Exhibit 10.1
AMENDMENT NUMBER ONE
to the
AMENDED AND RESTATED SALE AND SERVICING AGREEMENT,
dated as of November 12, 2004,
among
OPTION ONE OWNER TRUST 2003-5,
OPTION ONE LOAN WAREHOUSE CORPORATION,
OPTION ONE MORTGAGE CORPORATION
and
WELLS FARGO BANK, N.A.
          This AMENDMENT NUMBER ONE (this “Amendment”) is made and is effective
as of this 11th day of November, 2005, among Option One Owner Trust 2003-5 (the
“Issuer”), Option One Loan Warehouse Corporation (the “Depositor”), Option One
Mortgage Corporation (the “Loan Originator” and the “Servicer”) and Wells Fargo
Bank, N.A., (formerly known as Wells Fargo Bank Minnesota, National Association)
as Indenture Trustee (the “Indenture Trustee”), to the Amended and Restated Sale
and Servicing Agreement, dated as of November 12, 2004 (the “Sale and Servicing
Agreement”), among the Issuer, the Depositor, the Loan Originator, the Servicer
and the Indenture Trustee.
RECITALS
          WHEREAS, the parties hereto desire to amend the Sale and Servicing
Agreement subject to the terms and conditions of this Amendment.
          NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and of the mutual covenants herein
contained, the parties hereto hereby agree as follows:
          SECTION 1. Defined Terms. Any terms capitalized but not otherwise
defined herein shall have the respective meanings set forth in the Sale and
Servicing Agreement.
          SECTION 2. Amendments. (A) Section 1.01 of the Sale and Servicing
Agreement is hereby amended by adding the following definition:
          Interest-Only Loan: A loan which, by its terms, requires the related
Borrower to make monthly payments of only accrued interest for the certain
period of time following origination. After such interest-only period, the loan
terms provide that the Borrower’s monthly payment will be recalculated to cover
both interest and principal so that such loan will amortize fully on or prior to
its final payment date. Each Interest-Only Loan shall be identified as such on
the Loan Schedule, and shall have an interest-only period of five years or as
otherwise designated in the Loan Schedule.

 

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          (B) Section 1.01 of the Sale and Servicing Agreement is hereby amended
by amending the definition of the term “Revolving Period” in its entirety to
read as follows:
          Revolving Period: With respect to the Notes, the period commencing on
November 11, 2005 and ending on the earlier of (i) 364 days after such date, and
(ii) the date on which the Revolving Period is terminated pursuant to
Section 2.07.
          (C) Section 2.03(b) of the Sale and Servicing Agreement is amended in
its entirety to read as follows:
     (b) It is the intention of the parties hereto that, other than for federal,
state and local income or franchise tax purposes (as to which no treatment is
herein contemplated), the transfers and assignments of the Trust Estate on the
initial Closing Date, on each Transfer Date and as otherwise contemplated by the
Basic Documents and the Assignments shall constitute a sale of the Trust Estate
including, without limitation, the Loans and all other property comprising the
Trust Estate specified in Section 2.01(a) hereof, from the Depositor to the
Issuer and such property shall not be property of the Depositor. The parties
hereto shall treat the Notes as indebtedness for federal, state and local income
and franchise tax purposes.
          (D) Section 3.01(e) of the Sale and Servicing Agreement is amended in
its entirety to read as follows:
     (e) There are no actions or proceedings against, or investigations of, the
Depositor currently pending with regard to which the Depositor has received
service of process and no action or proceeding against, or investigation of, the
Depositor is, to the knowledge of the Depositor, threatened or otherwise pending
before any court, administrative agency or other tribunal that (A) if determined
adversely to the Depositor, has a reasonable possibility of prohibiting or
preventing its entering into any of the Basic Documents to which it is a party
or render the Securities invalid, (B) seek to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by any of
the Basic Documents to which it is a party or (C) if determined adversely to the
Depositor, would prohibit or materially and adversely affect the performance by
the Depositor of its obligations under, or the validity or enforceability of,
any of the Basic Documents to which it is a party or the Securities, provided,
however, that, insofar as this representation relates to the Loan Originator’s
satisfaction of its financial covenants, there is also a reasonable possibility
of an adverse determination of such action, proceeding or investigation having
such effect;

