Exhibit 10.1

 

EXECUTION VERSION

 

AMENDMENT NO. 5
TO MASTER REPURCHASE AGREEMENT

 

This FIFTH AMENDMENT TO MASTER REPURCHASE AGREEMENT (this “Amendment”) is dated
as of December 6, 2005 and is entered into by and among FIELDSTONE INVESTMENT
CORPORATION (“FIC” and a “Seller”), FIELDSTONE MORTGAGE COMPANY (“FMC” and a
“Seller”, and together with FIC, the “Sellers”) and MERRILL LYNCH BANK USA (the
“Buyer”) to that certain Master Repurchase Agreement dated as of November 12,
2004 as amended by Amendment No. 1 to Master Repurchase Agreement dated as of
May 10, 2005, Amendment No. 2 to Master Repurchase Agreement dated as of June 1,
2005, Amendment No. 3 to Master Repurchase Agreement dated as of July 11, 2005
and Amendment No. 4 to Master Repurchase Agreement dated as of November 9, 2005
(the “Existing Repurchase Agreement”, as amended by this Amendment, the
“Repurchase Agreement”).  Capitalized terms used but not otherwise defined
herein shall have the meanings given to them in the Existing Repurchase
Agreement.

 

RECITALS

 

The Buyer and the Sellers have agreed, subject to the terms and conditions of
this Amendment, that the Existing Repurchase Agreement be amended to reflect
certain agreed upon revisions to the terms of the Existing Repurchase Agreement.

 

Accordingly, the Buyer and the Sellers hereby agree, in consideration of the
mutual promises and mutual obligations set forth herein, that the Existing
Repurchase Agreement is hereby amended as follows:

 

SECTION 1.                                DEFINITIONS.  SECTION 2 OF THE
EXISTING REPURCHASE AGREEMENT IS HEREBY AMENDED BY:

 

1.1                                 ADDING THE FOLLOWING DEFINED TERMS IN THE
PROPER ALPHABETICAL ORDER:

 

““High Purchase Price Mortgage Loan” shall mean a Purchased Mortgage Loan
designated as a High Purchase Price Mortgage Loan by Seller in accordance with
Section 3.”

 

““Low Purchase Price Mortgage Loan” shall mean a Purchased Mortgage Loan
designated as a Low Purchase Price Mortgage Loan by Seller in accordance with
Section 3.”

 

1.2                                 DELETING THE DEFINITIONS OF “MATERIAL
ADVERSE EFFECT”, “MAXIMUM PURCHASE PRICE”, “PRICING SPREAD”, “PURCHASE PRICE
PERCENTAGE”, “SELLER EXCLUDED GUARANTEES” AND “TERMINATION DATE” IN THEIR
ENTIRETY AND REPLACING THEM WITH THE FOLLOWING:

 

 ““Material Adverse Effect” shall mean (a) a material adverse change in, or a
material adverse effect upon, the operations, business, Property, condition
(financial or otherwise) or prospects of the Sellers, taken as a whole, (b) a
material impairment of the ability of any of the Sellers to perform under any of
the Repurchase Documents to which it is a party, or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability of any of
the Repurchase Documents.”

 

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““Maximum Purchase Price” shall mean $300,000,000.”

 

““Pricing Spread” shall mean:

 

(a)                                  with respect to Transactions the subject of
which are High Purchase Price Mortgage Loans which are:

 

(i)                                     Mortgage Loans other than Wet-Ink
Mortgage Loans, 0.80%; or

 

(ii)                                  Wet-Ink Mortgage Loans, 1.125%.

 

(b)                                 with respect to Transactions the subject of
which are Low Purchase Price Mortgage Loans which are:

 

(i)                                     Mortgage Loans other than Wet-Ink
Mortgage Loans, 0.625%; or

 

(ii)                                  Wet-Ink Mortgage Loans, 1.00%.

