Exhibit 10.58

Execution Version

 

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SECOND AMENDED AND RESTATED MASTER LOAN AND SECURITY AGREEMENT

 

Dated as of January 30, 2004

 

among

 

NC CAPITAL CORPORATION,

as a Borrower

 

NEW CENTURY MORTGAGE CORPORATION,

as a Borrower

 

MORGAN STANLEY BANK,

as a Lender

 

and

 

MORGAN STANLEY MORTGAGE CAPITAL INC.,

as a Lender and as the Agent

 

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TABLE OF CONTENTS

 

          Page

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ARTICLE I

    

DEFINITIONS AND ACCOUNTING MATTERS

   3

Section 1.01

   Certain Defined Terms    3

Section 1.02

   Accounting Terms and Determinations    18

ARTICLE II

    

LOANS, NOTE AND PREPAYMENTS

   19

Section 2.01

   Loans    19

Section 2.02

   Notes    19

Section 2.03

   Procedure for Borrowing (Loans other than Wet-Ink Transactions)    20

Section 2.04

   Procedure For Borrowing (Wet-Ink Transactions)    21

Section 2.05

   Limitation on Types of Loans; Illegality    23

Section 2.06

   Repayment of Loans; Interest    23

Section 2.07

   Mandatory prepayments or Pledge    24

Section 2.08

   Extension of Termination Date    24

ARTICLE III

    

PAYMENTS; COMPUTATIONS; ETC.

   25

Section 3.01

   Payments    25

Section 3.02

   Computations    25

Section 3.03

   Requirements of Law    25

Section 3.04

   Facility Fee    26

ARTICLE IV

    

COLLATERAL SECURITY

   27

Section 4.01

   Collateral; Security Interest    27

Section 4.02

   Further Documentation    28

Section 4.03

   Changes in Locations, Names, etc.    28

Section 4.04

   Agent’s Appointment as Attorney-in-Fact    28

Section 4.05

   Performance by Agent of Borrowers’ Obligations    29

Section 4.06

   Proceeds    30

Section 4.07

   Remedies    30

Section 4.08

   Limitation on Duties Regarding Preservation of Collateral    31

Section 4.09

   Powers Coupled with an Interest    31

Section 4.10

   Release of Security Interest    31

 

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ARTICLE V

    

CONDITIONS PRECEDENT

   31

Section 5.01

   Initial Loan    31

Section 5.02

   Initial and Subsequent Loans    33

Section 5.03

   Wet-Ink Transactions    35

ARTICLE VI

    

REPRESENTATIONS AND WARRANTIES

   35

Section 6.01

   Existence    36

Section 6.02

   Financial Condition    36

Section 6.03

   Litigation    36

Section 6.04

   No Breach    36

Section 6.05

   Action    37

Section 6.06

   Approvals    37

Section 6.07

   Margin Regulations    37

Section 6.08

   Taxes    37

Section 6.09

   Investment Company Act    37

Section 6.10

   Collateral; Collateral Security    37

Section 6.11

   Chief Executive Office/Jurisdiction of Organization    38

Section 6.12

   Location of Books and Records    38

Section 6.13

   True and Complete Disclosure    38

Section 6.14

   ERISA    39

Section 6.15

   Subsidiaries    39

ARTICLE VII

    

COVENANTS OF THE BORROWERS

   39

Section 7.01

   Financial Statements    39

Section 7.02

   Litigation    41

Section 7.03

   Existence, etc.    41

Section 7.04

   Prohibition of Fundamental Changes    42

Section 7.05

   Borrowing Base Deficiency    42

Section 7.06

   Notices    42

Section 7.07

   Reports    43

Section 7.08

   Underwriting Guidelines    43

Section 7.09

   Transactions with Affiliates    43

Section 7.10

   Limitation on Liens    43

Section 7.11

   Limitation on Guarantees    44

Section 7.12

   Limitation on Distributions    44

Section 7.13

   Servicer; Servicing Tape    44

Section 7.14

   Required Filings    44

 

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Section 7.15

   No Adverse Selection    44

Section 7.16

   Remittance of Prepayments    44

Section 7.17

   Minimum Usage    44

ARTICLE VIII

    

EVENTS OF DEFAULT

   45

Section 8.01

   Events of Default    45

ARTICLE IX

    

REMEDIES UPON DEFAULT

   47

Section 9.01

   Remedies    47

ARTICLE X

    

THE AGENT.

   48

Section 10.01

   Appointment    48

Section 10.02

   Delegation of Duties    48

Section 10.03

   Exculpatory Provisions    48

Section 10.04

   Reliance by Agent    48

Section 10.05

   Notice of Default    49

Section 10.06

   Non-Reliance on Agent and Other Lenders    49

Section 10.07

   Indemnification    50

Section 10.08

   Agent in Its Individual Capacity    50

Section 10.09

   Successor Agent    50

ARTICLE XI

    

MISCELLANEOUS

   51

Section 11.01

   Waiver    51

Section 11.02

   Notices    51

Section 11.03

   Indemnification and Expenses    51

Section 11.04

   Amendments    52

Section 11.05

   Assignments and Participations    52

Section 11.06

   Survival    53

Section 11.07

   Captions    53

Section 11.08

   Counterparts    54

Section 11.09

   Loan Agreement Constitutes Security Agreement; Governing Law    54

Section 11.10

   Submission To Jurisdiction; Waivers    54

Section 11.11

   WAIVER OF JURY TRIAL    54

Section 11.12

   Acknowledgments    55

 

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Section 11.13

   Hypothecation or Pledge of Loans    55

Section 11.14

   Servicing    55

Section 11.15

   Due Diligence Review    56

Section 11.16

   Set-Off    57

Section 11.17

   Intent    57

Section 11.18

   Joint and Several Liability    57

Section 11.19

   Replacement by Repurchase Agreement    58

Section 11.20

   Treatment of Certain Information    58

 

SCHEDULES

    

Schedule 1

   Representations and Warranties re: Mortgage Loans

Schedule 2

   Filing Jurisdictions and Offices

Schedule 3

   Subsidiaries

Schedule 4

   Lender Commitments

EXHIBITS

    

Exhibit A

   Form of Promissory Note

Exhibit B

   Form of Custodial Agreement

Exhibit C-1

   Form of Opinion of In-House Counsel to the Borrowers and the Guarantor

Exhibit C-2

   Form of Opinion of Outside Counsel to the Borrowers and the Guarantor

Exhibit D

   Form of Request for Borrowing

Exhibit E-1

   Form of Borrower’s Release Letter

Exhibit E-2

   Form of Warehouse Lender’s Release Letter

Exhibit F

   Underwriting Guidelines

Exhibit G

   Form of Servicer Notice

Exhibit H

   Form of New Century Guaranty

Exhibit I

   Form of Assignment and Acceptance

Exhibit J

   Form of Amendment to Control Agreement

 

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SECOND AMENDED AND RESTATED

MASTER LOAN AND SECURITY AGREEMENT

 

SECOND AMENDED AND RESTATED MASTER LOAN AND SECURITY AGREEMENT, dated as of
January 30, 2004 (as amended, restated, supplemented or otherwise modified and
in effect from time to time, this “Loan Agreement”), among NC CAPITAL
CORPORATION, a California corporation (“NC Capital”), NEW CENTURY MORTGAGE
CORPORATION, a California corporation (“New Century”), (New Century, together
with NC Capital, each a “Borrower” and collectively, the “Borrowers”), MORGAN
STANLEY BANK, a Utah industrial loan corporation (“MSB”), as a lender (a
“Lender”), and MORGAN STANLEY MORTGAGE CAPITAL INC., a New York corporation
(“MSMCI”), as a lender (a “Lender”, in such capacity, together with MSB,
collectively, the “Lenders”) and as agent for the Lenders (in such capacity, the
“Agent”).

 

RECITALS

 

The Borrowers and MSMCI are parties to that certain Amended and Restated Master
Loan and Security Agreement, dated as of June 20, 2003 (as amended, supplemented
or otherwise modified prior to the date hereof, the “Existing Loan Agreement”).

 

The Borrowers have requested that the Lenders from time to time make, or
continue to make, as applicable, revolving credit loans to the Borrowers to
finance certain residential mortgage loans owned by the Borrowers and the
Lenders are prepared to make, or continue to make, such loans, as applicable,
upon the terms and conditions hereof.

 

NOW, THEREFORE, the Borrowers and the Lenders hereby agree, in consideration of
the mutual premises and mutual obligations set forth herein, the receipt and
sufficiency of which is hereby acknowledged, that the Existing Loan Agreement is
amended and restated in its entirety as set forth in the heading and recitals
hereto and as follows.

 

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS.

 

Section 1.01 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.1 or in other
provisions of this Loan Agreement in the singular to have the same meanings when
used in the plural and vice versa):

 

“Affiliate” shall mean with respect to any Person, any “affiliate” of such
Person, as such term is defined in the Bankruptcy Code.

 

“Agent” shall have the meaning provided in the introductory paragraph hereof.

 

“Alternate ‘A’ Mortgage Loan” shall mean an Eligible Mortgage Loan having an LTV
that is not greater than 95%, having a minimum FICO Score of 660 and satisfying
New Century’s Underwriting Guidelines applicable to “Alternate ‘A’ Mortgage
Loans”.

 

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“Applicable Collateral Percentage” shall mean, except as may be reduced pursuant
to Section 11.16 hereof, for any date of determination and each type of Eligible
Mortgage Loan, the applicable percentage specified in (a) or (b) below, as
requested by the Borrowers pursuant to Section 2.3 hereof:

 

(a) “Option One”:

 

Unseasoned Mortgage Loan

   98.5%

Second Lien Mortgage Loan

   98.5%

30+ Delinquent Mortgage Loan

   85%

60+ Delinquent Mortgage Loan

   75%

Wet-Ink Mortgage Loan

   98.5%

Defaulted Mortgage Loan

   the applicable BPO Percentage

Discretionary Mortgage Loan

  

the applicable percentage specified by the

Agent one (1) Business Day prior to the

applicable Funding Date

 

provided, however, if a Tangible Net Worth Trigger Event shall have occurred,
the Applicable Collateral Percentage with respect to all Unseasoned Mortgage
Loans and all Second Lien Mortgage Loans shall be reduced to 98%;

 

(b) “Option Two”:

 

Unseasoned Mortgage Loan

   97%

Second Lien Mortgage Loan

   97%

30+ Delinquent Mortgage Loan

   85%

60+ Delinquent Mortgage Loan

   75%

Wet-Ink Mortgage Loan

   97%

Defaulted Mortgage Loan

   the applicable BPO Percentage

Discretionary Mortgage Loan

  

the applicable percentage specified by the

Agent one (1) Business Day prior to the

applicable Funding Date

 

If more than one of the aforementioned categories in (a) or (b) shall apply to
an Eligible Mortgage Loan, the lower percentage shall be applicable.

 

“Applicable Loan Rate” shall mean the Eurodollar Loan Rate in effect from time
to time, unless an event set forth in Section 2.05 shall occur, in which case
the Applicable Loan Rate from and after the date of such event shall mean the
Federal Loan Rate.

 

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“Applicable Margin” shall mean the sum of the weighted average of the applicable
rates per annum for each type of Eligible Mortgage Loan for each day that Loans
shall be secured by such Eligible Mortgage Loans. For each type of Eligible
Mortgage Loan, the applicable rate shall be equal to the product of (x) a
fraction equal to (1) the Collateral Value of all Eligible Mortgage Loans of
such type, divided by (2) the Collateral Value of all Eligible Mortgage Loans,
and (y) the applicable percentage specified in (i) or (ii) below, as requested
by the Borrowers pursuant to Section 2.03 hereof:

 

(a) “Option One”:

 

Unseasoned Mortgage Loan

   1.00%

Second Lien Mortgage Loan

   1.00%

30+ Delinquent Mortgage Loan

   1.20%

60+ Delinquent Mortgage Loan

   1.20%

Defaulted Mortgage Loan

   1.45%

Wet-Ink Mortgage Loan

   1.00%

Discretionary Mortgage Loan

  

the applicable percentage specified by the

Agent one (1) Business Day prior to the

applicable Funding Date

 

(b) “Option Two”:

 

Unseasoned Mortgage Loan

   0.70%

Second Lien Mortgage Loan

   0.70%

30+ Delinquent Mortgage Loan

   1.00%

60+ Delinquent Mortgage Loan

   1.00%

Defaulted Mortgage Loan

   1.45%

Wet-Ink Mortgage Loan

   0.75%

Discretionary Mortgage Loan

  

the applicable percentage specified by the

Agent one (1) Business Day prior to the

applicable Funding Date

 

If more than one of the aforementioned categories in (i) or (ii) shall apply to
an Eligible Mortgage Loan, the higher percentage shall be applicable.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code, 11 U.S.C. § 10 1
et. seq., as amended from time to time.

 

“Board Report” shall mean the documentation delivered to the Board of Directors
of the Guarantor pursuant to Section 7.01(b), which shall include, but is not
limited to (i) financial overview, (ii) consolidated financial statements and
(iii) any additional financial information included in such report from time to
time.

 

“Borrower” and “Borrowers” shall have the meanings provided in the heading
hereof.

 

“Borrowing Base” shall mean the aggregate Collateral Value of all Eligible
Mortgage Loans.

 

“Borrowing Base Deficiency” shall have the meaning provided in Section 2.07
hereof.

 

“BPO Percentage” shall mean (i) with respect to any Defaulted Mortgage Loan for
which a Broker Price Opinion has not been obtained, 50% and (ii) with respect to
any Defaulted Mortgage Loan for which a Broker Price Opinion has been obtained,
65%.

 

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“Broker Price Opinion” shall mean, with respect to a Mortgage Loan or an REO
Property, a broker’s price opinion prepared by a duly licensed real estate
broker who has no interest, direct or indirect, in the Mortgage Loan or REO
Property or in the Borrowers or any Affiliate of the Borrowers and whose
compensation is not affected by the results of the broker’s price opinion, and
which valuation (i) indicates the expected proceeds for a sale of the related
Mortgaged Property or REO Property and, (ii) with respect to any condominium
development or planned unit development that was not Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation approved, the amount, if
any, by which the valuation was decreased as a result of such lack of approval,
and (iii) includes certain assumptions, including those as to the condition of
the exterior and interior of the applicable Mortgaged Property or REO property
and carrying costs and expenses during marketing time.

 

“Business Day” shall mean any day other than (i) a Saturday or Sunday or (ii) a
day on which the New York Stock Exchange, the Federal Reserve Bank of New York
or the Custodian is authorized or obligated by law or executive order to be
closed.

 

“Capital Lease Obligations” shall mean, for any Person, all obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Loan Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.

 

“Capital Stock” shall mean any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all similar ownership interests in a Person (other than a corporation) and
any and all warrants or options to purchase any of the foregoing.

 

“Closing Agent” shall mean, with respect to any Loan, the entity reasonably
satisfactory to the Agent (which may be a title company, escrow company or
attorney in accordance with local law and practice in the jurisdiction where the
related Wet-Ink Mortgage Loan is being originated) to which the proceeds of such
Loan are to be wired pursuant to the instructions of the Borrowers.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

“Collateral” shall have the meaning provided in Section 4.01(b) hereof.

 

“Collateral Value” shall mean, with respect to each Eligible Mortgage Loan, the
lesser of (x) the product of (i) the Market Value of such Eligible Mortgage
Loan, and (ii) the Applicable Collateral Percentage for such Eligible Mortgage
Loan, and (y) (i) 101% of the unpaid principal balance of such Eligible Mortgage
Loan for Option One and (ii) 100% of the unpaid principal balance of such
Eligible Mortgage Loan for Option Two; provided, however, if a Tangible Net
Worth Trigger Event shall have occurred, the Collateral Value with respect to
each Option One Eligible Mortgage Loans shall be the lesser of (x) the product
of (1) the Market Value of such Eligible Mortgage Loan, and (ii) the Applicable
Collateral Percentage for such

 

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Eligible Mortgage Loan, and (y) 100% of the unpaid principal balance of such
Eligible Mortgage Loan; provided, further,

 

(a) that the following additional limitations shall apply:

 

(i) the aggregate unpaid principal balance of all Eligible Mortgage Loans
pledged to the Agent hereunder, excluding Alternate ‘A’ Mortgage Loans, shall
not exceed $1,300,000,000;

 

(ii) the aggregate unpaid principal balance of the Alternate ‘A’ Mortgage Loans
shall not exceed $200,000,000;

 

(iii) the aggregate unpaid principal balance of the Second Lien Mortgage Loans
shall not exceed $100,000,000;

 

(iv) the aggregate unpaid principal balance of the HELOC Mortgage Loans shall
not exceed $100,000,000;

 

(v) the aggregate unpaid principal balance of the 30+ Delinquent Mortgage Loans
shall not exceed $30,000,000;

 

(vi) the aggregate unpaid principal balance of the 60+ Delinquent Mortgage Loans
shall not exceed $20,000,000;

 

(vii) the aggregate unpaid principal balance of the Mortgage Loans that are
secured by Mortgaged Properties consisting of Qualified Manufactured Housing (as
defined in Part III of Schedule 1 hereto) shall not exceed $30,000,000;

 

(viii) the aggregate unpaid principal balance of the Mortgage Loans that are
secured by Mortgaged Properties consisting of condominiums shall not exceed
$45,000,000;

 

(ix) the aggregate unpaid principal balance of the Mortgage Loans that are
secured by Mortgaged Properties which are non-owner occupied shall not exceed
$45,000,000;

 

(x) the aggregate unpaid principal balance of the Mortgage Loans which are
Sub-prime Mortgage Loans shall not exceed 10% of the aggregate principal balance
of all Loans at any time outstanding;

 

(xi) the aggregate unpaid principal balance of the Defaulted Mortgage Loans
shall not exceed $10,000,000;

 

(xii) the aggregate unpaid principal balance of the Discretionary Mortgage Loans
shall not exceed 10% of the aggregate outstanding principal balance of the
Loans;

 

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(xiii) the aggregate unpaid principal balance of the Wet-Ink Mortgage Loans
included shall not exceed $200,000,000; and

 

(b) that the Collateral Value shall be deemed to be zero with respect to each
Mortgage Loan:

 

(i) in respect of which there is a breach of any representation or warranty set
forth on Schedule 1 hereto (assuming each representation and warranty is made as
of the date the Collateral Value thereof is determined);

 

(ii) which ceases to be an Eligible Mortgage Loan for any reason;

 

(iii) which is a Nine-Day Aged Wet-Ink Mortgage Loan;

 

(iv) with respect to each Mortgage Loan, for so long as such Mortgage Loan is a
Wet-Ink Mortgage Loan, as to which the Agent or the Custodian shall have
notified the Borrowers that the Custodian shall have transferred an amount
greater than $1,000,000 to a single settlement location on a Funding Date,
unless consented to by the Agent;

 

(v) for which any Mortgage Loan Documents have been released from the possession
of the Custodian under the Custodial Agreement for a period in excess of 15
days;

 

(vi) which exceeds any limitation set forth in clause (a) above.

 

“Collection Account” shall mean one or more accounts established by the Servicer
subject to a security interest in favor of the Agent, for the ratable benefit of
the Lenders, into which all Collections shall be deposited by the Servicer.

 

“Collections” shall mean, collectively, all collections and proceeds on, or in
respect of the Mortgage Loans, excluding collections required to be paid to the
Servicer or a mortgagor on the Mortgage Loans.

 

“Commitment” shall mean, as to any Lender, the obligation of such Lender to make
Loans to the Borrowers pursuant to Section 2.01 hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount set forth
opposite such Lender’s name on Schedule 4 under the caption “Commitment” or in
an Assignment and Acceptance, as such amount may be reduced from time to time in
accordance with the provisions of this Loan Agreement. The aggregate Commitments
of the Lenders shall equal the Maximum Credit.

 

“Commitment Percentage” shall mean as to any Lender at any time, the percentage
which such Lender’s Commitment then constitutes of the aggregate Commitments
(or, at any time after the Commitments shall have expired or terminated, the
percentage which the aggregate principal amount of such Lender’s Loans then
outstanding constitutes of the aggregate principal amount of the Loans then
outstanding).

 

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“Control Agreement” shall mean that certain Account Control Agreement, dated as
of June 20, 2003, among New Century Mortgage Corporation, Morgan Stanley
Mortgage Capital Inc. and Deutsche Bank National Trust Company, as the same
shall be amended, restated, supplemented or otherwise modified and in effect
from time to time.

 

“Controlled Accounts” shall mean collectively, the Collection Account and the
Wet Funding Account.

 

“Credit Exposure” shall mean, as to any Lender at any time, its Commitment (or,
if the Commitments shall have expired or been terminated, the aggregate unpaid
principal amount of its Loans).

 

“Credit Exposure Percentage” shall mean, as to any Lender at any time, the
fraction (expressed as a percentage), the numerator of which is the Credit
Exposure of such Lender at such time and the denominator of which is the
aggregate Credit Exposures of all the Lenders at such time.

 

“Custodial Agreement” shall mean the Second Amended and Restated Custodial
Agreement, dated as of the date hereof, among the Borrowers, the Custodian and
the Agent, substantially in the form of Exhibit B hereto, as the same may be
amended, restated, supplemented or otherwise modified and in effect from time to
time.

 

“Custodian” shall mean Deutsche Bank National Trust Company, as custodian under
the Custodial Agreement, and its successors and permitted assigns thereunder.

 

“Default” shall mean an Event of Default or an event that with notice or lapse
of time or both would become an Event of Default.

 

“Defaulted Mortgage Loan” shall mean, as of any date of determination, an
Eligible Mortgage Loan which is 90 days or more Delinquent and/or is subject to
a foreclosure proceeding.

 

“Delinquent” shall mean that a Monthly Payment (as defined in Part III of
Schedule 1 hereto) has not been made by the close of business on the related Due
Date (as defined in Part III of Schedule 1 hereto).

 

“Disbursement Agent” shall mean Deutsche Bank National Trust Company, as
disbursement agent for the Agent pursuant to the Custodial Agreement.

 

“Discretionary Mortgage Loan” shall mean a Mortgage Loan which does not
specifically meet the parameters of an Eligible Mortgage Loan as described
herein.

 

“Dollars” and “$” shall mean lawful money of the United States of America.

 

“Due Diligence Review” shall mean the performance by the Agent of any or all of
the reviews permitted under Section 11.15 hereof with respect to any or all of
the Mortgage Loans, as desired by the Agent from time to time.

 

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“Effective Date” shall mean the date upon which the conditions precedent set
forth in Section 5.01 shall have been satisfied.

 

“Eligible Mortgage Loan” shall mean a Mortgage Loan originated by any Borrower
or any Affiliate of any Borrower, secured by a first or second mortgage Lien on
a one-to-four family residential property, as to which the representations, and
warranties in Section 6.10 and Part I and Part II of Schedule 1 hereof are
correct; provided, however, that, in no event shall any Eligible Mortgage Loan
be a security for purposes of any securities or blue-sky laws; and provided,
further, that the following Mortgage Loans shall not be an Eligible Mortgage
Loan: (1) a Mortgage Loan for which the related obligor is subject to a
voluntary or involuntary bankruptcy proceeding or for which the related
Mortgaged Property has been acquired through foreclosure, acceptance of a
deed-in-lieu of foreclosure or otherwise in accordance with applicable law in
connection with the default of such Mortgage Loan, (2) a Defaulted Mortgage Loan
for which a Broker Price Opinion can not be obtained, (3) a Mortgage Loan that
is listed on the Exception Report, and (4) a Mortgage Loan which shall have been
pledged to the Agent, for the ratable benefit of the Lenders hereunder, for more
than 120 days.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

“ERISA Affiliate” shall mean any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which any Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which any
Borrower is a member.

 

“Equity Proceeds” shall mean with respect to the Guarantor, an amount equal to
the net proceeds from the issuance of any securities of the Guarantor or the net
proceeds to the Guarantor from contributions to capital or otherwise by another
Person.

 

“Eurodollar Loan Rate” shall mean a rate per annum equal to the sum of the
Eurodollar Rate plus the Applicable Margin.