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          (E) Section 3.02(e) of the Sale and Servicing Agreement is amended in
its entirety to read as follows:
     (e) There are no actions or proceedings against, or investigations of, the
Loan Originator currently pending with regard to which the Loan Originator has
received service of process and no action or proceeding against, or
investigation of, the Loan Originator is, to the knowledge of the Loan
Originator, threatened or otherwise pending before any court, administrative
agency or other tribunal that (A) if determined adversely to the Loan
Originator, would prohibit its entering into any Basic Document to which it is a
party or render the Securities invalid, (B) seek to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by any
Basic Document to which it is a party or (C) if determined adversely to the Loan
Originator, would have a reasonable possibility of prohibiting or preventing or
materially and adversely affecting the sale of the Loans to the Depositor, the
performance by the Loan Originator of its obligations under, or the validity or
enforceability of, any Basic Document to which it is a party or the Securities,
provided, however, that, insofar as this representation relates to the Loan
Originator’s satisfaction of its financial covenants, there is also a reasonable
possibility of an adverse determination of such action, proceeding or
investigation having such effect;
          (F) Section 3.03(e) of the Sale and Servicing Agreement is amended in
its entirety to read as follows:
     (e) There are no actions or proceedings against, or investigations of, the
Servicer currently pending with regard to which the Servicer has received
service of process and no action or proceeding against, or investigation of, the
Servicer is, to the knowledge of the Servicer, threatened or otherwise pending
before any court, administrative agency or other tribunal that (A) if determined
adversely to the Servicer, would prohibit its entering into any Basic Document
to which it is a party, (B) seek to prevent the consummation of any of the
transactions contemplated by any Basic Document to which it is a party, (C) if
determined adversely to the Servicer, would have a reasonable possibility of
prohibiting or materially and adversely affecting the performance by the
Servicer of its obligations under, or the validity or enforceability of, any
Basic Document to which it is a party or the Securities, provided, however,
that, insofar as this representation relates to the Loan Originator’s
satisfaction of its financial covenants, there is also a reasonable possibility
of an adverse determination of such action, proceeding or investigation having
such effect, or (D) allege that the Servicer has engaged in practices, with
respect to any of the Loans, that are predatory, abusive, deceptive or otherwise
wrongful under any applicable statute, regulation or ordinance or that are
otherwise actionable and that have a reasonable possibility of adverse
determination;

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          (G) Section 7.02 of the Sale and Servicing Agreement is amended in its
entirety to read as follows:
     Section 7.02 Financial Covenants.
     (a) Each of the Loan Originator and the Servicer shall maintain a minimum
Tangible Net Worth of $425 million as of any day.
     (b) Each of the Loan Originator and the Servicer shall maintain a ratio of
1.0 or greater at any time pursuant to the Capital Adequacy Test, attached as
Exhibit G hereto.
     (c) Neither the Loan Originator nor the Servicer may exceed a maximum
non-warehouse leverage ratio (the ratio of (i) the sum of (A) all funded debt
(excluding debt from H&R Block, Inc. or any of its Affiliates and all
non-recourse debt) less (B) 91% of its mortgage loan inventory held for sale
less (C) 90% of servicing advance receivables (determined and valued in
accordance with GAAP) to (ii) Tangible Net Worth) of 0.50x at any time.
     (d) Each of the Loan Originator and the Servicer shall maintain a minimum
liquidity facility (defined as a committed, unsecured, non-amortizing liquidity
facility from H&R Block, Inc. not to mature (scheduled or accelerated) prior to
the Maturity Date) in an amount no less than $150 million. Such facility from
H&R Block, Inc. cannot contain covenants or termination events more restrictive
than the covenants or termination events contained in the Basic Documents.
     (e) Each of the Loan Originator and the Servicer shall maintain a minimum
“Net Income” (defined and determined in accordance with GAAP) of at least $1
based on the total of the current quarter combined with the previous three
quarters.
     (f) Each of the Loan Originator and the Servicer, on a quarterly basis,
shall provide the Noteholder Agent with an Officer’s Certificate stating that
the Loan Originator or the Servicer, as the case may be, is in compliance with
the financial covenants set forth in this Section 7.02 and the details of such
compliance.
          (H) Clause (10) of Section 9.01(a) of the Sale and Servicing Agreement
is amended in its entirety to read as follows:
     (10) so long as the Servicer or the Loan Originator is an Affiliate of the
Issuer, the occurrence of an Event of Default under the Indenture as a result of
the action or inaction of the Issuer.
          (I) Exhibit E to the Sale and Servicing Agreement is hereby amended by
amending (xx) the following representations and warranties:

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          (xx) Except for Interest-Only Loans, Principal payments on the Loan
commenced no more than two months after the proceeds of the Loan were disbursed.
The Loan bears interest at the Loan Interest Rate. With respect to each Loan
unless otherwise stated on the Loan Schedule, the Promissory Note is payable on
the first day of each month in Monthly Payments which, except for Balloon Loans,
are sufficient to fully amortize the original principal balance over the
original term thereof and to pay interest at the related Loan Interest Rate,
and, in the case of each ARM, are changed on each Adjustment Date. The
Promissory Note does not permit negative amortization. No Loan is a Convertible
Mortgage Loan;
     (J) A new Exhibit G is added to the Sale and Servicing Agreement, in the
form appended to this Amendment.
     SECTION 3. Representations. In order to induce the parties hereto to
execute and deliver this Amendment, each of the Issuer and the Depositor hereby
jointly and severally represents to the other parties hereto and the Noteholders
that as of the date hereof, after giving effect to this Amendment, (a) all of
its respective representations and warranties in the Note Purchase Agreement and
the other Basic Documents are true and correct, and (b) it is otherwise in full
compliance with all of the terms and conditions of the Sale and Servicing
Agreement.
     SECTION 4. Guaranty. Reference is hereby made to that certain Guaranty,
dated as of November 1, 2003 (the “Guaranty”), made by H&R Block, Inc. in favor
of Wells Fargo Bank Minnesota, National Association, as indenture trustee. H&R
Block, Inc., as guarantor pursuant to the Guaranty, hereby consents to this
Amendment and acknowledges and agrees that the Guaranty shall remain in full
force and effect and shall apply to all of the Guaranteed Obligations (as
defined in the Guaranty), as such term is amended or affected by this Amendment.
     SECTION 5. Limited Effect. Except as expressly amended and modified by this
Amendment, the Sale and Servicing Agreement shall continue in full force and
effect in accordance with its terms. Reference to this Amendment need not be
made in the Sale and Servicing Agreement or any other instrument or document
executed in connection therewith or herewith, or in any certificate, letter or
communication issued or made pursuant to, or with respect to, the Sale and
Servicing Agreement, any reference in any of such items to the Sale and
Servicing Agreement being sufficient to refer to the Sale and Servicing
Agreement as amended hereby.
     SECTION 6. Fees and Expenses. The Issuer and the Depositor jointly and
severally covenant to pay as and when billed by the Initial Noteholder all of
the reasonable out-of-pocket costs and expenses incurred in connection with the
transactions contemplated hereby and in the other Basic Documents including,
without limitation, (i) all reasonable fees, disbursements and expenses of
counsel to the Initial Noteholder, (ii) all reasonable fees and expenses of the
Indenture Trustee and Owner Trustee and their counsel and (iii) all reasonable
fees and expenses of the Custodian and its counsel.

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     SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAWS DOCTRINE APPLIED IN SUCH STATE.
     SECTION 8. Counterparts. This Amendment may be executed by each of the
parties hereto on any number of separate counterparts, each of which shall be an
original and all of which taken together shall constitute one and the same
instrument.
     SECTION 9. Limitation on Liability. It is expressly understood and agreed
by the parties hereto that (a) this Amendment is executed and delivered by
Wilmington Trust Company, not individually or personally, but solely as Owner
Trustee of Option One Owner Trust 2003-5 in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the parties hereto and by any Person claiming
by, through or under the parties hereto and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Issuer under this Amendment or any other related documents.

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered by their duly authorized officers as of the day and
year first above written.

              OPTION ONE OWNER TRUST 2003-5
 
            By: Wilmington Trust Company, not in its     individual capacity but
solely as owner trustee
 
       
 
  By:         /s/ Joann A. Rozell
 
            Name: Joann A. Rozell     Title: Financial Services Officer
 
            OPTION ONE LOAN WAREHOUSE CORPORATION
 
       
 
  By:        /s/ Bob Fulton
 
            Name: Bob Fulton     Title: Vice President
 
            OPTION ONE MORTGAGE CORPORATION
 
       
 
  By:         /s/ Bob Fulton
 
            Name: Bob Fulton     Title: Vice President
 
            WELLS FARGO BANK, N.A., as Indenture Trustee
 
       
 
  By:         /s/ Amy Doyle
 
            Name: Amy Doyle     Title: Vice President

Acknowledged and Agreed as
of the date first above written:
H&R BLOCK, INC.

         
By:
       /s/ Becky S. Shulman     Name: Becky S. Shulman     Title: Vice President
and Treasurer    

 

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EXHIBIT G
Capital Adequacy Test
*For each field multiply the HRB% by the Balance Sheet Amount for Required
Capital

                              HRB TEST   Balance Sheet   Required Capital
Unrestricted Cash and Equivalents
    0 %                
Restricted Cash
    0 %                
Loans Held for Sale
    9 %                
Servicing Advances
    10 %                
Beneficial Interests in trusts
    10 %                
Subprime Mortgage NIM Residual Interest
    60 %                
Real Estate Held for Sale
    10 %                
Furniture and Equipment
    0 %                
Mortgage Servicing Rights
    25 %                
Prepaid Expenses and Other Assets
    10 %                
Accrued interest receivable
    10 %                
Receivable from H&R Block
    0 %                
Intangibles and goodwill
    100 %                
Deferred Tax Assets
    10 %                
Derivative Assets
    10 %                
Total Required Capital
                       

Total Owners Equity on Balance Sheet Date
Less: Receivables from H&R Block / Adjusted Net Worth
Adjusted Net Worth divided by Required Capital = Ratio for Capital Adequacy Test