitals herein, the validity or sufficiency of this Agreement or for the due execution hereof by the Issuer or LFC or for or in respect of the validity or sufficiency of the Trust Certificate (except for the due execution and delivery thereof by the Liquidity Support Trustee), and the Liquidity Support Trustee shall in no event assume or incur any liability (except as provided in Section 5.01(j)), duty or obligation to the Issuer, LFC, the Indenture Trustee or any other Person, other than as expressly provided for herein. (g) The Liquidity Support Trustee shall not be under any obligation to appear in, prosecute or defend any action, which in its opinion may require it to incur any out-of-pocket expense or any liability unless it shall be furnished with such reasonable security and indemnity against such expense or liability as it may require in accordance with the terms of Section 5.03 hereof. The Liquidity Support Trustee may, but shall be under no duty to, undertake such action as it may deem necessary at any and all times to protect the Trust Property and the rights and interests of the Issuer pursuant to the terms of this Agreement. (h) In the exercise or administration of the trusts and powers hereunder, the Liquidity Support Trustee may employ agents (who may be affiliates of the Liquidity Support Trustee) and enter into agreements with them, and the Liquidity Support Trustee shall not be answerable for the default or misconduct of any such agents if such agents shall have been selected by it in good faith. (i) The Liquidity Support Trustee shall not have any duty or obligation to manage, control, use, sell, dispose of or otherwise deal with the Trust Property, or otherwise take or refrain from taking any action under or in connection with this Agreement, except as expressly required by the terms of this Agreement or expressly directed in written instructions pursuant to Section 2.05; and no implied duties or obligations shall be read into this Agreement against the Liquidity Support Trustee. (j) Neither the Liquidity Support Trustee nor Wilmington Trust shall have any liability hereunder to any Person, except for (i) any liability of the Liquidity Support Trustee to the Trust or to the Issuer or the Indenture Trustee, as the case may be, in its capacity as owner of the beneficial interest in the Trust, on account of any act or omission of the Liquidity Support Trustee constituting gross negligence or willful misconduct in the performance of its duties hereunder, (ii) any liability of Wilmington Trust arising by reason of any representation or warranty contained in Article IV being incorrect in any material respect when made and (iii) any liability of the Liquidity Support Trustee for taxes on net income payable by it based on or measured by any fees, commissions or compensation paid to the Liquidity Support Trustee in connection with its services hereunder. (k) The limitations on the liability of the Liquidity Support Trustee and Wilmington Trust set forth herein shall not limit the claims of the Trust against any other Person providing services to the Trust. (l) The Liquidity Support Trustee may consult with counsel, and (except as provided in Section 5.01(j)) the written advice of counsel or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith reliance thereon. (m) The Liquidity Support Trustee shall not be required to take any action under this Agreement if it shall reasonably determine, or shall have been advised by counsel, that such action is likely to result in personal liability, or is contrary to the terms hereof or otherwise contrary to law. (n) The Liquidity Support Trustee and its affiliates may, without having to account therefor to any other party hereto, accept deposits from, extend credit (on a secured or unsecured basis) to and generally engage in any kind of banking, trust or other business with any such party or any of its affiliates as if it were not acting as the Liquidity Support Trustee, and may accept fees and other consideration for services in connection with this Agreement or otherwise without having to account for the same to any other party. (o) It is understood and agreed that should any dispute arise with respect to the payment and/or ownership or right of possession of the Trust Account, the Liquidity Support Trustee is authorized and directed to retain in its possession, without liability to anyone, all or any part of the Trust Account until such dispute shall have been settled either by mutual agreement by the parties concerned or by the final order, decree or judgment of a court or other tribunal of competent jurisdiction in the United States of America and time for appeal has expired and no appeal has been perfected, but the Liquidity Support Trustee shall be under no duty whatsoever to institute or defend any such proceedings. SECTION 5.02. Books and Records; Filings. (a) The Liquidity Support Trustee shall keep proper books of record and account of all the transactions under this Agreement at its Corporate Trust Office, and such books and records shall be open to inspection by the Issuer upon reasonable notice to the Liquidity Support Trustee at all reasonable times during usual business hours of the Liquidity Support Trustee. (b) The Liquidity Support Trustee shall prepare such tax returns of the Trust and shall execute on behalf of the Trust such tax returns of the Trust and such other filings with state and Federal taxing authorities as may from time to time be requited under any state or Federal statute or any rule or regulation thereunder. The fiscal year of the Trust shall be the same as the fiscal year of the Issuer. (c) The Liquidity Support Trustee shall file a certificate of trust with respect to the Trust with the Secretary of State of the State of Delaware in accordance with Title 12, Section 3810 of the Delaware Code, and will make such other filings with the Secretary of State of the State of Delaware as may from time to time be required under the Delaware Code or as the Liquidity Support Trustee may be expressly directed to make in a notice delivered pursuant to Section 2.05. SECTION 5.03. Compensation and Indemnification of Liquidity Support Trustee. (a) the Liquidity Support Trustee shall be entitled to a fee, payable annually in advance, for its services as Liquidity Support Trustee hereunder in accordance with the separate agreement between LFC and Wilmington Trust dated the date hereof (the "Letter Agreement"). (b) In the event any tax is payable by the Trust as reflected in any tax return prepared by the Liquidity Support Trustee under Section 5.02(b), LFC shall pay to the Liquidity Support Trustee upon its request the amounts so due (such amounts to be paid sufficiently in advance of the relevant filing date as to permit the timely filing of any such return). (c) LFC shall indemnify, protect, save and hold the Liquidity Support Trustee harmless against, any and all losses, liabilities, obligations, damages, claims, penalties, taxes (excluding any taxes on the Liquidity Support Trustee on, or measured by, any compensation received by the Liquidity Support Trustee) or expenses arising out of or in connection with the creation, acceptance, operation or administration of the Trust, including the reasonable costs and reasonable expenses of defending itself against any claims or liabilities in connection with the exercise or performance of any of its powers or duties hereunder. In addition, LFC shall reimburse the Liquidity Support Trustee and Wilmington Trust upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Liquidity Support Trustee in the preparation and any subsequent amendment of this Agreement and the performance of its obligations under this Agreement (including the reasonable compensation and the reasonable expenses and disbursements of its counsel and of all agents and other Persons not regularly in its employ), except any such expense, disbursement or advance as may arise from (i) the gross negligence or willful misconduct of the Liquidity Support Trustee in the performance of its duties hereunder, (ii) the Liquidity Support Trustee's liability for taxes on net income payable by the Liquidity Support Trustee based on or measured by any fees, commissions or compensation paid to the Liquidity Support Trustee in connection with its services hereunder or (iii) any of its representations and warranties contained in Article IV being incorrect in any material respect when made. (d) In the event LFC shall not timely pay any amount due under the provisions of this Section 5.03 or under the Letter Agreement, the Liquidity Support Trustee shall have the right to set off and deduct the amount due (as determined by the Liquidity Support Trustee in good faith) from the Trust Account; and the Liquidity Support Trustee shall be deemed to have a lien on, and a security interest in, the Trust Account and all investments and proceeds forming a part thereof, to the extent of any such amounts from time to time due and unpaid. (e) The payment and indemnification obligations of LFC under this Section 5.03 and the Letter Agreement shall survive any termination of this Agreement or the Trust or any resignation, discharge or removal of the Liquidity Support Trustee. SECTION 5.04. Resignation, Discharge or Removal of Liquidity Support Trustee; Successor. (a) The Liquidity Support Trustee may resign and be discharged of the trust created by this Agreement by executing an instrument in writing and filing the same with the Issuer not less than sixty days before the date specified in such instrument when, subject to Section 5.04(c), such resignation is to take effect. Upon receiving such notice of resignation, the Issuer shall use its best efforts promptly to appoint a successor Liquidity Support Trustee in the manner and meeting the qualifications hereinafter provided by written instrument or instruments delivered to such resigning Liquidity Support Trustee and the successor Liquidity Support Trustee. With the consent of the Indenture Trustee, the Issuer may remove the Liquidity Support Trustee for any reason and appoint a successor Liquidity Support Trustee by written instrument or instruments delivered to the Liquidity Support Trustee so removed and the successor Liquidity Support Trustee. (b) In case at any time the Liquidity Support Trustee shall resign and no successor Liquidity Support Trustee shall have been appointed within thirty (30) days after notice of such resignation has been filed and mailed as required by Section 5.04(a), the resigning Liquidity Support Trustee may forthwith apply to a court of competent jurisdiction for the appointment of a successor Liquidity Support Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribed, appoint a successor Liquidity Support Trustee. (c) Any successor Liquidity Support Trustee appointed hereunder shall promptly execute and deliver to the Issuer and the resigning Liquidity Support Trustee an instrument accepting such appointment hereunder, and the successor Liquidity Support Trustee without any further act, deed or conveyance shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder with like effect as if originally named the Liquidity Support Trustee herein and shall be bound by all the terms and conditions of this Agreement. Upon the request of the successor Liquidity Support Trustee, the retiring Liquidity Support Trustee shall, upon payment of all amounts due the retiring Liquidity Support Trustee, execute and deliver an instrument transferring to the successor Liquidity Support Trustee all the rights and powers of the retiring Liquidity Support Trustee; and the retiring Liquidity Support Trustee shall transfer, deliver and pay over to the successor Liquidity Support Trustee all of the Trust Property at the time held by it, if any, together with all necessary instruments of transfer and assignment or other documents properly executed necessary to effect such transfer and such of the records or copies thereof maintained by the retiring Liquidity Support Trustee in the administration hereof as may be requested by the successor Liquidity Support Trustee and shall thereupon be discharged from all duties and responsibilities under this Agreement. Any resignation or removal of a Liquidity Support Trustee shall not become effective until acceptance by the successor Liquidity Support Trustee of its appointment pursuant to this Section 5.04(c). Any successor Liquidity Support Trustee shall meet the qualifications set forth in Section 5.05. (d) Any corporation into which the Liquidity Support Trustee may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Liquidity Support Trustee shall be a party, shall be the successor Liquidity Support Trustee under this Agreement without the execution, delivery or filing of any paper, instrument or further act to be done on the part of the parties hereto, anything herein, or in any agreement relating to such merger or consolidation, by which the predecessor corporation may seek to retain certain powers, rights and privileges theretofore obtaining for any period of time following such merger or consolidation, to the contrary notwithstanding; provided that such corporation resulting from any such merger or consolidation shall meet the qualifications set forth in Section 5.05. SECTION 5.05. Qualification of Liquidity Support Trustee. The Liquidity Support Trustee shall at all times be a banking corporation organized and doing business under the laws of the United States or the laws of the State of Delaware, having its principal office in the State of Delaware and all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on a trust business and having at all times an aggregate capital, surplus and undivided profits of not less than $100,000,000. SECTION 5.06. Not Acting in Individual Capacity. In acting hereunder, Wilmington Trust acts solely as trustee and not in its individual capacity, except as otherwise expressly provided herein; and, except as so provided, all persons having any claim against Wilmington Trust by reason of the transactions contemplated hereby shall look only to the Trust Property for payment or satisfaction thereof. SECTION 5.07. Further Assurances. The Liquidity Support Trustee agrees to execute and deliver all such other instruments, documents or certificates as reasonably may be requested pursuant to the written direction of the Issuer or the Indenture Trustee in connection with the transactions contemplated hereby and which are in form and content reasonably satisfactory to the Liquidity Support Trustee; provided, however, that the Liquidity Support Trustee shall have no obligation to execute any such instrument, document or certificate which, in the good faith judgment of the Liquidity Support Trustee, would adversely affect the Liquidity Support Trustee's rights, duties, obligations or immunities hereunder or under any document contemplated hereby. ARTICLE VI MISCELLANEOUS SECTION 6.01. Benefit of Agreement. Whenever any of the parties to this Agreement is referred to, such reference shall be deemed to include any Person who has become the successor and assign of such party in accordance with the provisions hereof. This Agreement shall inure solely to the benefit of the Issuer, the Liquidity Support Trustee, LFC and the Indenture Trustee, and their respective successors and assigns. SECTION 6.02. Severability. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be held invalid for any reason whatsoever, then, to the maximum extent permitted by applicable law, such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement, and the invalidity thereof shall not affect the validity or enforceability of the other provisions of this Agreement or of the Trust Certificate. SECTION 6.03. Amendments and Waivers. This Agreement may not be amended or modified, nor may compliance with any provision hereof be waived, except in accordance with the provisions of Section 3.18(b) of the Indenture. SECTION 6.04. Notices. Any notice, demand, direction or instruction to be given to the Liquidity Support Trustee under this Agreement shall be in writing and shall be duly given if mailed or delivered or set by telecopy to it at: Rodney Square North, 1100 North Market Street, Wilmington, Delaware, 19890-0001, telecopy number (302) 651-8882, Attention: Corporate Trust Administration, or at such other address or telecopy number as shall be specified by the Liquidity Support Trustee in a notice to the other parties hereto given in accordance with this Section 6.04. Any notice, demand, direction or instruction to be given to the Indenture Trustee under this Agreement shall be in writing and shall be duly given if mailed or delivered or sent by telecopy to it at: P.O. Box 2604, 500 Throckmorton Street, West Complex, 6th Floor, Fort Worth, Texas 76113, telecopy number (817) 884-4560, Attention: Tracey McMillan, or at such other address or telecopy number as shall be specified by the Indenture Trustee in a notice to the parties hereto given in accordance with this Section 6.04. Any notice, demand, direction or instruction to be given to the Issuer under this Agreement shall be in writing and shall be duly given if mailed or delivered or sent by telecopy to it as: ST Lending, Inc., 1420 Viceroy Drive, Suite B, Dallas, Texas 75235, telecopy number (214) 879-1383, Attention: Carey B. Wickland, or at such other address or telecopy number as shall be specified by the Indenture Trustee in a notice to the parties hereto given in accordance with this Section 6.04. Any notice, demand, direction or instruction to be given to LFC under this Agreement shall be in writing and shall be duly given if mailed or delivered or sent by telecopy to it at: Lomas Financial Corporation, 1600 Viceroy Drive, Dallas, Texas 75235, telecopy number (214) 879-5528, Attention: James L. Crowson, or at such other address or telecopy number as shall be specified by LFC in a notice to the other parties hereto given in accordance with this Section 6.04. Notice shall be deemed effective when received by the party to whom it is directed. SECTION 6.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, AND ALL LAWS OR RULES OF CONSTRUCTION OF SUCH STATE SHALL GOVERN THE RIGHTS OF THE PARTIES TO THIS AGREEMENT AND THE INTERPRETATION OF THE PROVISIONS OF THIS AGREEMENT. SECTION 6.06. Counterparts. This Agreement may be executed and delivered in any number of counterparts, and such counterparts taken together shall constitute one and the same instrument. SECTION 6.07. Termination of the Trust; No Power to Revoke or Withdraw Trust Property. (a) LFC may designate a Termination Date by delivery to the Issuer and the Liquidity Support Trustee of a notice specifying the selected date (the "Notice of Termination"); provided that the Termination Date so specified shall be a date which is not less than three (3) business days after the date the Notice of Termination is delivered to the Issuer and the Liquidity Support Trustee. On the Termination Date (whether such date is determined pursuant to this Section 6.07 or as otherwise provided in the definition of such term herein), or as soon thereafter as practicable, any Trust Property remaining in the Trust (after application of any amounts due under Section 5.03), shall be distributed in accordance with Section 2.08(d). Promptly following the Termination Date, the Liquidity Support Trustee shall take all such actions as it deems necessary or appropriate in connection with the winding up of the affairs of the Trust and, upon completion of winding up, shall file a certificate of cancellation with respect to the Trust with the Secretary of State of the State of Delaware in accordance with Title 12, Section 3810 of the Delaware Code. Upon the filing of the certificate of cancellation, this Agreement, subject to the survival provisions of Section 5.03(f), shall terminate and the estate and rights granted hereunder by the Issuer to the Liquidity Support Trustee shall cease, terminate and be void. (b) The bankruptcy or other incapacity of the Issuer shall not operate to terminate this Agreement, nor entitle the Issuer's legal representatives to claim an accounting or to take any action or proceeding in any court for a partition or winding up of the Trust or Trust Property, nor otherwise affect the rights, obligations and liabilities of the parties hereto. (c) Except as contemplated by the definition of Termination Date herein, the Issuer shall not be entitled to revoke the Trust established hereunder. SECTION 6.08. Nature of Interest in Trust Property. Except as provided in Section 2.08(d), the Issuer shall not have legal title to any part of the Trust Property. SECTION 6.09. Grantor Trust. The Issuer, LFC and the Liquidity Support Trustee shall treat the Trust as a grantor trust subject to the grantor trust provisions of Sections 671-679 of the Code and shall treat the property, income, deductions, credits and allowances of the Trust as property, income, deductions, credits and allowances of the Issuer for federal income tax purposes, unless the Code shall require otherwise. SECTION 6.10. Headings. The titles and headings of the articles and sections of this Agreement are for convenience of reference only and shall not define or modify any of the terms or provisions hereof. IN WITNESS WHEREOF, the Issuer, LFC and the Indenture Trustee have caused this Agreement to be duly executed and delivered to Wilmington Trust in Delaware and Wilmington Trust has accepted, executed and delivered this Agreement in Delaware, all as of the date first above written. ST LENDING, INC. By: /s/Carey Wickland ------------------------------ Name: Carey Wickland Title: President LOMAS FINANCIAL CORPORATION Solely with respect to its obligations and agreements under Section 2.08, Article V and Sections 6.04, 6.07 and 6.09 By: /s/James L. Crowson ------------------------------ Name: James L. Crowson Title: Executive Vice President BANK ONE, TEXAS, N.A., as Indenture Trustee By: /s/Tracey McMillan ------------------------------ Name: Tracey McMillan Title: Assistant Vice President WILMINGTON TRUST COMPANY, as Liquidity Support Trustee By: /s/Carolyn C. Daniels ------------------------------ Name: Carolyn C. Daniels Title: Assistant Vice President ANNEX 1 [FORM OF TRUST CERTIFICATE] TRUST CERTIFICATE LFC LIQUIDITY SUPPORT TRUST ________________________ THIS CERTIFIES THAT ST LENDING, INC. (the "Owner") is the registered owner of a 100% undivided beneficial interest in the Trust existing under the laws of the State of Delaware pursuant to the Liquidity Support Trust Agreement (the "Agreement"; the capitalized terms herein being used as therein defined) dated as of April 12, 1994, among ST Lending, Inc., Lomas Financial Corporation, Bank One, Texas, N.A., as Indenture Trustee, and Wilmington Trust Company not in its individual capacity but solely in its capacity as trustee under the Agreement (the "Liquidity Support Trustee"), has caused this Trust Certificate to be executed by one of its duly authorized signatories as set forth below. This Trust Certificate is the Trust Certificate referred to in the Agreement and is issued under and is subject to the terms, provisions and conditions of the Agreement to which the holder of this Trust Certificate by virtue of the acceptance hereof agrees and by which the holder hereof is bound. Reference is hereby made to the Agreement for a statement of the rights of the holder of this Trust Certificate, as well as for a statement of the terms and conditions of the Trust created by the Agreement. By its acceptance hereof, the holder hereof agrees that it will not offer, sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of this Trust Certificate except in accordance with Section 2.04(b) of the Agreement. IN WITNESS WHEREOF, the Liquidity Support Trustee has caused this Trust Certificate to be executed as of the date hereof by one of its Vice Presidents or Trust Officers by his manual signature. This Trust Certificate shall not be valid or enforceable for any purpose until it shall have been so signed by a Vice President or Trust Officer. Dated: April 12, 1994 LFC LIQUIDITY SUPPORT TRUST By: Wilmington Trust Company, not in its individual capacity but solely as Liquidity Support Trustee By: ------------------------------ Name: ----------------------- Title: ----------------------- ANNEX 2 [FORM OF LFC LIQUIDITY SUPPORT TRUST NOTE] LFC LIQUIDITY SUPPORT TRUST NOTE Dallas, Texas April 12, 1994 For value received, LOMAS FINANCIAL CORPORATION, a Delaware corporation (the "Borrower"), promises to pay to the order of ST LENDING, INC. (the "Issuer") on the Termination Date a principal sum equal to the aggregate amount of all withdrawals ( each, a "Withdrawal"), if any, theretofore made by the Borrower from the Liquidity Support Trust Account (the "Trust Account") pursuant to Section 2.08(a) of the Liquidity Support Trust Agreement dated as of April 12, 1994 (the "Trust Agreement") among the Issuer, the Borrower, Bank One, Texas, N.A., as Indenture Trustee, and Wilmington Trust Company, as Liquidity Support Trustee, and to pay interest at the Termination Date on the unpaid principal amount hereof from time to time at the rate or rates provided for below; provided that if, prior to the Termination Date, the Securities and all amounts due and payable under the Indenture have been paid in full, then all obligations of the Borrower hereunder, including the obligations of the Borrower with respect to the payment of principal and interest, shall be forgiven and discharged and the Issuer, on demand of the Borrower, shall execute proper instruments acknowledging satisfaction of and discharging this note. Payment of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds. Withdrawals made by the Borrower shall be recorded by the Issuer on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Issuer to make any such recordation shall not affect the obligations of the Borrower hereunder. This note shall bear interest from the date of the first Withdrawal, if any, at a rater per annum at any time equal to the weighted average rate per annum that the Liquidity Support Trustee is receiving at such time on the investment of funds on deposit in the Trust Account or, if no funds are on deposit in the Trust Account at such time, then for each day at the average rate for 90-day certificates of deposit that has at such time most recently been published in The Wall Street Journal. The Borrower hereby covenants and agrees that, prior to the Termination Date: 1. The Borrower will comply with the covenants of the Borrower set forth in Section 3.9 and 3.11 of the Lomas Senior Convertible Note Indenture dated as of November 1, 1991 between the Borrower and Texas Commerce, as trustee, as in effect on the date hereof. 