 

“Eurodollar Rate” shall mean, with respect to each day a Loan is outstanding,
the rate per annum based on the rate appearing at page 5 of the Telerate Screen
as one-month LIBOR on such date (and if such date is not a Business Day, the
Eurodollar Rate in effect on the Business Day immediately preceding such date),
and if such rate shall not be so quoted, the rate per annum at which the Agent
is offered Dollar deposits at or about 10:00 A.M., New York City time, on such
date by prime banks in the interbank eurodollar market where the eurodollar and
foreign currency exchange operations in respect of its Loans are then being
conducted for delivery on such day for a period of 30 days and in an amount
comparable to the amount of the Loans to be outstanding on such day.

 

“Exception” shall have the meaning specified in the Custodial Agreement.

 

“Exception Report” shall mean the portion of the Mortgage Loan Schedule and
Exception Report detailing Exceptions in respect of each Mortgage Loan.

 

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“Event of Default” shall have the meaning, provided in Article VIII hereof.

 

“Federal Funds Rate” shall mean, for any day, the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Agent from three federal funds
brokers of recognized standing selected by it.

 

“Federal Loan Rate” shall mean a rate per annum equal to the sum of (x) the
Federal Funds Rate plus 1.00% and (y) the Applicable Margin.

 

“Funding Date” shall mean the date on which a Loan is made hereunder.

 

“GAAP” shall mean generally accepted accounting principles as in effect from
time to time in the United States.

 

“Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any court or arbitrator having jurisdiction over any Borrower, any of its
Subsidiaries or any of its properties.

 

“Guarantee” shall mean, as to any Person, any obligation of such Person directly
or indirectly guaranteeing any Indebtedness of any other Person or in any manner
providing for the payment of any Indebtedness of any other Person or otherwise
protecting the holder of such Indebtedness against loss (whether by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, or to take-or-pay or otherwise); provided, that the term
“Guarantee” shall not include (i) endorsements for collection or deposit in the
ordinary course of business or (ii) obligations to make servicing advances for
delinquent taxes and insurance or other obligations in respect of a Mortgaged
Property, to the extent required by the Agent. The amount of any Guarantee of a
Person shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith. The terms
“Guarantee” and “Guaranteed” used as verbs shall have correlative meanings.

 

“Guarantor” shall mean New Century Financial Corporation.

 

“HELOC Mortgage Loan” shall mean a revolving line of credit that is a first or
second lien Mortgage Loan made by any Borrower to a Mortgagor, which is
underwritten substantially in accordance with the Underwriting Guidelines for
Mortgage Loans that are home equity lines of credit.

 

“Indebtedness” shall mean, for any Person: (a) obligations created, issued or
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of Property or services, other than trade

 

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accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
Indebtedness so secured has been assumed by such Person; (d) obligations
(contingent or otherwise) of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person; (e) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements, sale/buy-back agreements
or like arrangements; (g) Indebtedness of others Guaranteed by such Person; (h)
all obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; and (i) Indebtedness of general
partnerships of which such Person is a general partner.

 

“Initial Servicer” shall have the meaning provided in Section 11.14(a) hereof.

 

“Intangible Assets” shall mean the excess of the cost over book value of assets
acquired, patents, trademarks, copyrights, franchises and other intangible
assets (excluding, in any event, the value of any residual securities and the
value of any owned or purchased mortgage servicing rights).

 

“Interest Rate Protection Agreement” shall mean, with respect to any or all of
the Mortgage Loans, any short sale of US Treasury Securities, futures contract,
mortgage related security, Eurodollar futures contract, options related
contract, interest rate swap, cap or collar agreement or similar arrangement
providing for protection against fluctuations in interest rates or the exchange
of nominal interest obligations, either generally or under specific
contingencies, entered into by a Borrower and an Affiliate of the Agent, and
acceptable to the Agent.

 

“Lender” shall have the meaning provided in the heading hereto.

 

“Lien” shall mean any mortgage, lien, pledge, charge, security interest or
similar encumbrance.

 

“Loan” shall have the meaning provided in Section 2.01(a) hereof.

 

“Loan Agreement” shall have the meaning provided in the heading hereto.

 

“Loan Documents” shall mean, collectively, this Loan Agreement, each Note, the
Custodial Agreement, the Control Agreement and the New Century Guaranty.

 

“Loan-to-Value Ratio” or “LTV” shall mean with respect to any Mortgage Loan, the
ratio of the original outstanding principal amount of such Mortgage Loan to the
lesser of (a) the appraised Value of the related Mortgaged Property at the time
of origination and (b) if the related Mortgaged Property was purchased within 12
months of the origination of the Mortgage Loan, the purchase price of the
Mortgaged Property.

 

“Market Value” shall mean, as of any date in respect of an Eligible Mortgage
Loan, the value determined by the Agent in good faith and in its sole
discretion.

 

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“Material Adverse Effect” shall mean a material adverse effect on (a) the
Property, business, operations, financial condition or prospects of any Borrower
or any of its Material Affiliates, (b) the ability of any Borrower or any of its
Material Affiliates to perform its obligations under any of the Loan Documents
to which it is a party, (c) the validity or enforceability of any of the Loan
Documents, (d) the rights and remedies of the Agent or the Lenders under any of
the Loan Documents, (e) the timely payment of the principal of or interest on
the Loans or other amounts payable in connection therewith or (f) the Collateral
as a whole.

 

“Material Affiliate” shall mean New Century Financial Corporation and its
successors and assigns.

 

“Maximum Credit” shall mean $1,500,000,000, as reduced in accordance with
Section 2.01 hereof.

 

“Minimum Usage Fee” shall mean, with respect to any calendar month, an
annualized fee equal to the product of (x) the excess, if any, of (i)
$700,000,000 over (ii) the average outstanding principal balance of all Loans
during the four (4) calendar month period ending on the last day of such
calendar month, and (y) the Eurodollar Rate in effect on the last day of such
calendar month plus 0.70%, computed on the basis of a 360-day year for the
actual number of days elapsed in such calendar month.

 

“Moody’s” shall mean Moody’s Investors Service, Inc.

 

“Mortgage” shall mean the mortgage, deed of trust or other instrument securing a
Mortgage Note, which creates a first or second Lien on the fee in real property
securing the Mortgage Note.

 

“Mortgage File” shall have the meaning assigned thereto in the Custodial
Agreement.

 

“Mortgage Loan” shall mean a mortgage loan which the Custodian has been
instructed to hold for the Agent on behalf of the Lenders pursuant to the
Custodial Agreement, and which Mortgage Loan includes, without limitation, a
Mortgage Note and related Mortgage.

 

“Mortgage Loan Data File” shall mean a computer-readable file containing
information with respect to each Mortgage Loan, to be delivered by any Borrower
to the Agent pursuant to Section 2.03(a) hereof which fields are identified on
Annex I to the Custodial Agreement.

 

“Mortgage Loan Documents” shall mean, with respect to a Mortgage Loan, the
documents comprising the Mortgage File for such Mortgage Loan.

 

“Mortgage Loan Schedule” shall have the meaning assigned thereto in the
Custodial Agreement.

 

“Mortgage Loan Schedule and Exception Report” shall mean the mortgage loan
schedule and exception report prepared by the Custodian pursuant to the
Custodial Agreement.

 

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“Mortgage Note” shall mean the original executed promissory note or other
evidence of the indebtedness of a mortgagor/borrower with respect to a Mortgage
Loan.

 

“Mortgaged Property” shall mean the real property (including all improvements,
buildings, fixtures, building equipment and personal property thereon and all
additions, alterations and replacements made at any time with respect to the
foregoing) and all other collateral securing repayment of the debt evidenced by
a Mortgage Note.

 

“Mortgagor” shall mean the obligor on a Mortgage Note.

 

“MS & Co.” shall mean Morgan Stanley & Co. Incorporated, a registered
broker-dealer.

 

“MS Indebtedness” shall mean any indebtedness of a Borrower hereunder and under
any other arrangement (other than this Loan Agreement) between a Borrower on the
one hand and any Lender (or any Affiliate of any Lender) on the other hand
(including, without limitation, any Loans, interest due and default interest,
termination payments, hedging costs, facility fees and expenses).

 

“Multiemployer Plan” shall mean a multiemployer plan defined as such in Section
3(37) of ERISA to which contributions have been or are required to be made by
any Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA.

 

“Net Income” shall mean, for any period, the net income of the Guarantor for
such period as determined in accordance with GAAP.

 

“New Century Guaranty” shall mean the Second Amended and Restated Guaranty,
dated as of the date hereof, made by the Guarantor, substantially in the form of
Exhibit H hereto, as the same may be amended, restated, supplemented or
otherwise modified and in effect from time to time.

 

“Nine-Day Aged Wet-Ink Mortgage Loan” shall mean a Wet-Ink Mortgage Loan with
respect to which the related Mortgage File has not been received by the
Custodian and the Custodian has not issued a Trust Receipt by the ninth (9th)
Business Day following the applicable Funding Date.

 

“1934 Act” shall mean the Securities and Exchange Act of 1934, as amended.

 

“Note” shall have the meaning provided in Section 2.02(a) hereof.

 

“Option One” shall mean, with respect to any requested borrowing hereunder, the
option specified in (a) of the definition of “Applicable Collateral Percentage”
and 2(b)(i) of the definition of “Applicable Margin.”

 

“Option Two” shall mean, with respect to any requested borrowing hereunder, the
option specified in (b) of the definition of “Applicable Collateral Percentage
and (2)(b)(ii) of the definition “Applicable Margin.”

 

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“PBGC” shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

 

“Person” shall mean any individual, corporation, company, voluntary association,
partnership, joint venture, limited liability company, trust, unincorporated
association or government (or any agency, instrumentality or political
subdivision thereof).

 

“Plan” shall mean an employee benefit or other plan established or maintained by
any Borrower or any ERISA Affiliate and covered by Title IV of ERISA, other than
a Multiemployer Plan.

 

“Post-Default Rate” shall mean, in respect of any principal of any Loan or any
other amount under this Loan Agreement, the Notes or any other Loan Document
that is not paid when due to the applicable Lender or the Agent (whether at
stated maturity, by acceleration, by optional or mandatory prepayment or
otherwise), a rate per annum during the period from and including the due date
to but excluding the date on which such amount is paid in full equal to 4% per
annum plus the Prime Rate in effect on such due date and from time to time
thereafter until such amount is paid in full.

 

“Predatory Lending Practices” means any and all underwriting and lending
policies, procedures and practices defined or enumerated in any local or
municipal ordinance or regulation or any state or federal regulation or statute
prohibiting, limiting or otherwise relating to the protection of consumers from
such policies, procedures and practices. Such policies, practices and procedures
may include, without limitation, charging excessive loan, broker, and closing
fees, charging excessive rates of loan interest, making loans without regard to
a consumer’s ability to re-pay the loan, refinancing loans with no material
benefit to the consumer, charging fees for services not actually performed,
discriminating against consumers on the basis of race, gender, or age, failing
to make proper disclosures to the consumer of the consumer’s rights under
federal and state law, and any other predatory lending policy, practice or
procedure as defined by ordinance, regulation or statute.

 

“Prescribed Laws” shall mean, collectively, (a) the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (Public Law 107-56) (The USA PATRIOT Act), (b) Executive
Order No. 13224 on Terrorist Financing, effective September 24, 2001, and
relating to Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism, (c) the International
Emergency Economic Power Act, 50 U.S.C. §1701 et. seq. and (d) all other
Requirements of Law relating to money laundering or terrorism.

 

“Prime Rate” shall mean the prime rate announced to be in effect from time to
time, as published as the average rate in The Wall Street Journal.

 

“Property” shall mean any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.

 

“Regulations T, U and X” shall mean Regulations T, U and X of the Board of
Governors of the Federal Reserve System (or any successor), as the same may be
modified and supplemented and in effect from time to time.

 

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“Remittance Date” shall mean the 5th Business Day of each month. For purposes of
this definition, “Business Day” shall mean any day other than (a) a Saturday or
Sunday or (b) a day on which banking and savings and loan institutions in the
States of Florida and California are authorized or obligated by law or executive
order to be closed.

 

“Responsible Officer” shall mean, as to any Person, the chief executive officer
or, with respect to financial matters, the chief financial officer of such
Person.

 

“Requirement of Law” shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law (including, without limitation, Prescribed Laws), treaty,
rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.

 

“S&P” shall mean Standard and Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc.

 

“Second Lien Mortgage Loan” shall mean an Eligible Mortgage Loan which is
secured by a second Lien on the related Mortgaged Property.

 

“Secured Obligations” shall have the meaning provided in Section 4.01(c) hereof.

 

“Servicer” shall mean the Initial Servicer or a Third Party Servicer, as the
context requires.

 

“Servicer Notice” shall have the meaning provided in Section 11.14(c) hereof.

 

“Servicing Agreement” shall have the meaning provided in Section 11.14(c)
hereof.

 

“Servicing Records” shall have the meaning provided in Section 11.14(b) hereof.

 

“60+ Delinquent Mortgage Loan” shall mean, as of any date of determination, an
Eligible Mortgage Loan which is between 60 days and 89 days (inclusive)
Delinquent.

 

“Sub-prime Mortgage Loan” shall mean an Eligible Mortgage Loan with respect to
which the related Mortgagor has received a credit rating of “C” or “D” as
determined in accordance with New Century’s Underwriting Guidelines.

 

“Subsidiary” shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by

 

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such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.

 

“System” shall mean all hardware or software, or any system consisting of one or
more thereof, including, without limitation, any and all enhancements, upgrades,
customizations, modifications and the like utilized by any Person for the
benefit of such Person to perform its obligations and to administer and track,
store, process, provide, and where appropriate, insert, true and accurate dates
and calculations for dates and time spans with respect to the Mortgage Loans.

 

“Tangible Net Worth” shall mean, as of any date of determination, all amounts
which would be included under capital on a balance sheet of the Guarantor at
such date, determined in accordance with GAAP, less (i) amounts owing to the
Guarantor from Affiliates and (ii) Intangible Assets.

 

“Tangible Net Worth Trigger Event” shall have occurred (based on the Borrowers’
most recent monthly financials) if the Tangible Net Worth of the Guarantor is
less than the sum of (a) $375,000,000, (b) 75% of the aggregate consolidated
positive Net Income, calculated from the period beginning December 31, 2003 to
the most recently ended monthly period and (c) an amount equal to 50% of any
Equity Proceeds received by the Guarantor since December 31, 2003.

 

“Termination Date” shall mean January 28, 2005, as such date may be extended in
accordance with Section 2.08 hereof, or such earlier date on which this Loan
Agreement shall terminate in accordance with the provisions hereof or by
operation of law.

 

“Third Party Servicer” shall have the meaning provided in Section 11.14(c)
hereof.

 

“30+ Delinquent Mortgage Loan” shall mean, as of any date of determination, an
Eligible Mortgage Loan which is between 30 days and 59 days (inclusive)
Delinquent.

 

“Total Indebtedness” shall mean, for any period, the aggregate Indebtedness of
the Guarantor during such period maintained in accordance with GAAP less the
aggregate amount of any such Indebtedness that is reflected on the balance sheet
of the Guarantor in respect of obligations incurred pursuant to a securitization
transaction, solely to the extent such obligations are secured by the assets
securitized thereby and are non-recourse to the Guarantor. In the event that any
Indebtedness would be excluded from the calculation of Total Indebtedness but
for the existence of recourse, the Guarantor shall be entitled nonetheless to
exclude the amount of such Indebtedness that is not subject to recourse. The
amount of any recourse shall be the stated or determinable amount thereof or, if
not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by the Guarantor in good faith.

 

“Trust Receipt” shall have the meaning assigned thereto in the Custodial
Agreement.

 

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“Underwriting Guidelines” shall mean the underwriting guidelines attached as
Exhibit F hereto, as the same may be revised from time to time in accordance
with the terms hereof.

 

“Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect
from time to time in the State of New York; provided, that if by reason of
mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest or the renewal or enforcement thereof in
any Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than New York, “Uniform Commercial Code” shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or effect of perfection or
non-perfection.

 

“Unseasoned Mortgage Loan” shall mean, as of any date of determination, an
Eligible Mortgage Loan (provided, that notwithstanding the definition of the
term “Eligible Mortgage Loan,” an Unseasoned Mortgage Loan must have a first
Lien status with respect to the related Mortgaged Property) which has been
originated 120 days or less prior to the related Funding Date.

 

“Wet-Ink Mortgage Loan” shall mean a Mortgage Loan originated by any Borrower in
a transaction table-funded by a Lender, which origination or table funding is
financed in part or in whole with proceeds of Loans and as to which the
Custodian has not yet received the related Mortgage File. A Mortgage Loan shall
cease to be a Wet-Ink Mortgage Loan on the date on which the Agent has received
a Mortgage Loan Schedule and Exception Report from the Custodian with respect to
such Mortgage Loan confirming that the Custodian has physical possession of the
related Mortgage File and that there are no Exceptions (as defined in the
Custodial Agreement) with respect to such Mortgage Loan.

 

“Wet-Ink Transaction” shall mean a borrowing in connection with which Wet-Ink
Mortgage Loans are included in the Borrowing Base. A Wet-Ink Transaction shall
cease to be a Wet-Ink Transaction on the date that the underlying Wet-Ink
Mortgage Loan ceases to be a Wet-Ink Mortgage Loan (in accordance with the
definition thereof).

 

“Wet-Ink Aged Report” shall have the meaning specified in Section 3(a) of the
Custodial Agreement.

 

“Wet Funding Account” shall have the meaning specified in Section 4(i) of the
Custodial Agreement.

 

Section 1.02 Accounting Terms and Determinations. Except as otherwise expressly
provided herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Agent hereunder shall be prepared, in accordance
with GAAP.

 

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ARTICLE II

LOANS, NOTE AND PREPAYMENTS.

 

Section 2.01 Loans.

 

(a) Each Lender severally agrees to make or continue, as applicable, on the
terms and subject to the conditions of this Loan Agreement, loans (individually,
a “Loan” and, collectively, the “Loans”) to the Borrowers in Dollars, from and
including the Effective Date to but not including the Termination Date in an
aggregate principal amount at any one time outstanding up to but not exceeding
the lesser of (i) such Lender’s Commitment as then in effect and (ii) such
Lender’s Commitment Percentage of the Borrowing Base as in effect from time to
time. Notwithstanding the foregoing, MSB shall fund 100% of the first
$400,000,000 in principal amount of Loans at any time outstanding; provided,
that any failure by MSB to fund any such principal amount shall not relieve
MSMCI of its commitment to make Loans to the Borrowers in accordance with this
Loan Agreement.

 

(b) On the Effective Date, each Lender severally agrees to make or continue, as
applicable, on the terms and subject to the conditions of this Loan Agreement, a
Loan to the Borrowers in an aggregate principal amount equal to the “Initial
Advance Amount” set forth on Schedule 4 hereto in respect of such Lender, the
proceeds of which Loans shall be applied as full and complete satisfaction of
all amounts owing by the Borrowers under the Existing Loan Agreement.

 

(c) Subject to the terms and conditions of this Loan Agreement, during such
period the Borrowers may borrow, repay and reborrow hereunder; provided, that
notwithstanding the foregoing, no Lender shall have any obligation to make Loans
to the Borrowers in excess of the lesser of (i) the Maximum Credit and (ii) the
Borrowing Base and, if a Tangible Net Worth Trigger Event shall have occurred or
in the event the obligation of the Lenders to make Loans to the Borrowers shall
otherwise be terminated as permitted hereunder, no Lender shall have any further
obligation to make additional Loans hereunder.

 

Section 2.02 Notes.

 

(a) The Loans made by each Lender shall be evidenced by a single promissory note
of the Borrowers substantially in the form of Exhibit A hereto (each, a “Note”,
collectively, the “Notes”), dated the date hereof, payable to the order of such
Lender in a principal amount equal to the lesser of (i) the amount of the
Commitment of such Lender and (ii) the aggregate unpaid principal amount of all
Loans made by such Lender and otherwise duly completed. Each Lender shall have
the right to have its Note subdivided, by exchange for promissory notes of
lesser denominations or otherwise.

 

(b) The date, amount and interest rate of each Loan made by each Lender to the
Borrowers, and each payment made on account of the principal thereof, shall be
recorded by such Lender on its books and, prior to any transfer of its Note,
endorsed by such Lender on the schedule attached to its Note or any continuation
thereof; provided, that the failure of such Lender to make any such recordation
or endorsement shall not affect the obligations of the

 

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Borrowers to make a payment when due of any amount owing hereunder or under its
Note in respect of the Loans made by such Lender.

 

Section 2.03 Procedure for Borrowing (Loans other than Wet-Ink Transactions).

 

(a) The Borrowers may request a borrowing hereunder that is not a Wet-Ink
Transaction on any Business Day during the period from and including the
Effective Date to and including the Termination Date, by delivering to the
Agent, with a copy to the Custodian, a written request for borrowing,
substantially in the form of Exhibit D attached hereto, which request must be
received by the Agent prior to 11:00 a.m., New York City time, at least one (1)
Business Day prior to the requested Funding Date. Such request for borrowing
shall (i) attach a schedule identifying the Eligible Mortgage Loans that the
Borrowers propose to pledge to the Agent, for the ratable benefit of the
Lenders, and which are to be included in the Borrowing Base in connection with
such borrowing, (ii) specify the requested Funding Date and the amount requested
to be borrowed, (iii) be accompanied by a Mortgage Loan Data File containing
information with respect to the Eligible Mortgage Loans that the Borrowers
propose to pledge to the Agent, for the ratable benefit of the Lenders, and to
be included in the Borrowing Base in connection with such borrowing, (iv) attach
an officer’s certificate signed by a Responsible Officer of each applicable
Borrower as required by Section 5.02(b) hereof and (v) specify either Option One
or Option Two for such borrowing, at which point all borrowings hereunder,
including each Eligible Mortgage Loan then pledged or to be included in the
Borrowing Base in connection with such borrowing, shall be calculated according
to such option.

 

(b) Upon the Borrowers’ request for a borrowing pursuant to Section 2.03(a), the
Lenders shall, subject to the limitations set forth in Section 2.01(a) hereof
and upon satisfaction of all conditions precedent set forth in Sections 5.01 and
5.02 hereof, make a Loan to the Borrowers on the requested Funding Date, in the
amount so requested; provided, however, that if the Mortgage Loan Data File
includes Discretionary Mortgage Loans, which the Borrowers propose to pledge to
the Agent for the benefit of the Lenders and which are to be included in the
Borrowing Base in connection with such borrowing, the Lenders’ obligation to
fund such Discretionary Mortgage Loans shall be in their sole and absolute
discretion. The Borrowers acknowledge that the Agent may retain for the account
of the Lenders an amount equal to $100 per Defaulted Mortgage Loan to cover the
costs of obtaining Broker Price Opinions.

 

(c) The Borrowers shall release to the Custodian no later than 1:30 p.m. New
York time, one (1) Business Day prior to any Funding Date (in the case of the
first 150 Eligible Mortgage Loans delivered in connection with any Funding Date)
plus one (1) additional Business Day prior to any Funding Date (for each
additional 100 Eligible Mortgage Loans in excess thereof delivered in connection
with any Funding Date), the Mortgage File pertaining to each Eligible Mortgage
Loan to be pledged to the Agent, for the ratable benefit of the Lenders, and
included in the Borrowing Base on such requested Funding Date, in accordance
with the terms and conditions of the Custodial Agreement.

 

(d) Pursuant to the Custodial Agreement, the Custodian shall deliver to the
Agent and the Borrowers, no later than 1:00 p.m., New York City time on a
Funding Date, a Trust Receipt (as defined in the Custodial Agreement) in respect
of all Mortgage Loans pledged

 

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to the Agent, for the ratable benefit of the Lenders, on such Funding Date, and
a Mortgage Loan Schedule and Exception Report. The Borrowers acknowledge that
Mortgage Loans listed in the Exception Report are not Eligible Mortgage Loans
and no Lender is required to advance funds in respect of such Mortgage Loans and
such Mortgage Loans listed in the Exception Report shall not be subject to the
Lien of this Loan Agreement.

 

(e) Subject to Article V hereof, such borrowing will then be made available to
the Borrowers by the Agent transferring, via wire transfer, to the following
account of the Borrowers: ABA # 021001033, Account #01419663, Attn: New Century,
in the aggregate amount of such borrowing in funds immediately available to the
Borrowers.

