Exhibit 10.3


 


 


 


AMENDMENT NO. 1 

TO MASTER REPURCHASE AGREEMENT


 


AMENDMENT NO. 1 TO MASTER REPURCHASE AGREEMENT,
dated as of April 6, 2005, (the “Amendment”)
by and between Merrill Lynch Mortgage Capital Inc. (the “Buyer”), and Enspire Finance LLC (the “Seller”):


 


The
Buyer and the Seller are parties to that certain Master Repurchase Agreement,
dated as of February 18, 2004 (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.


 


Affordable
Residential Communities, LP (the “Parent Guarantor”) has made that
certain Second Amended and Restated Guaranty, dated as of April 6, 2005, (as
amended from time to time the “Parent Guaranty”) in favor of the Buyer.


 


ARC
Dealership, Inc. (the “Affiliate Guarantor”) has made that certain Amended
and Restated Guaranty, dated as of April 6, 2005, (as amended from time to
time the “Affiliate Guaranty” and together with the Parent Guaranty the “Guaranties”)
in favor of the Buyer.


 


The Buyer, the Seller, the Parent Guarantor and the
Affiliate Guarantor 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. As a
condition precedent to amending the Existing Master Repurchase Agreement, the
Buyer has required the Parent Guarantor and the Affiliate Guarantor to ratify
and affirm their respective Guaranties on the date hereof.


 


Accordingly, the Buyer, the Seller, the Parent
Guarantor and the Affiliate Guarantor hereby agree, in consideration of the
mutual premises 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                                 deleting
clause (j) from the definition of Market Value in its entirety and replacing it
with the following:


 


“(j) when the Purchase Price for such Purchased MH
Loan is added to other Purchased MH Loans, the aggregate Purchase Price of all
Delinquent MH Loans that are Purchased MH Loans exceeds $5,600,000;”


 


1.2                                 deleting
clause (k) from the definition of Market Value in its entirety.


 


1.3                                 deleting
the definition of “Maximum Purchase Price” in its entirety and replacing it
with the following:


 





















 


“Maximum Purchase Price” shall mean $125,000,000.


 


1.4                                 deleting
the definition of “Purchase Price Percentage” in its entirety and replacing it
with the following:


 


“Purchase Price Percentage” shall mean:


 


(a)                                  with
respect to each MH Loan (other than a Delinquent MH Loan), 75%; and


 


(b)                                 with
respect to each MH Loan which is a Delinquent MH Loan 60%,


 


provided, that in the event that (i) the
Seller or its Affiliates complete two (2) securitization transactions
through a public offering, (ii) each securitization transaction is at
least $200,000,000, (iii) MH Contracts that were Purchased MH Contracts
total at least fifty percent (50%) of the collateral underlying each
securitization transaction and (iii) each securitization transaction is
completed within twelve (12) months of the other, then the Purchase Price
Percentage shall be revised to equal the percentage after discounting the subordination
level required to achieve a AA level of risk as determined by S&P or Moody’s.


 


1.5                                 adding
the following definitions in their proper alphabetical order:


 


“Lease Receivables Facility” shall mean that
certain credit agreement among the Buyer, ARC Housing LLC and ARC HousingTX LP,
as amended from time to time.


 


“Maximum Exposure” shall mean the sum of the
aggregate outstanding purchase price of all Purchased MH Loans subject to
Transactions hereunder and the aggregate amount of all loans made under the
Lease Receivables Facility which shall not exceed $200,000,000.


 


Section 2.                                            Initiation;
Termination.  Section 3(b) of
the Existing Repurchase Agreement is hereby amended by deleting clause (iv) thereof
and replacing it with the following:


 


“(iv) After giving effect to the requested
Transaction, the aggregate outstanding Purchase Price for all Purchased MH
Loans subject to then outstanding Transactions under this Repurchase Agreement
shall not exceed (i) the Maximum Purchase Price or the (ii) Maximum Exposure;”


 


Section 3.                                            Covenants.  Section 12 of the Existing Repurchase
Agreement is hereby amended by:


 


3.1                                 deleting
clause (i) of subsection (j) in its entirety and replacing it with
the following:


 


“(i)  Maintenance of Tangible Net Worth.  (A) Seller shall maintain a Tangible Net
Worth of not less than $2,000,000 on and after June 30, 2005; and (B) Seller
shall maintain a Tangible Net Worth at the end of any calendar quarter of not
less than 80% of its Tangible Net Worth at the end of the second preceding calendar
quarter.  For example, Seller shall
maintain a


 


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Tangible Net Worth on September 30th
of not less than 80% of its Tangible Net Worth on March 31st.”


 


3.2                                 deleting
clause (iii) of subsection (j) in its entirety and replacing it with
the following:


 


“(iii) Maintenance of Liquidity.  The Seller shall ensure that, as of the end
of each calendar month, it has Cash Equivalents in an amount not less than the
greater of (A) $250,000 and (B) one-half percent (0.5%) of the
aggregate daily Purchase Price of Purchased MH Loans at the end of each
calendar month.”


 


3.3                                 deleting
subsection (y) in its entirety and replacing it with the following:


 


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


 


3.4                                 deleting
subsection (cc) in its entirety and replacing it with the following:


 


“(cc) Origination.  The Seller shall obtain and maintain such
licenses to originate MH Loans in each state where it acquires MH Paper as are
necessary to carry out its business as conducted.”