2. The Borrower will not create, assume or suffer to exist any Lien on the capital stock of the Issuer. In case one or more of the following Events of Default (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) shall have occurred and be continuing, that is to say: (a) failure on the part of the Borrower to pay all or any part of the principal of or interest on this note as and when the same shall become due and payable; or (b) failure on the part of the Borrower duly to observe or perform any other covenant contained in this note, for a period of 30 days after the date on which written notice specifying such failure, stating that such notice is a "Notice of Default" hereunder and demanding that the Borrower remedy the same, shall have been given by registered or certified mail, return receipt requested, to the Borrower by the Liquidity Support Trustee; or (c) a court having jurisdiction in the premises shall enter a decree or order (i) for relief in respect of the Borrower in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect; (ii) adjudging the Borrower a bankrupt or insolvent or approving a petition seeking reorganization, arrangement or composition in respect of or under any applicable bankruptcy, insolvency or other similar law; (iii) appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Borrower or for any substantial part of the property of the Borrower; or (iv) ordering the winding-up or liquidation of the Borrower's affairs; or (d) the Borrower shall (i) commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect or any other case or proceeding to be adjudicated a bankrupt or insolvent; (ii) consent to the entry of an order for relief in an involuntary case under any such law; (iii) consent to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) the Borrower or for any substantial part of the property of the Borrower; (iv) make any general assignment for the benefit of creditors; or (e) an event of default, as defined in any indenture or instrument evidencing or under which the Borrower has at the date of this note or shall hereafter have outstanding more than $5,000,000 aggregate principal amount of indebtedness for borrowed money, shall occur and be continuing and such indebtedness shall have been accelerated so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled within ten days after notice thereof shall have been given to the Borrower by the Liquidity Support Trustee; provided that if such event of default under such indenture or instrument shall be remedied or cured by the Borrower or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of the Liquidity Support Trustee; then, and in each and every case, the Issuer may, by notice in writing to the Borrower, declare this note to be, and this note shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that, in the case of any of the Events of Default specified in clause (b) or (c) above, this note shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This note is the LFC Liquidity Support Trust Note referred to in the Trust Agreement. Terms defined in the Trust Agreement and not otherwise defined herein are used herein with the same meanings. LOMAS FINANCIAL CORPORATION By: ------------------------------ Name: ----------------------- Title: ----------------------- WITHDRAWALS Date Amount of Withdrawal Notation Made of - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- ANNEX 3 [FORM OF TRUST WITHDRAWAL CERTIFICATE] TRUST WITHDRAWAL CERTIFICATE PURSUANT TO SECTION 2.08 OF THE LIQUIDITY SUPPORT TRUST AGREEMENT I, [Name] , a [Title] of Lomas Financial Corporation, a Delaware corporation, do hereby certify as follows: 1. On ________, 199__* (the "Senior Note Payment Date") there will be an Interest Shortfall Amount ("ISA") of $________________, computed as follows: ISA = A - [(B+C+D+E+F+G+H) - (I+J)] (A) ________ Interest on the LFC Senior Convertible Notes during the period commencing November 1, 1991 and ending on the Senior Note Payment Date. less the sum of the following: (B) ________ 50% of LMUSA's net income for the period from October 1, 1991 through the end of the last fiscal quarter ended before the Senior Note Payment Date (the "Income Measuring Period"). plus (C) ________ 50% of any tax expense recorded on the books of LMUSA for the Income Measuring Period which will never be repaid and has arisen solely from the application of net operating loss carryforwards. plus (D) ________ All dividends received by LFC during the Income Measuring Period from any company other than LMUSA. plus (E) ________ LFC's interest income for the Income Measuring Period. plus (F) ________ An amount carried on LFC's balance sheet representing the amount of taxes which have been prepaid by LFC during the Income Measuring Period. plus - --------------- *Insert the date of the next succeeding LFC Senior Convertible Note Payment Date. (G) ________ All amounts withdrawn from the Trust Account pursuant to Section 2.08(a) of the Liquidity Support Trust Agreement during the Income Measuring Period. plus (H) ________ All net income earned by any subsidiary of LFC other than LMUSA during the Income Measuring Period to the extent that (A) no legal or contractual provision prevented the distribution of such income to LFC as a dividend and (B) such distribution would not have left such subsidiary with an unduly small capital. less the sum of: (I) ________ LFC's general and administrative expenses for the Income Measuring Period. plus (J) ________ All federal, state and local income, excise, franchise, ad valorem and other taxes attributable to LFC and its activities and actually paid during the Income Measuring Period. 2. On ________, 199__, the Senior Note Payment Date, please make available to LFC immediately available funds in the amount of the Interest Shortfall Amount by [insert payment instructions]. 3. The Termination Date has not occurred. Capitalized terms used herein and not otherwise defined herein have the meanings attributed to such terms in the Liquidity Support Trust Agreement dated as of April 12, 1994 among ST Lending, Inc., Lomas Financial Corporation, Bank One, Texas, N.A., as Indenture Trustee, and Wilmington Trust Company, as Liquidity Support Trustee. IN WITNESS WHEREOF, I have hereunto set my hand and caused this certificate to be delivered this ____ day of ________, 199__. ____________________________________ [Name] [Title] EX-10.8 9 EXHIBIT 10.8 EXHIBIT 10.8 _______________________________________________________________ LOMAS MORTGAGE USA, INC., the Company, and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, the Lender 3/94 SENIOR SECURED WORKING CAPITAL CREDIT AGREEMENT March 21, 1994 _______________________________________________________________ DEFINED TERMS "3/94 Credit Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . 1 "6/93 Servicing Purchase Loan Agreement". . . . . . . . . . . . . . . . . 11 "Advance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 "Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 "Assignee". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 "Borrowing Base Report" . . . . . . . . . . . . . . . . . . . . . . . . . 2 "Borrowing Date". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 "Borrowing" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 "Business Day". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 "Ceiling Rate". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 "Certificate of Sale" . . . . . . . . . . . . . . . . . . . . . . . . . . 3 "Chapter One" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 "Code". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 "Collateral". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 "Commitment". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 "control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 "Credit Agreement". . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 "Credit Request". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 "Debt". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 "Debtor Laws" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 "Default Event" . . . . . . . . . . . . . . . . . . . . . . . . . . . .4, 30 "Eligible Collateral" . . . . . . . . . . . . . . . . . . . . . . . . . . 4 "Eligible Foreclosure Receivable" . . . . . . . . . . . . . . . . . . . . 4 "Eligible Property Tax Refund Receivable" . . . . . . . . . . . . . . . . 5 "Eligible REO Sale Receivable". . . . . . . . . . . . . . . . . . . . . 5, 6 "Eligible Servicing Receivable" . . . . . . . . . . . . . . . . . . . . . 6 "Eligible T&I Receivable" . . . . . . . . . . . . . . . . . . . . . . . . 7 "FHA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 "Financed Receivable" . . . . . . . . . . . . . . . . . . . . . . . . . . 7 "Financial Statements". . . . . . . . . . . . . . . . . . . . . . . . . . 7 "Foreclosure Repurchase Payment". . . . . . . . . . . . . . . . . . . . . 7 "GAAP". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 "Governmental Authority". . . . . . . . . . . . . . . . . . . . . . . . . 8 "indicated rate ceiling". . . . . . . . . . . . . . . . . . . . . . . . . 3 "Ineligible Mortgage Loan". . . . . . . . . . . . . . . . . . . . . . . . 8 "Investment Securities Facilities Agreement". . . . . . . . . . . . . . . 8 "Legal Requirement" . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 "Lender". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 8 "Lien". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 "Loan Papers" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 "Loan". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 "margin stock". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 "Material Adverse Effect" . . . . . . . . . . . . . . . . . . . . . . . . 9 "Monetary Default". . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 "Mortgage Loan in Foreclosure". . . . . . . . . . . . . . . . . . . . . . 9 "Mortgage Loan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 "Nonmonetary Default" . . . . . . . . . . . . . . . . . . . . . . . . . . 9 "Note Payment Account". . . . . . . . . . . . . . . . . . . . . . . . . . 9 "Obligations" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 "P&I Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 "Past Due Rate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 "Person". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 "Potential Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 "Prime Rate". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 "Property". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 "purpose credit". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 "Regulation U". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 "Regulation X". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 "REO Sold". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 "Security Instruments". . . . . . . . . . . . . . . . . . . . . . . . . . 11 "Servicing Contract". . . . . . . . . . . . . . . . . . . . . . . . . . . 11 "Servicing Payment" . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 "Servicing Sold". . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 "System Copy" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 "Termination Date". . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 "Texas Credit Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 "UCC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 "VA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 "Working Capital Collateral Value". . . . . . . . . . . . . . . . . . . . 12 "Working Capital Line Limit". . . . . . . . . . . . . . . . . . . . . . . 15 "Working Capital Note". . . . . . . . . . . . . . . . . . . . . . . . . . 15 TABLE OF CONTENTS PREAMBLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1. GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 Other Terms and References. . . . . . . . . . . . . . . . . . . 15 1.3 Accounting Principles . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2. COMMITMENT AND TERMS OF BORROWING AND PAYMENT . . . . . . . . 16 2.1 Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.2 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . 16 2.3 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.4 Working Capital Note. . . . . . . . . . . . . . . . . . . . . . 17 2.5 Payment Procedures. . . . . . . . . . . . . . . . . . . . . . . 17 2.6 Interest and Principal Payments . . . . . . . . . . . . . . . . 17 2.7 Past Due Rate . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.8 Interest Calculations . . . . . . . . . . . . . . . . . . . . . 18 2.9 Usury Not Intended; Credit or Refund of Any Excess Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.10 Chapter 15 Inapplicable . . . . . . . . . . . . . . . . . . . . 19 2.11 Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 3. SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.1 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.2 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . 22 3.3 Collection, Sale or Redemption of Collateral. . . . . . . . . . 23 3.4 Collateral Value. . . . . . . . . . . . . . . . . . . . . . . . 23 SECTION 4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . 24 4.1 Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . . 24 4.2 All Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . 25 5.1 Authorization and Power . . . . . . . . . . . . . . . . . . . . 25 5.2 No Conflicts or Consents. . . . . . . . . . . . . . . . . . . . 25 5.3 Enforceable Obligations . . . . . . . . . . . . . . . . . . . . 25 5.4 Priority of Liens . . . . . . . . . . . . . . . . . . . . . . . 25 5.5 No Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 5.6 Financial Condition . . . . . . . . . . . . . . . . . . . . . . 25 5.7 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 26 5.8 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 6. AFFIRMATIVE COVENANTS.. . . . . . . . . . . . . . . . . . . . 26 6.1 Financial Statements, Reports . . . . . . . . . . . . . . . . . 26 6.2 Borrowing Base Reports. . . . . . . . . . . . . . . . . . . . . 27 6.3 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 6.4 Certificates of Sale. . . . . . . . . . . . . . . . . . . . . . 27 6.5 Marking Collateral and Records. . . . . . . . . . . . . . . . . 27 6.6 Assignment of Certificate of Sale and Further Acts. . . . . . . 27 6.7 Other Papers. . . . . . . . . . . . . . . . . . . . . . . . . . 27 6.8 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 28 6.9 Deliveries After a Default Event. . . . . . . . . . . . . . . . 28 6.10 Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . 28 6.11 Right of Inspection . . . . . . . . . . . . . . . . . . . . . . 29 6.12 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . 29 7.1 Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . . 29 7.2 Collateral Matters. . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 8. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . 30 8.1 Nature of Event . . . . . . . . . . . . . . . . . . . . . . . . 30 8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 8.3 Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . 33 8.4 Private Sales . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.5 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.6 Performance by Lender . . . . . . . . . . . . . . . . . . . . . 34 8.7 No Responsibility . . . . . . . . . . . . . . . . . . . . . . . 35 8.8 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 8.9 Rights are Cumulative . . . . . . . . . . . . . . . . . . . . . 35 8.10 Application of Payments and Proceeds. . . . . . . . . . . . . . 35 8.11 Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 SECTION 9. Lender May Act Through Agents; Standard of Care, Release and Indemnification.. . . . . . . . . . . . . . . . . . . . . 36 9.1 Employment of Others by the Lender. . . . . . . . . . . . . . . 36 SECTION 10. Standard of Care, Release of Liability and Indemnification . 36 SECTION 11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 37 11.1 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 11.2 Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . 37 11.3 Communications. . . . . . . . . . . . . . . . . . . . . . . . . 38 11.4 Form and Number of Documents. . . . . . . . . . . . . . . . . . 38 11.5 Exceptions to Covenants . . . . . . . . . . . . . . . . . . . . 38 11.6 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 11.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 38 11.8 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . 39 11.9 Amendments, Waivers, Etc. and Conflicts . . . . . . . . . . . . 39 11.10 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . 39 11.11 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 39 11.12 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . 40 11.13 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 40 3/94 SENIOR SECURED WORKING CAPITAL CREDIT AGREEMENT PREAMBLE THIS 3/94 SENIOR SECURED WORKING CAPITAL CREDIT AGREEMENT dated as of March 21, 1994 (this "3/94 Credit Agreement" and as it may be supplemented, amended or restated from time to time, this "Agreement" or the "Credit Agreement") between LOMAS MORTGAGE USA, INC. (the "Company"), a Connecticut corporation and TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "Lender"), a national banking association. WITNESSETH: RECITALS: Lender has agreed to grant the Company's request to provide secured senior working capital financing for (1) first mortgage promissory note receivables owned and held by the Company as approved in writing by the Lender, (2) a specific contract for deed agreement for a property whose title is held by the Company until satisfaction of the terms of the contract for deed by the obligor and (3) the Company's claims as servicer, master servicer or subservicer for reimbursement from others for whom the Company services residential mortgage loans or from the mortgagors themselves for (a) foreclosure costs paid, (b) advances made to pay property taxes, assessments, maintenance fees and casualty insurance premiums in respect of property securing such serviced mortgage loans where the related escrow balances are insufficient to pay them and (c) other advances that the Company's mortgage loan servicing agreements with such investors obligate the Company to make, (4) receivables held by the Company for reimbursement of overpayments or erroneous payments made to taxing authorities, (5) receivables held by the Company from arm's-length sales to unrelated third parties of real estate acquired by the Company through foreclosure (or conveyances to the Company in lieu of foreclosure) of mortgage loans owned by the Company and (6) receivables held by the Company from arm's length sales to unrelated third parties of mortgage loan servicing rights. The Company is the borrower under the Restated Loan and Security Agreement dated as of July 8, 1993 with Bank One, Texas, N.A., as "Administrative Agent" and an "Agent" for the "Banks" that are also parties to it, with the Lender as "Syndication Agent" and also an "Agent" for the Banks, and with Bank One, Texas, N.A., the Lender and certain other banks as the "Banks". Such Restated Loan and Security Agreement, as it has been amended to date, is called the "7/93 RL&S Agreement". The reader is hereby referred to the 7/93 RL&S Agreement for all purposes, and any capitalized terms that are italicized and used without definition in this Agreement have the meanings assigned to them in the 7/93 RL&S Agreement. The credit shall be provided, secured, earn interest and be repaid, and shall otherwise operate, in accordance with the following terms, covenants and conditions. AGREEMENTS: For good and valuable consideration, the receipt and sufficiency of which the Company and the Lender each acknowledge, they hereby agree as follows: SECTION 1. GENERAL TERMS 1.1 Defined Terms. As stated in the recitals above, italicized capitalized terms used in this Agreement are defined in the 7/93 RL&S Agreement and it is to be referred to for definitions of those terms. As used in this Agreement and, unless otherwise specified, in each exhibit or schedule to this Credit Agreement and each Credit Paper, these terms have these meanings: "Advance" means an amount lent by Lender to the Company under this Agreement and is the complement to Borrowing, viewed from the Lender's position. "Affiliate" of a Person means any other Person who, directly or indirectly through ownership, voting securities, contract or otherwise, controls, is controlled by or is under common control with that Person, and, for purposes of this definition "control" and correlative terms mean the (i) power to direct, or to cause the direction of, that Person's management or policies or (ii) ownership or voting control of ten percent (10%) or more of the Voting Shares of that Person. "Borrowing" means an amount borrowed by the Company from the Lender under this Agreement and is the complement to Advance, viewed from the Borrower's position. "Borrowing Base Report" means a report prepared by the Company at least semimonthly (as of the fifteenth and last day of each month) substantially in the form of the "Lomas Mortgage USA Borrowing Base Summary as of March 16, 1994" and its supporting "Lomas Mortgage USA Schedule of Eligible Receivables March 16, 1994" and "Lomas Mortgage USA Schedule of Receivables by Account March 16, 1994" that are reproduced as Schedule BB. "Borrowing Date" has the meaning stated in Section 2.2(b). "Business Day" means any day other than Saturday, Sunday and any other day that national banks in Houston, Texas are authorized or required by applicable Law to be closed. "Ceiling Rate" means, on any day, the maximum nonusurious rate of inter- est permitted for that day by whichever of applicable federal or Texas law permits the higher interest rate, stated as a rate per annum. On each day, if any, that Chapter One ("Chapter One") of Title 79, Texas Revised Civil Statutes, 1925, as amended (the "Texas Credit Code") establishes the Ceiling Rate, the Ceiling Rate shall be the "indicated rate ceiling" (as defined in Chapter One) for that day. As to current and future balances, by notice to the Company, the Lender may from time to time implement any other ceiling under Chapter One if--and to the extent--permitted by Chapter One. "Certificate of Sale" means a certificate of sale, sheriff's certificate, certificate of purchase or comparable document under applicable state Law, issued to the Company pursuant to and in accordance with such applicable state Law following the foreclosure sale of the property securing a Mortgage Loan in Foreclosure to evidence or confirm the purchase of such property at such sale (subject to any applicable rights of redemption) by the Company, FHA or VA. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral" means all Property in which the Company grants a Lien to Lender under the Credit Papers. "Commitment" means the obligation of the Lender to make Working Capital Loans pursuant to this Agreement. "Company" has the meaning stated in this Agreement's preamble. "Credit Papers" means (a) this Agreement, the Working Capital Note, (b) all other agreements, documents or instruments ever executed and delivered by the Company or any other Person in connection with, or as security for the payment or performance of, any or all of the Obligations and (c) all renewals, extensions, supplements, amendments, restatements and replacements of or to any of them. "Credit Request" means a written request for a Borrowing substantially in the form of Exhibit B. "Debt" of any Person means, at any time, the sum (without duplication) of (i) all of that Person's debt for borrowed money or for the deferred purchase price of Property or services or that is evidenced by a bond, debenture, note or other instrument, (ii) all of that Person's obligations under any capitalized lease, (iii) all of that Person's obligations in respect of letters of credit, acceptances or similar obligations issued or created for the account of that Person, (iv) all of that Person's direct and indirect guaranties of indebtedness of others, (v) all liabilities secured by any Lien existing on Property owned by that Person, including liabilities so secured that have not been assumed by that Person or with respect to which that Person is not personally liable and (vi) all of that Person's liabilities in respect of unfunded vested benefits under Plans. "Debtor Laws" means all applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization and similar laws from time to time in effect that affect the rights of creditors generally. "Default Event" has the meaning stated in Section 8.1. "Eligible Collateral" means and includes each Eligible Foreclosure Receivable, Eligible Note Receivable, Eligible REO Sale Receivable, Eligible Servicing Receivable, Eligible Servicing Sale Receivable, Eligible Property Tax Refund Receivable and Eligible T&I Receivable. "Eligible Foreclosure Receivable" means a valid, readily enforceable and liquidated claim for the payment of money: (i) that is payable within one (1) year after the date a Foreclosure Repurchase Payment is made with respect to the related Mortgage Loan in Foreclosure; (ii) that is against either: (x) the VA under a VA guarantee of a Mortgage Loan in Foreclosure, but excluding any such claim arising out of a determination by VA to pay the full guaranty fee in respect of such Mortgage Loan in Foreclosure in lieu of bidding on the property being foreclosed (a so-called "VA no-bid"); (y) the FHA under an FHA insurance policy insuring a Mortgage Loan in Foreclosure; or (z) one of the private mortgage insurers (if any) that are listed on Exhibit C (or otherwise hereafter approved in writing by the Lender) under a mortgage insurance policy insuring a Mortgage Loan in Foreclosure; (iii) in which the Lender has been granted (pursuant to Section 3.1 or otherwise) and continues to hold a readily enforceable, first and prior perfected Lien; (iv) with respect to which there is no pending claim against the Company for any credit, allowance or adjustment; and (v) that the obligor has not denied or rejected and is enforceable without offset, counterclaim or defense of any kind. "Eligible Note Receivable" means a valid, readily enforceable and liquidated claim for the payment of money: (i) that is evidenced and secured by a valid and enforceable promissory note and first Lien against real property, or is evidenced by a valid and enforceable contract for deed in which the Company is the seller of real property that is free and clear of any other Lien; (ii) that is not past due or delinquent; (iii) in which the Lender has been granted (pursuant to Section 3.1 or otherwise) and continues to hold a readily enforceable, first and prior perfected Lien, including the requirements that the promissory note itself have been endorsed in blank and it, a recordable assignment of the Lien securing it, an appraisal that meets all current Legal Requirements and a true copy of its recorded mortgage, have all been delivered to the Lender or to a custodian and bailee designated by the Lender or (in the case of a contract for deed) in which the Lender has been granted a Lien that is in form and substance appropriate, valid and enforceable under the Law of the State in which the real property that is its subject matter is located to give the Lender a first and prior perfected Lien in the seller's income stream, reversionary rights and enforcement