 

(f) Unless the Agent shall have been notified in writing by any Lender prior to
a Funding Date for Loans hereunder that such Lender will not make the amount
that would constitute its share of the Loans being made on such date available
to the Agent, the Agent may, in reliance upon such assumption make available to
the Borrowers a corresponding amount. If such amount is not made available to
the Agent on the Funding Date therefor, such Lender shall pay to the Agent, on
demand, such amount with interest thereon at a rate per annum equal to the rate
specified in the first sentence of Section 2.06(b) for the period until such
Lender makes such amount immediately available to the Agent. A certificate of
the Agent submitted to any Lender with respect to any amounts owing under this
Section shall be conclusive in the absence of manifest error. If such Lender’s
pro rata share of such borrowing is not made available to the Agent by such
Lender within one (1) Business Day after such Funding Date, the Agent shall also
be entitled to recover such amount with interest thereon at a rate per annum
equal to the rate specified in the first sentence of Section 2.06(b), on demand,
from the Borrowers.

 

Section 2.04 Procedure For Borrowing (Wet-Ink Transactions).

 

(a) With respect to each Wet-Ink Transaction, the Borrowers may request a
borrowing hereunder, on any Business Day during the period from and including
the Effective Date to and excluding the Termination Date (provided that no
Borrowing Base Deficiency exists due to the inclusion of Nine-Day Aged Wet-Ink
Mortgage Loans in the Borrowing Base on such date), by delivering to the Agent,
an estimate of the amount required to fund Wet-Ink Transactions the following
Business Day, which estimate must be received by the Agent prior to 5:00 p.m.,
New York City time, one (1) Business Day prior to the requested Funding Date.

 

(b) On the requested Funding Date, the Borrowers may deliver to the Agent, with
a copy to the Custodian, no more than an aggregate total of three (3)
transmissions, which transmissions shall (i) attach a written request for
borrowing, substantially in the form of Exhibit D attached hereto, (ii) attach a
schedule identifying the Eligible Mortgage Loans that the Borrowers propose to
pledge to the Agent, and to be included in the Borrowing Base in connection with
such borrowing, (iii) specify the amount requested to be borrowed, (iv) attach a
schedule identifying the amount and wiring instructions with respect to the
settlement location of each wire transfer on such date and (v) attach an
officer’s certificate signed by a Responsible Officer of each applicable
Borrower as required by Section 5.02(b) hereof. Pursuant to the Custodial
Agreement, the Custodian shall deliver to the Agent and the Borrowers, in
connection with each transmission, a Mortgage Loan Schedule in respect of all
Mortgage Loans pledged to the Agent, for the ratable benefit of the Lenders, on
such Funding Date. The latest transmission

 

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must be received by the Agent no later than 4:00 p.m., New York City time, on
such Funding Date. Such request for borrowing shall specify the requested
Funding Date.

 

(c) The Borrowers shall deliver (or cause to be delivered) and release to the
Custodian the Mortgage File pertaining to such Wet-Ink Mortgage Loan on the next
Business Day following receipt of such Mortgage File by the applicable Borrower,
but in any event no later than eight (8) Business Days following the applicable
Funding Date in accordance with the terms and conditions of the Custodial
Agreement. On the applicable Funding Date and on each Business Day following the
applicable Funding Date, no later than 8:00 p.m., New York City time, pursuant
to the Custodial Agreement, the Custodian shall deliver to the Agent a schedule
listing each Wet-Ink Mortgage Loan with respect to which the complete Mortgage
File has not been received by the Custodian (the “Wet-Ink Aged Report”). On the
applicable Funding Date, the Agent shall confirm that the information in the
Wet-Ink Aged Report is consistent with the information provided to the Agent
pursuant to Section 2.04(b).

 

(d) Upon the Borrowers’ request for a borrowing pursuant to Section 2.04(a), the
Agent shall promptly notify each Lender thereof. Each Lender shall thereupon,
upon satisfaction of all conditions precedent set forth in Sections 5.01, 5.02
and 5.03 hereof, make its Commitment Percentage of the amount of such Borrowing
available to the Agent for the account of the Borrowers at the office of the
Agent specified in Section 11.02, on the Funding Date requested by the Borrowers
in funds immediately available to the Agent; provided, that the amount to be
made available by Morgan Stanley Bank shall be calculated as though the
Commitment Percentage of Morgan Stanley Bank were 100% until the aggregate
unpaid principal amount of all Loans made by such Lender equals such Lender’s
Commitment).

 

(e) Subject to Article V hereof, such borrowing will be made available by the
Agent transferring the amount of such borrowing to the Wet Funding Account. In
accordance with the Custodial Agreement, the Custodian shall then transfer, at
the direction of the Agent, via wire transfer, the amount of such borrowing from
the Wet Funding Account to the account of the designated Closing Agent pursuant
to disbursement instructions provided by the Borrowers on the electronic system
maintained by the Custodian; provided, however, that (i) the Agent shall
approve, in its sole discretion, each wiring location, (ii) the Custodian shall
not, in any event, (A) transfer funds to any Borrower or (B) transfer funds in
excess of the original principal balance of the related Wet-Ink Mortgage Loan.
Pursuant to the Custodial Agreement, the Custodian shall deliver to the Wet
Funding Account and the Borrowers, no later than 6:00 p.m., New York City time,
on each Funding Date with respect to a Wet-Ink Transaction, a report identifying
the wire transfer amount and the settlement location of each wire transfer made
on such date. Upon notice from the Closing Agent to the Borrowers that the
related Wet-Ink Mortgage Loan was not originated, the Wet-Ink Mortgage Loan
shall be removed from the list of Eligible Mortgage Loans and the Closing Agent
shall immediately return the funds via wire transfer to the Wet Funding Account.
The Borrowers shall notify the Agent if a Wet-Ink Mortgage Loan was not
originated and has been removed from the list of Eligible Mortgage Loans.

 

(f) With respect to transmissions delivered pursuant to Section 2.04(b) which
are received by the Agent no later than 4:00 p.m., New York City time, on each
Funding Date, the Agent shall transfer to the account of the Borrowers
identified in Section 2.03(e), no later than 5:00 p.m., New York City time, the
difference, if any, between (i) the aggregate Collateral

 

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Value of the Wet-Ink Mortgage Loans pledged to the Agent, for the benefit of the
Lenders, and included in the Borrowing Base on such date and (ii) the aggregate
amount transferred by the Custodian to the accounts of designated Closing Agents
with respect to such Wet-Ink Mortgage Loans on such date.

 

(g) Unless the Agent shall have been notified in writing by any Lender prior to
a Funding Date for Loans hereunder that such Lender will not make the amount
that would constitute its share of the Loans being made on such date available
to the Agent, the Agent may, in reliance upon such assumption make available to
the Borrowers a corresponding amount. If such amount is not made available to
the Agent on the Funding Date therefor, such Lender shall pay to the Agent, on
demand, such amount with interest thereon at a rate per annum equal to the rate
specified in the first sentence of Section 2.06(b) for the period until such
Lender makes such amount immediately available to the Agent. A certificate of
the Agent submitted to any Lender with respect to any amounts owing under this
Section shall be conclusive in the absence of manifest error. If such Lender’s
pro rata share of such borrowing is not made available to the Agent by such
Lender within one (1) Business Day after such Funding Date, the Agent shall also
be entitled to recover such amount with interest thereon at a rate per annum
equal to the rate specified in the first sentence of Section 2.06(b), on demand,
from the Borrowers.

 

Section 2.05 Limitation on Types of Loans; Illegality. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Rate:

 

(a) the Agent determines, which determination shall be conclusive, that
quotations of interest rates for the relevant deposits referred to in the
definition of “Eurodollar Rate” in Section 1.01 hereof are not being provided in
the relevant amounts or for the relevant maturities for purposes of determining
rates of interest for Loans as provided herein; or

 

(b) any Lender determines, which determination shall be conclusive, that the
relevant rate of interest referred to in the definition of “Eurodollar Rate” in
Section 1.01 hereof upon the basis of which the rate of interest for Loans is to
be determined is not likely adequately to cover the cost to such Lender of
making or maintaining Loans; or

 

(c) it becomes unlawful for any Lender to honor its obligation to make or
maintain Loans hereunder using a Eurodollar Rate;

 

then the Agent or such Lender, as the case may be, shall give the Borrowers
prompt notice thereof and, so long as such condition remains in effect, each
applicable Lender shall be under no obligation to make additional Loans, and
each Borrower shall, at its sole option and discretion, either prepay all such
Loans as may be outstanding or pay interest on such Loans at a rate per annum
equal to the Federal Loan Rate; provided, that if a Lender determines not to
make any additional Loans, then such Lender shall reimburse the Borrowers a pro
rata portion of the facility fee paid to such Lender pursuant to Section 3.04,
based upon the number of days elapsed from the Effective Date to date of such
determination.

 

Section 2.06 Repayment of Loans; Interest.

 

(a) The Borrowers hereby promise, jointly and severally, to repay in full in
Dollars on the Termination Date, the aggregate principal amount of the Loans
then outstanding.

 

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(b) The Borrowers hereby promise, jointly and severally, to pay to the Agent for
the account of each Lender interest on the unpaid principal amount of each Loan
for the period from and including the date of such Loan to, but excluding, the
date such Loan shall be paid in full, at a rate per annum equal to the
Applicable Loan Rate. Notwithstanding the foregoing, the Borrowers hereby
promise to pay to the Agent for the account of each Lender interest at the
applicable Post-Default Rate on any principal of any Loan and on any other
amount payable by the Borrowers hereunder or under any Note that shall not be
paid in full when due (whether at stated maturity, by acceleration or by
mandatory prepayment or otherwise) for the period from and including the due
date thereof to but excluding the date the same is paid in full. Interest shall
accrue on the unpaid principal balance of each Loan on a daily basis. Accrued
interest on each Loan shall be payable monthly on the first (1st) Business Day
of each month and for the last month of the Loan Agreement on the first (1st)
Business Day of such last month and on the Termination Date; provided, that the
Agent may, in its sole discretion, require accrued interest to be paid
simultaneously with any prepayment of principal made by the Borrowers on account
of any of the Loans outstanding. Interest payable at the Post-Default Rate shall
accrue daily and shall be payable in accordance with the foregoing.

 

(c) It is understood and agreed that, unless and until a Default shall have
occurred and be continuing, the Borrowers shall be entitled to the proceeds of
the Mortgage Loans pledged to the Agent, for the ratable benefit of the Lenders
hereunder.

 

Section 2.07 Mandatory prepayments or Pledge.

 

If at any time the aggregate outstanding principal amount of Loans exceeds the
Borrowing Base (a “Borrowing Base Deficiency”), as determined by the Agent and
notified to the Borrowers on any Business Day, the Borrowers shall no later than
one (1) Business Day after receipt of such notice, either prepay the Loans in
part or in whole or pledge additional Eligible Mortgage Loans (which Collateral
shall be in all respects acceptable to the Agent in its sole discretion) to the
Agent for the account of the Lenders, such that after giving effect to such
prepayment or pledge of additional Eligible Mortgage Loans a Borrowing Base
Deficiency shall no longer exist.

 

Section 2.08 Extension of Termination Date.

 

At the request of the Borrowers made at least thirty (30) days, but in no event
earlier than ninety (90) days, prior to the then current Termination Date, the
Agent may in its sole discretion extend the Termination Date for a period to be
determined by Agent in its sole discretion by giving written notice of such
extension to the Borrowers no later than twenty (20) days, but in no event
earlier than thirty (30) days, prior to the then current Termination Date. Any
failure by the Agent to deliver such notice of extension shall be deemed to be
the Agent’s determination not to extend the then current Termination Date.

 

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ARTICLE III

 

PAYMENTS; COMPUTATIONS; ETC.

 

Section 3.01 Payments.

 

(a) Except to the extent otherwise provided herein, all payments of principal,
interest and other amounts to be made by the Borrowers under this Loan Agreement
and the Notes, shall be made in Dollars, in immediately available funds, without
deduction, set-off or counterclaim, to the Agent at the following account
maintained by the Agent: Account No. 40615114, for the account of MSMCI,
Citibank, N.A., ABA No. 021000089, Attn: Whole Loan Operations, not later than
1:00 p.m., New York City time, on the date on which such payment shall become
due (and each such payment made after such time on such due date shall be deemed
to have been made on the next succeeding Business Day). Each Borrower
acknowledges that it has no rights of withdrawal from the foregoing account. The
Agent shall promptly provide to each Lender (via facsimile or other
transmission) the amount of such payment to be distributed to such Lender along
with the outstanding Loans then held by such Lender, after giving effect to such
payment; provided, that if no Default or Event of Default has occurred and is
then continuing, so long as, and to the extent that, after giving effect to such
payment, any principal amount is outstanding in respect of Loans made by MSMCI,
then 100% of such payment shall be made to MSMCI.

 

(b) The amount of such payments distributed to each Lender will be calculated
such that at all times that the aggregate unpaid principal amount of Loans
outstanding hereunder is less than or equal to Morgan Stanley Bank’s Commitment,
the Credit Exposure Percentage of Morgan Stanley Bank shall equal 100%.

 

(c) Except to the extent otherwise expressly provided herein, if the due date of
any payment under this Loan Agreement or any Note would otherwise fall on a day
that is not a Business Day, such date shall be extended to the next succeeding
Business Day, and interest shall be payable for any principal so extended for
the period of such extension.

 

Section 3.02 Computations. Interest on the Loans shall be computed on the basis
of a 360-day year for the actual number of days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.

 

Section 3.03 Requirements of Law.

 

(a) If any Requirement of Law (other than with respect to any amendment made to
any Lender’s certificate of incorporation and by-laws or other organizational or
governing documents) or any change in the interpretation or application thereof
or compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:

 

(i) shall subject any Lender to any tax of any kind whatsoever with respect to
this Loan Agreement, its Note or any Loan made by it (excluding taxes on such
Lender’s net income) or change the basis of taxation of payments to such Lender
in respect thereof;

 

(ii) shall impose, modify or hold applicable any reserve, special deposit,
compulsory Loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances, Loans or other extensions of
credit by, or

 

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any other acquisition of funds by, any office of any Lender which is not
otherwise included in the determination of the Eurodollar Rate hereunder; or

 

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

 

and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, participating
in, continuing or maintaining any Loan or to reduce any amount due or owing
hereunder in respect thereof, then, in any such case, the Borrowers shall
promptly pay such Lender such additional amount or amounts as will compensate
such Lender for such increased cost or reduced amount receivable.

 

(b) If any Lender shall have determined that the adoption of or any change in
any Requirement of Law (other than with respect to any amendment made to such
Lender’s certificate of incorporation and by-laws or other organizational or
governing documents) regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation controlling
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) from any Governmental Authority made subsequent to
the date hereof shall have the effect of reducing the rate of return on such
Lender’s or such corporation’s capital as a consequence of its obligations
hereunder to a level below that which such Lender or such corporation would have
achieved but for such adoption, change or compliance (taking into consideration
such Lender’s or such corporation’s policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, each
Borrower shall either (i) promptly pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction or (ii) at its sole
option and discretion, prepay all Loans as may be outstanding and terminate this
Loan Agreement. If the Borrowers prepay all outstanding Loans and terminate this
Loan Agreement as provided in (ii) of the prior sentence, then such Lender shall
reimburse the Borrowers a pro rata portion of the facility fee paid to such
Lender pursuant to Section 3.04, based upon the number of days elapsed from the
Effective Date to the date of termination.

 

(c) If any Lender becomes entitled to claim any additional amounts pursuant to
this Article, it shall promptly notify the Borrowers of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this Section submitted by such Lender to the Borrowers shall
be conclusive in the absence of manifest error.

 

Section 3.04 Facility Fee.

 

The Borrowers agree to pay to the Agent for the account of the Lenders, on or
prior to the execution of this Loan Agreement, a facility fee of $3,000,000,
such payment to be made in Dollars, in immediately available funds, without
deduction, set-off or counterclaim, to the account of the Agent set forth in
Section 3.01(a) hereof.

 

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ARTICLE IV

 

COLLATERAL SECURITY.

 

Section 4.01 Collateral; Security Interest.

 

(a) Pursuant to the Custodial Agreement, the Custodian shall hold the Mortgage
Loan Documents as exclusive bailee and agent for the Agent on behalf of the
Lenders pursuant to terms of the Custodial Agreement and shall deliver Trust
Receipts (as defined in the Custodial Agreement) to the Agent, each to the
effect that it has reviewed such Mortgage Loan Documents in the manner and to
the extent required by the Custodial Agreement and identifying any deficiencies
in such Mortgage Loan Documents as so reviewed.

 

(b) All of each Borrower’s right, title and interest in, to and under each of
the following items of property, whether now owned or hereafter acquired, now
existing or hereafter created and wherever located, is hereinafter referred to
as the “Collateral”:

 

(i) all Mortgage Loans;

 

(ii) all Mortgage Loan Documents, including, without limitation, all promissory
notes and all Servicing Records, Servicing Agreements and any other collateral
pledged or otherwise relating to such Mortgage Loans, together with all files,
documents, instruments, surveys, certificates, correspondence, appraisals,
computer programs (subject to any restrictions on transfer under any related
licensing agreement), accounting records and other books and records relating
thereto, including electronic records;

 

(iii) all mortgage guaranties and insurance (issued by governmental agencies or
otherwise) and any mortgage insurance certificate or other document evidencing
such mortgage guaranties or insurance relating to any Mortgage Loan and all
claims and payments thereunder;

 

(iv) all other insurance policies and insurance proceeds relating to any
Mortgage Loan or the related Mortgaged Property;

 

(v) all Interest Rate Protection Agreements, relating to or constituting any and
all of the foregoing;

 

(vi) the Controlled Accounts and all monies from time to time on deposit in the
Controlled Accounts;

 

(vii) all collateral, however defined, under any other agreement between a
Borrower or any of its Affiliates on the one hand and any Lender or any of its
Affiliates on the other hand;

 

(viii) all “general intangibles”, “accounts” and “chattel paper” as defined in
the Uniform Commercial Code relating to or constituting any and all of the
foregoing; and

 

(ix) any and all replacements, substitutions, distributions on or proceeds of
any and all of the foregoing.

 

(c) Each Borrower hereby assigns, pledges and grants a security interest in all
of its right, title and interest in, to and under the Collateral to the Agent,
for the ratable benefit of the Lenders, to secure the MS Indebtedness including,
without limitation, the repayment of

 

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principal of and interest on all Loans and all other amounts owing to the
Lenders hereunder, under the Notes and under the other Loan Documents
(collectively, the “Secured Obligations”). Each Borrower agrees to mark its
computer records and tapes to evidence the interests granted hereunder to the
Agent, for the ratable benefit of the Lenders.

 

Section 4.02 Further Documentation. At any time and from time to time, upon the
written request of the Agent, and at the sole expense of the Borrowers, the
Borrowers will promptly and duly execute and deliver, or will promptly cause to
be executed and delivered, such further instruments and documents and take such
further action as the Agent may reasonably request for the purpose of obtaining
or preserving the full benefits of this Loan Agreement and of the rights and
powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code in effect
in any jurisdiction with respect to the Liens created hereby. Each Borrower also
hereby authorizes the Agent to file any such financing or continuation statement
without the signature of any Borrower to the extent permitted by applicable law.
A photographic or other reproduction of this Loan Agreement shall be sufficient
as a financing statement for filing in any jurisdiction.

 

Section 4.03 Changes in Locations, Names, etc. The Borrowers shall not (i)
change the location of its chief executive office/chief place of business from
that specified in Article VI hereof, (ii) change its name, identity or corporate
structure (or the equivalent), or change the location where it maintains its
records with respect to the Collateral or (iii) reincorporate or reorganize
under the laws of another jurisdiction unless it shall have given the Agent at
least 30 days prior written notice thereof and shall have delivered to the Agent
all Uniform Commercial Code financing statements and amendments thereto as the
Agent shall request and taken all other actions deemed necessary by the Agent to
continue its perfected status in the Collateral with the same or better
priority.

 

Section 4.04 Agent’s Appointment as Attorney-in-Fact.

 

(a) Each Borrower hereby irrevocably constitutes and appoints the Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of such Borrower and in the name of such Borrower or in its own name,
from time to time in the Agent’s discretion, for the purpose of carrying out the
terms of this Loan Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Loan Agreement, and, without
limiting the generality of the foregoing, such Borrower hereby gives the Agent
the power and right, on behalf of such Borrower, without assent by, but with
notice to such Borrower, if an Event of Default shall have occurred and be
continuing, to do the following:

 

(i) in the name of such Borrower or its own name, or otherwise, to take
possession of and endorse and collect any checks, drafts, notes, acceptances or
other instruments for the payment of moneys due under any mortgage insurance or
with respect to any other Collateral and to file any claim or to take any other
action or proceeding in any court of law or equity or otherwise deemed
appropriate by the Agent for the purpose of collecting any and all such moneys
due under any such mortgage insurance or with respect to any other Collateral
whenever payable;

 

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(ii) to pay or discharge taxes and Liens levied or placed on or threatened
against the Collateral; and

 

(iii) (A) to direct any party liable for any payment under any Collateral to
make payment of any and all moneys due or to become due thereunder directly to
the Agent or as the Agent shall direct; (B) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and other amounts
due or to become due at any time in respect of or arising out of any Collateral;
(C) to sign and endorse any invoices, assignments, verifications, notices and
other documents in connection with any of the Collateral; (D) to commence and
prosecute any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any portion thereof and to
enforce any other right in respect of any Collateral; (E) to defend any suit,
action or proceeding brought against such Borrower with respect to any
Collateral; (F) to settle, compromise or adjust any suit, action or proceeding
described in clause (E) above and, in connection therewith, to give such
discharges or releases as the Agent may deem appropriate; and (G) generally, to
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Agent were the
absolute owner thereof for all purposes, and to do, at the Agent’s option and
such Borrower’s expense, at any time, and from time to time, all acts and things
which the Agent deems necessary to protect, preserve or realize upon the
Collateral and the Agent’s Liens thereon and to effect the intent of this Loan
Agreement, all as fully and effectively as such Borrower might do.

 

Each Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.

 

(b) Each Borrower also authorizes the Agent, at any time and from time to time,
to execute, in connection with any sale provided for in Section 4.07 hereof, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral and to file any initial financing statements,
amendments thereto and continuation statements with or without the signature of
any Borrower as authorized by applicable law, as applicable to all or any part
of the Collateral.

 

(c) The powers conferred on the Agent pursuant to this Section 4.04 are solely
to protect the Lenders’ interests in the Collateral and shall not impose any
duty upon the Agent to exercise any such powers. The Agent shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and neither the Agent nor any of its officers, directors, or employees
shall be responsible to the Borrowers for any act or failure to act hereunder,
except for its own gross negligence, bad faith or willful misconduct.

 

Section 4.05 Performance by Agent of Borrowers’ Obligations. If any Borrower
fails to perform or comply with any of its agreements contained in the Loan
Documents and the Agent itself performs or complies, or otherwise causes
performance or compliance, with such agreement, the expenses of the Agent
incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the

 

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Post-Default Rate, shall be payable by the Borrowers to the Agent on demand and
shall constitute Secured Obligations.

 

Section 4.06 Proceeds. If an Event of Default shall occur and be continuing, (a)
all proceeds of Collateral received by the Borrowers consisting of cash, checks
and other near-cash items shall be held by the Borrowers in trust for the Agent
for the ratable benefit of the Lenders, segregated from other funds of the
Borrowers, and shall forthwith upon receipt by the Borrowers be turned over to
the Agent in the exact form received by the Borrowers (duly endorsed by the
Borrowers to the Agent, if required) and (b) any and all such proceeds received
by the Agent (whether from the Borrowers or otherwise) may, in the sole
discretion of the Agent, be held by the Agent as collateral security for, and/or
then or at any time thereafter may be applied by the Agent against, the Secured
Obligations (whether matured or unmatured), such application to be in such order
as the Agent shall elect. Any balance of such proceeds remaining after the
Secured Obligations shall have been paid in full and this Loan Agreement shall
have been terminated shall be paid over to the Borrowers or to whomsoever may be
lawfully entitled to receive the same. For purposes hereof, proceeds shall
include, but not be limited to, all principal and interest payments, all
prepayments and payoffs, insurance claims, condemnation awards, sale proceeds,
real estate owned rents and any other income and all other amounts received with
respect to the Collateral.

