EXHIBIT 10.2

 

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MASTER REPURCHASE AGREEMENT

 

Among:

 

DB STRUCTURED PRODUCTS, INC., as Buyer

ASPEN FUNDING CORP., as Buyer

NEWPORT FUNDING CORP., as Buyer

 

ECC CAPITAL CORPORATION, as Guarantor and Originator

ENCORE CREDIT CORP., as Guarantor and Originator

BRAVO CREDIT CORPORATION, as Guarantor and Originator

 

And

 

ECC SPV II, as Seller

ENCORE SPV II, as Seller

BRAVO SPV II, as Seller

 

Dated as of May 16, 2005

 

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TABLE OF CONTENTS

 

1.   

APPLICABILITY

   1 2.   

DEFINITIONS AND INTERPRETATION

   1 3.   

THE TRANSACTIONS

   15 4.   

CONFIRMATIONS

   16 5.   

PAYMENT AND TRANSFER

   16 6.   

MARGIN MAINTENANCE

   17 7.   

INCOME PAYMENTS

   17 8.   

TAXES; TAX TREATMENT; INCREASED COSTS

   18 9.   

SECURITY INTEREST; BUYERS’ APPOINTMENT AS ATTORNEY-IN-FACT

   19 10.   

CONDITIONS PRECEDENT

   21 11.   

RELEASE OF PURCHASED LOANS

   23 12.   

RELIANCE

   24 13.   

REPRESENTATIONS AND WARRANTIES

   24 14.   

COVENANTS OF SELLER AND GUARANTOR

   27 15.   

REPURCHASE DATE PAYMENTS/COLLECTIONS

   32 16.   

REPURCHASE OF PURCHASED LOANS; CHANGE OF LAW

   32 17.   

SUBSTITUTION

   33 18.   

REPURCHASE TRANSACTIONS

   34 19.   

EVENTS OF DEFAULT

   34 20.   

REMEDIES

   38 21.   

DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE

   40 22.   

USE OF EMPLOYEE PLAN ASSETS

   40 23.   

INDEMNITY

   40 24.   

WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS

   43 25.   

SET-OFF

   43 26.   

FURTHER ASSURANCES

   43 27.   

ENTIRE AGREEMENT; PRODUCT OF NEGOTIATION

   43 28.   

TERMINATION

   44 29.   

ASSIGNMENT

   44 30.   

AMENDMENTS, ETC.

   44 31.   

SEVERABILITY

   44 32.   

BINDING EFFECT; GOVERNING LAW

   44 33.   

WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION AND VENUE; SERVICE OF PROCESS

   45 34.   

SINGLE AGREEMENT

   45 35.   

INTENT

   46 36.   

NOTICES AND OTHER COMMUNICATIONS

   46 37.   

CONFIDENTIALITY

   49 38.   

DUE DILIGENCE

   49 39.   

NO PROCEEDINGS

   50 40.   

BUYER ACTING AS AGENT

   50

 

EXHIBIT A-1

  

MONTHLY CERTIFICATION

EXHIBIT A-2

  

QUARTERLY CERTIFICATION

EXHIBIT B

  

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO LOANS

EXHIBIT C

  

FORM OF NOTICE OF LOAN SALE

EXHIBIT D

  

UNDERWRITING GUIDELINES

 

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MASTER REPURCHASE AGREEMENT

 

Dated as of May 16, 2005

 

AMONG:

 

DB STRUCTURED PRODUCTS, INC. (“DBSP”), ASPEN FUNDING CORP. (“Aspen”), NEWPORT
FUNDING CORP. (“Newport” and collectively with DBSP and Aspen, the “Buyers” and
individually, a “Buyer,” which term shall include any “Principal” as defined and
provided for in Annex I), or as agent pursuant hereto (“Agent”),

 

ECC CAPITAL CORPORATION ( “ECC” or a “Guarantor”),

ENCORE CREDIT CORPORATION (“Encore Credit” or a “Guarantor”),

BRAVO CREDIT CORPORATION (“Bravo” or a “Guarantor”; ECC, Encore Credit and
Bravo, collectively the “Guarantors”)

 

and

 

ECC SPV II, (a “Seller”),

Encore SPV II (a “Seller”),

Bravo SPV II, (a “Seller”; ECC SPV II, Encore SPV II and Bravo SPV II,
collectively, the “Sellers”)

 

1. APPLICABILITY

 

DBSP shall (and Aspen and/or Newport may), from time to time, upon the terms and
conditions set forth herein, agree to enter into transactions in which a Seller
transfers to the related Buyer Eligible Loans against the transfer of funds by
the related Buyer, with a simultaneous agreement by the related Buyer to
transfer to such Seller such Purchased Loans at a date certain, against the
transfer of funds by such Seller. Each such transaction shall be referred to
herein as a “Transaction”, and, unless otherwise agreed in writing, shall be
governed by this Agreement.

 

2. DEFINITIONS AND INTERPRETATION

 

(a) Defined Terms.

 

“Accepted Servicing Practices” means with respect to any Loan, those mortgage
servicing practices (including collection procedures) of prudent mortgage
banking institutions which service mortgage loans of the same type as the Loans
in the jurisdiction where the related Mortgaged Property is located.

 

“Acquisition Guidelines” means the loan acquisition guidelines of any ECC
Person, which will be provided to Buyers prior to their effectiveness, as the
same may be amended from time to time.

 

“Additional Purchased Loans” shall have the meaning assigned thereto in Section
6(a) hereof.

 

“Adjustable Rate Mortgage Loan” means a Loan which provides for the adjustment
of the Mortgage Interest Rate payable in respect thereto.

 

“Adjusted Tangible Net Worth” means consolidated Net Worth less goodwill,
intangible assets and intercompany/interaffiliate receivables (each calculated
in accordance with GAAP).

 

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“Adjustment Date” means with respect to each Adjustable Rate Mortgage Loan, the
date set forth in the related Note on which the Mortgage Interest Rate on the
Loan is adjusted in accordance with the terms of the Note.

 

“Affiliate” means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, “control” means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise and the terms
“controlling” and “controlled” have meanings correlative to the meaning of
“control”.

 

“Agent” means any Buyer or any successor.

 

“Agreement” means this Master Repurchase Agreement (including all exhibits,
schedules and other addenda thereto), as supplemented by the Pricing Side
Letter, as it may be amended, further supplemented or otherwise modified from
time to time.

 

“ALTA” means the American Land Title Association.

 

“Appraised Value” means the value set forth in an appraisal made in connection
with the origination of the related 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
(except for the blank for the name of the assignee), sufficient under the laws
of the jurisdiction wherein the related Mortgaged Property is located to reflect
the assignment of the Mortgage to Buyers.

 

“Balloon Loan” means, with respect to a Loan, a final Monthly Payment that is
significantly larger than the other scheduled Monthly Payments in respect of
such Loan.

 

“Bravo” means Bravo Credit Corporation, a California corporation.

 

“Breakage Costs” shall have the meaning assigned thereto in Section 3(c) herein.

 

“Business Day” means any day other than (i) a Saturday or Sunday or (ii) a day
upon 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.

 

“Cash Equivalents” shall mean any of the following: (a) marketable direct
obligations issued by, or unconditionally guaranteed by, the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within one year from the date
of acquisition; (b) certificates of deposit, time deposits, eurodollar time
deposits or overnight bank deposits having maturities of six months or less from
the date of acquisition issued by any commercial bank organized under the laws
of the United States or any state thereof having combined capital and surplus of
not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1
by Standard & Poor’s Ratings Services (“S&P”) or P-1 by Moody’s Investors
Service, Inc. (“Moody’s”), or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating agencies cease
publishing ratings of commercial paper issuers generally, and maturing within
six months from the date of acquisition; (d) repurchase obligations of any
commercial bank satisfying the requirements of clause (b) of this definition,
having a term of not more than 30 days, with respect to securities issued or
fully guaranteed or insured by the United States government; (e) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the

 

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United States, by any political subdivision or taxing authority of any such
state, commonwealth or territory or by any foreign government, the securities of
which state, commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A by
Moody’s; (f) securities with maturities of six months or less from the date of
acquisition backed by standby letters of credit issued by any commercial bank
satisfying the requirements of clause (b) of this definition; or (g) shares of
money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this definition.

 

“Change in Control” shall mean:

 

(i) any transaction or event as a result of which ECC ceases to own,
beneficially or of record, 100% of the stock of Encore Credit or Bravo;

 

(ii) any transaction or event as a result of which ECC ceases to own, directly
or indirectly through a subsidiary, beneficially or of record, 100% of the
equity of ECC SPV II;

 

(iii) any transaction or event as a result of which Encore Credit ceases to own,
directly or indirectly through a subsidiary, beneficially or of record, 100% of
the equity of Encore SPV II;

 

(iv) any transaction or event as a result of which Bravo ceases to own, directly
or indirectly through a subsidiary, beneficially or of record, 100% of the
equity of Bravo SPV II;

 

(v) the sale, transfer, or other disposition of all or substantially all of any
of any Seller’s or any ECC Person’s assets (excluding any such action taken in
connection with any securitization transactions or sale of assets among
affiliates for purposes including but not limited to meeting REIT Status tests);

 

(vi) the consummation of a merger of any ECC Person or any Seller with or into
another entity or any corporate reorganization, if more than 50% of the combined
voting power of the continuing or surviving entity’s stock outstanding
immediately after such merger, consolidation or such other reorganization is
owned by persons who were not, directly or indirectly, stockholders of such ECC
Person or such Seller on the date of this Agreement; or

 

(vii) the acquisition by any Person, or two or more Persons acting in concert,
of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of outstanding
shares of voting stock of Guarantor at any time if after giving effect to such
acquisition such Person or Persons owns fifty percent (50%) or more of such
outstanding voting stock.

 

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by Buyers (or any Affiliate of a Buyer)
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement.

 

“Closed End Second Lien Loan” means a closed-end Second Lien Loan.

 

“Closing Date” means May 16, 2005.

 

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

 

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“Collateral” shall have the meaning assigned thereto in Section 9(a) hereof.

 

“Collection Account” means the following account established by the Guarantors
in accordance with Section 14(w) for the benefit of the Buyers, “DB Structured
Products, Inc., Aspen Funding Corp., and Newport Funding Corp.—P&I
account—Account #                     ”.

 

“Combined Loan-to-Value Ratio” or “CLTV” means with respect to any First Lien
Mortgage Loan or Second Lien Mortgage Loan, the sum of the original principal
balance of such First Lien Mortgage Loan or Second Lien Mortgage Loan, as
applicable, at the time of origination and the outstanding principal balance of
any related first lien loan or second lien loan, if applicable as of the date of
origination of such First Lien Mortgage Loan or Second Lien Mortgage Loan, as
applicable, divided by the lesser of (a) the Appraised Value of the related
Mortgage Property as of the date of origination of such First Lien Mortgage Loan
or Second Lien Mortgage Loan, as applicable and (b) if the related Mortgaged
Property was purchased within twelve (12) months of the origination of such
First Lien Mortgage Loan or Second Lien Mortgage Loan, as applicable, the
purchase price of such Mortgaged Property.

 

“Commercial Paper Notes” shall mean the short-term promissory notes issued by
Aspen or Newport having an original term to maturity of 270 days or less
(including the date of issuance thereof).

 

“Computer Tape” means a computer tape or other electronic medium generated by or
on behalf of a Seller and delivered or transmitted to Buyers and Custodian which
provides information relating to the Purchased Loans, including the information
set forth in the Loan Schedule and the information set forth on Annex 1 to the
Disbursement Agreement, in a format acceptable to Buyers.

 

“Confirmation” shall have the meaning assigned thereto in Section 4 hereof.

 

“Conforming Mortgage Loan” means a Loan which is insured by, and meets all
criteria of, Fannie Mae, Freddie Mac, the FHA or the Department of Veterans
Affairs which is secured by a first lien on the related Mortgaged Property.

 

“Custodial and Disbursement Agreement” means the Custodial and Disbursement
Agreement dated as of May 16, 2005 among Sellers, Buyers, ECC, Encore Credit,
Bravo, the Custodian, and the Disbursement Agent.

 

“Custodian” means Deutsche Bank National Trust Company, as custodian, or its
successors and permitted assigns.

 

“DBSI” means Deutsche Bank Securities Inc. and any successor thereto.

 

“Default” means any event, that, with the giving of notice or the passage of
time or both, would constitute an Event of Default.

 

“Default Rate” means, as of any date of determination, the lesser of (i) the
Prime Rate plus 2% and (ii) the maximum rate permitted by applicable law. The
Default Rate is calculated on the basis of a 360-day year and the actual number
of days elapsed between the date of Default and the date of determination.

 

“Delinquent” means, with respect to a Loan, that a monthly payment due thereon
is not made by the close of business on the Due Date.

 

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“Delinquent Loan” means any 30-Day Delinquent Loan, 60-Day Delinquent Loan, or
90-Day Delinquent Loan.

 

“Disbursement Agent” means Deutsche Bank National Trust Company, as disbursement
agent, or its successors and permitted assigns.

 

“Dollars” or “$” means, unless otherwise expressly stated, means lawful money of
the United States of America.

 

“Dry Mortgage Loan” shall mean a first or second lien Mortgage Loan which is
underwritten in accordance with the Underwriting Guidelines and as to which the
related Mortgage File contains all required Mortgage Loan Documents.

 

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

 

“ECC” means ECC Capital Corporation, a Maryland corporation.

 

“ECC Person” means any of ECC, Encore Credit, or Bravo, and “ECC Persons” shall
mean ECC, Encore Credit and Bravo.

 

“Effective Date” shall mean the date set forth on the top of the first page of
this Agreement.

 

“Electronic Tracking Agreement” means the electronic tracking agreement dated as
of May 16, 2005 among Buyers, Sellers, Servicer, MERSCORP, Inc. and Mortgage
Electronic Registration, Systems, Inc., in form and substance acceptable to
Buyers to be entered into in the event that any of the Loans become MERS
Designated Mortgage Loans; provided that if no Loans are or will be MERS
Designated Mortgage Loans, all references herein to the Electronic Tracking
Agreement shall be disregarded.

 

“Electronic Transmission” means the delivery of information in an electronic
format acceptable to the applicable recipient thereof. An Electronic
Transmission shall be considered written notice for all purposes hereof (except
when a request or notice by its terms requires execution).

 

“Eligible Loan” means any Subprime Loan, 30-Day Delinquent Loan, 60-Day
Delinquent Loan, 90-Day Delinquent Loan, Wet-Ink Subprime Loan, Closed End
Second Lien Loan or Performing Scratch and Dent Loan, that satisfies the
criteria set forth in the definition of “Eligible Loan” in the Pricing Side
Letter.

 

“Encore Credit” means Encore Credit Corp., a California corporation.

 

“Escrow Instruction Letter” means the escrow or closing instruction letter from
a Seller to the Settlement Agent.

 

“Escrow Payments” means the amounts constituting ground rents, taxes,
assessments, water charges, sewer rents, mortgage insurance premiums, fire and
hazard insurance premiums and other payments as may be required to be escrowed
by the Mortgagor with the Mortgagee pursuant to the terms of any Note or
Mortgage.

 

“Event of Default” shall have the meaning assigned thereto in Section 19 hereof.

 

“Facility Fee Amount” shall have the meaning assigned thereto in the Pricing
Side Letter.

 

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“Fannie Mae” means the Federal National Mortgage Association, and its successors
in interest.

 

“FHA” means the Federal Housing Administration, an agency within HUD, or any
successor thereto and including the Federal Housing Commissioner and the
Secretary of Housing and Urban Development where appropriate under the FHA
regulations.

 

“FICO Score” means the credit score of the Mortgagor provided by Fair, Isaac &
Company, Inc. or such other organization providing credit scores at the time of
the origination of a Loan.

 

“First Lien Mortgage Loan” means a Loan secured by a first priority lien on the
related Mortgaged Property.

 

“Freddie Mac” means the Federal Home Loan Mortgage Corporation, and its
successors in interest.

 

“GAAP” means generally accepted accounting principles in the United States of
America in effect from time to time.

 

“Government Securities” means negotiable U.S. Treasury securities or federal
agencies backed by the full faith and credit of the United States government.

 

“Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof, or any entity exercising executive, legislative,
judicial, regulatory or administrative functions over Seller or Guarantor.

 

“Gross Margin” means with respect to each Adjustable Rate Mortgage Loan, the
fixed percentage amount set forth in the related Note and the Loan Schedule that
is added to the Index on each Adjustment Date in accordance with the terms of
the related Note to determine the new Mortgage Interest Rate for such Loan.

 

“Ground Lease” means a ground lease to which the Mortgaged Property is subject
as to which all of the following are true: (i) the Mortgagor is the owner of a
valid and subsisting interest as tenant; (ii) it is in full force and effect,
unmodified and not supplemented by any writing or otherwise; (iii) all rent,
additional rent and other charges reserved therein have been paid to the extent
they are payable to the date hereof; (iv) the Mortgagor enjoys the quiet and
peaceful possession of the estate demised thereby, subject to any sublease; (v)
the Mortgagor is not in default under any of the terms thereof and there are no
circumstances which, with the passage of time or the giving of notice or both,
would constitute an event of default thereunder; (vi) the lessor thereunder is
not in default under any of the terms or provisions thereof on the part of the
lessor to be observed or performed; (vii) the lessor thereunder has satisfied
all of its repair or construction obligations, if any, to date pursuant to the
terms thereof; (viii) the remaining term thereof extends not less than ten (10)
years following the maturity date of such Mortgage Loan; and (ix) the execution,
delivery and performance of the Mortgage do not require the consent (other than
those consents which have been obtained and are in full force and effect)
thereunder, and will not contravene any provision of or cause a default
thereunder;

 

“Guarantee” means, 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.

 

“Guarantor” means ECC Capital Corporation, Encore Credit Corp. or Bravo Credit
Corporation and their respective successors thereto.

 

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“Guaranty” means the Guaranty and Pledge Agreement of Guarantors in favor of
Buyers, dated as of May 16, 2005.

 

“Hedge Instrument” means any interest rate cap agreement, interest rate floor
agreement, interest rate swap agreement or other interest rate hedging agreement
entered into by a Seller or the relevant Guarantor with a counterparty approved
by the Buyers.

