**Exhibit 10.1(1)**

 

FUNDINGAGREEMENT

 

This FUNDINGAGREEMENT (as amended, supplemented or otherwise modified and in effect fromtime to time, this “Agreement”), dated as of July 27, 2005, is byand among FIELDSTONE INVESTMENT FUNDING, LLC, a Delaware limited liabilitycompany, as borrower (in such capacity, the “Borrower”), FIELDSTONEINVESTMENT CORPORATION, a Maryland corporation, as servicer (in such capacity,the “Servicer”), CREDIT SUISSE, NEW YORK BRANCH (“CSFB”), asFacility Agent for the benefit of the Group Agents and the Lenders (in suchcapacity, the “Facility Agent”), and THE SEVERAL CONDUIT LENDERS,COMMITTED LENDERS AND GROUP AGENTS PARTY HERETO FROM TIME TO TIME.

 

PRELIMINARYSTATEMENTS

 

WHEREAS, theBorrower may desire to borrow funds from the Lenders from time to time tofinance the purchase of certain Mortgage Loans and Related Securityconstituting Eligible Assets, and the Lenders have agreed to advance such fundsfrom time to time, subject to the terms and conditions of this Agreement.

 

NOW, THEREFORE,for good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.1.  CertainDefined Terms. Capitalized terms used herein shall have the meanings assigned to suchterms in, or incorporated by reference into, Schedule A attached hereto,which Schedule A is incorporated by reference herein and made a parthereof.

 

SECTION 1.2.  OtherTerms.  All accountingterms not specifically defined herein shall be construed in accordance withGAAP.

 

SECTION 1.3.  Computationof Time Periods. Unless otherwise stated in this Agreement, in the computation of aperiod of time from a specified date to a later specified date, the word “from”means “from and including”, the words “to” and “until” each means “to butexcluding”, and the word “within” means “from and excluding a specified dateand to and including a later specified date”.

 

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ARTICLE II

 

LOANS ANDSETTLEMENTS

 

SECTION 2.1.  Facility.  Upon the terms and subject to the conditionsset forth herein and in the other Transaction Documents from the Effective Dateto the Termination Date, and subject to the satisfaction in full of all LoanConditions, (x) the Borrower may, at its option, borrow funds from the Lendersfor the purpose of purchasing Eligible Assets and (y) each Conduit Lender(acting through its Group Agent) may, at its option, and such Conduit Lender’srelated Committed Lenders (acting through its Group Agent) shall be obligatedto, advance funds to the Borrower from time to time (each such advance offunds, a “Loan”).  No more thanone (1) Loan shall be made by the Lenders on any Business Day.  Subject to the Loan Conditions and the otherterms of this Agreement, the Borrower may borrow, repay and reborrow hereunder.

 

SECTION 2.2.  Loans; Procedures.

 

(a)                                  Prior to the Termination Date, theBorrower shall, by notice in substantially the form of Exhibit C hereto(each such notice, a “Loan Notice”) to the Facility Agent and the GroupAgents given by telecopy or electronic mail (with a copy to the Custodian),request, or cause to be requested, a Loan secured by certain Mortgage Loans andRelated Security.  Each Loan Notice shallbe delivered to the Facility Agent and the Group Agents no later than 11:00 A.M.(New York time) on the second (2nd) Business Day prior to thedesired Loan Date.  Each Loan Noticeshall include all information required to be included therein and attachedthereto under this Agreement and the Custodial Agreement.  The Borrower shall also deliver, or cause tobe delivered, to the Custodian all other information required by the CustodialAgreement and each Mortgage File (or, in the case of Wet-Ink Mortgage Loans,the Wet-Ink Mortgage Information) and otherwise comply with the procedures setforth in the Custodial Agreement.  EachLoan Notice shall be irrevocable and binding on the Borrower, and the Borrowershall indemnify the Lenders against any loss or expense incurred by the Lenders,either directly or indirectly, as a result of any failure by the Borrower tocomplete such Loan, including, without limitation, any actual loss or expenseincurred by the Lenders, either directly or indirectly, by reason of theliquidation or reemployment of funds acquired by the Lenders (including,without limitation, funds obtained by Conduit Lenders by issuing CommercialPaper or promissory notes, obtaining deposits as loans from third parties andreemployment of funds) for the Lenders to fund such Loan.

 

(b)                                 Each Group Agent will promptlynotify its related Conduit Lender and Committed Lenders of such Group Agent’sreceipt of any Loan

 

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Notice, such noticeto confirm its Pro Rata Share of the related Loan, the desired Loan Date and theapplicable Yield Rate.  The portion ofeach Loan made by the Lenders of a Lending Group on a Loan Date shall equalsuch Lending Group’s Pro Rata Share of such Loan.  No Lender shall be obligated to advance fundsto be secured by any Mortgage Loan and Related Security unless all of the LoanConditions relating to such Mortgage Loan and Related Security have beensatisfied.  The portion of each Loan madeby a Conduit Lender shall be in such Conduit Lender’s sole and absolutediscretion, and any portion of such Loan not made by the Conduit Lender of aLending Group will be made by the Committed Lenders of such Lending Group ifthe Termination Date has not occurred and all of the Loan Conditions have beensatisfied.   At its option, any ConduitLender shall accept or reject any such Loan Notice by notice given to itsrelated Group Agent by telephone or telecopy.  On each Loan Date, the Facility Agent shall record on its books andrecords each Lending Group’s Pro Rata Share of each Loan made to the Borrower,which records shall be conclusive evidence of Loans made to the Borrower,absent manifest error.

 

(c)                                  The Borrower agrees to reportimmediately to the Custodian, the Facility Agent and the Group Agents withinone (1) Business Day of discovery that any Wet-Ink Mortgage Loan that waspreviously pledged to the Facility Agent, on behalf of the Group Agents and theLenders, did, in fact, not close or was rescinded for any reason (includingthat the related Obligor has rescinded the related Mortgage Note and relateddocuments under applicable law) or that any other Mortgage Loan has beenrescinded and to cause such Mortgage Loan to be removed from the Collateral asprovided herein.