rights, but none of the seller's liability, under the relevant contract for deed and as to which the Company's local counsel for such state has issued a legal opinion to the Lender in respect of such Lien that is reasonably satisfactory to the Lender and its counsel; (iv) with respect to which there is no pending claim against the Company for any credit, allowance or adjustment; (v) that is enforceable without offset, counterclaim or defense of any kind; and (vi) that has been specifically approved in writing by the Lender as an Eligible Note Receivable. "Eligible Property Tax Refund Receivable" means a valid, readily enforceable claim against any taxing authority for repayment of any overpayment, extra payment or mispayment of property taxes paid by the Company in respect of any Mortgage Loan serviced (or subserviced) by the Company: (i) that is currently due from that taxing authority; (iii) with respect to which there is no pending claim against the Company for any credit, allowance or adjustment; and (iv) that is enforceable without offset, counterclaim or defense of any kind. "Eligible REO Sale Receivable" means a valid, readily enforceable and liquidated claim for the payment of money arising from the Company's disposition of REO Sold: (i) that is not past due or delinquent; (ii) that is payable within ninety (90) days after the date the Company conveyed the related REO Sold; (iii) in which the Lender has been granted (pursuant to Section 3.1 or otherwise) and continues to hold a readily enforceable, first and prior perfected Lien, including the requirements that if there is any promissory note evidencing it, the note shall have been endorsed in blank and a recordable assignment of all Liens (if any) securing it have all been delivered to the Lender or to a custodian and bailee designated by the Lender; (iv) with respect to which there is no pending claim against the Company for any credit, allowance or adjustment; (v) that is enforceable without offset, counterclaim or defense of any kind. "Eligible Servicing Receivable" means a valid, readily enforceable and liquidated claim for the payment of money: (i) that is payable within one (1) year after the date the related Servicing Payment is made; (ii) that is a valid and enforceable claim under the Servicing Agreement between the Company, as servicer, master service or subservicer, and another Person that owns or holds the serviced Mortgage Loans or is its servicer, against either: (x) the Person that owns or holds the related Mortgage Loan or its servicing rights; or (y) the obligor on the related Mortgage Loan and the accounts of that obligor, and is a valid and enforceable claim under the Mortgage Loan's documents; and (iii) in which the Lender has been granted (pursuant to Section 3.1 or otherwise) and continues to hold a readily enforceable, first and prior perfected Lien; (iv) with respect to which there is no pending claim against the Company for any credit, allowance or adjustment; and (v) that is enforceable without offset, counterclaim or defense of any kind. "Eligible Servicing Sale Receivable" means a valid, readily enforceable and liquidated claim for the payment of money arising from the Company's disposition of Servicing Sold; (i) that is not past due or delinquent; (ii) that is payable within one hundred eighty (180) days after the date the Company conveyed the related Servicing Sold; (iii) in which the Lender has been granted (pursuant to Section 3.1 or otherwise) and continues to hold a readily enforceable, first and prior perfected Lien, including the requirements that if there is any promissory note evidencing it, the note shall have been endorsed in blank and it, a recordable assignment of all Liens (if any) securing it have all been delivered to the Lender or to a custodian and bailee designated by the Lender; (iv) with respect to which there is no pending claim against the Company for any credit, allowance or adjustment; (v) that is enforceable without offset, counterclaim or defense of any kind. "Eligible T&I Receivable" means a valid, readily enforceable claim against any obligor on any Mortgage Loan and the accounts of that obligor for repayment of any T&I Payment made by the Company: (i) that is currently due from that obligor; (ii) in which the Lender has been granted (pursuant to Section 3.1 or otherwise) and continues to hold a readily enforceable, first and prior perfected Lien; (iii) with respect to which there is no pending claim against the Company for any credit, allowance or adjustment; and (iv) that is enforceable without offset, counterclaim or defense of any kind. "FHA" means the Federal Housing Administration and any successor. "Financed Receivable" means any Mortgage Loan in Foreclosure, T&I Payment, REO Sold, Servicing Payment, Servicing Sold, property tax refund or Mortgage note or contract for deed that is financed (including refinancings) or requested to be financed, with Loan proceeds without regard to its eligibility for financing under this Agreement or its Working Capital Collateral Value. "Financial Statements" means balance sheets, profit and loss statements, statements of cash flow and any other financial statements, reports or information specified by the Lender. "Foreclosure Repurchase Payment" means a payment made by the Company to repurchase a delinquent Mortgage Loan from an investor, whether before or after foreclosure, that is--or after foreclosure, will be--a Mortgage Loan in Foreclosure and which payment, when paid, created or will create (as applicable) a reimbursement claim for the Company against the VA, the FHA or a private mortgage insurer. "GAAP" means generally accepted accounting principles consistently applied as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants or in statements of the Financial Accounting Standards Board and is in effect at the time of application of the provisions hereof so as to properly reflect the financial condition, and the results of operation and changes in cash flow, of the Company or such other Person as may be applicable; provided that wherever in this Agreement principles of accounting different from those required by GAAP are specified, the principles of accounting specified in this Agreement shall govern. "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 government or pertaining to it. "Ineligible Mortgage Loan" means a Mortgage Loan (a) that the Company has formally referred to legal counsel (whether in-house or outside legal counsel) for legal action to protect the Company's interest in the collateral securing such Mortgage Loan, (b) that is in foreclosure or (c) in respect of which for any other reason the full and timely recoverability of any T&I Advance made or to be made is or should be reasonably doubtful. "Investment Securities Facilities Agreement" means the October 30, 1990 letter loan agreement between the Lender and the Company that currently provides for a senior secured revolving credit facility for the Company of up to One Hundred Fifty Million Dollars ($150,000,000) from time to time permitted to be borrowed and outstanding to finance the Company's short term investments in investment grade securities, as it has been and may be supplemented, amended and restated from time to time (all of the other credit facilities formerly provided for under that loan agreement, as amended, having terminated.) "Law" means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other determination, direction or requirement (including any of the foregoing which relate to environmental standards or controls, energy regulations and occupational, safety and health standards or controls) of any (domestic or foreign) arbitrator, court or other Governmental Authority. "Legal Requirement" means, for any Person, the articles of incorporation and bylaws or other organization or governing documents of that Person, and any Law that is applicable to or binding upon that Person or any of its Property or to which that Person or any of its Property is subject. "Lender" has the meaning stated in this Agreement's preamble. "Lien" means any lien, mortgage, security interest, pledge or encumbrance, conditional sale or title retention agreement, any lease in the nature thereof, or any other interest in Property designed to secure the repayment of Debt, whether arising by agreement or under Law, or otherwise. "Loan" means, on any day, the aggregate outstanding principal amount of all Borrowings on that day. "Material Adverse Effect" means any material adverse effect on (i) the validity or enforceability of this Agreement, the Working Capital Note or any Security Instrument, (ii) the Company's operations or consolidated financial condition, (iii) the Collateral (or its value), taken as a whole, (iv) the Company's ability to continue in business as a going concern--without limitation, any written statement issued by the Company's accountants or auditors expressing doubt about the Company's ability to continue in business as a going concern will be treated as having a Material Adverse Effect without any requirement for inquiry into the reasons underlying such statement--or (v) the Company's ability to fulfill its obligations under this Agreement, the Working Capital Note or any Security Instrument. "Monetary Default" has the meaning stated in Section 8.1(j). "Mortgage Loan" means a promissory note that has a term of not more than thirty (30) years evidencing a loan or advance and the mortgage or deed of trust that secures it and covers real property that has been improved by a completed one-, two-, three- or four-family dwelling unit (whether a detached house, a townhouse or a condominium unit.) "Mortgage Loan in Foreclosure" means an FHA Mortgage Loan or a VA Mortgage Loan or a conventional mortgage loan (a) that is (i) covered by private mortgage insurance, (ii) serviced by the Company and (iii) subject to a pending or completed foreclosure, (b) for which (unless applicable state law does not provide for Certificates of Sale) a Certificate of Sale has been issued (or, after foreclosure, will be issued) pursuant to and in accordance with applicable state law procedures and (c) that is (or will be when foreclosure has been completed) subject to a statutory redemption period, if any, of not more than twelve (12) months. "Nonmonetary Default" has the meaning stated in Section 8.1(j). "Note Payment Account" means non-interest bearing demand checking account no. 001-0 to be maintained by the Company with the Lender to be used for (a) the Lender's deposits of proceeds of Advances and payments constituting collections on and other proceeds of Collateral; (b) the Lender's deposits of payments of the Loan received from the Company or for its account and (c) only if and when (i) no Potential Default has occurred unless it has been cured and (ii) no Default Event has occurred unless the Lender has declared in writing that it has been cured or waived, the Company's withdrawal of proceeds of Advances for the purposes permitted for the Loan under this Agreement and the Lender's transfer from the Note Payment Account to the Company's own designated account (or to a controlled disbursement account maintained by the Company with the Lender) of proceeds of collections of Collateral in excess of the Borrowings then outstanding against such Collateral. The Note Payment Account shall be part of the Collateral for the Obligations. The Note Payment Account shall be subject to setoff by the Lender. The Company shall have no right to directly withdraw funds from the Note Payment Account, but instead such funds may be withdrawn or paid out only against the order of an authorized officer of the Lender, although under the circumstances described in clause (c) of the immediately preceding sentence and subject to the conditions specified in that clause, the Lender shall use reasonable efforts to cause Advances proceeds and excess Collateral proceeds that are received as therein described and that are deposited to the Note Payment Account before 3:00 P.M. on a Business Day, to be transferred to an account designated by the Company and on which the Company does have withdrawal order authority on that same Business Day. "Obligations" means all of the Company's present and future debt, obligations and liabilities before or after the date of this Agreement and related to any Credit Paper, whether for principal, interest, premium, fees, costs, attorneys' fees or other obligation or liability, and whether absolute or contingent, and all renewals, extensions and modifications of any of them. "P&I Payment" is a payment made by or for the account of the Company of principal or interest due to the investor in respect of a Mortgage Loan serviced by the Company as to which the principal or interest payments received by the Company from the obligors in respect of such Mortgage Loan are not timely received or are otherwise insufficient to fully fund the corresponding principal or interest payment due to the investor or owners of mortgage-backed securities based on and backed by a pool that includes such Mortgage Loan. "Past Due Rate" means, for any day, an annual rate of interest equal from day to day to the lesser of (a) the Prime Rate plus five percent (5%) and (b) the Ceiling Rate. "Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, Governmental Authority or any other form of entity. "Potential Default" means the occurrence of any event or existence of any circumstances that would, upon notice or lapse of time or both, become a Default Event. "Prime Rate" means, on any day, the prime rate for that day as announced by the Lender and entered in the minutes of its Loan and Discount Committee. The Prime Rate is a reference rate and does not necessarily represent the Lender's best or lowest rate or a favored rate, and the Lender disclaims any statement, representation or warranty to the contrary. "Property" means any interest of the Company in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including the Collateral. "REO Sold" means real estate acquired by the Company through foreclosure or conveyance in lieu of foreclosure of a Mortgage Loan and sold to an unrelated third party in an arm's-length transaction. "Regulation U" means Regulation U promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other regulation when promulgated to replace the prior Regulation U and having substantially the same function. "Regulation X" means Regulation X promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 224, or any other regulation when promulgated to replace the prior Regulation X and having substantially the same function. "Security Instruments" means any and all papers now or hereafter executed and delivered by the Company or any other Person in connection as security for the payment or performance of the Obligations or otherwise in connection with them, as those agreements, documents and instruments may be renewed, extended, amended or substituted from time to time, including this Agreement. "Servicing Agreement" means a contract or agreement purchased by the Company or entered into by the Company for its own account, whether now existing or hereafter purchased or executed, pursuant to which the Company master services, services or subservices Mortgage Loans or Mortgage Loan pools for another Person. "Servicing Payment" is a payment made by the Company pursuant to its obligation under a Servicing Agreement as servicer, master servicer or subservicer of Mortgage Loans other than (a) a P&I Payment, (b) a T&I Payment or (c) a Foreclosure Repurchase Payment. "Servicing Sold" means the Mortgage Loan servicing rights under a Servicing Agreement formerly owned by the Company and that the Company has sold to an unrelated third party in an arm's-length transaction. "6/93 Servicing Purchase Loan Agreement" means the June 28, 1993 letter loan agreement between the Company and the Lender providing for a two- advance, nonrevolving amortizing term loan by the Lender to the Company of up to Eleven Million Six Hundred Fifty-seven Thousand Nine Hundred Seventy-three Dollars ($11,657,973) to finance the Company's purchase from Heartland Federal Savings and Loan Association and its subsidiary, InterWest Mortgage Corporation, of certain loan servicing rights, as supplemented, amended or restated from time to time. "System Copy" means for any document pertaining or related to a Mortgage Loan, the exact image (excluding, if applicable, any handwritten notations, insertions or signatures) of that document stored in the computer or computers maintained by or on behalf of the Company in such a way that it is readily retrievable and capable of being printed or otherwise reproduced on paper in a form substantially identical to the original of that document (excluding, if applicable, any handwritten notations, insertions or signatures). "T&I Payment" means a recoverable payment of real estate taxes or insurance premiums that the Company is obligated by the terms of a Servicing Agreement to fund, in respect of a Mortgage Loan serviced by the Company and that is not an Ineligible Mortgage Loan. "Termination Date" means the earlier of (a) March 20, 1995 and (b) the date the Commitment shall have terminated or been canceled. "UCC" means the Uniform Commercial Code or similar laws of the applicable jurisdiction, as amended from time to time. "VA" means the Department of Veterans Affairs and any successor. "Working Capital Collateral Value" means, on any day, the collateral values of the Eligible Collateral. Subject to the further provisions of this definition concerning the circumstances under which otherwise Eligible Collateral will cease to have Working Capital Collateral Value, the collateral value of each type of Eligible Collateral is: (a) for each Eligible Foreclosure Receivable, ninety percent (90%) of the amount of the claim on that day that the Company has the right, and reasonably expects, to thereafter recover; or (b) for each Eligible Note Receivable, Eligible REO Sale Receivable, Eligible T&I Receivable, Eligible Servicing Receivable, Eligible Servicing Sale Receivable and Eligible Property Tax Refund Receivable, sixty percent (60%) of the amount of the claim on that day that the Company has the right, and reasonably expects, to thereafter recover. An Eligible Foreclosure Receivable shall cease to have Working Capital Collateral Value if: (i) it is not paid--or its obligor informs the Company that it will not be paid--within one (1) year after the date a Foreclosure Repurchase Payment is made with respect to the related Mortgage Loan in Foreclosure; (ii) the claim is dishonored, rejected, repudiated or disputed by the VA, FHA or private mortgage insurer obligated on it--provided that if such a claim is rejected in part and confirmed in part by its obligor, then the Working Capital Collateral Value of that Eligible Foreclosure Receivable shall be reduced to ninety percent (90%) of the amount so confirmed instead of to zero--or the Company learns of any grounds for any such dishonor, rejection, repudiation or dispute; (iii) the Company fails to comply with the requirements of either of Sections 6.4 and 6.6 of the Credit Agreement with respect to such claim or any related Certificate of Sale; or (iv) the Lender determines that the prospects for its payment are materially impaired, gives the Company written notice of that determination and the Company is unable to furnish the Lender clear and convincing evidence to the contrary on or before thirty (30) days after such notice. An Eligible Note Receivable shall cease to have Working Capital Collateral Value if: (1) any payment (whether of principal, interest, fees, premium--if any- - -or any escrow deposit) under the terms of the promissory note or mortgage evidencing and securing it, or if it is a contract for deed, any scheduled payment of any part of the purchase price or any time price differential or interest in respect of it, is not paid when due or on or before ten (10) days after its due date; (2) any other material default shall occur under the note or the mortgage evidencing and securing it, or (in the case of a contract for deed) or under the terms of such contract for deed, whether or not the Company elects to waive the default, that is not cured on or before thirty (30) days after its occurrence; (3) the Lender determines that the prospects for its payment, the value of its security or its enforceability are materially impaired, gives the Company written notice of that determination and the Company is unable to furnish the Lender clear and convincing evidence to the contrary on or before thirty (30) days after such notice. An Eligible REO Sale Receivable shall cease to have Working Capital Collateral Value if: (A) it is not paid--or its obligor informs the Company that it will not be paid--within ninety (90) days after the settlement date of the related REO Sold sale; (B) the claim is dishonored, rejected, repudiated or disputed by the Person that owns or holds the related serviced Mortgage Loan, or the Company learns of any grounds for any such dishonor, rejection, repudiation or dispute; or (C) the Lender determines that the prospects for its payment are materially impaired, gives the Company written notice of that determination and the Company is unable to furnish the Lender clear and convincing evidence to the contrary on or before thirty (30) days after such notice. An Eligible Servicing Receivable shall cease to have Working Capital Collateral Value if: (D) it is not paid--or its obligor informs the Company that it will not be paid--within one (1) year after the funding date of the related Servicing Payment; (E) the claim is dishonored, rejected, repudiated or disputed by the Person that owns or holds the related serviced Mortgage Loan, or the Company learns of any grounds for any such dishonor, rejection, repudiation or dispute; or (F) the Lender determines that the prospects for its payment are materially impaired, gives the Company written notice of that determination and the Company is unable to furnish the Lender clear and convincing evidence to the contrary on or before thirty (30) days after such notice. An Eligible Servicing Sale Receivable shall cease to have Working Capital Collateral Value if: (G) it is not paid--or its obligor informs the Company that it will not be paid--within one hundred eighty (180) days after the settlement date of the related Servicing Sold sale; (H) the claim is dishonored, rejected, repudiated or disputed by the purchaser of such Servicing Sold, or the Company learns of any grounds for any such dishonor, rejection, repudiation or dispute; or (I) the Lender determines that the prospects for its payment are materially impaired, gives the Company written notice of that determination and the Company is unable to furnish the Lender clear and convincing evidence to the contrary on or before thirty (30) days after such notice. An Eligible T&I Receivable shall cease to have Working Capital Collateral Value if: i) the Mortgage Loan in respect of which the T&I Payment that gave rise to it is (or becomes) an Ineligible Mortgage Loan; or ii) the Lender determines that the prospects for its payment are materially impaired, gives the Company written notice of that determination and the Company is unable to furnish the Lender clear and convincing evidence to the contrary on or before thirty (30) days after such notice. An Eligible Property Tax Refund Receivable shall cease to have Working Capital Collateral Value if: a) the claim is dishonored, rejected, repudiated or disputed by the taxing authority that purportedly owes it, or the Company learns of any grounds for any such dishonor, rejection, repudiation or dispute; or b) the Lender determines that the prospects for its payment are materially impaired, gives the Company written notice of that determination and the Company is unable to furnish the Lender clear and convincing evidence to the contrary on or before thirty (30) days after such notice. "Working Capital Line Limit" means Twenty-five Million Dollars ($25,000,000), the maximum aggregate amount of principal Borrowings that are permitted to be outstanding under this Agreement on any day. "Working Capital Note" means a promissory note, substantially in the form of Exhibit A, dated as of the date of this Agreement, executed by the Company and payable to the order of the Lender, and all of that note's renewals, extensions, modifications, increases, decreases and replacements. 1.2 Other Terms and References. Except where specifically otherwise provided: (a) Wherever the term "including" or any of its correlatives appears in this Agreement, it shall be read as if it were written, "including (by way of example and without limiting the generality of the subject or concept referred to)". (b) Except where otherwise specified, each time of day used in the Credit Papers means local time in Houston, Texas. (c) References in any of the Credit Papers to Article or Section numbers are references to the Articles and Sections of that Credit Paper. (d) References in any of the Credit Papers to Exhibits, Schedules, Annexes and Appendices are references to the Exhibits, Schedules, Annexes and Appendices to that Credit Paper and they shall be deemed incorporated into that Credit Paper as if set forth verbatim at each such reference. (e) Wherever the word "herein" or "hereof" is used in any of the Credit Papers, it is a reference to that entire Credit Paper and not just to the Section, clause or subdivision of it in which the word is used. (f) Words and phrases used or defined in the UCC in force in the State of Texas on the effective date of this 3/94 Credit Agreement that are not redefined in any later supplement, amendment or restatement of this 3/94 Credit Agreement have the same meanings here as there. (g) Accounting terms not otherwise defined have the meanings given them under GAAP. (h) Defined terms may be used in the singular or the plural, as the context requires. 1.3 Accounting Principles. Under the Credit Papers, unless otherwise stated, (a) GAAP determines all accounting and financial terms and compliance with financial reporting covenants, (b) GAAP in effect on the date of this Agreement determines compliance with financial covenants and (c) otherwise, all accounting principles applied in a current period must be comparable in all material respects to those applied during the preceding comparable period other than changes concurred in by the Company's independent public accountants. SECTION 2. COMMITMENT AND TERMS OF BORROWING AND PAYMENT. 