 

“High Cost Loan” means a Loan that is (a) subject to the provisions of the Home
Ownership and Equity Protection Act of 1994 as amended (“HOEPA”); (b) a “high
cost” mortgage loan, “covered” mortgage loan, “high risk home” mortgage loan or
“predatory” mortgage loan or any other comparable term, no matter how defined
under any federal, state or local law; (c) subject to any comparable federal,
state or local statutes and regulations, or any other statute or regulation
providing for heightened regulatory scrutiny or assignee liability to holders of
such mortgage loans; or (d) a “High Cost Loan” or “Covered Loan”, as applicable
(as such terms are defined in the current Standard & Poor’s LEVELS® Glossary
Revised, Appendix E).

 

“HUD” means the Department of Housing and Urban Development, or any federal
agency or official thereof which may from time to time succeed to the functions
thereof with regard to FHA mortgage insurance. The term “HUD,” for purposes of
this Agreement, is also deemed to include subdivisions thereof such as the FHA
and Government National Mortgage Association.

 

“Income” means, with respect to any Purchased Loan at any time, any principal
and/or interest thereon and all dividends, sale proceeds (including, without
limitation, any proceeds from the securitization of such Purchased Loan or other
disposition thereof) and other collections and distributions thereon (including,
without limitation, any proceeds received in respect of mortgage insurance), but
not including any commitment fees, origination fees and/or servicing fees
accrued in respect of periods on or after the initial Purchase Date with respect
to such Purchased Loan.

 

“Indebtedness” shall mean, for any Person: (a) all obligations for borrowed
money (excluding non-recourse debt obligations); (b) obligations of such Person
to pay the deferred purchase or acquisition price of Property or services, other
than trade 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 and paid within ninety (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 for account of such Person; (e) capital
lease obligations of such Person; (f) obligations of such Person under
repurchase agreements or like arrangements; (g) indebtedness of others
guaranteed on a recourse basis by such Person; (h) all obligations of such
Person incurred in connection with the acquisition or carrying of fixed assets
by such Person; (i) indebtedness of general partnerships of which such Person is
a general partner; and (j) any other contingent liabilities of such Person.

 

“Index” means with respect to each Adjustable Rate Mortgage Loan, the index
identified on the related Loan Schedule and set forth in the related Note for
the purpose of calculating the interest rate thereon.

 

“Investment Company Act” means the Investment Company Act of 1940, as amended,
including all rules and regulations promulgated thereunder.

 

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“LIBOR” shall mean, for each day, the rate determined by Buyers on the related
Purchase Date on the basis of the offered rate for one-month U.S. dollar
deposits, as such rate appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on such date (rounded up to the nearest whole multiple of 1/16%); provided
that if such rate does not appear on Telerate Page 3750, the rate for such date
will be the rate determined by reference to such other comparable publicly
available service publishing such rates as may be selected by Buyers in their
sole discretion and communicated to Sellers.

 

“Loan” means a first lien or second lien, fixed rate or adjustable rate,
closed-end, wet or dry-funded residential mortgage loan originated in accordance
with the Underwriting Guidelines and the warranties attached as Exhibit B
hereto.

 

“Loan Schedule” means the list of Loans delivered by a Seller or the related
Originator to Buyer and Custodian together with each Transaction Notice and the
paper portion of which is attached by the Custodian to the related Trust
Receipt. Each Loan Schedule (which shall also include a Computer Tape) shall set
forth the following information with respect to each Loan: product description,
purchased loan number, obligor name and address, principal balance, coupon,
first payment date, last payment date, next payment due date, monthly payment,
origination date, credit score, debt-to-income ratio, property type, property
valuation, LTV, CLTV, loan purpose, owner occupancy, lien status, senior liens,
subordinate liens, purchase price paid, selling entity, whether the loans are
subject to prepayment charges, any other information reasonably required by the
related Buyer and any other additional items to be delivered as set forth on
Annex 1 to the Custodial Agreement.

 

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

 

“Manufactured Home” means a prefabricated or manufactured home a lien on which
secures a Loan and which is considered and treated as “real property” under
applicable law and which satisfies each of the requirements therefor that are
set forth in clause (i) of Exhibit B hereto.

 

“Margin Call” shall have the meaning assigned thereto in Section 6(a) hereof.

 

“Margin Deficit” shall have the meaning assigned thereto in Section 6(a) hereof.

 

“Market Value” means (i) with respect to any Purchased Loan that is an Eligible
Loan, as of any date of determination, the value ascribed to such asset by the
related Buyer in its sole discretion based on its knowledge of the market for
such asset as marked to market daily (but in no event greater than the Market
Value of such Purchased Loan on the related initial Purchase Date), and (ii)
with respect to a Purchased Loan that is not an Eligible Loan or a Purchased
Loan that is deemed by the related Buyer to be unsecuritizable or otherwise
uncollectible, zero.

 

“Master Loan Sale Agreement” means the Master Loan Sale and Contribution
Agreement, dated as of May 16, 2005 between the Originators and the Sellers.

 

“Master Netting Agreement” means the letter agreement among Buyers and Guarantor
and certain Affiliates in form and substance acceptable to Buyers to be entered
into in the event that the Buyers and Guarantor agree; provided that if such
agreement is not entered into, all references herein to the Master Netting
Agreement shall be disregarded.

 

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“Material Adverse Change” means, with respect to a Person, any material adverse
change in the business, condition (financial or otherwise), operations,
performance, properties or prospects taken as a whole or prospects of such
Person.

 

“Material Adverse Effect” means (a) a Material Adverse Change with respect to a
Person or a Person and its Affiliates that are party to any Program Document
taken as a whole; (b) a material impairment of the ability of a Person or any
Affiliate thereof that is a party to any Program Document to perform under any
Program Document and to avoid any Event of Default; (c) a material adverse
effect upon the legality, validity, binding effect or enforceability of any
Program Document against a Person or any Affiliate of such Person that is a
party to any Program Document; or (d) a material adverse effect upon the value
or marketability of a material portion of the Purchased Loans.

 

“Maximum Aggregate Purchase Price” means Three Hundred Million Dollars
($300,000,000) for all Sellers.

 

“Maximum Mortgage Interest Rate” means with respect to each Adjustable Rate
Mortgage Loan, a rate that is set forth on the related Loan Schedule and in the
related Mortgage Note and is the maximum interest rate to which the Mortgage
Interest Rate on such Mortgage Loan may be increased on any Adjustment Date.

 

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

 

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

 

“Monthly Payment” means with respect to any Loan, the scheduled combined payment
of principal and interest payable by a Mortgagor under the related Mortgage Note
on each Due Date.

 

“Mortgage” means a mortgage, deed of trust, or other instrument that creates a
lien on the related Mortgaged Property and secures a Note.

 

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

 

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

 

“Mortgage Interest Rate” means, with respect to each Loan, the annual rate at
which interest accrues on such Loan from time to time in accordance with the
provisions of the related Note.

 

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

 

“Mortgaged Property” means, with respect to a Loan, the related Mortgagor’s fee
interest in real property or leasehold interest in real property improved by a
Residential Dwelling and all other collateral securing repayment of the debt
evidenced by the related Note.

 

“Mortgagee” means the record holder of a Note secured by a Mortgage.

 

“Mortgagor” means the obligor or obligors on a Note, including any person who
has assumed or guaranteed the obligations of the obligor thereunder.

 

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“MV Margin Amount” means, with respect to any Transaction, as of any date of
determination, the amount obtained by application of the MV Margin Percentage to
the Repurchase Price for such Transaction as of such date.

 

“MV Margin Percentage” shall have the meaning assigned thereto in the Pricing
Side Letter.

 

“Net Worth” shall mean, with respect to ECC, the excess of ECC’s total
consolidated assets, over ECC’s total consolidated liabilities, determined in
accordance with GAAP.

 

“90-Day Delinquent Loan” shall mean a Loan that is ninety (90) days or more
Delinquent.

 

“Non Usage Fee” shall have the meaning assigned thereto in the Pricing Side
Letter.

 

“Note” means, with respect to any Loan, the related promissory note together
with all riders thereto and amendments thereof or other evidence of indebtedness
of the related Mortgagor.

 

“Obligations” means (a) all of each Seller’s and each Guarantor’s obligation to
pay the Repurchase Price on the Repurchase Date and other obligations and
liabilities of such Seller and such Guarantor to Buyers, its Affiliates,
Custodian or any other Person arising under, or in connection with, the Program
Documents or directly related to the Purchased Loans, whether now existing or
hereafter arising; (b) any and all sums paid by Buyers or on behalf of Buyers
pursuant to the Program Documents in order to preserve any Purchased Loan or its
interest therein; (c) in the event of any proceeding for the collection or
enforcement of any Seller’s or any Guarantor’s indebtedness, obligations or
liabilities referred to in clause (a), the reasonable expenses of retaking,
holding, collecting, preparing for sale, selling or otherwise disposing of or
realizing on any Purchased Loan, or of any exercise by Buyers or any such
Affiliate of their rights under the Program Documents, including without
limitation, reasonable attorneys’ fees and disbursements and court costs; and
(d) all of each Seller’s and each Guarantor’s indemnity obligations to Buyers
pursuant to the Program Documents.

 

“Originator” means any of ECC, Encore Credit, or Bravo, as the case may be, and
ECC, Encore Credit and Bravo together being the “Originators”.

 

“Par Margin Amount” means, with respect to any Transaction, as of any date of
determination, the amount obtained by application of the Par Margin Percentage
to the Repurchase Price for such Transaction as of such date.

 

“Par Margin Percentage” shall have the meaning assigned thereto in the Pricing
Side Letter.

 

“Performing Scratch and Dent Loans” shall mean a Purchased Loan for which the
selected Loan was repurchased from either (i) a securitization of an
Originator’s residential Mortgage Loans or (ii) a whole loan sale between an
Originator and a third party as a result of a breach of a representation or
warranty other than breaches that result from, or relate to or involve
regulatory compliance or fraud.

 

“Person” means any legal person, including any individual, corporation,
partnership, association, joint stock company, trust, limited liability company,
unincorporated organization, governmental entity or other entity of similar
nature.

 

“Price Differential” means, with respect to each Transaction as of any date of
determination, the aggregate amount obtained by daily application of the Pricing
Rate (or, during the continuation of an Event of Default, by daily application
of the Default Rate) for such Transaction to the Purchase Price for such
Transaction on a 360-day-per-year basis for the actual number of days elapsed
during the period

 

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commencing on (and including) the Purchase Date and ending on (but excluding)
the Repurchase Date (reduced by any amount of such Price Differential in respect
of such period previously paid by the applicable Seller to Buyers with respect
to such Transaction).

 

“Pricing Rate” means the per annum percentage rate for determination of the
Price Differential as set forth in the Pricing Side Letter.

 

“Pricing Side Letter” means the pricing side letter, dated as of May 16, 2005,
among Sellers, Guarantors and Buyers, as the same may be amended, supplemented
or modified from time to time.

 

“Prime Rate” means the daily prime loan rate as reported in The Wall Street
Journal or if more than one rate is published, the highest of such rates.

 

“Principal” shall have the meaning given to it in Annex I.

 

“Program Documents” means this Agreement, the Custodial and Disbursement
Agreement, any Servicing Agreement, the Master Netting Agreement, the Guaranty,
the Undertaking Agreement, any assignment of Hedge Instrument, the Master Loan
Sale Agreement, the Pricing Side Letter, the Electronic Tracking Agreement, the
Seller’s trust agreement and any other agreement entered into by any Seller
and/or any ECC Person and/or the Servicer, on the one hand, and the Buyers or
one of their Affiliates (or Custodian on its behalf) on the other, in connection
herewith or therewith.

 

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

 

“Purchase Date” means, with respect to each Transaction, the date on which
Purchased Loans are sold by a Seller to the related Buyer hereunder.

 

“Purchase Price” shall have the meaning assigned thereto in the Pricing Side
Letter.

 

“Purchased Loans” means any of the following assets sold by a Seller to one or
more Buyers in a Transaction: the related Loans, together with the related
Records, Servicing Rights, such Seller’s or the related Guarantor’s rights under
any related Hedge Instruments, such Seller’s or the related Guarantor’s rights
under any takeout commitment related to the Loans and other Collateral, such
other property, rights, titles or interest as are specified on a related
Transaction Notice, and all instruments, chattel paper, and general intangibles
comprising or relating to all of the foregoing. The term “Purchased Loans” with
respect to any Transaction at any time also shall include Additional Purchased
Loans delivered pursuant to Section 6(a) hereof (Margin Maintenance) and
Substitute Loans delivered pursuant to Section 17 hereof.

 

“Reacquired Loans” shall have the meaning assigned thereto in Section 17.

 

“Records” means all instruments, agreements and other books, records, and
reports and data generated by other media for the storage of information
maintained by a Seller or any other person or entity with respect to a Purchased
Loan. Records shall include, without limitation, the Notes, any Mortgages, the
Mortgage Files, the Servicing File, and any other instruments necessary to
document or service a Loan that is a Purchased Loan, including, without
limitation, the complete payment and modification history of each Loan that is a
Purchased Loan.

 

“REIT” means a real estate investment trust, as defined in Section 856 of the
Code.

 

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“REIT Status” means with respect to any Person, such Person’s status as a real
estate investment trust, as defined in Section 856(a) of the Code that satisfies
the conditions and limitations set forth in Sections 856(b) and 856(c) of the
Code.

 

“REMIC” means a “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code.

 

“Repurchase Date” means the date occurring on (i) the [15th] day of each month
following the related Purchase Date (or if such date is not a Business Day, the
following Business Day), (ii) any other Business Day set forth in the related
Transaction Notice and/or the related Confirmation, or (iii) the date determined
by application of Section 20, as applicable.

 

“Repurchase Price” means the price at which Purchased Loans are to be
transferred from the related Buyer to the related Seller upon termination of a
Transaction, which will be determined in each case (including Transactions
terminable upon demand) as the sum of the then unpaid Purchase Prices for such
Purchased Loans and the Price Differential as of the date of such determination.

 

“Requirement of Law” means as to any Person, the certificate of incorporation
and by-laws or other organizational or governing documents of such Person, and
any law, 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.

 

“Residential Dwelling” means any one of the following: (i) a detached single
family dwelling, (ii) a two-to-four family dwelling, (iii) a one-family dwelling
unit in a Fannie Mae eligible condominium project, (iv) a townhouse, or (v) a
detached single family dwelling in a planned unit development none of which is a
co-operative commercial property. Mortgaged Properties that consist of the
following property types are not Residential Dwellings: (a) mixed use
properties, (b) log homes, (c) earthen homes, (d) underground homes, (e) mobile
homes or manufactured housing units not secured by real property, (f) any
dwelling situated on more than ten acres of property and (g) any dwelling
situated on a leasehold estate unless each of the requirements set forth in the
definition of “Ground Lease” have been satisfied.

 

“Second Lien Mortgage Loan” means an Eligible Loan secured by a lien on the
Mortgaged Property, which is subject to one prior lien on such Mortgaged
Property.

 

“Security Agreement” means with respect to any Loan, any contract, instrument or
other document related to security for repayment thereof (other than the related
Mortgage and Note), executed by the Mortgagor and/or others in connection with
such Loan, including without limitation, any security agreement, guaranty, title
insurance policy, hazard insurance policy, chattel mortgage, letter of credit or
certificate of deposit or other pledged accounts, and any other documents and
records relating to any of the foregoing.

 

“Seller” means ECC SPV II, a Delaware statutory trust, Encore SPV II, a Delaware
statutory trust or Bravo SPV II, a Delaware statutory trust.

 

“Servicer” means either or both of Option One Mortgage Corporation or HomEq
Servicing Corporation and any successor thereto, or any other servicer approved
by Buyers in their sole discretion.

 

“Servicing Agreements” means collectively (i) the Servicing Agreements between
Encore Credit and a Servicer, or any agreement (other than the Custodial and
Disbursement Agreement) giving rise or relating to Servicing Rights with respect
to a Purchased Loan, including any assignment or other

 

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agreement relating to such agreement and (ii) those notices, dated as of May 16,
2005, among the Buyers, the Servicers and the Sellers.

 

“Servicing File” means with respect to each Loan, the file retained by the
applicable Seller consisting of all documents that a prudent originator and
servicer would have, including copies of the Mortgage Loan Documents, all
documents necessary to document and service the Loans and any and all documents
required to be delivered pursuant to any of the Program Documents.

 

“Servicing Rights” means contractual, possessory or other rights of a Seller or
any other Person, whether arising under a Servicing Agreement or otherwise, to
administer or service a Purchased Loan or to possess related Records.

 

“Settlement Agent” means, with respect to any Transaction related to a Wet-Ink
Mortgage Loan, prior to the occurrence of the Transaction, the person identified
as such in a notice sent by a Seller to the Buyers, which person 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 Transaction are to be wired.

 

“60-Day Delinquent Loan” means a Loan which is more than fifty-nine (59) days
Delinquent but less than ninety (90) days Delinquent.

 

“Subprime Loan” means any Loan that is not a Conforming Loan.

 

“Subsidiary” means, 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 such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person.

 

“Substitute Loans” has the meaning assigned thereto in Section 17.

 

“Termination Date” means the earlier of (i) 364 days following the Effective
Date or (ii) at Buyers’ option, upon the occurrence of an Event of Default.

 

“30-Day Delinquent Loan” shall mean a Loan which is more than twenty-nine (29)
days Delinquent but less than sixty (60) days Delinquent.

 

“Transaction” has the meaning assigned thereto in Section 1.

 

“Transaction Notice” means a written request of a Seller to enter into a
Transaction, in a form attached as Exhibit A to the Custodial Agreement or such
other form as shall be mutually agreed upon among Sellers and Buyers, which is
delivered to the related Buyer, the Disbursement Agent and the Custodian.

 

“Trust Receipt” means a Trust Receipt and Certification as defined in the
Custodial Agreement.

 

“Underwriting Guidelines” means Encore Credit’s or Bravo’s loan underwriting
guidelines, as applicable, (and in the case of ECC, either of the applicable
guidelines depending on which entity it

 

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acquired the loan from) set forth on Exhibit D in effect as of the date of this
Agreement, which have been approved in writing by Buyers, as the same may be
amended from time to time in accordance with terms of this Agreement.