 

““Purchase Price Percentage” shall mean:

 

(a) in the case of Mortgage Loans, that are High Purchase Price Mortgage Loans,
the following percentage, as applicable:

 

(i)                                     with respect to each Mortgage Loan which
is a Wet-Ink Mortgage Loan (other than a Conforming Mortgage Loan or Jumbo
Mortgage Loan, that, in either case, is a Wet-Ink Mortgage Loan), 93%;

 

(ii)                                  with respect to each Mortgage Loan which
is a Wet-Ink Mortgage Loan that is either a Conforming Mortgage Loan or Jumbo
Mortgage Loan, 95%;

 

(iii)                               with respect to each Mortgage Loan (other
than a Conforming Mortgage Loan, Jumbo Mortgage Loan or Wet-Ink Mortgage Loan),
97%; and

 

(iv)                              with respect to each Mortgage Loan which is a
Conforming Mortgage Loan or a Jumbo Mortgage Loan (other than a Wet-Ink Mortgage
Loan), 98%.

 

(b) in the case of Mortgage Loans, that are Low Purchase Price Mortgage Loans,
the following percentage, as applicable:

 

(i)                                     with respect to each Mortgage Loan which
is a Wet-Ink Mortgage Loan (other than a Conforming Mortgage Loan or Jumbo
Mortgage Loan, that, in either case, is a Wet-Ink Mortgage Loan), 91%;

 

(ii)                                  with respect to each Mortgage Loan which
is a Wet-Ink Mortgage Loan that is either a Conforming Mortgage Loan or Jumbo
Mortgage Loan, 93%;

 

(iii)                               with respect to each Mortgage Loan (other
than a Conforming Mortgage Loan, Jumbo Mortgage Loan or Wet-Ink Mortgage Loan),
95%; and

 

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(iv)                              with respect to each Mortgage Loan which is a
Conforming Mortgage Loan or a Jumbo Mortgage Loan (other than a Wet-Ink Mortgage
Loan), 96%.”

 

““Seller Excluded Guarantees” shall mean (a) mortgage repurchase and warehouse
facilities whereby the Sellers are jointly and severally liable thereunder;
(b) mortgage repurchase and warehouse facilities, mortgage loan sale or purchase
agreements, leases and third party vendor agreements whereby FIC guarantees the
obligations of its Subsidiaries thereunder; and (c) obligations of the Seller
pursuant to surety bonds required in connection with state licensing of branch
offices.”

 

““Termination Date” shall mean November 10, 2006.”

 

1.3                                 DELETING SUBSECTION (F) OF THE DEFINITION OF
“ASSET VALUE” IN ITS ENTIRETY AND REPLACING IT WITH THE FOLLOWING:

 

“(f) the aggregate Asset Value of all Second Lien Mortgage Loans that are
Purchased Mortgage Loans shall not exceed $45,000,000.”

 

SECTION 2.                                INITIATION; TERMINATION.

 

2.1                                 SECTION 3 OF THE EXISTING REPURCHASE
AGREEMENT IS HEREBY AMENDED BY ADDING THE FOLLOWING SUBSECTIONS (VIII) AND
(IX) TO THE END OF SUBSECTION (C) THEREOF:

 

“(VIII)                  ONCE PER MONTH DURING ANY CALENDAR MONTH, WITH RESPECT
TO ALL REQUESTED TRANSACTIONS AND ALL RELATED PURCHASED MORTGAGE LOANS, SELLERS
SHALL DESIGNATE ALL SUCH PURCHASED MORTGAGE LOANS AS EITHER LOW PURCHASE PRICE
MORTGAGE LOANS OR HIGH PURCHASE PRICE MORTGAGE LOANS.  IN THE EVENT THAT SELLERS
FAIL TO MAKE SUCH DESIGNATION, THE PURCHASE PRICE ELECTION SET FORTH ABOVE WILL
NOT BE AVAILABLE AND ALL PURCHASED MORTGAGE LOANS IN SUCH CALENDAR MONTH SHALL
BE TREATED AS HIGH PURCHASE PRICE MORTGAGE LOANS.”