 

(d)                                 As a result of the making of anyLoan or the pledge of Collateral by the Borrower hereunder, no Lender, nor theFacility Agent nor any Group Agent, shall be required to be licensed,registered or approved or to obtain permits in any jurisdiction other thanthose in which such Person is required to be so licensed or registered on the EffectiveDate.

 

SECTION 2.3.  Loan Repayment; Yield; Fees.

 

(a)                                  The Borrower shall repay in full onthe Termination Date the Facility Outstanding Principal, all accrued and unpaidYield, and all other Aggregate Unpaids. Yield on the Loans shall be payable inarrears monthly on each Settlement Date in respect to the immediately precedingSettlement Period and on the Termination Date.

 

(b)                                 If a LIBO Rate is available for aLoan on the related Loan Date, such Loan shall initially bear interest at aYield Rate equal to the applicable Eurodollar Rate.    The Borrower shall pay to the Lenders Yieldon the

 

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unpaid principalbalance of each Loan for the period from and including the date of such Loan tobut excluding the date such Loan or portion thereof shall be paid in full, at arate per annum equal to the applicable Yield Rate.  Notwithstanding the foregoing, the Borrowershall pay to the Lenders Yield at the Base Rate plus 2% on any portion of theFacility Outstanding Principal and on any other amount payable by the Borrowerhereunder that shall not be paid in full when due (whether at stated maturity,by acceleration or by mandatory prepayment or otherwise), for the period fromand including the due date thereto to but excluding the date the same is paidin full.  Accrued Yield on each Loanshall be payable monthly on each Settlement Date and on the Termination Date,except that Yield payable at the Base Rate plus 2% shall accrue daily and shallbe payable promptly upon receipt of an invoice therefor by the Borrower.  Promptly after the determination of anyinterest rate provided for herein or any change therein, the Facility Agentshall give written notice thereof to the Borrower.

 

(c)                                  Notwithstanding any limitation orpurported limitation on recourse contained in this Agreement or the otherTransaction Documents, nothing shall limit in any way the obligations of theBorrower to pay the Aggregate Unpaids as and when due in accordance with thisAgreement and the other Transaction Documents.

 

SECTION 2.4.  Optional Prepayments.

 

(a)                                  The Loans are prepayable withoutpremium or penalty, in whole or in part, on each Settlement Date in accordancewith Section 2.5(a).    Amountsrepaid may be reborrowed in accordance with this Agreement.  Partial prepayments shall be in an aggregateprincipal amount of at least $25,000,000 and integral multiples of $20,000 inexcess thereof.  Any specific Collateralto be released on such Settlement Date from the Lien of the Facility Agenthereunder shall be in accordance with Sections 2.4(b) and (c) below,and such Settlement Date shall be treated as a “Prepayment Date” for purposesof such Sections.

 

(b)                                 The Loans are prepayable by theBorrower, in whole or in part, on any Business Day other than a Settlement Date(each, a “Prepayment Date”) upon two (2) Business Days’ priorwritten notice to the Facility Agent and the Group Agents, which notice shallspecify (i) the Business Day on which Loans are to be prepaid, (ii) theaggregate principal amount of the Loans to be prepaid, (iii) the aggregateamount of all accrued and unpaid Yield on such principal amount through thedate of such prepayment and (iv) the particular Mortgage Loan or Loansthat are to be released from the Lien of the Facility Agent on such PrepaymentDate in accordance with Section 2.4(c) below (each such notice, a “PrepaymentNotice”).  Proceeds of any suchprepayment shall be paid ratably to the Group Agents for the benefit of theapplicable Lenders.  No more than three (3) prepaymentsunder this

 

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Section 2.4(b) shalloccur during any Settlement Period.  Noprepayment by the Borrower shall be made under this Section 2.4(b) aboveunless, after giving effect to such prepayment, all of the PrepaymentConditions have been satisfied.

 

(c)                                  Immediately upon receipt of theprepayment proceeds into the Collection Account on the related Prepayment Date,and subject to the satisfaction in full of the Prepayment Conditions, theFacility Agent shall, at the expense of the Borrower, release all of its right,title and interest in, to and under the Mortgage Loans and related Collateralspecified in the related Prepayment Notice.

 

SECTION 2.5.  Application of Payments.

 

(a)                                  The Servicer shall cause allCollections in respect of the Collateral to be deposited to the CollectionAccount within two (2) Business Days after receipt thereof by theBorrower, the Servicer or their Affiliates or agents.  The Servicer shall be permitted, in its reasonablediscretion, to set aside and pay from Collections any accrued and unpaidServicing Fee due and owing to it, and such amounts shall not constituteAvailable Collections.   On eachSettlement Date, the Servicer shall, from the Available Collections on depositin the Collection Account that relate to the immediately preceding SettlementPeriod, pay the following Persons in the following order of priority:

 

(i)                                     first, to the Servicer, to repay anyoutstanding Servicer Advances;

 

(ii)                                  second, on a prorata basis,(A) to the Servicer, the Servicing Fee and any other reasonable amountsdue and owing to the Servicer (to the extent any portion of the accrued andunpaid Servicing Fee has not been previously set aside from Collections by theServicer in accordance with the second sentence of this Section 2.5(a))and (ii) to the Custodian, the Custodial Fee and the reasonableout-of-pocket costs and expenses of the Custodian not covered by the CustodialFee;

 

(iii)                               third, to the Facility Agent, itsAdministration Fee;

 

(iv)                              fourth, to the Lenders, proratain proportion to their portions of the Facility Outstanding Principal, allaccrued and unpaid Yield due and owing to the Lenders for the immediatelypreceding Settlement Period;

 

(v)                                 fifth, to the Lenders, all accrued andunpaid fees and other costs and expenses under the Fee Letters;

 

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(vi)                              sixth, to the Lenders, (A) prior tothe Termination Date, any amount selected by the Borrower in its discretiontoward a reduction of the Facility Outstanding Principal, or any amountnecessary to reduce the Facility Outstanding Principal to cure an Event ofDefault or Potential Event of Default or to satisfy the Borrowing Base Test orthe Pool Criteria and (B) following the Termination Date, all remainingAvailable Collections will be used to reduce the Facility Outstanding Principalto zero;

 

(vii)                           seventh, to the Facility Agent, the Lendersand the Group Agents, all costs, expenses and indemnification payments, if any,due and owing to such Persons under this Agreement and the other TransactionDocuments; and

 

(viii)                        eighth, any remaining funds shall be paidto the Borrower (prior to the Termination Date if, after giving effect to suchpayment, no Event of Default shall occur and the Borrowing Base Test shall besatisfied) or to the Group Agents, the Lenders and the Facility Agent to reducethe Aggregate Unpaids to zero (following the Termination Date), to the extentAggregate Unpaids remain due and owing.