 

“Uniform Commercial Code” means the Uniform Commercial Code as in effect on the
date hereof in the State of New York or the Uniform Commercial Code as in effect
in the applicable jurisdiction.

 

“Unrestricted Cash” means cash and Cash Equivalents, of ECC that are not subject
to a lien in favor of any Person other than the Buyers pursuant to the Guaranty
or that are not required to be maintained by the ECC pursuant to a contractual
agreement (other than this Agreement) or requirement of law.

 

“USC” shall have the meaning assigned thereto in Section 35.

 

“Wet Funding Package” shall have the meaning set forth in the Custodial
Agreement.

 

“Wet-Ink Mortgage Loan” means an Eligible Loan which is sold to the related
Buyer simultaneously with the origination thereof by the applicable Originator,
which origination is in accordance with the Underwriting Guidelines and is
funded in part or in whole with proceeds of the sale of the Eligible Loan to the
related Buyer paid directly to a Settlement Agent and for which all of the
Mortgage Loan Documents specified in the Custodial Agreement have not been
delivered to Custodian in accordance with the Custodial Agreement. For the
avoidance of doubt Wet-Ink Mortgage Loans shall include a Wet-Ink Subprime Loan.

 

“Wet-Ink Subprime Loan” means a Subprime Loan that is also a Wet-Ink Mortgage
Loan.

 

(b) Capitalized terms used but not defined in this Agreement shall have the
meanings assigned thereto in the Custodial Agreement.

 

(c) Interpretation.

 

Headings are for convenience only and do not affect interpretation. The
following rules of this subsection (c) apply unless the context requires
otherwise. The singular includes the plural and conversely. A gender includes
all genders. Where a word or phrase is defined, its other grammatical forms have
a corresponding meaning. A reference to a subsection, Section, Annex or Exhibit
is, unless otherwise specified, a reference to a Section of, or annex or exhibit
to, this Agreement. A reference to a party to this Agreement or another
agreement or document includes the party’s successors and permitted substitutes
or assigns. A reference to an agreement or document is to the agreement or
document as amended, modified, novated, supplemented or replaced, except to the
extent prohibited by any Program Document. A reference to legislation or to a
provision of legislation includes a modification or re-enactment of it, a
legislative provision substituted for it and a regulation or statutory
instrument issued under it. A reference to writing includes a facsimile
transmission and any means of reproducing words in a tangible and permanently
visible form. A reference to conduct includes, without limitation, an omission,
statement or undertaking, whether or not in writing. An Event of Default exists
until it has been waived in writing by Buyers or has been timely cured. The
words “hereof”, “herein”, “hereunder” and similar words refer to this Agreement
as a whole and not to any particular provision of this Agreement. The term
“including” is not limiting and means “including without limitation”. In the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including”, the words “to” and “until” each mean
“to but excluding”, and the word “through”

 

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means “to and including”. This Agreement may use several different limitations,
tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and shall each be performed
in accordance with their terms. Unless the context otherwise clearly requires,
all accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied. References herein to “fiscal year”
and “fiscal quarter” refer to such fiscal periods of a Seller or an ECC Person,
as applicable.

 

Except where otherwise provided in this Agreement, any determination, consent,
approval, statement or certificate made or confirmed in writing with notice to
the applicable Seller or the applicable Guarantor by any Buyer or an authorized
officer of any Buyer provided for in this Agreement is conclusive and binds the
parties in the absence of manifest error. A reference to an agreement includes a
security interest, guarantee, agreement or legally enforceable arrangement
whether or not in writing related to such agreement.

 

A reference to a document includes an agreement (as so defined) in writing or a
certificate, notice, instrument or document, or any information recorded in
computer disk form. Where a Seller or an ECC Person is required to provide any
document to Buyers under the terms of this Agreement, the relevant document
shall be provided in writing or printed form unless Buyers request otherwise. At
the request of Buyers, the document shall be provided in computer disk form or
both printed and computer disk form.

 

This Agreement is the result of negotiations among, and has been reviewed by
counsel to, Buyers, each ECC Person and Sellers, and is the product of all
parties. In the interpretation of this Agreement, no rule of construction shall
apply to disadvantage one party on the ground that such party proposed or was
involved in the preparation of any particular provision of this Agreement or
this Agreement itself. Except where otherwise expressly stated, Buyers may give
or withhold, or give conditionally, approvals and consents and may form opinions
and make determinations at its absolute discretion. Any requirement of good
faith, discretion or judgment by Buyers shall not be construed to require Buyers
to request or await receipt of information or documentation not immediately
available from or with respect to Sellers, any ECC Person, a servicer of the
Purchased Loans, any other Person or the Purchased Loans themselves.

 

3. THE TRANSACTIONS

 

(a) Subject to the terms and conditions of the Program Documents, DBSP hereby
agrees to (and Aspen and Newport may) enter into Transactions with an aggregate
Purchase Price for all Purchased Loans acquired by all Buyers and sold by all
Sellers not to exceed the Maximum Aggregate Purchase Price. Unless otherwise
agreed, (i) with respect to the purchase of Loans that are Dry Mortgage Loans,
the applicable Seller shall give the related Buyer and Custodian notice of any
proposed purchase by delivering on the proposed purchase prior to 11:00 a.m. New
York City time one (1) Business Day prior to the proposed Purchase Date (the
date on which such notice is so given, the “Notice Date”) (1) a Transaction
Notice, a Loan Schedule and a Computer Tape to the related Buyer and Custodian,
and (2) the Mortgage File to Custodian for each Loan subject to such
Transaction, and (ii) with respect to the purchase of Wet-Ink Mortgage Loans,
prior to 11:00 a.m., New York City time, on the Business Day prior to the
purchase of such Wet-Ink Mortgage Loans by a Buyer, the applicable Seller shall
notify the related Buyer and the Disbursement Agent of an estimate of the
Purchase Price of such Wet-Ink Mortgage Loans and such Seller shall give the
related Buyer and the Custodian notice of any proposed purchase, prior to 4:00
p.m. New York City time on the proposed Purchase Date (also a “Notice Date”) and
deliver a Transaction Notice, a Loan Schedule and a Computer Tape to the related
Buyer and Custodian. In

 

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addition to other information provided on the applicable Notice Date, the
applicable Seller or the related Originator, as applicable shall simultaneously
deliver by electronic mail the applicable notice set forth herein as Exhibit C
which shall be included in the Transaction Notice.

 

(b) The related Seller shall repurchase Purchased Loans from the related Buyer
on each related Repurchase Date for the price indicated in Section 15. Each
obligation to repurchase exists without regard to any prior or intervening
liquidation or foreclosure with respect to any Purchased Loan. The related
Seller is obligated to obtain the Purchased Loans from the related Buyer or its
designee (including the Custodian) at Seller’s expense on (or after) the related
Repurchase Date. Provided that the applicable conditions in Sections 10(a) and
(b) have been satisfied, each Purchased Loan that is repurchased by the related
Seller on the Repurchase Date shall automatically become subject to a new
Transaction unless the related Buyer is otherwise notified by the related Seller
at least one (1) Business Day prior to any such Repurchase Date; provided that
if the Repurchase Date so determined is later than the Termination Date, the
Repurchase Date for such Transaction shall automatically reset to the
Termination Date, and the provisions of this sentence as it might relate to a
new Transaction shall expire on such date. For each new Transaction, unless
otherwise agreed, (y) the accrued and unpaid Price Differential shall be settled
in cash on each related Repurchase Date, and (z) the Pricing Rate shall be as
set forth in the Pricing Side Letter.

 

(c) If a Seller repurchases Purchased Loans on any day which is not a Repurchase
Date for such Purchased Loans, such Seller shall indemnify the related Buyer and
hold the related Buyer harmless from any losses, costs and/or expenses which the
related Buyer may sustain or incur arising from the reemployment of funds
obtained by the related Buyer hereunder or from fees payable to terminate the
deposits from which such funds were obtained, in each case for the remainder of
the applicable 30 day period (“Breakage Costs”). The related Buyer shall deliver
to the related Seller a statement setting forth the amount and basis of
determination of any Breakage Costs in such detail as determined in good faith
by the related Buyer to be adequate, it being agreed that such statement and the
method of its calculation shall be adequate and shall be conclusive and binding
upon such Seller, absent manifest error. The provisions of this Section 3(c)
shall survive termination of this Agreement and the repurchase of all Purchased
Loans subject to Transactions hereunder.

 

4. CONFIRMATIONS

 

In the event that the parties hereto desire to enter into a Transaction on terms
other than as set forth in this Agreement (as amended by the Pricing Side
Letter), the parties shall execute a “Confirmation” specifying such terms prior
to entering into such Transaction, including, without limitation, the Purchase
Date, the Purchase Price, the Pricing Rate therefor and the Repurchase Date. Any
such Confirmation and the related Transaction Notice, together with this
Agreement, shall constitute conclusive evidence of the terms agreed to between
the related Buyer and the related Seller with respect to the Transaction to
which the Confirmation relates. In the event of any conflict between this
Agreement and a Confirmation, the terms of the Confirmation shall control with
respect to the related Transaction.

 

5. PAYMENT AND TRANSFER

 

Unless otherwise agreed, all transfers of funds hereunder shall be in
immediately available funds and all Purchased Loans transferred shall be
transferred to the Custodian pursuant to the Custodial Agreement. Any Repurchase
Price or Price Differential received by the related Buyer after 2:00 p.m. New
York City time shall be applied on the next succeeding Business Day.

 

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6. MARGIN MAINTENANCE

 

(a) If at any time either (i) the aggregate Market Value of all Purchased Loans
subject to all Transactions is less than the aggregate MV Margin Amount for all
such Transactions, or (ii) the aggregate unpaid principal balance of the
Purchased Loans for all Transactions is less than the sum of the aggregate Par
Margin Amount for all such Transactions (either such event, a “Margin Deficit”),
then the related Buyer may by notice to related Seller require related Seller in
such Transactions to transfer to the related Buyer cash or, at the related
Buyer’s option (and provided such Seller has additional Eligible Loans and
agrees to do so), additional Eligible Loans (“Additional Purchased Loans”)
within one (1) Business Day of such notice by such Buyer, so that both (x) the
cash and aggregate Market Value of such Purchased Loans, including any such
Additional Purchased Loans, will thereupon equal or exceed such aggregate MV
Margin Amount, and (y) the cash and unpaid principal balance of such Purchased
Loans, including any such Additional Purchased Loans, will thereupon equal or
exceed such aggregate Par Margin Amount (either such requirement, a “Margin
Call”).

 

(b) Notice required pursuant to Section 6(a) may be given by any means provided
in Section 36 hereof. Any notice given on a Business Day shall be met, and the
related Margin Call satisfied, no later than 5:00 p.m. New York City time on the
following Business Day. The failure of any Buyer, on any one or more occasions,
to exercise its rights hereunder, shall not change or alter the terms and
conditions to which this Agreement is subject or limit the right of such Buyer
to do so at a later date. Sellers, Guarantors and Buyers each agree that a
failure or delay by any Buyer to exercise its rights hereunder shall not limit
or waive Buyers’ rights under this Agreement or otherwise existing by law or in
any way create additional rights for any Seller or any Guarantor.

 

7. INCOME PAYMENTS

 

Where a particular term of a Transaction extends over the date on which Income
is paid in respect of any Purchased Loan subject to that Transaction, such
Income shall be the property of Buyers. Notwithstanding the foregoing, and
provided no Default or Event of Default has occurred and is continuing, Buyers
agree that the applicable Seller shall be entitled to receive an amount equal to
all Income paid in respect of any Purchased Loan, which is not otherwise
received by such Seller, to the full extent it would be so entitled if the
Purchased Loans had not been sold to Buyers; provided that any Income received
by or on behalf of a Seller while the related Transaction is outstanding shall
be deemed to be held by such Seller solely in trust for Buyers pending the
repurchase on the related Repurchase Date. If a Default or an Event of Default
has occurred and is continuing, the Sellers shall hold all Income in the
Collection Account. Provided no Default or Event of Default has occurred, Buyers
shall, as the parties may agree with respect to any Transaction (or, in the
absence of any such agreement, as Buyers shall reasonably determine in their
sole discretion), on the Repurchase Date following the date such Income is
received by Buyers (or a servicer on their behalf) either (i) transfer (or
permit the servicer to transfer) to the applicable Seller such Income with
respect to any Purchased Loans subject to such Transaction or (ii) if a Margin
Deficit then exists, apply the Income payment to reduce the amount, if any, to
be transferred to Buyers by the applicable Seller upon termination of such
Transaction. Buyers shall not be obligated to take any action pursuant to the
preceding sentences (A) to the extent that such action would result in the
creation of a Margin Deficit, unless prior thereto or simultaneously therewith
the applicable Seller transfers to Buyers cash or Additional Purchased Loans
sufficient to eliminate such Margin Deficit, or (B) if an Event of Default with
respect to Seller has occurred and is then continuing at the time such Income is
paid.

 

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8. TAXES; TAX TREATMENT; INCREASED COSTS

 

(a) All payments made by the Sellers under this Repurchase Agreement shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities (including penalties, interest and additions
to tax) with respect thereto imposed by any Governmental Authority thereof or
therein, excluding income taxes, branch profits taxes, franchise taxes or any
other tax imposed on the net income by the United States, a state or a foreign
jurisdiction under the laws of which the Buyers are organized or of their
applicable lending office, or any political subdivision thereof (collectively,
“Taxes”), all of which shall be paid by the applicable Seller for its own
account not later than the date when due. If any Seller is required by law or
regulation to deduct or withhold any Taxes from or in respect of any amount
payable hereunder, it shall: (a) make such deduction or withholding; (b) pay the
amount so deducted or withheld to the appropriate Governmental Authority not
later than the date when due; (c) deliver to Buyers, promptly, original tax
receipts and other evidence satisfactory to Buyers of the payment when due of
the full amount of such Taxes; and (d) pay to the Buyers such additional amounts
as may be necessary so that such Buyers receive, free and clear of all Taxes, a
net amount equal to the amount it would have received under this Agreement, as
if no such deduction or withholding had been made. Notwithstanding the
foregoing, with respect to any jurisdiction in which Buyer is a taxpayer for the
taxable year affected, if Buyer receives a refund or credit of the withholding
tax for which Buyer has received payment from Seller pursuant to this Section,
Buyer shall refund to Seller the amount of any such payment, provided that any
such refund shall not exceed the amount of the refund or credit received by the
Buyer.

 

(b) In addition, the Sellers agree to pay to the relevant Governmental Authority
in accordance with applicable law any current or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
(including, without limitation, mortgage recording taxes, transfer taxes and
similar fees) imposed by the United States or any taxing authority thereof or
therein that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Repurchase
Agreement (“Other Taxes”).

 

(c) The Sellers agree to indemnify the Buyers for the full amount of Taxes
(including additional amounts with respect thereto) and Other Taxes, and the
full amount of Taxes of any kind imposed by any jurisdiction on amounts payable
under this Section 8, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, provided that the Buyers
shall have provided the Seller with evidence, reasonably satisfactory to the
Sellers, of payment of Taxes or Other Taxes, as the case may be.

 

(d) Any Buyer that is not incorporated under the laws of the United States, any
State thereof, or the District of Columbia (a “Foreign Buyer”) shall, prior to
becoming a Buyer, provide the Sellers with properly completed United States
Internal Revenue Service (“IRS”) Form W-8BEN or W-8ECI or any successor form
prescribed by the IRS, certifying that such Foreign Buyer is entitled to
benefits under an income tax treaty to which the United States is a party which
reduces the rate of withholding tax on payments of interest or certifying that
the income receivable pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States on or prior to the date
upon which each such Foreign Buyer becomes a Buyer. Each Foreign Buyer will
resubmit the appropriate form on the earliest of (A) the third anniversary of
the prior submission or (B) on or before the expiration of thirty (30) days
after there is a “change in circumstances” with respect to such Foreign Buyer as
defined in Treas. Reg. Section 1.1441(e)(4)(ii)(D). For any period with respect
to which a Foreign Buyer has failed to provide the Sellers with the appropriate
form or other relevant document pursuant to this Section 8(d) (unless such
failure is due to a change in treaty, law, or regulation occurring subsequent to
the date on which a form originally was required to be provided), such Foreign
Buyer shall not be entitled to any

 

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“gross-up” of Taxes or indemnification under Section 8(c) with respect to Taxes
imposed by the United States; provided, however, that should a Foreign Buyer,
which is otherwise exempt from a withholding tax, become subject to Taxes
because of its failure to deliver a form required hereunder, the Sellers shall
take such steps as such Foreign Buyer shall reasonably request to assist such
Foreign Buyer to recover such Taxes.

 

(e) Without prejudice to the survival or any other agreement of Sellers
hereunder, the agreements and obligations of Sellers contained in this Section 8
shall survive the termination of this Agreement. Nothing contained in this
Section 8 shall require Buyers to make available any of their tax returns or
other information that it deems to be confidential or proprietary.

 

(f) Each party to this Agreement acknowledges that it is its intent for purposes
of U.S. federal, state and local income and franchise taxes to treat each
Transaction as indebtedness of Sellers that is secured by the Purchased Loans
and that the Purchased Loans are owned by Sellers in the absence of an Event
Default by Sellers. All parties to this Agreement agree to such treatment and
agree to take no action inconsistent with this treatment, unless required by
law.

 

(g) If Buyers determine that, due to the introduction of, any change in, or the
compliance by Buyers with (i) any eurocurrency reserve requirement, or (ii) the
interpretation of any law, regulation or any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law), there shall be an increase in the cost to Buyers in engaging in the
present or any future Transactions, then Sellers agree to pay to Buyers, from
time to time, upon demand by Buyers (with a copy to Custodian) the actual cost
of additional amounts as specified by Buyers to compensate Buyers for such
increased costs. Notwithstanding any other provisions in this Agreement, in the
event of any such change in the eurocurrency reserve requirement or the
interpretation of any law, regulation or any guideline or request from any
central bank or other Governmental Authority, Sellers will have the right to
terminate all Transactions then outstanding as of a date selected by Sellers,
which date shall be prior to the applicable Repurchase Date and which date shall
thereafter for all purposes hereof, be deemed to be the Repurchase Date. In
addition, Buyers shall promptly notify Seller if any events in clause (i) or
(ii) of this Section 8(g) occur.

