EXHIBIT 10.1

 

SERVICER ADVANCE FINANCING FACILITY AGREEMENT

 

SERVICER ADVANCE FINANCING FACILITY AGREEMENT, dated as of the 28th day of
August 2003, by and between (i) CITIGROUP GLOBAL MARKETS REALTY CORP., a New
York corporation, as Lender and Pledgee (“Citigroup”), and (ii) NEW CENTURY
MORTGAGE CORPORATION, a California corporation, as Borrower and Pledgor (the
“Borrower”).

 

R E C I T A L S

 

WHEREAS, the Borrower desires to enter into this Agreement (as defined herein)
and the Note (as defined herein); and

 

WHEREAS, the Borrower will incur monetary and other obligations to the Lender
pursuant to this Agreement and the Note; and

 

WHEREAS, Citigroup has agreed, subject to the terms and conditions set forth
herein, to finance certain advances to be made by the Borrower in connection
with any securitization transaction consummated after January 1, 2003 for which
the Borrower is acting as servicer which shall be listed on Schedule 1 attached
hereto as updated from time to time (each, a “Specified Securitization
Transaction”); and

 

WHEREAS, the financing to be provided by Citigroup pursuant to this Agreement is
in consideration of the pledge of the Collateral (as defined herein) and on the
terms and conditions set forth herein; and

 

WHEREAS, it is a condition precedent to the obligation of Citigroup to enter
into this Agreement and to make any Loan hereunder to the Borrower, that the
Borrower shall have taken all action necessary to assure the recovery of any
Servicer Advances (as defined herein) financed by Citigroup;

 

NOW THEREFORE in consideration of the premises and mutual agreements contained
herein, the adequacy and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

 

Section 1. Definitions. When used herein, the following terms shall have the
meanings set forth below:

 

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“Affiliate” shall mean, with respect to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such Person. For purposes of this definition, control of a Person
shall mean the power, direct or indirect, (i) to vote 25% or more of the
securities having ordinary voting power for the election of directors of such
Person or (ii) to direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.

 

“Agreement” shall mean this Servicer Advance Financing Facility Agreement, as
the same may be amended, supplemented or otherwise modified from time to time.

 

“Authorized Person” shall mean the persons listed on Schedule 2 attached hereto,
as the same may be updated from time to time.

 

“Authorized Servicing Officer” shall mean the persons listed on Schedule 3
attached hereto, as the same may be updated from time to time.

 

“Borrower” shall mean New Century Mortgage Corporation, a California
corporation, and any successor thereto.

 

“Business Day” shall mean any day other than a Saturday, Sunday or any day on
which federal reserve banks or the Lender or the banks in the State of
California are not authorized or required to close.

 

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

 

“Cash” shall mean all cash and cash equivalents, as shown on the consolidated
balance sheet of the Borrower prepared in accordance with GAAP, including,
without limitation, all deposit accounts of the Borrower with the Lender or any
other financial institution.

 

“Cash Equivalents” shall mean (a) securities with maturities of 90 days or less
from the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of 90 days or less from the date of
acquisition and overnight bank deposits of any commercial bank having capital
and surplus in excess of $500,000,000, (c) repurchase obligations of any
commercial bank satisfying the requirements of clause (b) of this definition,
having a term of not more than seven days with respect to securities issued or
fully guaranteed or insured by the United States Government, (d) commercial
paper of a domestic issuer rated at least A-1 or the equivalent thereof by
Standard and Poor’s Ratings Group (“S&P”) or P-1 or the equivalent thereof by
Moody’s Investors Service, Inc. (“Moody’s”) and in either case maturing within
90 days after the day of acquisition, (e) securities with maturities of 90 days
or less from the date of acquisition

 

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issued or fully guaranteed by any state, commonwealth or territory of the 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 90 days 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.

 

“Citigroup” shall mean Citigroup Global Markets Realty Corp., or its successor
in interest.

 

“Code” shall mean the Internal Revenue Code of 1986, together with all
amendments from time to time thereto.

 

“Collateral” shall have the meaning set forth in Section 3.1 hereof.

 

“Collateral Deficiency” shall have the meaning set forth in Section 3.5 hereof.

 

“Collateral Value” shall mean with respect to any Loan and any of the Eligible
Servicer Advances securing such Loan, the product of 95% times the applicable
Expected Recovery Amount.

 

“Compliance/Borrowing Base Certificate” shall mean a certificate in a form
mutually acceptable to the Lender and the Borrower.

 

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

 

“Eligible Servicer Advances” shall mean Servicer Advances the reimbursement of
which is in a first priority position under the related Pooling and Servicing
Agreement or as otherwise acceptable to the Lender in its sole discretion;
provided, however, with respect to a proposed Servicer Advance in connection
with a Mortgage Loan which is 90 or more days delinquent, the Servicer shall
deliver to the Lender a certificate signed by an Authorized Servicing Officer of
the Borrower which evidences the Borrower’s determination that such Servicer
Advance will be recoverable from collections on the related Mortgage Loan on a
first priority basis under the related Pooling and Servicing Agreement;
provided, further that such officer’s certificate shall include, at a minimum,
the date and amount of the outstanding Servicer Advances for such Mortgage Loan,
the unpaid principal balance of such Mortgage Loan and the appraised value of
the related mortgaged property.

 

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

 

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“ERISA Affiliate” shall mean any trade or business (whether or not incorporated)
that is a member of a group that is treated as a single employer under Section
414 of the Code of which any Loan Party is a member.

 

“Event of Default” shall have the meaning set forth in Section 9 hereof.

 

“Expected Recovery Amount” shall mean the amount of any Servicer Advances which
the Borrower, in its sole reasonable discretion, expects to be recovered from
collections on the related Mortgage Loan or from general collections on a first
priority basis as described in the related Pooling and Servicing Agreement.

 

“Facility” shall mean the secured financing facility described in this
Agreement.

 

“Facility Amount” shall have the meaning set forth in Section 2.1 hereof.

 

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

 

“Governmental Authority” shall mean any nation, government, or State, or any
political subdivision thereof, or any court, stock exchange, entity or agency
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

 

“Guarantee” shall mean any obligation, contingent or otherwise, of any Person
guaranteeing or having the economic effect of guaranteeing any Indebtedness of
any other Person (the “primary obligor”) in any manner, whether directly or
otherwise, including, without limitation, obligations (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any direct or
indirect security therefor, (b) to purchase property, securities, or services
for the purpose of assuring the owner of such Indebtedness of the payment of
such Indebtedness, (c) to maintain working capital, equity capital, or other
financial statement condition of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or otherwise to protect the owner thereof
against loss in respect thereof, or (d) entered into for the purpose of assuring
in any manner the owner of such Indebtedness of the payment of such Indebtedness
or to protect such owner against loss in respect thereof; provided, that the
term “Guarantee” shall not include endorsements for collection or deposit, in
each case in the ordinary course of business, or obligations to make servicing
advances or other obligations in respect of a Mortgaged Property.

 

“Guarantor” shall mean NCFC.

 

“Guaranty” shall mean that certain Affiliate Guaranty dated as of the date
hereof made by the Guarantor in favor of the Lender, as amended from time to
time.

 

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“Indebtedness” shall mean with respect to any Person at any time, without
duplication, all obligations of such Person which, in accordance with GAAP,
consistently applied, should be classified as liabilities on a consolidated
balance sheet of such Person, but in any event shall include: (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred purchase price
of property or services, but excluding accrued expenses and trade payables
incurred and paid in the ordinary course of business, (f) all obligations of
others secured by any Lien on property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (g) all capitalized
lease obligations of such Person, (h) all obligations of such Person in respect
of interest rate protection agreements, (i) all obligations of such Person,
actual or contingent, in respect of letters of credit or banker’s acceptances,
(j) all obligations of any general partnership or limited partnership or joint
venture as to which such Person is a general partner, and (k) all Guarantees by
such Person of Indebtedness of others.

 

“Interest Rate” shall have the meaning set forth in Section 2.4 hereof.

 

“Investment” as applied to any Person, shall mean any direct or indirect
purchase or other acquisition by that Person of, or a beneficial interest in,
stock or other securities of any other Person, or any direct or indirect loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by that Person to any other Person.

 

“Interest Rate” shall have the meaning set forth in Section 2.4 hereof.

 

“Lender” shall mean Citigroup.

 

“Leverage Ratio” shall mean, on any date of determination, the ratio of (a)
Total Indebtedness to (b) Tangible Net Worth.

 

“Lien” shall mean any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of such property, whether such interest
is based on the common law, statute or contract, and including, but not limited
to, the security interest, security title or lien arising from a security
agreement, mortgage, deed of trust, deed to secure debt, encumbrance or pledge
for security purposes.

 

“Loan” shall mean each extension of funds to the Borrower by Citigroup pursuant
to Section 2 of this Agreement.

 

“Loan Party” shall mean each of the Borrower and the Guarantor, individually and
“Loan Parties” shall mean the Borrower and the Guarantor, collectively.

 

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“Mandatory Prepayment Amount” shall mean for each Loan, all of the monthly cash
flow attributable to the related Eligible Servicer Advances after payment of
interest on the Loans pursuant to Section 2.4 hereof, which are pledged as
Collateral for such Loan.

 

“Material Adverse Effect” shall mean a material adverse effect on (a) the
business, operations, properties or condition (financial or otherwise) of any
Loan Party individually and its Subsidiaries taken as a whole or (b) the
validity or enforceability of this or any of the other Operative Documents or
the rights or remedies of the Lender hereunder or thereunder or (c) the ability
of any Loan Party to perform its obligations under any Operative Document or any
Other Agreement.

 

“Mortgage” shall mean a mortgage or deed of trust on real property which has
been improved by a completed single family (i.e., one to four family units)
dwelling unit (i.e., a detached house, townhouse or condominium).

 

“Mortgage Loan” shall mean a Mortgage Note and the related Mortgage.

 

“Mortgage Note” shall mean a promissory note which has a term not exceeding 30
years evidencing a loan or advance which is secured by a Mortgage.

 

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

 

“Multiemployer Plan” shall mean a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.

 

“NCFC” shall mean New Century Financial Corporation, a Delaware corporation.

 

“Net Worth” with respect to any Person, shall mean the excess of total assets of
such Person over total liabilities of such Person, determined in accordance with
GAAP.

 

“Note” shall have the meaning set forth in Section 2.3 hereof.

 

“Notice of Borrowing” shall have the meaning set forth in Section 2.2 hereof.

 

“Obligations” shall mean (i) the unpaid principal of, and interest (including
interest accruing at the then applicable rate provided in this Agreement after
the maturity of the Loans and interest accruing at the then applicable rate
provided in this Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceedings, relating
to the Borrower whether or not a claim for post-filing or post-petition

 

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interest is allowed in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise and (ii) all other obligations and liabilities of every nature of the
Borrower from time to time owing to Citigroup, in each case whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred (including monetary obligations incurred during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding), which may arise
under, out of, or in connection with, this Agreement or any other Operative
Document or under any other document made, delivered or given in connection with
any of the foregoing, in each case whether on account of principal, interest,
fees, indemnities, costs, expenses or otherwise (including all reasonable fees
and disbursements of counsel to the Lender) that are required to be paid by the
Borrower pursuant to the terms of this Agreement or any other Operative
Document.