 

(b)                                 If on any Settlement Date AvailableCollections are not sufficient to pay the sum of the amounts described inclauses (ii) through (v) above that are due and payable, the Servicermay, in its sole discretion and solely to the extent that the Servicerreasonably expects to be reimbursed in full pursuant to Section 2.5(a)(i),advance an amount equal to such amounts due and payable on such Settlement Date(each, a “Servicer Advance”).

 

(c)                                  All Collections received by theBorrower, the Servicer or their Affiliates shall promptly (but in any event nolater than two (2) Business Days after receipt thereof) be remitted to theCollection Account.

 

SECTION 2.6.  Extensions. From time to time, the Borrower may request the extension of anyCommitted Lender’s Scheduled Commitment Expiry Date for an additional period oftime of up to three hundred and sixty-four (364) days by providing the relatedGroup Agent with a written request for such extension no fewer than forty-five(45) days but no more than sixty (60) days prior to such Committed Lender’sScheduled Commitment Expiry Date then in effect.  Such Group Agent shall promptly forward suchwritten notice to the relevant Committed Lender following receipt thereof.  Such Committed Lender shall notify theFacility Agent, the related Group Agent and the Borrower in writing of itsintent to extend (subject to satisfaction of the Renewal Conditions) or notextend (which decision

 

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shall be made in such CommittedLender’s sole and absolute discretion) no later than the thirtieth (30th) dayprior to the Scheduled Commitment Expiry Date then in effect; providedthat failure of such Committed Lender to provide such written notice by suchthirtieth (30th) day shall be deemed to be a decision not to extend.  Any such extension shall be effective on theScheduled Commitment Expiry Date then in effect and shall be conditioned uponthe satisfaction in full of the Renewal Conditions.

 

SECTION 2.7.  Security Interest.

 

(a)                                  To secure the repayment by the Borrowerof all of the Aggregate Unpaids, the Borrower hereby grants to the FacilityAgent, on behalf of the Lenders and the Group Agents, a security interest inall of the Borrower’s right, title and interest in, to and under theCollateral, whether now owned or hereafter acquired and wherever located,together with all of the Borrower’s rights in, to and under (i) theCollection Account, (ii) the Custodial Agreement, (iii) the PurchaseAgreement and (iv) the Subservicing Agreement, and this Agreement shallconstitute a security agreement under applicable law.  The Borrower hereby assigns to the FacilityAgent, on behalf of the Lenders and the Group Agents, all of its rights andremedies under the Purchase Agreement as collateral security.

 

(b)                                 The Borrower agrees that it will, tothe extent that it is permitted to do so under the Transaction Documents andapplicable law, enforce its rights against the Originator from time to timeand, at its expense, promptly execute and deliver all instruments and documentsand take all actions as may be necessary or as the Facility Agent or the GroupAgents may reasonably request in order to perfect or protect the Collateral orto enable the Facility Agent, the Group Agents or the Lenders to exercise orenforce any of their respective rights hereunder and thereunder.  The Borrower hereby authorizes the Lender tofile any financing or continuation statement or amendment regarding thisAgreement and the Lien of the Facility Agent hereunder without the signature ofthe Borrower to the extent permitted by applicable law (including the filing ofa financing statement naming the Borrower as debtor and describing the propertysecured as “all assets” or “all personal property” of the Borrower).  The Borrower shall at its expense, uponrequest of the Facility Agent or the Group Agents, obtain such additionalsearch reports as the Facility Agent or the Group Agents shall reasonablyrequest.  To the fullest extent permittedby applicable law, the Facility Agent shall be permitted to file continuationstatements and amendments thereto and assignments thereof.

 

(c)                                  Pursuant to the Custodial Agreement,the Custodian shall hold the Mortgage Loan Documents as exclusive bailee andagent for the Facility Agent, on behalf of the Lenders and the Group Agents,pursuant to the terms of the Custodial Agreement and shall deliver to theFacility Agent and the Group

 

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Agents Trust Receiptsand Wet-Ink Mortgage Loan Trust Receipts, together with any applicable FatalException Reports and Permitted Exception Reports, to the effect that it hasreceived such Mortgage Loan Documents in the manner required by the CustodialAgreement and identifying any deficiencies in such Mortgage Loan Documents asso reviewed.

 

(d)                                 The Borrower hereby irrevocablyconstitutes and appoints the Facility Agent and any officer or agent thereof,with full power of substitution, as its true and lawful attorney-in-fact withfull irrevocable power and authority in the place and stead of the Borrower andin the name of the Borrower or in its own name, from time to time in theFacility Agent’s discretion following the occurrence and during thecontinuation of an Event of Default, for the purpose of carrying out the termsof this Agreement, including, without limitation, protecting, preserving andrealizing upon the Collateral, to take any and all appropriate action and toexecute any and all documents and instruments which may be necessary ordesirable to accomplish the purposes of this Agreement, including withoutlimitation, to protect, preserve and realize upon the Collateral and, withoutlimiting the generality of the foregoing, the Borrower hereby gives theFacility Agent, on behalf of the Lenders and the Group Agents, the power and theright, on behalf of the Borrower, without assent by, but with notice to, theBorrower, if an Event of Default shall have occurred and be continuing, to dothe following:

 