2.1 Commitment. On the terms and subject to the conditions of the Credit Papers, on Business Days during the period beginning on the date of this Agreement and ending on the Termination Date, the Lender agrees to lend (and after repayment, to relend) Advances to the Company at such times and in such amounts as the Company shall request, if: (a) the aggregate principal amount of Advances at any time outstanding does not (and will not after giving effect to any pending requested Advance) exceed the lesser of (i) the Working Capital Line Limit or (ii) the Working Capital Collateral Value of all Eligible Collateral in which the Lender then has a first and prior perfected Lien; and (b) either no Potential Default or Default Event has occurred, or if one has, the Lender has elected in writing to continue funding of Advances to the Company. If either of the conditions stated in clauses (a) and (b) of the immediately preceding sentence is not satisfied, or would not be satisfied after giving effect to any requested Advance, then the Lender shall have no obligation to make that Advance. 2.2 Borrowing Procedure. The following conditions and procedures apply to all Borrowings: (a) The Company may request a Borrowing by delivering to the Lender a Credit Request correctly completed in all relevant respects and with a current Borrowing Base Report attached demonstrating that the Borrower is entitled to receive the requested Borrowing. The Credit Request and its attached Borrowing Base Report for each Borrowing must be received by the Lender by no later than 10:00 AM. (b) By 11:00 AM on the Business Day ("Borrowing Date") when all conditions precedent to funding of a requested Borrowing have been satisfied at or before 10:00 AM, the Lender shall fund the Advance by depositing it in the Note Payment Account and transferring it from that account (or, at the Lender's election, funding it directly) to the Company's primary operating account which currently is non-interest bearing demand deposit account number 0100071638 maintained with Bank One Texas, N.A. ABA #111000614, or to such account maintained by the Company with another federally-insured financial institution as the Company may from time to time designate in writing. 2.3 Termination. Upon giving at least three (3) Business Days' prior written and irrevocable notice to Lender, the Company may terminate the Commitment in full, whereupon the Lender's obligation to fund future Advances shall terminate, although no refund of the Commitment Fee shall be due except to the extent, if any, required to strictly comply with applicable Law, including applicable usury Law. If not terminated earlier by the Company, the Commitment automatically terminates on the Termination Date. Once terminated, the Commitment may not be reinstated except by an amendment to this Agreement made in accordance with the provisions of Section 11.9. 2.4 Working Capital Note. The Loan (and all of its Advances) shall be evidenced by the Working Capital Note, executed by the Company, payable to the order of the Lender and in face principal amount equal to the Commitment. 2.5 Payment Procedures. (a) The Company shall pay principal of and interest on the Loan to the Lender by wire transfer in immediately available funds. Payments that are received by the Lender (i) by 1:30 PM on a Business Day shall be deemed received on that Business Day, or (ii) after 1:30 PM on a Business Day shall be deemed received on the next Business Day. Interest shall continue to accrue through the Business Day immediately before the Business Day when the payment is deemed received by the Lender under this clause. (b) Each payment received by the Lender in accordance with this Agreement is valid and effective to satisfy and discharge the Company's liability under the Credit Papers to the extent of the payment. 2.6 Interest and Principal Payments. (a) Interest is due and payable as it accrues (1) through the last day of the calendar month preceding the payment's due date, on the fifteenth (15th) day of each calendar month beginning April 15, 1994, and (2) on the Termination Date, except that any payment under this clause may be deferred until three (3) days after the Lender notifies the Company of the interest payment due, provided that interest accruing at the Past Due Rate shall be due and payable on demand and without grace. (b) On the Termination Date, the Company shall pay, without notice or demand, the entire outstanding balance of the Loan, including principal and interest, and all other sums then owing to the Lender under the Credit Papers. (c) If at any time any of the limitations of Section 2.1 are exceeded (whether because the aggregate of the Working Capital Collateral Values of all Financed Receivables then pledged to the Lender has diminished for one or more of the reasons mentioned in the definition of Working Capital Collateral Value or for any other reason), then before the close of business on the next Business Day after the Company learns of that change, the Company will repay Advances in a total amount at least equal to that excess. (d) The Company may voluntarily prepay all or any part of any Advance at any time without premium or penalty. 2.7 Past Due Rate. To the extent permitted by applicable law, all past due principal of the Loan and accrued interest on it shall bear interest from maturity (whether stated or by acceleration) until paid at the Past Due Rate, regardless of whether payment is made before or after entry of a judgment. 2.8 Interest Calculations. Except as otherwise specified in this Agreement or any relevant Credit Papers, interest is to be calculated on the basis of a year of 360 days (i.e., on the 360/365--or 360/366 in a leap year- - -day basis), unless that would result in or increase violation of applicable usury Laws, in which event interest shall be calculated on the basis of the days elapsed in a calendar year (i.e., on the 365/365--or 366/366 in a leap year--day basis) to the extent necessary to eliminate (or if it is impossible to eliminate, minimize) usury. All interest rate determinations and calculations by the Lender shall be presumed correct. 2.9 Usury Not Intended; Credit or Refund of Any Excess Payments. It is the intent of the Company and the Lender in the execution and performance of this Agreement and the other Credit Papers to contract in strict compliance with the usury laws of the State of Texas and the United States of America from time to time in effect. In furtherance of that purpose, the Company and the Lender stipulate and agree that none of the terms and provisions contained in this Agreement or the other Credit Papers shall ever be construed to create a contract to pay for the use, forbearance or detention of money with interest at a rate in excess of the Ceiling Rate and that for purposes hereof "interest" shall include the aggregate of all charges that constitute interest under such laws that are contracted for, charged, taken, reserved or received under this Agreement or any of the other Credit Papers. In the event that the Working Capital Note's maturity is accelerated by reason of any election of its holder resulting from any Default Event under this Agreement or otherwise, or in the event of any mandatory or permitted prepayment of any Borrowings, then such consideration that constitutes in- terest may never include more than the maximum nonusurious amount permitted by applicable Law, and excess interest, if any, provided for in this Agreement, the Working Capital Note or any of the other Credit Papers or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the Working Capital Note (or, if the Working Capital Note shall have been paid in full, refunded to the payor of such interest). The provisions of this Section shall control over all other provisions of this Agreement, the Working Capital Note or any of the other Credit Papers that may be in apparent conflict with this Section. In the event the Lender shall collect monies that are deemed to constitute interest at a rate in excess of the Ceiling Rate then in effect, all such sums deemed to constitute interest in excess of the Ceiling Rate shall be immediately returned to their payor (or, at the option of the holder of the Obligations in respect of which such monies were collected, credited against the unpaid principal of those Obligations) upon such determination, and, to the extent permitted by applicable law, the Lender shall not be subject to any penalties provided by any Laws for contracting for, charging, taking, reserving or receiving interest at a rate in excess of the Ceiling Rate. In determining whether or not the interest paid or payable under any specific contingency exceeds the Ceiling Rate, to the maximum extent permitted under applicable Law, the Company and the Lender shall (a) characterize any non-principal payment as an expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and their effects and (c) "spread" the total amount of interest throughout the entire contemplated term of the Working Capital Note and interest owing on it so that the interest rate is uniform throughout its entire term. 2.10 Chapter 15 Inapplicable. The Company agrees that Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 1925, as amended (which regulates certain revolving credit loan accounts and revolving triparty accounts), does not apply to the Obligations. 2.11 Fee. The Company shall pay to the Lender a cash commitment fee of Sixty-two Thousand Five Hundred Dollars ($62,500) on the day this Agreement is executed. Such fee is not compensation for the use or detention or forbearance of money, is in addition to, and not in lieu of, interest and expenses otherwise described in this Agreement and is non-refundable. SECTION 3. SECURITY. 3.1 Collateral. (a) As security for the Obligations and the Company's performance of its obligations under this Agreement and under the other Credit Papers, the Company hereby GRANTS to the Lender, as secured party, a first and prior security interest in, and collaterally assigns to the Lender, any and all right, title, interest, security interest, power and privilege that the Company may now or hereafter have or acquire in and to any and all of the following described Collateral, and agrees to defend the Collateral against all claims and demands of all Persons at any time claiming any interest in the Collateral adverse to the Lender, the Collateral being: (1) all of the following-listed accounts and general intangibles of the Company, including the Company's present and future claims for reimbursement, repayment or damages for failing to reimburse the Company therefor, from (i) Persons for whom the Company services Mortgage Loans or from obligors on or in respect of Mortgage Loans serviced by the Company for or on account of payments heretofore, now or hereafter made by the Company in respect of the Company's obligation to do so under the Company's Servicing Agreement with such Persons and (ii) FHA, VA or any private mortgage insurer or guarantor for reimbursement for any foreclosure cost paid by the Company in respect of any Mortgage Loan serviced by the Company, including all such claims posted to the following accounts on the Company's books (and all accounts for similar purposes hereafter created in respect of other Persons with whom the Company from time to time has Servicing Agreements): Account Number Description 1225-2000 Tax trade 1225-2100 Tax unbilled 1225-2300 FHA subsidy advance 1225-2400 Overpaid assistance 1225-2500 Insurance advances 1225-2700 LAD-servicing sales 1225-3000 Mortgage claim advances 1225-3200 Foreclosure claims 1225-3300 FNMA specials 1225-3600 Sales-claims sold REOs 1225-4000 LAD-servicing advances 1225-4300 Misapplied payment adv 1225-4500 Custodial advances 1225-5400 GNMA pool to security adv diff 1225-6000 Deficit escrow-T&I advances 1225-6100 Liq & Preserv advances 1225-6200 Short poff suspense advances 1225-6300 Unapplied suspense advances 1225-6400 Acq loans suspense pending 1225-6500 Other prod acct advances 1225-6600 Escrow deficits-USAA 1225-6700 Escrow deficits-Quality 1225-6800 Escrow deficits, LMP, LP 1225-6900 Escrow deficits-subserv collected 1225-7000 Escrow deficits-Subservicing 1225-7100 Escrow deficits-Associates 1225-8100 Third party buydowns 1225-8200 Subservicing misc but excluding all such claims arising out of P&I Payments made by the Company and all claims now or hereafter properly posted to the following accounts on the Company's books: Account Number Description 1225-1000 MLS cash clearing 1225-1200 MLS cash settlement 1225-1500 LAD-ret cks-corp deposit 1225-1600 LAD-ret cks-lock boxes 1225-1700 Bi-weekly prog return item 1225-2200 Tax clearing 1225-2800 LAD-miscellaneous 1225-3100 Foreclosure miscellaneous advances 1225-3500 Carteret advances 1225-4200 Commercial loan misc adv 1225-4350 Bank recon project-IAD 1225-4400 Cash/payoffs 1225-4600 Private investor advances 1225-4700 Housing authorities advances 1225-4800 GNMA advances 1225-4900 GNMA II advances 1225-5000 FNMA advances 1225-5100 OMBS advances 1225-5200 FHLMC advances 1225-5300 Soldiers relief act advances 1225-8000 Mortgage plan insurance 1225-9000 Misc rec from LMP,LP (2) the promissory note dated June 30, 1987, in the original principal amount of $7,937,300, executed by Dallas UTF, Inc., payable to the order of Lomas & Nettleton Company and now owned and held by the Company, the mortgage securing that promissory note also dated June 30, 1987, covering and affecting certain real and personal property in Dallas, County, Texas and recorded in Volume 87126, Page 3732 of the Real Property Records of Dallas County, Texas, and all other security for and guaranties of that note, all other related papers and all renewals, extensions, rearrangements and restatements of such note, mortgage, security, guaranties and other related papers; (3) a contract for deed dated October 15, 1993 by which the Company agreed to convey to Anderson Plaza Partnership, LP, a Washington Limited Partnership, for a purchase price of $2,300,000, certain real and personal property in Clark County, Washington, for a $250,000 cash down payment and the purchaser's promise to pay the remainder, with interest, in monthly installments over ten (10) years, a memorandum of said contract having been recorded in ___________________, _____________________ of the __________________ Records of Clark County, Washington, and all security related to that contract for deed, all guaranties or other suretyship undertakings in respect of it, all related papers, whether now or hereafter existing, and all modifications, extensions or amendments of such contract or related papers; (4) All files, certificates, correspondence, appraisals, computer programs, tapes, disks, cards, books, accounting records and other records, information and data of the Company relating to any of such claims or promissory note; (5) The Note Payment Account; (6) Any other asset of the Company that has been or hereafter is at any time delivered or pledged by any means to the Lender pursuant to this Credit Agreement; (7) Any and all balances, credits, deposits, accounts or monies of the Company in its name representing or evidencing any of the foregoing; and (8) all rights to have and receive any of the foregoing and all proceeds of any of the foregoing, including all accounts, general intangibles, instruments, real or personal property, documents, chattel paper and proceeds arising from or by virtue of or collections with respect to, or comprising part of, any of the foregoing. (b) In furtherance of the foregoing, the Company (i) hereby agrees to perform such acts and to duly authorize, execute, acknowledge, deliver, file and record such financing statements, assignments, security agreements, deeds of trust, mortgages, bond powers and supplements, modifications or amendments to any of them, and such other papers as the Lender may reasonably request in order to establish and preserve the priority of, perfect and protect the Liens granted or intended to be granted to the Lender in and to any and all Collateral and to preserve and protect Lender's rights in respect of all present and future collateral for the Obligations. 3.2 Power of Attorney. The Company hereby irrevocably appoints the Lender its attorney in fact, with full power of substitution, for and on behalf and in the name of the Company, to (i) endorse and deliver to any Person any check, instrument or other paper coming into the Lender's or its designated custodian's possession and representing payment made in respect of any Collateral; (ii) endorse and deliver or otherwise transfer or cause to be identified on the books of any financial intermediary any Collateral and do every other thing necessary or desirable to effect transfer of all or any part of the Collateral to Lender, its designated custodian, financial intermediary or any other Person; (iii) take all necessary and appropriate action with respect to all Obligations and the Collateral to be delivered to the Lender or its designated custodian or financial intermediary; (iv) commence, prosecute, settle, discontinue, defend, or otherwise dispose of any claim relating to any Collateral and (v) sign the Company's name wherever appropriate to effect the performance of this Agreement or any of the Company's obligations under any of the Credit Papers. This section shall be liberally, not restrictively, construed so to give the greatest latitude to Lender's power, as the Company's attorney in fact, to collect, sell, enforce, transfer, identify, perfect Lender's security interest in and deliver any of the Collateral and all other papers relating to it. The powers and authorities herein conferred on the Lender may be exercised by the Lender through its designated custodian or any other Person who, at the time of the execution of a particular instrument, is an officer of the Lender or such custodian. The power of attorney conferred by this Section shall not be exercised by the Lender before the occurrence of a Default Event. It is granted for a valuable consideration, is coupled with an interest and is irrevocable for so long as the Obligations, or any part of them, shall remain unpaid or the Commitment is outstanding. All Persons dealing with the Lender, its designated custodian or any officer of either acting pursuant hereto, or any substitute, shall be fully protected in treating the powers and authorities conferred by this Section as existing and continuing in full force and effect until advised by the Lender that the Obligations have been fully and finally paid and satisfied and the Commitment has been terminated. 3.3 Collection, Sale or Redemption of Collateral. (a) Proceeds of Collateral. Until the occurrence of a Default Event, the Company may receive all payments and collections on the Collateral and use them in the normal course of business, provided that the Company makes such principal payments as shall be required to continuously comply with the terms and conditions of the Credit Agreement, including the limitations on the maximum principal permitted to be outstanding on the Loan at any time set forth in Section 2.1(a). From and after the occurrence of a Default Event, the Company shall hold all payments and realizations received in trust for the Lender and segregated from the Company's other property, and the Company shall deliver to the Lender promptly upon its request made from time to time, any FHA or private mortgage insurance certificates or VA guaranties in the Company's possession and relating to any of the Collateral, and the Lender shall be entitled, pursuant to the power of attorney granted in this Agreement, to direct the VA, the FHA and any private mortgage insurer to pay such proceeds to the Lender directly, and to sign all checks and drafts representing such proceeds for deposit into the Note Payment Account; provided that the Lender agrees, upon written demand made by the Company, to release from the Note Payment Account all funds (if any) from time to time in the Collateral Account that constitute part of another Person's collateral or property and do not constitute part of the Collateral. (b) Certain Credits. The Lender shall not be under any duty at any time to credit the Company for any amounts due from any obligor on any Collateral until the Lender has actually received payment of such amounts, and the Lender shall not be under any duty at any time to collect any amounts or otherwise enforce any obligations due from any obligor on any Collateral, but instead the Company specifically hereby agrees with the Lender to diligently require strict performance of all such obligations and enforce them. 3.4 Collateral Value. If at any time any Financed Receivable shall cease to meet any of the requirements for an Eligible Foreclosure Receivable, an Eligible Note Receivable, an Eligible REO Sale Receivable an Eligible Servicing Receivable, an Eligible Servicing Sale Receivable, an Eligible Property Tax Refund Receivable or an Eligible T&I Receivable (as the case may be) under this Agreement, then that item will automatically cease to be Eligible Collateral and the Company will timely post that change to its relevant general ledger account so that value is no longer given to that Financed Receivable on the Company's books or in subsequent Borrowing Base Reports. SECTION 4. CONDITIONS PRECEDENT. The Lender's Commitment to make Advances is subject to fulfillment of the following conditions: 4.1 Initial Borrowing. In addition to the conditions precedent specified in Section 4.2, the Lender's Commitment to make the initial Advance is subject to delivery to Lender of all of the closing papers described on Schedule 4.1. 4.2 All Borrowings. The Lender's commitment to make any Advance is subject to the following additional conditions precedent: (a) The Company has delivered a completed Credit Request to the Lender. (b) The representations and warranties made by the Company in the Credit Papers are true and correct in all material respects on and as of the date of that Borrowing and after giving effect to that Borrowing, except only to the extent that (i) a representation or warranty speaks to a specific date or (ii) the facts on which a representation or warranty is based have changed by transactions or conditions contemplated or expressly permitted by the Credit Papers. (c) As of the date of any Borrowing and after giving effect to that Borrowing, no Potential Default has occurred that has not been cured before it shall have become a Default Event, and no Default Event has occurred that has not been declared in writing by the Lender to have been cured or waived. (d) No limitation set forth in Section 2.1 is exceeded as of the date of any Borrowing or will be exceeded after giving effect to that Borrowing. (e) Executed financing statements as required by the Lender have been delivered to the Lender in order to perfect or to establish or maintain the priority of the Liens granted under this Agreement and under the Security Instruments. (f) Any other documents and opinions of counsel have been delivered to the Lender, including any documents as may be necessary or desirable to perfect or maintain the priority of any Lien granted or intended to be granted under this Agreement whether due to any change in any Legal Requirement or otherwise. Each Credit Request constitutes a representation and warranty by the Company on the date of the requested Borrowing that the facts specified in Subsections 4.2(b), 4.2(c) and 4.2(d) of this Section are true. SECTION 5. REPRESENTATIONS AND WARRANTIES. The Company hereby makes to the Lender all of the same representations and warranties as the Company has made to the lenders under the 7/93 RL&S Agreement, to the same effect as if they were repeated herein verbatim and republished on the date of this Agreement, and regardless of whether or not the 7/93 RL&S Agreement expires or is terminated before this Agreement. Cumulative of those warranties and representations, the Company also represents and warrants to the Lender as follows: 5.1 Authorization and Power. The Company has the corporate power and requisite authority to execute, deliver and perform this Agreement, the Working Capital Note and the other Credit Papers. 5.2 No Conflicts or Consents. Neither the execution and delivery of this Agreement, the Working Capital Note or the other Credit Papers, 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 materially contravene or conflict with any Law to which the Company is subject or any credit agreement, mortgage, deed of trust or other agreement or instrument of which the Company is a party or by which the Company or any of its Property may be bound, or to which the Company or any of its Property may be subject. 5.3 Enforceable Obligations. This Agreement, the Working Capital Note and the other Credit Papers are the legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as limited by Debtor Laws and general principles of equity. 5.4 Priority of Liens. Upon the funding of any Advance, the Lender will have a valid, enforceable, perfected, first priority Lien and security interest in all Financed Receivables, including those to be funded with the proceeds of the Advance although such Lien will not attach to them until they come into existence upon funding of the related advances by the Company. The Lender will have a valid, enforceable, perfected, first priority Lien and security interest in all other Collateral described or referred to as Collateral in this Agreement from (at the latest) the date of the first funding of any proceeds of the Loan. 5.5 No Liens. The Company has good and indefeasible title to the Collateral and all the Collateral is free and clear of all Liens and other adverse claims of any nature, other than the Lender's Lien. 5.6 Financial Condition. The Company has delivered to Lender copies of (a) its audited balance sheet as of June 30, 1993 and the related statements of income and cash flows for the period ended on such date and (b) its unaudited balance sheet and income statement as of January 31, 1994, such Financial Statements are complete and correct in all material respects and fairly present the Company's financial condition as of such respective dates and its results of operations for the periods ended on such respective dates, and have been prepared in accordance with GAAP, subject to normal year-end adjustments; as of those dates, there were no obligations, liabilities or Debt (including material contingent and indirect liabilities and obligations or unusual forward or long-term commitments) of the Company that are not reflected in those Financial Statements and are required to be reflected based upon GAAP; and no change having a Material Adverse Effect has occurred since the respective dates of those Financial Statements. 