 

“One-Month LIBOR” shall mean as of any date of determination, the rate per annum
equal to the rate appearing at page 3750 of the Telerate Screen as one-month
LIBOR on such day, and if such rate shall not be so quoted, the rate per annum
at which the Lender is offered Dollar deposits at or about 11:00 a.m., New York
City time, on such date by prime banks in the interbank eurodollar market where
the eurodollar and foreign currency exchange operations in respect of its Loans
are then being conducted for delivery on such day for a period of one month, and
in an amount comparable to the amount of the Loans to be outstanding on such
day.

 

“Operative Documents” shall mean and include this Agreement, the Note, the
Guaranty and all other documents and instruments executed and delivered in
connection herewith or therewith including any document executed after the date
hereof in connection with the financing of Servicer Advances by the Lender.

 

“Other Agreements” shall mean any financing facility agreement, other than this
Agreement, between the Borrower and Citigroup or any of its Affiliates or
agents, whether now existing or hereafter entered into, as any such financing
facility agreement may be amended, supplemented or otherwise modified from time
to time.

 

“Overcollateralization” shall mean, as of any date of determination, the excess
of (i) the collateral value of assets pledged by the Borrower to a lender under
a committed warehouse or repurchase facility (after taking into account required
haircuts) over (ii) the aggregate amount of the advances or loans made by the
lender to the Borrower under any such committed warehouse or repurchase
facility.

 

“P&I Advances” shall mean advances of principal and interest on a Mortgage Loan
which the Borrower is obligated to make pursuant to the terms of a Pooling and
Servicing Agreement in connection with a Specified Securitization Transaction.

 

“Payment Date” shall mean the third day of each month or if such day is not a
Business Day, the Business Day immediately following such third day.

 

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“Person” shall mean an individual, partnership, limited liability company,
corporation, statutory trust, joint venture or other entity of whatever nature.

 

“Plan” shall mean, at a particular time, any employee benefit plan which is
subject to Title IV of ERISA or section 412 of the code and in respect of which
any Loan Party or an Affiliate is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) or has, within the
preceding six years been, an “employer” as defined in Section 3(5) of ERISA or
had any obligation or liability.

 

“Pledgee” shall mean Citigroup.

 

“Pledgor” shall mean the Borrower.

 

“Pooling and Servicing Agreement” shall mean any pooling and servicing
agreement, trust agreement or other agreement pursuant to which the Borrower is
responsible for the making of Servicer Advances.

 

“Proceeds” shall mean all “proceeds” as defined in Section 9-102(64) of the UCC
and, in any event, shall include without limitation, all collections,
distributions or other income or receipts from or in respect of the Servicer
Advances.

 

“Quarterly Average Leverage Ratio” shall mean for each three-month period ending
on March 31, June 30, September 30 or December 31 of any year during the term of
this Agreement, the ratio of (a) the average monthly amount of Total
Indebtedness of NCFC and its Subsidiaries outstanding during such three-month
period to (b) the average of the Tangible Net Worth of NCFC and its Subsidiaries
at the end of each month during such three-month period.

 

“Residual Securities” shall mean interest-only strips, residual interests or
reserve certificates issued in connection with a public or private
securitization transaction.

 

“Responsible Officer” shall mean the president or any vice president of the
Borrower or the Guarantor.

 

“Restricted Payments” shall mean with respect to any Person, collectively, all
dividends or other distributions of any nature (cash, securities, assets or
otherwise), and all payments, by virtue of redemption or otherwise, on any class
of equity securities (including, without limitation, warrants, options or rights
therefor) issued by such Person, whether such securities are now or may
hereafter be authorized or outstanding and any distribution in respect of any of
the foregoing, whether directly or indirectly.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

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“Securitization Commitment” has the meaning specified in Section 2.11 hereof.

 

“Servicer Advances” shall mean those P&I Advances and T&I Advances made by the
Borrower in its capacity as servicer pursuant to a Pooling and Servicing
Agreement.

 

“Servicing Contract” shall mean a contract or agreement purchased by New Century
or its Affiliate or entered into by New Century or its Affiliate for its own
account (and not as nominee or subservicer), whether now existing or hereafter
purchased or entered into, pursuant to which New Century services Mortgage Loans
or Mortgage Loan pools for others.

 

“Servicing Rights” shall mean any and all rights of New Century held for its own
account (and not as nominee or subservicer), whether pursuant to a Servicing
Contract or otherwise, to service Mortgage Loans or Mortgage Loan pools,
including, without limitation, (i) all rights to collect payments due and
enforce the rights of the mortgagee under any Mortgage Loans, (ii) all rights to
receive compensation and termination fees under any Servicing Contract and (iii)
all rights to receive the proceeds from any sale or other transfer of New
Century’s interest in any Servicing Contract.

 

“Servicing System Update” shall mean the update to the Borrower’s servicing
system required to enable the Borrower to either (i) establish a segregated
account in the name of the Lender for the direct deposit of reimbursements of
Servicer Advances subject to this Agreement or (ii) cause the direct remittance
of reimbursements of Servicer Advances subject to this Agreement to the trustee
under a Specified Securitization Transaction for subsequent remittance to the
Lender.

 

“Specified Securitization Transaction” shall have the meaning set forth in the
recitals hereto.

 

“Subsidiary” shall mean, as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more intermediaries, or both,
by such Person.

 

“T&I Advances” shall mean advances for the payment of taxes, assessments and
maintenance fees and insurance with respect to a Mortgaged Property which the
Borrower is obligated to make pursuant to the terms of a Pooling and Servicing
Agreement in connection with a Specified Securitization Transaction.

 

“Tangible Net Worth” with respect to any Person, shall mean, as of any date of
determination, the consolidated Net Worth of such Person and its Subsidiaries,
less the consolidated net book value of all assets of such Person and its
Subsidiaries (to the extent

 

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reflected as an asset in the balance sheet of such Person or any Subsidiary of
such Person at such date) which will be treated as intangibles under GAAP,
including, without limitation, such items as deferred financing expenses, net
leasehold improvements, goodwill, trademarks, trade names, service marks,
copyrights, patents, licenses and unamortized debt discount and expense;
provided, that Residual Securities owned by such Person shall not be treated as
intangibles for purposes of this definition.

 

“Termination Date” shall mean August 26, 2004 or such earlier date on which this
Agreement shall terminate in accordance with the provisions hereof or by
operation of law, as same may be extended by Lender in its sole discretion.

 

“Total Indebtedness” shall mean, for any period, the aggregate Indebtedness of
any Person during such period maintained in accordance with GAAP less the
aggregate amount of any such Indebtedness that is reflected on the balance sheet
of such Person in respect of obligations incurred pursuant to a securitization
transaction, solely to the extent such obligations are secured by assets
securitized thereby and are non-recourse to such Person.

 

“Trustee” shall mean any trustee under a Pooling and Servicing Agreement.

 

“UCC” shall mean the Uniform Commercial Code from time to time in effect in the
State of New York.

 

“Underwriting Guidelines” shall be the Borrower’s underwriting guidelines in
effect as of the date hereof, a copy of which is attached hereto as Exhibit F.

 

Section 2. The Loans; Conditions Precedent.

 

2.1 Agreement to Lend. Subject to the terms and conditions of this Agreement,
and provided that no Default or Event of Default shall have occurred and be
continuing hereunder, Citigroup shall make available to the Borrower a secured
credit facility in an aggregate principal amount (the “Facility Amount”) not to
exceed (i) prior to the Servicing System Update, $20,000,000 at any one time
outstanding or (ii) on and after the Servicing System Update, $75,000,000 at any
one time outstanding, against which the Borrower may borrow, prepay, in whole or
in part, and re-borrow at any time (and without limit on the number of times)
before the Termination Date. The amount of each Loan drawn down by the Borrower
shall be at least $500,000.

 

2.2 Manner of Borrowing.

 

(1) The Borrower shall notify the Lender of its intention to borrow hereunder by
delivering a Notice of Borrowing substantially in the form of Exhibit B hereto
(a “Notice of Borrowing”) not later than 12:00 Noon New York City time on a
Business Day, no more than once per week. Each Notice of Borrowing shall be
executed by an Authorized Person and shall

 

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specify (i) the amount of the Loan requested and (ii) the information contained
on Exhibit I hereto with respect to any Servicer Advances and any other
Collateral securing such Loan (the “Collateral Information”). In addition, the
Borrower shall forward to the Lender a copy of the related Pooling and Servicing
Agreements and such other documents reasonably requested by the Lender in order
for the Lender to determine that such Loan, if made, would be secured by
Eligible Servicer Advances. Notwithstanding anything to the contrary contained
herein, the Lender shall have no obligation to make a Loan hereunder if the
Servicer Advances proposed as collateral for such Loan are not, in the Lender’s
judgment, Eligible Servicer Advances.

 

(2) In connection with each Notice of Borrowing, if, as of the date of the
requested Loan, all of the conditions to the making of a Loan set forth in
Section 8 have been met, the Lender shall, within three (3) Business Days after
receipt of such Notice of Borrowing and via wire transfer in immediately
available funds, extend the requested Loan to the Borrower; provided that the
aggregate outstanding principal amount of all of the Loans (taking into account
the Loan to be made on such date) shall not exceed the lesser of (i) the
Collateral Value of the Collateral securing such Loans and (ii) the Facility
Amount.

 

(3) With respect to a proposed Servicer Advance in connection with a Mortgage
Loan which is 90 or more days delinquent, the Borrower shall deliver to the
Lender a certificate signed by an Authorized Servicing Officer of the Borrower
which evidences the Borrower’s determination that such Servicer Advance will be
recoverable from collections on the related Mortgage Loan or from general
collections on a first priority basis; provided, that such officer’s certificate
shall include, at a minimum, the date and amount of the outstanding Servicer
Advances for such Mortgage Loan, the unpaid principal balance of such Mortgage
Loan and the appraised value of the related Mortgaged Property at origination or
based on any appraisal performed after the origination of the related Mortgage
Loan so long as such subsequent appraisal complies with the requirements set
forth in the related Pooling and Servicing Agreement.

 

(4) Concurrently with the financing of any Servicer Advance which occurs prior
to the Servicing System Update, the Borrower shall deliver an acknowledgement
letter to the Trustee in the form of Exhibit G-1 hereto (an “Acknowledgment
Letter”), which Acknowledgement Letter shall specify each Servicer Advance to be
made in connection with a Specified Securitization Transaction which constitutes
part of the Collateral hereunder. In addition, such Letter shall instruct the
Trustee to pay all amounts in reimbursement of such Servicer Advance to the
account designated by the Lender in the event that the Borrower is terminated as
servicer under such Specified Securitization Transaction.