(i)                                     In the name of the Borrower or inits own name, or otherwise, to take possession of and endorse and collect anychecks, drafts, notes, acceptances or other instruments for the payment ofmoney due under any mortgage insurance or with respect to any other Collateraland to file any claim or to take any other action or proceeding in any court oflaw or equity or otherwise deemed appropriate by the Facility Agent for thepurpose of collecting any and all such monies due under any such mortgageinsurance or with respect to any other Collateral whenever payable;

 

(ii)                                  To pay or discharge taxes and Lienslevied or placed on or threatened against the Collateral; and

 

(iii)                               (A) to direct any party liablefor any payment under any Collateral to make payment of any and all monies dueor to become due thereunder directly to the Facility Agent or as the FacilityAgent shall direct; (B) to ask or demand for, collect, receive payment andreceipt for, any and all monies, claims and other amounts due or to become dueat any time in respect of or arising out of any Collateral; (C) to signand endorse any invoices, assignments, verifications, notices and otherdocuments in connection with any of

 

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theCollateral; (D) to commence and prosecute any suits, actions orproceedings at law or in equity in any court of competent jurisdiction tocollect the Collateral or any party thereof and to enforce any other right inrespect of any Collateral; (E) to defend any suit, action or proceedingbrought against the Borrower with respect to any Collateral; (F) tosettle, compromise or adjust any suit, action or proceeding described in clause(E) above and, in connection therewith, to give such discharges orreleases as the Facility Agent may deem appropriate; and (G) generally, tosell, transfer, pledge and make any agreement with respect to or otherwise dealwith any of the Collateral as fully and completely as though the FacilityAgent, on behalf of the Lenders and the Group Agents, were the absolute ownerthereof for all purposes, and to do, at the Facility Agent’s option and at theBorrower’s expense, at any time, or from time to time, all acts and thingswhich the Facility Agent deems necessary to protect, preserve or realize uponthe Collateral and to effect the intent of this Agreement, all as fully andeffectively as the Borrower might do.

 

The Borrower herebyratifies all that said attorneys shall lawfully do or cause to be done byvirtue hereof.  This power of attorney isa power coupled with an interest and shall be irrevocable.  The powers conferred on the Facility Agentare solely to protect the Facility Agent’s interests in the Collateral andshall not impose any duty upon the Facility Agent, the Group Agents or theLenders to exercise any such powers.  Intaking the actions described in this Section 2.7(d), the Facility Agentwill comply with all applicable laws, rules and regulations (including, ifnecessary or advisable, designating a Person on its behalf that is permittedunder applicable law to take such action), and the Borrower and its Affiliateswill not be required to take any action in contravention of applicable laws, rules andregulations.

 

(e)                                  Upon termination of this Agreementand the repayment to the Facility Agent, the Group Agents and the Lenders ofall Aggregate Unpaids and the performance of all obligations under theTransaction Documents, the Facility Agent, on behalf of the Lenders and theGroup Agents, shall release its security interest in any remaining Collateral; providedthat if any payment, or any part thereof, of any of the Aggregate Unpaids isrescinded or must otherwise be restored or returned by any of the FacilityAgent, the Group Agents or the Lenders for any reason, this Agreement, allrights hereunder and the Liens created hereby shall continue to be effective,or shall be reinstated, until such payments have been made.

 

SECTION 2.8.  DeemedCollections.  (a) If on any day a Mortgage Loan included in the Collateral becomes the subject ofan event described in Section 2.2(c), the Borrower shall be deemed to havereceived on such day a Collection of such Mortgage Loan equal to the relatedMortgage Loan Release Amount, and the

 

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Borrower shall pay such amountto the Collection Account within one (1) Business Day, upon which suchMortgage Loan shall be released from the Collateral.  Any such amount shall be reported as such onthe next succeeding Servicer Report and shall be applied by the Servicer as anAvailable Collection in accordance with Section 2.5(a).

 

(b)                                 If on any day any of therepresentations or warranties in Article III is determined to be incorrector untrue with regard to a specific Mortgage Loan included in the Collateral asof the time to which such representation or warranty speaks, the Borrower shallbe deemed to have received on such day a Collection of such Mortgage Loan equalto the related Mortgage Loan Release Amount, and the Borrower shall pay suchamount to the Collection Account within one (1) Business Day, upon whichsuch Mortgage Loan shall be released from the Collateral.  Any such amount shall be reported as such onthe next succeeding Servicer Report and shall be applied by the Servicer as anAvailable Collection in accordance with Section 2.5(a).  Simultaneously with any such payment by theBorrower, the Facility Agent, on behalf of the Lenders and the Group Agents,shall release all of its right, title and interest in such Mortgage Loan andrelated Collateral to the Borrower, and the Facility Agent, on behalf of theLenders and the Group Agents, shall take all action reasonably requested by theBorrower, and at the expense of the Borrower, to effectuate such release.

 

(c)                                  In lieu of any payment required tobe made pursuant to Sections 2.8(a) and (b) above, the Borrower mayelect to include in the Collateral other mortgage loans and related propertythat satisfy the following criteria (each, in the case of Section 2.8(a),an “Additional Mortgage Loan” and, in the case of Section 2.8(b), a“Substituted Mortgage Loan”) on the date of inclusion of such mortgageloans and related property into the Collateral (each, an “Addition Date”):  (i) such mortgage loans and relatedproperty are of reasonably equivalent or greater value to the Mortgage Loanswith respect to which Collections have been deemed to have been received underSections 2.8(a) and (b) and are otherwise reasonably acceptable tothe Facility Agent and the Group Agents, (ii) each such mortgage loan andrelated property satisfies the definition of “Eligible Asset” and (iii) allof the Loan Conditions are satisfied as if such mortgage loans and relatedproperty were being included in the Collateral as the subject of a Loan on aLoan Date.