5.7 Full Disclosure. There is no material fact that the Company has not disclosed to the Lender that could reasonably be expected to have a Material Adverse Effect, except that the Company makes no warranty regarding general economic conditions. To the best of the Company's knowledge, neither the Financial Statements referred to in Section 5.6, nor any Credit Request, officer's certificate or written statement (other than any financial projections, which the Company does not guarantee but represents are reasonable) authored by the Company and delivered by the Company to the Lender in connection with this Agreement contains any untrue statement of material fact. 5.8 Survival. All representations and warranties made to the Lender by the Company (including all of them in the 7/93 R&LS Agreement, which are deemed made by the Company in this Agreement) shall survive delivery of the Working Capital Note and the making of the Loan, and any investigation at any time made by or on behalf of the Lender shall not diminish the Lender's right to rely on those representations and warranties. SECTION 6. AFFIRMATIVE COVENANTS. The Company hereby agrees with the Lender to keep, observe and perform the Company's affirmative covenants stated in the 7/93 RL&S Agreement to the same effect as if they were repeated herein verbatim and regardless of whether or not the 7/93 RL&S Agreement expires or is terminated before this Agreement, and to concurrently provide copies to the Lender herein of all written materials required to be provided to the agent or the lenders thereunder. Until the Commitment is terminated and the Obligations are paid and performed in full, the Company shall comply with those affirmative covenants and with the following, all of which shall be taken and construed as cumulative of each other: 6.1 Financial Statements, Reports and Notices. The Company shall furnish directly to the Lender each Financial Statement or other report, each Compliance Certificate, accountant's opinion and report and each notice that the Company is obligated to furnish to the lenders or any agent under the 7/93 RL&S Agreement, and such other information concerning the Collateral, the business, properties or financial condition or operations of the Company, or otherwise relating to this Agreement, as the Lender may reasonably request from time to time and shall in any event furnish the Lender a copy of its unaudited Financial Statements as of the end of each fiscal quarter and a copy of its annual audited Financial Statements as soon as each is available. 6.2 Borrowing Base Reports. The Company shall furnish to the Lender a current Borrowing Base Report (a) concurrently with the initial Credit Request and (b) semimonthly thereafter as soon as available. Each such Borrowing Base Report (i) shall be dated as of the 15th or the last day of each month, whichever occurred more recently before the date it is furnished to the Lender, (ii) dated as of the 15th of a month shall be furnished by the 20th of that month and (iii) dated as of the last day of a month shall be furnished by the 10th of the next month, except that such deadlines shall automatically be extended for Borrowing Base Reports dated as of the last day of a fiscal (x) quarter by ten (10) days and (y) year by fifteen (15) days. 6.3 Taxes. The Company will promptly pay any and all taxes, assessments and governmental charges on the Collateral before the date when penalties are incurred or they become a Lien on any of the Collateral, except only to the extent that the Company is contesting such taxes, assessments and charges in good faith and by appropriate proceedings and has set aside reserves adequate under GAAP. 6.4 Certificates of Sale. Promptly after the foreclosure sale for each Mortgage Loan in Foreclosure--and in any event within the shortest time required under applicable FHA, VA or private mortgage insurance requirements or applicable state Law for doing so--the Company will (a) either (i) file or record the related Certificate of Sale in the real estate records with the appropriate county (or other) authorities or (ii) deliver the related Certificate of Sale to FHA or VA and (b) comply with any and all other statutory requirements applicable to the Company regarding that Certificate of Sale. 6.5 Marking Collateral and Records. Promptly on the Lender's request, the Company will mark or permit the Lender to mark in a reasonable manner, the Company's books, records and accounts showing or dealing with the Collateral with a notation clearly setting forth that the Lender has been granted a security interest in the Collateral. 6.6 Assignment of Certificate of Sale and Further Acts. Upon demand made by the Lender at any time after the occurrence of any Potential Default or Default Event, whether or not it is caused or waived, the Company will deliver to the Lender a duly executed assignment of each Certificate of Sale for each Mortgage Loan in Foreclosure for which one is issued. The Lender agrees not to file such certificate for recording in the real estate records unless and until a Potential Default or Default Event occurs. 6.7 Other Papers. The Company shall deliver to the Lender (a) at closing and no less frequently than every six (6) month anniversary of the closing a System Copy of the claim documentation filed with FHA, VA or private mortgage insurer (as applicable) with respect to each Eligible Foreclosure Receivable, and (b) upon the Lender's requests made from time to time (i) a certificate signed by a Company officer that, as of the certificate's date, the Company either has possession of the applicable FHA or private mortgage insurance certificate or VA guaranty covering the Mortgage Loan in Foreclosure related to each Eligible Foreclosure Receivable, or has complied with all requirements and conditions for obtaining it or its proceeds, and (ii) such other papers as the Lender shall request with respect to any Eligible Foreclosure Receivable or its related Mortgage Loan in Foreclosure. 6.8 Further Assurances. The Company shall promptly, and in any event within three (3) Business Days after the Lender's request, cure any defects in the execution and delivery of the Working Capital Note, this Agreement and the other Credit Papers and the Company shall, at its expense, promptly execute and deliver to the Lender upon request all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of the Company in this Agreement and in the other Credit Papers or to further evidence and more fully describe the Collateral intended as security for the Obligations or to collaterally assign it, any related Certificate of Sale or such certificate's subject matter to the Lender, or to correct any omissions in this Agreement or the other Credit Papers, or more fully to state the security obligations set out in this Agreement or in any of the other Credit Papers, or to perfect, protect or preserve any Liens created (or intended to be created) or their priority, pursuant hereto or to any of the other Credit Papers, or to make any recordings, to file any notices, or obtain any consents. 6.9 Deliveries After a Default Event. Upon the Lender's request made from time to time whenever a Default Event exists, the Company agrees to endorse and deliver to the Lender any draft, check, note or other writing that evidences a right to the payment or money and constitutes Collateral (including proceeds of other Collateral.) 6.10 Reimbursement of Expenses. The Company agrees to pay (a) all reasonable legal fees incurred by the Lender in connection with the preparation, negotiation or execution of this Agreement, the Working Capital Note and the other Credit Papers and in connection with each separate future amendment, consent, waiver or approval executed in connection with this Agreement, (b) all fees, charges or taxes for the recording or filing of the Security Instruments, (c) all other reasonable out-of-pocket expenses of the Lender in connection with the preparation, negotiation, execution or administration of this Agreement, the Working Capital Note and the other Credit Papers, including courier expenses incurred in connection with the Collateral, and (d) all amounts expended, advanced or incurred by the Lender to satisfy any obligation of the Company under this Agreement or any of the other Credit Papers or to collect the Working Capital Note, or to enforce the Lender's rights under this Agreement or any of the other Credit Papers, which amounts shall include all court costs, attorneys fees (including costs and attorneys' fees for trial, appeal or other proceedings), fees of auditors and accountants and investigation expenses reasonably incurred by the Lender in connection with any such matters, together with interest at the Stated Rate from the date the expense, fee, charge or tax is paid by the Lender and at the Past Due Rate on each item specified in clauses (a) through (d) of the first sentence in this Section, from the date of written demand or request for reimbursement until the date of reimbursement. In addition, the Company agrees to pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this Agreement, the Working Capital Note and the other Credit Papers, and agrees to save the Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes. 6.11 Right of Inspection. The Company will permit any of the Lender's officers, employees or agents, during regular business hours and upon one (1) Business Day's prior notice, to visit and inspect any of its Property, examine its books of record and accounts, take copies and extracts therefrom and discuss its affairs, finances and accounts with its officers, accountants and auditors, all as often as the Lender may desire. 6.12 Notice of Default. The Company agrees to furnish to the Lender immediately upon becoming aware of the existence of any Default Event or Potential Default, a written notice specifying its nature and the period of its existence and the action that the Company is taking or proposes to take with respect to it. SECTION 7. NEGATIVE COVENANTS. The Company hereby agrees with the Lender to keep, observe and perform the Company's negative covenants stated in the 7/93 RL&S Agreement to the same effect as if they were repeated herein verbatim and regardless of whether or not the 7/93 RL&S Agreement expires or is terminated before this Agreement, and to concurrently provide copies of all written materials required to be provided to the agent or the lenders thereunder to the Lender herein. Until the Commitment is terminated and the Obligations are paid and performed in full, the Company shall comply with those negative covenants and with the following, all of which shall be taken and construed as cumulative of each other: 7.1 Use of Proceeds; Margin Stock. The Company may not use or permit any Borrowing proceeds to be used for (i) the purpose of purchasing or carrying any "margin stock" as defined in Regulation U, (ii) the purpose of reducing or retiring any Debt that was originally incurred to purchase or carry margin stock or (iii) any other purpose that might constitute this transaction a "purpose credit" within the meaning of Regulation U. Neither the Company nor any Person acting on behalf of the Company shall take any action in violation of Regulation U or Regulation X or shall violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation under it, in each case as now in effect or as it may hereinafter be in effect. 7.2 Collateral Matters. The Company may not: (a) relocate its principal office, chief executive office or principal place of business, or change its corporate name or the name under which it is doing business, without first (i) giving the Lender thirty (30) days' prior written notice of the proposed relocation or change and (ii) executing and delivering all additional papers and performing all additional acts as the Lender in its sole discretion, may request in order to continue or maintain the existence and priority of the Liens intended to be created under the Credit Papers in favor of the Lender; (b) except in the ordinary course of business (provided that no such action shall be taken in respect of any Eligible Note Receivable whether or not it is within the ordinary course of business without the Lender's prior written consent): (1) compromise, extend, release or adjust payments on any Collateral, accept a conveyance of security in full or partial satisfaction of any Collateral or release any security for, or underlying any security for, any Collateral; or (2) agree to the amendment or termination of any Financed Receivable in which the Lender has a Lien; (c) transfer, sell, assign or deliver any Collateral pledged to the Lender to any Person other than the Lender or the Lender's designated custodian or financial intermediary, except that the Company may assign Mortgage Loan in Foreclosures to VA, FHA or a private mortgage insurer (as applicable) in connection with the payment of the related foreclosure receivable claim; or (d) grant, create, incur, assume, permit, or suffer to exist any Lien upon any Collateral except for Liens granted to the Lender to secure the Working Capital Note and the Obligations. SECTION 8. DEFAULTS AND REMEDIES. 8.1 Nature of Event. As used in this Agreement, "Default Event" means the occurrence of any one or more of the following: (a) the Company fails to make any payment of principal of or interest on the Working Capital Note or any of the Company's other obligations under the Credit Papers on or before the Business Day when that payment is due, or, in the case of accrued interest or any fee, expense or other amount due, on or before three (3) Business Days after the date when the Company received the Lender's bill for such interest is such third Business Day is later than the due date of such accrued interest payment; (b) any material statement, warranty or representation by or on behalf of the Company contained in this Agreement, the Working Capital Note or any other Credit Papers or any Credit Request, officer's certificate or other writing (other than financial projections) made by the Company and 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; (c) the Company shall generally fail to pay its debts as they become due or shall admit in writing its inability to pay its debts (other than, in each case, non-recourse debt obligations), or shall make a general assignment for the benefit of creditors; (d) The Company 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 any action for the purpose of effecting any of the foregoing; (e) An involuntary petition or complaint shall be filed against the Company seeking bankruptcy or reorganization of that Person or the appointment of a receiver, custodian, trustee, intervenor or liquidator of that Person or all or substantially all of its assets, and such petition or complaint shall not have been dismissed, within sixty (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 that Person or appointing a receiver, custodian, trustee, intervenor or liquidator of, that Person or of all or substantially all of its assets; (f) Any material provision of this Agreement, the Working Capital Note or any other Credit Papers 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 by any court or other Governmental Authority of competent jurisdiction, or the validity or enforceability of any such paper shall be challenged or denied by the Company; (g) Any Event of Default or similar event, however denominated, occurs under the 7/93 RL&S Agreement or any event shall occur that would have been an Event of Default or similar event, however denominated, under the 7/93 RL&S Agreement but for that agreement's having expired or been terminated; (h) Any Event of Default or similar event, however denominated, occurs under the 6/93 Servicing Purchase Loan Agreement or any event shall occur that would have been an Event of Default or similar event, however denominated, under the 6/93 Servicing Purchase Loan Agreement but for that agreement's having expired or been terminated; (i) Any Event of Default or similar event, however denominated, occurs under the Investment Securities Facilities Agreement or any event shall occur that would have been an Event of Default or similar event, however denominated, under the Investment Securities Facilities Agreement but for that agreement's having expired or been terminated; or (j) any default shall occur in the punctual and complete performance of any covenant of the Company contained in this Agreement or any of the other Credit Papers (including covenants incorporated by reference) which default is not referred to in any of the other subsections of this Section, if such default is not cured on or before five (5) days (in the case of a default--a "Monetary Default"--that is susceptible of being cured by payment of a liquidated sum of money) or thirty (30) days (in the case of a default--a "Nonmonetary Default"--that is not susceptible of being cured by payment of a liquidated sum of money); 8.2 Remedies. (a) Upon the occurrence of a Default Event described in any of Sections 8.1(c), 8.1(d) or 8.1(e) above, the Lender's Commitment to lend shall automatically be terminated and the outstanding Loan, the accrued and unpaid interest on it and the other Obligations shall automatically become due and payable, without presentment, demand, notice of default, notice of acceleration or other requirement of any kind, all of which are expressly waived by the Company. (b) At any time after a Default Event--other than those described in Sections 8.1(c), 8.1(d) or 8.1(e) above--occurs and before the time (if ever) when the Lender shall have declared in writing that such Default Event has been cured or waived, the Lender may terminate the Commitment to lend by giving written notice to the Company of its election to do so. Upon the Lender's termination, the outstanding Loan and the accrued and unpaid interest on it shall automatically become due and payable, without presentment, demand, notice of default, notice of acceleration, or other requirement of any kind, all of which are expressly waived by the Company. (c) at any time after the termination of the Lender's Commitment to lend and acceleration of the Working Capital Note, Lender may do any one or more of the following: (1) reduce any claim to judgment; (2) foreclose on or otherwise enforce any Liens on Collateral pledged, mortgaged or hypothecated to the Lender; (3) notify any or all obligors in respect of Collateral that the Collateral has been assigned to the Lender and that all payments thereon are to be made directly to the Lender or any other party as may be designated by the Lender; settle, compromise or release, in whole or in part, any amounts owing on the Collateral by any obligor under any of the Collateral, on terms acceptable to the Lender; enforce payment and prosecute any action or proceeding with respect to any and all Collateral and where any such Collateral is in default, foreclose on and enforce Liens securing such Collateral by any available judicial procedure or without judicial process and sell property acquired as a result of any such foreclosure; (4) perform, or contract with a third party to perform, all of the Company's obligations, if any, required in connection with the performance of any conditions to the collection of any Financed Receivable; (5) exercise all rights and remedies of a secured creditor under the UCC, including selling the Collateral at public or private sale, including sale pursuant to any applicable Disposition Agreement. To the extent that applicable law requires that the Company receive notice of or prior to any such sale (or any other disposition of Collateral) the Company agrees that ten (10) days' notice shall be commercially reasonable notice. At any sale or other disposition, the Collateral may be sold or disposed of as an entirety or in separate parts, as the Lender may determine. The Lender may, without notice or publication, adjourn any public or private sale or cause it to be adjourned from time to time by announcement at the time and place fixed for the sale, and that sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Lender until the selling price is paid by its purchaser, but the Lender shall not incur any liability in case of that purchaser's failure to take up and pay for the Collateral so sold and, in case of any such failure, that Collateral may again be sold upon like notice. However, instead of exercising the power of sale herein conferred upon it, the Lender may proceed by a suit or suits at law or in equity to collect, or to have its designated custodian collect, all amounts due upon the Collateral or to foreclose on and sell the Collateral or any portion of the Collateral under a judgment or decree of a court or courts of competent jurisdiction, or both; and (6) exercise any other rights, remedies and privileges in this Agreement or provided at law, in equity or otherwise that the Lender may choose to exercise. 8.3 Right of Offset. Cumulative of all other rights of offset and banker's lien existing by contract or Law, the Company hereby grants to the Lender a right of offset, to secure the repayment of the Obligations, upon any and all monies, securities or other Property of the Company, and the proceeds from it now or hereafter held or received by or in transit to the Lender or its designated custodian from or for the account of the Company, whether for safekeeping, custody, pledge, transmission, collection or other- wise, and also upon any and all deposits (general or special, time or demand, provisional or final) and credits of the Company, and any and all claims of the Company against the Lender at any time existing; provided that the right of offset shall not apply to accounts with respect to which the Company or any of its Affiliates is a bona fide trustee or a bona fide escrow agent for a third party, excluding any person or entity that is an Affiliate of the Company or has an interest in the Company or any of its Affiliates or in which the Company or any of its Affiliates has an interest (although, for purposes of this Section, neither Liberte Investors, a Massachusetts business trust (formerly Lomas & Nettleton Mortgage Investors), nor Capstead Mortgage Corporation, nor any other non-consolidated publicly-held corporation or other entity managed by the Company or any of its Affiliates shall be deemed to be an Affiliate of the Company. Neither this nor any other provision of any of the Credit Papers shall imply any obligation of the Company to maintain any deposit balances with the Lender, and any such obligation is hereby disclaimed. Upon the occurrence of any Default Event, the Lender is hereby authorized at any time and from time to time, without notice to the Company, to offset, appropriate and apply any and all items referred to in this Section (subject to the proviso in the first sentence of this Section) against the Obligations. 8.4 Private Sales. Neither the Lender nor any custodian for the Lender shall incur any liability as a result of the sale of the Collateral, or any part of the Collateral, at any private sale made (a) after the occurrence of any Default Event that the Lender has not declared in writing to have been cured or waived and (b) in a commercially reasonable manner, even if such sale causes or could cause the Company to breach a contractual obligation to any other Person. The Company hereby waives any claims it may have against the Lender or any custodian for the Lender arising because the price at which the Collateral may have been sold at that private sale was less than the price which might have been obtained at a public sale or was less than the Obligations, or because such sale interfered with the Company's ability to perform a contractual obligation to sell the same Property to another Person. 8.5 Waivers. The Company waives any right to require the Lender to (a) proceed against the obligor to the Company on any of the Collateral or any other Person, (b) proceed against or exhaust any of the Collateral or any of its security or pursue its rights and remedies as against the Collateral in any particular order or (c) pursue any other remedy in its power. Neither the Lender nor any custodian for the Lender shall be required to take any steps necessary to preserve any rights of the Company against any obligor on or in respect to any Collateral or any other Person, or to preserve rights against prior parties. The Company and each surety, endorser, pledgor and other party ever liable or whose Property is ever liable for payment of any of the Obligations, jointly and severally waive presentment and demand for payment, protest, notice of intention to accelerate, notice of acceleration and notice of protest and nonpayment, and agree that their or their Property's liability with respect to the Obligations, or any part of them, shall not be affected by any renewal or extension in the time of payment of the Obligations, by any indulgence or by any release or change in any security for the payment of the Obligations, and hereby consent to any and all renewals, extensions, indulgences, releases, or changes, regardless of the number of them. 8.6 Performance by Lender. Should any covenant, duty or agreement of the Company fail to be performed in accordance with the terms of this Agreement or of any document delivered under this Agreement, then the Lender may, at its option, perform, or attempt to perform, such covenant, duty or agreement on behalf of the Company and shall notify the Company that it has done so. In such event, at the request of the Lender, the Company shall promptly pay any amount expended by the Lender in such performance or attempted performance to the Lender at its principal place of business in Houston, Texas, together with interest on the unreimbursed balance of that amount from time to time outstanding at the Ceiling Rate from the date of such expenditure by the Lender until paid. Notwithstanding the foregoing, it is expressly understood that the Lender does not assume and shall never have, except by the Lender's specific written consent, any liability or responsibility for the performance of any duties of the Company under this Agreement, any Financed Receivable or other Collateral, any other paper delivered under any of them or any of the Company's other debts, undertakings or obligations. 8.7 No Responsibility. Except in the case of its own fraud, gross negligence or willful misconduct, neither the Lender nor any custodian for the Lender nor any of its officers, directors, employees or attorneys shall assume, or be deemed to have assumed or to have promised to assume, any obligation under or in respect of any Collateral, and none of them shall ever have any liability or responsibility for any diminution in the value of any or all of the Collateral. 8.8 No Waiver. The Lender's acceptance at any time and from time to time of partial payment or performance by the Company of any of its Obligations under this Agreement, the Working Capital Note or any of the other Credit Papers shall not be deemed to be a waiver of any Default Event then existing. No waiver by the Lender shall be deemed to be a waiver of any other then existing or subsequent Default Event. No delay or omission by the Lender in exercising any right under this Agreement or under any of the other Credit Papers shall impair such right or be construed as a waiver of it or any acquiescence in the Default Event or Potential Default, nor shall any single or partial exercise of any such right preclude other or further exercise of it, or the exercise of any other right under this Agreement or otherwise. 