 

(5) Concurrently with the financing of any Servicer Advance which occurs on or
after the Servicing System Update, the Borrower shall deliver an irrevocable
notice and instruction letter to the Trustee in the form attached hereto as
Exhibit G-2 (an “Instruction Letter”), which Instruction Letter shall specify
each Servicer Advance to be made in connection with a Specified Securitization
Transaction, and shall instruct the Trustee to pay all amounts in

 

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reimbursement of such Servicer Advance to the account designated by the Lender.
Provided that no Default shall have occurred and be continuing, the Lender shall
release to the Trustee or, at the direction of the Trustee, to the Borrower any
amounts paid to the Lender which exceed the amount due the Lender in respect of
Servicer Advances, together with interest thereon at the Interest Rate or the
Default Rate, as applicable. The Lender shall notify the Trustee in writing upon
payment in full of amounts due the Lender in connection with any Servicer
Advance. Notwithstanding the foregoing, if the Servicing System Update enables
the Borrower to cause the direct remittance of reimbursements of Servicer
Advances to a segregated account in the name of the Lender, the Borrower shall
be required to deliver an Acknowledgment Letter to the Trustee as described in
clause (4) above.

 

2.3 Note.

 

(1) The Borrower’s obligation to repay any and all Loans extended and interest
thereon shall be evidenced by a single promissory note of the Borrower payable
to the order of the Lender, substantially in the form of Exhibit A hereto (as
amended, supplemented or otherwise modified from time to time, the “Note”).

 

(2) The date and amount of each Loan made by the Lender and the date and amount
of each payment of principal made by the Borrower shall be evidenced by entries
made by the Lender in its books and records kept by it in the normal course of
its business. The Borrower agrees and acknowledges that such books and records
of the Lender documenting actual disbursements paid to and received from the
Borrower shall constitute prima facie evidence of the Borrower’s Indebtedness
outstanding hereunder.

 

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2.4 Interest.

 

(1) The Borrower agrees to pay the Lender interest on the unpaid principal
amount of each Loan from and including the date the Loan is extended to but not
including the date on which the Loan is paid in full. Interest shall accrue on
an adjustable monthly basis at a rate per annum equal to One-month LIBOR plus
1.50% (one hundred and fifty basis points) (the “Interest Rate”). The Interest
Rate for such succeeding period shall be determined on each Payment Date.
Accrued interest shall be payable in arrears on each Payment Date and on the
date of repayment in full of the applicable Loan.

 

(2) If the Borrower shall fail to pay when due (whether at stated maturity, by
acceleration or otherwise) any principal, interest or other amount owing to the
Lender under this Agreement or the Note and such failure to pay shall constitute
an Event of Default, the Borrower shall pay to the Lender on demand such
principal, interest or other amount together with interest on such principal,
interest or other amount in default from and including the date such payment
became due until payment thereof in full at a rate per annum equal to One-month
LIBOR plus 4.00% (the “Default Interest Rate”).

 

(3) All interest payable hereunder shall be computed on the basis of a 360-day
year for the actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable.

 

2.5 Repayment of the Loans. Each Loan outstanding shall be repaid in full on the
Termination Date, together with accrued but unpaid interest thereon.

 

2.6 Optional Prepayments. The Borrower may at any time upon one (1) Business
Day’s prior written notice to the Lender prepay any Loan in whole or in part,
without premium, together with accrued interest to the date of such prepayment
on the amount prepaid.

 

2.7 Payment Procedures.

 

(1) All payments to the Lender hereunder or under the Note shall be made in
immediately available funds, and free and clear of and without deduction for any
taxes, levies, duties, charges, counterclaims, set-offs, fees or withholdings of
any nature hereafter imposed, assessed or collected, not later than the due date
for such payment through the Federal Reserve Fedwire System for credit to the
account of the Lender (Account No. 066-612187 at Chase Manhattan Bank, ABA No.
021-000-021, Attention: Citigroup Global Markets Realty Corp., Mortgage
Operations, phone number: 212-615-7725).

 

(2) Any payments made by the Borrower hereunder shall be applied first against
costs and expenses due hereunder; then against default interest, if any; then
against interest due on the Loans; and thereafter against the unpaid principal
of the Loans. Following the

 

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occurrence and during the continuance of an Event of Default, any payments made
hereunder shall be applied in accordance with Section 9.3 hereof.

 

(3) Notwithstanding anything to the contrary contained in this Agreement, prior
to the Servicing System Update, the Borrower shall, on a weekly basis, reconcile
the amount of the outstanding Loans and the amount of Servicer Advances securing
such Loans. If the amount of the Servicer Advances is less than the Collateral
Value required under this Agreement, the Borrower shall, within 1 Business Day
of such reconciliation, repay a portion of the outstanding Loans to the Lender
in an amount necessary to cause the amount of the Servicer Advances subject to
this Agreement to equal the Collateral Value required hereunder; provided,
however, the Borrower shall not be required to remit such amount to the Lender
if the remittance would be for an amount less than $100,000; provided further
that any remittance not required to be made pursuant to this Section 2.7(3)
shall not constitute a Default under this Agreement.

 

2.8 U.S. Taxes.

 

(1) The Borrower agrees to pay to the Lender such additional amounts as are
necessary in order that the net payment of any amount due to the Lender
hereunder after deduction for or withholding in respect of any U.S. Tax (as
defined below) imposed with respect to such payment (or in lieu thereof, payment
of such U.S. Tax by the Lender), will not be less than the amount stated herein
to be then due and payable; provided, that the foregoing obligation to pay such
additional amounts shall not apply:

 

(a) to any payment to the Lender hereunder unless the Lender is entitled to
submit a Form 1001 (relating to the Lender and entitling it to a complete
exemption from withholding on all interest to be received by it hereunder in
respect of the Loans) or Form 4224 (relating to all interest to be received by
the Lender hereunder in respect of the Loans), or

 

(b) to any U.S. Tax imposed solely by reason of the failure by the Lender to
comply with applicable certification, information, documentation or other
reporting requirements concerning the nationality, residence, identity or
connections with the United States of America of the Lender if such compliance
is required by statute or regulation of the United States of America as a
precondition to relief or exemption from such U.S. Tax.

 

For the purposes of this Section 3.03(a), (w) “Form 1001” shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) “Form 4224” shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form

 

14

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relates), and (y) “U.S. Taxes” shall mean any present or future tax, assessment
or other charge or levy imposed by or on behalf of the United States of America
or any taxing authority thereof or therein excluding income taxes or franchise
taxes.

 

(2) Within 30 days after paying any such amount to the Lender, and within 30
days after it is required by law to remit such deduction or withholding to any
relevant taxing or other authority, the Borrower shall deliver to the Lender
evidence satisfactory to the Lender of such deduction, withholding or payment
(as the case may be).

 

(3) The Lender represents and warrants to the Borrower that on the date hereof
the Lender is either incorporated under the laws of the United States or a State
thereof or is entitled to submit a Form 1001 (relating to the Lender and
entitling it to a complete exemption from withholding on all interest to be
received by it hereunder in respect of the Loans) or Form 4224 (relating to all
interest to be received by the Lender hereunder in respect of the Loans).

 

2.9 Commitment Fee. The Borrower shall pay to the Lender a commitment fee (the
“Commitment Fee”) which in the aggregate shall not be greater than $375,000. The
Commitment Fee shall be payable in two installments, the first installment shall
be equal to $100,000 and shall be paid to the Lender upon the execution of this
Agreement. The second installment of the Commitment Fee shall be equal to the
greater of (i) $125,000 and (ii) (A) the product of (x) 0.50% and (y)
$55,000,000 multiplied by (B) (i) the number of days from the date of the
Servicing System Update up to and including August 26, 2004 divided by (ii) 364
and shall be paid to the Lender on the date of the Servicing System Update. Any
such payment by the Borrower to the Lender pursuant to this Section 2.9 shall be
made in Dollars, in immediately available funds, without deduction, set-off or
counterclaim.

 

2.10 Renewal Fee. In the event that the Lender and the Borrower agree to extend
the term of this Facility for a period of at least 364 days, the Borrower shall
pay to the Lender a renewal fee which in the aggregate shall be equal to
$150,000 (the “Renewal Fee”), such payment to be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim. The Renewal Fee
shall be paid by the Borrower to the Lender on the date the Lender renews this
Facility.

 

2.11 Securitization Commitment. The Borrower agrees that during the term of this
Facility, it shall cause Citigroup Global Markets, an affiliate of the Lender,
to be named as lead manager with respect to Securitization Transactions entered
into by the Borrower resulting in the issuance of at least $1.0 billion of
securities during the eighteen month period following the date of this Agreement
(the “Securitization Commitment”).

 

Section 3. Pledge; Grant of Security Interest.

 

3.1 Pledge. The Borrower hereby pledges and grants to the Lender and its
successors, endorsees, transferees and assigns, as collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the

 

15

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Obligations, a security interest in and assignment of all of the Borrower’s
rights, title and interest in and to the following property and interests in
property, whether now owned or existing or hereafter arising or acquired and
wheresoever located and whether the same comprise accounts, instruments,
securities, chattel paper or general intangibles (as each such term is defined
in the UCC) (the “Collateral”):

 

(1) all of the Borrower’s rights to receive reimbursement of the Servicer
Advances and any additional property acceptable to the Lender in its sole
discretion and delivered or otherwise perfected as required by the Lender;

 

(2) all rights, privileges, authority and powers of the Borrower as owner or
holder of the Servicer Advances and any other property pledged by Borrower to
Lender hereunder, including, but not limited to, all general intangibles and
contract rights related thereto;

 

(3) all securities, moneys or property representing dividends or interest on any
of the foregoing, or representing a distribution in respect of the foregoing, or
resulting from a split-up, revision, reclassification or other like change of
the foregoing or otherwise received in exchange therefor, and any subscription
warrants, rights or options issued to the holders of, or otherwise in respect
of, the foregoing;

 

(4) all documents and certificates representing or evidencing the Borrower’s
interest in the foregoing;

 

(5) all distributions, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of, or in exchange for,
the Borrower’s interest in the foregoing;

 

(6) all “collateral”, however defined, under any Other Agreements and all other
property securing indebtedness of the Borrower to the Lender or any of its
Affiliates or Subsidiaries to the extent not applied to the satisfaction of such
indebtedness; and

 

(7) any other right, title, interest, privilege, authority and power of the
Borrower, as a holder of the foregoing, all whether now existing or hereafter
arising, and whether arising at law or in equity and any and all Proceeds of any
of the foregoing and all books and records of the Borrower pertaining to any of
the foregoing.

 

Notwithstanding anything to the contrary contained in this Agreement, the
servicing rights related to any Mortgage Loan for which the Borrower has
financed Eligible Servicer Advances pursuant to this Agreement shall not
constitute Collateral under this Agreement.