 

“(IX)                          ONCE PER MONTH DURING ANY CALENDAR MONTH AND WITH
RESPECT TO ALL HIGH PURCHASE PRICE MORTGAGE LOANS, SELLERS MAY, BY PRIOR WRITTEN
NOTICE TO BUYER, ELECT TO TRANSFER CASH TO THE ACCOUNT OF BUYER SPECIFIED IN
SECTION 9; PROVIDED THAT SUCH CASH IS SUFFICIENT TO CAUSE THE PURCHASE PRICE OF
SUCH HIGH PURCHASE PRICE MORTGAGE LOANS RECALCULATED TO INCLUDE SUCH CASH, LOW
ENOUGH TO CLASSIFY SUCH HIGH PURCHASE PRICE MORTGAGE LOANS AS LOW PURCHASE PRICE
MORTGAGE LOANS.  ANY AMOUNTS SO TRANSFERRED SHALL BE ALLOCATED TO ALL HIGH
PURCHASE PRICE MORTGAGE LOANS TO EFFECT SUCH RECALCULATION.”

 

2.2                                 SECTION 3 OF THE EXISTING REPURCHASE
AGREEMENT IS HEREBY AMENDED BY DELETING SUBSECTION (B)(XI) IN ITS ENTIRETY AND
REPLACING IT WITH THE FOLLOWING:

 

“(xi)                          In the event that either Seller makes any
material amendment or modification to the Underwriting Guidelines, such Seller
shall have promptly delivered notice of the amended or modified Underwriting
Guidelines to Buyer with appropriate access to such Underwriting Guidelines.  If
the Buyer does not notify the Sellers of the Buyer’s disapproval within ten
(10) Business Days of the Buyer’s receipt of such notice (any such disapproval
as

 

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determined by Buyer in its sole good faith discretion), the proposed amendments
or modifications shall be deemed approved; and”

 

2.3                                 SECTION 3 OF THE EXISTING REPURCHASE
AGREEMENT IS HEREBY AMENDED BY ADDING THE FOLLOWING LANGUAGE AS SUBSECTION AS
(B)(XIII):

 

“(XIII)                    FIC HAS SATISFIED ALL OF THE FOLLOWING ASSET OR
INCOME TESTS:

 

(A)                              AT THE CLOSE OF EACH TAXABLE YEAR, AT LEAST 75
PERCENT OF FIC’S GROSS INCOME CONSISTS OF (I) “RENTS FROM REAL PROPERTY” WITHIN
THE MEANING OF SECTION 856(C)(3)(A) OF THE CODE, (II) INTEREST ON OBLIGATIONS
SECURED BY MORTGAGES ON REAL PROPERTY OR ON INTERESTS IN REAL PROPERTY, WITHIN
THE MEANING OF SECTION 856(C)(3)(B) OF THE CODE, (III) GAIN FROM THE SALE OR
OTHER DISPOSITION OF REAL PROPERTY (INCLUDING INTERESTS IN REAL PROPERTY AND
INTERESTS IN MORTGAGES ON REAL PROPERTY) WHICH IS NOT PROPERTY DESCRIBED IN
SECTION 1221(A)(1) OF THE CODE, WITHIN THE MEANING OF SECTION 856(C)(3)(C) OF
THE CODE, (IV) DIVIDENDS OR OTHER DISTRIBUTIONS ON, AND GAIN (OTHER THAN GAIN
FROM “PROHIBITED TRANSACTIONS” WITHIN THE MEANING OF
SECTION 857(B)(6)(B)(III) OF THE CODE) FROM THE SALE OR OTHER DISPOSITION OF,
TRANSFERABLE SHARES (OR TRANSFERABLE CERTIFICATES OF BENEFICIAL INTEREST) IN
OTHER QUALIFYING REITS WITHIN THE MEANING OF SECTION 856(D)(3)(D) OF THE CODE,
AND (V) AMOUNTS DESCRIBED IN SECTIONS 856(C)(3)(E) THROUGH 856(C)(3)(I) OF THE
CODE.

 