 

SECTION 2.9.  Paymentsand Computations.   Allamounts to be paid or deposited by the Borrower or the Servicer hereunder shallbe paid or deposited in accordance with the terms hereof no later than 11:00 A.M.(New York time) on the day when due in immediately available funds as notifiedby the Facility Agent or the related Group Agent.  No later than 1:00 P.M. (New York time)on each Loan Date, each Lending Group, acting through its Group Agent, willinitiate a wire transfer of immediately available funds to the Borrower forsuch Lending Group’s

 

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Pro Rata Share of the amount ofsuch Loan on such day by remitting such amount to an account of the Borrowerspecified in the related Loan Notice.  All computations of Yield and all per annum fees hereunder shall be madeon the basis of a year of 360 days (or, in the case of Yield calculated at theBase Rate, a year of 365 or 366 days, as applicable) for the actual number ofdays (including the first but excluding the last day) elapsed.  Any computations by the Facility Agent or aGroup Agent of amounts payable by the Borrower hereunder shall be binding uponthe Borrower absent manifest error.

 

SECTION 2.10.  Reports.    No later than 5:00 P.M. (New Yorktime) on the first Business Day following the last day of each SettlementPeriod, the Facility Agent shall provide notice to the Borrower of all accruedand unpaid Yield (and all other fees, indemnified amounts and other costs andexpenses due and owing to the Facility Agent, the Group Agents and the Lenders)for the immediately preceding Settlement Period.  No later than 5:00 P.M. on the second (2nd)Business Day prior to each Settlement Date, the Servicer shall deliver a dulycompleted Servicer Report to the Facility Agent and the Group Agents withrespect to the immediately preceding Settlement Period and, on any otherBusiness Day, such other information as the Facility Agent or the Group Agentsmay reasonably request.

 

SECTION 2.11.  Collection Account.

 

(a)                                  There shall be established by theBorrower on or before the Effective Date and maintained, for the benefit of theFacility Agent on behalf of the Lenders and the Group Agents, one (1) segregated,non-interest-bearing deposit account (the “Collection Account”), bearinga designation for each such account clearly indicating that the funds depositedtherein are held for the benefit of the Facility Agent on behalf of the Lendersand the Group Agents, which account shall be held with JPMorgan Chase Bank,N.A., in its capacity as a “bank” (as defined in Section 9-102 of theRelevant UCC).  The Servicer shall remitor cause to be remitted to the Collection Account all Collections received bythe Borrower or its Affiliates with respect to any Collateral within two (2) BusinessDays of receipt thereof.  Funds ondeposit in the Collection Account will not be invested except in Permitted Investments.    The Collection Account will at all timesconstitute a “deposit account” (as defined in Section 9-102(a)(29) of theRelevant UCC) and not a “securities account” (as defined in Section 8-501of the Relevant UCC).

 

SECTION 2.12.  Rightof Setoff.  Each of theFacility Agent, the Group Agents and the Lenders is hereby authorized (inaddition to any other rights it may have), at any time after the occurrence ofthe Termination Date or during the continuation of a Potential Event of Defaultthat has been declared by the Facility Agent, to set-off, appropriate and apply(without presentment, demand, protest or other notice which are herebyexpressly waived) any deposits and any other

 

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indebtedness held or owing bysuch Person to, or for the account of, the Borrower against the amount of theAggregate Unpaids owing by the Borrower to such Person (even if contingent orunmatured).

 

SECTION 2.13.  Sharingof Payments, Etc.  Ifany Lender (for purposes of this Section 2.13 only, being a “Recipient”)shall obtain any payment (whether voluntary, involuntary, through the exerciseof any right of setoff, or otherwise) on account of any interest in theCollateral pledged to it in excess of its ratable share of payments on accountof any interest in the Collateral obtained by the Lenders entitled thereto,such Recipient shall forthwith purchase from the Lenders entitled to a share ofsuch amount participations in the percentage interests owned by such Persons asshall be necessary to cause such Recipient to share the excess payment ratablywith each such other Person entitled thereto; provided, however,that if all or any portion of such excess payment is thereafter recovered fromsuch Recipient, such purchase from each such other Person shall be rescindedand each such other Person shall repay to the Recipient the purchase price paidby such Recipient for such participation to the extent of such recovery,together with an amount equal to such other Person’s ratable share (accordingto the proportion of (a) the amount of such other Person’s requiredpayment to (b) the total amount so recovered from the Recipient) of anyinterest or other amount paid or payable by the Recipient in respect of thetotal amount so recovered.

 

SECTION 2.14.  BrokenFunding.  In the eventof (a) in the case of a Conduit Lender, a sale of the portion of theFacility Outstanding Principal held by such Conduit Lender to its relatedCommitted Lenders, (b) the payment of any principal of any Loan other thanon the last day of the Funding Period applicable thereto (including as a resultof the occurrence of the Termination Date or an optional prepayment of a Loan),(c) the conversion of any Loan other than on the last day of the relatedFunding Period, or (d) any failure to borrow, convert, continue or prepayany Loan on the date specified in any notice delivered pursuant hereto, then,in any such event, the Borrower shall compensate the Lenders, withoutduplication, for the loss, cost and expense attributable to such event.  Such loss, cost or expense to any Lendershall be deemed to include an amount determined by such Lender to be theexcess, if any, of (i) the amount of Yield which would have accrued on theoutstanding principal amount of such Loan had such event not occurred, at theYield Rate that would have been applicable to such Loan, for the period fromthe date of such event to the last day of the related Funding Period (or, inthe case of a failure to borrow, convert or continue, for the period that wouldhave been the related Funding Period), over (ii) the amount of interestwhich would accrue on such principal amount for such period at the interestrate which such Lender would bid were it to bid, at the commencement of suchperiod, for dollar deposits of a comparable amount and period from other banksin the interbank eurodollar market. Within ten (10) days after any Lender hereunder receives actualknowledge of any of the events

 

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specified in this Section 2.14,a certificate of such Lender setting forth any amount or amounts that suchLender is entitled to receive pursuant to this Section 2.14 and thereason(s) therefor shall be delivered to the Borrower (with a copy to theFacility Agent and the related Group Agent) and shall be conclusive absentmanifest error.  The Borrower shall payeach such Lender the amount shown as due on any such certificate on the nextsucceeding Settlement Date following receipt thereof.  Each Lender hereby agrees to take allcommercially reasonable action necessary to mitigate the amount of any costsincurred pursuant to this Section 2.14.