 

3.2 Reserved.

 

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3.3 Notification to Trustee. (1) Concurrently with the financing of any Servicer
Advance by the Lender which occurs prior to the Servicing System Update, (A) the
Borrower (i) shall have notified the Trustee in connection with the related
Securitization Transaction of the financing of the Servicer Advance hereunder,
(ii) shall have instructed the Trustee to pay all amounts in reimbursement of
such Servicer Advances to the account designated by the Lender on and after the
termination of the Borrower as servicer under such Specified Securitization
Transaction and (iii) shall have executed any documents reasonably required by
the Lender in connection with the Lender’s right to receive reimbursement for
Servicer Advances and (B) the Trustee shall have acknowledged in writing the
instructions set forth in clause (A) above, and a copy of the fully executed
Acknowledgement Letter in the form of Exhibit G-1 attached hereto shall be
delivered to the Lender. The Lender shall notify the Trustee in writing upon
payment in full of amounts due the Lender in connection with any Servicer
Advance.

 

(2) Concurrently with the financing of any Servicer Advance by the Lender which
occurs on or after the Servicing System Update, (A) the Borrower (1) shall have
notified the Trustee in connection with the related Securitization Transaction
of the financing of the Servicer Advance hereunder, (2) shall have instructed
the Trustee to pay all amounts in reimbursement of such Servicer Advances to the
account designated by the Lender and (3) shall have executed any documents
reasonably required by the Lender in connection with the Lender’s right to
receive reimbursement for Servicer Advances and (B) the Trustee shall have
acknowledged in writing the instructions set forth in clause (A) above, and a
copy of the fully executed Instruction Letter in the form of Exhibit G-2
attached hereto shall be delivered to the Lender. The Lender shall notify the
Trustee in writing upon payment in full of amounts due the Lender in connection
with any Servicer Advance. Notwithstanding the foregoing, if the Servicing
System Update enables the Borrower to cause the direct remittance of
reimbursements of Servicer Advances to a segregated account in the name of the
Lender, the Borrower shall not be required to comply with the requirements of
this clause (2).

 

3.4 Further Assurances. The Borrower shall take any and all action reasonably
required by the Lender in order that the Lender has a valid, first priority,
perfected security interest in the Collateral, including executing financing
statements, assigning or endorsing Collateral to the Lender and delivering
Collateral to the Lender.

 

3.5 Collateral Maintenance; Release of Collateral.

 

(1) In the event that at any determination of the Collateral Value of Collateral
by the Lender, in its sole reasonable discretion, the Collateral Value of
Collateral is less than the aggregate principal balance of the Loans outstanding
plus accrued interest thereon (a “Collateral Deficiency”) and such Collateral
Deficiency exceeds $100,000, the Borrower shall upon written request of the
Lender deliver to the Lender (as instructed by the Lender) additional cash or
Collateral in an amount at least equal to such Collateral Deficiency or repay
Loans in the amount of such Collateral Deficiency, in each case within one
Business Day of receipt of such request.

 

17

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Until such time as the Collateral Value of Collateral equals or exceeds the
aggregate principal balance of the Loans outstanding plus accrued interest
thereon, the Lender shall not be obligated to extend further Loans hereunder and
all funds received by the Borrower in respect of, and Proceeds of, such
Collateral shall be remitted to the Lender and applied in the manner set forth
in Section 2.7.

 

(2) The Borrower may request from time to time, and the Lender shall agree, to
release the Lien of the Lender with respect to its right to receive
reimbursement for Servicer Advances which Servicer Advances, together with any
interest due thereon, have been paid in full; provided that (i) no Default shall
have occurred and be continuing, and (ii) after giving effect to such release,
no Collateral Deficiency shall exist. Subject to the proviso set forth in the
preceding sentence, the Lender shall release to the Trustee or, at the direction
of the Trustee, to the Borrower any amounts paid to the Lender which exceed the
amount due the Lender in respect of Servicer Advances and interest thereon at
the Interest Rate or the Default Rate, as applicable.

 

Section 4. Representations and Warranties of the Borrower.

 

The Borrower hereby represents and warrants to the Lender as of the date of this
Agreement and on each date that a Loan is made hereunder as follows:

 

4.1 Organization. It is a corporation duly incorporated and validly existing in
good standing under the laws of the State of its incorporation and is duly
qualified to do business and is in good standing in each jurisdiction in which
such qualification is necessary, except where the failure to be so qualified or
in good standing would not reasonably be expected to have a Material Adverse
Effect.

 

4.2 Power and Authority. It has all requisite corporate power and authority and
has all material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being conducted and
to execute and deliver and perform its obligations under the Operative
Documents, including its obligation to execute the Note.

 

4.3 Authorization of Borrowing. All appropriate and necessary action has been
taken by it to authorize the execution and delivery of this Agreement and, in
the case of the Borrower, the Note, and to authorize the performance and
observance of the terms hereof and thereof.

 

4.4 Agreement Binding. This Agreement and the Note each constitutes the legal,
valid and binding obligation of the Borrower enforceable in accordance with its
terms except as may be limited by laws governing insolvency or creditors’ rights
or by rules of equity. The execution, delivery and performance of this
Agreement, the Note and any other Operative Document will not violate any
provision of law, regulation, order or other governmental directive, or conflict
with, constitute a default under, or result in the breach of any provision of
any material agreement, ordinance, decree, bond, indenture, order or judgment to
which the Borrower is a party or by which it or its properties is or are bound.

 

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4.5 Compliance with Law. It is conducting its business and operations in
material compliance with all applicable material laws, regulations, ordinances
and directives of governmental authorities. It has filed all tax returns
required to be filed and has paid all taxes in respect of the ownership of its
assets or the conduct of its operations prior to the date after which penalties
attach for failure to pay except (a) to the extent that the payment of such
taxes is being contested in good faith by it in appropriate proceedings and
adequate reserves have been provided for the payment thereof, or (b) with
respect to such returns and/or taxes which are not material in either nature or
amount such that any failure to file such returns or pay such taxes would not
materially and adversely affect its financial condition, operations, business or
prospects.

 

4.6 Consents. All licenses, consents and approvals required from and all
registrations and filings required to be made with any governmental or other
public body or authority for the making and performance by the Borrower of this
Agreement and the Note have been obtained and are in effect.

 

4.7 Litigation. There is no action, suit or proceeding at law or in equity by or
before any court, governmental agency or authority or arbitral tribunal now
pending or, to the knowledge of the Borrower, threatened against or affecting it
which is reasonably likely to be adversely determined and, if determined
adversely, would reasonably be expected to have a Material Adverse Effect.

 

4.8 Financial Statements. The audited balance sheet of the Borrower (on a
consolidated basis) as of December 31, 2002 and the unaudited balance sheet as
of March 31, 2003, and the related statements of income for the fiscal periods
ended on such dates, in each case heretofore furnished to the Lender, are
complete and correct in all material respects and fairly present the financial
condition of the Borrower as of said date, all in accordance with GAAP applied
on a consistent basis (except for the omission of footnotes and the absence of
year end adjustments on the unaudited statements). On said date, the Borrower
had no material contingent liabilities, liabilities for taxes or unusual or
anticipated losses from any unfavorable commitments, except as referred to or
reflected in said balance sheet as of said date. Since March 31, 2003, there has
been no material adverse change in the operations, condition (financial or
otherwise) or business of the Borrower from that set forth in said financial
statements as of said date.

 

4.9 Other Obligations. It is not in default in the performance, observance or
fulfillment of any obligation, covenant or condition in any agreement or
instrument to which it is a party or by which it is bound the result of which
would reasonably be expected to have a Material Adverse Effect.

 

4.10 Margin Regulations. It is not engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin

 

19

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stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System). No part of the proceeds of any Loan will be used to (a)
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock or (b) pay the principal or interest
of any securities issued by the Borrower in connection with a Securitization
Transaction.

 

4.11 Investment Company Act. It is not an “investment company” or a company
“controlled” by an investment company within the meaning of the Investment
Company Act of 1940, as amended.

 

4.12 Chief Executive Office. The chief executive office of the Borrower is
located in 18400 Von Karman, Suite 1000, Irvine, California 92612 or such other
location in the United States as has been communicated to the Lender from time
to time pursuant to Section 5.21.

 

4.13 Ownership of the Borrower of the Servicing Rights. The Borrower owns
beneficially and of record all of the servicing rights with respect to the
Mortgage Loans, free and clear of all Liens.

 

4.14 Full Disclosure. No representation or warranty made by or on behalf of the
Borrower contained herein and no information (written or oral), certificate,
financial statement or report furnished by or at the direction on behalf of the
Borrower hereunder, contains an untrue statement of a material fact or omits to
state any material fact necessary to make the statements herein or therein
contained, in light of the circumstances under which they were made, not
misleading.

 

4.15 ERISA. None of the assets of any Loan Party are “plan assets” within the
meaning of Department of Labor Regulation 2510.3-101. Except as disclosed to the
Lender, none of it, any Loan Party, or any of their respective Subsidiaries
maintains any Plans, and it agrees to notify the Lender in advance of forming
any Plans. None of it, any other Loan Party, or any of their ERISA Affiliates
has any obligations or liabilities with respect to Plans or Multiemployer Plans
which could result in material liability to any of them or any lien on any of
their assets, nor have any such Persons had any obligations or liabilities with
respect to any such Plans or Multiemployer Plans during the five-year period
prior to the date this representation is made or deemed made which could result
in material liability to any of them or any lien on any of their assets. No Loan
Party has an obligation to provide medical, health or life insurance benefits to
former or retired employees, except at such person’s expense and as required by
the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). All Plans
maintained by it or any of its Affiliates are in compliance with all applicable
laws (including ERISA) except where a failure to comply would not result in
liability.

 

4.16 Representations of the Borrower with respect to its right to receive
reimbursement for Servicer Advances.

 

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(1) The right to receive reimbursement for Servicer Advances, when pledged as
Collateral hereunder, shall be unencumbered (except for the security interest of
the Lender), and this Agreement, together with the filing of a financing
statement on Form UCC-1 with the Secretary of State of the State of California
naming the Borrower as “debtor” and the Lender as “secured party” and describing
such Collateral as the “collateral,” will create a valid first priority
perfected security interest in such Collateral in favor of the Lender in
accordance with its terms against all creditors of the Borrower and any Persons
purporting to purchase such Collateral from the Borrower

 

(2) Borrower has obtained from any and all concerned creditors any waivers,
amendments, releases or acknowledgments necessary to create and perfect in favor
of the Lender the first priority security interests provided herein.

 

4.17 Representations as to each Pooling and Servicing Agreement. All of the
representations and warranties in any applicable Pooling and Servicing Agreement
are true and correct in all material respects as of the date hereof as if made
on such date and are incorporated herein by reference mutatis mutandis; or any
such breach thereof does not and will not have a Material Adverse Effect. No
Event of Default has occurred and is continuing under any Pooling and Servicing
Agreement.