(B)                                AT THE CLOSE OF EACH TAXABLE YEAR, AT LEAST
95 PERCENT OF FIC’S GROSS INCOME CONSISTS OF (I) THE ITEMS OF INCOME DESCRIBED
IN PARAGRAPH (I) HEREOF (OTHER THAN THOSE DESCRIBED IN SECTION 856(C)(3)(I) OF
THE CODE), (II) GAIN REALIZED FROM THE SALE OR OTHER DISPOSITION OF STOCK OR
SECURITIES WHICH ARE NOT PROPERTY DESCRIBED IN SECTION 1221(A)(1) OF THE CODE,
(III) INTEREST, (IV) DIVIDENDS, AND (V) INCOME DERIVED FROM PAYMENTS TO FIC ON
INTEREST RATE SWAP OR CAP AGREEMENTS, OPTIONS, FUTURES CONTRACTS, FORWARD RATE
AGREEMENTS AND OTHER SIMILAR FINANCIAL INSTRUMENTS ENTERED INTO TO REDUCE THE
INTEREST RATE RISKS WITH RESPECT TO ANY INDEBTEDNESS INCURRED OR TO BE INCURRED
TO ACQUIRE OR CARRY REAL ESTATE ASSETS, OR GAIN FROM THE SALE OR OTHER
DISPOSITION OF SUCH AN INVESTMENT AS DESCRIBED IN SECTION 856(C)(5)(G), IN EACH
CASE WITHIN THE MEANING OF SECTION 856(C)(2) OF THE CODE.

 

(C)                                AT THE CLOSE OF EACH QUARTER OF FIC’S TAXABLE
YEARS, AT LEAST 75 PERCENT OF THE VALUE OF FIC’S TOTAL ASSETS (AS DETERMINED IN
ACCORDANCE WITH TREASURY REGULATIONS SECTION 1.856-2(D)) HAS CONSISTED OF AND
WILL CONSIST OF REAL ESTATE ASSETS WITHIN THE MEANING OF SECTIONS 856(C)(4) AND
856(C)(5)(B) OF THE CODE, CASH AND CASH ITEMS (INCLUDING RECEIVABLES WHICH ARISE
IN THE ORDINARY COURSE OF FIC’S OPERATIONS, BUT NOT INCLUDING RECEIVABLES
PURCHASED FROM ANOTHER PERSON), AND GOVERNMENT SECURITIES.

 

(D)                               AT THE CLOSE OF EACH QUARTER OF EACH OF FIC’S
TAXABLE YEARS, (A) NOT MORE THAN 25 PERCENT OF FIC’S TOTAL ASSET VALUE WILL BE
REPRESENTED BY SECURITIES (OTHER THAN THOSE DESCRIBED IN PARAGRAPH (III),
(B) NOT MORE THAN 20 PERCENT OF

 

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FIC’S TOTAL ASSET VALUE WILL BE REPRESENTED BY SECURITIES OF ONE OR MORE TAXABLE
REIT SUBSIDIARIES, AND (C) (I) NOT MORE THAN 5 PERCENT OF THE VALUE OF FIC’S
TOTAL ASSETS WILL BE REPRESENTED BY SECURITIES OF ANY ONE ISSUER (OTHER THAN
THOSE DESCRIBED IN PARAGRAPH (III) AND SECURITIES OF TAXABLE REIT SUBSIDIARIES),
AND (II) FIC WILL NOT HOLD SECURITIES POSSESSING MORE THAN 10 PERCENT OF THE
TOTAL VOTING POWER OR VALUE OF THE OUTSTANDING SECURITIES OF ANY ONE ISSUER
(OTHER THAN THOSE DESCRIBED IN PARAGRAPH (III), SECURITIES OF TAXABLE REIT
SUBSIDIARIES, AND SECURITIES OF A QUALIFIED REIT SUBSIDIARY WITHIN THE MEANING
OF SECTION 856(I) OF THE CODE).”

 

SECTION 3.                                MARGIN AMOUNT MAINTENANCE.  SECTION 4
OF THE EXISTING REPURCHASE AGREEMENT IS HEREBY AMENDED BY ADDING THE FOLLOWING
SUBSECTION (E) TO THE END THEREOF:

 

“(E)                            NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN,
IF A MARGIN DEFICIT OCCURS WITH RESPECT TO A LOW PURCHASE PRICE MORTGAGE LOAN,
WHICH, IF CONSIDERED TO BE A HIGH PURCHASE PRICE MORTGAGE LOAN, WOULD NOT CAUSE
A MARGIN DEFICIT TO OCCUR, THEN SELLERS MAY TRANSFER TO BUYER CASH IN AN AMOUNT
AT LEAST EQUAL TO THE MARGIN DEFICIT, PROVIDED THAT SUCH CASH IS SUFFICIENT TO
ENSURE SUCH PURCHASED MORTGAGE LOAN IS FULLY COMPLIANT AS A LOW PURCHASE PRICE
MORTGAGE LOAN.”