8.9 Rights are Cumulative. All rights available to the Lender under this Agreement, the Working Capital Note or any other Credit Papers are cumulative of all other rights of the Lender granted or existing from time to time under any other contract, at law or in equity, whether or not the Working Capital Note or any of the other Obligations is then due and whether or not the Lender shall have instituted any suit for collection, foreclosure or other action in connection with this Agreement, the Working Capital Note or any other Credit Papers. 8.10 Application of Payments and Proceeds. (a) While a Default Event exists, all payments and all proceeds of Collateral --whether voluntary, involuntary, through the exercise of any right of set-off or other right, realization against any Collateral, or otherwise--received by the Lender shall be applied in the following order: (1) All costs and expenses incurred by the Lender under or in connection with the Credit Papers, including those incurred in attempting to collect the Loan or realize on Collateral. (2) Accrued and unpaid fees owing to the Lender under the Credit Papers. (3) Accrued and unpaid interest on the Loan. (4) The Loan. (5) All other portions of the Obligations. (6) Either (i) to the Company, its successors or assigns, or (ii) as a court of competent jurisdiction may direct. (b) If the proceeds of any sale or exercise of any rights are insufficient to fully satisfy the Obligations, then the Company shall remain liable for any deficiency. 8.11 Costs. All court costs, reasonable attorneys' fees, other costs of collection and other sums spent by the Lender in the exercise of any right or remedy (including any effort to collect or enforce the Working Capital Note and any effort to enforce any Person's obligation on or in respect to any Collateral) provided in this Agreement or the other Credit Papers shall be payable to the Lender on demand, shall become part of the Obligations, and shall bear interest at a rate per annum equal to the Stated Rate from the date the cost, fee or sum was paid by the Lender until the date the Lender demands that the Company reimburse the Lender and which shall bear interest at a rate per annum equal to the lesser of (x) the Past Due Rate and (y) the Ceiling Rate, from the date demanded by the Lender until the date repaid. SECTION 9. Lender May Act Through Agents; Standard of Care, Release and Indemnification. 9.1 Employment of Others by the Lender. The Lender may execute and perform any of its duties under the Credit Papers, including any collateral custodial, handling and delivery operations, by or through a custodian and/or other agents (other than the Company or any of its Affiliates), employees or attorneys and shall be entitled to rely (and shall be protected in relying) upon opinions of counsel concerning all matters pertaining to its duties under the Credit Papers. No custodian nor any of its directors, officers, agents or employees 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 its or their own gross negligence or willful misconduct, the parties specifically intending to hereby release the Lenders' custodian, if any, from liability for its own simple negligence. SECTION 10. Standard of Care, Release of Liability and Indemnification. Except in the case of its own fraud, gross negligence or willful misconduct, neither the Lender, any custodian for the Lender or any other agent appointed by the Lender, nor any of their officers, directors, employees, attorneys or agents shall be liable for any action taken or omitted to be taken by it or them under this Agreement or any of the other Credit Papers in good faith and believed by it or them to be within the discretion or power conferred upon it or them by the Credit Papers, or be responsible for consequences of any error of judgment. Subject to the foregoing limitations, each of the Lender and any custodian appointed by the Lender shall perform the duties imposed by this Agreement with respect to the Collateral with the same amount of diligence and using the same amount of judgment and discretion as if it (the Lender or the Lender's custodian, as the case may be) were acting solely for its own account. In connection therewith, the Lender, acting directly or through any agent, is hereby authorized to (a) settle, compromise and release claims against the makers of any Collateral and any other Person obligated with respect to any Collateral, (b) foreclose on and enforce security interests in any Collateral or Property securing it, (c) sell Collateral and Property acquired as the result of foreclosure under Collateral Documents and (d) do all other acts and things as the Lender is authorized by this Agreement or applicable Law to do to protect its rights and interests and to realize the benefits of the Collateral and the security intended to be provided by it. Each of the Lender and any custodian for the Lender and its officers, directors, employees, attorneys and agents shall be entitled to rely shall incur no liability by relying and otherwise be fully protected in relying upon (i) any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype message, statement, order or other documents or conversation believed by it or them to be genuine and correct and to have been signed or made by the proper Person, or (ii) advice of its legal counsel. The Company agrees to indemnify and defend the Lender, any custodian or other agent appointed hereunder by the Lender, any Person deemed to control the Lender, any Person deemed to control such custodian or other appointed agent, and their respective directors, officers, agents, attorneys and employees, from, and to hold each of them harmless against, any and all losses, liabilities, claims, damages, deficiencies, interest, judgments, costs or expenses (including reasonable attorneys' fees) incurred by any of them, arising from or because of (a) any investigation, litigation or other proceeding brought or threatened in connection with any Credit Paper or the transactions contemplated by the Credit Papers, including any use by the Company of the proceeds of Borrowings, (b) any impoundment, attachment or retention of any Collateral or any failure of any obligor on any Collateral to pay the entire amount due in respect of such Collateral, or to pay timely, (c) any alleged violation of any federal or state law relating to usury in connection with any Collateral, (d) any alleged violation of any federal or state securities or Blue Sky law relating to any Collateral and (3) any representation made by the Company under any Credit Paper; provided that the release from liability and indemnification provisions of this Section may not be construed to apply to any indemnitee's own gross negligence, willful misconduct or fraud, although they are specifically intended to apply to any indemnitee's own simple negligence. The Company shall provide indemnification and defense under this Section upon written request made by any indemnitee. The provisions of this Section and the Section immediately preceding it are specifically intended to benefit the Lender, any custodian and all of Lender's other agents, employees or attorneys acting hereunder. SECTION 11. MISCELLANEOUS. 11.1 Headings. The headings, captions and arrangements used in any of the Credit Papers are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of the Credit Papers nor affect their meaning. 11.2 Non-Business Days. Any payment or action that is due under any Credit Paper on a day that is not a Business Day may be delayed until the next-succeeding Business Day (although applicable interest, if any, shall continue to accrue on any unpaid amount until payment is in fact made). 11.3 Communications. Unless otherwise stated, when a Credit Paper requires or permits any consent, approval, notice, request, objection or demand from one party to another, it must be written and is deemed given: (a) for Credit Requests, only when actually received by the Lender; (b) otherwise, if by telecopy, when transmitted to the appropriate telecopy number (but, without affecting the date deemed given, a telecopy communication must be promptly confirmed by telephone as having been received by its intended recipient); (c) otherwise, if by mail, on the third (3rd) Business Day after being enclosed in a properly addressed, stamped and sealed envelope and deposited in the appropriate official U.S. Postal Service mail depository; and (d) otherwise, if by other means, when actually delivered; provided, that any written notice that is actually received shall be treated as given when received unless it is deemed given earlier by operation of a preceding provision of this Section. Until changed by notice, the address and the telephone and telecopy numbers are stated for each of the Company and the Lender beside its name on the signature pages below. 11.4 Form and Number of Documents. The form, substance and number of counterparts of each writing to be furnished under this Agreement must be satisfactory to the Lender and its legal counsel. 11.5 Exceptions to Covenants. No party to a Credit Paper may take or fail to take any action that is permitted as an exception to any of the covenants contained in any Credit Paper if that action or omission would result in the breach of any other covenant contained in any Credit Paper. 11.6 Survival. All covenants, agreements, undertakings, representations and warranties made in any of the Credit Papers (a) survive all closings under the Credit Papers until the Commitment has been terminated and the Obligations have been paid in full, and (b) except as otherwise indicated, are not affected by any investigation made by any party. 11.7 Governing Law. The internal Laws of the State of Texas (excluding its conflict of laws provisions) and the United States of America shall govern the rights and duties of the parties to the Credit Papers and the validity, construction, enforcement and interpretation of the Credit Papers. 11.8 Invalid Provisions. Any provision in any Credit Paper held to be illegal, invalid or unenforceable is fully severable, the appropriate Credit Paper shall be construed and enforced as if that provision had never been included and the remaining provisions shall remain in full force and effect and shall not be affected by the severed provision. The Lender, the Company and each other party (if any) to the affected Credit Paper shall negotiate the terms of a replacement provision as similar to the severed provision as may be possible and be legal, valid and enforceable. 11.9 Amendments, Waivers, Etc. and Conflicts. An amendment of--or an approval, consent or waiver by the Lender under--any Credit Paper must be in writing and must be executed by the party sought to be charged with the effect of such amendment, approval, consent or waiver. The Lender's rights under the Credit Papers may not be waived by course of dealing or failure or delay in the exercise of those rights. An approval, consent or waiver is only effective for the specific instance and purpose for which it is given. The Credit Papers may only be supplemented by papers delivered according to their respective express terms. Any conflict or ambiguity between this Agreement's provisions and any other Credit Paper's provisions must be resolved in favor of this Agreement's provisions. 11.10 Multiple Counterparts. Any Credit Paper may be executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement; but, in making proof of any Credit Paper, it shall not be necessary to produce or account for more than one counterpart. 11.11 Successors and Assigns. (a) This Agreement shall bind and benefit the Company, the Lender and their respective successors and assigns, except that the Company may not, directly or indirectly, assign, transfer or delegate (or attempt to do so) any of its rights, duties or obligations under any Credit Papers without the Lender's specific written consent; (b) the Lender, its successors and assigns, may freely sell, transfer or assign and resell, transfer or reassign, any of the Company's debt under the Credit Papers, the Working Capital Note or any related security and any Credit Papers to any Federal Reserve Bank or other Person, and may also sell, transfer, resell and retransfer participation interests in them and may disclose to any bona fide purchaser or prospective purchaser of any such debt, note, related security or participation interest, financial and other information concerning the Company and its corporate parent, Lomas Financial Corporation; provided that no such sale, transfer, resale or retransfer shall be made unless (i) all applicable laws, orders, rules and regulations of competent governmental authority having jurisdiction are complied with by both the Lender and its assignee, transferee or participant (and the Company does not, by virtue of the Credit Papers, assume any duty with respect to, or assure, any such compliance); (ii) in respect of the Credit Papers, the Company shall not have any direct obligation or liability to, or any obligations to negotiate or confer with, any such participant and (iii) the Company shall be entitled to treat the Lender as the sole owner of all of its rights under the Credit Papers without regard to notice or actual knowledge of any such participation; provided further, that if the Lender shall irrevocably assign all of its rights under the Credit Papers to any purchaser, assignee, transferee or participant (the "Assignee"), then effective on the tenth (10th) day after written notice of such assignment is given to the Company, (1) the Assignee shall have all of the Lender's rights hereunder, (2) the Company shall be obligated directly to the Assignee and (3) the Lender shall no longer be deemed a party to the Credit Papers; and (c) any purported assignment, transfer or sale in contravention of the foregoing provisions is void from its inception and not effective. 11.12 Waiver of Jury Trial. The Company and the Lender each hereby knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to any litigation based on, or arising out of, under or in connection with the Credit Papers. Each of them is hereby authorized to submit, as conclusive evidence of such waiver of jury trial, this Agreement to a court that has jurisdiction over the subject matter of such litigation and the parties to this Agreement. 11.13 ENTIRE AGREEMENT. THIS AGREEMENT, THE WORKING CAPITAL NOTE AND THE OTHER CREDIT PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. EXECUTED effective as of the date first above written. 1600 Viceroy LOMAS MORTGAGE USA, INC. Dallas, Texas 75235 Attention: Mr. Paul Fletcher Vice President and Assistant Treasurer Telecopy No. (214) 879-5081 By: /s/PAUL D. FLETCHER ------------------------------ Telephone No. (214) 879-7018 Name: Paul D. Fletcher -------------------------- Title: Senior Vice President ------------------------- (the "Company") 712 Main Street TEXAS COMMERCE BANK Houston, Texas 77002 NATIONAL ASSOCIATION Attention: Manager, Corporate Real Estate Finance Group Telecopy No. (713) 216-2182 By: /s/CARLOTTA M. HUDLER --------------------------------- Telephone No. (713) 216-5298 Name: Carlotta M. Hudler ------------------------------ Title: Vice President ----------------------------- (the "Lender") SCHEDULE 4.1 CLOSING PAPERS (All dated as of March 21, 1994, unless otherwise indicated) LSZ 1. 3/94 SENIOR SECURED WORKING CAPITAL CREDIT AGREEMENT (the "3/94 Credit Agreement") between Lomas Mortgage USA, Inc. (the "Company") and Texas Commerce Bank National Association (the "Lender"), accompanied by: Schedule 4.1 - List of Closing Papers Schedule BB - Form of Borrowing Base Report Exhibit A - Form of the Working Capital Note Exhibit B - Credit Request Exhibit C - List of Approved Private Mortgage Insurers Exhibit D - Opinion of Company's General Counsel LSZ 2. WORKING CAPITAL NOTE in the face principal amount of $25,000,000, executed by the Company, payable to the order of the Lender, in the form of Exhibit A to the Credit Agreement LSZ 3. UCC FINANCING STATEMENT, executed by the Company, as debtor, in favor of the Lender, as secured party, to give notice of the Lender's security interest in the Collateral described in the Credit Agreement, for filing in the Office of the Secretary of State of the State of Texas LG 4. SECRETARY'S CERTIFICATE for the Company executed by the Secretary or any Assistant Secretary of the Company as to (a) the due incumbency of its officers authorized to execute or attest to the Credit Papers, (b) resolutions duly adopted by its directors approving and authorizing the execution of the Credit Papers, (c) any amendments to its corporate charter or articles of incorporation since the certificate furnished for the 6/93 Servicing Purchase Agreement, (d) any amendments to its Bylaws since the certificate furnished for the 6/93 Servicing Purchase Agreement, to which will be attached: Exhibit A - Resolutions Exhibit B - Copies of amendments to Charter or articles of incorporation Exhibit C - Copies of amendments to Bylaws LG 5. UCC SEARCH REPORTS showing that no financing statements are on file in respect of any Collateral, as defined in the 3/94 Credit Agreement, other than item 3 above. LG 6. CERTIFICATES OF QUALIFICATION, GOOD STANDING, AND AUTHORITY for the Company issued by the appropriate governmental officials for the States of Connecticut and Texas LG 7. OPINION of General Counsel for the Company, in the form of Exhibit D to the Credit Agreement. LSZ 8. Such other papers as the Lender may reasonably request. SCHEDULE BB BORROWING BASE REPORT Lomas Mortgage USA Schedule of Eligible Receivables March 16, 1994 General Ledger Ineligible Eligible Balance Receivables Receivables -------------- --------------- -------------- Accrued interest $ 77,273.44 $ (77,273.44) $ 0.00 T&I Receivables 21,778,711.79 (17,222,570.24) 4,556,141.55 Foreclosure claims 5,920,940.90 0.00 5,920,940.90 Servicing 22,828,442.76 (712,010.09) 22,116,432.67 Master servicing 3,798,666.33 0.00 3,798,666.33 Production 484,425.00 0.00 484,425.00 Notes 9,324,785.13 0.00 9,324,785.13 -------------- --------------- -------------- $64,213,245.35 $(18,011,853.77) $46,201,391.58 ============== =============== ============== Lomas Mortgage USA Borrowing Base Summary As of March 16, 1994 Receivable Eligible Borrowing Base Category Receivable Advance Rate Borrowing Base - --------------------------------------------------------------------------- Servicing Receivables $22,116,432.67 60% $13,269,859.60 T&I Receivables 4,556,141.55 60% 2,733,684.93 Foreclosure claims 5,920,940.90 90% 5,328,846.81 Notes Receivable 9,324,785.13 60% 5,594,871.08 Other Receivables: Accrued Interest 0.00 Master Servicing 3,798,666.33 Production 484,425.00 Total Other -------------- Receivables 4,283,091.33 60% 2,569,854.80 -------------- Total Eligible Total Borrowing Receivables $46,201,391.58 Base $29,497,117.22 ============== ============== Lomas Mortgage USA Schedule of Receivables by Account March 16, 1994
Account General Ledger Ineligible Eligible Number Description Balance Receivables Receivables ------------ ------------------------------- -------------- --------------- -------------- 1215-1500 Accr Int-Escrow Investments $ 0.00 $ 0.00 $ 0.00 1215-2000 Accr Int-FHLMC T Bill 77,273.44 (77,273.44) 0.00 1215-2500 Accr Int-Mortgage Loans 0.00 0.00 0.00 1215-3000 Accr Int-Swaps 0.00 0.00 0.00 1215-3500 Accr Int-S/T Investment 0.00 0.00 0.00 1215-4000 Accr Int-Other 0.00 0.00 0.00 -------------- --------------- -------------- Total Accrued Interest 77,273.44 (77,273.44) 0.00 1225-6000 Escrow (T&I) Advances 21,778,711.79 (17,222,570.24) 4,556,141.55 p/o 1225-6700 DLJ Quality Escrow Adv. 0.00 0.00 0.00 p/o 1225-6600 USAA Escrow Advances 0.00 0.00 0.00 -------------- --------------- -------------- Total T & I Receivable 21,778,711.79 (17,222,570.24) 4,556,141.55 1225-3200 Foreclosure Claims (777,959.38) 0.00 (777,959.38) 1225-3200 Foreclosure Claims-Leader 0.00 0.00 0.00 1225-3400 GNMA Custodial Account 6,698,900.28 0.00 6,698,900.28 p/o 1225-6100 Liq & Preserv advances 0.00 0.00 0.00 -------------- --------------- -------------- Total Foreclosure Claims 5,920,940.90 0.00 5,920,940.90 1225-1000 MLS cash clearing (8,978,188.34) 8,978,188.34 0.00 1225-1200 MLS cash settlement 10,824,050.54 (10,824,050.54) 0.00 1225-1500 LAD-ret cks-corp deposit 3,740.19 (3,740.19) 0.00 1225-1600 LAD-ret cks-lock boxes (198,991.03) 198,991.03 0.00 1225-1700 Bi-weekly prog return item 24,611.04 (24,611.04) 0.00 1225-2000 Tax trade 639,663.86 639,663.86 1225-2100 Tax unbilled 46,690.13 46,690.13 1225-2200 Tax clearing 13,458.10 (13,458.10) 0.00 1225-2300 FHA subsidy advance 7,921.97 7,921.97 1225-2400 Overpaid assistance 186,046.68 186,046.68 1225-2500 Insurance advances 61,805.48 61,805.48 1225-2700 LAD-servicing sales 983,993.43 983,993.43 1225-2800 LAD-miscellaneous 981,731.27 (981,731.27) 0.00 1225-3000 Mortgage claim advances 496,905.91 496,905.91 1225-3100 Foreclosure miscellaneous advance 92,306.93 (92,306.93) 0.00 1225-3300 FNMA specials 0.00 (1) 0.00 1225-3500 Carteret advances 54,843.22 (54,843.22) 0.00 1225-3600 Sales-claims sold REOs 1,286,870.00 (2) 1,286,870.00 1225-4000 LAD-servicing advances 169,907.05 169,907.05 1225-4100 National customer service advances 45,693.06 45,693.06 1225-4200 Commercial loan misc adv 13,986.03 (13,986.03) 0.00 1225-4300 Misapplied payment adv 39,635.01 39,635.01 1225-4350 Bank recon project - IAD (9,311,793.91) 9,311,793.91 0.00 1225-4400 Cash/payoffs 172,385.40 (172,385.40) 0.00 1225-4500 Custodial advances 121,271.68 121,271.68 1225-4600 Private investor advances 96,682.68 (96,682.68) 0.00 1225-4700 Housing authorities advances 315,217.23 (315,217.23) 0.00 1225-4800 GNMA advances 0.00 0.00 0.00 1225-4900 GNMA II advances 0.00 0.00 0.00 1225-5000 FNMA advances 18,294.38 (18,294.38) 0.00 1225-5100 OMBS advances 4,293,442.76 (4,293,442.76) 0.00 1225-5200 FHLMC advances 708,757.04 (708,757.04) 0.00 1225-5300 Soldiers relief act advances 220,637.03 (220,637.03) 0.00 1225-5400 GNMA pool to security adv diff 185,766.40 185,766.40 1225-6100 Liq & Preserv advances 15,332,471.73 15,332,471.73 p/o 1225-6100 Recorded in Foreclosure Claims 0.00 0.00 1225-6200 Short poff suspense advances 158,996.17 158,996.17 1225-6300 Unapplied suspense advances 98,002.62 98,002.62 1225-6400 Acq loans suspense pending 4,699.75 4,699.75 1225-6500 Other prod acct advances (3,375.45) (3,375.45) 1225-6600 Escrow deficits-USAA 137,130.80 137,130.80 p/o 1225-6600 Recorded in T&I Receivable 0.00 0.00 0.00 1225-6700 Escrow deficits-Quality 2,104,423.72 2,104,423.72 p/o 1225-6700 Recorded in T&I Receivable 0.00 0.00 0.00 1225-6800 Escrow deficits-LMP,LP 53,459.88 (53,459.88) 0.00 1225-6900 Escrow deficits-subserv collected (2,635,519.32) (2,635,519.32) 1225-7000 Escrow deficits-Subservicing 2,509,370.30 2,509,370.30 1225-7100 Escrow deficits-Associates 564.20 (564.20) 0.00 1225-8000 Mortgage plan insurance 287,867.34 (287,867.34) 0.00 1225-8100 Third party buydowns 46,055.45 46,055.45 1225-8200 Subservicing misc 91,756.24 91,756.24 1225-9000 Misc rec from LMP,LP 1,024,908.93 (1,024,908.93) 0.00 1225-9100 Misc rec from LMP 39.18 (39.18) 0.00 1225-9810 IAD-Servicing Receivable 250.00 0.00 250.00 -------------- --------------- -------------- Total Servicing Receivables 22,828,442.76 (712,010.09) 22,116,432.67 1230-1000 MSD-Admin Fee Accrual 0.00 0.00 0.00 1230-2000 MSD-Corporate Advances 3,798,666.33 0.00 3,798,666.33 -------------- --------------- -------------- Total Master Servicing Rec 3,798,666.33 0.00 3,798,666.33 1240-1000 Acquisitions/Prod Receivable 64,365.00 0.00 64,365.00 1240-2000 GNMA Pool Settlements 0.00 0.00 0.00 1240-3000 PERS Consumer Loan Advance 420,060.00 0.00 420,060.00 Total Production Receivable 484,425.00 0.00 484,425.00 1285-1000 N/R Landel Plaza 2,045,470.11 0.00 2,045,470.11 1285-1300 N/R Landel Plaza - Rent 6,979.80 0.00 6,979.80 1285-2000 N/R United Trust Fund 7,272,335.22 0.00 7,272,335.22 -------------- --------------- -------------- Total Notes Receivable 9,324,785.13 0.00 9,324,785.13 Total Receivables $64,213,245.35 $(18,011,853.77) $46,201,391.58 ============== =============== ============== (1) Reverse $(2,520,017.37) for additional funds received from FNMA for March repurchases. Lomas will pay for repurchases of FNMA special loans on March 18th. (2) February accrual to be reversed when March accrual is posted.