 

9. SECURITY INTEREST; BUYERS’ APPOINTMENT AS ATTORNEY-IN-FACT

 

(a) Sellers and Buyers intend that the Transactions hereunder be sales to Buyers
of the Purchased Loans and not loans from Buyers to Sellers secured by the
Purchased Loans. However, in order to preserve Buyers’ rights under this
Agreement in the event that a court or other forum recharacterizes the
Transactions hereunder as other than sales, and as security for each Seller’s
performance of all of its Obligations, each Seller hereby grants Buyers a fully
perfected security interest in the following property, whether now existing or
hereafter acquired: the Purchased Loans, the related Records, all related
Servicing Rights, all mortgage guaranties and insurance relating to such
Purchased Loans (issued by governmental agencies or otherwise) or the related
Mortgaged Property and any mortgage insurance certificate or other document
evidencing such mortgage guaranties or insurance and all claims and payments
thereunder, the applicable Seller’s rights under the Master Loan Sale Agreement
(including, without limitation, the security interest in favor of Seller
pursuant to Section 4 thereof) any purchase agreements or other agreements or
contracts relating to or constituting any or all of the foregoing, all
“accounts” as defined in the Uniform Commercial Code relating to or constituting
any or all of the foregoing, all other insurance policies and insurance proceeds
relating to any Purchased Loan or the related Mortgage Property and any other
contract rights, payments, rights to payment (including payments of interest or
finance charges), and all instruments, chattel paper, securities, investment
property and general intangibles, payment intangibles, and other assets
comprising or relating to the Purchased Loans,

 

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any security account and all rights to Income and the rights to enforce such
payments arising from any of the Purchased Loans, the Servicing Rights, all
guarantees, supporting obligations or other support for the Purchased Loans, and
any and all replacements, substitutions, distributions on, income, payments and
proceeds with respect to, any of the foregoing (collectively the “Collateral”).
Each Seller acknowledges and agrees that its rights with respect to the
Collateral (including without limitation, its security interest in the Purchased
Loans and any other collateral granted to such Seller pursuant to any other
agreement) are and shall continue to be at all times junior and subordinate to
the rights of Buyers hereunder.

 

(b) Each Seller hereby irrevocably constitutes and appoints Buyers 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 Seller and in the name of such Seller or in its own name, from
time to time in Buyers’ discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be reasonably necessary or desirable to
accomplish the purposes of this Agreement, to file such financing statement or
statements relating to the Purchased Loans and the Collateral without the
applicable Seller’s signature thereon as Buyers at their option may deem
appropriate, and, without limiting the generality of the foregoing, Seller
hereby gives Buyers the power and right, on behalf of such Seller, without
assent by, but with notice to, such Seller, if an Event of Default shall have
occurred and be continuing, to do the following:

 

(i) in the name of Seller, or in 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 with respect to any other Purchased
Loans 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 Buyers for the purpose
of collecting any and all such moneys due with respect to any other Purchased
Loans whenever payable;

 

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

 

(iii) (A) to direct any party liable for any payment under any Purchased Loans
to make payment of any and all moneys due or to become due thereunder directly
to Buyers or as Buyers 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 Purchased Loans;
(C) to sign and endorse any invoices, assignments, verifications, notices and
other documents in connection with any Purchased Loans; (D) to commence and
prosecute any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Purchased Loans or any proceeds thereof
and to enforce any other right in respect of any Purchased Loans; (E) to defend
any suit, action or proceeding brought against Seller with respect to any
Purchased Loans; (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 Buyers may deem appropriate; and (G) generally,
to sell, transfer, pledge and make any agreement with respect to or otherwise
deal with any Purchased Loans as fully and completely as though the related
Buyer were the absolute owner thereof for all purposes, and to do, at Buyers’
option and Seller’s expense, at any time, and from time to time, all acts and
things which Buyers deem necessary to protect, preserve or realize upon the
Purchased Loans and the Collateral and Buyers’ Liens thereon and to effect the
intent of this Agreement, all as fully and effectively as Seller might do.

 

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Each Seller 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.

 

Each Seller also authorizes Buyers, if an Event of Default shall have occurred,
from time to time, to execute, in connection with any sale provided for in
Section 20 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Purchased Loans.

 

The powers conferred on Buyers hereunder are solely to protect Buyers’ interests
in the Purchased Loans and shall not impose any duty upon it to exercise any
such powers. A Buyer shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers, and neither it nor any of
its officers, directors, employees or agents shall be responsible to the related
Seller for any act or failure to act hereunder, except for its or their own
gross negligence or willful misconduct.

 

10. CONDITIONS PRECEDENT

 

(a) As conditions precedent to the initial Transaction, Buyers shall have
received on or before the day of such initial Transaction the following, in form
and substance satisfactory to Buyers and duly executed by each party thereto (as
applicable):

 

(i) The Program Documents duly executed and delivered by the parties thereto and
being in full force and effect, free of any modification, breach or waiver;

 

(ii) A certified copy of each Seller’s and each ECC Person’s consents or
corporate resolutions, as applicable, approving the Program Documents and
Transactions thereunder (either specifically or by general resolution), and all
documents evidencing other necessary corporate action or governmental approvals
as may be required in connection with the Program Documents;

 

(iii) An incumbency certificate of the secretaries of each Seller and each ECC
Person certifying the names, true signatures and titles of each Seller’s and
each ECC Person’s representatives duly authorized to request Transactions
hereunder and to execute the Program Documents and the other documents to be
delivered thereunder;

 

(iv) An opinion of each Sellers’ and each Guarantor’s counsel as to such matters
as Buyers may reasonably request (including, without limitation, perfected
security interest in the Collateral, a “true sale” and a “non-consolidation”
opinion with respect to each Seller and each Guarantor) each in form and
substance acceptable to Buyers;

 

(v) The original trust certificates, representing 100% beneficial ownership in
each Seller, issued in the name of the related Guarantor and an original
conveyance power in blank executed by such Guarantor;

 

(vi) A copy of each of the Underwriting Guidelines certified by an officer of
Encore Credit or Bravo, as applicable;

 

(vii) A waiver from Guarantors’ lenders permitting the Guarantors to issue the
Guaranty, if any is needed;

 

(viii) The payment in respect of the Facility Fee Amount and the legal fees as
set forth in the Pricing Side Letter;

 

(ix) Reserved;

 

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(x) A copy of the insurance required by Section 14(o) of this Agreement;

 

(xi) Buyers shall have completed the due diligence review pursuant to Section
38, and such review shall be satisfactory to Buyers in their sole discretion;
and

 

(xii) Any other documents reasonably requested by Buyers.

 

(b) The obligation of Buyers to enter into each Transaction pursuant to this
Agreement is subject to the following conditions precedent:

 

(i) Buyers or their designee shall have received on or before the day of a
Transaction with respect to such Purchased Loans (unless otherwise specified in
this Agreement) the following, in form and substance satisfactory to Buyers and
(if applicable) duly executed:

 

(A) The Transaction Notice, Loan Schedule and Computer Tape with respect to such
Purchased Loans, delivered pursuant to Section 3(a);

 

(B) The Trust Receipt with respect to such Purchased Loans, with the Loan
Schedule attached;

 

(C) Such certificates, customary opinions of counsel or other documents as
Buyers may reasonably request, provided that such opinions of counsel shall not
be required routinely in connection with each Transaction but shall only be
required from time to time as deemed necessary by Buyers in its commercially
reasonable judgment; and

 

(D) A copy of the applicable notice set forth as Exhibit C (which may be
contained in the related Transaction Notice).

 

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

 

(iii) Buyers shall not have reasonably determined that the introduction of or a
change in any requirement of law or in the interpretation or administration of
any requirement of law applicable to Buyers has made it unlawful, and no
Governmental Authority shall have asserted that it is unlawful, for Buyers to
enter into Transactions with a Pricing Rate based on LIBOR.

 

(iv) All representations and warranties in the Program Documents shall be true
and correct on the date of such Transaction and each Seller and each ECC Person
is in compliance with the terms and conditions of the Program Documents.

 

(v) The then aggregate outstanding Purchase Price for all Purchased Loans, when
added to the Purchase Price for the requested Transaction, shall not exceed the
Maximum Aggregate Purchase Price.

 

(vi) Satisfaction of any conditions precedent to the initial Transaction as set
forth in clause (a) of this Section 10 that were not satisfied prior to such
initial Purchase Date.

 

(vii) Buyers shall have determined that all actions necessary or, in the opinion
of Buyers, desirable to maintain the related Buyer’s perfected interest in the
Purchased Loans and other Collateral have been taken, including, without
limitation, duly executed and filed Uniform Commercial Code financing statements
on Form UCC-1.

 

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(viii) Sellers shall have paid to Buyers any accrued and unpaid Non Usage Fees
and all other fees and expenses owed to Buyers in accordance with the Program
Documents.

 

(ix) Buyers or their designee shall have received any other documents reasonably
requested by Buyers.

 

(x) Such Transaction, when added to all other Transactions previously entered
into on such Business Day for all Sellers shall not exceed four (4)
Transactions.

 

(xi) There is no Margin Deficit at the time immediately prior to entering into a
new Transaction.

 

(xii) The Purchase Price for the requested Transaction shall not be less than
$1,000,000 per Transaction.

 

(xiii) No event or events shall have been reasonably determined by Buyers to
have occurred resulting in the effective absence of a whole loan or asset backed
securities market or commercial paper market.

 

(xiv) Each secured party (including any party that has a precautionary security
interest in a Loan) has released all of its right, title and interest in, to and
under such Loan (including, without limitation, any security interest that such
secured party or secured party’s agent may have by virtue of its possession,
custody or control thereof) and has filed Uniform Commercial Code termination
statements in respect of any Uniform Commercial Code filings made in respect of
such Loan, and each such release and Uniform Commercial Code termination
statement has been delivered to the Buyers prior to each Transaction and to the
Custodian as part of the Mortgage File.

 

11. RELEASE OF PURCHASED LOANS

 

Upon timely payment in full of the Repurchase Price and all other Obligations
(if any) then owing with respect to a Purchased Loan, unless a Default or Event
of Default shall have occurred and be continuing, then (a) Buyers shall be
deemed to have terminated any ownership or security interest that Buyers may
have in such Purchased Loan and any Collateral solely related to such Purchased
Loan and (b) with respect to such Purchased Loan, Buyers shall direct Custodian
to release such Purchased Loan and any Collateral solely related to such
Purchased Loan to the applicable Seller unless such release and termination
would give rise to or perpetuate a Margin Deficit and Buyers give the related
Seller notice thereof on the Repurchase Date; provided that if a Margin Deficit
is then continuing, and a Margin Call has been made, Sellers may provide Buyers
cash in the amount equal to the amount necessary to cure any Margin Deficit
whereupon all such Purchased Loans shall be released. Concurrently with any
termination and releases as described above in this Section 11, Buyer shall
execute and deliver to the related Seller upon request, and Buyer hereby
authorizes the related Seller to file and record, such documents as such Seller
may reasonably deem necessary or advisable to evidence such termination and
release. Except as set forth in Sections 6(a) and 17, a Seller shall give at
least one (1) Business Day prior written notice to Buyers if such repurchase
shall occur on any date other than the Repurchase Date.

 

If such a Margin Deficit is applicable, the related Buyer shall notify the
related Seller of the amount thereof and the related Seller may thereupon
satisfy the Margin Call in the manner specified in Section 6.

 

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12. RELIANCE

 

With respect to any Transaction, Buyers may conclusively rely upon, and shall
incur no liability to any Seller or any ECC Person in acting upon, any request
or other communication that Buyers reasonably believe to have been given or made
by a person authorized to enter into a Transaction on such Seller’s or the
applicable ECC Person’s behalf.

 

13. REPRESENTATIONS AND WARRANTIES

 

Each of the Sellers and each ECC Person hereby represents and warrants, as to
itself, and shall on and as of each Purchase Date for any Transaction and on and
as of each date thereafter through and including the related Repurchase Date be
deemed to represent and warrant, as to itself, that:

 

(a) Due Organization and Qualification. Each ECC Person and each Seller is duly
organized, validly existing and in good standing under the laws of the
jurisdiction under whose laws it is organized. Each ECC Person and each Seller
is duly qualified to do business and has obtained all necessary licenses,
permits, charters, registrations and approvals necessary for the conduct of its
business as currently conducted and the performance of its obligations under the
Program Documents except where any failure to obtain such a license, permit,
charter, registration or approval will not cause a Material Adverse Effect with
respect to any Seller or any ECC Person or impair the enforceability of any
Loan.

 

(b) Power and Authority. Each ECC Person and each Seller has all necessary power
and authority to conduct its business as currently conducted, to execute,
deliver and perform its obligations under the Program Documents and to
consummate the Transactions.

 

(c) Due Authorization. The execution, delivery and performance of the Program
Documents by each ECC Person and each Seller have been duly authorized by all
necessary action and do not require any additional approvals or consents or
other action by or any notice to or filing with any Person other than any that
have heretofore been obtained, given or made.

 

(d) Noncontravention. None of the execution and delivery of the Program
Documents by any Seller or any ECC Person or the consummation of the
Transactions and transactions thereunder:

 

(i) conflicts with, breaches or violates any provision of the organizational
documents or material agreements of any Seller or any ECC Person or any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award currently in effect having applicability to any Seller or any ECC Person
or its properties;

 

(ii) constitutes a material default by any Seller or any ECC Person under any
loan or repurchase agreement, mortgage, indenture or other agreement or
instrument to which any Seller or any ECC Person is a party or by which it or
any of its properties is or may be bound or affected; or

 

(iii) results in or requires the creation of any lien upon or in respect of any
of the assets of any Seller or any ECC Person except the lien relating to the
Program Documents.

 

(e) Legal Proceeding. There is no action, proceeding or investigation by or
before any court, governmental or administrative agency or arbitrator affecting
any of the Purchased Loans, any Seller, any Guarantor or any of their
Affiliates, pending or threatened, which, if decided adversely, could reasonably
be expected to have a Material Adverse Effect with respect to any Seller or any
Guarantor.

 

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(f) Valid and Binding Obligations. Each of the Program Documents to which any
Seller or any ECC Person is a party, when executed and delivered by such Seller
or such ECC Person, as applicable, will constitute the legal, valid and binding
obligations of such Seller or such ECC Person, as applicable, enforceable
against such Seller or such ECC Person, as applicable, in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and general equitable principles (regardless of
whether enforcement is sought in a proceeding in equity or at law).

 

(g) Financial Statements. The financial statements of ECC, copies of which have
been furnished to Buyers, (i) are, as of the dates and for the periods referred
to therein, complete and correct in all material respects, (ii) present fairly
the financial condition and results of operations of ECC as of the dates and for
the periods indicated and (iii) have been prepared in accordance with GAAP
consistently applied, except as noted therein (subject as to interim statements
to normal year-end adjustments). Since the date of the most recent financial
statements, there has been no Material Adverse Change with respect to ECC.
Except as disclosed in such financial statements, ECC is not subject to any
contingent liabilities or commitments that, individually or in the aggregate,
have a material possibility of causing a Material Adverse Change with respect to
ECC.

 

(h) Accuracy of Information. None of the documents or information prepared by or
on behalf of any Seller or any ECC Person and provided to Buyers relating to any
Seller’s or any ECC Person’s financial condition contain any statement of a
material fact with respect to Seller or any ECC Person, or the Transactions that
was untrue or misleading in any material respect when made. Since the furnishing
of such documents or information, there has been no change, nor any development
or event involving a prospective change known to any Seller or any ECC Person,
that would render any of such documents or information untrue or misleading in
any material respect.

 

(i) No Consents. No consent, license, approval or authorization from, or
registration, filing or declaration with, any regulatory body, administrative
agency, or other governmental, instrumentality, nor any consent, approval,
waiver or notification of any creditor, lessor or other non-governmental person,
is required in connection with the execution, delivery and performance by any
Seller or any ECC Person of this Agreement or the consummation by any Seller or
any ECC Person of any other Program Document, other than any that have
heretofore been obtained, given or made.

 

(j) Compliance With Law, Etc. No practice, procedure or policy employed or
proposed to be employed by any Seller or any ECC Person in the conduct of their
businesses violates any law, regulation, judgment, agreement, regulatory
consent, order or decree applicable to it which, if enforced, would result in
either a Material Adverse Change or a Material Adverse Effect with respect to
any Seller or any ECC Person.

 

(k) Solvency: Fraudulent Conveyance. Each ECC Person and each Seller is solvent
and will not be rendered insolvent by the Transaction and, after giving effect
to such Transaction, neither any Seller nor any ECC Person will be left with an
unreasonably small amount of capital with which to engage in its business.
Neither any Seller nor any ECC Person intends to incur, nor believes that it has
incurred, debts beyond its ability to pay such debts as they mature. Neither any
Seller nor any ECC Person is contemplating the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official in respect of any
Seller or any ECC Person or any of their assets. The amount of consideration
being received by the applicable Seller upon the sale of the Purchased Loans to
Buyers constitutes reasonably equivalent value and fair consideration for such
Purchased Loans. The Sellers are not transferring any Purchased Loans with any
intent to hinder, delay or defraud any of its creditors. The amount of
consideration being

 

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received by the Originator upon the sale of the Purchased Loans to the related
Seller, respectively, constitutes reasonably equivalent value and fair
consideration for such Purchased Loans. No Originator is transferring any
Purchased Loans with any intent to hinder, delay or defraud any of its
creditors.

 

(l) Investment Company Act and Holding Company Act Compliance. No Seller is: (a)
required to be registered as an “investment company” as defined under the
Investment Company Act nor as an entity under the control of an “investment
company” as defined under the Investment Company Act or (b) a “holding company”
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935 as amended.

 

(m) Taxes. Each ECC Person and each Seller has filed all federal and state tax
returns which are required to be filed and paid all taxes, including any
assessments received by it, to the extent that such taxes have become due (other
than for taxes that are being contested in good faith or for which it has
established adequate reserves). Any taxes, fees and other governmental charges
payable by any Seller or any ECC Person in connection with a Transaction and the
execution and delivery of the Program Documents have been paid.