 

Section 4.07 Remedies. If a Default shall occur and be continuing, the Agent
may, at its option and at the Borrowers’ expense, enter into one or more
Interest Rate Protection Agreements covering all or a portion of the Mortgage
Loans pledged to the Agent, for the benefit of the Lenders hereunder, and the
Borrowers shall be responsible for all damages, judgments, costs and expenses of
any kind which may be imposed on, incurred by or asserted against the Agent
relating to or arising out of such Interest Rate Protection Agreements;
including, without limitation, any losses resulting from such Interest Rate
Protection Agreements. If an Event of Default shall occur and be continuing, the
Agent may exercise, in addition to all other rights and remedies granted to it
in this Loan Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and remedies of a
secured party under the Uniform Commercial Code. Without limiting the generality
of the foregoing, the Agent without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrowers or any other Person
(each and all of which demands, presentments, protests, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels or as an entirety at public
or private sale or sales, at any exchange, broker’s board or office of the Agent
or elsewhere upon such terms and conditions and at such prices as it may deem
best in its good faith judgment, for cash or on credit or for future delivery
without assumption of any credit risk. The Agent shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Borrowers, which right or
equity is hereby waived or released. The Borrowers further agree, at the Agent’s
request, to assemble the Collateral and make it available to the Agent at places
that the Agent shall reasonably select, whether at the Borrowers’ premises or
elsewhere. The Agent shall apply the

 

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net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Agent
hereunder, including, without limitation, reasonable attorneys’ fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Agent may elect, and only after such application and after the
payment by the Agent of any other amount required or permitted by any provision
of law, including, without limitation, Section 9-608(a)(l)(c) of the Uniform
Commercial Code, need the Agent account for the surplus, if any, to the
Borrowers. To the extent permitted by applicable law, each Borrower waives all
claims, damages and demands it may acquire against the Agent or any Lender
arising out of the exercise by the Agent or any Lender of any of its rights
hereunder, other than those claims, damages and demands arising from the gross
negligence, bad faith or willful misconduct of the Agent or such Lender. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least ten
(10) days before such sale or other disposition. The Borrowers shall remain
liable for any deficiency (plus accrued interest thereon as contemplated
pursuant to Section 2.06(b) hereof) if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Secured Obligations
and the fees and disbursements of any attorneys employed by the Agent to collect
such deficiency.

 

Section 4.08 Limitation on Duties Regarding Preservation of Collateral. The
Agent’s duty with respect to the custody, safekeeping and physical preservation
of the Collateral in its possession, under Section 9-207 of the Uniform
Commercial Code or otherwise, shall be to deal with it in the same manner as the
Agent deals with similar property for its own account. Neither the Agent, any
Lender nor any of their respective directors, officers or employees shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Borrowers or
otherwise.

 

Section 4.09 Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.

 

Section 4.10 Release of Security Interest. Upon termination of this Loan
Agreement and repayment to the Lenders of all Secured Obligations and the
performance of all obligations under the Loan Documents, the Agent shall release
its security interest in any remaining Collateral.

 

ARTICLE V

 

CONDITIONS PRECEDENT.

 

Section 5.01 Initial Loan. The obligation of MSMCI to continue the Loans made
pursuant to the Existing Loan Agreement and the obligation of each Lender to
make Loans hereunder is subject to the satisfaction of the condition precedent
that the Agent shall have received all of the following items, each of which
shall be satisfactory to the Agent and its counsel in form and substance:

 

(a) Loan Documents.

 

(i) Loan Agreement. This Loan Agreement, executed and delivered by a duly
authorized officer of each of the Borrowers and the Guarantor;

 

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(ii) Notes. For each Lender, a Note, executed and delivered by a duly authorized
officer of each of the Borrowers;

 

(iii) Custodial Agreement. The Custodial Agreement, executed and delivered by a
duly authorized officer of the Borrowers and the Custodian; and

 

(iv) Amendment to Control Agreement. An amendment to the Control Agreement,
substantially in the form of Exhibit J hereto, executed and delivered by the
parties thereto.

 

(v) New Century Guaranty. The New Century Guaranty, executed and delivered by a
duly authorized officer of the Guarantor.

 

(b) Organizational Documents. A good standing certificate and certified copies
of the charter and by-laws (or equivalent documents) of each Borrower and the
Guarantor (or a certificate from a Responsible Officer of each Borrower and the
Guarantor that there have been no amendments to the charter or by-laws (or
equivalent documents) since the date on which such documents were previously
delivered under the Existing Loan Agreement) and of all corporate or other
authority for each Borrower and the Guarantor with respect to the execution,
delivery and performance of the Loan Documents to which it is a party, and each
other document to be delivered by the Borrowers and the Guarantor from time to
time in connection with the Loan Documents (and the Lenders may conclusively
rely on such certificate until it receives notice in writing from the Borrowers
or the Guarantor to the contrary).

 

(c) Legal Opinions. Legal opinions of inside and outside counsels to the
Borrowers and the Guarantor, substantially in the forms attached hereto as
Exhibit C-1 and C-2, respectively.

 

(d) Trust Receipt and Mortgage Loan Schedule and Exception Report. A Trust
Receipt, substantially in the form of Annex 2 of the Custodial Agreement, dated
the Effective Date, from the Custodian, duly completed, with a Mortgage Loan
Schedule and Exception Report attached thereto.

 

(e) Servicing Agreement(s). Any Servicing Agreement, certified as a true,
correct and complete copy of the original together, with a fully executed
Servicer Notice and, if the Servicer is a Borrower or an Affiliate of a
Borrower, the letter of the applicable Servicer consenting to termination of
such Servicing Agreement, without charge, upon the occurrence of an Event of
Default.

 

(f) Lien Searches and Actions to Perfect Liens. The Agent shall have received
the results of a recent search conducted by a Person satisfactory to the Agent
with respect to any liens which may have been filed against any of the
Collateral, and the results of such search shall be satisfactory to the Agent.
The Borrowers shall have taken all such action as

 

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the Agent shall deem necessary or advisable (including, without limitation, the
authorization and execution of Uniform Commercial Code financing, continuation
or amendment statements) to perfect, continue or otherwise ensure perfection of
the security interests granted in favor of the Agent under the Loan Documents.

 

(g) [Reserved]

 

(h) Facility Fee. The facility fee as contemplated by Section 3.04.

 

(i) Financial Statements. The financial statements referenced in Section 6.02.

 

(j) Underwriting Guidelines. A certified copy of the Underwriting Guidelines,
which shall be in form and substance satisfactory to the Agent.

 

(k) Consents, Licenses, Approvals, etc. Copies certified by the Borrowers of all
consents, licenses and approvals, if any, required in connection with the
execution, delivery and performance by the Borrowers of, and the validity and
enforceability of, the Loan Documents, which consents, licenses and approvals
shall be in full force and effect.

 

(l) Other Documents. Such other documents as the Agent may reasonably request.

 

Section 5.02 Initial and Subsequent Loans. The making of each Loan to the
Borrowers (including the initial Loan) on any Business Day is subject to the
satisfaction of the following further conditions precedent, both immediately
prior to the making of such Loan and also after giving effect thereto and to the
intended use thereof:

 

(a) No Default. No Default or Event of Default shall have occurred and be
continuing.

 

(b) Representations and Warranties. Both immediately prior to the making of such
Loan and also after giving effect thereto and to the intended use thereof, the
representations and warranties made by the Borrowers in Article VI and Schedules
1 and 2 hereof, and elsewhere in each of the Loan Documents, shall be true,
correct and complete on and as of the date of the making of such Loan in all
material respects (in the case of the representations and warranties in Section
6.10 and Schedules 1 and 2, solely with respect to Mortgage Loans included in
the Borrowing Base) with the same force and effect as if made on and as of such
date (or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date). The Agent shall have
received an officer’s certificate signed by a Responsible Officer of each
Borrower certifying as to the truth, accuracy and completeness of the above,
which certificate shall specifically include a statement that each Borrower is
in compliance with all governmental licenses and authorizations and is qualified
to do business and in good standing in all required jurisdictions.

 

(c) Borrowing Base. The aggregate outstanding principal amount of the Loans
shall not exceed the Borrowing Base.

 

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(d) Due Diligence. Subject to the Agent’s right to perform one or more Due
Diligence Reviews pursuant to Section 11.15 hereof, the Agent shall have
completed its due diligence review of the Mortgage Loan Documents for each Loan
and such other documents, records, agreements, instruments, mortgaged properties
or information relating to such Mortgage Loans as the Agent in its sole
discretion deems appropriate to review and such review shall be satisfactory to
the Agent in its sole discretion.

 

(e) Mortgage Loan Schedule and Exception Report. The Agent shall have received
from the Custodian a Mortgage Loan Schedule and Exception Report with Exceptions
as are acceptable to the Agent in its sole discretion in respect of Eligible
Mortgage Loans to be pledged hereunder on such Business Day.

 

(f) Release Letter. If applicable, the Agent shall have received from the
applicable Borrower a Warehouse Lender’s Release Letter substantially in the
form of Exhibit E-2 hereto (or such other form acceptable to the Agent) or a
Seller’s Release Letter substantially in the form of Exhibit E-1 hereto (or such
other form acceptable to the Agent) covering each Mortgage Loan to be pledged to
the Agent, for the ratable benefit of the Lenders.

 

(g) Fees and Expenses. The Agent shall have received all fees and expenses of
counsel to the Agent as contemplated by Section 11.03, which amount, at the
Agent’s option, may be netted from any Loan advanced under this Agreement.

 

(h) No Market Events. None of the following shall have occurred and/or be
continuing:

 

(i) an event or events shall have occurred resulting in the effective absence of
a “repo market” or comparable “lending market” for financing debt obligations
secured by mortgage loans or securities or an event or events shall have
occurred resulting in any Lender not being able to finance any Mortgage Loans
through the “repo market” or “lending market” with traditional counterparties at
rates which would have been reasonable prior to the occurrence of such event or
events;

 

(ii) an event or events shall have occurred resulting in the effective absence
of a “securities market” for securities backed by mortgage loans or an event or
events shall have occurred resulting in any Lender not being able to sell
securities backed by mortgage loans at prices which would have been reasonable
prior to such event or events; or

 

(iii) there shall have occurred a material adverse change in the financial
condition of any Lender which affects (or can reasonably be expected to affect)
materially and adversely the ability of such Lender to fund its obligations
under this Loan Agreement;

 

provided, however, that if any such events shall have occurred or be continuing
and any Lender shall have determined, in its sole discretion, to not make any
additional Loans, then such Lender shall reimburse the Borrowers a pro rata
portion of the facility fee paid to such Lender pursuant to Section 3.04 based
upon the number of days elapsed from the Effective Date to date of such
determination.

 

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(i) No Morgan Stanley Downgrade. Morgan Stanley & Co.’s unsecured long-term debt
rating, as calculated by S&P or Moody’s, has not been lowered or downgraded to a
rating below “A-”, as indicated by S&P, or below “A3”, as indicated by Moody’s.

 

(j) Filings, Registrations, Recordings. Any documents (including, without
limitation, financing statements) required to be filed, registered or recorded
in order to create, in favor of the Agent, for the ratable benefit of the
Lenders, a perfected, first-priority security interest in the Collateral,
subject to no Liens other than those created hereunder, shall have been properly
prepared and executed for filing (including the applicable county(ies) if the
Agent determines such filings are necessary in its sole discretion),
registration or recording in each office in each jurisdiction in which such
filings, registrations and recordations are required to perfect such
first-priority security interest; provided, that assignments of the Mortgages
securing or related to the Mortgage Loans shall not be required to be recorded
prior to the occurrence of an Event of Default.

 

(k) Discretionary Mortgage Loans. At least three (3) Business Days prior to a
Funding Date, the Borrowers shall have provided to the Agent a certification as
to the reason why a Discretionary Mortgage Loan has not been previously disposed
of by the Borrowers and the Agent shall have approved of the inclusion of such
Discretionary Mortgage Loan in the Mortgage Loan Schedule and Exception Report
to be pledged hereunder on such Funding Date.

 

Each request for a borrowing under this Loan Agreement shall constitute a
certification by the Borrowers that all of the conditions set forth in this
Article V (other than Sections 5.02(h) and (i)) have been satisfied (both as of
the date of such request and as of the date of borrowing).

 

(l) Minimum Usage Fee. The Agent shall have received the Minimum Usage Fee, if
any.

 

Section 5.03 Wet-Ink Transactions. The funding of each Wet-Ink Transaction on
any Business Day is subject to the following further conditions precedent:

 

(a) Wet-Ink Aged Report. The Agent shall have received from the Custodian a
Wet-Ink Aged Report in form and substance satisfactory to the Lender; and

 

(b) Wet Aging. A Borrowing Base Deficiency shall not have occurred and be
continuing because of the inclusion of Nine-Day Aged Wet-Ink Mortgage Loans in
the Borrowing Base.

 

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ARTICLE VI

 

REPRESENTATIONS AND WARRANTIES.

 

Each Borrower represents and warrants to the Agent and the Lenders that
throughout the term of this Loan Agreement:

 

Section 6.01 Existence. Each Borrower (a) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite corporate or other power, and has all
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted, except where the lack of such licenses, authorizations, consents and
approvals would not be reasonably likely to have a Material Adverse Effect, and
(c) is qualified to do business and is in good standing in all other
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary, except where failure so to qualify would not be
reasonably likely (either individually or in the aggregate) to have a Material
Adverse Effect.

 

Section 6.02 Financial Condition. Each of the Borrowers and the Guarantor has
heretofore furnished to the Agent a copy of (i) its consolidated balance sheet
and the consolidated balance sheets of its consolidated Subsidiaries for the
fiscal year of the Borrowers ended December 31, 2003 and the related
consolidated statements of income and retained earnings and of cash flows for
the Borrowers, the Guarantor and their consolidated Subsidiaries for such fiscal
year, setting forth in each case in comparative form the figures for the
previous year, with the opinion thereon of KPMG, LLC and (ii) its consolidated
balance sheet and the consolidated balance sheets of its consolidated
Subsidiaries for the three most recently ended quarterly fiscal periods of the
Borrowers and the related consolidated statements of income and retained
earnings and of cash flows for the Borrowers, the Guarantor and their
consolidated Subsidiaries for such quarterly fiscal periods, setting forth in
each case in comparative form the figures for the previous year. All such
financial statements fairly present, in all material respects, the consolidated
financial condition of the Borrowers, the Guarantor and their Subsidiaries and
the consolidated results of their operations as at such dates and for such
fiscal periods, all in accordance with GAAP applied on a consistent basis. Since
the date of the most recently delivered financials, there has been no material
adverse change in the consolidated business, operations or financial condition
of the Borrowers, the Guarantor and their consolidated Subsidiaries taken as a
whole from that set forth in said financial statements.

 

Section 6.03 Litigation. There are no actions, suits, arbitrations,
investigations (including, without limitation, any of the foregoing which are
pending or, to each Borrower’s knowledge, threatened) or other legal or
arbitrable proceedings affecting the Borrowers or any of its Affiliates or
affecting any of the Property of any of them before any Governmental Authority
that (i) questions or challenges the validity or enforceability of any of the
Loan Documents or any action to be taken in connection with the transactions
contemplated hereby, (ii) makes a claim or claims in an aggregate amount greater
than $1,000,000, (iii) which, individually or in the aggregate, if adversely
determined, could reasonably be likely to have a Material Adverse Effect or (iv)
requires filing with the Securities and Exchange Commission in accordance with
the 1934 Act or any rules thereunder.

 

Section 6.04 No Breach. Neither (a) the execution and delivery of the Loan
Documents nor (b) the consummation of the transactions therein contemplated in
compliance with the terms and provisions thereof will conflict with or result in
a breach of the charter or by-laws of any Borrower, or any applicable law, rule
or regulation, or any order, writ, injunction or decree of any Governmental
Authority, or any Servicing Agreement or other material agreement or instrument
to which any Borrower or any of its Affiliates is a party or by which any of
them or

 

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any of their Property is bound or to which any of them is subject, or constitute
a default under any such material agreement or instrument or result in the
creation or imposition of any Lien (except for the Liens created pursuant to
this Loan Agreement) upon any Property of any Borrower or any of its
Subsidiaries pursuant to the terms of any such agreement or instrument.

 

Section 6.05 Action. Each Borrower has all necessary corporate or other power,
authority and legal right to execute, deliver and perform its obligations under
each of the Loan Documents to which it is a party; the execution, delivery and
performance by each Borrower of each of the Loan Documents to which it is a
party have been duly authorized by all necessary corporate or other action on
its part; and each Loan Document has been duly and validly executed and
delivered by the Borrowers and constitutes a legal, valid and binding obligation
of the Borrowers, enforceable against the Borrowers in accordance with its
terms.

 

Section 6.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority or any securities
exchange are necessary for the execution, delivery or performance by the
Borrowers of the Loan Documents or for the legality, validity or enforceability
thereof, except for filings and recordings in respect of the Liens created
pursuant to this Loan Agreement.

 

Section 6.07 Margin Regulations. Neither the making of any Loan hereunder, nor
the use of the proceeds thereof, will violate or be inconsistent with the
provisions of Regulations T, U or X.

 

Section 6.08 Taxes. Each Borrower and its Subsidiaries have filed all Federal
income tax returns and all other material tax returns that are required to be
filed by them and have paid all taxes due pursuant to such returns or pursuant
to any assessment received by any of them, except for any such taxes as are
being appropriately contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate reserves have been
provided. The charges, accruals and reserves on the books of each Borrower and
its Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of each Borrower, adequate.

 

Section 6.09 Investment Company Act. No Borrower nor any of its Subsidiaries is
an “investment company”, or a company “controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

 

Section 6.10 Collateral; Collateral Security.

 

(a) No Borrower has assigned, pledged, or otherwise conveyed or encumbered any
Mortgage Loan or other Collateral to any other Person, and immediately prior to
the pledge of each Mortgage Loan or any other Collateral to the Agent, a
Borrower was the sole owner of such Mortgage Loan or such other Collateral and
had good and marketable title thereto, free and clear of all Liens, in each case
except for Liens to be released simultaneously with the Liens granted in favor
of the Agent, for the benefit of the Lenders hereunder. No Mortgage Loans or
other Collateral pledged to the Agent, for the benefit of the Lenders hereunder,
was acquired (by purchase or otherwise) by a Borrower from any Affiliate of any
Borrower, other than those Mortgage Loans or other Collateral which were
acquired by NC

 

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Capital pursuant to (i) the Mortgage Loan Purchase and Servicing Agreement,
dated December 1, 1998, between NC Capital and New Century Mortgage Corporation
or (ii) the Mortgage Loan Purchase and Servicing Agreement, dated July 1, 2001,
between Worth Funding Incorporated and New Century Mortgage Corporation, unless
such acquisition (by purchase or otherwise) is evidenced by a sale agreement and
an assignment of rights thereunder to the Agent, in each case, in form and
substance acceptable to the Agent, and the applicable Borrower and its
Affiliates file or have filed in all relevant jurisdictions, UCC-1 financing
statements reflecting the transfer of such Mortgage Loan to such Borrower,
together with the assignment of such interest described in such financing
statement to the Agent.

 

(b) The provisions of this Loan Agreement are effective to create in favor of
the Agent, for the ratable benefit of the Lenders, a valid security interest in
all right, title and interest of each Borrower in, to and under the Collateral.

 

(c) Upon receipt by the Custodian of each Mortgage Note, endorsed in blank by a
duly authorized officer of the relevant Borrower, the Agent shall have a fully
perfected first priority security interest therein, in the Mortgage Loan
evidenced thereby and in the relevant Borrower’s interest in the related
Mortgaged Property.

 

(d) Upon the filing of financing statements on Form UCC-1 naming the Agent as
“Secured Party” and each Borrower as “Debtor” and describing the Collateral in
the jurisdictions and recording offices listed on Schedule 2 attached hereto,
the security interests granted hereunder in the Collateral will continue to
constitute fully perfected first priority security interests under the Uniform
Commercial Code in all right, title and interest of the Borrowers in, to and
under such Collateral which can be perfected by filing under the Uniform
Commercial Code.

 

Section 6.11 Chief Executive Office/Jurisdiction of Organization. On the
Effective Date, and during the four months immediately preceding the Effective
Date, each Borrower’s chief executive office, is, and has been, located at 18400
Von Karman, Suite 1000, Irvine, California 92612. On the Effective Date, each
Borrower’s jurisdiction of organization is California.

 

Section 6.12 Location of Books and Records. The location where each Borrower
keeps its books and records, including all computer tapes and records relating
to the Collateral is its chief executive office.

 

Section 6.13 True and Complete Disclosure. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of each
Borrower to the Agent in connection with the negotiation, preparation or
delivery of this Loan Agreement and the other Loan Documents or included herein
or therein or delivered pursuant hereto or thereto, when taken as a whole, do
not contain any untrue statement of material fact or omit to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. All written
information furnished after the date hereof by or on behalf of each Borrower to
the Agent in connection with this Loan Agreement and the other Loan Documents
and the transactions contemplated hereby and thereby will be true, complete and
accurate in every material respect, or (in the case of projections) based on

 

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reasonable estimates, on the date as of which such information is stated or
certified. There is no fact known to a Responsible Officer of each Borrower,
after due inquiry, that could reasonably be expected to have a Material Adverse
Effect that has not been disclosed herein, in the other Loan Documents or in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing, furnished to the Agent for use in connection with the transactions
contemplated hereby or thereby.

 

Section 6.14 ERISA. Each Plan to which each Borrower or its Subsidiaries make
direct contributions, and, to the knowledge of each Borrower, each other Plan
and each Multiemployer Plan is in compliance in all material respects with, and
has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other Federal or State law. No
event or condition has occurred and is continuing as to which the Borrowers
would be under an obligation to furnish a report to the Agent under Section
7.01(d) hereof.

 

Section 6.15 Subsidiaries. Schedule 3 sets forth the name of each direct or
indirect Subsidiary of each Borrower and of the holders of Capital Stock of each
Borrower, its form of organization, its jurisdiction of organization, the total
number of issued and outstanding shares or other interests of Capital Stock
thereof, the classes and number of issued and outstanding shares or other
interests of Capital Stock of each such class, the name of each holder of
Capital Stock thereof and the number of shares or other interests of such
Capital Stock held by each such holder and the percentage of all outstanding
shares or other interests of such class of Capital Stock held by such holders.

 

ARTICLE VII

 

COVENANTS OF THE BORROWERS.

 

The Borrowers covenant and agree with the Agent and the Lenders that, so long as
any Loan is outstanding, and until payment in full of all Secured Obligations:

 

Section 7.01 Financial Statements. The Borrowers shall deliver to the Agent:

 

(a) as soon as available and in any event within 90 days after the end of each
fiscal year of the Guarantor, the consolidated balance sheets of the Guarantor
and its consolidated Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income and retained earnings and of cash
flows for the Guarantor and its consolidated Subsidiaries for such year, setting
forth in each case in comparative form the figures for the previous year,
accompanied by an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall not be qualified as to scope
of audit or going concern and shall state that said consolidated financial
statements fairly present the consolidated financial condition and results of
operations of the Guarantor and its consolidated Subsidiaries as at the end of,
and for, such fiscal year in accordance with GAAP, and a certificate of such
accountants stating that, in making, the examination necessary for their
opinion, they obtained no knowledge, except as specifically stated, of any
Default or Event of Default;

 

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(b) as soon as available and in any event within 30 days after the end of each
calendar month, the unaudited consolidated balance sheets of the Guarantor and
its consolidated Subsidiaries as at the end of such month and the related
unaudited consolidated statements of income and retained earnings and of cash
flows of the Guarantor and its consolidated Subsidiaries for such month and the
portion of the fiscal year through the end of such month, setting forth in each
case in comparative form the figures for the previous year, accompanied by (i) a
certificate of a Responsible Officer of the Guarantor, which certificate shall
state that said consolidated financial statement fairly represents the
consolidated financial condition and results of operation of the Guarantor and
its consolidated Subsidiaries in accordance with GAAP, consistently applied, as
of the end of, and for, such month (subject to normal year-end audit
adjustments) and (ii) the Board Report.