 

4.18 Reserved.

 

4.19 Survival. All representations and warranties made by the Borrower herein,
whether express or implied, shall survive until all Obligations have been fully
satisfied and discharged.

 

Section 5. Affirmative Covenants of the Borrower. The Borrower hereby covenants
to the Lender that, until the payment in full and final performance of all of
its respective Obligations to the Lender under the Operative Documents, it shall
perform the following obligations:

 

5.1 Financial Statements and Other Reports. Each Loan Party will maintain a
system of accounting established and administered in accordance with sound
business practices such as to permit the preparation of financial statements in
accordance with GAAP and furnish or cause to be furnished to the Lender:

 

(1) as soon as available and in any event within 30 days after the end of each
calendar month, a copy of the unaudited financial statements of each Loan Party
(on a consolidated and a consolidating basis) as of the end of such month,
consisting of at least a balance sheet and the related statements of income,
shareholders’ equity and cash flow of the Borrower for such month and from the
beginning of the then current fiscal year of each Loan Party to the end of such
month, setting forth in each case in comparative form the figures for the
corresponding date or period of the previous fiscal year, all in reasonable
detail, and certified by the chief financial officer of each Loan Party as being
complete and correct in all material

 

21

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respects and fairly presenting each Loan Party’s financial condition and results
of operations, subject to the omission of footnotes and to changes resulting
from normal year-end adjustments;

 

(2) (a) as soon as available and in any event within 95 days after the end of
each fiscal year, unaudited financial statements of the Borrower and New Century
and audited financial statements of NCFC (on a consolidated and a consolidating
basis), consisting of at least a balance sheet as of the end of such fiscal year
and the related statement of income, shareholders’ equity and cash flow for such
fiscal year of NCFC, setting forth in each case in comparative form the
corresponding figures as of the end of and for the previous fiscal year, all in
reasonable detail, accompanied by a report thereon of the accounting firm of
KPMG LLP or other independent certified public accountants selected by NCFC and
reasonably satisfactory to the Lender, which report shall be unqualified and
shall state that such financial statements present fairly the financial
condition of NCFC as of the date indicated and the results of their operations
for the periods indicated in conformity with GAAP applied on a basis consistent
with prior fiscal years (except as otherwise required by GAAP and stated
therein) and that the examination of such accountants in connection with such
consolidated financial statements has been made in accordance with generally
accepted auditing standards, accompanied by any management letters to NCFC or
its board of directors furnished by such accounting firm in connection with its
audit of NCFC’s consolidated financial statements;

 

(b) as soon as available and in any event within 90 days after the end of each
fiscal year, a copy of NCFC’s annual report on Form 10-K filed with the
Securities and Exchange Commission (the “Commission”).

 

(c) within 45 days after the end of each fiscal quarter, a copy of the NCFC’s
quarterly report on Form 10-Q filed with the Commission.

 

(3) with the financial statements furnished pursuant to Section 5.1(a) for each
calendar month: (i) a certificate signed by the chief financial officer of each
Loan Party stating that to such officer’s knowledge, after due inquiry, there
exists no Default, or, if such Default exists, stating the nature thereof, the
period of existence thereof, and what action such Loan Party proposes to take
with respect thereto; (ii) a properly completed Compliance/Borrowing Base
Certificate as of the end of such month; (iii) with respect to such Collateral,
a servicing/delinquency report showing the number of Mortgage Loans included
therein, the total outstanding principal amount of such Mortgage Loans, the
weighted average coupon of the related Mortgage Notes and the delinquency status
and foreclosure experience with respect to such Mortgage Loans and the aggregate
amount of outstanding Servicer Advances; and (iv) such additional information
concerning the Collateral and such selective detail by segments and categories
thereof as may from time to time be reasonably requested by the Lender;

 

(4) within five Business Days after any officer of the Borrower or any Guarantor
has knowledge of their occurrence, notice of each of the following events: (i)
the commencement of any action, suit, proceeding or arbitration against the
Borrower or any

 

 

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Subsidiary of the Borrower or any Guarantor or Subsidiary of any Guarantor, or
any material development in any action, suit, proceeding or arbitration pending
or threatened against the Borrower, a Guarantor or any such Subsidiary, (A) in
which the aggregate uninsured amount claimed is more than $1,000,000, (B) which
is reasonably likely to be adversely determined to the Borrower, such Guarantor
or such Subsidiary, and which would in such event result in a Material Adverse
Effect or (C) which relates to this Agreement or any document executed pursuant
hereto or any transaction financed or to be financed in whole or in part
directly or indirectly with the proceeds of the loans made pursuant hereto; (ii)
any Default and what actions, if any, the Borrower or the related Guarantor, as
applicable, is taking or contemplates taking in regard thereto; (iii) any notice
under any Pooling and Servicing Agreement from any party thereunder that it
intends to declare an event of default thereunder, or that it intends to
terminate the servicer thereunder; (iv) notice of any other Material Adverse
Effect, including any material adverse development which occurs in any
litigation, arbitration or governmental investigation or proceeding previously
disclosed by the Borrower or either Guarantor to the Lender;

 

(5) as soon as available, copies of all financial statements, reports and
returns sent to the Borrower’s and the Guarantor’s stockholders and copies of
all regular, periodic, or special reports which the Borrower or either Guarantor
is or may be required to file with any governmental department, bureau,
commission or agency of a material financial nature; and

 

(6) from time to time, such other information regarding the business,
operations, affairs and financial condition of the Borrower as the Lender may
reasonably request.

 

The parties hereto acknowledge that the financial statements of each Loan Party
described in Section 5.1(1) above shall not be required to be prepared in
accordance with GAAP. Notwithstanding the preceding sentence, each Loan Party
hereby represents to the Lender that such financial statements will accurately
reflect the Borrower’s or Guarantor’s financial condition, as applicable, and
any deviation from GAAP standards will not have the effect of increasing the
Borrower’s or Guarantor’s Tangible Net Worth above the amount that would have
been determined using GAAP standards.

 

5.2 Corporate Existence; Agency Status. Each Loan Party will (a) maintain its
corporate existence in good standing under the laws of the jurisdiction of its
incorporation and (b) its right to carry on its business and operations in each
jurisdiction in which the character of the properties owned or leased by it or
the business conducted by it makes such qualification necessary and the failure
to be in good standing would preclude such Loan Party from enforcing its rights
with respect to any material assets or expose such Loan Party to any material
liability.

 

5.3 Compliance with Laws, Taxes, etc. Each Loan Party will comply in all
material respects with all applicable laws, rules, regulations and orders
(including without limitation Regulations T, U and X of the Board of Governors
of the Federal Reserve System), the failure to be in compliance with which would
have a Material Adverse Effect on the financial condition of such Loan Party,
such compliance to include, without limitation, paying before the same become

 

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delinquent all taxes, assessments and governmental charges imposed upon it or
upon its property except to the extent contested in good faith by appropriate
proceedings and for which any reserves required by GAAP have been established.
In the event the Borrower fails to satisfy its obligations under this Section
5.3 as to taxes, assessments and governmental charges, the Lender may but is not
obligated to satisfy such obligations in whole or in part and any payments made
and expenses incurred in doing so shall constitute Obligations, shall bear
interest at the rate set forth in Section 2.4 from the date incurred and shall
be paid or reimbursed by the Borrower on demand.

 

5.4 ERISA. (a) The assets of the Loan Parties will not be deemed to be “plan
assets” within the meaning of Department of Labor Regulation 2510.3-101. No Loan
Party will incur any obligation to provide medical, health or life insurance
coverage to any former or retired employee, except at such person’s expense and
as required by COBRA. Each Loan Party will maintain, and cause each ERISA
Affiliate to maintain, each Plan in compliance with all material applicable
requirements of ERISA and of the Code and with all applicable rulings and
regulations issued under the provisions of ERISA and of the Code and will not
and not permit any of the ERISA Affiliates to (a) engage in any transaction in
connection with which any Loan Party or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in each case in an amount
exceeding $50,000, or (b) fail to make full payment when due of all amounts
which, under the provisions of any Plan, any Loan Party or any ERISA Affiliate
is required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived with respect to any Plan in an aggregate
amount exceeding $50,000. No Loan Party will permit, or allow any ERISA
Affiliate to permit, any event to occur or condition to exist which would permit
a lien to be imposed or any Plan to terminate under any circumstances which
would cause the Lien provided for in Section 4068 of ERISA or other liability to
attach to any assets of any Loan Party or any Subsidiary or any ERISA Affiliate
of any Loan Party; and no Loan Party will permit, as of the most recent
valuation date for any Plan subject to Title IV of ERISA, the present value
(determined on the basis of reasonable assumptions employed by the independent
actuary for such Plan and previously furnished in writing to the Lender) of such
Plan’s benefit liabilities (as defined in section 4001(a)(16) of ERISA to exceed
the fair market value of such Plan’s assets. No Loan Party will become, or
permit any ERISA Affiliate to become, a party to any Multiemployer Plan.

 

(b) Each Loan Party agrees to notify the Lender in advance of the formation of
any Plan.

 

(c) Each Affiliate of the Loan Parties will give notice if at any time it or any
of its ERISA Affiliates has any obligations or liabilities with respect to any
Plan or Multiemployer Plan which could result in material liability to it or its
ERISA Affiliates or is reasonably likely to give rise to a lien on assets of it
or its ERISA Affiliates.

 

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5.5 Assets and Insurance. The Borrower will maintain or require to be maintained
in full force and effect (a) an adequate errors and omissions insurance policy,
(b) such other insurance coverage, by financially sound and respectable
insurers, on all properties of a character usually insured by organizations
engaged in the same or similar business against loss or damage of a kind
customarily insured against by such organizations, (c) adequate public liability
insurance against tort claims which may be asserted against the Borrower, and
(d) a mortgage banker’s blanket bond insurance policy in at least the amount
customarily maintained by organizations engaged in the same or similar business
and under similar circumstances as the Borrower.

 

5.6 Inspection, Visitation, etc. The Borrower will permit any Person reasonably
designated by the Lender in writing, at the Lender’s expense, to visit and
inspect any of the properties, corporate books and financial records of the
Borrower and discuss its affairs and finances with the principal officers of the
Borrower and its independent public accountants, all at such times as the Lender
shall reasonably request; provided that such person shall be subject to
confidentiality requirements similar to those applicable to the Lender.

 

5.7 Further Assurances. The Borrower will take all such further actions and
execute all such further documents and instruments as the Lender may at any time
reasonably determine in its sole discretion to be necessary or advisable to
further carry out and consummate the transactions contemplated by the Operative
Documents and to perfect or protect the Liens granted to the Lender under any
Operative Document.

 

5.8 Liens. The Borrower will not, directly or indirectly, create, incur, assume
or permit to exist, any Lien with respect to any Collateral pledged to the
Lender hereunder.