 

SECTION 2.15.  Conversionand Continuation of Outstanding Loans.  Prior to the occurrence of the TerminationDate, each Loan may, at the option of the Borrower at the end of the relatedFunding Period, be continued at the same Yield Rate or converted to anotherYield Rate.  If the Termination Date hasoccurred and is continuing, then (i) no outstanding Loan funded by theLenders may be converted to, or continued as, a Eurodollar Loan and (ii) unlessrepaid, each Eurodollar Loan shall bear interest at a Base Rate on the last dayof the Funding Period related thereto. For any such conversion or continuation, the Borrower shall give theFacility Agent and the related Group Agent irrevocable notice (each, a “Conversion/ContinuationNotice”) of such request not later than 12:30 P.M. (New York time) (i) inthe case of a conversion of a BR Loan into a Eurodollar Loan, or a continuationof a Eurodollar Loan as a Eurodollar Loan, three (3) Business Days beforethe date of such conversion or continuation, as applicable, and (ii) inthe case of a conversion of a Eurodollar Loan into a BR Loan or a continuationof a BR Loan, on the Business Day of such conversion or continuation.  If a Conversion/Continuation Notice has notbeen timely delivered with respect to any Loan, such Loan shall beautomatically continued as, or converted to, a BR Loan.  Each Conversion/Continuation Notice shallspecify (a) the requested date (which shall be a Business Day) of suchconversion or continuation, (b) the aggregate amount and rate optionapplicable to the Loan which is to be converted or continued and (c) theamount and rate option(s) of Loan(s) into which such Loan is to be converted orcontinued.  For administrativeconvenience, Conversion/Continuation Notices may be in the form of standinginstructions mutually agreeable to the Borrower, the Facility Agent and theGroup Agents.

 

SECTION 2.16.  Illegality.  (a)  Notwithstanding any other provisionherein, if, after the Effective Date, the adoption of any Law or bankregulatory guideline or any amendment or change in the interpretation of anyexisting or future Law or bank regulatory guideline by any Official Bodycharged with the administration, interpretation or application thereof, or thecompliance with any directive of any Official Body (in the case of any bankregulatory guideline, whether or not having the force of Law), shall make itunlawful for any Lender to acquire or maintain a Eurodollar Loan ascontemplated by this Agreement, (i) such Lender shall, within ten (10) daysafter receiving actual knowledge thereof, deliver a

 

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certificate to the Borrower(with a copy to the Facility Agent and the Group Agents) setting forth thebasis for such illegality, which certificate shall be conclusive absentmanifest error, (ii) the commitment of such Lender hereunder to make aportion of a Eurodollar Loan, continue any portion of a Eurodollar Loan as suchand convert a BR to a Eurodollar Loan shall forthwith be suspended, and suchsuspension shall remain in effect so long as the circumstance described aboveexists, and (iii) such Lender’s portion of any Loan then outstanding shallbe converted automatically to a BR Loan on the last day of the related FundingPeriod, or within such earlier period as required by law.

 

If any suchconversion of a portion of a Eurodollar Loan occurs on a day that is not thelast day of the related Funding Period, the Borrower shall pay to such Lendersuch amounts, if any, as may be required to compensate such Lender.  If circumstances subsequently change so thatit is no longer unlawful for an affected Lender to acquire or to maintain aportion of a Eurodollar Loan as contemplated hereunder, such Lender will, assoon as reasonably practicable after such Lender knows of such change incircumstances, notify the Borrower and the Facility Agent, and upon receipt ofsuch notice, the obligations of such Lender to acquire or maintain itsacquisition of portions of Eurodollar Loans or to convert its portion of aEurodollar Loan into portions of Eurodollar Loans shall be reinstated.

 

(b)                                 Each Lender agrees that, upon theoccurrence of any event giving rise to the operation of Section 2.16(a) withrespect to such Lender, it will, if requested by the Borrower and to the extentpermitted by law or by the relevant Official Body, endeavor in good faith tochange the office at which it books its portions of Eurodollar Loans hereunderif such change would make it lawful for such Lender to continue to acquire orto maintain its acquisition of portions of Eurodollar Loans hereunder; provided,however, that such change may be made in such manner that such Lender,in its sole determination, suffers no unreimbursed cost or expense or any otherdisadvantage whatsoever.

 

SECTION 2.17.  Inabilityto Determine Yield Rate. (a)  If, prior to the first day of any Funding Period:

 

(1)                                  any Group Agent shall havedetermined (which determination in the absence of manifest error shall beconclusive and binding upon the Borrower) that, by reason of circumstancesaffecting the relevant market, adequate and reasonable means do not exist forascertaining the Eurodollar Rate for such Funding Period with respect to suchGroup Agent’s related Lenders; or

 

(2)                                  any Group Agent shall have receivednotice from its related Lenders that the Eurodollar Rate determined or to be

 

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determinedfor such Funding Period will not adequately and fairly reflect the cost to suchLenders (as conclusively certified by such Lenders) of purchasing ormaintaining their affected portions of Eurodollar Loans during such FundingPeriod;

 

then, ineither such event, such Group Agent shall give telecopy or telephonic noticethereof (confirmed in writing) to the Borrower and such Group Agent’s relatedLenders as soon as practicable (but, in any event, within ten (10) daysafter such determination or notice, as applicable) thereafter.  Until such notice has been withdrawn by suchGroup Agent, no further Eurodollar Loans shall be made by the relatedLenders.  The related Group Agent agreesto withdraw any such notice as soon as reasonably practicable after it isnotified of a change in circumstances which makes such notice inapplicable.

 

(b)  The Borrower shall have the right, upon no less than thirty(30) days’ prior written notice to the Facility Agent and the Group Agents, toreplace the Lenders and related Group Agent of any Lending Group with respectto which an event described in Section 2.16 or in this Section 2.17has occurred.  Any such replacementLenders and related Group Agent shall be with the consent of the FacilityAgent, which consent shall not be unreasonably withheld, delayed orconditioned; provided that if the Facility Agent is the same Person (oran Affiliate thereof) as the affected Group Agent or Lenders, then no suchconsent shall be required.  Any suchassignment of the rights of the affected Group Agent and Lenders to areplacement Lending Group will be made by the affected Group Agent and Lenderswithout recourse, representation and warranty and upon payment in full, inimmediately available funds, of all Aggregate Unpaids due and owing to theaffected Group Agent and Lenders through the date of such assignment.