 


3.5                                 adding
the following subsection (ee) thereto with the following:


 


“(ee) Fees. 
On the same Business Day as the first borrowing under the Lease
Receivables Facility, the Seller shall pay the Buyer and Buyer’s counsel the
fees set forth in that certain payoff letter among the Buyer, the Seller and
the Affiliate Guarantor.”


 


Section 4.                                            Events
of Default. Section 13.01 of the Existing Repurchase Agreement is
hereby amended by deleting subclause (c) thereof and replacing it with the
following:


 


“(c) the failure of the Seller to perform, comply
with or observe any term, covenant or agreement applicable to the Seller
contained in Sections 12(a)(i), (h), (j), (r), (s), (t), (u), (v), (w), (y),
(z), (aa) or (ee); or”


 


Section 5.                                            Waiver.  For purposes of this Amendment, this Section 5
will be effective only for the period from and including February 18, 2004
through and including the Amendment Effective Date (the “Waiver Period”).


 


The Buyer hereby waives, solely during the Waiver
Period, any rights or remedies arising from the breach, if any, of clause (q)
of Section 11 of the Repurchase Agreement and clauses (d) (iii), (iv) and
(v), (j),(i), (ii) and (iii), (n), (x) and (z) of Section 12 of the
Repurchase Agreement (such clauses, the “Financial Covenants”) (including,
without limitation, a Default or Event of Default or a breach of any
representation that results from the breach of the Financial Covenants by the
Seller and any notice obligations of the Buyer under clauses (c) (i) or
(ii) of Section 12 of the Repurchase Agreement).


 


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Section 6.                                            Conditions
Precedent.  This Amendment shall
become effective on the date hereof (the “Amendment Effective Date”)
subject to the satisfaction of the following conditions precedent:


 


6.1                                 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 by a duly authorized officer of each of the
Buyer, the Seller, the Parent Guarantor and the Affiliate Guarantor; and


 


(b)                                 Termination
letter to the Loan and Security Agreement, executed and delivered by duly
authorized officers of the parties thereto;


 


(c)                                  Amended
and Restated Guaranty made by the Affiliate Guarantor, executed and delivered
by duly authorized officers of the parties thereto;


 


(d)                                 Second
Amended and Restated Guaranty made by the Parent Guarantor, executed and
delivered by duly authorized officers of the parties thereto;


 


(e)                                  Termination
letter to the Amended and Restated Guaranty made by the Seller, executed and
delivered by duly authorized officers of the parties thereto;


 


(f)                                    Lease
Receivables Facility, executed and delivered by duly authorized officers of the
parties thereto;


 


(g)                                 An
opinion of internal counsel that Seller is licensed as appropriate to conduct
its business; and


 


(h)                                 such
other documents as the Buyer or counsel to the Buyer may reasonably request.


 


Section 7.                                            Confidentiality.  The parties hereto acknowledge that Section 32
of the Repurchase Agreement shall apply to this Amendment.


 


Section 8.                                            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. 
The waivers set forth in Section 5 of this Amendment shall expire
upon the expiration of the Waiver Period at which time the terms of the
Repurchase Agreement referenced in Section 5 of this Amendment shall revert
to that set forth in the Existing Repurchase Agreement.


 


Section 9.                                            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 10.       GOVERNING LAW.  THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,


 


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AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED
IN ACCORDANCE WITH SUCH LAWS.


 


Section 11.                                      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.


 


Section 12.                                      Reaffirmation
of Guaranties.  The Parent Guarantor hereby ratifies and affirms
all of the terms, covenants, conditions and obligations of the Parent Guaranty
and acknowledges and agrees that such Parent Guaranty shall apply to all of the
Obligations under the Master Repurchase Agreement, as it may be amended,
modified and in effect, from time to time. 
The Affiliate Guarantor hereby ratifies and affirms all of the terms,
covenants, conditions and obligations of the ARC Dealership Guaranty and
acknowledges and agrees that such ARC Dealership Guaranty shall apply to all of
the Obligations under the Master Repurchase Agreement, as it may be amended,
modified and in effect, from time to time.


 


[SIGNATURE PAGE FOLLOWS]


 


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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 MORTGAGE

  CAPITAL INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James B. Cason

  
	
   

  	
   

  	
  Name: James B. Cason

  
	
   

  	
   

  	
  Title:   Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
  Seller:

  	
  ENSPIRE FINANCE LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John G. Sprengle

  
	
   

  	
   

  	
  Name: John G. Sprengle

  
	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
   

  
	
  Parent
  Guarantor:

  	
  AFFORDABLE RESIDENTIAL

  COMMUNITIES, LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John G. Sprengle

  
	
   

  	
   

  	
  Name: John G. Sprengle

  
	
   

  	
   

  	
  Title:   President

  
	
   

  	
   

  
	
   

  	
   

  
	
  Affiliate
  Guarantor:

  	
  ARC DEALERSHIP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John G. Sprengle

  
	
   

  	
   

  	
  Name: John G. Sprengle

  
	
   

  	
   

  	
  Title:   Vice-Chairman