 

SECTION 4.                                INCOME PAYMENTS.  SECTION 5 OF THE
EXISTING REPURCHASE AGREEMENT IS HEREBY AMENDED BY DELETING SUBSECTION (C) IN
ITS ENTIRETY AND REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“(C)                            NOTWITHSTANDING THE FOREGOING, AFTER THE
OCCURRENCE OF AN EVENT OF DEFAULT, THE SELLERS SHALL DEPOSIT SUCH INCOME IN A
DEPOSIT ACCOUNT (THE TITLE OF WHICH SHALL INDICATE THAT THE FUNDS THEREIN ARE
BEING HELD IN TRUST FOR THE BUYER) (THE “COLLECTION ACCOUNT”) WITH A FINANCIAL
INSTITUTION ACCEPTABLE TO THE BUYER AND SUBJECT TO THE ACCOUNT AGREEMENT.  ALL
SUCH INCOME SHALL BE HELD IN TRUST FOR THE BUYER, SHALL CONSTITUTE THE PROPERTY
OF THE BUYER AND SHALL NOT BE COMMINGLED WITH OTHER PROPERTY OF THE SELLERS OR
ANY AFFILIATE OF THE SELLERS EXCEPT AS EXPRESSLY PERMITTED ABOVE.  FUNDS
DEPOSITED IN THE COLLECTION ACCOUNT DURING ANY MONTH SHALL BE HELD THEREIN, IN
TRUST FOR THE BUYER, UNTIL THE NEXT PAYMENT DATE.  NOTWITHSTANDING THE PRECEDING
PROVISIONS, IF AN EVENT OF DEFAULT HAS OCCURRED, ALL FUNDS IN THE COLLECTION
ACCOUNT SHALL BE WITHDRAWN AND APPLIED AS DETERMINED BY THE BUYER AND ANY
REMAINING AMOUNTS TO THE SELLERS.”

 

SECTION 5.                                TAXES.  SECTION 7 OF THE EXISTING
REPURCHASE AGREEMENT IS HEREBY AMENDED BY DELETING SUBSECTION (K) IN ITS
ENTIRETY AND REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“(K)                            EACH PARTY TO THIS REPURCHASE AGREEMENT
ACKNOWLEDGES THAT IT IS ITS INTENT FOR PURPOSES OF U.S. FEDERAL, STATE AND LOCAL
INCOME AND FRANCHISE TAXES, TO TREAT THE TRANSACTION AS INDEBTEDNESS OF THE
SELLERS THAT IS SECURED BY THE PURCHASED MORTGAGE LOANS AND THE PURCHASED
MORTGAGE LOANS AS OWNED BY THE SELLERS FOR FEDERAL INCOME TAX PURPOSES IN THE
ABSENCE OF AN EVENT OF DEFAULT BY THE SELLERS.  ALL PARTIES TO THIS REPURCHASE
AGREEMENT AGREE TO SUCH TREATMENT AND AGREE TO TAKE NO ACTION INCONSISTENT WITH
THIS TREATMENT, UNLESS REQUIRED BY LAW.”

 

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SECTION 6.                                REPRESENTATIONS.  SECTION 11 OF THE
EXISTING REPURCHASE AGREEMENT IS HEREBY AMENDED BY:

 

6.1                                 DELETING SUBSECTION (F) IN ITS ENTIRETY AND
REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“(f)                              Litigation.  There are no actions, suits,
arbitrations, investigations (including, without limitation, any of the
foregoing which are pending or threatened) or other legal or arbitrable
proceedings affecting the Seller or any of its Subsidiaries or affecting any of
the Repurchase Assets or any of the other properties of the Seller before any
Governmental Authority which (i) questions or challenges the validity or
enforceability of the Repurchase Documents or any action to be taken in
connection with the transactions contemplated hereby or (ii) makes a claim or
claims that would reasonably be expected to have a Material Adverse Effect.”