 

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ARTICLE III

 

REPRESENTATIONSAND WARRANTIES

 

SECTION 3.1.  Representationsand Warranties of the Borrower.  The Borrower hereby represents and warrantsto the Facility Agent, the Group Agents and the Lenders as of the EffectiveDate, each Loan Date, each Addition Date, each Prepayment Date and on any otherdate specified in any Servicer Report or other certificate or report deliveredby or on behalf of the Borrower hereunder that:

 

(a)                                  Existence and Power. The Borrower is a limited liability company duly organized, validlyexisting and in good standing under the laws of its jurisdiction of formationand has all requisite power and all governmental licenses, authorizations,consents and approvals required to carry on its business in each jurisdictionin which its business is now conducted. The Borrower is duly qualified to do business in, and is in goodstanding in, every other jurisdiction in which the nature of its businessrequires it to be so qualified.

 

(b)                                 Limited Liability Company andGovernmental Authorization; Contravention.  Theexecution, delivery and performance by the Borrower of this Agreement and theother Transaction Documents to which it is a party are within the Borrower’slimited liability company powers, have been duly authorized by all necessaryaction, require no action by or in respect of, or filing with, any OfficialBody or official thereof (except as contemplated by Section 2.7 hereof),and do not contravene, or constitute a default under, any provision ofapplicable law, rule or regulation or of the Certificate of Formation orLimited Liability Company Agreement of the Borrower or of any agreement or ofany judgment, injunction, order, writ, decree or other instrument binding uponthe Borrower or result in the creation or imposition of any Lien on the assetsof the Borrower (other than the Lien of the Facility Agent hereunder).

 

(c)                                  Binding Effect.  Each of this Agreement and the otherTransaction Documents to which the Borrower is a party constitutes the legal,valid and binding obligation of the Borrower, enforceable against it inaccordance with its terms, subject to applicable bankruptcy, insolvency,moratorium or other similar laws affecting the rights of creditors generallyand general equitable principles (whether considered in a proceeding at law orin equity).

 

(d)                                 Perfection. Immediately preceding the making of each Loan hereunder, the Borrowershall be the owner of all of the Collateral being

 

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pledged to theFacility Agent in connection with such Loan, free and clear of all Liens.  On or prior to the making of each Loan, allfinancing statements and other documents required to be recorded or filed inorder to perfect the Collateral in favor of the Facility Agent free and clearof any Lien will have been duly filed in each filing office necessary for suchpurpose, and all filing fees and taxes, if any, payable in connection with suchfilings shall have been paid in full (and, as applicable, all documentsrequired to be delivered to the Custodian under the Custodial Agreement havebeen delivered in accordance with the terms thereof).

 

(e)                                  Accuracy of Information. All information heretofore furnished by or on behalf of the Borrower(including, without limitation, the Servicer Reports and any other document,instrument, certificate or notice delivered to the Facility Agent, the GroupAgents or the Lenders) to the Facility Agent, the Group Agents or the Lendersfor purposes of, or in connection with, this Agreement and the otherTransaction Documents is true and accurate in every material respect as of thedate to which such information speaks.

 

(f)                                    Tax Status. The Borrower has filed all tax returns (Federal, state and local)required to be filed and has paid or made adequate provision for the payment ofall taxes, assessments and other governmental charges.

 

(g)                                 Action, Suits. Except as set forth on Exhibit G, there are no actions, suits orproceedings pending or, to the knowledge of the Borrower threatened, against oraffecting the Borrower, the Originator, the Servicer or their respectiveproperties, in or before any court, arbitrator or other body, which,individually or in the aggregate, is reasonably likely to result in a MaterialAdverse Effect.

 

(h)                                 Use of Proceeds. No proceeds of any Loan will be used by the Borrower in any way whichwould violate Regulation T, U or X of the Board of Governors of the FederalReserve System.

 

(i)                                     Place of Business. The principal place of business of the Borrower is located at theaddress of the Borrower indicated in Section 10.3 hereof, and thelocations of the offices where the Borrower keeps Servicing Records are locatedat the address(es) described on Exhibit H or at such other locations asare identified to the Facility Agent in writing.

 

(j)                                     Good Title. Upon the making of each Loan by the Lenders, the Facility Agent, onbehalf of the Lenders and the Group Agents, shall have a valid and perfectedsecurity interest in all of the Collateral, free and clear of any Lien (otherthan the Lien of the Facility Agent hereunder).

 

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(k)                                  Tradenames, Etc. As of the date hereof:  (i) theBorrower has no subsidiaries and divisions; and (ii) the Borrower has notradenames and has not changed its name, merged with or into or consolidatedwith any other corporation or been the subject of any proceeding under Title11, United States Code (Bankruptcy).

 

(l)                                     Eligible Assets. Each Mortgage Loan and related Collateral (x) represented by theBorrower or the Servicer to be an Eligible Asset (including in any Loan Notice,Servicer Report or other report delivered to the Funding Agent, the Group Agentor the Lenders) or (y) included in the calculation of the Net Eligible AssetsBalance, in each case meets the requirements of the definition of “EligibleAsset” as of the date of such representation or inclusion, as applicable.

 

(m)                               Underwriting Policy &Servicing Standards.  Since November 1, 2004, there have beenno changes in the Underwriting Policy and the Servicing Standards which arereasonably likely to result in a Material Adverse Effect.

 

(n)                                 [Reserved]

 

(o)                                 No Event of Default. No event has occurred and is continuing and no condition exists thatconstitutes an Event of Default or Potential Event of Default.

 

(p)                                 Not an Investment Company. The Borrower is not, and is not controlled by, an “investment company”within the meaning of the Investment Company Act of 1940, as amended, or isexempt from all provisions of such Act.