EXHIBIT A (The "3/94 Working Capital Note") $25,000,000 Houston, Texas March 21, 1994 ON OR BEFORE MARCH 20, 1995, FOR VALUE RECEIVED, LOMAS MORTGAGE USA, INC. (the "Company"), a Connecticut corporation, promises to pay to the order of TEXAS COMMERCE BANK NATIONAL ASSOCIATION ("Payee"), a national banking association at 712 Main Street, Houston, Texas 77002 or at such other place as the holder (the "Holder", whether or not Payee is such holder) of this note may hereafter designate in writing, in immediately available funds and in lawful money of the United States of America, the principal sum of Twenty-five Million Dollars ($25,000,000) (or the unpaid balance of all principal advanced against this note, if that amount is less), together with interest on the unpaid principal balance of this note from time to time outstanding until maturity at the Stated Rate, and interest on all past due amounts, both principal and accrued interest, at the Past Due Rate; provided that for the full term of this note the interest rate produced by the aggregate of all sums paid or agreed to be paid to Holder for the use, forbearance or detention of the debt evidenced hereby shall not exceed the Ceiling Rate. 1. Definitions. In addition to the definitions given above, the definitions given in the 3/94 Senior Secured Working Capital Credit Agreement dated as of March 21, 1994, as it may from time to time in the future may be supplemented, amended or restated (the "Credit Agreement") between the Company and Payee, for capitalized terms that are used in this note shall apply here as well as there, and the following term has this meaning when used in this note: "Prime Rate" means, on any day, the prime rate for that day as announced by Payee and entered in the minutes of its Loan and Discount Committee. The Prime Rate is a reference rate and does not necessarily represent Payee's best or lowest rate or a favored rate, and Payee disclaims any statement, representation or warranty to the contrary. In case of any dispute as to what the Prime Rate was on any day, the certificate of Payee's chief credit officer shall be conclusive. "Stated Rate" means, for any day, a rate per annum equal to the Prime Rate for that day; provided that if on any day, the Stated Rate shall exceed the Ceiling Rate for that day, then the Stated Rate shall be fixed at the Ceiling Rate on that day and on each day thereafter until the total amount of interest accrued at the Stated Rate on the unpaid balance of this note equals the total amount of interest that would have accrued if there were no Ceiling Rate. However, neither the maturity of this note nor the Company's privilege to prepay it shall be affected by this paragraph, and if this note matures (or is prepaid) before such equality is achieved, then, in addition to the unpaid principal and accrued interest then owing pursuant to the other provisions of this note, the Company promises to pay INITIALLED FOR IDENTIFICATION: --------------- Page 1 of 5 on demand to the order of Holder interest in an amount equal to the excess (if any) of (a) the lesser of (i) the total interest that would have accrued on this note if the Stated Rate had been defined as equal to the Ceiling Rate from time to time in effect and (ii) the total interest which would have accrued on this note if the Stated Rate were not so prohibited from exceeding the Ceiling Rate, over (b) the total interest actually accrued hereon to such maturity (or prepayment) date. 2. Rates Change Automatically and Without Notice. Without notice to the Company or any other Person and to the full extent allowed by applicable law from time to time in effect, the Stated Rate, the Past Due Rate and the Ceiling Rate shall each automatically fluctuate upward and downward as and in the amount by which the Prime Rate, the Past Due Rate and the maximum nonusurious rate of interest permitted by applicable law, respectively, fluctuate. 3. Excess Interest Will be Refunded or Credited. If, for any reason whatever, the interest paid or received on this note during its full term produces a rate which exceeds the Ceiling Rate, Holder shall refund to the payor or, at Holder's option, credit against the principal of note such portion of said interest as shall be necessary to cause the interest paid on this note to produce a rate equal to the Ceiling Rate. 4. Interest Will be Spread. To the extent (if any) necessary to avoid violation of applicable usury laws (or to minimize the extent of the violation if complete avoidance is impossible for any reason, it being the intent and purpose of the Company and all Holders to comply strictly with all applicable usury and other laws), all sums paid or agreed to be paid to Holder for the use, forbearance or detention of the indebtedness evidenced hereby shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in equal parts throughout the full term of this note, so that the interest rate is uniform throughout the full term of this note. 5. Payment Schedule. Principal of this note and accrued interest on it shall be due and payable as provided in the Credit Agreement; provided, that on March 16, 1995, its final stated maturity date, all principal of this note and all accrued interest then unpaid shall be finally due and payable. All such scheduled payments shall be applied first to accrued interest and the balance (if any) shall be applied to principal. 6. Prepayment. The Company may prepay this note in accordance with and subject to the provisions of the Credit Agreement. 7. The Credit Agreement, this Note and its Security. This note is the Working Capital Note as defined in the Credit Agreement, it is issued pursuant to the Credit Agreement (to which reference is made for all purposes) and may be referred to as the "3/94 Working Capital Note", and as it may hereafter be renewed, extended, rearranged, increased, decreased, modified or replaced may be referred to as the "Working Capital Note". Holder is entitled to the benefits of and security provided for in the Credit Agreement. Such security includes, among other security, the INITIALLED FOR IDENTIFICATION: --------------- Page 2 of 5 security interests granted by Section 3 of the Credit Agreement (as such Section may have been modified and/or renumbered under the Credit Agreement.) 8. Revolving Credit. Upon and subject to the terms and conditions of the Credit Agreement, the Company may borrow, repay and reborrow against this note under the circumstances, in the manner and for the purposes specified in the Credit Agreement, but for no other purposes. Advances against this note by Payee or other Holder shall be governed by the terms of the Credit Agreement. The unpaid principal balance of this note at any time shall be the total of all principal lent or advanced against this note less the sum of all principal payments and permitted prepayments made on this note by or for the account of the Company. Absent manifest error, Holder's computer records shall on any day conclusively evidence the unpaid balance of this note and its advances and payments history posted up to that day. All loans and advances and all payments and permitted prepayments made hereon may be (but are not required to be) endorsed by or on behalf of Holder on the schedule which is attached as Annex I hereto (which is hereby made a part hereof for all purposes) or otherwise recorded in Holder's computer or manual records; provided, that any failure to make notation of (a) any principal advance or accrual of interest shall not cancel, limit or otherwise affect the Company's obligations or any Holder's rights with respect to that advance or accrual, or (b) any payment or permitted prepayment of principal or interest shall not cancel, limit or otherwise affect the Company's entitlement to credit for that payment as of the date of its receipt by Holder. 9. Defaults and Remedies. Any Default Event under the Credit Agreement or any other Credit Papers shall constitute a Default Event under this note and all other Credit Papers and shall have the consequences provided for in the Credit Agreement. Holder may waive any default without waiving any other prior or subsequent default. Holder or the Lender may remedy any default without Holder's waiving the default remedied. Holder's or the Lender's failure to exercise any right, power or remedy upon any default shall not be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at a later date. No single or partial exercise by Holder or the Lender of any right, power or remedy shall exhaust it or shall preclude any other or future exercise of it, and every such right, power or remedy under this note, any of the other Credit Papers or applicable Law may be exercised at any time and from time to time. No modification or waiver of any provision of this note nor consent to any departure by the Company from its terms shall be effective unless it is in writing and signed by Holder (or, if authorized for that purpose by the Credit Agreement, the Lender), and then such waiver or consent shall be effective only in the specific instance given, for the purposes for which given and to the extent therein specified. EDG Legal Costs. If any Holder or the Lender retains an attorney in connection with any such default or to collect, enforce or defend this note or any papers intended to secure or guarantee it in any lawsuit or in any probate, reorganization, bankruptcy or other proceeding, or if the Company or anyone claiming by, through or under the Company sues any Holder in INITIALLED FOR IDENTIFICATION: --------------- Page 3 of 5 connection with this note or any such papers and does not prevail, then the Company agrees to pay to each such Holder and the Lender, respectively, in addition to principal and interest, all reasonable costs and expenses incurred by such Holder or the Lender in trying to collect this note or in any such suit or proceeding, including reasonable attorneys' fees. An amount equal to ten percent (10%) of the unpaid principal and accrued interest owing on this note when and if this note is placed in the hands of an attorney for collection after default is stipulated to be reasonable attorneys' fees unless a Holder, the Lender or the Company timely pleads otherwise to a court of competent jurisdiction. 11. Waivers. The Company and any and all co-makers, endorsers, guarantors and sureties severally waive notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit for the purpose of fixing liability and consent that the time of payment hereof may be extended and re-extended from time to time without notice to any of them. Each such Person agrees that his, her or its liability on or with respect to this note shall not be affected by any release of or change in any guaranty or security at any time existing or by any failure to perfect or maintain perfection of any lien against or security interest in any such security or the partial or complete unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with or without notice and before or after maturity. 12. Governing Law, Jurisdiction and Venue. This note shall be governed by and construed in accordance with the laws of the State of Texas (except its conflicts of law provisions) and the United States of America from time to time in effect. The Company and all endorsers, guarantors and sureties each hereby irrevocably submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of Texas and the state district courts of Harris County, Texas, for purposes of all legal proceedings arising out of or relating to this note, the debt evidenced hereby or any loan agreement, security agreement, guaranty or other papers or agreements relating to this note. To the fullest extent permitted by law, the Company and all endorsers, guarantors and sureties each irrevocably waives any objection which he, she or it may now or hereafter have to the laying of venue for any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Harris County, Texas shall be a proper place of venue for suit on or in respect of this note. Nothing INITIALLED FOR IDENTIFICATION: --------------- Page 4 of 5 herein shall affect the right of the Company or any Holder at any time to initiate any suit in the United States District Court for the Southern District of Texas, Houston Division, or to remove any pending suit to that Court. 13. General Purpose of Loan. The Company warrants and represents to Payee and all other Holders that all loans evidenced by this note are and will be for business, commercial, investment or other similar purpose and not primarily for personal, family, household or agricultural use, as such terms are used in Chapter One of the Texas Credit Code. LOMAS MORTGAGE USA, INC. (the "Company") By: ----------------------------------- Name: -------------------------------- Title: -------------------------------- Page 5 of 5 ANNEX 1 to $25,000,000 Lomas Mortgage USA, Inc. 3/94 Working Capital Note LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST
_______________________________________________________________________________ | Payment | | | | Date of | Applied on | Payment | | | Name of Payment or | (or advance | Applied on | Principal | Interest | Person Making Advance | vs.) Principal | Interest | Balance | Paid to | Notation - -----------|----------------|------------|-----------|----------|--------------- | | | | | | | | | | - -----------|----------------|------------|-----------|----------|--------------- | | | | | | | | | | - -----------|----------------|------------|-----------|----------|--------------- | | | | | | | | | | - -----------|----------------|------------|-----------|----------|--------------- | | | | | | | | | | - -----------|----------------|------------|-----------|----------|--------------- | | | | | | | | | | - -----------|----------------|------------|-----------|----------|--------------- | | | | | | | | | | - -----------|----------------|------------|-----------|----------|--------------- | | | | | | | | | | - -----------|----------------|------------|-----------|----------|--------------- | | | | | | | | | | - -----------|----------------|------------|-----------|----------|--------------- /TABLE EXHIBIT B CREDIT REQUEST LENDER: Texas Commerce Bank National Association COMPANY: Lomas Mortgage USA, Inc. DATE: _____________________, 199____ - --------------------------------------------------------------------------- This request is delivered under the 3/94 Senior Secured Working Capital Credit Agreement (as supplemented, amended or restated from time to time, the "Credit Agreement") dated as of March 21, 1994, between the Company and the Lender. Unless they are otherwise defined in this request, terms defined in the Credit Agreement have the same meanings here as there. This request is for a $_______________________ Borrowing (the "Requested Borrowing") to be funded on __________________, 199____ (the "Requested Borrowing Date"). Please fund the Requested Borrowing in the manner specified in Section 2.2(b) of the Credit Agreement. This Borrowing is to finance the Company's existing Eligible Working Capital Collateral. The attached current Borrowing Base Report demonstrates that, after giving effect to the $________________ Advance that is requested in this paragraph, the outstanding principal of the Loan will not exceed the Working Capital Collateral Value of such existing Collateral. The undersigned Company officer hereby certifies that as of the Requested Borrowing Date, after giving effect to the Requested Borrowing, (a) the Loan will not exceed the lesser of (i) the Commitment or (ii) the aggregate Working Capital Collateral Value of all Collateral in which the Lender then has an enforceable, first and prior perfected security interest, (b) the Company is entitled to receive the Requested Borrowing under the Credit Agreement, (c) all other items that the Company is required by the Credit Agreement to furnish to the Lender for this Requested Borrowing and otherwise have been delivered, or will be delivered before this Requested Borrowing is funded, in all respects as required by the Credit Agreement and the other Credit Papers, (d) no Default Event has occurred that the Lender has not declared in writing to have been cured or waived, (e) no Potential Default has occurred that has not been cured before it shall have become a Default Event and (f) the Company's representations and warranties stated in the Credit Papers are true and correct in all material respects except only to the extent that (1) a representation or warranty speaks to a specific date or (2) the facts on which a representation or warranty is based have changed by transactions or conditions contemplated or expressly permitted by the Credit Papers. LOMAS MORTGAGE USA, INC. By --------------------------- (Name) ----------------------- (1) (Title) ----------------------- (1) Must be the President, Treasurer or Assistant Treasurer, a Vice President or the Controller of the Company. EXHIBIT C LIST OF APPROVED PRIVATE MORTGAGE INSURERS (None) EXHIBIT D BASIC FORM OF OPINION OF COMPANY'S GENERAL COUNSEL March 21, 1994 Texas Commerce Bank National Association, Agent 712 Main Street Houston, Texas 77002 Re: 3/94 Senior Secured Working Capital Credit Agreement dated March 21, 1994 (the "3/94 Credit Agreement") between Lomas Mortgage USA, Inc. (the "Company") and Texas Commerce Bank National Association (the "Lender") Ladies and Gentlemen: I am general counsel for the Company, and have acted as such in connection with the 3/94 Credit Agreement. This opinion is rendered to you in compliance with Section 4.1 of the 3/94 Credit Agreement. Unless otherwise defined in this opinion, or unless the context requires a different meaning, each capitalized term that is defined in the 3/94 Credit Agreement (or is defined by reference in the 3/94 Credit Agreement to another paper) and is used in this opinion has the same meaning here as there. In my capacity as general counsel, I have examined: a. the Credit Papers; b. the Company's articles or certificate of incorporation and bylaws; c. the records of the corporate proceedings and actions of the Company's board of directors with respect to the Credit Papers and the transactions that they contemplate; d. a certificate of good standing of the Company from each of the States of Connecticut and Texas; and e. such other documents and matters as I have deemed necessary to render the opinions set forth in this letter, subject the limitations, assumptions and qualifications noted below. I have been furnished with--and, with the consent of the Lender have relied on--certificates of the Company's officers (copies of which certificates have been provided to you) and other information supplied by them with respect to certain factual matters. In addition, I have obtained and relied upon such certificates and assurances from public officials as I have deemed necessary. I have also assumed the authenticity of all materials so examined and the genuineness of signatures on them. For purposes of my opinions I have assumed the due authorization, execution, delivery and performance of the 3/94 Credit Agreement by the Lender. Based on the foregoing, and subject to the assumptions and qualifications set forth later in this letter, it is my opinion that: 14. The Company (a) is a corporation duly organized, validly existing and in good standing under the Laws of the State of Connecticut, (b) has the full legal power and authority to own its Property and carry on its business as currently conducted and (c) is duly qualified to transact business as a foreign corporation and licensed to operate as a mortgage company in each jurisdiction where the nature of the business it transacts or Property it owns requires such qualification or licensing, except in jurisdictions where the failure to be in good standing or be licensed (as the case may be) would have no Material Adverse Effect. 15. The Company has the requisite corporate power and authority to execute, deliver and comply with the terms of the 3/94 Credit Agreement, the Working Capital Note and the other Credit Papers. 16. The Company's execution, delivery and performance of the 3/94 Credit Agreement, the Working Capital Note and the other Credit Papers (a) have been duly authorized by all necessary corporate action on the part of the Company, (b) do not conflict with the Company's articles or certificate of incorporation or bylaws, (c) do not conflict with any Laws or Legal Requirements, (d) do not conflict with any agreement or instrument ("Company Papers") to which the Company is a party or by which the Company or any of its Property is bound or affected, (e) do not result in a breach of any Company Papers, (f) do not constitute a default under any Company Papers, (g) do not require any consent under any Company Papers, (h) do not result in the creation of any Lien upon any of the Company's Property or assets (except for the Liens created by the Credit Papers) and (i) do not result in acceleration of any of the Company's debt under any of the Company Papers or trigger any right of any such acceleration. 17. The 3/94 Credit Agreement and the Working Capital Note each constitute legal, valid and binding obligations of the Company and grant perfected Liens in the Collateral to the Lender enforceable in accordance with their respective terms, except as limited by (i) bankruptcy, insolvency or other such Laws in effect affecting the enforcement of creditors' rights generally and (ii) the application of equitable principles. 18. The Company is not an "investment company" or "controlled by" an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 19. There are no claims, suits or proceedings pending, threatened or reasonably anticipated against or affecting the Company or with respect to any of the Credit Papers or any transactions contemplated in them which, if adversely affected, could reasonably be expected to result in a Material Adverse Effect. [Qualifications agreed to by the issuer and the Lender and its legal counsel may be put here.] Very truly yours, EX-10.9 10 EXHIBIT 10.9 EXHIBIT 10.9 March 1, 1994 David L. Chapman II Lomas Mortgage USA, Inc. 1600 Viceroy Dallas, Texas 75235 Dear David: As you are aware, Lomas Financial Corporation (the "Parent") established on June 30, 1990, an Employee Protection Plan (the "Plan") for certain officers and employees of the Lomas Financial Group of affiliated companies. You were a participant in the Plan, which by its terms expired July 31, 1993, eighteen months after the Company's final emergence from Chapter 11 proceedings on January 31, 1992. However, I am pleased to report to you that Lomas Mortgage USA, Inc. (the "Company") has decided to provide you on an individual basis with protection comparable to that provided by the Plan through June 30, 2008. Specifically, should you be involuntarily terminated (for any reason other than for cause or by reason of a transfer to a position with another entity within the Lomas Financial Group), you will receive in addition to all otherwise accrued and vested benefits, a lump sum cash payment equal to 200% of your then current annual base salary. The foregoing severance benefit will also be paid in the event of your "constructive discharge," "mutually agreed to early retirement" or voluntary termination of employment following a "change-in-control." "Constructive Discharge" is defined as termination of employment due to (a) a reduction in your base salary of 10 percent or more in any calendar year or an aggregate reduction in your base salary of 20 percent or more in any four calendar years, (b) a material reduction in your job function, duties or responsibilities, or (c) a required relocation of more than 100 miles from your current location of employment. Provided, however, that if you elect to continue to be employed after an event of "constructive discharge," you may not receive benefits under this letter. "Change-in-Control" is defined as a change in control, without your concurrence, of a nature that would be required to be reported in response to Item 1 or Item 2 of the Form 8-K Current Report promulgated pursuant to Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, such a Change-in-Control shall be deemed to have occurred if (y) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Parent representing twenty-five percent (25%) or more of the combined voting power of the Parent's then outstanding securities, and (z) individuals who, at the date of this letter, constituted the Board of Directors of the Parent cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the date of this letter has, prior to such election, been approved by directors who both represent at least two-thirds (2/3) of the directors in office at the time of such approval and who were also directors at the date of this letter. "Mutually agreed to early retirement" is defined as early retirement under any preexisting retirement plan of the Company agreed to by the Company. If the Company and you mutually agree to an early retirement you will receive payment as if involuntarily terminated and may, in the sole discretion of the chief executive officer of the Company, be granted up to three additional years of credited service for purposes of calculation of benefits under any retirement plan in effect at the time of severance. If, as a result of your involuntary termination prior to attaining age 55 or in the event of your "constructive discharge," "mutually agreed to early retirement" or voluntary termination of employment following a "change-in- control" (as such phrases are defined above), you receive payment of the severance benefit provided in this letter, you also will receive, upon payment of any plan-required employee contributions, an enhanced retirement benefit derived by crediting you with additional years of pay and service through your fifty-fifth birthday for purposes of calculating benefits under the Management Security Plan. In addition, the Company will continue your coverage under the Company's group medical plan on the same terms as provided for an active employee for two years following any involuntary termination of your employment which results in payment of the severance benefits described above. Finally, you will forfeit the benefits described in this letter if you voluntarily terminate your employment or if your employment is "terminated for cause" by the Company. "Terminated for cause" is defined as termination of employment due to any of the following circumstances: (1) gross incompetence, insubordination, excessive absences, negligence or dishonesty in the performance of Company duties; or (2) actions which cause the Company to lose any license or certification necessary for the operation of the Company; or (3) conviction of fraud, theft or embezzlement or conviction of any felony. The severance benefits provided in this letter are in recognition of your past and anticipated future valuable contributions to the Company and are governed entirely by the terms of this letter. This letter supersedes in its entirety the Company's letter to you dated December 1, 1993 relating to the subject matter covered by this letter. Sincerely, /s/JESS HAY Jess Hay JH:LPG:msg EX-10.10 11 EXHIBIT 10.10 EXHIBIT 10.10 March 1, 1994 Gary Kell Lomas Mortgage USA, Inc. 1820 Regal Row Dallas, Texas 75235 Dear Gary: As you are aware, Lomas Financial Corporation (the "Parent") established on June 30, 1990, an Employee Protection Plan (the "Plan") for certain officers and employees of the Lomas Financial Group of affiliated companies. You were a participant in the Plan, which by its terms expired July 31, 1993, eighteen months after the Company's final emergence from Chapter 11 proceedings on January 31, 1992. However, I am pleased to report to you that Lomas Mortgage USA, Inc. (the "Company") has decided to provide you on an individual basis with protection comparable to that provided by the Plan through December 31, 2005. Specifically, should you be involuntarily terminated (for any reason other than for cause or by reason of a transfer to a position with another entity within the Lomas Financial Group), you will receive in addition to all otherwise accrued and vested benefits, a lump sum cash payment equal to 200% of your then current annual base salary. The foregoing severance benefit will also be paid in the event of your "constructive discharge", "mutually agreed to early retirement" or voluntary termination of employment following a "change-in-control." "Constructive Discharge" is defined as termination of employment due to (a) a reduction in your base salary of 10 percent or more in any calendar year or an aggregate reduction in your base salary of 20 percent or more in any four calendar years, (b) a material reduction in your job function, duties or responsibilities, or (c) a required relocation of more than 100 miles from your current location of employment. Provided, however, that if you elect to continue to be employed after an event of "constructive discharge," you may not receive benefits under this letter. "Change-in-Control" is defined as a change in control, without your concurrence, of a nature that would be required to be reported in response to Item 1 or Item 2 of the Form 8-K Current Report promulgated pursuant to Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided that, without limitation, such a Change-in-Control shall be deemed to have occurred if (y) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Parent representing twenty-five percent (25%) or more of the combined voting power of the Parent's then outstanding securities, and (z) individuals who, at the date of this letter, constituted the Board of Directors of the Parent cease for any reason to constitute at least a majority thereof, unless the election of each director who was not a director at the date of this letter has, prior to such election, been approved by directors who both represent at least two-thirds (2/3) of the directors in office at the time of such approval and who were also directors at the date of this