 

(c) from time to time such other information regarding the financial condition,
operations, or business of each Borrower or the Guarantor as the Agent may
reasonably request; and

 

(d) as soon as reasonably possible, and in any event within thirty (30) days
after a Responsible Officer of any Borrower knows, or with respect to any Plan
or Multiemployer Plan to which any Borrower or any of its Subsidiaries makes
direct contributions, has reason to believe, that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan has
occurred or exists, a statement signed by a senior financial officer of any
Borrower setting forth details respecting such event or condition and the
action, if any, that any Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by each Borrower or an ERISA Affiliate with respect to such event
or condition):

 

(i) any reportable event, as defined in Section 4043(c) of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not
by regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within thirty (30) days of the occurrence of such event (provided, that
a failure to meet the minimum funding standard of Section 412 of the Code or
Section 302 of ERISA, including, without limitation, the failure to make on or
before its due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code); and any request
for a waiver under Section 412(d) of the Code for any Plan;

 

(ii) the distribution under Section 4041(c) of ERISA of a notice of intent to
terminate any Plan or any action taken by any Borrower or an ERISA Affiliate to
terminate any Plan;

 

(iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by any Borrower or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by PBGC with respect to such Multiemployer
Plan;

 

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(iv) the complete or partial withdrawal from a Multiemployer Plan by any
Borrower or any ERISA Affiliate that results in liability under Section 4201 or
4204 of ERISA (including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt by any Borrower or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA;

 

(v) the institution of a proceeding by a fiduciary of any Multiemployer Plan
against any Borrower or any ERISA Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within 30 days; and

 

(vi) the adoption of an amendment to any Plan that would result in the loss of
tax-exempt status of the Plan and trust of which such Plan is a part if any
Borrower or an ERISA Affiliate fails to provide timely security to such Plan if
and as required by the provisions of Section 401(a)(29) of the Code or Section
307 of ERISA.

 

Each Borrower will furnish to the Agent, at the time it furnishes each set of
financial statements pursuant to paragraphs (a) and (b) above, a certificate of
a Responsible Officer of such Borrower to the effect that, to the best of such
Responsible Officer’s knowledge, such Borrower during such fiscal period or year
has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Loan Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate (and, if any Default or Event of Default
has occurred and is continuing, describing, the same in reasonable detail and
describing the action such Borrower has taken or proposes to take with respect
thereto).

 

Section 7.02 Litigation. The Borrowers will promptly, and in any event within
ten (10) days after service of process on any of the following, give to the
Agent notice of all litigation, actions, suits, arbitrations, investigations
(including, without limitation, any of the foregoing which are pending or
threatened) or other legal or arbitrable proceedings affecting the Borrowers or
any of their Subsidiaries or affecting, any of the Property of any of them
before any Governmental Authority that (i) questions or challenges the validity
or enforceability of any of the Loan Documents or any action to be taken in
connection with the transactions contemplated hereby, (ii) makes a claim or
claims in an aggregate amount greater than $1,000,000, (iii) which, individually
or in the aggregate, if adversely determined, could be reasonably likely to have
a Material Adverse Effect or (iv) requires filing with the Securities and
Exchange Commission in accordance with the 1934 Act and any rules thereunder.

 

Section 7.03 Existence, etc. Each Borrower will:

 

(a) preserve and maintain its legal existence and all of its material rights,
privileges, licenses and franchises (provided, that nothing in this Section
7.03(a) shall prohibit any transaction expressly permitted under Section 7.04
hereof);

 

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(b) comply with the requirements of all applicable laws, rules, regulations and
orders of Governmental Authorities (including, without limitation, all
Prescribed Laws, environmental laws and all laws with respect to unfair and
deceptive lending practices and Predatory Lending Practices) if failure to
comply with such requirements would be reasonably likely (either individually or
in the aggregate) to have a Material Adverse Effect;

 

(c) keep adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied;

 

(d) change its jurisdiction of organization from the jurisdiction referred to in
Section 6.11 unless it shall have provided the Agent 30 days’ prior written
notice of such change;

 

(e) pay and discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its Property prior to the
date on which penalties attach thereto, except for any such tax, assessment,
charge or levy, the payment of which is being contested in good faith and by
proper proceedings and against which adequate reserves are being maintained; and

 

(f) permit representatives of the Agent, during normal business hours, to
examine, copy and make extracts from its books and records, to inspect any of
its Properties, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by the Agent.

 

Section 7.04 Prohibition of Fundamental Changes. No Borrower shall enter into
any transaction of merger or consolidation or amalgamation, or liquidate, wind
up or dissolve itself (or suffer any liquidation, winding up or dissolution) or
sell all or substantially all of its assets; provided, that each Borrower may
merge or consolidate with (a) any wholly-owned subsidiary of such Borrower or
(b) any other Person if such Borrower is the surviving corporation and such
Borrower’s Net Worth would not be affected by such merger or consolidation and
provided further, that if after giving effect thereto, no Default would exist
hereunder.

 

Section 7.05 Borrowing Base Deficiency. If at any time there exists a Borrowing
Base Deficiency the Borrowers shall cure same in accordance with Section 2.07
hereof.

 

Section 7.06 Notices. The Borrowers shall give notice to the Agent:

 

(a) promptly upon receipt of notice or knowledge of the occurrence of any
Default or Event of Default;

 

(b) with respect to any Mortgage Loan pledged to the Agent, for the benefit of
the Lenders hereunder, immediately upon receipt of any principal prepayment (in
full or partial) of such pledged Mortgage Loan;

 

(c) with respect to any Mortgage Loan pledged to the Agent, for the benefit of
the Lenders hereunder, immediately upon receipt of notice or knowledge that the
underlying Mortgaged Property has been damaged by waste, fire, earthquake or
earth movement,

 

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windstorm, flood, tornado or other casualty, or otherwise damaged so as to
affect adversely the Collateral Value of such pledged Mortgage Loan;

 

(d) promptly upon receipt of notice or knowledge of (i) any default related to
any Collateral, (ii) any Lien or security interest (other than security
interests created hereby or by the other Loan Documents) on, or claim asserted
against, any of the Collateral or (iii) any event or change in circumstances
which could reasonably be expected to have a Material Adverse Effect; and

 

(e) promptly upon any material change in the market value of any or all of each
Borrower’s assets.

 

Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of each Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrowers have taken or propose
to take with respect thereto.

 

Section 7.07 Reports. The Borrowers shall provide the Agent with a quarterly
report, which report shall include, among other items, (a) a summary of each
Borrower’s delinquency and loss experience with respect to mortgage loans
serviced by any Borrower, any Servicer or any designee of either, plus any such
additional reports as the Agent may reasonably request with respect to any
Borrower’s or any Servicer’s servicing portfolio or pending originations of
mortgage loans and (b) a mark to market summary of any residual and/or
subordinate securities held by any Borrower.

 

Section 7.08 Underwriting Guidelines. Without the prior written consent of the
Agent, the Borrowers shall not materially amend or otherwise modify the
Underwriting Guidelines. Notwithstanding the preceding sentence, in the event
that any Borrower makes any amendment or modification to the Underwriting
Guidelines, (i) such Borrower shall promptly deliver to the Agent a complete
copy of the amended or modified Underwriting Guidelines and (ii) if such change
is made without the prior written consent of the Agent, then Lender may, at its
sole option and discretion, refrain from funding any additional borrowings under
Section 2.03 hereof.

 

Section 7.09 Transactions with Affiliates. No Borrower will enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Loan Agreement, (b) in
the ordinary course of such Borrower’s business and (c) upon fair and reasonable
terms no less favorable to such Borrower than it would obtain in a comparable
arm’s length transaction with a Person which is not an Affiliate, or make a
payment that is not otherwise permitted by this Section 7.09 to any Affiliate.
In no event shall any Borrower pledge to the Agent, for the benefit of the
Lenders hereunder, any Mortgage Loan acquired by any Borrower from an Affiliate
of a Borrower.

 

Section 7.10 Limitation on Liens. The Borrowers will defend the Collateral
against, and will take such other action as is necessary to remove, any Lien,
security interest or claim on or to the Collateral, other than the security
interests created under this Loan Agreement,

 

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and the Borrowers will defend the right, title and interest of the Agent and the
Lenders in and to any of the Collateral against the claims and demands of all
persons whomsoever.

 

Section 7.11 Limitation on Guarantees. The Borrowers shall not create, incur,
assume or suffer to exist any Guarantees (provided that acting as a co-borrower
with respect to credit facilities entered into as the ordinary course of
business shall not be deemed Guarantees.)

 

Section 7.12 Limitation on Distributions. After the occurrence and during the
continuation of any Default, the Borrowers shall not make any payment on account
of, or set apart assets for, a sinking or other analogous fund for the purchase,
redemption, defeasance, retirement or other acquisition of any equity or
partnership interest of the Borrowers, whether now or hereafter outstanding, or
make any other distribution in respect of any of the foregoing or to any
shareholder or equity owner of the Borrowers, either directly or indirectly,
whether in cash or property or in obligations of the Borrowers or any of each
Borrower’s consolidated Subsidiaries.

 

Section 7.13 Servicer; Servicing Tape. The Borrowers shall provide to the Agent
on the tenth (10th) Business Day of each month a computer readable file
containing servicing information, including, without limitation, those fields
specified by the Agent from time to time, on a loan-by-loan basis and in the
aggregate, with respect to the Mortgage Loans serviced hereunder by the
Borrowers or any Servicer. The Borrowers shall not cause the Mortgage Loans to
be serviced by any servicer other than a servicer expressly approved in writing
by the Agent.

 

Section 7.14 Required Filings. The Borrowers shall promptly provide the Agent
with copies of all documents which the Borrowers or any Affiliates of the
Borrowers are required to file with the Securities and Exchange Commission in
accordance with the 1934 Act or any rules thereunder.

 

Section 7.15 No Adverse Selection. The Borrowers have not selected the
Collateral in a manner so as to adversely affect the Lenders’ interests.

 

Section 7.16 Remittance of Prepayments. The Borrowers shall remit, with
sufficient detail to enable the Agent to appropriately identify the Mortgage
Loan to which any amount remitted applies, to the Agent on each Remittance Date
all principal prepayments that the Borrowers have received since the prior
Remittance Date.

 

Section 7.17 Minimum Usage. If, as of the last day of any calendar month, the
average outstanding principal balance of all Loans during the four (4) calendar
month period ending on such day is less than $650,000,000, the Borrowers shall
remit to the Agent within one (1) Business Day after receiving notice of such
deficiency, the Minimum Usage Fee for such calendar month.

 

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ARTICLE VIII

 

EVENTS OF DEFAULT.

 

Section 8.01 Events of Default.

 

Each of the following events shall constitute an event of default (an “Event of
Default”) hereunder:

 

(a) any Borrower shall default in the payment of any principal of or interest on
any Loan when due (whether at stated maturity, upon acceleration or at mandatory
or optional prepayment); or

 

(b) any Borrower shall default in the payment of any other amount payable by it
hereunder or under any other Loan Document after notification by the Agent of
such default, and such default shall have continued unremedied for five (5)
Business Days; or

 

(c) any representation, warranty or certification made or deemed made herein or
in any other Loan Document by the Borrowers or any certificate furnished to the
Agent pursuant to the provisions hereof or thereof shall prove to have been
false or misleading in any material respect as of the time made or furnished
(other than the representations and warranties set forth in Schedule 1, which
shall be considered solely for the purpose of determining the Collateral Value
of the Mortgage Loans; unless (i) the Borrowers shall have made any such
representations and warranties with knowledge that they were materially false
or-misleading at the time made or (ii) any such representations and warranties
have been determined by the Agent in its sole discretion to be materially false
or misleading on a regular basis); or

 

(d) any Borrower shall fail to comply with the requirements of Section 7.03(a),
Section 7.04, Section 7.05, Section 7.06, or Sections 7.09 through 7.16 hereof;
or any Borrower shall otherwise fail to comply with the requirements of Sections
7.03, 7.07 and 7.08 hereof and such default shall continue unremedied for a
period of five (5) Business Days; or the Borrowers shall fail to observe or
perform any other covenant or agreement contained in this Loan Agreement or any
other Loan Document and such failure to observe or perform shall continue
unremedied for a period of seven (7) Business Days; or

 

(e) a final judgment or judgments for the payment of money in excess of
$1,500,000 in the aggregate shall be rendered against any Borrower or any of its
Material Affiliates by one or more courts, administrative tribunals or other
bodies having jurisdiction and the same shall not be satisfied, discharged (or
provision shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within thirty (30) days from the date
of entry thereof, and any Borrower or any such Material Affiliate shall not,
within said period of thirty (30) days, or such longer period during which
execution of the same shall have been stayed or bonded, appeal therefrom and
cause the execution thereof to be stayed during such appeal; or

 

(f) any Borrower or any of its Material Affiliates shall admit in writing its
inability to pay its debts as such debts become due; or

 

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(g) any Borrower or any of its Material Affiliates shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator or the like of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of its creditors, (iii) commence a voluntary case under the Bankruptcy Code,
(iv) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or
winding-up, or composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take any
corporate or other action for the purpose of effecting any of the foregoing; or

 

(h) a proceeding or case shall be commenced, without the application or consent
of any Borrower or any of its Material Affiliates, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner, liquidator or the like of any Borrower or any such Affiliate
or of all or any substantial part of its property or (iii) similar relief in
respect of any Borrower or any such Affiliate under any law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or
winding-up, or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 30 or more days; or an order for relief against any
Borrower or any such Affiliate shall be entered in an involuntary case under the
Bankruptcy Code; or

 

(i) the Custodial Agreement or any Loan Document shall for whatever reason be
terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by any Borrower; or

 

(j) any Borrower shall grant, or suffer to exist, any Lien on any Collateral
except the Liens contemplated hereby; or the Liens contemplated hereby shall
cease to be first priority perfected Liens on the Collateral in favor of the
Agent, for the ratable benefit of the Lenders, or shall be Liens in favor of any
Person other than the Agent; or

 

(k) any Borrower or any of any Borrower’s Material Affiliates shall be in
default under any note, indenture, loan agreement, guaranty, swap agreement or
any other contract to which it is a party in excess of $5,000,000, including,
without limitation, any MS Indebtedness, which default (i) involves the failure
to pay a matured obligation or (ii) permits the acceleration of the maturity of
obligations by any other party to or beneficiary of such note, indenture, loan
agreement, guaranty, swap agreement or other contract; or

 

(l) any materially adverse change in the Property, business, financial condition
or prospects of any Borrower or any of its Material Affiliates shall occur, in
each case as determined by the Agent in its sole discretion, or any other
condition shall exist which, in the Agent’s sole discretion, constitutes a
material impairment of any Borrower’s ability to perform its obligations under
this Loan Agreement, any Note or any other Loan Document; or

 

(m) MS & Co.’s unsecured long-term debt rating has been lowered or downgraded to
a rating below “A-” by S&P or “A3” by Moody’s and any Borrower shall have

 

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failed to repay all amounts owing to the Lenders under this Agreement, the Notes
and the other Loan Documents within ninety (90) days following such downgrade;
or

 

(n) the discovery by the Agent of a condition or event which existed at or prior
to the execution hereof and which the Agent, in its sole discretion, determines
materially and adversely affects: (i) the condition (financial or otherwise) of
any Borrower and the Guarantor, their Subsidiaries or Affiliates; or (ii) the
ability of any Borrower to fulfill their respective obligations under this Loan
Agreement; or

 

(o) any representation, warranty or certification made or deemed made in the New
Century Guaranty by the Guarantor shall prove to have been false or misleading
in any material respect as of the time made or furnished; or

 

(p) the Guarantor shall fail to observe or perform any covenant or agreement
contained in Section 11 of the New Century Guaranty; or

 

(q) any “Event of Default” shall have occurred under any other loan, repurchase
or other similar agreement involving $1,000,000 or more between any Borrower (or
any Affiliate of any Borrower) on the one hand and any Lender (or any Affiliate
of any Lender) on the other hand.

 

ARTICLE IX

 

REMEDIES UPON DEFAULT.

 

Section 9.01 Remedies.

 

(a) An Event of Default shall be deemed to be continuing unless expressly waived
by the Agent in writing. Upon the occurrence of one or more Events of Default
hereunder, the obligation of each Lender to make additional Loans to the
Borrowers shall automatically terminate without further action by any Person.
Upon the occurrence of one or more Events of Default other than those referred
to in Sections (f), (g) and (h) of Article VIII, the Agent may immediately
declare the principal amount of the Loans then outstanding under the Notes to be
immediately due and payable, together with all accrued and unpaid interest
thereon and fees and expenses accruing under this Loan Agreement. Upon the
occurrence of an Event of Default referred to in Sections (f), (g) and (h) of
Article VIII, such amounts shall immediately and automatically become due and
payable without any further action by any Person. Upon such declaration or such
automatic acceleration, the balance then outstanding on the Notes shall become
immediately due and payable, without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrowers.

 

(b) Upon the occurrence of a Default, the Agent shall have the right to obtain,
and the Borrowers shall deliver or cause to be delivered, on demand, physical
possession of the Servicing Records and all other files of the Borrowers
relating to the Collateral and all documents relating to the Collateral which
are then or may thereafter come in to the possession of the Borrowers or any
third parties acting for the Borrowers and the Borrowers shall deliver to

 

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the Agent such assignments as the Agent shall request. The Agent shall be
entitled to specific performance of all agreements of the Borrowers contained in
this Loan Agreement.

 

ARTICLE X

 

THE AGENT.

 

Section 10.01 Appointment. Each Lender hereby irrevocably designates and
appoints Morgan Stanley Mortgage Capital Inc. as the Agent of such Lender under
this Loan Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes the Agent, in such capacity, to take such action on its
behalf under the provisions of this Loan Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Agent by the terms of this Loan Agreement and the other Loan Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Loan Agreement,
the Agent shall not have any duties or responsibilities, except those expressly
set forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Loan Agreement or any other Loan Document or otherwise exist
against the Agent.

 

Section 10.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.

 

Section 10.03 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Loan Agreement or any other Loan Document
(except for its or such Person’s own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Borrower or any officer
thereof contained in this Loan Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Loan Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Loan Agreement or any other Loan Document
or for any failure of any Borrower to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Loan Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrowers.

 

Section 10.04 Reliance by Agent. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to each Borrower), independent accountants and other

 

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experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. As between the Agent and the other Lenders, the Agent shall be fully
justified in failing or refusing to take any action under this Loan Agreement or
any other Loan Document unless it shall first receive such advice or concurrence
of the Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. As
between the Agent and the other Lenders, the Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Loan Agreement and
the other Loan Documents in accordance with a request of the Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Loans.

 

Section 10.05 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder (other
than under Section 8.01 hereof) unless the Agent has received notice from a
Lender or any Borrower referring to this Loan Agreement, describing such Default
or Event of Default and stating that such notice is a “notice of default”. In
the event that the Agent receives such a notice, the Agent shall give notice
thereof to the Lenders. The Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Lenders;
provided that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.

 

Section 10.06 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrowers, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers and made its own decision to make its Loans hereunder and enter into
this Loan Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Loan Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of any
Borrower. Except for notices, reports and other documents expressly required to
be furnished by each Borrower to the Agent hereunder or under the other Loan
Documents, which the Agent must distribute promptly to the other Lenders, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of any
Borrower which may come into the possession of the Agent or any of its officers,
directors, employees, attorneys-in-fact or Affiliates.

 

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Section 10.07 Indemnification. The Lenders agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrowers and without
limiting the obligation of the Borrowers to do so), ratably according to their
respective Credit Exposure Percentages in effect on the date on which
indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of, the Commitments, this Loan Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Agent’s gross negligence or
willful misconduct. The agreements in this Section shall survive the payment of
the Loans and all other amounts payable hereunder.

 

Section 10.08 Agent in Its Individual Capacity. The Agent and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the Borrowers as though the Agent were not the Agent hereunder and under
the other Loan Documents. With respect to the Loans made by it, the Agent shall
have the same rights, powers and obligations under this Loan Agreement and the
other Loan Documents as any Lender and may exercise the same as though it were
not the Agent, and the terms “Lender” and “Lenders” shall include the Agent in
its individual capacity.

 

Section 10.09 Successor Agent. The Agent may resign as Agent upon thirty (30)
days’ notice to the Lenders and to the Borrowers. If the Agent shall resign as
Agent under this Loan Agreement and the other Loan Documents, then the Lenders
shall appoint from among the Lenders a successor Agent for the Lenders, which
successor Agent shall be approved by the Borrowers (unless an Event of Default
has occurred and is continuing), and any such successor Agent shall succeed to
the rights, powers and duties of the Agent, and the term “Agent” shall mean such
successor Agent effective upon such appointment and approval, and the former
Agent’s rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Loan Agreement or any holders of the Loans and Notes. If no
successor Agent has been appointed and shall have accepted such appointment
within 30 days after the retiring Agent’s giving notice of its resignation, then
the retiring Agent, on behalf of the Lenders, may appoint an Agent which shall
(unless an Event of Default has occurred and is continuing) be reasonably
acceptable to the Borrowers. Upon the acceptance of any appointment as the Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations, under this Loan Agreement and the other Loan Documents. After any
retiring Agent’s resignation as Agent, the provisions of this Article X shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Loan Agreement and the other Loan Documents.

 

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ARTICLE XI

 

MISCELLANEOUS.

 

Section 11.01 Waiver. No failure on the part of the Agent or any Lender to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under any Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under any Loan Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.

 

Section 11.02 Notices. Except as otherwise expressly permitted by this Loan
Agreement, all notices, requests and other communications provided for herein
and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests or consents under, this Loan Agreement)
shall be given or made in writing (including without limitation by telex or
telecopy) delivered to the intended recipient at the “Address for Notices”
specified below its name on the signature pages hereof or thereof); or, as to
any party, at such other address as shall be designated by such party in a
written notice to each other party provided, that a copy of all notices given
under Section 7.01 shall simultaneously be delivered to Credit Department,
Morgan Stanley, 1221 Avenue of the Americas, 35th Floor, Attention: Patrick
Romaine. Except as otherwise provided in this Loan Agreement and except for
notices given under Article II (which shall be effective only on receipt), all
such communications shall be deemed to have been duly given when transmitted by
telex or telecopy or personally delivered or, in the case of a mailed notice,
upon receipt, in each case given or addressed as aforesaid.

 

Section 11.03 Indemnification and Expenses. The Borrowers agree to hold the
Agent, each Lender and each of their respective Affiliates and their officers,
directors, employees, agents and advisors (each an “Indemnified Party”) harmless
from and indemnify any Indemnified Party against all liabilities, losses,
damages, judgments, costs and expenses of any kind which may be imposed on,
incurred by or asserted against such Indemnified Party (collectively, the
“Costs”) relating to or arising out of this Loan Agreement, any Note, any other
Loan Document or any transaction contemplated hereby or thereby, or any
amendment, supplement or modification of, or any waiver or consent under or in
respect of, this Loan Agreement, any Note, any other Loan Document or any
transaction contemplated hereby or thereby, that, in each case, results from
anything, other than any Indemnified Party’s gross negligence, bad faith or
willful misconduct. Without limiting the generality of the foregoing, the
Borrowers agree to hold any Indemnified Party harmless from and indemnify such
Indemnified Party against all Costs with respect to all Mortgage Loans relating
to or arising, out of any violation or alleged violation of any environmental
law, rule or regulation or any consumer credit laws, including without
limitation, laws with respect to unfair or deceptive lending practices or
Predatory Lending Practices, the Truth in Lending Act and/or the Real Estate
Settlement Procedures Act, that, in each case, results from anything other than
such Indemnified Party’s gross negligence, bad faith or willful misconduct. In
any suit, proceeding or action brought by an Indemnified Party in connection
with any Mortgage Loan for any sum owing thereunder, or to enforce any
provisions of any Mortgage Loan, the Borrowers will save, indemnify and hold
such Indemnified Party harmless from and against all expense, loss or damage
suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction or liability whatsoever of the

 

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account debtor or obligor thereunder, arising out of a breach by the Borrowers
of any obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to or in favor of such account debtor or obligor
or its successors from the Borrowers. The Borrowers also agree to reimburse an
Indemnified Party as and when billed by such Indemnified Party for all such
Indemnified Party’s costs and expenses incurred in connection with the
enforcement or the preservation of such Indemnified Party’s rights under this
Loan Agreement, any Note, any other Loan Document or any transaction
contemplated hereby or thereby, including, without limitation, the reasonable
fees and disbursements of its counsel. The Borrowers hereby acknowledge that,
notwithstanding the fact that each Note is secured by the Collateral, the
obligation of the Borrowers under the Notes is a recourse obligation of the
Borrowers.