 

5.9 Net Worth. The Borrower will at all times maintain, on a consolidated basis,
a Tangible Net Worth of not less than (a) the greater of (i) $230,000,000 and
(ii) eighty-five percent (85%) of the Tangible Net Worth at the end of the most
recently completed fiscal year (or, in the case of the Tangible Net Worth at the
end of any fiscal year, its prior fiscal year) plus (b) ninety percent (90%) of
capital contributions made during such fiscal year plus (c) fifty percent (50%)
of positive year-to-date net income. NCFC will at all times during each fiscal
year maintain, on a consolidated basis, Tangible Net Worth of not less than (x)
the greater of (i) $250,000,000 and (ii) eighty-five percent (85%) of the
Tangible Net Worth at the end of the most recently completed fiscal year (or, in
the case of the Tangible Net Worth at the end of any fiscal year, its prior
fiscal year) plus (y) ninety percent (90%) of capital contributions made during
such fiscal year plus (z) fifty percent (50%) of positive year-to-date net
income.

 

5.10 Ratio of Total Indebtedness to Tangible Net Worth. The ratio of the
Borrower’s and New Century’s Total Indebtedness to Tangible Net Worth,
determined on a joint basis, is not greater than 10:1 as of the last day of each
fiscal quarter. NCFC will not permit (i) the Quarterly Average Leverage Ratio
for any period of measurement to be greater than 12:1 or (ii) the ratio of

 

25

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Total Indebtedness to Tangible Net Worth as of the last day of each fiscal
quarter to be greater than 12:1.

 

5.11 Liquidity. At all times prior to the Servicing System Update, the Borrower
and the Guarantor have, on a consolidated basis, cash, Cash Equivalents and
Overcollateralization in an amount of not less than $75,000,000. At all times on
and after the Servicing System Update, the Borrower and the Guarantor have, on a
consolidated basis, cash, Cash Equivalents and Overcollateralization in an
amount of not less than $20,000,000.

 

5.12 Restriction on Fundamental Changes. The Borrower will not engage in any
business activities or operations substantially different from or unrelated to
those in which the Borrower was engaged on the date of this Agreement, enter
into any transaction of merger or consolidation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, transfer or otherwise dispose of, in one transaction or a series of
transactions, any of its assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all the business or
property of, or stock or other evidence of beneficial ownership of, any Person,
except:

 

(1) the Borrower may sell or otherwise dispose of obsolete or unused property
and other property in the ordinary course of business, provided such sales or
dispositions do not include all or substantially all of the assets of the
Borrower; and

 

(2) the Borrower and its Subsidiaries may engage in any business involving the
origination, acquisition, service, sale or securitization of Mortgage Loans or
other consumer obligations.

 

5.13 Restricted Payments. Following the occurrence and during the continuance of
an Event of Default, the Borrower will not make any Restricted Payments.

 

5.14 Borrower Solvent; Fraudulent Conveyance. As of the date hereof and
immediately after giving effect to each Loan, the fair value of the assets of
the Borrower is greater than the fair value of the liabilities (including,
without limitation, contingent liabilities if and to the extent required to be
recorded as a liability on the financial statements of the Borrower in
accordance with GAAP) of the Borrower and the Borrower is and will be solvent,
is and will be able to pay its debts as they mature and does not and will not
have an unreasonably small amount of capital to engage in the business in which
it is engaged and proposes to engage. Borrower does not intend to incur, or
believe that it has incurred, debts beyond its ability to pay such debts as they
mature. Borrower is not 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
Borrower or any of its assets. Borrower is not transferring any Collateral with
any intent to hinder, delay or defraud any of its creditors.

 

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5.15 Subsidiaries. The Borrower will not create or acquire any Subsidiaries,
other than Subsidiaries engaged solely in any business involving the
origination, acquisition, service, sale or securitization of Mortgage Loans or
other consumer obligations.

 

5.16 Affiliate Transactions. The Borrower will not enter into any transaction
with an Affiliate of the Borrower, other than (a) transactions in the ordinary
course of business on terms no less favorable to the Borrower than those that
would be obtained in an arm’s-length transaction and (b) transactions with
wholly-owned Subsidiaries.

 

5.17 Escrow Imbalances. The Borrower will, no later than thirty (30) days after
learning (from any source) of any material imbalance in any escrow account,
fully and completely correct and eliminate such imbalance.

 

5.18 Inconsistent Agreements. The Borrower will not, directly or indirectly,
enter into any agreement containing any provision which would be violated or
breached by any borrowing by the Borrower hereunder or by the performance by the
Borrower of its obligations hereunder or under any other Operative Document.

 

5.19 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default if such action is taken or condition exists.

 

5.20 Notice of Change of Chief Executive Office. It will provide the Lender with
not less than 30 days prior written notice of any change in its chief executive
office to permit the Lender to make any additional filings necessary to continue
the Lender’s perfected security interest in the Collateral.

 

5.21 Covenants of the Borrower with respect to the Servicer Advances.

 

(1) The Borrower shall promptly deliver to the Lender (i) any report received by
or required to be delivered by any Person pursuant to the Pooling and Servicing
Agreement at the same time as required thereunder, including, without
limitation, any trustee’s report and any reports delivered to related surety
companies; (ii) any notice of transfer of servicing; and (iii) any other such
document or information as the Lender may reasonably request from time to time
in connection with the Servicer Advances.

 

(2) The Borrower shall pay, and save the Lender harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
stamp, excise, sales or other similar taxes which may be payable by Borrower or
determined to be payable by Borrower with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Agreement.

 

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5.22 Data Reporting. With respect to each Servicer Advance financed by the
Lender pursuant to this Agreement, the Borrower will, on a monthly basis,
provide to Lender (i) the Collateral Information as of the close of business on
the last day of the preceding collection period; and (ii) such other information
as the Lender shall reasonably request.

 

Section 6. Reserved.

 

Section 7. Rights of Lender as Pledgee.

 

7.1 If an Event of Default shall occur and be continuing,

 

(1) The Lender shall have the right to make application of any cash dividends or
distributions paid in respect of the Servicer Advances to the Obligations in
such order as is provided in Section 9.3 hereof, and

 

(2) The Lender shall have the right to notify any Person obligated on any
Collateral of the rights of Citigroup hereunder, enter into any extension,
settlement or compromise agreement relating to or affecting the Collateral,
receive payment or performance of any insurance claims, claims for breach of
warranty or any other claims concerning the Collateral, all without liability
(other than for its gross negligence or willful misconduct) except to account
for property actually received by it, but the Lender shall have no duty to the
Borrower to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.

 

Section 8. Conditions Precedent.

 

8.1 Conditions Precedent to this Agreement. The obligations of the Lender to
extend any Loan hereunder are subject to the receipt by the Lender, concurrently
with the signing of this Agreement and in form and substance satisfactory to the
Lender, of the following:

 

(1) Evidence of the authority of the persons executing this Agreement, the Note
and any other documents contemplated herein and therein, together with specimen
signatures of such persons;

 

(2) A certified copy of the Borrower’s Articles of Incorporation and By-Laws and
a good standing certificate from its State of incorporation;

 

(3) Certified copies of all necessary resolutions of the Board of Directors of
the Borrower authorizing the execution and delivery and performance under this
Agreement and the Note;

 

(4) The duly executed, original Note;

 

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(5) A certificate, as of the date of signing of the Agreement, by the President,
a Vice President or the Treasurer of the Borrower certifying that the
representations and warranties contained in Section 4 hereof are true and
correct in all material respects, that the Borrower is in compliance with the
covenants set forth in Section 5 and that no Default or Event of Default has
occurred and is continuing;

 

(6) The duly executed, original Guaranty executed by the Guarantor;

 

(7) With respect to the Guarantor, a certified copy of the Certificate or
Articles of Incorporation and By-Laws and a good standing certificate from its
State of incorporation;

 

(8) The following opinions of counsel in form and substance reasonably
satisfactory to the Lender’s counsel:

 

(a) Standard corporate opinions of the Borrower regarding due authorization,
execution, consents, material litigation and noncontravention, which opinions
may be rendered by in-house counsel;

 

(b) Enforceability of the Agreement and the Note;

 

(c) Lien and perfection opinions relating to the pledge of Collateral from the
Borrower to the Lender; and

 

(d) Such other opinions as the Lender shall reasonably request;

 

(9) The Lender shall have received the first installment of the Commitment Fee
and all fees and expenses required to be paid by the Borrower pursuant to the
Operative Documents on or prior to the date of the initial Loan pursuant to
Section 14 hereof; provided that such fees and expenses may be netted out of any
Loan made by the Lender hereunder;

 

(10) Financing statements on Form UCC-1 naming the Borrower as “debtor” and the
Lender as “secured party” and describing the Collateral as “collateral”
thereunder, to be filed in each jurisdiction in which it is necessary to file to
perfect a security interest in Collateral; and

 

(11) Such other documents, certificates or financial or other information as the
Lender may reasonably request.

 

8.2 Conditions Precedent to Each Loan. In addition to each of the conditions
precedent set forth in Section 8.1 being met, the obligations of the Lender to
extend each Loan hereunder shall be subject to the following conditions:

 

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(1) There shall not have occurred and be continuing any Event of Default and the
Borrower shall be in compliance in all material respects with all of its
respective covenants and obligations under the Operative Documents;

 

(2) The Lender shall have received the Notice of Borrowing described in Section
2.2;

 

(3) Taking into account the amount of the requested Loan, the Collateral Value
of the Collateral shall be equal to or in excess of the aggregate principal
balance of the Loans outstanding plus accrued interest thereon;

 

(4) If such Loan is requested prior to the Servicing System Update, the Lender
shall have received an original executed copy of the Acknowledgement Letter in
the form attached hereto as Exhibit G-1 and any other documents reasonably
required by the Lender in connection with the Lender’s right to receive
reimbursement for Servicer Advances. If such Loan is requested on or after the
Servicing System Update, the Lender shall have received an original executed
copy of the Instruction Letter in the form attached hereto as Exhibit G-2 and
any other documents reasonably required by the Lender in connection with the
Lender’s right to receive reimbursement for Servicer Advances; provided, however
that if the Servicing System Update enables the Borrower to establish a
segregated account in the name of the Lender for the direct remittance of
reimbursements of the Servicer Advances securing such Loan, the Borrower shall
deliver written evidence, satisfactory to the Lender, of the establishment of
such segregated account.