 

6.2                                 DELETING SUBSECTION (X) IN ITS ENTIRETY AND
REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“(x)                             Agency Approvals.  FMC is an FHA Approved
Mortgagee and a VA Approved Lender.  FMC is also approved by Fannie Mae as an
approved lender and Freddie Mac as an approved seller/servicer, and, to the
extent necessary, approved by the Secretary of Housing and Urban Development
pursuant to Sections 203 and 211 of the National Housing Act.  In each such
case, the Seller is in good standing, with no event having occurred or the
Seller having any reason whatsoever to believe or suspect will occur prior to
the issuance of the consummation of the related Takeout Commitment, as the case
may be, including, without limitation, a change in insurance coverage which
would either make the Seller unable to comply with the eligibility requirements
for maintaining all such applicable approvals or require notification to the
relevant Agency or to the Department of Housing and Urban Development, FHA or
VA.  The Seller has adequate financial standing, servicing facilities,
procedures and experienced personnel necessary for the sound servicing of
mortgage loans of the same types as may from time to time constitute Mortgage
Loans and in accordance with Accepted Servicing Practices.”

 

SECTION 7.                                COVENANTS.  SECTION 12 OF THE EXISTING
REPURCHASE AGREEMENT IS HEREBY AMENDED BY:

 

7.1                                 DELETING SUBSECTION (C)(III) IN ITS ENTIRETY
AND REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“(iii)                         any litigation, investigation, regulatory action
or proceeding that is pending or threatened by or against the Seller (a) in any
federal or state court or before any Governmental Authority (in each case) would
reasonably be expected to have a Material Adverse Effect and (b) of any
litigation or proceeding that is pending or threatened in connection with any
material portion of the Repurchase Assets, which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect; and”

 

7.2                                 DELETING SUBSECTION (C)(IV)(C) IN ITS
ENTIRETY AND REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

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“(C)                          upon receipt of notice or knowledge of any Lien or
security interest (other than security interests created hereby or under any
other Repurchase Document) on, or claim asserted against, a material portion of
the Repurchase Assets; and”

 

7.3                                 DELETING SUBSECTION (Z) IN ITS ENTIRETY AND
REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“(z)                             Guarantees.  The Seller shall not create,
incur, assume or suffer to exist any Guarantees, except (i) Seller Excluded
Guarantees, (ii) to the extent reflected in the Seller’s financial statements or
notes thereto or (iii) to the extent the aggregate Guarantees of the Seller do
not exceed $5,000,000.”

 

7.4                                 DELETING SUBSECTION (BB) IN ITS ENTIRETY AND
REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“(BB)                    UNDERWRITING GUIDELINES.  IN THE EVENT THAT EITHER
SELLER MAKES ANY AMENDMENT OR MODIFICATION TO THE UNDERWRITING GUIDELINES, SUCH
SELLER SHALL PROMPTLY DELIVER TO THE BUYER NOTICE OF THE AMENDED OR MODIFIED
UNDERWRITING GUIDELINES WITH APPROPRIATE ACCESS TO SUCH UNDERWRITING
GUIDELINES.”

 

SECTION 8.                                EVENTS OF DEFAULT.  SECTION 13 OF THE
EXISTING REPURCHASE AGREEMENT IS HEREBY AMENDED BY:

 

8.1                                 DELETING THE REFERENCE TO $10,000,000 IN
SUBSECTION (E) IN ITS ENTIRETY AND REPLACING IT WITH $20,000,000.

 

8.2                                 DELETING THE REFERENCE TO $10,000,000 IN
SUBSECTION (F) IN ITS ENTIRETY AND REPLACING IT WITH $20,000,000.

 

8.3                                 DELETING SUBSECTION (H) IN ITS ENTIRETY AND
REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“(h)                           for any reason, this Repurchase Agreement at any
time shall not be in full force and effect in all material respects or shall not
be enforceable in all material respects in accordance with its terms, or any
party thereto (other than the Buyer or any Affiliate of the Buyer) shall seek to
disaffirm, terminate, limit or reduce its obligations hereunder; or”

 

8.4                                 DELETING SUBSECTION (I) IN ITS ENTIRETY AND
REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“(i)                               this Agreement shall for any reason cease to
create a valid, first priority security interest in any material portion of the
Purchased Mortgage Loans or Repurchase Assets purported to be covered hereby;
or”

 

8.5                                 DELETING SUBSECTION (N)(I)-(IV) IN ITS
ENTIRETY.

 