 

The Borrowers agree to pay as and when billed by the Agent all of the
out-of-pocket costs and expenses incurred by the Agent in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Loan Agreement, the Notes, any other Loan Document or any
other documents prepared in connection herewith or therewith, including the New
Century Guaranty. The Borrowers agree to pay as and when billed by the Agent all
of the out-of-pocket costs and expenses incurred in connection with the
consummation and administration of the transactions contemplated hereby and
thereby including, without limitation, (i) all the reasonable and documented
fees, disbursements and expenses of counsel to the Agent, (ii) all the due
diligence, inspection, testing and review costs and expenses incurred by the
Agent with respect to Collateral under this Loan Agreement, including, but not
limited to, those costs and expenses incurred by the Agent pursuant to Sections
11.03, 11.14 and 11.15 hereof and (iii) except to the extent amounts in respect
thereof have previously paid pursuant to Section 2.03, the costs of Broker Price
Opinions in respect of Defaulted Mortgage Loans.

 

Section 11.04 Amendments. Except as otherwise expressly provided in this Loan
Agreement, any provision of this Loan Agreement may be modified or supplemented
only by an instrument in writing signed by the Borrowers and the Lenders and any
provision of this Loan Agreement may be waived by the Agent.

 

Section 11.05 Assignments and Participations.

 

(a) Subject to the approval of the Borrowers, which approval shall not be
unreasonably withheld (provided that such approval shall not be required with
respect to an assignment to any Affiliate of a Lender or if an Event of Default
shall have occurred and is continuing) each Lender may assign and delegate to
one or more Persons all or a portion of its rights and obligations under this
Loan Agreement; provided, further, that none of the costs incurred by the
assigning Lender or its assignee in connection therewith shall be borne by the
Borrowers and the parties to each such assignment shall execute and deliver an
Assignment and Acceptance substantially in the form of Exhibit I, with
appropriate completions (an “Assignment and Acceptance”), along with replacement
Notes executed and delivered by the Borrowers.

 

(b) Upon such execution and delivery, from and after the effective date
specified in such Assignment and Acceptance, (i) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations hereunder have
been assigned and delegated to it pursuant to such Assignment and Acceptance,
have the rights and obligations of such Lender

 

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hereunder, and (ii) the Lender assignor thereunder shall, to the extent that any
rights and obligations hereunder have been assigned and delegated by it, and
accepted and assumed by the assignee pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Loan
Agreement.

 

(c) Any Lender may sell participations to one or more Persons in or to all or a
portion of its rights and obligations under this Loan Agreement; provided,
however, that (i) such Lender’s obligations under this Loan Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) such Lender shall
remain the holder of any such Note for all purposes of this Loan Agreement; and
(iv) the Borrowers shall, to the extent otherwise required by this Loan
Agreement, continue to deal solely and directly with such Lender in connection
with such Lender’s rights and obligations under and in respect of this Loan
Agreement and the other Loan Documents. Notwithstanding the terms of Section
3.03, each participant of a Lender shall be entitled to the additional
compensation and other rights and protections afforded such Lender under Section
3.03 to the same extent as such Lender would have been entitled to receive them
with respect to the participation sold to such participant.

 

(d) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 11.05, disclose to
the assignee or participant or proposed assignee or participant, as the case may
be, any information relating to the Borrowers or any of their Subsidiaries or to
any aspect of the Loans that has been furnished to such Lender by or on behalf
of the Borrowers or any of their Subsidiaries; provided that such assignee or
participant agrees to hold such information confidential pursuant to a written
agreement substantially similar to the existing agreement between the Lenders
and the Borrowers and provided that such proposed assignee or participant is not
a competitor of any Borrower.

 

(e) Any Lender may at any time create a security interest in all or any portion
of its rights under this Loan Agreement (including, without limitation, the
Loans owing to it and the Note held by it) in favor of any Federal Reserve Bank
in accordance with Regulation A of the Board of Governors of the Federal Reserve
System and any Operating Circular issued by such Federal Reserve Bank. No such
assignment shall release the assigning Lender from its obligations hereunder.

 

Section 11.06 Survival. The obligations of the Borrowers under Sections 3.03 and
11.03 hereof shall survive the repayment of the Loans and the termination of
this Loan Agreement. In addition, each representation and warranty made or
deemed to be made by a request for a borrowing, herein or pursuant hereto shall
survive the making of such representation and warranty, and the Lenders shall
not be deemed to have waived, by reason of making, any Loan, any Default that
may arise because any such representation or warranty shall have proved to be
false or misleading, notwithstanding that the Lenders may have had notice or
knowledge or reason to believe that such representation or warranty was false or
misleading at the time such Loan was made.

 

Section 11.07 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Loan Agreement.

 

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Section 11.08 Counterparts. This Loan Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Loan Agreement by
signing any such counterpart.

 

Section 11.09 Loan Agreement Constitutes Security Agreement; Governing Law. This
Loan Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York, and shall constitute a security
agreement within the meaning of the Uniform Commercial Code.

 

Section 11.10 Submission To Jurisdiction; Waivers. Each Borrower hereby
irrevocably and unconditionally:

 

SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS LOAN AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS, OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE
FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND APPELLATE COURTS FROM ANY THEREOF;

 

CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND,
TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT
OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND
AGREES NOT TO PLEAD OR CLAIM THE SAME;

 

AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED
BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY
SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS
SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE AGENT SHALL HAVE BEEN
NOTIFIED; AND

 

AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY
OTHER JURISDICTION.

 

Section 11.11 WAIVER OF JURY TRIAL. EACH OF THE LENDERS, THE BORROWERS AND THE
AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

 

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Section 11.12 Acknowledgments. Each Borrower hereby acknowledges that:

 

(a) it has been advised by counsel in the negotiation, execution and delivery of
this Loan Agreement, the Notes and the other Loan Documents;

 

(b) no Lender has any fiduciary relationship to any Borrower, and the
relationship between each Borrower and each Lender is solely that of debtor and
creditor; and

 

(c) no joint venture exists between any Lender and any Borrower.

 

Section 11.13 Hypothecation or Pledge of Loans. The Agent, acting at the
direction of the Lenders, shall have free and unrestricted use of all Collateral
and nothing in this Loan Agreement shall preclude the Agent from engaging in
repurchase transactions with the Collateral or otherwise pledging, repledging,
transferring, hypothecating, or rehypothecating the Collateral. Nothing
contained in this Loan Agreement shall obligate the Agent to segregate any
Collateral delivered to the Agent by the Borrowers.

 

Section 11.14 Servicing.

 

(a) Each Borrower covenants to maintain or cause the servicing of the Mortgage
Loans to be maintained in conformity with accepted and prudent servicing
practices in the industry for the same type of mortgage loans as the Mortgage
Loans and in a manner at least equal in quality to the servicing such Borrower
provides for mortgage loans which it owns. In the event that the preceding
language is interpreted as constituting one or more servicing contracts, each
such servicing contract shall terminate automatically upon the earliest of (i)
an Event of Default, (ii) the date on which all the Secured Obligations have
been paid in full or (iii) the transfer of servicing approved by the Agent in
writing. The Agent hereby approves New Century as the initial servicer (the
“Initial Servicer”) of the Mortgage Loans.

 

(b) If the Mortgage Loans are serviced by New Century, (i) New Century agrees
that the Agent is the collateral assignee of all servicing records, including,
but not limited to, any and all servicing agreements, files, documents, records,
data bases, computer tapes, copies of computer tapes, proof of insurance
coverage, insurance policies, appraisals, other closing documentation, payment
history records, and any other records relating to or evidencing the servicing
of Mortgage Loans (the “Servicing Records”), and (ii) New Century grants the
Agent, for the ratable benefit of the Lenders, a security interest in all
servicing fees and rights relating to the Mortgage Loans and all Servicing
Records to secure the obligation of New Century or its designee to service in
conformity with this Section and any other obligation of New Century to the
Lenders. New Century covenants to safeguard such Servicing Records and to
deliver them promptly to the Agent or its designee (including the Custodian) at
the Agent’s request.

 

(c) If the Mortgage Loans are serviced by a third party servicer (such third
party servicer, the “Third Party Servicer”) the Borrowers (i) shall provide a
copy of the servicing agreement to the Agent, which shall be in form and
substance acceptable to the Agent (the “Servicing Agreement”), and (ii) shall
provide a Servicer Notice to the Third Party Servicer substantially in the form
of Exhibit G hereto (a “Servicer Notice”) and shall cause such Third Party
Servicer to acknowledge and agree to the same. Any successor or assignee of a
Third Party Servicer shall be approved in writing by the Agent and shall
acknowledge and agree to a

 

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Servicer Notice prior to such successor’s assumption of servicing obligations
with respect to the Mortgage Loans.

 

(d) If the Servicer of the Mortgage Loans is a Borrower or an Affiliate of a
Borrower, such Borrower shall provide to the Agent a letter to the effect that
upon the occurrence of an Event of Default, the Agent may terminate any
Servicing Agreement and in any event transfer servicing to the Agent’s designee,
at no cost or expense to the Agent, it being agreed that such Borrower will pay
any and all fees required to terminate the Servicing Agreement and to effectuate
the transfer of servicing to the designee of the Agent.

 

(e) After the Funding Date, until the pledge of any Mortgage Loan is
relinquished by the Custodian, (i) the Borrowers shall give prior written notice
to the Agent of any proposed modification or alteration to the terms of any such
Mortgage Loan and unless the Borrowers shall have received the Agent’s written
approval of such modification or alteration within five (5) Business Days
thereafter, in the event the Borrowers nevertheless make such modification or
alteration to the terms of such Mortgage Loan thereafter, such Mortgage Loan
shall thereupon have a Collateral Value equal to zero, and (ii) the Borrowers
will have no obligation or right to repossess such Mortgage Loan or substitute
another Mortgage Loan, except as provided in the Custodial Agreement.

 

(f) In the event any Borrower or its Affiliate is servicing the Mortgage Loans,
such Borrower shall permit the Agent from time to time during business hours and
upon prior reasonable notice (provided, that if a Default shall have occurred
and be continuing, no such notice shall be required) to inspect the Borrower’s
or its Affiliate’s servicing facilities, as the case may be, for the purpose of
satisfying the Agent that such Borrower or its Affiliate, as the case may be,
has the ability to service the Mortgage Loans as provided in this Loan
Agreement.

 

Section 11.15 Due Diligence Review.

 

(a) Mortgage Loans. The Borrowers acknowledge that the Agent has the right to
perform continuing due diligence reviews with respect to the Mortgage Loans, for
purposes of verifying compliance with the representations, warranties and
specifications made hereunder or otherwise, and the Borrowers agree that upon
reasonable (but no less than one (1) Business Day’s) prior notice to the
Borrowers or the Servicer, as the case may be, the Agent or its authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts of, the Mortgage Files and Servicing
Records and any and all documents, records, agreements, instruments or
information relating to such Mortgage Loans in the possession or under the
control of the Borrowers, the Servicer and/or the Custodian. The Borrowers also
shall make available to the Agent a knowledgeable financial or accounting,
officer for the purpose of answering questions respecting the Mortgage Files and
the Mortgage Loans. Without limiting the generality of the foregoing, the
Borrowers acknowledge that the Agent may make Loans to the Borrowers based
solely upon the information provided by the Borrowers to the Agent in the
Mortgage Loan Data File and the representations, warranties and covenants
contained herein, and that the Agent, at its option, has the right at any time
to conduct a partial or complete due diligence review on some or all of the
Mortgage Loans securing such Loan, including without limitation ordering new
credit reports and new appraisals on the related Mortgaged Properties and
otherwise re-generating the information used to originate such

 

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Mortgage Loan. The Agent may underwrite such Mortgage Loans itself or engage a
mutually agreed upon third party underwriter to perform such underwriting. The
Borrowers agree to cooperate with the Agent and any third party underwriter in
connection with such underwriting, including, but not limited to, providing the
Agent and any third party underwriter with access to any and all documents,
records, agreements, instruments or information relating to such Mortgage Loans
in the possession, or under the control, of any Borrower.

 

(b) Borrowers. Each Borrower acknowledges that the Agent has the right to
perform quarterly due diligence reviews of each Borrower’s operations,
including, but not limited to, a review of (1) the financial condition of the
Borrowers, (2) loan origination and servicing guidelines, and (3) other
corporate due diligence matters at the discretion of the Agent. In connection
therewith, the Borrowers agree that upon reasonable (but no less than two (2)
Business Day’s) prior notice to the Borrowers (provided, that if a Default has
occurred and is continuing, no such notice shall be required), the Agent or its
authorized representatives will be permitted during normal business hours to
examine, inspect, and make copies and extracts of all documents, records,
agreements, instruments or information relating to the Borrowers which are in
possession or under the control of the Borrowers, as the Agent may reasonably
request. The Borrowers shall also make available to the Agent a knowledgeable
financial or accounting officer for the purpose of answering questions
respecting the financial condition of the Borrowers and make available to the
Agent an officer of each Borrower for the purpose of answering questions
respecting other corporate due diligence matters.

 

(c) Fees and Expenses of Due Diligence Review. The Borrowers further agree that
the Borrowers shall reimburse the Agent and each Lender for any and all
out-of-pocket costs and expenses incurred by the Agent or such Lender in
connection with the Agent’s or such Lender’s activities pursuant to this Section
11.15.

 

Section 11.16 Set-Off. In addition to any rights and remedies of the Lenders
provided by this Loan Agreement and by law, each Lender shall have the right,
without prior notice to the Borrowers, any such notice being expressly waived by
the Borrowers to the extent permitted by applicable law, upon any amount
becoming due and payable by the Borrowers hereunder (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any Affiliate thereof to or for the credit or the account of any Borrower. Each
Lender agrees promptly to notify the Borrowers after any such set-off and
application made by such Lender; provided, that the failure to give such notice
shall not affect the validity of such set-off and application.

 

Section 11.17 Intent. The parties recognize that each Loan is a “securities
contract” as that term is defined in Section 741 of Title 11 of the United
States Code, as amended.

 

Section 11.18 Joint and Several Liability. Each Borrower hereby acknowledges and
agrees that such Borrower shall be jointly and severally liable to the Lenders
to the

 

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maximum extent permitted by applicable law for all representations, warranties,
covenants, obligations and indemnities of the Borrowers hereunder.

 

Section 11.19 Replacement by Repurchase Agreement. Each Borrower hereby
acknowledges and agrees that this Loan Agreement may, at any time and without
any further cost to the Borrowers, in the sole discretion of the Agent, be
replaced by a repurchase facility with substantially similar terms as those
contained in this Loan Agreement. Each Borrower hereby agrees to take such
action and execute such documents and instruments as is necessary to effectuate
such conversion.

 

Section 11.20 Treatment of Certain Information. Notwithstanding anything to the
contrary contained herein or in any other Loan Document, all Persons may
disclose to any and all Persons, without limitation of any kind, the federal
income tax treatment of the Loans or any of the transactions contemplated by
this Agreement or any other Loan Document (collectively, the “Transactions”),
any fact relevant to understanding the federal tax treatment of the Transactions
and all materials of any kind (including opinions or other tax analyses)
relating to such federal income tax treatment; provided, that, except as
otherwise required by law, rule or regulation, no Person may disclose the name
of or identifying information with respect to any party identified herein or in
any other Loan Document or any pricing terms (including the Applicable Margin
and Facility Fee) or other nonpublic business or financial information
(including Collateral Value and financial covenants) that is unrelated to the
purported or claimed federal income tax treatment of the Transactions and is not
relevant to understanding the purported or claimed federal income tax treatment
of the transaction, without the prior consent of the Agent.

 

[SIGNATURES FOLLOW]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be
duly executed and delivered as of the day and year first above written.

 

NC CAPITAL CORPORATION, as a Borrower

By:  

/s/ Kevin Cloyd

   

--------------------------------------------------------------------------------

   

Name: Kevin Cloyd

   

Title: President

 

Address for Notices:

   

18400 Von Karman, Suite 1000

Irvine, California 92612

Attention: Ralph Flick

Telecopier No.: (949) 440-7033

Telephone No.: (949) 225-7817

 

NEW CENTURY MORTGAGE CORPORATION, as a Borrower

By:  

/s/ Kevin Cloyd

   

--------------------------------------------------------------------------------

   

Name: Kevin Cloyd

   

Title: President

 

Address for Notices:

   

18400 Von Karman, Suite 1000

Irvine, California 92612

Attention: Ralph Flick

Telecopier No.: (949) 440-7033

Telephone No.: (949) 225-7817

 

--------------------------------------------------------------------------------

MORGAN STANLEY BANK, as a Lender

By:  

/s/ Andrew B. Neuberger

   

--------------------------------------------------------------------------------

   

Name: Andrew B. Neuberger

   

Title: Vice President

 

Address for Notices:

   

2500 Lake Boulevard

West Valley City, Utah 84120

Attention: Richard Felix

Telecopier No.: (801) 902-4055

Telephone No.: (801) 902-4087

 

MORGAN STANLEY MORTGAGE CAPITAL INC., as a Lender and as Agent

By:  

/s/ Andrew B. Neuberger

   

--------------------------------------------------------------------------------

   

Name: Andrew B. Neuberger

   

Title: Vice President:

 

Address for Notices:

   

1221 Avenue of the Americas

New York, NY 10020

Attention: Andy Neuberger

Telecopier No.: (212) 762-9495

Telephone No.: (212) 762-6401

 

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Schedule 1

 

REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS

 

PART I - REPRESENTATIONS AND WARRANTIES WITH RESPECT TO EACH ELIGIBLE
RESIDENTIAL MORTGAGE LOAN

 

As to each residential Mortgage Loan included in the Borrowing Base on a Funding
Date (and the related Mortgage, Mortgage Note, Assignment of Mortgage and
Mortgaged Property), the Borrowers shall be deemed to make the following
representations and warranties to each of the Lenders and the Agent as of such
date and as of each date Collateral Value is determined (certain defined terms
used herein and not otherwise defined in the Loan Agreement appearing, in Part
III to this Schedule 1):

 

(a) Mortgage Loans as Described. The information set forth in the Mortgage Loan
Schedule with respect to the Mortgage Loan is complete, true and correct in all
material respects.

 

(b) No Outstanding Charges. Other than delinquencies in payment of principal or
interest in respect of the 30+ Delinquent Mortgage Loans, 60+ Delinquent
Mortgage Loans and Defaulted Mortgage Loans, there are no defaults in complying
with the terms of the Mortgage securing the Mortgage Loan. All taxes,
governmental 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. No Borrower nor the Qualified
Originator from which any Borrower acquired the Mortgage Loan has 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 proceeds of the
Mortgage Loan, whichever is earlier, to the day which precedes by one month the
Due Date of the first installment of principal and interest thereunder.

 

(c) Original Terms Unmodified. The terms of the Mortgage Note and Mortgage have
not been impaired, waived, altered or modified in any respect from the date of
origination except by a written instrument which has been recorded, if
necessary, to protect the interests of the Lenders, and which has been delivered
to the Custodian and the terms of which are reflected in the Mortgage Loan
Schedule. The substance of any such waiver, alteration or modification has been
approved by the title insurer, to the extent required, and its terms are
reflected on the Mortgage Loan Schedule. No Mortgagor in respect of the Mortgage
Loan has been released, in whole or in part, except in connection with an
assumption agreement approved by the title insurer, to the extent required by
such policy, and which assumption agreement is part of the Mortgage File

 

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delivered to the Custodian and the terms of which are reflected in the Mortgage
Loan Schedule.

 

(d) No Defenses. 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 and no such right of
rescission, set-off, counterclaim or defense has been asserted with respect
thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor in any
state or Federal bankruptcy or insolvency proceeding at the time the Mortgage
Loan was originated. Each Borrower has no knowledge nor has it received any
notice that any Mortgagor in respect of the Mortgage Loan is a debtor in any
state or federal bankruptcy or insolvency proceeding

 

(e) No Retail Installment Contracts. The Mortgage Loan is not a retail
installment contract for goods or services or a home improvement loan for goods
or services, which would be either “consumer credit contracts” or “purchase
money loans” as such terms are defined in 16 C.F.R. Section 433.1.

 

(f) No Implied Warranty. The Mortgagor on the Mortgage Loan does not have a
claim or defense against the Borrowers or any assignor or assignee of the
Borrowers under any express or implied warranty with respect to goods or
services provided in connection with the Mortgage Loan.

 

(g) Hazard Insurance. The Mortgaged Property is insured by a fire and extended
perils insurance policy, issued by a Qualified Insurer, and such other hazards
as are customary in the area where the Mortgaged Property is located, and to the
extent required by each Borrower as of the date of origination consistent with
the Underwriting Guidelines, against earthquake and other risks insured against
by Persons owning like properties in the locality of the Mortgaged Property, in
an amount not less than the greatest of (i) 100% of the replacement cost of all
improvements to the Mortgaged Property, (ii) the outstanding principal balance
of the Mortgage Loan or (iii) the amount necessary to avoid the operation of any
co-insurance provisions with respect to the Mortgaged Property, and consistent
with the amount that would have been required as of the date of origination in
accordance with the Underwriting Guidelines. If any portion of the Mortgaged
Property is in an area identified by any federal Governmental Authority as
having special flood hazards, and flood insurance is available, a flood
insurance policy meeting the current guidelines of the Federal Emergency
Management Agency is in effect with a generally acceptable insurance carrier in
an amount representing coverage not less than the least of (1) the outstanding
principal balance of the Mortgage Loan, (2) the full insurable value of the
Mortgaged Property and (3) the maximum amount of insurance available under the
National Flood Insurance Act of 1968, as amended by the Flood Disaster
Protection Act of 1974. All such insurance policies (collectively, the “Hazard
Insurance Policy”) contain a standard mortgagee clause naming the Borrowers, its
successors and assigns (including, without limitation, subsequent owners of the
Mortgage Loan), as mortgagee, and may not be reduced, terminated or canceled
without 30 days’ prior written notice to the mortgagee. No such notice has been
received by the

 

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Borrowers. All accrued premiums on such insurance policy have been paid. The
related Mortgage obligates the Mortgagor to maintain all such insurance and, at
such Mortgagor’s failure to do so, authorizes the mortgagee to maintain such
insurance at the Mortgagor’s cost and expense and to seek reimbursement therefor
from such Mortgagor. Where required by state law or regulation, the Mortgagor
has been given an opportunity to choose the carrier of the required hazard
insurance, provided the policy is not a “master” or “blanket” Hazard Insurance
Policy covering a condominium, or any Hazard Insurance policy covering the
common facilities of a planned unit development. The Hazard Insurance Policy is
the valid and binding obligation of the insurer and is in full force and effect.
The Borrowers have not engaged in, and have no knowledge of the Mortgagor’s
having engaged in, any act or omission which would impair the coverage of any
such policy, the benefits of the endorsement provided for therein, or the
validity and binding effect of either including, without limitation, no unlawful
fee, commission, kickback or other unlawful compensation or value of any kind
has been or will be received, retained or realized by any attorney, firm or
other Person, and no such unlawful items have been received, retained or
realized by the Borrowers.

 

(h) Compliance with Applicable Laws. Any and all requirements of any federal,
state or local law including, without limitation, usury, truth-in-lending, real
estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to the Mortgage Loan have been
complied with, the consummation of the transactions contemplated hereby will not
involve the violation of any such laws or regulations, and the Borrowers shall
maintain or shall cause its agent to maintain in its possession, available for
the inspection of the Lender, and shall deliver to the Lender, upon demand,
evidence of compliance with all such requirements.

 

(i) No Satisfaction of Mortgage. 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. The Borrowers have not waived the performance by
the Mortgagor of any action, if the Mortgagor’s failure to perform such action
would cause the Mortgage Loan to be in default, nor have the Borrowers waived
any default resulting from any action or inaction by the Mortgagor.