letter. "Mutually agreed to early retirement" is defined as early retirement under any preexisting retirement plan of the Company agreed to by the Company. If the Company and you mutually agree to an early retirement you will receive payment as if involuntarily terminated and may, in the sole discretion of the chief executive officer of the Company, be granted up to three additional years of credited service for purposes of calculation of benefits under any retirement plan in effect at the time of severance. If, as a result of your involuntary termination prior to attaining age 55 or in the event of your "constructive discharge," "mutually agreed to early retirement" or voluntary termination of employment following a "change-in- control" (as such phrases are defined above) you receive payment of the severance benefit provided in this letter, you also will receive an enhanced retirement benefit derived by crediting you with additional years of pay and service through your fifty-fifth birthday for purposes of calculating benefits under The Lomas Financial Group Pension Plan, and, upon payment of any plan-required employee contributions, under the Management Security Plan. As you know, a portion of your incentive compensation for the fiscal years ended June 30, 1991, 1992 and 1993 has been deferred pursuant to letter agreements between the Company and you dated August 22, 1991, July 1, 1992 and August 24, 1993 (collectively, the "Deferred Incentive Compensation Agreements"). Pursuant to the Deferred Incentive Compensation Agreements, you will be paid, subject to continued employment as described below, the following amounts on the dates indicated: Payment Date Amount July 1, 1994 $ 138,770 July 1, 1995 131,205 July 1, 1996 123,640 July 1, 1997 82,075 July 1, 1998 42,400 If you die before payment in full under the Deferred Incentive Compensation Agreements, all unpaid installments will be paid to your wife, if she survives you, or to your estate if she does not survive you, at the time and in the manner set forth above. If you are involuntarily terminated (for any reason other than for cause or by reason of transfer to a position with another entity within the Lomas Financial Group) or in the event of your "constructive discharge," "mutually agreed to early retirement" or voluntary termination of employment following a "change-in-control" (as such phrases are defined above) the remaining unpaid installments under the Deferred Incentive Compensation Agreements will be paid to you upon the effective date of your termination. In addition, the Company will continue your coverage under the Company's group medical plan on the same terms as provided for an active employee for two years following any involuntary termination of your employment which results in payment of the severance benefits described above. Finally, you will forfeit the benefits described in this letter and any unpaid installments under the Deferred Incentive Compensation Agreements if you voluntarily terminate your employment or if your employment is "terminated for cause" by the Company. "Terminated for cause" is defined as termination of employment due to any of the following circumstances: (1) gross incompetence, insubordination, excessive absences, negligence or dishonesty in the performance of Company duties; or (2) actions which cause the Company to lose any license or certification necessary for the operation of the Company; or (3) conviction of fraud, theft or embezzlement or conviction of any felony. The severance benefits provided in this letter and the deferred payments under the Deferred Incentive Compensation Agreements are in recognition of your past and anticipated future valuable contributions to the Company and are governed by the terms of this letter and, to the extent consistent with this letter, by the Deferred Incentive Compensation Agreements. This letter supersedes in its entirety the Company's letter to you dated September 1, 1993 relating to the subject matter covered by this letter. Sincerely, /s/JESS HAY Jess Hay JH:LPG:msg EX-10.11 12 EXHIBIT 10.11 EXHIBIT 10.11 AMENDED AND RESTATED SEVERANCE AGREEMENT This Amended and Restated Severance Agreement (this "Agreement") is made effective the 31st day of March, 1994, by and between Lomas Financial Corporation ("Lomas") and Michael E. Patrick ("Employee"). W I T N E S S E T H WHEREAS, Lomas Mortgage USA, Inc. ("Lomas Mortgage") and Employee entered into an Employment Agreement (the "Employment Agreement") on the 14th day of October 1991; WHEREAS, pursuant to the Employment Agreement, Employee served as an executive officer or director of Lomas, Lomas Mortgage and various other direct and indirect subsidiaries of Lomas; WHEREAS, Lomas and Employee provided for the termination of the employer-employee relationship between Lomas and Employee pursuant to a Severance Agreement (the "Severance Agreement") dated December 31, 1993 by and between Lomas and Employee; and WHEREAS, Lomas and Employee desire to enter into this Agreement to amend and restate the Severance Agreement and provide, among other things, for the payment to Employee of certain severance benefits upon termination of the employer-employee relationship between Lomas and Employee. NOW, THEREFORE, Lomas and Employee in consideration of the mutual promises and agreements contained herein, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, agree as follows: 1. Termination of Employment. Employee's employment (a) by Lomas, Lomas Mortgage and all direct and indirect subsidiaries of Lomas, other than Lomas Information Systems, Inc. ("LIS"), terminated effective as of December 31, 1993, and (b) by LIS will be terminated effective as of June 30, 1994 (the "Termination Date"). Effective the Termination Date, Employee will resign as a director and executive officer of LIS. Effective December 31, 1993, Employee resigned as a director of Lomas, Lomas Mortgage and all other direct and indirect subsidiaries of Lomas (other than LIS). Until the Termination Date, Employee will continue as a director and President of LIS, at his current salary and Lomas shall provide Employee with an office in Lomas' office space at 1750 Viceroy, Dallas, Texas and secretarial and other administrative support services. 2. Severance Benefit. (a) Contemporaneous with the execution of the Severance Agreement Lomas paid Employee $845,000 representing one-half of his severance benefits pursuant to the Employment Agreement less all applicable federal, state and local withholding taxes. Contemporaneous with the execution of this Agreement, Lomas has paid an additional $845,000 representing the remaining one-half of severance benefits pursuant to the Employment Agreement less all applicable federal, state and local withholding taxes. (b) If, prior to the Termination Date (i) Lomas enters into a definitive agreement with Prudential Insurance Co. or its affiliates ("Prudential") to effect a Transaction, as hereinafter defined, or (ii) (A) Lomas enters into an agreement in principle with Prudential to effect a Transaction and (B) such agreement in principle results, within the sixty (60) day period following the Termination Date, in a definitive agreement with Prudential to effect a Transaction, Lomas agrees to pay Employee an amount equal to twenty-five (25) basis points of the aggregate consideration received by Lomas as a result of such Transaction. In the context of this paragraph, a "Transaction" shall mean a disposition of all or a majority of the stock or assets of LIS, whether in the form of a sale, spin-off, joint venture or other similar arrangement, in one or a series of transactions. (c)(i) Employee will be eligible to participate in Lomas' group medical plan, group life plan, group long term disability plan and group accidental death and dismemberment plan at the employee premium rate for twelve (12) months subsequent to the Termination Date; provided, however, that Employee's right to such continued participation shall cease if Employee receives comparable coverage as a result of future employment, (ii) Employee will not receive any distribution from the Lomas Qualified Pension Plan and (iii) Employee will receive a lump sum distribution of Employee's vested benefit in the Lomas 401(k) Plan. (d) As a result of the severance benefits provided above, Employee acknowledges that he is not entitled to and will not receive any accrued and unpaid benefits provided for under the Lomas Short Term Incentive Compensation Plan or any other incentive plan. 3. Release. (a) As a material inducement to enter into this Agreement, and in consideration of payment of (i) the severance benefits described in Section 2 hereof and (ii) the employment benefits described in Section 1 hereof, Employee (for himself, his heirs, executors, administrators and assigns) hereby irrevocably and unconditionally releases, acquits and forever discharges Lomas and each of Lomas' owners, stockholders, predecessors, successors, assigns, agents, directors, officers, employees, representatives, attorneys, divisions, subsidiaries, affiliates, (and agents, directors, officers, employees, representatives and attorneys of such parent companies, divisions, subsidiaries and affiliates), and all persons acting by, through, under or in concert with any of them (collectively "Releasees"), or any of them, from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including reasonable attorney's fees and costs actually incurred) of any nature whatsoever relating to the employer-employee relationship between Lomas or any of its affiliates and Employee, whether pursuant to the Employment Agreement or otherwise, which claims accrued or arose on or prior to the date of this Agreement, or which claims accrue or arise on or prior to the Termination Date, whether known or unknown, suspected or unsuspected, including, but not limited to, rights under federal, state or local laws prohibiting discrimination, claims growing out of any legal restrictions on Lomas' right to terminate its employees ("Claim" or "Claims"), which Employee now has, owns or holds, or claims to have owned or held, or which Employee at any time heretofore had, owned or held, or which Employee at any time hereinafter has , owns or holds, or may claim to own or hold or previously to have owned or held against each of any of the Releasees; provided, however, if Employee is named as a codefendant with the Releasees, or any of them, on account of a cause of action brought by a third party and arising out of matters related to Employee's performance of his duties and responsibilities as an employee of Lomas, Lomas will, at Lomas' expense, defend Employee in such cause of action and indemnify him from and against any liability arising out of such cause of action. (b) Employee expressly acknowledges and agrees that the severance benefits described in Section 2 of this Agreement constitute the only benefits to which Employee is entitled as a result of Employee's severance, that neither Lomas nor any of the Releasees shall have any further liability to Employee in connection therewith and that, upon execution of this Agreement by Employee, the Employment Agreement shall be null and void. 4. No Competition. Employee agrees that, for a period of eighteen (18) months from and after the date hereof, Employee will not, except pursuant to the terms of a written agreement between Lomas and Employee, directly or indirectly, (a) seek to divert any business opportunity to any competitors of Lomas or any of its affiliates and away from Lomas or any of its affiliates, or otherwise interfere with the business of Lomas or any of its affiliates, or (b) entice or induce any customer of Lomas or any of its affiliates to cancel or not renew, or otherwise interfere with, the business relationship of such customers with Lomas or any of its affiliates. 5. Solicitation of Employees. Employee agrees that, for a period of eighteen (18) months from and after the date hereof, Employee will not, directly or indirectly, employ or solicit for employment by him or any entity for which he may be employed or any other entity any employee of Lomas or any of its affiliates, without the prior written consent of Lomas which consent shall not be unreasonably withheld; provided, however, that Employee will not be prohibited from making any general advertisement of a position which may be suitable for any such employee or former employee, and making an offer of employment and hiring any persons who may approach Employee as a result of such advertisement. 6. Confidential Information. (a) Employee shall not knowingly use for his own benefit or disclose or reveal to any unauthorized person any information concerning Lomas or any of its affiliates which is furnished to Employee by or on behalf of Lomas or any of its affiliates whether furnished before or after the date of this Agreement including, without limitation, any trade secrets, customer lists, customer needs, price and performance information, hardware, software, business opportunities, marketing, promotional, pricing and financing techniques, or other information relating to Lomas or any of its affiliates or to any of their respective businesses, or analyses or other documents prepared by Employee on the basis of such information (collectively, the "Material"). The term "Material" shall also include any processes, programs or other products that Employee may have conceived, created, organized, prepared or produced during his employment with Lomas or any of its affiliates. Employee acknowledges that all such Material is the property of Lomas or its affiliates irrespective of whether Employee has in fact executed an assignment thereof to Lomas or its affiliates. The term "Material" does not include information that (i) is or becomes generally available to the trade or the public other than as a result of a disclosure by Employee, (ii) is or becomes available to Employee on a nonconfidential basis from a source (other than Lomas or its affiliates, directors, officers, employees or authorized representatives) that is not prohibited from transmitting the information to Employee by a contractual or legal obligation, or (iii) is personal, personnel or confidential information concerning Employee including, but not limited to, information furnished in his capacity as a mortgagor or customer of Lomas or any of its affiliates. (b) If Employee is requested or required (by legal process, civil investigative demand or similar process) to disclose any Material, Employee agrees to promptly notify Lomas so that Lomas may seek, at Lomas's expense, an appropriate protective order or waive compliance with this Agreement. If Employee is nonetheless compelled to disclose information concerning Lomas or any of its affiliates by any tribunal, Employee may disclose such information as is required by the tribunal; provided, however, that Employee shall use his best efforts to obtain, at Lomas's expense, an order or other reasonable assurance that confidential treatment will be accorded to such information. (c) Employee shall promptly deliver to Lomas all Material furnished by Lomas or its agents to Employee without retaining any copy thereof. All other documents constituting Material will be destroyed or, if not possible, held by Employee subject to this Agreement. 7. Remedies. Employee acknowledges that the possible restrictions on his activities that may result from his performance of the obligations imposed by Sections 4, 5 and 6 of this Agreement are required for the reasonable protection of Lomas and its affiliates, and Employee acknowledges that such restrictions are fair and reasonable for that purpose. Employee further acknowledges that money damages alone may not be an adequate remedy for any breach or violation of such obligations and that Lomas, in addition to all other remedies at law or in equity to which it may be entitled, shall be entitled, as a matter of right, to appropriate equitable relief, including injunctive relief and specific performance of the terms of this Agreement, with respect to any such breach or violation, in any court of competent jurisdiction. If any of the provisions of Sections 4, 5 and 6 are held to be in any respect an unreasonable restriction on Employee's activities, then such provisions shall be deemed to extend only to the maximum period of time and range of activities as to which such provisions are enforceable. 8. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, in such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof; any such prohibition will not invalidate or render unenforceable such provisions in any other jurisdiction. 9. Notices. Any notices, requests, instructions or other documents to be given hereunder to any party will be in writing delivered personally or sent by mail, Return Receipt Requested, as follows: To Lomas: Office of the General Counsel Lomas Financial Group 1600 Viceroy Drive Dallas, Texas 75235 Attention: James L. Crowson To Employee: Michael E. Patrick 4506 Kelsey Road Dallas, Texas 75229 10. Entire Agreement. This Agreement contains the entire Agreement between the parties hereto and supersedes all prior agreements and understandings, including the Severance Agreement, with respect to the subject matter hereof. Neither this Agreement nor any provision hereof may be waived, modified, amended, discharged or terminated, except by an instrument, in writing, authorized and signed by the party to be charged, and then only to the extent set forth in such instrument. 11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 12. Assignment. Neither party to this Agreement may assign rights or responsibilities to a third party under any circumstances. 13. Arbitration of Disputes. In the event a dispute should arise under this Agreement, both parties agree to in good faith use all best efforts to resolve the dispute in a reasonable manner. Any disputes which cannot be settled amicably, arising out of or relating to this Agreement, or the breach thereof, except controversies involving less than One Thousand Dollars ($1,000), shall be settled by binding arbitration in accordance with the rules of the American Arbitration Association in Dallas, Texas, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. IN WITNESS WHEREOF, Lomas and Employee have executed this Agreement, each intending to be legally bound hereby. LOMAS FINANCIAL CORPORATION By: /s/JAMES L. CROWSON -------------------------- James L. Crowson Executive Vice President Employee /s/MICHAEL E. PATRICK ---------------------------- Michael E. Patrick EX-10.12 13 EXHIBIT 10.12 EXHIBIT 10.12 TEXAS COMMERCE BANK NATIONAL ASSOCIATION P. O. BOX 2558 HOUSTON, TEXAS 77252-8056 March 31, 1994 Lomas Mortgage USA, Inc. 1600 Viceroy Drive Dallas, Texas 75235 Re: 3/94 (second) Amendment to 6/93 Servicing Purchase Loan Agreement (the "3/94 Amendment to 6/93 Servicing Purchase Loan Agreement") Ladies and Gentlemen: The June 28, 1993 letter loan agreement (the "6/93 Servicing Purchase Loan Agreement") between your Company and this Bank (all terms that are defined in which and that are used herein without definition having the same meaning here as there) that has been amended once previously by the letter agreement (the "8/93 Amendment to 6/93 Servicing Purchase Loan Agreement") between us dated August ___, 1993 is hereby further amended by mutual agreement as follows: Subsection (k) (titled "Maintain $215 Million Net Worth; No Business Changes") of Section 3.1 (titled "Affirmative Covenants") of the 6/93 Servicing Purchase Agreement is amended in its entirety so that, from and after the effective date of this 3/94 Amendment to 6/93 Servicing Purchase Loan Agreement, it will read as follows: (k) Maintain $200 Million Net Worth; No Business Changes. Your Company will maintain a net worth, determined in accordance with GAAP, of not less than Two Hundred Million Dollars ($200,000,000) and will make no material change in the nature or character of its business. Each of your Company and this Bank hereby acknowledges receipt of $10 and other good and valuable consideration for this amendment, and ratifies and confirms (a) the 6/93 Servicing Purchase Loan Agreement, as amended by the 8/93 Amendment to 6/93 Servicing Purchase Loan Agreement and as further amended by this 3/94 Amendment to 6/93 Servicing Purchase Loan Agreement (the "Amended 6/93 Servicing Purchase Loan Agreement"), and (b) the other Loan Papers, remain in full force and effect. Your Company hereby republishes all of its warranties and representations made in them, declares that they are true on the date of this letter and reconfirms the debt to your Bank that is presently evidenced by the 6/93 Servicing Purchase Note. Lomas Mortgage USA, Inc. March 31, 1994 Page 2 Notice Pursuant to Tex. Bus. & Comm. Code Section 26.02. THE AMENDED 6/93 SERVICING PURCHASE LOAN AGREEMENT AND THE OTHER LOAN PAPERS TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS 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 UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Very truly yours, TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/CARLOTTA M. HUDLER ----------------------- Carlotta M. Hudler Vice President Accepted and agreed to: LOMAS MORTGAGE USA, INC. By: /s/PAUL D. FLETCHER ------------------------ Name: Paul D. Fletcher ----------------------- Title: Vice President ---------------------- Date: March 31, 1994 ----------------------- EX-10.13 14 EXHIBIT 10.13 EXHIBIT 10.13 3/31/94 AMENDMENT TO 3/94 SENIOR SECURED WORKING CAPITAL CREDIT AGREEMENT PREAMBLE THIS 3/31/94 [first] AMENDMENT TO 3/94 SENIOR SECURED WORKING CAPITAL CREDIT AGREEMENT (the "3/31/94 Amendment to WCC Agreement") dated as of March 31, 1994 amending the 3/94 Senior Secured Working Capital Credit Agreement dated as of March 21, 1994 (the "3/94 Credit Agreement" and as it is hereby and may from time to time hereafter be supplemented, amended or restated the "Credit Agreement") between LOMAS MORTGAGE USA, INC. (the "Company"), a Connecticut corporation and TEXAS COMMERCE BANK NATIONAL ASSOCIATION (the "Lender"), a national banking association, WITNESSETH: RECITALS: The Company has requested that the minimum Consolidated Net Worth negative covenant of the 3/94 Credit Agreement be amended to reduce the second element of the test for compliance specified in that covenant from $215,000,000 to $200,000,000, and the Lender has agreed to do so. The Sections of this 3/31/94 Amendment to WCC Agreement are numbered to correspond to those in the 3/94 Credit Agreement and are therefore not in sequential order. All capitalized terms used without definition in this Agreement that are defined in the 3/94 Credit Agreement have the same meanings here as there. All italicized capitalized terms used in the Credit Agreement, including this amendment of it, are defined in the 7/93 RL&S Agreement, and it is to be referred to for definitions of those terms. AGREEMENTS: For good and valuable consideration, the receipt and sufficiency of which the Company and the Lender each acknowledge, they hereby agree as follows: The first sentence of Section 7 (titled "Negative Covenants") of the 3/94 Credit Agreement is amended in its entirety to henceforth read as follows: The Company hereby agrees with the Lender to keep, observe and perform the Company's negative covenants stated in the 7/93 RL&S Agreement to the same effect as if they were repeated herein verbatim and regardless of whether or not the 7/93 RL&S Agreement expires or is terminated before this Agreement, and to concurrently provide copies of all written materials required to be provided to the agent or the lenders thereunder to the Lender herein; provided that Section 7.4 of the 7/93 RL&S Agreement shall be deemed for purposes of this Agreement to read as follows from and after March 31, 1994: 7.4 Consolidated Net Worth. Permit its Consolidated Net Worth to be less than the greater of (i) the amount required by FHA, FHLMC, FNMA, VA and GNMA at any and all times for maintaining the Company's status as an approved mortgagee, seller/servicer, or issuer, or (ii) $200,000,000. SECTION 11. MISCELLANEOUS. 11.13 ENTIRE AGREEMENT. THE 3/94 CREDIT AGREEMENT, AS AMENDED BY THIS 3/31/94 AMENDMENT TO WCC AGREEMENT, THE WORKING CAPITAL NOTE AND THE OTHER CREDIT PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. EXECUTED effective as of the date first above written. 1600 Viceroy LOMAS MORTGAGE USA, INC. Dallas, Texas 75235 Attention: Mr. Paul Fletcher Vice President and Assistant Treasurer Telecopy No. (214) 879-5081 By: /s/ PAUL D. FLETCHER Telephone No. (214) 879-7018 -------------------------- Name: Paul D. Fletcher ------------------------ Title: Vice President and Assistant Treasurer ----------------------- (the "Company") 712 Main Street TEXAS COMMERCE BANK Houston, Texas 77002 NATIONAL ASSOCIATION Attention: Manager, Corporate Real Estate Finance Group Telecopy No. (713) 216-2182 By: /s/CARLOTTA M. HUDLER Telephone No. (713) 216-5298 -------------------------- Name: Carlotta M. Hudler ------------------------ Title: Vice President ----------------------- (the "Lender") EX-11 15 EXHIBIT 11 EXHIBIT 11 LOMAS FINANCIAL CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS (LOSS) PER SHARE (in thousands, except per share amounts) Quarter Ended Nine Months Ended March 31 March 31 ----------------- ------------------- 1994 1993 1994 1993 -------- ------ --------- ------- Primary earnings (loss) per share: Average common shares outstanding 20,100 20,084 20,099 20,087 Common stock equivalents under Nonemployee Directors Long Term Incentive Plan 35 30 32 30 -------- ------ --------- ------- Total shares 20,135 20,114 20,131 20,117 ======== ====== ========= ======= Income (loss) from continuing operations $(10,669) $3,519 $(104,374) $11,055 Income (loss) from discontinued operations (7,000) (16) (11,000) 167 -------- ------ --------- ------- Net income (loss) $(17,669) $3,503 $(115,374) $11,222 ======== ====== ========= ======= Primary earnings (loss) per share: Income (loss) from continuing operations $(.53) $.17 $(5.18) $.55 Income (loss) from discontinued operations (.35) -- (.55) .01 ----- ---- ------ ---- Net income (loss) $(.88) $.17 $(5.73) $.56 ===== ==== ====== ==== Fully diluted earnings (loss) per share: Average common shares outstanding 20,100 20,084 20,099 20,087 Common stock equivalents under Nonemployee Directors Long Term Incentive Plan 35 30 32 30 -------- ------ --------- ------- Total shares 20,135 20,114 20,131 20,117 ======== ====== ========= ======= Income (loss) from continuing operations $(10,669) $3,519 $(104,374) $11,055 Income (loss) from discontinued operations (7,000) (16) (11,000) 167 -------- ------ --------- ------- Net income (loss) $(17,669) $3,503 $(115,374) $11,222 ======== ====== ========= ======= Fully diluted earnings (loss) per share: Income (loss) from continuing operations $(.53) $.17 $(5.18) $.55 Income (loss) from discontinued operations (.35) -- (.55) .01 ----- ---- ------ ---- Net income (loss) $(.88) $.17 $(5.73) $.56 ===== ==== ====== ==== -----END PRIVACY-ENHANCED MESSAGE-----