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SECTION 9.                                DUE DILIGENCE.  SECTION 27 OF THE
EXISTING REPURCHASE AGREEMENT IS HEREBY AMENDED BY DELETING SUCH SECTION IN ITS
ENTIRETY AND REPLACING IT WITH THE FOLLOWING LANGUAGE:

 

“SECTION 27.               DUE DILIGENCE

 

The Sellers acknowledge that Buyer has the right to perform continuing due
diligence reviews with respect to the Mortgage Loans and the Sellers, for
purposes of verifying compliance with the representations, warranties and
specifications made hereunder, or otherwise, and the Sellers agree that upon
reasonable prior notice unless an Event of Default shall have occurred, in which
case no notice is required, to the Sellers, the Buyer or its authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts of, the Mortgage Files and any and all
documents, records, agreements, instruments or information relating to such
Mortgage Loans in the possession or under the control of the Sellers and/or the
Custodian.  The Sellers also shall make available to the Buyer a knowledgeable
financial or accounting officer for the purpose of answering questions
respecting the Mortgage Files and the Mortgage Loans.  Without limiting the
generality of the foregoing, the Sellers acknowledge that the Buyer may purchase
Mortgage Loans from the Sellers based solely upon the information provided by
the Sellers to the Buyer in the Purchased Mortgage Loan Schedule and the
representations, warranties and covenants contained herein, and that the Buyer,
at its option, has the right at any time to conduct a partial or complete due
diligence review on some or all of the Mortgage Loans purchased in a
Transaction, including, without limitation, ordering broker’s price opinions,
new credit reports and new appraisals on the related Mortgaged Properties and
otherwise re-generating the information used to originate such Mortgage Loan. 
The Buyer may underwrite such Mortgage Loans itself or engage a mutually agreed
upon third party underwriter to perform such underwriting.  The Sellers agree to
cooperate with the Buyer and any third party underwriter in connection with such
underwriting, including, but not limited to, providing the Buyer and any third
party underwriter with access to any and all documents, records, agreements,
instruments or information relating to such Mortgage Loans in the possession, or
under the control, of the Sellers.  The Sellers further agree that the Sellers
shall pay all out-of-pocket costs and expenses incurred by the Buyer in
connection with the Buyer’s activities pursuant to this Section 27 (“Due
Diligence Costs”); provided, that such Due Diligence Costs shall not exceed
$25,000 per calendar year unless an Event of Default shall have occurred, in
which event the Buyer shall have the right to perform due diligence, at the sole
expense of the Seller without regard to the dollar limitation set forth herein.”

 

SECTION 10.                          NOTICES.  THE EXISTING REPURCHASE AGREEMENT
IS HEREBY AMENDED BY DELETING ALL REFERENCES TO JAMES CASON’S FACSIMILE NUMBER
AND REPLACING THEM WITH THE FOLLOWING NUMBER: (212) 738-2700.

 

SECTION 11.                          SCHEDULES. SCHEDULE 2 OF THE EXISTING
REPURCHASE AGREEMENT IS HEREBY AMENDED BY DELETING IT IN ITS ENTIRETY AND
REPLACING IT WITH EXHIBIT A ATTACHED HERETO.

 

SECTION 12.                          CONDITIONS PRECEDENT.  THIS AMENDMENT SHALL
BECOME EFFECTIVE ON DECEMBER 6, 2005 (THE “AMENDMENT EFFECTIVE DATE”) SUBJECT TO
THE SATISFACTION OF THE FOLLOWING CONDITIONS PRECEDENT:

 

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12.1                           DELIVERED DOCUMENTS.  ON THE AMENDMENT EFFECTIVE
DATE, THE BUYER SHALL HAVE RECEIVED THE FOLLOWING DOCUMENTS, EACH OF WHICH SHALL
BE SATISFACTORY TO THE BUYER IN FORM AND SUBSTANCE:

 

(A)                                  THIS AMENDMENT, EXECUTED AND DELIVERED AND
DULY AUTHORIZED OFFICERS OF THE BUYER AND THE SELLERS; AND

 

(B)                                 SUCH OTHER DOCUMENTS AS THE BUYER OR COUNSEL
TO THE BUYER MAY REASONABLY REQUEST.