 

(j) Location and Type of Mortgaged Property. The Mortgaged Property is fee
simple property located in a state identified in the Mortgage Loan Schedule. The
Mortgaged Property consists of a real property with a detached single family
residence erected thereon, or a two-to four-family dwelling, or an individual
residential condominium unit in a low-rise condominium project, or an individual
unit in a planned unit development, a manufactured home; provided, however, that
any condominium unit or planned unit development shall conform with the
Underwriting Guidelines. In the case of any Mortgaged Properties that are
manufactured homes (a “Manufactured Home Mortgage Loan”), (i) such Manufactured
Home Mortgage Loan conforms with the applicable FNMA or FHLMC requirements
regarding mortgage loans related to manufactured dwellings, (ii) the related
manufactured dwelling is permanently affixed to the land, (iii) the related
manufactured dwelling and the related land are subject to a

 

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Mortgage properly filed in an appropriate public recording office and naming a
Borrower as mortgagee, (iv) the applicable laws of the jurisdiction in which the
related Mortgaged Property is located will deem the manufactured dwelling
located on such Mortgaged Property to be a part of the real property on which
such dwelling is located and (v) such Manufactured Home Mortgage Loan is (a) a
qualified mortgage under Section 860G(a)(3) of the Code and (y) secured by a
manufactured housing treated as a single residence under Section 25(e)(10) of
the Code. No portion of the Mortgaged Property is used for commercial purposes;
provided, that Mortgaged Properties which contain a home office shall not be
considered as being used for commercial purposes so long as the Mortgaged
Property has not been altered for commercial purposes and is not storing any
chemicals or raw materials other than those commonly used for homeowner repair,
maintenance and/or household purposes.

 

(k) Valid Lien. The Mortgage is a valid, subsisting, enforceable and perfected
first or second lien on the real property included in the Mortgaged Property,
including all buildings on the Mortgaged Property 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. in the case of any Mortgage Loan with a second lien position, a first lien on
such Mortgaged Property and subject, in all cases, to the exceptions to title
set forth in the title insurance policy with respect to the related Mortgage
Loan, which exceptions are generally acceptable to second mortgage lending
companies, and such other exceptions to which similar properties are commonly
subject and which do not individually, or in the aggregate, materially and
adversely affect the benefits of the security intended to be provided by such
mortgage;

 

3. covenants, conditions and restrictions, rights of way, easements and other
matters of the public record as of the date of recording acceptable to prudent
mortgage lending institutions generally and specifically referred to in the
lender’s title insurance policy delivered to the originator of the Mortgage Loan
and (a) referred to or otherwise considered in the appraisal made for the
originator of the Mortgage Loan or (b) which do not adversely affect the
Appraised Value of the Mortgaged Property set forth in such appraisal; and

 

4. 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.

 

Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first or second lien and first or second priority
security interest on the property described therein and the Borrowers have full
right to pledge and assign the same to the Agent.

 

(l) Validity of Mortgage Documents. The Mortgage Note and the Mortgage and any
other agreement executed and delivered by a Mortgagor or Guarantor, if
applicable, in connection with a Mortgage Loan are genuine, and each is the
legal, valid

 

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and binding obligation of the maker thereof enforceable in accordance with its
terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, receivership, moratorium or similar laws affecting
the enforcement of creditors’ rights generally and by the availability of
equitable remedies. All parties to the Mortgage Note, the Mortgage and any other
such related agreement had legal capacity to enter into the Mortgage Loan and to
execute and deliver the Mortgage Note, the Mortgage and any such agreement, and
the Mortgage Note, the Mortgage and any other such related agreement have been
duly and properly executed by such related parties. No fraud, error, omission,
misrepresentation, negligence or similar occurrence with respect to a Mortgage
Loan has taken place on the part of any Person, including, without limitation,
the Mortgagor, any appraiser, any builder or developer, or any other party
involved in the origination of the Mortgage Loan. The Borrower has reviewed all
of the documents constituting the Servicing File and has made such inquiries as
it deems necessary to make and confirm the accuracy of the representations set
forth herein.

 

(m) Full Disbursement of Proceeds. The Mortgage Loan has been closed and the
proceeds of the Mortgage Loan have been fully disbursed and there is no further
requirement for future advances thereunder, and any and all requirements as to
completion of any on-site or off-site improvement and as to disbursements of any
escrow funds therefor have been 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.

 

(n) Ownership. The applicable Borrower is the sole owner and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged, and the Borrower
has good, indefeasible and marketable title thereto, and has full right to
transfer, pledge and assign the Mortgage Loan to the Agent free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge, claim or
security interest, and has full right and authority subject to no interest or
participation of, or agreement with, any other party, to assign, transfer and
pledge each Mortgage Loan pursuant to this Loan Agreement and following the
pledge of each Mortgage Loan, the Agent will hold such Mortgage Loan free and
clear of any encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest except any such security interest created pursuant to
the terms of this Loan Agreement.

 

(o) Title Insurance. The Mortgage Loan is covered by an ALTA lender’s title
insurance policy or, with respect to the Mortgaged Properties located in
California, a CLTA lender’s title insurance policy, or other generally
acceptable form of policy of 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 each Borrower,
its successors and assigns as to the first or second priority lien of the
Mortgage in the original principal amount of the Mortgage Loan and against any
loss by reason of the invalidity or unenforceability of the lien resulting from
the provisions of the Mortgage providing for adjustment in the Mortgage Interest
Rate and Monthly Payment, subject only to the exceptions contained in clauses
(1), (3) and (4) and, with respect to each Second Lien Mortgage Loan clause (2),
of paragraph (k) of this

 

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Part I of this Schedule 1. Where required by state law or regulation, the
Mortgagor has been given the opportunity to choose the carrier of the required
mortgage title insurance. Additionally, such lender’s title insurance policy
affirmatively insures ingress and egress and against encroachments by or upon
the Mortgaged Property or any interest therein. The title policy does not
contain any special exemptions (other than the standard exclusions) for zoning
and uses and has been marked to delete the standard survey exception or to
replace the standard survey exception with a specific survey reading. The
applicable Borrower, its successors and assigns, are the sole insured of such
lender’s title insurance policy, and such lender’s title insurance policy is in
full force and effect upon the consummation of the transactions contemplated by
this Loan Agreement. No claims have been made under such lender’s title
insurance policy, and no prior holder or servicer of the Mortgage, including the
Borrowers, has done, by act or omission, anything which would impair the
coverage of such lender’s title insurance policy, including, without limitation,
no unlawful fee, commission, kickback or other unlawful compensation or value of
any kind has been or will be received, retained or realized by any attorney,
firm or other Person, and no such unlawful items have been received, retained or
realized by the Borrowers.

 

(p) No Defaults. Other than delinquencies in payment of principal or interest in
respect of the 30+ Delinquent Mortgage Loans and 60+ Delinquent Mortgage Loans,
there is no default, breach, violation or event of acceleration existing under
the Mortgage or the Mortgage Note and no event has occurred 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 the Borrowers nor, to the Borrowers’ knowledge, any of their
predecessors have waived any default, breach, violation or event of
acceleration.

 

(q) No Mechanics’ Liens. 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 applicable law could give rise to such liens) affecting the Mortgaged
Property which are or may be liens prior to, or equal or coordinate with, the
lien of the Mortgage.

 

(r) Location of Improvements: No Encroachments. All improvements which were
considered in determining the Appraised Value of the Mortgaged Property lie
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 and building, law, ordinance
or regulation.

 

(s) Origination; Payment Terms. Either (a) the Mortgage Loan was originated by a
mortgagee approved by the Secretary of Housing and Urban Development pursuant to
Sections 203 and 211 of the National Housing Act, a savings and loan
association, a savings bank, a commercial bank, credit union, insurance company
or other similar institution which is supervised and examined by a federal or
state authority or (b) the following requirements have been met with respect to
the Mortgage Loan: the Mortgage Loan meets the requirements set forth in clause
(a), and (i) such Mortgage Loan was underwritten in accordance with standards
established by the Borrowers, using

 

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application forms and related credit documents approved by the Borrowers, (ii)
the Borrowers approved each application and the related credit documents before
a commitment by the correspondent was issued, and no such commitment was issued
until the Borrowers agreed to fund such Mortgage Loan, (iii) the closing
documents for such Mortgage Loan were prepared on forms approved by the
Borrowers and (iv) such Mortgage Loan was actually funded by the Borrowers and
was purchased by the Borrowers at closing or soon thereafter. No Mortgage Loan
contains terms or provisions which would result in negative amortization. The
Mortgage Interest Rate is adjusted, with respect to adjustable rate Mortgage
Loans, on each Interest Rate Adjustment Date equal to the Index plus the Gross
Margin (rounded up or down to the nearest 0.125%), subject to the Mortgage
Interest Rate Cap. The Mortgage Note is payable on the first day of each month
in equal monthly installments of principal and interest, which installments of
interest, with respect to adjustable rate Mortgage Loans, are subject to change
due to the adjustments to the Mortgage Interest Rate on each Interest Rate
Adjustment Date, 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 30 years from the commencement of amortization.

 

(t) LTV; CLTV. No Mortgage Loan that is secured by a first mortgage lien on the
Mortgaged Property has an LTV greater than 95%, other than Eligible Mortgage
Loans pledged to the Agent, for the ratable benefit of the Lenders, and included
in the Borrowing Base which are secured by a first mortgage lien on a Mortgaged
Property that (i) have an LTV greater than 95% and equal to or less than 100%
and (ii) have a minimum FICO Score of 620; provided, the aggregate unpaid
principal balance of all such Mortgage Loans included in the Borrowing Base
shall at no time exceed 3% of the aggregate principal amount of all Loans then
outstanding. No Mortgage Loan that is secured by a second mortgage lien on the
Mortgaged Property has a CLTV greater than 100%.

 

(u) Customary Provisions. The Mortgage Note has a stated maturity. 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,
(i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale
and (ii) otherwise by judicial foreclosure. Upon default by a Mortgagor on a
Mortgage Loan and foreclosure on, or trustee’s sale of, the Mortgaged Property
pursuant to the proper procedures, the holder of the Mortgage Loan will be able
to deliver good and merchantable title to the Mortgaged Property. There is no
homestead or other exemption available to a Mortgagor which would interfere with
the right to sell the Mortgaged Property at a trustee’s sale or the right to
foreclose the Mortgage.

 

(v) Conformance with Underwriting Guidelines and Agency Standards. The Mortgage
Loan was underwritten in accordance with the Underwriting Guidelines. The
Mortgage Note and Mortgage are on forms similar to those used by FHLMC or FNMA
and the Borrowers have not made any representations to a Mortgagor that are
inconsistent with the mortgage instruments used.

 

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(w) No Additional Collateral. 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
clause (k) above.

 

(x) Deeds of Trust. In the event the Mortgage constitutes a deed of trust, a
trustee, authorized and 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 the Custodian or
the Agent to the trustee under the deed of trust, except in connection with a
trustee’s sale after default by the Mortgagor.

 

(y) Delivery of Mortgage Documents. The Mortgage Note, the Mortgage, the
Assignment of Mortgage and any other documents required to be delivered under
the Custodial Agreement for each Mortgage Loan (other than Wet-Ink Mortgage
Loans) have been delivered to the Custodian. A Borrower or its agent is in
possession of a complete, true and accurate Mortgage File in compliance with the
Custodial Agreement, except for such documents the originals of which have been
delivered to the Custodian.

 

(z) Transfer of Mortgage Loans. 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.

 

(aa) Due-On-Sale. 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.

 

(bb) No Buydown Provisions: No Graduated Payments or Contingent Interests. The
Mortgage Loan does not contain provisions pursuant to which Monthly Payments are
paid or partially paid with funds deposited in any separate accounts established
by the Borrowers, the Mortgagor, or anyone on behalf of the Mortgagor, or paid
by any source other than the Mortgagor nor does it contain any other similar
provisions which may constitute a “buydown” provision. The Mortgage Loan is not
a graduated payment mortgage loan and the Mortgage Loan does not have a shared
appreciation or other contingent interest feature.

 

(cc) Consolidation of Future Advances. Any future advances made to the Mortgagor
prior to the Funding 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 or second 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.

 

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(dd) Mortgaged Property Undamaged. 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 and each
Mortgaged Property is in good repair. There have not been any condemnation
proceedings with respect to the Mortgaged Property and the Borrowers have no
knowledge of any such proceedings.

 

(ee) Collection Practices: Escrow Deposits; Interest Rate Adjustments. The
origination and collection practices used by the originator, each servicer of
the Mortgage Loan and the Borrowers with respect to the Mortgage Loan have been
in all respects in compliance with Accepted Servicing Practices, applicable laws
and regulations, 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,
or under the control of, the Borrowers and there exist no deficiencies in
connection therewith for which customary arrangements for repayment thereof have
not been made. All Escrow Payments have been collected in full compliance with
state and federal law. An escrow of funds is not prohibited by applicable law
and has been established in an amount sufficient to pay for every item that
remains unpaid and has been assessed but is not yet due and payable. No escrow
deposits or Escrow Payments or other charges or payments due the Borrowers have
been capitalized under the Mortgage or the Mortgage Note. All Mortgage Interest
Rate adjustments have been made in strict compliance with state and federal law
and the terms of the related Mortgage Note. Any interest required to be paid
pursuant to state, federal and local law has been properly paid and credited.

 

(ff) Conversion to Fixed Interest Rate. With respect to adjustable rate Mortgage
Loans, the Mortgage Loan is not convertible to a fixed interest rate Mortgage
Loan.

 

(gg) Other Insurance Policies. No action, inaction or event has occurred and no
state of facts exists or has existed that has resulted or will result in the
exclusion from, denial of, or defense to coverage under any applicable special
hazard insurance policy, PMI Policy or bankruptcy bond, irrespective of the
cause of such failure of coverage. In connection with the placement of any such
insurance, no commission, fee, or other compensation has been or will be
received by the Borrowers or by any officers, directors, or employees of the
Borrowers or any designees of the Borrowers or any corporations in which the
Borrowers or any officers, directors, or employees had a financial interest at
the time of placement of such insurance.

 

(hh) Servicemembers Civil Relief Act. The Mortgagor has not notified the
Borrowers, and the Borrowers have no knowledge, of any relief requested or
allowed to the Mortgagor under the Servicemembers Civil Relief Act of 2003
(formerly known as the Soldiers’ and Sailors’ Civil Relief Act of 1940).

 

(ii) Appraisal. The Mortgage File contains an appraisal of the related Mortgaged
Property signed prior to the approval of the Mortgage Loan application by a
qualified appraiser, duly appointed by the applicable Borrower, who had no
interest, direct or indirect in the Mortgaged Property or in any loan made on
the security thereof,

 

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and whose compensation is not affected by the approval or disapproval of the
Mortgage Loan, and the appraisal and appraiser both satisfy the requirements of
FNMA or FHLMC and Title XI of the Federal Institutions Reform, Recovery, and
Enforcement Act of 1989 as amended and the regulations promulgated thereunder,
all as in effect on the date the Mortgage Loan was originated.

 

(jj) Disclosure Materials. The Mortgagor has executed a statement to the effect
that the Mortgagor has received all disclosure materials required by applicable
law with respect to the making of adjustable rate mortgage loans, and the
Borrowers maintain such statement in the Mortgage File.

 

(kk) Construction or Rehabilitation of Mortgaged Property. No Mortgage Loan was
made in connection with the construction or rehabilitation of a Mortgaged
Property or facilitating the trade-in or exchange of a Mortgaged Property.

 

(ll) No Defense to Insurance Coverage. No action has been taken or failed to be
taken, no event has occurred and no state of facts exists or has existed on or
prior to the Funding Date (whether or not known to the Borrowers on or prior to
such date) which has resulted or will result in an exclusion from, denial of, or
defense to coverage under any private mortgage insurance (including, without
limitation, any exclusions, denials or defenses which would limit or reduce the
availability of the timely payment of the full amount of the loss otherwise due
thereunder to the insured) whether arising out of actions, representations,
errors, omissions, negligence or fraud of any Borrower, the related Mortgagor or
any party involved in the application for such coverage, including the
appraisal, plans and specifications and other exhibits or documents submitted
therewith to the insurer under such insurance policy, or for any other reason
under such coverage, but not including the failure of such insurer to pay by
reason of such insurer’s breach of such insurance policy or such insurer’s
financial inability to pay.

 

(mm) Capitalization of Interest. The Mortgage Note does not by its terms provide
for the capitalization or forbearance of interest.

 

(nn) No Equity Participation. No document relating to the Mortgage Loan provides
for any contingent or additional interest in the form of participation in the
cash flow of the Mortgaged Property or a sharing in the appreciation of the
value of the Mortgaged Property. The indebtedness evidenced by the Mortgage Note
is not convertible to an ownership interest in the Mortgaged Property or the
Mortgagor and the Borrower has not financed nor do they own directly or
indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.

 

(oo) Proceeds of Mortgage Loan. The proceeds of the Mortgage Loan have not been
and shall not be used to satisfy, in whole or in part, any debt owed or owing by
the Mortgagor to the Borrowers or any Affiliates or correspondents of the
Borrowers.

 

(pp) Withdrawn Mortgage Loans. If the Mortgage Loan has been released to the
Borrowers pursuant to a Request for Release as permitted under Section 5 of the
Custodial Agreement, then the promissory note relating to the Mortgage Loan was

 

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returned to the Custodian within 15 days (or if such tenth day was not a
Business Day, the next succeeding Business Day).

 

(qq) Origination Date. Each Mortgage Loan that is not a Defaulted Mortgage Loan
or a Discretionary Mortgage Loan was originated within 120 days prior to the
related Funding Date and each Mortgage Loan that is a Defaulted Mortgage Loan
was originated within twelve (12) months prior to the related Funding Date.

 

(rr) Qualified Originator. The Mortgage Loan has been originated by, and, if
applicable, purchased by the Borrowers from, a Qualified Originator.

 

(ss) Mortgage Submitted for Recordation. If an Event of Default under the Loan
Agreement has occurred, the Mortgage either has been or will promptly be
submitted for recordation in the appropriate governmental recording office of
the jurisdiction where the Mortgaged Property is located.

 

(tt) Riegle Act. None of the Mortgage Loans are classified as “high cost” loans
under the Home Ownership and Equity Protection Act of 1994.

 

(uu) Second Lien Mortgages. The related first Lien on the Mortgage Loan does not
require a consent from the holder of the first Lien, or if such a consent is
required, it has been obtained and is contained in the Mortgage File. The
Borrowers have not received notice of a default of the related first Lien which
has not been cured.

 

(vv) Section 32 Mortgage Loan. The Mortgage Loan is not a Section 32 Mortgage
Loan.

 

(ww) First Payment Defaults. Any default by a Mortgagor in the payment of the
initial payment due on the Mortgage Loan was cured on or before the date on
which the second payment was due in respect of such Mortgage Loan.

 

PART II - REPRESENTATIONS AND WARRANTIES WITH RESPECT TO ALL ELIGIBLE
RESIDENTIAL MORTGAGE LOANS

 

As to all Mortgage Loans included in the Borrowing Base on a Funding Date (and
the related Mortgages, Mortgage Notes, Assignments of Mortgage and Mortgaged
Properties), the Borrowers shall be deemed to make the following representations
and warranties to each of the Lenders and the Agent as of such date and as of
each date Collateral Value is determined (certain defined terms used herein and
not otherwise defined in the Loan Agreement appearing in Part III to this
Schedule 1):

 

(a) Payment Current. All payments required to be made up to the Funding Date for
all Mortgage Loans (other than 30+ Delinquent Mortgage Loans, 60+ Delinquent
Mortgage Loans and Defaulted Mortgage Loans) under the terms of the related
Mortgage Note have been made and credited. No payment required under the
Mortgage Loans (other than 30+ Delinquent Mortgage Loans, 60+ Delinquent
Mortgage Loans and Delinquent Mortgage Loans) are delinquent nor have any
payment under the

 

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Mortgage Loans been delinquent at any time since the origination of such
Mortgage Loan. The first Monthly Payment shall be made with respect to the
Mortgage Loan on its Due Date or within the grace period, all in accordance with
the terms of the related Mortgage Note; provided, however, that any Mortgage
Loan that defaulted on its first Monthly Payment is current on all subsequent
Monthly Payments.

 

(b) Location of Mortgaged Properties. To the best of the Borrowers’ knowledge,
no Mortgaged Property is located within a one-mile radius of any site listed in
the National Priorities List as defined under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or on any similar
state list of hazardous waste sites which are known to contain any hazardous
substance or hazardous waste.

 

(c) Bulk Transfer. The transfer, assignment and conveyance of the Mortgage Notes
and the Mortgages by the Borrowers pursuant to this Loan Agreement are not
subject to the bulk transfer laws or any similar statutory provisions in effect
in any applicable jurisdiction.

 

PART III - DEFINED TERMS

 

In addition to terms defined elsewhere in the Loan Agreement, the following
terms shall have the following meanings when used in this Schedule 1:

 

“Accepted Servicing Practices” shall mean, with respect to any Mortgage Loan,
those mortgage servicing practices of prudent mortgage lending institutions
which service mortgage loans of the same type as such Mortgage Loans in the
jurisdiction where the related Mortgaged Property is located.

 

“ALTA” means the American Land Title Association.

 

“Appraised Value” shall mean the value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.

 

“Assignment of Mortgage” means, with respect to any mortgage, an assignment of
the mortgage, notice of transfer or equivalent instrument in recordable form,
sufficient under the laws of the jurisdiction wherein the related mortgaged
property is located to reflect the assignment and pledge of the mortgage.

 

“Best’s” means Best’s Key Rating Guide, as the same shall be amended from time
to time.

 

“Combined Loan-to-Value Ratio” or “CLTV” shall mean with respect to any Second
Lien Mortgage Loan, the ratio (expressed as a percentage) of (a) the outstanding
principal balance on the date of origination of the sum of (i) the mortgage loan
constituting the first Lien plus (ii) the Second Lien Mortgage Loan to (b) the
lesser of (i) the Appraised Value of

 

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the Mortgage property and (ii) if the Mortgage Loan was made to finance the
acquisition of the related Mortgaged Property, the purchase price of the
Mortgaged Property.

 

“Due Date” means the day of the month on which the Monthly Payment is due on a
Mortgage Loan, exclusive of any days of grace.

 

“Escrow Payments” means with respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.

 

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

 

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

 

“Gross Margin” means with respect to each adjustable rate Mortgage Loan, the
fixed percentage amount set forth in the related Mortgage Note.

 

“Ground Lease” means a lease for all or any portion of the real property
comprising the Mortgaged Property, the lessee’s interest in which is held by the
Mortgagor of the related Mortgage Loan.

 

“Index” means with respect to each adjustable rate Mortgage Loan, the index set
forth in the related Mortgage Note for the purpose of calculating the interest
rate thereon.

 

“Insurance Proceeds” means with respect to each Mortgage Loan, proceeds of
insurance policies insuring the Mortgage Loan or the related Mortgaged Property.

 

“Interest Rate Adjustment Date” means with respect to each adjustable rate
Mortgage Loan, the date, specified in the related Mortgage Note and the Mortgage
Loan Schedule, on which the Mortgage Interest Rate is adjusted.

 

“Monthly Payment” means the scheduled monthly payment of principal and interest
on a Mortgage Loan as adjusted in accordance with changes in the Mortgage
Interest Rate pursuant to the provisions of the Mortgage Note for an adjustable
rate Mortgage Loan.

 

“Mortgage Interest Rate” means the annual rate of interest home on a Mortgage
Note, which shall be adjusted from time to time with respect to adjustable rate
Mortgage Loans.

 

“Mortgage Interest Rate Cap” means with respect to an adjustable rate Mortgage
Loan, the limit on each Mortgage Interest Rate adjustment as set forth in the
related Mortgage Note.

 

“Mortgagee” means the relevant Borrower or any subsequent holder of a Mortgage
Loan.

 

1-13

--------------------------------------------------------------------------------

“Qualified Manufactured Housing” shall mean a manufactured home so affixed to
land upon which it sits that it is deemed a part of real property and treated as
such for all municipal purposes in the jurisdiction in which such manufactured
home is located.

 

“Origination Date” shall mean, with respect to each Mortgage Loan, the date of
the Mortgage Note relating to such Mortgage Loan, unless such information is not
provided by the Borrower with respect to such Mortgage Loan, in which case the
Origination Date shall be deemed to be the date that is 40 days prior to the
date of the first payment under the Mortgage Note relating to such Mortgage
Loan.