 

(5) The following documents shall have been delivered to the Lender with respect
to the Servicer Advances: (i) the original documents described in Section 3.3
hereof and (ii) a copy of the executed Pooling and Servicing Agreement governing
the Servicer Advances and/or any supplements thereto, and the offering documents
related to the Eligible Servicer Advances, each certified by the Borrower or the
Trustee or master servicer under such Pooling and Servicing Agreement as a true,
correct and complete copy of the original, and all ancillary documents required
to be delivered to the certificateholders under such Pooling and Servicing
Agreement;

 

(6) Subject to the Lender’s right to perform one or more Due Diligence Reviews
pursuant to Section 13 hereof, the Lender shall have completed its due diligence
review of the relevant documentation for each Loan and such other documents,
records, agreements, instruments, mortgaged properties or information relating
to such Loans as the Lender in its reasonable discretion deems appropriate to
review and such review shall be satisfactory to the Lender in its reasonable
discretion;

 

(7) Neither of the following shall have occurred and/or be continuing:

 

(a) An event or events resulting in the inability of the Lender to finance

 

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any Loans with traditional counterparties at rates which would have been
reasonable prior to the occurrence of such event or events or a material adverse
change in the financial condition of the Lender which affects (or can reasonably
be expected to affect) materially and adversely the ability of the Lender to
fund its obligations under or otherwise comply with the terms of this Agreement;
or;

 

(b) Any other event beyond the control of the Lender shall have occurred which
the Lender reasonably determines will result in the Lender’s inability to
perform its obligations under this Agreement including, without limitation, acts
of God, strikes, lockouts, riots, acts of war or terrorism, epidemics,
nationalization, expropriation, currency restrictions, fire, communication line
failures, computer viruses, power failures, earthquakes, or other disasters of a
similar nature to the foregoing.

 

Each request for a borrowing by the Borrower hereunder shall constitute a
certification by the Borrower that the conditions set forth in this Section 8.2
have been satisfied (both as of the date of such notice, request or confirmation
and as of the date of such borrowing).

 

Section 9. Default.

 

9.1 Events of Default. Each of the following events and occurrences shall
constitute an Event of Default under this Agreement if not cured within 3
Business Days of its occurrence unless the context of the provision indicates
otherwise (provided that the events described in paragraphs 9.1 (1)(a), (2),
(5), (6), (7), (8) and (9) shall have no cure period):

 

(1) The Borrower shall fail to make payment to the Lender of (a) principal or
interest when due of any amount that the Borrower is obligated to pay under this
Agreement or the Note or (b) any other amount payable by it hereunder or under
any other Operative Document and such default shall have continued unremedied
for three (3) Business Days.

 

(2) The Borrower shall fail to perform or observe the requirements of Section 5
of this Agreement (other than Section 5.17) following the earlier of (a) a
Responsible Officer of the Borrower having knowledge of such failure to perform
or observe or (b) written notice thereof from the Lender.

 

(3) The Borrower shall fail to perform or observe any other provision of this
Agreement or the Note, within 30 days following the earlier of (a) a Responsible
Officer of the Borrower having knowledge of such failure to perform or observe
or (b) written notice thereof from the Lender.

 

(4) The Guarantor shall (a) fail to make any payment required to be made to the
Lender under the Guaranty or (b) fail to comply with the requirements of Section
3(b) of the Guaranty.

 

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(5) The Borrower shall fail to pay any money due under any other agreement,
note, indenture or instrument evidencing, securing, guaranteeing or otherwise
relating to indebtedness of the Borrower for borrowed money, which failure to
pay constitutes a default or event of default under any such agreement or
indebtedness, or the Borrower receives written notice, or a Responsible Officer
of the Borrower has knowledge, of any other default or event of default or other
event which with the giving of notice or the passing of time or both would
constitute a default or event of default under any such agreement or instrument,
with respect to amounts due under such agreement or instrument, whether by
acceleration or otherwise, in an aggregate amount of $2,000,000 or such lesser
amount as shall be included in a cross-acceleration provision of any such
agreement or instrument.

 

(6) Any representation, warranty or certification made or deemed made by the
Borrower herein or by the Borrower in any other Operative Document or any
certificate furnished to the Lender pursuant to the provisions thereof or in
connection with a Securitization Transaction, shall prove to have been false or
misleading in any material respect as of the time made or furnished.

 

(7) The Collateral or any other material assets of the Borrower or any Guarantor
are attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors and the same is not dissolved or dismissed within sixty
(60) days thereafter; an application is made by any Person for the appointment
of a receiver, trustee, or custodian for the Collateral or any assets of the
Borrower or any Guarantor thereof and the same is not dismissed within sixty
(60) days after the application thereof; or the Borrower or any Guarantor shall
have concealed, removed or permitted to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud its creditors or made or
suffered a transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or other similar law.

 

(8) An application is made by the Borrower or any Guarantor for the appointment
of a receiver, trustee or custodian for the Collateral or any other assets of
the Borrower or any Guarantor; a petition under any section or chapter of the
Bankruptcy Code or any similar federal or state law or regulation shall be filed
by the Borrower or any Guarantor or the Borrower or any Guarantor shall make an
assignment for the benefit of its creditors, or any case or proceeding shall be
filed by the Borrower or any Guarantor for its dissolution, liquidation, or
termination, by the Borrower or any Guarantor, or the Borrower or any Guarantor
ceases to conduct a material part of its current business.

 

(9) The Borrower or any Guarantor is enjoined, restrained or in any way
prevented by court order from conducting all or any material part of its
business affairs, or a petition under any section or chapter of the Bankruptcy
Code or any similar federal or state law or regulation is filed against the
Borrower or any Guarantor, or any case or proceeding is filed against the
Borrower or any Guarantor, for its dissolution or liquidation, and such
injunction,

 

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restraint, petition, case or proceeding is not dismissed within sixty (60) days
after the entry of filing thereof.

 

(10) The Borrower or any Guarantor becomes insolvent or admits in writing to its
inability to pay its debts as they mature.

 

(11) Any financial statement of the Borrower, in the Lender’s reasonable
opinion, contains a material adverse change with respect to the Borrower, the
Servicer Advances or any other Collateral.

 

(12) A “default,” “event of default” or “event of termination,” however defined,
shall occur under any Other Agreement, which has not been waived by the Lender
or its Affiliate, as applicable.

 

(13) The Borrower shall grant, or suffer to exist, any Lien on any Collateral
except the Liens contemplated hereby; or the Liens contemplated hereby shall
cease to be first priority perfected Liens on the Collateral in favor of the
Lender or shall be Liens in favor of any Person other than the Lender.

 

(14) Any breach of Section 5.4 shall occur.

 

(15) Any other event shall occur which, in the sole good faith discretion of the
Lender, has had a Material Adverse Effect.

 

(16) any materially adverse change in the properties, business or financial
condition, or prospects of the Borrower or any of its Subsidiaries or
Affiliates, in each case as determined by the Lender in its sole discretion, or
the existence of any other condition which, in the Lender’s sole discretion,
constitutes a material impairment of the Borrower’s ability to perform its
obligations under this Agreement, the Note or any other Operative Document.

 

(17) the Lender shall reasonably request, specifying the reasons for such
request, information, and/or written responses to such requests, regarding the
financial well-being of the Borrower and such information and/or responses shall
not have been provided within five (5) Business Days of such request.

 

(18) any Change of Control of the Borrower shall have occurred without the prior
consent of the Lender.

 

9.2 Acceleration. If not cured within the cure period provided within the
relevant provision, then upon the continuance of such Event of Default, the
Lender may, by notice to the Borrower (which notice shall be deemed given
automatically upon the occurrence of an Event of Default referred to in
paragraph (1)(a), (7), (8) or (9), (A) declare the obligations of the Lender
hereunder to be terminated, whereupon those obligations shall terminate, and (B)
declare

 

33

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immediately due and payable all amounts payable hereunder and under the Note by
the Borrower that would otherwise be due after the date specified in the notice
(or the date such notice is deemed given), whereupon all those amounts shall
become immediately due and payable, all without further diligence, presentment,
demand of payment, protest or notice of any kind, all of which are expressly
waived by the Borrower.

 

9.3 Remedies on Default.

 

(1) If an Event of Default shall have occurred and be continuing, at any time at
the Lender’s election, the Lender may apply all or any part of Proceeds of the
Collateral in payment of the Obligations in the following order of priority:

 

FIRST, to the payment of all reasonable costs and expenses then due and owing to
the Lender pursuant to the terms of this Agreement, the Note or any other
Operative Document, including, without limitation, all court costs and the
reasonable costs or expenses incurred in connection with the exercise by the
Lender of any right or remedy under this Agreement, the Note or any other
Operative Document;

 

SECOND, to the satisfaction of all other Obligations; and

 

THIRD, any excess to the Borrower or to whomsoever may be lawfully entitled to
receive the same.

 

(2) (a) If an Event of Default shall occur and be continuing, the Lender may
exercise, in addition to all other rights and remedies granted in this Agreement
and in any other instrument or agreement securing, evidencing or relating to the
Obligations, and at law or in equity, all rights and remedies of a secured party
under the UCC. Without limiting the generality of the foregoing, to the extent
permitted by law, the Lender, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrower or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived to the extent permitted by law), may in such circumstances forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, assign, give option or options to purchase
or otherwise dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any exchange, broker’s
board or office of the Lender or elsewhere upon such terms and conditions as it
may deem advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The Lender shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in the
Borrower, which right or equity is hereby waived and released. The Lender shall
apply any Proceeds from time to time held by it and the proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, in the order
of priority specified in

 

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Section 9.3(1) hereof, and only after such application and after the payment by
the Lender of any other amount required by any provision of law need the Lender
account for any surplus and remit such amount to the Borrower. To the extent
permitted by applicable law, the Borrower waives all claims, damages and demands
it may acquire against the Lender arising out of the exercise by them of any
rights hereunder, other than any such claims, damages and demands that may arise
from its gross negligence or willful misconduct. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, to the extent
permitted by law such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. The Borrower shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
Collateral are insufficient to pay the Obligations and the fees and expenses of
any attorneys employed by the Lender to collect such deficiency.

 

(b) The Borrower recognizes that the Lender may be unable to effect a public
sale of any or all of its interest in connection with its right to receive
reimbursement for Servicer Advances, and may be compelled to resort to one or
more private sales thereof. The Borrower acknowledges and agrees that any such
private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially reasonable
manner.

 

Section 10. Irrevocable Authorization and Instruction to the Trustees.

 

The Borrower hereby authorizes and instructs each Trustee to comply with any
Acknowledgement Letter or Instruction Letter received by it from the Borrower in
connection with the reimbursement of Servicer Advances.

 

The Borrower hereby authorizes and instructs each Trustee to comply with any
instruction received by it from the Lender in writing that (a) states that an
Event of Default has occurred and is continuing and (b) is otherwise in
accordance with the terms of this Agreement and any other Operative Document to
which it is a party, without any other or further instructions from the
Borrower, and the Borrower agrees that each Trustee shall be fully protected in
so complying.

 

Section 11. The Lender’s Appointment as Attorney-in-Fact.

 

(1) The Borrower hereby irrevocably constitutes and appoints the Lender and any
officer or agent of the Lender, 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 the Borrower and in the name of the Borrower or in the Lender’s own
name, from time to time in the Lender’s discretion, for the purpose of carrying
out the terms of this Agreement or any other Operative Document, to take any and
all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this
Agreement, to the extent

 

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permitted by law, including, without limitation, any financing statements,
endorsements, assignments or other instruments of transfer.