 

(n) Additional Representations. With respect to each Loan to be sold hereunder
by a Seller to Buyers, the applicable Seller and the related Originator, jointly
and severally, hereby make all of the applicable representations and warranties
set forth in Exhibit B as of the date the related Mortgage File, or Wet Funding
Package, as applicable, is delivered to the Custodian with respect to the Loans
and continuously while such Loan is subject to a Transaction. Further, as of
each Purchase Date, the applicable Seller and the related Originator shall be
deemed to have represented and warranted in like manner that neither such Seller
nor such Originator have any knowledge that any such representation or warranty
may have ceased to be true in a material respect as of such date, except as
otherwise stated in a Transaction Notice, any such exception to identify the
applicable representation or warranty and specify in reasonable detail the
related knowledge of such Seller or such Originator. In addition, the applicable
Originator agrees to make the representations and warranties set forth in
Exhibit B to this Agreement as of the “cut-off date” of the securitization or
whole loan sale of the related Loans by the related Seller or the related Buyer,
as applicable; provided, however, that to the extent that the Originator has at
the time of such securitization or whole loan sale actual knowledge of any facts
or circumstances that would render any of such representations and warranties
materially false, the Originator shall have no obligation to make such
materially false representation and warranty.

 

(o) No Broker. Neither any Seller nor any ECC Person has dealt with any broker,
investment banker, agent, or other person, except for Buyers, who may be
entitled to any commission or compensation in connection with the sale of
Purchased Loans pursuant to this Agreement; provided, that if any Seller or any
ECC Person has dealt with any broker, investment banker, agent, or other person,
except for Buyers, who may be entitled to any commission or compensation in
connection with the sale of Purchased Loans pursuant to this Agreement, such
commission or compensation shall have been paid in full by such Seller or such
ECC Person, as applicable.

 

(p) Corporate Separateness.

 

(i) The capital of each Seller and each ECC Person is adequate for the
respective business and undertakings of each Seller and each ECC Person.

 

(ii) Other than as provided in this Agreement and the other Program Documents,
no Seller is engaged in any business transactions with any Guarantor or any of
its Affiliates other than transactions in the ordinary course of its business on
an “arms-length” basis.

 

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(iii) The funds and assets of each Seller are not and will not be, commingled
with the funds of any other Person.

 

The representations and warranties set forth in this Agreement shall survive
transfer of the Purchased Loans to Buyers and shall continue for so long as the
Purchased Loans are subject to this Agreement.

 

14. COVENANTS OF SELLER AND GUARANTOR

 

Each ECC Person and each Seller, as applicable, hereby covenants, as to itself,
with Buyers as follows:

 

(a) Defense of Title. Each Seller and each ECC Person warrants and will defend
the right, title and interest of Buyers in and to all Collateral against all
adverse claims and demands.

 

(b) No Amendment or Compromise. Without Buyers’ prior written consent, neither
any Seller, nor any ECC Person nor those acting on any Seller’s or any ECC
Person’s behalf shall amend or modify, or waive any term or condition of, or
settle or compromise any claim in respect of, any item of the Purchased Loans,
any related rights or any of the Program Documents, provided that any such party
may amend or modify a Loan if such amendment or modification does not affect the
amount or timing of any payment of principal or interest, extend its scheduled
maturity date, modify its interest rate, or constitute a cancellation or
discharge of its outstanding principal balance and does not materially and
adversely affect the security afforded by the real property, furnishings,
fixtures, or equipment securing the Loan.

 

(c) No Assignment. Except as permitted herein, neither any Seller, nor any ECC
Person, nor any servicer shall sell, assign, transfer or otherwise dispose of,
or grant any option with respect to, or pledge, hypothecate or grant a security
interest in or lien on or otherwise encumber (except pursuant to the Program
Documents), any of the Purchased Loans or any interest therein, provided that
this Section 14(c) shall not prevent any of the following: any contribution,
sale, assignment, transfer or conveyance of Purchased Loans in accordance with
the Program Documents; servicing arrangement between the Servicer and any Seller
or its Affiliates; and any forward purchase commitment or other type of take out
commitment for the Purchased Loans.

 

(d) Servicing of Loans. Sellers and the ECC Persons shall cause Servicer to
service, or cause to be serviced, all Loans that are part of the Purchased Loans
in accordance with Accepted Servicing Practices, pending any delivery of such
servicing to Buyers pursuant to Section 14(r), employing at least the same
procedures and exercising the same care that Servicer customarily employs in
servicing Loans for its own account. Sellers shall notify all Servicers and
subservicers of Buyers’ interests hereunder and Sellers shall notify Buyers of
the name and address of all Servicers and subservicers of Purchased Loans.
Buyers shall have the right to approve each such Servicer or subservicer and the
form of all Servicing Agreements or servicing side letter agreements with
respect thereto. Sellers shall cause the Servicer to hold or cause to be held
all escrow funds collected with respect to such Loans in trust accounts and
shall apply the same for the purposes for which such funds were collected. Upon
Buyers’ request, Sellers shall provide reasonably promptly to Buyers a letter
addressed to and agreed to each servicer of Loans, in form and substance
reasonably satisfactory to Buyers, advising such servicer of such matters as
Buyers may reasonably request. If any Seller should discover that, for any
reason whatsoever, such Seller or any entity responsible to Seller by contract
for managing or servicing any such Loan has failed to perform fully such
Seller’s obligations under the Program Documents with respect to the servicing
of the

 

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Purchased Loans or any of the obligations of such entities with respect to the
Purchased Loans, such Seller shall promptly notify Buyers.

 

(e) Preservation of Collateral: Collateral Value. Each of Sellers and the ECC
Persons shall do all things necessary to preserve the Collateral so that it
remains subject to a first priority perfected security interest hereunder.
Without limiting the foregoing, Sellers and the ECC Persons will comply with all
applicable laws, rules, regulations and other laws of any Governmental Authority
applicable to any Seller or any ECC Person relating to the Collateral and cause
the Collateral to comply with all applicable laws, rules, regulations and other
laws of any such Governmental Authority. Neither any Seller nor any ECC Person
will allow any default to occur for which such Seller or such ECC Person is
responsible under any Collateral or any Program Documents and the Sellers and
the ECC Persons shall fully perform or cause to be performed when due all of its
obligations under any Collateral or the Program Documents.

 

(f) Maintenance of Papers, Records and Files. Sellers and the ECC Persons shall
acquire, and Sellers or ECC or the other ECC Persons shall build, maintain and
have available, a complete file in accordance with lending industry custom and
practice for each Purchased Loan. Sellers and the ECC Persons will maintain all
such Records not in the possession of Custodian in good and complete condition
in accordance with industry practices and preserve them against loss.

 

(i) Sellers and the ECC Persons shall collect and maintain or cause to be
collected and maintained all Records relating to the Purchased Loans in
accordance with industry custom and practice, including those maintained
pursuant to the preceding subsection, and all such Records shall be in
Custodian’s possession unless Buyers otherwise approve. Neither any Seller nor
any ECC Person will cause or authorize any such papers, records or files that
are an original or an only copy to leave Custodian’s possession, except for
individual items removed in connection with servicing a specific Loan, in which
event the applicable Seller or the applicable ECC Person will obtain or cause to
be obtained a receipt from the Custodian for any such paper, record or file.

 

(ii) For so long as Buyers have an interest in or lien on any Purchased Loan,
Sellers and the ECC Persons will hold or cause to be held all related Records in
trust for Buyers. The applicable Seller and the applicable ECC Person shall
notify, or cause to be notified, every other party holding any such Records of
the interests and liens granted hereby.

 

(iii) Upon reasonable advance notice from Custodian or Buyers, Sellers and the
applicable ECC Persons shall (x) make any and all such Records available to
Custodian or Buyers to examine any such Records, either by its own officers or
employees, or by agents or contractors, or both, and make copies of all or any
portion thereof, (y) permit Buyers or their authorized agents to discuss the
affairs, finances and accounts of the applicable Seller or the ECC Person with
its respective chief operating officer and chief financial officer and to
discuss the affairs, finances and accounts of the applicable Seller or the
applicable ECC Person with its independent certified public accountants.

 

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(g) Financial Statements and Other Information; Financial Covenants.

 

(i) ECC shall keep or cause to be kept in reasonable detail books and records of
each Seller and each ECC Person setting forth an account of their respective
assets and business and shall clearly reflect therein the transfer of Purchased
Loans to Buyers. Each Seller and ECC shall furnish or cause to be furnished to
Buyers the following:

 

(A) Financial Statements. (x) As soon as available and in any event within
ninety (90) days after the end of each fiscal year of ECC’s, ECC’s consolidated
(and consolidating), audited balance sheets as of the end of each such fiscal
year, and the Guarantor’s consolidated (and consolidating), audited financial
statements of income and changes in equity and audited statement of cash flows,
each for such fiscal year, (y) as soon as available and in any event within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year of ECC, ECC’s consolidated (and consolidating), unaudited balance
sheets as of the end of each quarter, and ECC’s unaudited financial statements
of income and changes in equity and unaudited statement of cash flows, each for
the portion of the fiscal year then ended, and (z) within thirty (30) days after
the end of each month, monthly consolidated (and consolidating) and unaudited
financial statements (excluding cash flow statements) and balance sheets as
provided in clause (y), all of which shall have been prepared in accordance with
GAAP and certified by ECC’s chief financial officer in the form of a compliance
certificate to be delivered along with the above financial statements. Each
Seller and each Guarantor shall furnish or cause to be furnished to Buyers any
other financial information regarding each Guarantor and/or any Seller
reasonably requested by Buyers.

 

(B) Loan Data. Monthly reports in form and scope satisfactory to Buyers, setting
forth data regarding the performance of the Purchased Loans for the immediately
preceding month, and such other information as Buyers may reasonably request,
including, without limitation, all collections, delinquencies, losses and
recoveries related to the Purchased Loans, any other information regarding the
Purchased Loans requested by Buyers and the performance of any loans serviced by
or on behalf of Servicer and any other financial information regarding Seller
reasonably requested by Buyers.

 

(C) Monthly Servicing Diskettes. On or before the tenth (10th) day of each
calendar month (or if such day is not a Business Day, the immediately following
Business Day), or any other time as Buyers request, a computer tape or a
diskette (or any other Electronic Transmission acceptable to Buyers) in a format
acceptable to Buyers containing such information with respect to the Purchased
Loans as Buyers may reasonably request.

 

(ii) ECC shall comply with the following financial covenants: (A) the Adjusted
Tangible Net Worth of ECC shall at all times exceed Two Hundred Forty-Six
Million Dollars ($246,000,000) (B) the ratio of the Guarantor’s Total
Indebtedness to Adjusted Tangible Net Worth shall at no time exceed 20:1; (C)
the sum of Unrestricted Cash plus unused borrowing capacity under any committed
repurchase agreements or secured credit facilities that can be drawn on by ECC
shall be at all times at least Thirty Million Dollars ($30,000,000) and (D) the
ECC’s net income before taxes, for any period of two consecutive fiscal quarters
(commencing with the period beginning January 1, 2005), shall not be less than
$1.00.

 

(iii) Certifications. Each Seller shall execute and deliver a monthly
certification substantially in the form of Exhibit A-1 attached hereto within
thirty (30) days after the end of each calendar month and ECC shall execute and
deliver a quarterly certification substantially in the form of Exhibit A-2
attached hereto within forty-five (45) days after the end of each fiscal
quarter.

 

(D) Other Information. Upon the request of Buyer, such other information or
reports as Buyer may from time to time reasonably request.

 

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(h) Notice of Material Events. Each ECC Person and each Seller shall promptly
inform Buyers in writing of any of the following:

 

(i) any Default, Event of Default or default or breach by a Seller or an ECC
Person of any material obligation under any Program Document, or the occurrence
or existence of any event or circumstance that any Seller or any ECC Person
reasonably expects will with the passage of time become a Default or Event of
Default;

 

(ii) any material change in the insurance coverage required of a Seller or an
ECC Person or any other Person pursuant to any Program Document, with copy of
evidence of same attached;

 

(iii) any material dispute, litigation, investigation, proceeding or suspension
between a Seller or an ECC Person, on the one hand, and any Governmental
Authority or any other Person;

 

(iv) any material adverse change in accounting policies or financial reporting
practices of any Seller or any ECC Person;

 

(v) the occurrence of any material employment dispute or licensing issue and a
description of the strategy for resolving it; and

 

(vi) any event, circumstance or condition that has resulted, or has a reasonable
likelihood of resulting in either a Material Adverse Change or a Material
Adverse Effect with respect to any Seller or any ECC Person.

 

(i) Maintenance of Licenses. Each ECC Person and each Seller shall (i) maintain
all licenses, permits or other approvals necessary for each ECC Person and each
Seller to conduct its business and to perform its obligations under the Program
Documents, (ii) remain in good standing under the laws of each state in which it
conducts business or any Mortgage Property is located, and (iii) shall conduct
its business strictly in accordance with applicable law.

 

(j) Taxes, Etc. Each Seller shall pay and discharge or cause to be paid and
discharged, when due all taxes, assessments and governmental charges or levies
imposed upon them or upon their income and profits or upon any of its property,
real, personal or mixed (including without limitation, the Purchased Loans) or
upon any part thereof, as well as any other lawful claims which, if unpaid,
might become a Lien upon such properties or any part thereof, except for any
such taxes, assessments and governmental charges, levies or claims as are
appropriately contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are provided. Each Seller
shall file on a timely basis all federal, and material state and local tax and
information returns, reports and any other information statements or schedules
required to be filed by or in respect of it.

 

(k) Nature of Business. Neither any Seller nor any ECC Person shall make any
material change in the nature of its business as carried on at the date hereof.

 

(l) Limitation on Distributions. ECC shall have the right to pay dividends so
long as ECC remains in compliance with the financial covenants set forth in
Section 14(g)(ii) immediately following such dividend distribution.
Notwithstanding the foregoing, if a Default or Event of Default has occurred and
is occurring, neither any Seller nor any ECC Person shall pay any dividends or
distributions with respect to any capital stock or other equity interests in any
Seller or any ECC Person, whether now or

 

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hereafter outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash or property or in obligations of any
Seller or any ECC Person.

 

(m) Use of Custodian. Without the prior written consent of Buyers, Sellers and
the ECC Persons shall use no third party custodian as document custodian other
than the Custodian with respect to third party purchasers, prospective third
party purchasers, lenders and prospective third party lenders with respect to
loans of the same type as the Purchased Loans.

 

(n) Merger of Guarantor. ECC shall not at any time, directly or indirectly, (i)
liquidate or dissolve or enter into any consolidation or merger or be subject to
a Change in Control without Buyers’ prior consent; (ii) form or enter into any
partnership, joint venture, syndicate or other combination which could
reasonably be expected to have a Material Adverse Effect with respect to ECC; or
(iii) make any Material Adverse Change with respect to ECC or ECC’s
Subsidiaries.

 

(o) Insurance. Seller and each ECC Person will, and Seller and the ECC Person
shall cause the Servicer to obtain and maintain insurance with responsible
companies in such amounts and against such risks as are customarily carried by
business entities engaged in similar businesses similarly situated, and will
furnish Buyers on request full information as to all such insurance, and provide
within fifteen (15) days after receipt of such request the certificates or other
documents evidencing renewal of each such policy. Guarantor shall continue to
maintain, for itself and its subsidiaries, (i) general liability insurance and
umbrella insurance in an aggregate amount of at least $3,500,000 and (ii) a
surety bond that encompasses employee dishonesty, forgery or alteration, theft,
disappearance and destruction, robbery and safe burglary, property (other than
money and securities), and computer fraud in an aggregate amount of at least
$1,000,000.

 

(p) Affiliate Transaction. Neither any Seller on the one hand nor any ECC Person
on the other hand will at any time, directly or indirectly, sell, lease or
otherwise transfer any property or assets to, or otherwise acquire any property
or assets from, or otherwise engage in any transactions with, a Seller on the
one hand and an ECC Person on the other hand unless the terms thereof are no
less favorable to the Seller or the ECC Person, as applicable, than those that
could be obtained at the time of such transaction in an arm’s length transaction
with a Person who is not an Affiliate.

 

(q) Change of Fiscal Year. Neither any Seller nor any ECC Person will at any
time, directly or indirectly, except upon ninety (90) days’ prior written notice
to Buyers, change the date on which such Seller’s or such ECC Person’s fiscal
year begins from such Seller’s or such ECC Person’s current fiscal year
beginning date.

 

(r) Servicing. With respect to the Servicing Rights of each Purchased Loan,
unless otherwise stated in writing by Buyers, the applicable Seller and any
applicable ECC Person shall cause the Purchased Loans to be serviced in
accordance with the Servicing Agreements.

 

(s) Underwriting Guidelines. The ECC Persons shall not permit any material
modifications to be made to the Underwriting Guidelines that will impact either
the Buyers or the Purchased Loans without the prior consent of Buyers (such
consent not to be unreasonably withheld). Each ECC Person agrees to deliver to
Buyers copies of (or amendments to) its Underwriting Guidelines within ten (10)
Business Days of the date of any change in the event that any changes are made
to the Underwriting Guidelines following the Closing Date.

 

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(t) No Other Indebtedness. Without the prior written consent of the Buyers, the
Sellers shall not incur any Indebtedness or guaranty the Indebtedness of any
other Person other than any Indebtedness deemed incurred under the Program
Documents.

 

(u) Facility Fee Amount. Sellers agree to pay to Buyers, a commitment fee in the
amount of the Facility Fee Amount, each such payment to be made in Dollars, in
immediately available funds, without deduction, set-off or counterclaim. Such
fee shall be deemed to be earned as of the date hereof and the Facility Fee
Amount shall be paid in the amounts and at the times set forth in the Pricing
Side Letter. Buyers may, in their sole discretion, net such commitment fee that
is due and unpaid from the proceeds of any Purchase Price payable to Seller.

 

(v) Non Usage Fee. On and after the date which is thirty (30) days following the
Closing Date, the applicable Seller agrees to pay to the Buyers on every third
Repurchase Date (i.e., quarterly) the accrued and unpaid Non Usage Fees.