 

SECTION 13.                          LIMITED EFFECT.  EXCEPT AS EXPRESSLY
AMENDED AND MODIFIED BY THIS AMENDMENT, THE EXISTING REPURCHASE AGREEMENT SHALL
CONTINUE TO BE, AND SHALL REMAIN, IN FULL FORCE AND EFFECT IN ACCORDANCE WITH
ITS TERMS.

 

SECTION 14.                          FEES.  THE SELLER AGREES TO PAY AS AND WHEN
BILLED BY THE BUYER ALL OF THE REASONABLE FEES, DISBURSEMENTS AND EXPENSES OF
COUNSEL TO THE BUYER IN CONNECTION WITH THE DEVELOPMENT, PREPARATION AND
EXECUTION OF, THIS AMENDMENT OR ANY OTHER DOCUMENTS PREPARED IN CONNECTION
HEREWITH AND RECEIPT OF PAYMENT THEREOF SHALL BE A CONDITION PRECEDENT TO THE
BUYER ENTERING INTO ANY TRANSACTION PURSUANT HERETO.

 

SECTION 15.                          CONFIDENTIALITY.  THE PARTIES HERETO
ACKNOWLEDGE THAT THIS AMENDMENT, THE EXISTING REPURCHASE AGREEMENT, AND ALL
DRAFTS THEREOF, DOCUMENTS RELATING THERETO AND TRANSACTIONS CONTEMPLATED THEREBY
ARE CONFIDENTIAL IN NATURE AND THE SELLER AGREE THAT, UNLESS OTHERWISE DIRECTED
BY A COURT OF COMPETENT JURISDICTION OR AS IS NECESSARY TO DO SO IN WORKING WITH
GOVERNMENTAL AGENCIES OR REGULATORY BODIES IN ORDER TO COMPLY WITH ANY
APPLICABLE FEDERAL OR STATE LAWS, THEY SHALL LIMIT THE DISTRIBUTION OF SUCH
DOCUMENTS AND THE DISCUSSION OF SUCH TRANSACTIONS TO SUCH OF ITS OFFICERS,
EMPLOYEES, ATTORNEYS, ACCOUNTANTS AND AGENTS AS IS REQUIRED IN ORDER TO FULFILL
ITS OBLIGATIONS UNDER SUCH DOCUMENTS AND WITH RESPECT TO SUCH TRANSACTIONS.

 

SECTION 16.                          GOVERNING LAW.  THIS AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

 

SECTION 17.                          COUNTERPARTS.  THIS AMENDMENT MAY BE
EXECUTED IN ONE OR MORE COUNTERPARTS AND BY DIFFERENT PARTIES HERETO ON SEPARATE
COUNTERPARTS, EACH OF WHICH, WHEN SO EXECUTED, SHALL CONSTITUTE ONE AND THE SAME
AGREEMENT.

 

SECTION 18.                          CONFLICTS.  THE PARTIES HERETO AGREE THAT
IN THE EVENT THERE IS ANY CONFLICT BETWEEN THE TERMS OF THIS AMENDMENT, AND THE
TERMS OF THE EXISTING REPURCHASE AGREEMENT, THE PROVISIONS OF THIS AMENDMENT
SHALL CONTROL.

 

[SIGNATURE PAGE FOLLOWS]

 

9

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IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by
their respective officers thereunto duly authorized as of the day and year first
above written.

 

 

Buyer:

MERRILL LYNCH BANK USA,

 

as Buyer

 

 

 

 

 

By:

/s/ James Cason

 

 

 

Name:

James B. Cason

 

 

 

Title:

Vice President

 

 

 

 

 

Seller:

FIELDSTONE INVESTMENT
CORPORATION,

 

as Seller

 

 

 

 

 

By:

/s/ Mark C. Krebs

 

 

 

Name:

Mark C. Krebs

 

 

 

Title:

Senior Vice President and Treasurer

 

 

 

 

 

Seller:

FIELDSTONE MORTGAGE COMPANY,

 

as Seller

 

 

 

 

 

By:

/s/ Mark C. Krebs

 

 

 

Name:

Mark C. Krebs

 

 

 

Title:

Senior Vice President and Treasurer

 

 

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