 

(2) The Borrower hereby ratifies all that said attorneys shall lawfully do or
cause to be done pursuant to the power of attorney granted hereunder. All
powers, authorizations and agencies contained in this Agreement are coupled with
an interest and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.

 

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Section 12. Duty of Citigroup as Pledgee.

 

Neither the Lender nor any of its respective directors, officers, employees or
agents shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Borrower or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.

 

Section 13. Periodic Due Diligence Review.

 

The Borrower acknowledges that the Lender has the right to perform continuing
due diligence reviews and audits with respect to the Collateral, for purposes of
verifying compliance with the representations, warranties and specifications
made hereunder, or otherwise, and the Borrower agrees that upon reasonable (but
no less than three (3) Business Days’) prior notice to the Borrower, the Lender
or its authorized representatives will be permitted during normal business hours
to examine, inspect, make copies of, and make extracts of, any and all
documents, records, agreements, instruments or information relating to such
Collateral in the possession, or under the control, of the Borrower. The
Borrower also shall make available to the Lender a knowledgeable financial or
accounting officer for the purpose of answering questions respecting the
Collateral. Without limiting the generality of the foregoing, the Borrower
acknowledges that the Lender shall make Loans to the Borrower based solely upon
the information provided by the Borrower to the Lender and the representations,
warranties and covenants contained herein, and that the Lender, at its option,
has the right, at any time to conduct a partial or complete due diligence review
or audit on some or all of the Collateral securing such Loan. The Lender may
review or audit such Collateral itself or engage a third party to perform such
review or audit. The Borrower agrees to cooperate with the Lender and any third
party auditor or underwriter in connection with any such review or audit,
including, but not limited to, providing the Lender and any third party with
access to any and all documents, records, agreements, instruments or information
relating to such Collateral in the possession, or under the control, of the
Borrower. In addition, the Lender has the right to perform continuing Due
Diligence Reviews of the Borrower and its Affiliates, directors and officers.
The Borrower and Lender further agree that all out-of-pocket costs and expenses
incurred by the Lender in connection with the Lender’s or third party’s
activities pursuant to this Section 13 shall be paid by the Borrower; provided
that the Borrower’s aggregate reimbursement obligations hereunder shall not
exceed $15,000.00 per quarter.

 

Section 14. Miscellaneous.

 

14.1 Indemnification.

 

The Borrower agrees to hold the Lender and each of its officers, directors,
agents and employees (each, an “Indemnified Party”) harmless from and indemnify
each Indemnified Party against all liabilities, losses, damages, judgments,
costs and expenses of any kind which

 

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may be imposed on, incurred by or asserted against such Indemnified Party in any
suit, action, claim or proceeding with a third party relating to or arising out
of this Agreement, the Note, any other Operative Document or any transaction
contemplated hereby or thereby, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the Note, any
other Operative Document or any transaction contemplated hereby or thereby,
that, in each case, results from anything other than the Lender’s gross
negligence or willful misconduct. In any suit, proceeding or action brought by
the Lender for any sum owing in connection with any Servicer Advance, or to
enforce any provisions thereof, the Borrower will save, indemnify and hold the
Lender harmless from and against all expense, loss or damage suffered by reason
of any defense, set-off, counterclaim, recoupment or reduction or liability
whatsoever of the account debtor or obligor thereunder, arising out of a breach
by the Borrower of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
account debtor or obligor or its successors from the Borrower. The Borrower also
agrees to reimburse the Lender as and when billed by the Lender for all the
Lender’s costs and expenses incurred in connection with the enforcement or the
preservation of the Lender’s rights under this Agreement, the Note, any other
Operative Document or any transaction contemplated hereby or thereby, including
without limitation the fees and disbursements of its counsel (including all
reasonable fees and disbursements incurred in any action or proceeding between
the Borrower and the Lender or between the Lender and any third party relating
hereto). The Borrower hereby acknowledges that, notwithstanding the fact that
the Note is secured by the Collateral, the obligation of the Borrower under the
Note is a recourse obligation of the Borrower.

 

14.2 Expenses.

 

The Borrower agrees to pay as and when billed by the Lender all of the
out-of-pocket costs and expenses incurred by the Lender in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement, the Note, any other Operative Document or any
other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including without limitation all the reasonable fees, disbursements and
expenses of counsel to the Lender in connection with the execution of the
Operative Documents.

 

14.3 Set-off. In addition to any rights and remedies of the Lender provided by
this Agreement and by law, the Lender shall have the right, without prior notice
to the Borrower, any such notice being expressly waived by the Borrower to the
extent permitted by applicable law, upon any amount becoming due and payable by
the Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
property and 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 the Lender or any Affiliate
thereof to or for the credit or the account of the Borrower. The Lender

 

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may set-off cash, the proceeds of the liquidation of any Collateral and all
other sums or obligations owed by the Lender or its Affiliates to the Borrower
against all of the Borrower’s obligations to the Lender or its Affiliates,
whether under this Agreement or under any other agreement between the parties or
between the Borrower and any affiliate of the Lender, or otherwise, whether or
not such obligations are then due, without prejudice to the Lender’s or its
Affiliate’s right to recover any deficiency. The Lender agrees promptly to
notify the Borrower after any such set-off and application made by the Lender;
provided that the failure to give such notice shall not affect the validity of
such set-off and application.

 

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

 

14.5 Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior agreements,
arrangements and understandings relating to the matters provided for herein. No
alteration, waiver, amendment, or change or supplement hereto shall be binding
or effective unless the same is set forth in writing by a duly authorized
representative of each party hereto.

 

14.6 Waiver of Notices, etc. The Borrower hereby expressly waives promptness,
diligence, notice of acceptance and any other notice with respect to any of its
Obligations hereunder or under the Note, and any requirement that the Lender
protect, secure, perfect or insure any security interest or lien or any property
subject thereto or exhaust any right or take any action against the Borrower or
any other person or entity or any collateral, and all other notices, demands and
protests, and all other formalities of every kind in connection with the
enforcement of the Obligations hereunder or under the Note.

 

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

 

14.8 Binding Effect. This Agreement shall be binding upon and shall be
enforceable by the Borrower and the Lender and their respective successors and
permitted assigns.

 

14.9 Survival. The provisions of Section 14.1 shall survive the payment in full
of the Loans and all other amounts payable under this Agreement and the Note.

 

14.10 GOVERNING LAW, ETC.; WAIVER OF TRIAL BY JURY.

 

(A) THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW

 

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YORK. THE BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE PERSONAL JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF
ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR THE PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. THE BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.

 

(B) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE NOTE OR THE TRANSACTIONS CONTEMPLATED
HEREBY. EACH PARTY HERETO ALSO WAIVES THE RIGHT IN ANY SUCH LITIGATION TO IMPOSE
COUNTERCLAIMS OR SET-OFFS OF ANY KIND OR DESCRIPTION UNLESS SUCH COUNTERCLAIM OR
SET-OFF IS COMPULSORY OR MANDATORY IN NATURE UNDER THE NEW YORK CIVIL PRACTICE
LAW AND RULES.

 

14.11 Notice. Any notice hereunder shall be in writing and shall be personally
delivered, transmitted by overnight delivery, by facsimile, telegram or cable to
the parties as follows:

 

To the Lender:

  

Citigroup Global Markets Realty Corp.

    

390 Greenwich Street

    

New York, New York 10013

    

Attention: Evan Mitnick

    

Telephone: (212) 723-6621

    

Facsimile: (212) 723-8604

To the Borrower:

  

New Century Mortgage Corporation

    

18400 Von Karman

    

Suite 1000

    

Irvine, California 92612

    

Attention: Patti Dodge

    

Telephone: (949) 224-5719

    

Facsimile: (949) 224-5739

    

with a copy to:

    

New Century Mortgage Corporation

    

18400 Von Karman

    

Suite 1000

 

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Irvine, California 92612

    

Attention: Ralph Flick

    

Telephone: (949) 224-5706

    

Facsimile: (949) 440-7033

 

All notices and other communications shall be deemed to have been duly given on
the date of receipt if delivered personally; the date two (2) Business Days
after posting if transmitted by overnight delivery; or in the case of a
facsimile, telegram or cable, at the time receipt is confirmed. Any party hereto
may change its address for purposes hereof by written notice to the other.

 

14.12 Severability. If any one or more of the provisions contained in this
Agreement or any document executed in connection herewith shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired.

 

14.13 Counterparts. This Agreement may be signed in any number of counterparts
which, taken together, shall constitute a full and original agreement for all
purposes.

 

14.14 Assignability.

 

(1) Neither the Borrower nor the Lender may assign any of its rights or
obligations hereunder or under the Note without the prior written consent of the
other, which consent shall not be unreasonably withheld.

 

(2) The Lender may, in accordance with applicable law, at any time sell to one
or more lenders or other entities (“Participants”) participating interests in
any Loan, the Note, its commitment to make Loans, or any other interest of the
Lender hereunder and under the other Operative Documents. In the event of any
such sale by the Lender of participating interests to a Participant, the
Lender’s obligations under this Agreement to the Borrower shall remain
unchanged, the Lender shall remain solely responsible for the performance
thereof, the Lender shall remain the holder of the Note for all purposes under
this Agreement and the other Operative Documents, and the Borrower shall
continue to deal solely and directly with the Lender in connection with the
Lender’s rights and obligations under this Agreement and the other Operative
Documents. The Borrower agrees that if amounts outstanding under this Agreement
and the Note are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement and the Note to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement or the Note; provided, that such Participant shall
only be entitled to such right of set-off if it shall have agreed in the
agreement pursuant to which it shall have acquired its participating interest to
share with the Lender the proceeds thereof.

 

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(3) The Lender may furnish any information concerning the Borrower or any of its
Subsidiaries in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants) provided that
such persons agree to confidentiality requirements substantially similar to
those applicable to the Lender.

 

(4) The Borrower agrees, at the Lender’s cost, to cooperate with the Lender in
connection with any such assignment and/or participation, to execute and deliver
such replacement notes, and to enter into such restatements of, and amendments,
supplements and other modifications to, this Agreement and the other Operative
Documents in order to give effect to such assignment and/or participation. The
Borrower further agrees to furnish to any Participant identified by the Lender
to the Borrower copies of all reports and certificates to be delivered by the
Borrower to the Lender hereunder, as and when delivered to the Lender.

 

14.15 Hypothecation or Pledge of Collateral. The Lender shall have free and
unrestricted use of all Collateral and nothing in this Agreement shall preclude
the Lender from engaging in repurchase transactions with the Collateral or
otherwise pledging, repledging, transferring, hypothecating, or rehypothecating
the Collateral.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives on the date first written above.

 

 

CITIGROUP GLOBAL MARKETS REALTY CORP., as
Lender and Pledgee

By:

 

/s/ Evan J. Mitnik

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

   

Name: Evan J. Mitnik

   

Title: Director

NEW CENTURY MORTGAGE CORPORATION

as Borrower and Pledgor

By:

 

/s/ Patrick Flanagan

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

   

Name: Patrick Flanagan

   

Title: President