 

“PMI Policy” or “Primary Insurance Policy” means a policy of primary mortgage
guaranty insurance issued by a Qualified Insurer.

 

“Qualified Insurer” means an insurance company duly qualified as such under the
laws of the states in which the Mortgaged Property is located, duly authorized
and licensed in such states to transact the applicable insurance business and to
write the insurance provided, and approved as an insurer by FNMA and FHLMC and
whose claims paying ability is rated in the two highest rating categories by any
of the rating agencies with respect to primary mortgage insurance and in the two
highest rating categories by Best’s with respect to hazard and flood insurance.

 

“Qualified Originator” means an originator of Mortgage Loans reasonably
acceptable to the Agent.

 

“Servicing File” means with respect to each Mortgage Loan, the file retained by
the relevant Borrower consisting of originals of all documents in the Mortgage
File which are not delivered to a Custodian and copies of the Mortgage Loan
Documents set forth in Section 2 of the Custodial Agreement.

 

1-14

--------------------------------------------------------------------------------

Schedule 2

 

FILING JURISDICTIONS AND OFFICES

 

1. California

 

2-1

--------------------------------------------------------------------------------

Schedule 3

 

SUBSIDIARIES

 

3-1

--------------------------------------------------------------------------------

Schedule 4

 

LENDER COMMITMENTS

 

Lender

--------------------------------------------------------------------------------

   Commitment

--------------------------------------------------------------------------------

   Initial Advance

--------------------------------------------------------------------------------

   Unfunded Commitment1

--------------------------------------------------------------------------------

Morgan Stanley Bank

   $ 400,000,000    $ 400,000,000.00    $ 0

Morgan Stanley Mortgage Capital Inc.

   $ 1,100,000,000    $ 325,839,560.13    $ 774,160,439.87     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Total

   $ 1,500,000,000    $ 725,839,560.13    $ 774,160,439.87

--------------------------------------------------------------------------------

1 As of the Effective Date.

 

4-1

--------------------------------------------------------------------------------

Exhibit A

 

FORM OF PROMISSORY NOTE

 

$[            ]

 

January 30, 2004

New York, New York

 

FOR VALUE RECEIVED, NC CAPITAL CORPORATION, a California corporation (“NC
Capital”), and NEW CENTURY MORTGAGE CORPORATION, a California corporation (“New
Century”, together with NC Capital, each a “Borrower” and, collectively, the
“Borrowers”), hereby promises to pay, jointly and severally, to the order of
[LENDER] (the “Lender”), at the principal office of Morgan Stanley Mortgage
Capital Inc., Agent for the Lenders under the Loan Agreement referred to below,
at 1221 Avenue of the Americas, 27th Floor, New York, New York, 10020, in lawful
money of the United States, and in immediately available funds, the principal
sum of [             AND 00/100 UNITED STATES DOLLARS ($            )] (or such
lesser amount as shall equal the aggregate unpaid principal amount of the Loans
made by the Lender to the Borrowers under the Loan Agreement), on the dates and
in the principal amounts provided in the Loan Agreement, and to pay interest on
the unpaid principal amount of each such Loan, at such office, in like money and
funds, for the period commencing on the date of such Loan until such Loan shall
be paid in full, at the rates per annum and on the dates provided in the Loan
Agreement.

 

This Note is one of the “Notes” referred to in that certain Second Amended and
Restated Master Loan and Security Agreement, dated as of January 30, 2004 (as
amended, restated, supplemented or otherwise modified and in effect from time to
time, the “Loan Agreement”), among the Borrowers, Morgan Stanley Bank, a Utah
industrial loan corporation (“MSB”), as a lender, and Morgan Stanley Mortgage
Capital Inc., a New York corporation, as a lender (in such capacity, together
with MSB, collectively, the “Lenders”) and as agent for the Lenders (in such
capacity, the “Agent”). Capitalized terms used but not defined herein shall have
the meanings specified in the Loan Agreement.

 

Pursuant to and subject to the terms of the Loan Agreement, the Borrowers may
borrow, repay and reborrow funds until the Termination Date. In all events, the
Borrowers shall repay the aggregate outstanding principal amount of all Loans
plus all accrued interest thereon on the Termination Date.

 

Pursuant to the Loan Agreement, from time to time the Borrowers will be required
to pledge additional Collateral or to prepay Loans to cure a Borrowing Base
Deficiency.

 

The date, amount and interest rate of each Loan made by the Lender to the
Borrowers, and each payment made on account of the principal thereof, shall be
recorded by the Lender on its books and, prior to any transfer of this Note,
endorsed by the Lender on the schedule attached hereto or any continuation
thereof, provided, that the failure of the Lender to make any such recordation
or endorsement shall not affect the obligations of the Borrowers to make a
payment when due of any amount owing under the Loan Agreement or hereunder in
respect of the Loans made by the Lender.

 

A-1

--------------------------------------------------------------------------------

The Borrowers agree, jointly and severally, to pay all the Lender’s costs of
collection and enforcement (including reasonable attorneys’ fees and
disbursements of Lender’s counsel) in respect of this Note when incurred,
including, without limitation, reasonable attorneys’ fees through appellate
proceedings.

 

Notwithstanding the pledge of the Collateral, each Borrower hereby acknowledges,
admits and agrees that each Borrower’s obligations under this Note are recourse
obligations of the Borrowers to which each Borrower pledges its full faith and
credit.

 

The Borrowers, and any endorsers or guarantors hereof, (a) severally waive
diligence, presentment, protest and demand and also notice of protest, demand,
dishonor and nonpayments of this Note, (b) expressly agree that this Note, or
any payment hereunder, may be extended from time to time, and consent to the
acceptance of further Collateral, the release of any Collateral for this Note,
the release of any party primarily or secondarily liable hereon, and (c)
expressly agree that it will not be necessary for the Lender, in order to
enforce payment of this Note, to first institute or exhaust the Lender’s
remedies against the Borrowers or any other party liable hereon or against any
Collateral for this Note. No extension of time for the payment of this Note, or
any installment hereof, made by agreement by the Lender with any person now or
hereafter liable for the payment of this Note, shall affect the liability under
this Note of the Borrowers, even if the Borrowers are not a party to such
agreement; provided, however, that the Lender and the Borrowers, by written
agreement between them, may affect the liability of the Borrowers.

 

Any reference herein to the Lender shall be deemed to include and apply to every
subsequent holder of this Note. Reference is made to the Loan Agreement for
provisions concerning optional and mandatory prepayments, Collateral,
acceleration and other material terms affecting this Note.

 

This Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York, whose laws the Borrowers expressly
elect to apply to this Note. The Borrowers agree that any action or proceeding
brought to enforce or arising out of this Note may, be commenced in the Supreme
Court of the State of New York, Borough of Manhattan, or in the District Court
of the United States for the Southern District of New York.

 

NC CAPITAL CORPORATION

     

NEW CENTURY MORTGAGE CORPORATION

By:

         

By:

       

--------------------------------------------------------------------------------

         

--------------------------------------------------------------------------------

   

Name:

         

Name:

   

Title:

         

Title:

 

A-2

--------------------------------------------------------------------------------

SCHEDULE OF LOANS

 

This Note evidences Loans made under the within-described Loan Agreement to the
Borrowers, on the dates, in the principal amounts and bearing interest at the
rates set forth below, and subject to the payments and prepayments of principal
set forth below:

 

Date Made

--------------------------------------------------------------------------------

 

Principal
Amount of
Loan

--------------------------------------------------------------------------------

 

Interest Rate

--------------------------------------------------------------------------------

   Amount Paid
or Prepaid

--------------------------------------------------------------------------------

   Unpaid
Principal
Amount

--------------------------------------------------------------------------------

   Notation
Made by

--------------------------------------------------------------------------------

                            

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

                            

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

                            

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

                            

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

                            

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

                            

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

                            

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

                            

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

  

--------------------------------------------------------------------------------

 

A-3

--------------------------------------------------------------------------------

Exhibit B

 

FORM OF CUSTODIAL AGREEMENT

 

(See Tab 3)

 

B-1

--------------------------------------------------------------------------------

Exhibit C-1

 

FORM OF OPINION OF IN-HOUSE COUNSEL

TO THE BORROWERS AND THE GUARANTOR

 

C-1-1

--------------------------------------------------------------------------------

Exhibit C-2

 

FORM OF OPINION OF OUTSIDE COUNSEL

TO THE BORROWERS AND THE GUARANTOR

 

C-2-1

--------------------------------------------------------------------------------

Exhibit D

 

FORM OF REQUEST FOR BORROWING

 

Second Amended and Restated Master Loan and Security Agreement, dated as of
January     , 2004 (the “Loan and Security Agreement”), by and among NC Capital
Corporation, (“NC Capital”) a California corporation and New Century Mortgage
Corporation, a California corporation (“New Century”) and together with NC
Capital, each a “Borrower” and collectively, the “Borrowers”, Morgan Stanley
Bank, a Utah industrial loan corporation (“MSB”), as a lender (a “Lender”), and
Morgan Stanley Mortgage Capital Inc., a New York corporation, as a lender (a
“Lender”, in such capacity, together with MSB, collectively, the “Lenders”) and
as agent for the Lenders (in such capacity, the “Agent”).

 

Lenders:    Morgan Stanley Bank      Morgan Stanley Mortgage Capital Inc. Agent:
   Morgan Stanley Mortgage Capital Inc. Borrower:    NC Capital Corporation
Borrower:    New Century Mortgage Corporation Requested Fund Date:         

--------------------------------------------------------------------------------

Transmission Date:         

--------------------------------------------------------------------------------

Transmission Time:         

--------------------------------------------------------------------------------

Type of Funding:

(Wet or Dry)

        

--------------------------------------------------------------------------------

[if Wet Funding]      Estimated Wet Funding Requirement    $            

--------------------------------------------------------------------------------

Mortgage Loans to be Pledged

[if Dry Funding]

   See Attached Mortgage Loans to be Pledged –    See Attached UPB:    $        
   

--------------------------------------------------------------------------------

Requested Wire Amount:    $            

--------------------------------------------------------------------------------

 

Wire Instructions (including relevant bank account):

 

D-1

--------------------------------------------------------------------------------

Requested by:

 

NC CAPITAL CORPORATION

     

NEW CENTURY MORTGAGE CORPORATION

By:

         

By:

       

--------------------------------------------------------------------------------

         

--------------------------------------------------------------------------------

   

Name:

         

Name:

   

Title:

         

Title:

 

 

By:

       

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

D-2

--------------------------------------------------------------------------------

Attachment 1

 

SCHEDULE OF ELIGIBLE MORTGAGE LOANS PROPOSED TO BE PLEDGED

 

D-2

--------------------------------------------------------------------------------

Attachment 2

 

OFFICER’S CERTIFICATE

 

The undersigned hereby certifies to the Lender on behalf of [applicable
Borrower], as of the requested Funding Date, that:

 

(a) no Default or Event of Default has occurred and is continuing on the date
hereof nor will occur after giving effect to such Loan as a result of such Loan;

 

(b) each of the representations and warranties made by [applicable Borrower] in
or pursuant to the Loan Documents is true and correct in all material respects
on and as of such date as if made on and as of the date hereof (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date); and

 

(c) [applicable Borrower] is in compliance with all governmental licenses and
authorizations and is qualified to do business and in good standing in all
required jurisdictions.

 

Responsible Officer Certification:

 

By:

       

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

D-3

--------------------------------------------------------------------------------

Exhibit E-1

 

FORM OF BORROWER’S RELEASE LETTER

 

[Date]

 

Morgan Stanley Mortgage Capital Inc.

1221 Avenue of the Americas, 27th Floor

New York, New York 10020

Attention: Peter Woroniecki

Facsimile: (212) 507-4950

 

  Re: Second Amended and Restated Master Loan and Security Agreement, dated as
of January             , 2004 (the “Loan and Security Agreement”), by and among
NC Capital Corporation, a California corporation, (“NC Capital”) and New Century
Mortgage Corporation, a California corporation (“New Century”) and together with
NC Capital, each a “Borrower” and collectively, the “Borrowers”, Morgan Stanley
Bank, a Utah industrial loan corporation (“MSB”), as a lender (a “Lender”), and
Morgan Stanley Mortgage Capital Inc., a New York corporation, as a lender (a
“Lender”, in such capacity, together with MSB, collectively, the “Lenders”) and
as agent for the Lenders (in such capacity, the “Agent”)

 

Ladies and Gentlemen:

 

With respect to the mortgage loans described in the attached Schedule A (the
“Mortgage Loans”) (a) we hereby certify to you that the Mortgage Loans are not
subject to a lien of any third party and (b) we hereby release all right,
interest or claim of any kind with respect to such Mortgage Loans, such release
to be effective automatically without further action by any party upon payment
from Morgan Stanley Mortgage Capital Inc., of the amount of the Loan
contemplated under the Loan and Security Agreement (calculated in accordance
with the terms thereof) in accordance with the wiring instructions set forth in
the Loan and Security Agreement.

 

Very truly yours,

 

[BORROWER]

By:        

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

E-1-1

--------------------------------------------------------------------------------

Exhibit E-2

 

FORM OF WAREHOUSE LENDER’S RELEASE LETTER

 

[Date]

 

Morgan Stanley Mortgage Capital Inc.

1221 Avenue of the Americas, 27th Floor

New York, New York 10020

Attention: Peter Woroniecki

Facsimile: (212) 507-4950

 

  Re: Certain Mortgage Loans Identified on Schedule A hereto and owned by
[BORROWER]

 

The undersigned hereby releases all right, interest, lien or claim of any kind
with respect to the mortgage loan(s) described in the attached Schedule A, such
release to be effective automatically without any further action by any party
upon payment in one or more installments, in immediately available funds of
$                    , in accordance with the following wire instructions:

 

--------------------------------------------------------------------------------

   

--------------------------------------------------------------------------------

Very truly yours,

  [WAREHOUSE LENDER] By:        

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

E-2-1

--------------------------------------------------------------------------------

Exhibit F

 

UNDERWRITING GUIDELINES

 

F-1

--------------------------------------------------------------------------------

Exhibit G

 

FORM OF SERVICER NOTICE

 

                                     , 200        

 

[SERVICER], as Servicer

[ADDRESS]

Attention:                     

 

  Re: Second Amended and Restated Master Loan and Security Agreement, dated as
of January             , 2004 (the “Loan and Security Agreement”), by and among
NC Capital Corporation, a California corporation (“NC Capital”) and New Century
Mortgage Corporation, a California corporation (“New Century”) and together with
NC Capital, each a “Borrower” and collectively, the “Borrowers”, Morgan Stanley
Bank, a Utah industrial loan corporation (“MSB”), as a lender (a “Lender”), and
Morgan Stanley Mortgage Capital Inc., a New York corporation, as a lender (a
“Lender”, in such capacity, together with MSB, collectively, the “Lenders”) and
as agent for the Lenders (in such capacity, the “Agent”)

 

Ladies and Gentlemen:

 

[SERVICER] (the “Servicer”) is servicing certain mortgage loans for the
Borrowers pursuant to certain Servicing Agreements between the Servicer and the
applicable Borrower. Pursuant to the Loan Agreement among the Lenders and the
Borrowers, the Servicer is hereby notified that the Borrowers have granted a
security interest to the Lender in certain mortgage loans which are serviced by
Servicer.

 

Upon receipt of a Notice of Event of Default from the Agent in which the Agent
shall identify the mortgage loans which are then pledged to the Agent, for the
ratable benefit of the Lenders under the Loan Agreement (the “Pledged Mortgage
Loans”), the Servicer shall segregate all amounts collected on account of such
Pledged Mortgage Loans, hold them in trust for the sole and exclusive benefit of
the Agent, and remit such collections in accordance with the Agent’s written
instructions. Following such Notice of Event of Default, the Servicer shall
follow the instructions of the Agent with respect to the Pledged Mortgage Loans,
and shall deliver to the Agent, any information with respect to the Pledged
Mortgage Loans reasonably requested by the Agent.

 

Notwithstanding any contrary information or direction which may be delivered to
the Servicer by the Borrowers, the Servicer may conclusively rely on any
information, direction or notice of an Event of Default delivered by the Agent,
and the Borrowers shall indemnify and hold the Servicer harmless for any and all
claims asserted against the Servicer for any actions taken in good faith by the
Servicer in connection with the delivery of such information or Notice of Event
of Default.

 

G-1

--------------------------------------------------------------------------------

No provision of this letter may be amended, countermanded or otherwise modified
without the prior written consent of the Agent. The Agent is an intended third
party beneficiary of this letter.

 

Please acknowledge receipt and your agreement to the terms of this instruction
letter by signing in the signature block below and forwarding an executed copy
to the Agent promptly upon receipt. Any notices to the Agent should be delivered
to the following, address: 1221 Avenue of the Americas, 27th Floor, New York,
New York 10020; Attention: Mr. Peter Woroniecki; Telephone: (212) 537-1791,
Facsimile: (212) 507-4950.

 

Very truly yours,

  NC CAPITAL CORPORATION By:        

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

NEW CENTURY MORTGAGE CORPORATION By:        

--------------------------------------------------------------------------------

   

Name:

   

Title:

 

ACKNOWLEDGED AND AGREED TO:

 

--------------------------------------------------------------------------------

as Servicer  

By

       

--------------------------------------------------------------------------------

   

Title:

   

Telephone:

   

Facsimile:

 

G-2

--------------------------------------------------------------------------------

Exhibit H

 

FORM OF NEW CENTURY GUARANTY

 

[204718]

 

H-1

--------------------------------------------------------------------------------

Exhibit I

 

FORM OF ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Second Amended and Restated Master Loan and Security
Agreement dated as of January             , 2004 (as amended, restated,
supplemented or otherwise modified and in effect from time to time, the “Loan
Agreement”) among NC CAPITAL CORPORATION, a California corporation (“NC
Capital”), NEW CENTURY MORTGAGE CORPORATION, a California corporation (“New
Century”), (New Century, together with NC Capital, each a “Borrower” and
collectively, the “Borrowers”), MORGAN STANLEY BANK, a Utah industrial loan
corporation (“MSB”), as a lender (a “Lender”), and MORGAN STANLEY MORTGAGE
CAPITAL INC., a New York corporation (“MSMCI”), as a lender (a “Lender”, in such
capacity, together with MSB, collectively, the “Lenders”) and as agent for the
Lenders (in such capacity, the “Agent”). Capitalized terms used but not not
otherwise defined herein shall have the meanings assigned thereto in the Loan
Agreement.

 

Each “Assignor” referred to on Schedule I hereto (each, an “Assignor”) and each
“Assignee” referred to on Schedule I hereto (each an “Assignee”) hereby agrees
severally with respect to all information relating to it and its assignment
hereunder and on Schedule I hereto as follows:

 

Such Assignor hereby sells and assigns and delegates, without recourse except as
to the representations and warranties made by it herein, to such Assignee, and
such Assignee hereby purchases and assumes from such Assignor, an interest in
and to such Assignor’s rights and obligations under the Loan Agreement as of the
Effective Date (as hereinafter defined) equal to the percentage interest
specified on Schedule I hereto of all outstanding rights and obligations under
the Loan Agreement (collectively, the “Assigned Interests”).

 

Such Assignor:

 

(a) hereby represents and warrants that its name set forth on Schedule I hereto
is its legal name, that it is the legal and beneficial owner of the Assigned
Interest and that such Assigned Interest is free and clear of any adverse claim;

 

(b) other than as provided herein, makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Loan Agreement or any of the
other Loan Documents, or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of, or the perfection or priority of any lien
or security interest created or purported to be created under or in connection
with, the Loan Agreement or any of the other Loan Documents, or any other
instrument or document furnished pursuant thereto;

 

(c) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrowers or the performance or
observance by

 

I-1

--------------------------------------------------------------------------------

the Borrowers of any of their Obligations under or in respect of any of the Loan
Documents, or any other instrument or document furnished pursuant thereto; and

 

(d) attaches the Note held by such Assignor for the Assigned Interests specified
on Schedule I hereto and requests that the Borrowers exchange such Note for a
new Note payable either to the order of such Assignee or to its registered
assigns in an amount equal to the Assigned Interests assumed by such Assignee
pursuant hereto and either to the order of such Assignor or to its registered
assigns in an amount equal to the interests retained by such Assignor under the
Loan Agreement, respectively, as specified on Schedule I hereto.

 

Such Assignee:

 

(a) confirms that it has received a copy of the Loan Agreement, together with
copies of the financial statements referred to in Section 7.01 thereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance;

 

(b) agrees that it will, independently and without reliance upon the Lenders and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Agreement;

 

(c) represents and warrants that its name set forth on Schedule I hereto is its
legal name;

 

(d) agrees that, from and after the Effective Date, it will be bound by the
provisions of the Loan Agreement and the other Loan Documents and, to the extent
of the Assigned Interest, it will perform in accordance with their terms all of
the obligations that by the terms of the Loan Agreement are required to be
performed by it as a Lender; and

 

(e) the effective date for this Assignment and Acceptance (the “Effective Date”)
shall be the date specified on Schedule I hereto.

 

As of the Effective Date, (a) such Assignee shall be a party to the Loan
Agreement and, to the extent that rights and obligations under the Loan
Agreement have been assigned and delegated to it pursuant to this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and (b) such
Assignor shall, to the extent that any rights and obligations under the Loan
Agreement have been assigned and delegated by it pursuant to this Assignment and
Acceptance, relinquish its rights (other than provisions of the Loan Documents
that are specified under the terms of such Loan Documents to survive the payment
in full of the Obligations of the Borrowers under or in respect of the Loan
Documents) and be released from its obligations under the Loan Agreement (and,
if this Assignment and Acceptance covers all or the remaining rights and
obligations of such Assignor under the Loan Agreement, such Assignor shall cease
to be a party thereto).

 

I-2

--------------------------------------------------------------------------------

Such Assignor and such Assignee shall make all appropriate adjustments in
payments under the Loan Agreement and the Note for periods prior to the
Effective Date directly between themselves.

 

This Assignment and Acceptance shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York.

 

This Assignment and Acceptance shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and assigns. This
Assignment and Acceptance may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
Schedule I hereto by telecopier shall be effective as delivery of an originally
executed counterpart of this Assignment and Acceptance.

 

IN WITNESS WHEREOF, each Assignor and each Assignee have caused Schedule I
hereto to be executed by their respective officers thereunto duly authorized, as
of the date specified thereon.

 

I-3

--------------------------------------------------------------------------------

Schedule I

to

ASSIGNMENT AND ACCEPTANCE

 

Percentage interest assigned

     %      %      %      %      %

Amount of Maximum Credit assigned

   $      $      $      $      $  

Aggregate outstanding principal amount of Loans assigned

   $      $      $      $      $  

Principal amount of Note payable to Assignor

   $      $      $      $      $  

Principal amount of Note payable to Assignee

   $      $      $      $      $  

 

Effective Date:                                         ,                 

 

Assignor  

                                                                               
   , as

        Assignor

        [Type or print legal name of Assignor]    

By

       

--------------------------------------------------------------------------------

   

Name:

   

Title:

     

Dated:

 

                                     ,                 

 

I-4

--------------------------------------------------------------------------------

Assignee  

                                                                               
   , as

         Assignee         [Type or print legal name of Assignee]    

By

       

--------------------------------------------------------------------------------

   

Name:

   

Title:

     

Dated:

 

                                     ,                 

      Domestic Lending Office:       Eurodollar Lending Office:

 

I-5

--------------------------------------------------------------------------------

Accepted and agreed:2

 

NC CAPITAL CORPORATION

 

By:

       

--------------------------------------------------------------------------------

    Name:     Title:

 

NEW CENTURY MORTGAGE CORPORATION

 

By:

       

--------------------------------------------------------------------------------

    Name:     Title:

--------------------------------------------------------------------------------

2 Not required if Assignee is an Affiliate of a Lender or if an Event of Default
shall have occurred and be continuing. (See Section 11.05 of the Loan
Agreement.)

 

I-6

--------------------------------------------------------------------------------

Exhibit J

 

FORM OF AMENDMENT TO CONTROL AGREEMENT

 

[204733]

 

J-1