 

(w) Establishment of Collection Account. If a Default or an Event of Default has
occurred and is continuing, the Guarantor shall establish, for the benefit of
the Buyers, a collection account in the Buyers’ name for the sole and exclusive
benefit of the Buyers. Each ECC Person and each Seller shall follow the
instructions of Buyers with respect to the Purchased Loans and deliver to Buyers
any information with respect to the Purchased Loans reasonably requested by
Buyers. If a Default or an Event of Default has occurred and is continuing, (i)
each ECC Person and each Seller shall segregate all amounts collected on account
of the Purchased Loans, to be held in trust for the benefit of the Buyers, and
shall remit such collections in accordance with the Buyers’ written
instructions, which amounts deposited into such account shall not be removed
without the Buyers’ prior written consent, and (ii) each ECC Person, each Seller
and the Servicer shall deposit or credit to the Collection Account all items to
be deposited or credited thereto irrespective of any right of setoff or
counterclaim arising in favor of it (or any third party claiming through it)
under any other agreement or arrangement.

 

(x) MERS. The Sellers will and will cause the Servicer to comply in all material
respects with the rules and procedures of MERS in connection with the servicing
of the MERS Designated Mortgage Loans for as long as such Purchased Loans are
registered with MERS.

 

15. REPURCHASE DATE PAYMENTS/COLLECTIONS

 

On each Repurchase Date, the related Seller shall remit or shall cause to be
remitted to the related Buyer the Repurchase Price together with any other
Obligations then due and payable.

 

16. REPURCHASE OF PURCHASED LOANS; CHANGE OF LAW

 

(a) Upon discovery by any Seller or any ECC Person of a breach of any of the
representations and warranties set forth on Exhibit B to this Agreement, the
applicable Seller or the applicable ECC Person shall give prompt written notice
thereof to Buyers. Upon any such discovery by Buyers, Buyers will notify the
related Seller. It is understood and agreed that the representations and
warranties set forth in Exhibit B to this Agreement with respect to the
Purchased Loans shall survive delivery of the respective Mortgage Files to the
Custodian with respect to the Purchased Loans and shall inure to the benefit of
Buyers. The fact that Buyers have conducted or have failed to conduct any
partial or complete due diligence investigation in connection with their
purchase of any Purchased Loan shall not affect Buyers’ right to demand
repurchase as provided under this Agreement. The applicable Seller shall, within
five (5) Business Days of the earlier of such Seller’s or such ECC Person’s
discovery or either such Seller or such ECC Person receiving notice with respect
to any Purchased Loan of (i) any breach of

 

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a representation or warranty contained in Exhibit B of this Agreement or (ii)
any failure to deliver any of the items required to be delivered as part of the
Mortgage File within the time period required for delivery pursuant to the
Custodial Agreement, promptly cure such breach or delivery failure in all
material respects. If within five (5) Business Days after the earlier of such
Seller’s or such ECC Person’s discovery of such breach or delivery failure or
Seller or the ECC Person receiving notice thereof that such breach or delivery
failure has not been remedied by such Seller, such Seller shall promptly upon
receipt of written instructions from Buyers, at Buyers’ option, either (i)
repurchase such Purchased Loan at a purchase price equal to the Repurchase Price
with respect to such Purchased Loan by wire transfer to the account designated
by Buyers, or (ii) transfer comparable Substitute Loans to Buyers, as provided
in Section 17 hereof.

 

(b) If Buyers determine that the introduction of, any change in, or the
interpretation or administration of, any requirement of law has made it unlawful
or commercially impracticable to engage in any Transactions with the applicable
Pricing Rate based on LIBOR, then the applicable Seller (i) shall, upon its
receipt of notice of such fact and demand from Buyers (with a copy of such
notice to Custodian), repurchase the Purchased Loans subject to the Transaction
on the next succeeding Business Day and, at such Seller’s election, concurrently
enter into a new Transaction with Buyers with a Pricing Rate based on the Prime
Rate plus the margin set forth in the Pricing Side Letter as part of the Pricing
Rate and (ii) may elect, by giving notice to Buyers and Custodian, that all new
Transactions shall have Pricing Rates based on the Prime Rate plus such margin.

 

(c) If Buyers determine in their sole discretion that any Change in Law or any
change in accounting rules regarding capital requirements has or would have the
effect of reducing the rate of return on Buyers’ capital or on the capital of
any Affiliate of Buyers as a consequence of such Change in Law on this
Agreement, then from time to time Sellers will compensate Buyers or Buyers’
Affiliate, as applicable, for such reduced rate of return suffered as a
consequence of such Change in Law on terms similar to those imposed by Buyers on
their other similarly affected customers. Buyers shall provide Sellers with
prompt notice as to any Change in Law. Notwithstanding any other provisions in
this Agreement, in the event of any such Change in Law, Sellers will have the
right to terminate all Transactions then outstanding as of a date selected by
Sellers, which date shall be prior to the then applicable Repurchase Date and
which date shall thereafter for all purposes hereof be deemed to be the
Repurchase Date.

 

17. SUBSTITUTION

 

Sellers may, subject to agreement with and acceptance by Buyers upon one (1)
Business Day’s notice, substitute other assets which are substantially the same
as the Purchased Loans (i.e., loan type, Market Value, etc.) (the “Substitute
Loans”) for any Purchased Loans. Such substitution shall be made by transfer to
Buyers of such other Substitute Loans and transfer to Sellers of such Purchased
Loans (the “Reacquired Loans”) along with the other information to be provided
with respect to the applicable Purchased Loan as described in Section 4. After
substitution, the Substitute Loans shall be deemed to be Purchased Loans, the
Reacquired Loans shall no longer be deemed Purchased Loans, Buyers shall be
deemed to have terminated any security interest that Buyers may have in the
Reacquired Loans and any Collateral solely related to such Reacquired Loans to
Sellers unless such termination and release would give rise to or perpetuate a
Margin Deficit. Concurrently with any termination and release described in this
Section 17, Buyers shall execute and deliver to Sellers upon request and Buyers
hereby authorize Seller to file and record such documents as Sellers may
reasonably deem necessary or advisable in order to evidence such termination and
release.

 

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18. REPURCHASE TRANSACTIONS

 

Each Buyer may, in its sole election, engage in repurchase transactions with the
Purchased Loans or otherwise pledge, hypothecate, assign, transfer or otherwise
convey the Purchased Loans with a counterparty of Buyers’ choice, in all cases
subject to Buyers’ obligation to reconvey the Purchased Loans (and not
substitutes therefor) on the Repurchase Date. In the event Buyers engage in a
repurchase transaction with any of the Purchased Loans or otherwise pledge or
hypothecate any of the Purchased Loans, Buyers shall have the right to assign to
Buyers’ counterparty any of the applicable representations or warranties in
Exhibit B to this Agreement and the remedies for breach thereof, as they relate
to the Purchased Loans that are subject to such repurchase transaction.

 

19. EVENTS OF DEFAULT

 

With respect to any Transactions covered by or related to this Agreement, the
occurrence of any of the following events shall constitute an “Event of
Default”:

 

(a) Any Seller fails to transfer the Purchased Loans to the related Buyer on the
applicable Purchase Date (provided such Buyer has tendered the related Purchase
Price);

 

(b) Any Seller or Guarantor fails to: (A) repurchase the Purchased Loans on the
applicable Repurchase Date, (B) pay any Non Usage Fee on the applicable
Repurchase Date, or (C) perform its obligations under Section 6;

 

(c) Either any Seller or any ECC Person shall fail to perform, observe or comply
with any other material term, covenant or agreement contained in the Program
Documents (other than Exhibit B to this Agreement and the other “Events of
Default” set forth in this Section 19) and such failure is not cured within the
time period expressly provided or, if no such cure period is provided, within
five (5) Business Days (or one (1) Business Day with respect to a default on any
payment obligation of principal or interest in this Agreement or any other note
document or one (1) Business Day if the Purchased Loans exceed any applicable
sublimits) of the earlier of (i) such party’s receipt of written notice from
Buyers or Custodian of such breach or (ii) the date on which such party obtains
notice or knowledge of the facts giving rise to such breach;

 

(d) Any representation or warranty made by any Seller or any ECC Person (or any
of any Seller’s or any ECC Person’s officers) in the Program Documents or in any
other document delivered in connection therewith shall have been incorrect or
untrue in any material respect when made or repeated or deemed to have been made
or repeated (other than the representations or warranties in Exhibit B which
shall be considered solely for the purpose of determining whether the related
Purchased Loan is an Eligible Loan, unless such Seller shall have made any such
representations or warranties with the knowledge that they were materially false
or misleading at the time made or repeated or deemed to have been made or
repeated);

 

(e) Any Seller, any Guarantor, or any of any Sellers’ or any Guarantor’s
Subsidiaries shall fail to pay any of any Seller’s, any Guarantor’s or any
Sellers’ or any Guarantor’s Subsidiaries’ Indebtedness, or any interest or
premium thereon when due (whether by scheduled maturity, requirement prepayment,
acceleration, demand or otherwise), or shall fail to make any payment when due
under any Seller’s, any Guarantor’s or any Seller’s or any Guarantor’s
Subsidiaries’ Guarantee of another person’s Indebtedness for borrowed money, and
such failure shall entitle the related counterparty to declare any such
Indebtedness or Guarantee to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof;

 

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(f) A custodian, receiver, conservator, liquidator, trustee, sequestrator or
similar official for any Seller, any Guarantor or any of any Seller’s or any
Guarantor’s Subsidiaries, or of any of any Sellers’, any Guarantor’s or their
Subsidiaries’ respective Property (as a debtor or creditor protection
procedure), is appointed or takes possession of such Property; or any Seller,
any Guarantor or any of any Seller’s or any Guarantor’s Subsidiaries generally
fails to pay any Seller’s, any Guarantor’s or any Seller’s or any Guarantor’s
Subsidiaries’ debts as they become due; or any Seller, any Guarantor or any of
any Seller’s or any Guarantor’s Subsidiaries is adjudicated bankrupt or
insolvent; or an order for relief is entered under the Federal Bankruptcy Code,
or any successor or similar applicable statute, or any administrative insolvency
scheme, against any Seller, any Guarantor or any of any Seller’s or any
Guarantor’s Subsidiaries; or any of any Seller’s, any Guarantor’s or any
Seller’s or any Guarantor’s Subsidiaries’ Property is sequestered by court or
administrative order; or a petition is filed against any Seller, any Guarantor
or any of any Seller’s or any Guarantor’s Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
moratorium, delinquency or liquidation law of any jurisdiction, whether now or
subsequently in effect;

 

(g) Any Seller, any Guarantor or any of any Seller’s or any Guarantor’s
Subsidiaries files a voluntary petition in bankruptcy, seeks relief under any
provision of any bankruptcy, reorganization, moratorium, delinquency,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction whether now or subsequently in effect; or consents to the
filing of any petition against it under any such law; or consents to the
appointment of or taking possession by a custodian, receiver, conservator,
trustee, liquidator, sequestrator or similar official for any Seller, any
Guarantor or any of any Sellers’ or any Guarantor’s Subsidiaries, or of all or
any part of any Sellers’, any Guarantor’s or any Seller’s or any Guarantor’s
Subsidiaries Property; or makes an assignment for the benefit of any Seller, any
Guarantor or any Seller’s or any Guarantor’s Subsidiaries’ creditors;

 

(h) Any final judgment or order for the payment of money in excess of (i) Two
Million Dollars ($2,000,000) in the case of any Guarantor and (ii) ten thousand
Dollars ($10,000) in the case of any Seller in the aggregate (to the extent that
it is, in the reasonable determination of Buyers, uninsured and provided that
any insurance or other credit posted in connection with an appeal shall not be
deemed insurance for these purposes) shall be rendered against any Seller, any
Guarantor or any of any Seller’s or any Guarantor’s Subsidiaries by one or more
courts, administrative tribunals or other bodies having jurisdiction over them
and the same shall not be discharged (or provisions shall not be made for such
discharge) satisfied, or bonded, or a stay of execution thereof shall not be
procured, within thirty (30) days from the date of entry thereof and any Seller,
any Guarantor or any of any Seller’s or any Guarantor’s Subsidiaries, as
applicable, 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;

 

(i) Any Governmental Authority or any person, agency or entity acting or
purporting to act under governmental authority shall have taken any action to
condemn, seize or appropriate, or to assume custody or control of, all or any
substantial part of the Property of any Seller, any Guarantor or any of any
Seller’s or any Guarantor’s Subsidiaries, or shall have taken any action to
displace the management of any Seller, any Guarantor or any of any Seller’s or
any Guarantor’s Subsidiaries or to curtail its authority in the conduct of the
business of any Seller, any Guarantor or any of any Seller’s or any Guarantor’s
Subsidiaries, or takes any action in the nature of enforcement to remove, limit
or restrict the approval of any Seller, any Guarantor or any of any Seller’s or
any Guarantor’s Subsidiaries as an issuer, buyer or a seller/servicer of Loans
or securities backed thereby;

 

(j) Either (i) any Seller or Guarantor or any of any Seller’s or any Guarantor’s
Subsidiaries shall default under, or fail to perform as requested under, or
shall otherwise breach the material terms of,

 

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in each case beyond any applicable cure period, any instrument, agreement or
contract relating to Indebtedness and such default, failure or breach shall
entitle any counterparty to declare such Indebtedness to be due and payable
prior to the maturity thereof or (ii) ECC or any of its Affiliates (other than
Sellers) shall default under, or fail to perform as requested under, or shall
otherwise breach the material terms of, in each case beyond any applicable cure
period, any instrument, agreement or contract relating to Indebtedness in excess
of (i) Two Million Dollars ($2,000,000) in the case of any Guarantor and (ii)
ten thousand Dollars ($10,000) in the case of any Seller and such default,
failure or breach shall entitle any counterparty to declare such Indebtedness to
be due and payable prior to the maturity thereof;

 

(k) In the good faith judgment of Buyers any Material Adverse Effect shall have
occurred with respect to any Seller, any ECC Person or any of any Seller’s or
any ECC Person’s Subsidiaries taken as a whole or any Material Adverse Change
shall have occurred with respect to the financial conditions or operations of
any Seller, Servicer or any ECC Person;

 

(l) Either (i) any Seller or any ECC Person shall admit in writing its inability
to, or intention not to, perform any of any Seller’s or any ECC Person’s
respective material Obligations, or (ii) Buyers shall have determined in good
faith that any Seller or any ECC Person is unable to meet its commitments;

 

(m) Except as expressly permitted in this Agreement, any Seller or any ECC
Person dissolves, merges or consolidates with another entity, or sells,
transfers, or otherwise disposes of a material portion of any Seller’s or any
ECC Person’s (as applicable) business or assets unless Buyers’ written consent
is given;

 

(n) This Agreement shall for any reason cease to create (or maintain) a valid
first priority perfected security interest or ownership interest upon transfer
in any material portion of the Purchased Loans or Collateral purported to be
covered hereby;

 

(o) Either any Seller’s or any ECC Person’s audited annual financial statements
or the notes thereto or other opinions or conclusions stated therein shall be
qualified or limited by reference to the status of any Seller or any ECC Person
as a “going concern” or a reference of similar import or shall indicate that any
Seller or any ECC Person has a negative net worth or is insolvent;

 

(p) A Change in Control of any ECC Person or any Seller.

 

(q) The occurrence of an Event of Default hereunder as to any Seller, shall
constitute an Event of Default for each other Seller.

 

(r) Any of Messrs. Holder and Asghar (each of the foregoing until replaced as
described below, a “Key Person” and collectively, the “Key Persons”) is no
longer an employee or consultant of ECC or its Affiliates for any reason
including, but not limited to, his or her death, permanent disability or
resignation (each of the foregoing, a “Termination Event”, and any affected such
Key Person a “Terminated Key Person”), but subject to the following limitations.
Notwithstanding the foregoing, within 90 days after such Termination Event, ECC
may request the Buyers to approve a replacement individual to replace any
Terminated Key Person, and the Buyers shall consider such request and shall not
unreasonably withhold or delay its approval of such individual as eligible to be
a replacement for such Terminated Key Person hereunder. Upon the receipt of the
approval from the Buyers of such individual as a replacement Key Person, ECC
will promptly hire or promote or engage such individual. The list of named Key
Persons and the timing or terms of the replacement process may be modified from
time to time at the written request of ECC and upon the reasonable agreement of
the Buyers. A Terminated Key Person shall no longer be deemed to be a Key Person
for any purpose.

 

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(s) Buyers shall reasonably request, specifying the reasons for such request,
reasonable information, and/or written responses to such requests, regarding the
financial well-being of any Seller or any ECC Person and such reasonable
information and/or responses shall not have been provided within five (5)
Business Days of such request;

 

(t) If any Seller or any ECC Person admits its inability or is manifestly unable
to perform fully when such performance will become due any obligation on any
Seller’s or any Guarantor’s part to any broker, dealer, bank or other financial
institution in respect of a transaction involving securities, commodities or
other instruments not then due (regardless of whether Buyers have any right,
title or interest therein);

 

(u) ECC shall fail to satisfy any of the financial covenants set forth in
Section 14(g)(ii) of this Agreement;

 

(v) If any Seller, an ECC Person or any of their Affiliates shall default in
respect of any payment obligation under any Transaction with Buyers or any of
their Affiliates and such breach is not remedied in one (1) Business Day;

 

(w) If any Seller or any Guarantor fails to satisfy a Margin Call and such
failure is not remedied in one (1) Business Day;

 

(x) Any material amendment is made to the Underwriting Guidelines that in the
judgment of the Buyers impacts the Buyers or the Purchased Loans and that shall
not have been previously approved by Buyer;

 

(y) After such time as ECC has elected to be treated as a REIT, the failure of
ECC to continue to be (i) qualified as a REIT as defined in Section 856 of the
Code and (ii) entitled to a dividend paid deduction under Section 857 of the
Code with respect to dividends paid by it with respect to each taxable year for
which it claims a deduction on its Form 1120 – REIT filed with the United States
Internal Revenue Service for such year, or the entering into by ECC of any
material “prohibited transactions” as defined in Sections 857(b) and 856(c) of
the Code; or

 

(z) after such time as ECC has elected to be treated as a REIT, the failure of
ECC to satisfy any of the following asset or income tests and a Material Adverse
Effect has occurred:

 

(i) At the close of each taxable year, at least 75 percent of ECC’s gross income
consists of (A) “rents from real property” within the meaning of Section
856(c)(3)(A) of the Code, (B) interest on obligations secured by mortgages on
real property or on interests in real property, within the meaning of Section
856(c)(3)(B) of the Code, (C) gain from the sale or other disposition of real
property (including interests in real property and interests in mortgages on
real property) which is not property described in Section 1221(a)(1) of the
Code, within the meaning of Section 856(c)(3)(C) of the Code, (D) dividends or
other distributions on, and gain (other than gain from “prohibited transactions”
within the meaning of Section 857(b)(6)(B)(iii) of the Code) from the sale or
other disposition of, transferable shares (or transferable certificates of
beneficial interest) in other qualifying REITs within the meaning of Section
856(d)(3)(D) of the Code, and (E) amounts described in Sections 856(c)(3)(E)
through 856(c)(3)(I) of the Code;

 

(ii) At the close of each taxable year, at least 95 percent of ECC’s gross
income consists of (A) the items of income described in paragraph (i) hereof
(other than those described in Section 856(c)(3)(I) of the Code), (B) gain
realized from the sale or other disposition of stock

 

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or securities which are not property described in Section 1221(a)(1) of the
Code, (C) interest and (D) dividends, in each case within the meaning of Section
856(c)(2) of the Code;

 

(iii) At the close of each quarter of ECC’s taxable year, at least 75 percent of
the value of ECC’s total assets (as determined in accordance with Treasury
Regulations Section 1.856-2(d)) has consisted of and will consist of real estate
assets within the meaning of Sections 856(c)(4) and 856(c)(5)(B) of the Code,
cash and cash items (including receivables which arise in the ordinary course of
ECC’s operations, but not including receivables purchased from another person),
and Government Securities;

 

(iv) At the close of each quarter of each of ECC’s taxable years, (A) not more
than 25 percent of ECC’s total asset value will be represented by securities
(other than those described in paragraph 3), (B) not more than 20 percent of
ECC’s total asset value will be represented by securities of one or more taxable
REIT subsidiaries, and (C) (1) not more than 5 percent of the value of the ECC’s
total assets will be represented by securities of any one issuer (other than
Government Securities and securities of taxable REIT subsidiaries), and (2) ECC
will not hold securities possessing more than 10 percent of the total voting
power or value of the outstanding securities of any one issuer (other than
Government Securities, securities of taxable REIT subsidiaries, and securities
of a qualified REIT subsidiary within the meaning of Section 856(i) of the
Code).

 

20. REMEDIES

 

Upon the occurrence of an Event of Default, Buyers, at their option (which
option shall be deemed to have been exercised immediately upon the occurrence of
an Event of Default pursuant to Section 19(f), (g) or (l) hereof), shall have
the right to exercise any or all of the following rights and remedies:

 

(a) (i) The Repurchase Date for each Transaction hereunder shall, if it has not
already occurred, be deemed immediately to occur (except that, in the event that
the Purchase Date for any Transaction has not yet occurred as of the date of
such exercise or deemed exercise, such Transaction shall be deemed immediately
canceled). Sellers’ obligations hereunder to repurchase all Purchased Loans at
the Repurchase Price therefor on the Repurchase Date in such Transactions shall
thereupon become immediately due and payable; all Income paid after such
exercise or deemed exercise shall be remitted to and retained by Buyers and
applied to the aggregate Repurchase Prices and any other amounts owing by
Sellers hereunder; each Seller, Servicer (unless Servicer is not an Affiliate of
any Guarantor or any Seller) and each Guarantor shall immediately deliver to
Buyers or their designee any and all original papers, records and files relating
to the Purchased Loans subject to such Transaction then in its possession and/or
control; and all right, title and interest in and entitlement to such Purchased
Loans.

 

(ii) Buyers may (A) sell, on or following the Business Day following the date on
which the Repurchase Price became due and payable pursuant to Section 20(a)(i)
without notice or demand of any kind, at a public or private sale and at such
price or prices as Buyers may reasonably deem satisfactory any or all Purchased
Loans and/or (B) in its sole discretion elect, in lieu of selling all or a
portion of such Purchased Loans, to give Sellers credit for such Purchased Loans
in an amount equal to the Market Value of the Purchased Loans against the
aggregate unpaid Repurchase Price and any other amounts owing by Sellers
hereunder. Sellers shall remain liable to Buyers for any amounts that remain
owing to Buyers following a sale and/or credit under the preceding sentence. The
proceeds of any disposition of Purchased Loans shall be applied first to the
reasonable costs and expenses incurred by Buyers in connection with or as a
result of an Event of Default; second to Breakage Costs, costs of cover

 

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and/or related hedging transactions; third to the aggregate Repurchase Prices;
and fourth to all other Obligations.

 

(iii) The parties recognize that it may not be possible to purchase or sell all
of the Purchased Loans on a particular Business Day, or in a transaction with
the same purchaser, or in the same manner because the market for such Purchased
Loans may not be liquid. In view of the nature of the Purchased Loans, the
parties agree that liquidation of a Transaction or the underlying Purchased
Loans does not require a public purchase or sale and that a good faith private
purchase or sale shall be deemed to have been made in a commercially reasonable
manner. Accordingly, Buyers may elect the time and manner of liquidating any
Purchased Loan and nothing contained herein shall obligate Buyers to liquidate
any Purchased Loan on the occurrence of an Event of Default or to liquidate all
Purchased Loans in the same manner or on the same Business Day or constitute a
waiver of any right or remedy of Buyers. Notwithstanding the foregoing, the
parties to this Agreement agree that the Transactions have been entered into in
consideration of and in reliance upon the fact that all Transactions hereunder
constitute a single business and contractual obligation and that each
Transaction has been entered into in consideration of the other Transactions.

 

(b) Sellers hereby acknowledge, admit and agree that Sellers’ obligations under
this Agreement are full recourse obligations of Sellers to which Sellers pledges
their full faith and credit. In addition to their rights hereunder, Buyers shall
have the right to proceed against any of Sellers’ assets which may be in the
possession of Buyers, any of Buyers’ Affiliates or their designee (including the
Custodian), including the right to liquidate such assets and to set-off the
proceeds against monies owed by Seller to Buyers pursuant to this Agreement.
Buyers may set off cash, the proceeds of the liquidation of the Purchased Loans
and Additional Purchased Loans, any other Collateral or its proceeds and all
other sums or obligations owed by Buyers to Sellers against all of Sellers’
Obligations to Buyers, whether under this Agreement, under a Transaction, or
under any other agreement between the parties, or otherwise, whether or not such
Obligations are then due, without prejudice to Buyers’ right to recover any
deficiency.

 

(c) Buyers shall have the right to obtain physical possession of the Records and
all other files of Sellers relating to the Purchased Loans and all documents
relating to the Purchased Loans which are then or may thereafter come into the
possession of Sellers or any third party acting for Sellers and Sellers shall
deliver to Buyers such assignments as Buyers shall request.

 

(d) Buyers shall have the right to direct all Persons servicing the Purchased
Loans to take such action with respect to the Purchased Loans as Buyers
determine appropriate.

 

(e) Buyers shall, without regard to the adequacy of the security for the
Obligations, be entitled to the appointment of a receiver by any court having
jurisdiction, without notice, to take possession of and protect, collect,
manage, liquidate, and sell the Purchased Loans and any other Collateral or any
portion thereof, collect the payments due with respect to the Purchased Loans
and any other Collateral or any portion thereof, and do anything that Buyers are
authorized hereunder to do. Sellers shall pay all costs and expenses incurred by
Buyers in connection with the appointment and activities of such receiver.

 

(f) Buyers may, at their option, enter into one or more Hedge Instruments
covering all or a portion of the Purchased Loans, and the Sellers shall be
responsible for all damages, judgments, costs and expenses of any kind which may
be imposed on, incurred by or asserted against the Lender relating to or arising
out of such Hedge Instruments; including without limitation any losses resulting
from such Hedge Instruments.

 

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(g) In addition to all the rights and remedies specifically provided herein,
Buyers shall have all other rights and remedies provided by applicable federal,
state, foreign, and local laws, whether existing at law, in equity or by
statute, including, without limitation, all rights and remedies available to a
purchaser/secured party under the Uniform Commercial Code.

 

Except as otherwise expressly provided in this Agreement, Buyers shall have the
right to exercise any of their rights and/or remedies without presentment,
demand, protest or further notice of any kind other than as expressly set forth
herein, all of which are hereby expressly waived by Sellers.

 

Buyers may enforce their rights and remedies hereunder without prior judicial
process or hearing, and Sellers hereby expressly waive, to the extent permitted
by law, any right Sellers might otherwise have to require Buyers to enforce
their rights by judicial process. Sellers also waive, to the extent permitted by
law, any defense Sellers might otherwise have to the Obligations, arising from
use of nonjudicial process, enforcement and sale of all or any portion of the
Purchased Loans and any other Collateral or from any other election of remedies.
Sellers recognize that nonjudicial remedies are consistent with the usages of
the trade, are responsive to commercial necessity and are the result of a
bargain at arm’s length.

 

Each ECC Person and each Seller shall cause all sums received by it with respect
to the Purchased Loans to be deposited into the Collection Account promptly upon
receipt thereof but in no event later than two Business Days thereafter.
Following an Event of Default, Sellers shall be liable to Buyers for the amount
of all expenses (plus interest thereon at a rate equal to the Default Rate), and
Breakage Costs including, without limitation, all costs and expenses incurred
within thirty (30) days of the Event of Default in connection with hedging or
covering transactions related to the Purchased Loans, conduit advances and
payments for mortgage insurance.

 

21. DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE

 

No failure on the part of Buyers to exercise, and no delay in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise by Buyers of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All rights and remedies of Buyers provided for herein
are cumulative and in addition to any and all other rights and remedies provided
by law, the Program Documents and the other instruments and agreements
contemplated hereby and thereby, and are not conditional or contingent on any
attempt by Buyers to exercise any of their rights under any other related
document. Buyers may exercise at any time after the occurrence of an Event of
Default one or more remedies, as they so desire, and may thereafter at any time
and from time to time exercise any other remedy or remedies.

 

22. USE OF EMPLOYEE PLAN ASSETS

 

No assets of an employee benefit plan subject to any provision of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”) shall be used by
either party hereto in a Transaction.

 

23. INDEMNITY

 

Each Seller and each ECC Person agrees to pay on demand (with interest thereon
at the Default Rate following an Event of Default): (i) all reasonable
out-of-pocket costs and expenses of Buyers and the Custodian in connection with
the preparation, execution, delivery, modification, administration and amendment
of the Program Documents (including, without limitation, (A) all collateral
review and UCC search and filing fees and expenses and (B) the reasonable fees
and expenses of counsel for Buyers with

 

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respect to advising Buyers as to their rights and responsibilities, or the
perfection, protection or preservation of rights or interests, under this
Agreement, with respect to negotiations with any Seller or any ECC Person or
with other creditors of Sellers or the ECC Persons or any of their Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors’ rights generally and any proceeding ancillary thereto) (ii) all
reasonable out-of-pocket expenses and reasonable attorneys’ fees in connection
with the taking of any action, including legal, required or permitted to be
taken by Buyers (without duplication by Buyers) and/or Custodian pursuant
thereto, any “due diligence” or loan agent reviews conducted by Buyers or on
their behalf or by refinancing or restructuring in the nature of a “workout” and
(iii) all costs and expenses of Buyers in connection with the exercise of any
right or remedy as the enforcement of this Agreement (including any waivers),
whether in any action, suit or litigation, any bankruptcy, insolvency or other
similar proceeding affecting creditors’ rights generally (including, without
limitation, the reasonable fees and expenses of counsel for Buyers) whether or
not the transactions contemplated hereby are consummated.

 

(a) Each Seller and each ECC Person agrees to indemnify and hold harmless Buyers
and each of their Affiliates and their respective officers, directors,
employees, agents and advisors (each, an “Indemnified Party”) from and against
(and will reimburse each Indemnified Party as the same is incurred) any and all
claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel and allocated costs of
internal counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including without limitation, in connection with) (i) any
investigation, litigation or other proceeding (whether or not such Indemnified
Party is a party thereto) relating to, resulting from or arising out of any of
the Program Documents and all other documents related thereto, any breach of a
representation or warranty of any Seller or any ECC Person and/or their
respective officers in this Agreement or any other Program Document, and all
actions taken pursuant thereto, (ii) the Transactions, the actual or proposed
use of the proceeds of the Transactions, this Agreement or any of the
transactions contemplated thereby, including, without limitation, any
acquisition or proposed acquisition, or any indemnity payable under the
Servicing Agreement or other servicing arrangement, (iii) the actual or alleged
presence of hazardous materials on any Property or any environmental action
relating in any way to any Property, or (iv) the actual or alleged violation of
any federal, state, municipal or local predatory lending laws, except to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party’s gross negligence or willful misconduct or is the
result of a claim made by a Seller or an ECC Person against the Indemnified
Party, and a Seller or an ECC Person is ultimately the successful party in any
resulting litigation or arbitration. Sellers and the ECC Persons also agree not
to assert (and to cause Servicer not to assert) any claim against Buyers or any
of their Affiliates, or any of their respective officers, directors, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Program Documents, the actual or proposed use of the proceeds of the
Transactions, this Agreement or any of the transactions contemplated thereby.
THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES,
WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT) OF THE INDEMNIFIED PARTIES.

 

(b) If any action or proceeding (including any governmental investigation) shall
be brought or asserted against any Indemnified Party in respect of which the
indemnity provided above may be sought from any Seller or any ECC Person (the
“Indemnifying Party”) each such Indemnified Party shall promptly notify the
Indemnifying Party in writing, and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel satisfactory to the
Indemnified Party and the payment of all

 

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expenses and reasonable legal fees; provided that failure to notify the
Indemnifying Party shall not relieve it from any liability it may have to such
Indemnified Party except to the extent that it shall be actually prejudiced
thereby. The Indemnified Party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof at the expense of
the Indemnified Party; provided, however that the fees and expenses of separate
counsel to the Indemnified Party in any such proceeding shall be at the expense
of the Indemnifying Party if (i) the Indemnifying Party has agreed to pay such
fees and expenses, (ii) the Indemnifying Party shall have failed to assume the
defense of such action or proceeding or employ counsel satisfactory to the
Indemnified Party in any such action or proceeding within a reasonable time
after the commencement of such action or (iii) the named parties to any such
action or proceeding (including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party, and the Indemnified Party shall
have been advised in writing by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the Indemnifying Party which gives rise to a conflict of interest
(in which case, if the Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Party, it
being understood, however, that the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
Indemnified Parties, which firm shall be designated in writing by the
Indemnified Party and shall be acceptable to the Indemnified Party). The
Indemnifying Party shall not be liable for any settlement of any such action or
proceeding effected without its written consent to the extent that any such
settlement shall be prejudicial to the Indemnifying Party (to which the
Indemnified Party did not consent), but, if settled with its written consent, or
if there is a final non-appealable judgment for the plaintiff in any such action
or proceeding with respect to which the Indemnifying Party shall have received
notice in accordance with this paragraph, the Indemnifying Party agrees to
indemnify and hold the Indemnified Parties harmless from and against any loss or
liability by reason of such settlement or judgment.

 

(c) Without limitation on the provisions of Section 6, if any payment of the
Repurchase Price of any Transaction is made by any Seller other than on the then
scheduled Repurchase Date thereto as a result of an acceleration of the
Repurchase Date pursuant to Section 20 or for any other reason, such Seller
shall, except as otherwise provided in Sections 16(c) and 25, upon demand by
Buyers, pay to Buyers any Breakage Costs incurred as of a result of such
payment.

 

(d) If any Seller fails to pay when due any costs, expenses or other amounts
payable by it under this Agreement, including, without limitation, reasonable
fees and expenses of counsel and indemnities, such amount may be paid on behalf
of such Seller by Buyers, in their sole discretion and such Seller shall remain
liable for any such payments by Buyers. No such payment by Buyers shall be
deemed a waiver of any of Buyers’ rights under the Program Documents.

 

(e) Without prejudice to the survival of any other agreement of Sellers
hereunder, the covenants and obligations of Sellers contained in this Section 23
shall survive the payment in full of the Repurchase Price and all other amounts
payable hereunder and delivery of the Purchased Loans by Buyers against full
payment therefore.

 

(f) Notwithstanding any provision to the contrary in this Agreement (including
the preceding subsections of this Section 23) or any other Program Documents
(including the Master Netting Agreement), in no event shall any Guarantor (in
any capacity) have any obligations or liabilities of any kind whatsoever
(including obligations or liabilities for any breach or alleged breach of any

 

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representation, warranty, covenant or agreement and further including
obligations or liabilities for indemnification, reimbursement, contribution and
the like) with respect to any of the following matters: (i) any transfer or
delivery of Purchased Loans and any related Collateral to Buyer or its designee;
(ii) any payment or other satisfaction of, or any setoff or other credit against
the payment or other satisfaction of, Repurchase Prices, Price Differentials,
Margin Calls or Margin Deficits; (iii) any transfer of cash or Additional
Purchased Loans in connection with a Margin Call; (iv) any substitution of
Substitute Loans for Purchased Loans; and (v) any claims, damages, losses,
liabilities and expenses in respect of a Purchased Loan, in each case, to the
extent and only to the extent that such claims, damages, losses, liabilities and
expenses directly or indirectly relate to (A) the insolvency, bankruptcy, lack
of creditworthiness, delinquency and similar characteristics of the related
obligor under such Purchased Loan or (B) the uncollectibility of any principal,
interest and other charges (including late fees) under such Purchased Loan.

 

(g) The indemnifications payable by ECC Persons shall be limited as provided in
the Guaranty.

 

24. WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS

 

Seller hereby expressly waives, to the fullest extent permitted by law, every
statute of limitation on a deficiency judgment, any reduction in the proceeds of
any Purchased Loans as a result of restrictions upon Buyers or Custodian
contained in the Program Documents or any other instrument delivered in
connection therewith, and any right that it may have to direct the order in
which any of the Purchased Loans shall be disposed of in the event of any
disposition pursuant hereto.

 

25. SET-OFF

 

In addition to any rights and remedies of Buyers hereunder and by law, Buyers
shall have the right, without prior notice to Sellers, any such notice being
expressly waived by Sellers to the extent permitted by applicable law, upon any
amount becoming due and payable by any Seller 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 Buyers or any
Affiliate thereof to or for the credit or the account of such Seller or any
Affiliate thereof. Buyers agrees promptly to notify the applicable Seller after
any such set-off and application made by Buyers; provided that the failure to
give such notice shall not affect the validity of such set-off and application.

 

26. FURTHER ASSURANCES

 

Sellers and the ECC Persons agree to do such further acts and things and to
execute and deliver to Buyers such additional assignments, acknowledgments,
agreements, powers and instruments as are reasonably required by Buyers to carry
into effect the intent and purposes of this Agreement and the other Program
Documents, to perfect the interests of Buyers in the Purchased Loans and the
other items of Collateral or to better assure and confirm unto Buyers their
rights, powers and remedies hereunder and thereunder.

 

27. ENTIRE AGREEMENT; PRODUCT OF NEGOTIATION

 

This Agreement supersedes and integrates all previous negotiations, contracts,
agreements and understandings between the parties relating to a sale and
repurchase of Purchased Loans and Additional

 

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Purchased Loans thereto, and it, together with the other Program Documents, and
the other documents delivered pursuant hereto or thereto, contains the entire
final agreement of the parties. No prior negotiation, agreement, understanding
or prior contract shall have any validity hereafter.

 

28. TERMINATION

 

This Agreement shall remain in effect until the Termination Date. However, no
such termination shall affect any Seller’s outstanding obligations to Buyers at
the time of such termination. Each Seller’s obligations to indemnify Buyers
pursuant to this Agreement and the other Program Documents shall survive the
termination hereof.

 

29. ASSIGNMENT

 

The Program Documents are not assignable by any Seller or any Guarantor. Buyers
in their sole discretion may at any time assign all or a portion of their rights
and obligations under this Agreement and the Program Documents; provided,
however, that Buyers shall maintain, for review by Sellers upon written request,
a register of assignees and a copy of an executed assignment and acceptance by
Buyers and assignee (“Assignment and Acceptance”), specifying the percentage or
portion of such rights and obligations assigned. Upon such assignment, (a) such
assignee shall be a party hereto and to each Program Document to the extent of
the percentage or portion set forth in the Assignment and Acceptance, and shall
succeed to the applicable rights and obligations of Buyers hereunder, and (b)
Buyers shall, to the extent that such rights and obligations have been so
assigned by it to either (i) an Affiliate of any Buyer which assumes the
obligations of such Buyer or (ii) to another Person which assumes the
obligations of such Buyer, be released from its obligations hereunder accruing
thereafter and under the Program Documents. Unless otherwise stated in the
Assignment and Acceptance, Sellers shall continue to take directions solely from
Buyers unless otherwise notified by Buyers in writing. Buyers may distribute to
any prospective assignee any document or other information delivered to Buyers
by Seller. Notwithstanding any assignment by Buyers pursuant to this Section 29,
Buyers shall remain liable as to the Transactions.

 

30. AMENDMENTS, ETC.

 

No amendment or waiver of any provision of this Agreement nor any consent to any
failure to comply herewith or therewith shall in any event be effective unless
the same shall be in writing and signed by each Guarantor, each Seller and each
Buyer, and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

 

31. SEVERABILITY

 

If any provision of any Program Document is declared invalid by any court of
competent jurisdiction, such invalidity shall not affect any other provision of
the Program Documents, and each Program Document shall be enforced to the
fullest extent permitted by law.

 

32. BINDING EFFECT; GOVERNING LAW

 

This Agreement shall be binding and inure to the benefit of the parties hereto
and their respective successors and assigns, except that neither any Guarantor
nor any Seller may assign or transfer any of their respective rights or
obligations under this Agreement or any other Program Document without the prior
written consent of Buyers. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH,
AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, INCLUDING

 

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SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT
OTHERWISE WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

 

33. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION AND VENUE; SERVICE OF PROCESS

 

EACH ECC PERSON AND EACH SELLER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE PROGRAM DOCUMENTS
OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH SELLER AND EACH
GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS, ON BEHALF OF ITSELF
AND ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF
NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE PROGRAM
DOCUMENTS IN ANY ACTION OR PROCEEDING. EACH ECC PERSON AND EACH SELLER HEREBY
SUBMITS TO, AND WAIVES ANY OBJECTION SUCH PARTY MAY HAVE TO, NON-EXCLUSIVE
PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT
TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM DOCUMENTS. EACH ECC
PERSON AND EACH SELLER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF A SUMMONS
AND COMPLAINT AND OTHER PROCESS IN ANY ACTION, CLAIM OR PROCEEDING BROUGHT BY
ANOTHER PARTY IN CONNECTION WITH THIS AGREEMENT OR THE OTHER PROGRAM DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS, ON BEHALF OF ITSELF OR ITS PROPERTY, IN THE MANNER
SPECIFIED IN THIS SECTION 33 AND TO SUCH PARTY’S ADDRESS SPECIFIED IN SECTION 36
OR SUCH OTHER ADDRESS AS SUCH PARTY SHALL HAVE PROVIDED IN WRITING TO THE OTHER
PARTIES HERETO. NOTHING IN THIS SECTION 33 SHALL AFFECT THE RIGHT OF ANY PARTY
HERETO TO (I) SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE
LAW, OR (II) BRING ANY ACTION OR PROCEEDING AGAINST ANY OTHER PARTY OR ITS
PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTIONS.

 

34. SINGLE AGREEMENT

 

Sellers, Guarantors and Buyers acknowledge that, and have entered hereinto and
will enter into each Transaction hereunder in consideration of and in reliance
upon the fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, Sellers, Guarantors and Buyers each agree (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, and (ii) that payments, deliveries and other
transfers made by any of them in respect of any Transaction shall be deemed to
have been made in consideration of payments, deliveries and other transfers in
respect of any other Transaction hereunder, and the obligations to make any such
payments, deliveries and other transfers may be applied against each other and
netted.

 

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35. INTENT

 

Sellers and Buyers recognize that each Transaction is a “repurchase agreement”
as that term is defined in Section 101 of Title 11 of the United States Code, as
amended (“USC”) (except insofar as the Purchased Loans subject to such
Transaction or the term of such Transaction would render such definition
inapplicable), a “forward contract” as that term is defined in Section 101 of
Title 11 of the USC, and a “securities contract” as that term is defined in
Section 741 of Title 11 of the USC (except insofar as the Purchased Loans
subject to such Transaction or the term of such Transaction would render such
definition inapplicable).

 

It is understood that each Buyer’s right to liquidate the Purchased Loans
delivered to it in connection with the Transactions hereunder or to exercise any
other remedies pursuant to Section 20 hereof is a contractual right to liquidate
such Transaction as described in Sections 555 and 559 of Title 11 of the USC.

 

36. NOTICES AND OTHER COMMUNICATIONS

 

Except as provided herein, all notices required or permitted by this Agreement
shall be in writing (including without limitation by Electronic Transmission,
email or facsimile) and shall be effective and deemed delivered only when
received by the party to which it is sent; provided, however, that a facsimile
transmission shall be deemed to be received when transmitted so long as the
transmitting machine has provided an electronic confirmation (without error
message) of such transmission and notices being sent by first class mail,
postage prepaid, shall be deemed to be received five (5) Business Days following
the mailing thereof. Any such notice shall be sent to a party at the address or
facsimile transmission number set forth below:

 

if to ECC SPV II:    ECC SPV II      1833 Alton Parkway      Irvine, CA 92606  
   Attention:    William E. Moffatt      Telephone:    (949) 856-7698     
Facsimile:    (949) 221-9816      With a copy to:      ECC Capital Corporation  
   1833 Alton Parkway      Irvine, CA 92606      Attention:    Alanna Darling,
Corporate Counsel      Telephone:    (949) 856-4848      Facsimile:    (949)
856-4948 if to Encore SPV II:    Encore SPV II      1833 Alton Parkway     
Irvine, CA 92606      Attention:    William E. Moffatt      Telephone:    (949)
856-7698      Facsimile:    (949) 221-9816

 

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     With a copy to:      ECC Capital Corporation      1833 Alton Parkway     
Irvine, CA 92606      Attention:    Alanna Darling, Corporate Counsel     
Telephone:    (949) 856-4848      Facsimile:    (949) 856-4948 if to Bravo SPV
II:    Bravo SPV II      1833 Alton Parkway      Irvine, CA 92606     
Attention:    William E. Moffatt      Telephone:    (949) 856-7698     
Facsimile:    (949) 221-9816      With a copy to:      ECC Capital Corporation  
   1833 Alton Parkway      Irvine, CA 92606      Attention:    Alanna Darling,
Corporate Counsel      Telephone:    (949) 856-4848      Facsimile:    (949)
856-4948 if to ECC Capital     

Corporation:

   ECC Capital Corporation      1833 Alton Parkway      Irvine, CA 92606     
Attention:    William E. Moffatt      Telephone:    (949) 856-7698     
Facsimile:    (949) 221-9816      With a copy to:      ECC Capital Corporation  
   1833 Alton Parkway      Irvine, CA 92606      Attention:    Alanna Darling,
Corporate Counsel      Telephone:    (949) 856-4848      Facsimile:    (949)
856-4948

if to Encore Credit:

   Encore Credit Corp.      1833 Alton Parkway      Irvine, CA 92606     
Attention:    William E. Moffatt      Telephone:    (949) 856-7698     
Facsimile:    (949) 221-9816

 

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     With a copy to:      ECC Capital Corporation      1833 Alton Parkway     
Irvine, CA 92606      Attention:    Alanna Darling. Corporate Counsel     
Telephone:    (949) 856-4848      Facsimile:    (949) 856-4948 if to Bravo:   
Bravo Credit Corporation      1833 Alton Parkway      Irvine, CA 92606     
Attention:    William E. Moffatt      Telephone:    (949) 856-7698     
Facsimile:    (949) 221-9816      With a copy to:      ECC Capital Corporation  
   1833 Alton Parkway      Irvine, CA 92606      Attention:    Alanna Darling,
Corporate Counsel      Telephone:    (949) 856-4848      Facsimile:    (949)
856-4948 if to Aspen:    Aspen Funding Corp.      60 Wall Street      New York,
NY 10005      Attention:    Vincent D’Amore      Telephone:    (212) 250-7328  
   Facsimile:    (212) 797-5160 if to Newport:    Newport Funding Corp.      60
Wall Street      New York, NY 10005      Attention:    Vincent D’Amore     
Telephone:    (212) 250-7328      Facsimile:    (212) 797-5160 if to DBSP:    DB
Structured Products, Inc.      60 Wall Street      New York, NY 10005     
Attention:    Vincent D’Amore      Telephone:    (212) 250-7328      Facsimile:
   (212) 797-5160

 

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or to such other address or facsimile number as either party may notify to the
other in writing from time to time. Notices required hereunder to be provided to
one Buyer must be simultaneously provided to all Buyers.

 

37. CONFIDENTIALITY

 

The Program Documents and their respective terms, provisions, supplements and
amendments, and transactions and notices hereunder, are proprietary to Buyers
and Agent and shall be held by Sellers and each ECC Person (and Sellers and the
ECC Persons shall cause Servicer to hold it) in strict confidence and shall not
be disclosed to any third party without the consent of Buyers except for (i)
disclosure to any Seller’s or any ECC Person’s direct and indirect parent
companies, directors, attorneys, agents or accountants, provided that such
attorneys or accountants likewise agree to be bound by this covenant of
confidentiality, or are otherwise subject to confidentiality restrictions or
(ii) with prior written notice to Buyers, disclosure required by law, rule,
regulation or order of a court or other regulatory body or (iii) with prior
written notice to Buyers, disclosure to any approved hedge counterparty to the
extent necessary to obtain any Hedge Instrument hereunder or (iv) with prior
written notice to Buyers, any disclosures or filing required under Securities
and Exchange Commission (“SEC”) or state securities’ laws; provided that in the
case of (iv), the Sellers and the ECC Persons shall not file any of the Program
Documents other than the Agreement with the SEC or state securities office
unless a Seller or an ECC Person, as applicable, shall have provided at least
thirty (30) days (or such lesser time as may be demanded by the SEC or state
securities office) prior written notice of such filing to Buyer. Notwithstanding
anything herein to the contrary, except as reasonably necessary to comply with
applicable securities laws, each party (and each employee, representative, or
other agent of each party) may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to it relating to such tax treatment and tax structure. For this
purpose, tax treatment and tax structure shall not include (i) the identity of
any existing or future party (or any Affiliate of such party) to this Agreement
or (ii) any specific pricing information or other commercial terms, including
the amount of any fees, expenses, rates or payments arising in connection with
the transactions contemplated by this Agreement.

 

38. DUE DILIGENCE

 

Each ECC Person, each Seller and the Servicer agrees to promptly provide Buyers
and their agents with access to, copies of and extracts from any and all
documents, records, agreements, instruments or information (including, without
limitation, any of the foregoing in computer data banks and computer software
systems) relating to its financial condition, the performance of its obligations
under the Program Documents, the documents contained in the Servicing File or
the Purchased Loans in the possession, or under the control, of Servicer, a
Seller or an ECC Person. In addition, Buyers have the right to perform
continuing due diligence reviews on a quarterly basis of (x) Sellers, Servicer,
Guarantors and their respective Affiliates, directors, officers, employees and
significant shareholders, including, without limitation, their respective
financial condition and performance of their obligations under the Program
Documents, and (y) the Servicing File and the Purchased Loans. Sellers shall
also make available to Buyers a knowledgeable financial or accounting officer
for the purpose of answering questions respecting the Purchased Loans. Without
limiting the generality of the foregoing, Sellers acknowledge that Buyers shall
enter into transactions with Sellers based solely upon the information provided
by Seller to Buyers and the representations, warranties and covenants contained
herein, and that Buyers, at their option, has the right at nay time to conduct a
partial or complete due diligence review on some or all of the Purchased Loans,
including, without limitation, ordering new credit reports, new appraisals on
the related Mortgaged Properties and otherwise re-generating the information
used to

 

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originate such Purchased Loans. Servicer, Sellers and the applicable ECC Persons
shall pay Buyers’ out-of-pocket costs and expenses incurred in connection with
any due diligence hereunder which, prior to a Default or an Event of Default,
shall be limited to $40,000 per annum.

 

39. NO PROCEEDINGS

 

(a) Each ECC Person, the Servicer and the each Seller hereby covenants and
agrees (which agreement, shall, pursuant to the terms of this Agreement, be
binding upon its successors and assigns) that it shall not institute against, or
join any other Person in instituting against, Aspen or Newport any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding or other
proceedings under any federal or state bankruptcy or similar law, for one year
and a day after the latest maturing Commercial Paper Note (whether or not issued
to fund a Transaction under this Agreement) issued by Aspen or Newport, as
applicable, is paid. Notwithstanding anything in this Agreement to the contrary,
any breach of the terms or conditions of this Section 39 shall not be subject to
any grace or cure period. The agreements in this Section 39(a) shall survive the
termination of this Agreement and the satisfaction of all Obligations under the
Program Documents.

 

(b) Each ECC Person and the Servicer hereby covenants and agrees that it will
not at any time (until the expiration of one year and one day following the
satisfaction of all Obligations under the Program Documents) institute against
the Seller, or solicit or join in or cooperate with or encourage any institution
against any Seller of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any United States Federal
or State bankruptcy or similar law in connection with any obligations under the
Program Documents. Notwithstanding anything to the contrary contained in this
Agreement, any breach of the terms or conditions of this Agreement shall not be
subject to any grace or cure period. The agreements in this Section 39(b) shall
survive the termination of this Agreement and the satisfaction of all
Obligations under the Program Documents.

 

40. BUYER ACTING AS AGENT

 

Each Seller and each Buyer agrees that from time to time a Buyer may act as
Agent for each other Buyer and/or any Seller pursuant to the provisions set
forth on Annex I attached hereto.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, Sellers, Guarantors and Buyers have caused their names to be
signed to this Master Repurchase Agreement by their respective officers
thereunto duly authorized as of the date first above written.

 

ECC SPV II, as Seller

By:

 

ECC Capital Corporation, as Administrator

By:

 

/s/ William E. Moffatt

Name:

 

William E. Moffatt

Title:

 

Treasurer

ENCORE SPV II, as Seller

By:

 

Encore Credit Corp., as Administrator

By:

 

/s/ William E. Moffatt

Name:

 

William E. Moffatt

Title:

 

Treasurer

BRAVO SPV II, as Seller

By:

 

Bravo Credit Corporation, as Administrator

By:

 

/s/ William E. Moffatt

Name:

 

William E. Moffatt

Title:

 

Treasurer

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

ECC CAPITAL CORPORATION, as Originator and

Guarantor

By:

 

/s/ William E. Moffatt

Name:

 

William E. Moffatt

Title:

 

Treasurer

ENCORE CREDIT CORP., as Guarantor and Originator

By:

 

/s/ William E. Moffatt

Name:

 

William E. Moffatt

Title:

 

Treasurer

BRAVO CREDIT CORPORATION, as Guarantor

and Originator

By:

 

/s/ William E. Moffatt

Name:

 

William E. Moffatt

Title:

 

Treasurer

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

DB STRUCTURED PRODUCTS, INC., as Buyer

and Agent, as applicable

By:

 

/s/ Vincent D’Amore

Name:

 

Vincent D’Amore

Title:

 

Authorized Signatory

By:

 

/s/ Adam Cohen

Name:

 

Adam Cohen

Title:

 

Managing Director

ASPEN FUNDING CORP., as Buyer and Agent, as

applicable

By:

 

/s/ Douglas K. Johnson

Name:

 

Douglas K. Johnson

Title:

 

President

NEWPORT FUNDING CORP., as Buyer and Agent,

as applicable

By:

 

/s/ Evelyn Echevarria

Name:

 

Evelyn Echevarria

Title:

 

Vice President