 

(q)                                 ERISA. Each of the Borrower and its ERISA Affiliates is in compliance in allmaterial respects with ERISA, and no Lien exists in favor of the PensionBenefit Guaranty Corporation (or any Benefit Plan) on any of the Collateral.

 

(r)                                    Collections. Only Collections are deposited into the Collection Account.

 

(s)                                  Bulk Sales. No transaction contemplated hereby or by the other Transaction Documentsrequires compliance with any “bulk sales” act or similar law.

 

(t)                                    Sales Under Purchase Agreement. Each Mortgage Loan which has been sold to the Borrower by the Originatorhas been purchased or

 

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acquired by the Borrowerfrom the Originator pursuant to, and in accordance with, the terms of thePurchase Agreement.

 

(u)                                 Preference; Voidability. The Borrower has given reasonably equivalent value to the Originator inconsideration for the conveyance by the Originator of Mortgage Loans andrelated property under the Purchase Agreement, and each such conveyance shallnot have been made for or on account of an antecedent debt owed by theOriginator to the Borrower, and no such conveyance is intended to be voidableunder the Bankruptcy Code.

 

(v)                                 Mortgage Loans. On each Loan Date, Addition Date and Prepayment Date, the Borrowerrepresents and warrants that (i) each Mortgage Loan and related propertythat is to be included in the Collateral on such day, as applicable, is anEligible Asset and (ii) each such Mortgage Loan and related propertysatisfies all of the criteria contained in Exhibit D hereto.

 

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SECTION 3.2.  Representationsand Warranties of the Servicer.  The Servicer hereby represents and warrantsto the Facility Agent, the Group Agents and the Lenders as of the EffectiveDate, each Loan Date, each Addition Date, each Prepayment Date and on any otherdate specified in any Servicer Report or other certificate or report deliveredby or on behalf of the Servicer hereunder that:

 

(a)                                  Corporate Existence and Power. The Servicer is a corporation duly organized, validly existing and ingood standing under the laws of its jurisdiction of incorporation and has allrequisite power and all governmental licenses, authorizations, consents andapprovals required to carry on its business in each jurisdiction in which itsbusiness is now conducted.  The Serviceris duly qualified to do business in, and is in good standing in, every otherjurisdiction in which the nature of its business requires it to be soqualified.

 

(b)                                 Corporate and GovernmentalAuthorization; Contravention.  Theexecution, delivery and performance by the Servicer of this Agreement and theother Transaction Documents to which it is a party are within the Servicer’scorporate powers, have been duly authorized by all necessary action, require noaction by or in respect of, or filing with, any Official Body or officialthereof, and do not contravene, or constitute a default under, any provision ofapplicable law, rule or regulation or of the certificate of incorporationor bylaws of the Servicer or of any agreement or of any judgment, injunction,order, writ, decree or other instrument binding upon the Servicer or result inthe creation or imposition of any Lien on the assets of the Servicer.

 

(c)                                  Binding Effect. Each of this Agreement and the other Transaction Documents to which theServicer is a party constitutes the legal, valid and binding obligation of theServicer, enforceable against it in accordance with its terms, subject toapplicable bankruptcy, insolvency, moratorium or other similar laws affectingthe rights of creditors generally and general equitable principles (whetherconsidered in a proceeding at law or in equity).

 

(d)                                 Accuracy of Information. All information heretofore furnished by or on behalf of the Servicer(including, without limitation, the Servicer Reports and any other document,instrument, certificate or notice delivered to the Facility Agent, the GroupAgents or the Lenders) to the Facility Agent, the Group Agents or the Lendersfor purposes of, or in connection with, this Agreement and the otherTransaction Documents is true and accurate in every material respect as of thedate to which such information speaks.

 

(e)                                  Tax Status. The Servicer has filed all tax returns (Federal, state and local)required to be filed and has paid or made adequate provision for the payment ofall taxes, assessments and other governmental charges.

 

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(f)                                    Action, Suits. Except as set forth on Exhibit G, there are no actions, suits orproceedings pending or, to the knowledge of the Servicer threatened, against oraffecting the Servicer, the Originator or the Borrower or their respectiveproperties, in or before any court, arbitrator or other body, which,individually or in the aggregate, is reasonably likely to result in a MaterialAdverse Effect.

 

(g)                                 Place of Business. The principal place of business of the Servicer is located at theaddress of the Servicer indicated in Section 10.3 hereof, and thelocations of the offices where the Servicer keeps Servicing Records are locatedat the address(es) described on Exhibit H or at such other locations thatare notified to the Facility Agent in writing.

 

(h)                                 Eligible Assets. Each Mortgage Loan and related Collateral (x) represented by theServicer to be an Eligible Asset (including in any Loan Notice, Servicer Reportor other report delivered to the Funding Agent, the Group Agent or the Lenders)or (y) included in the calculation of the Net Eligible Assets Balance, in eachcase meets the requirements of the definition of “Eligible Asset” as of thedate of such representation or inclusion, as applicable.

 

(i)                                     Underwriting Policy &Servicing Standards.  Since November 1, 2004, there have beenno changes in the Underwriting Policy and the Servicing Standards which arereasonably likely to result in a Material Adverse Effect.

 

(j)                                     Collections and Servicing. The Servicer or an Affiliate is an approved seller/servicer ofconventional Mortgage Loans for Fannie Mae and Freddie Mac.  The Servicer or an Affiliate is in goodstanding to service Mortgage Loans for either Fannie Mae or Freddie Mac, and noevent has occurred, including a change in insurance coverage, which would makethe Servicer or an Affiliate unable to comply with either Fannie Mae or FreddieMac eligibility requirements or which would require notification to eitherFannie Mae or Freddie Mac.  Since November 1,2004, there has been no change in the ability of the Servicer to perform itsobligations hereunder which is reasonably likely to result in a MaterialAdverse Effect.

 

(k)                                  No Event of Default. No event has occurred and is continuing and no condition exists that constitutesan Event of Default or Potential Event of Default.

 

(l)                                     Not an Investment Company. The Servicer is not, and is not controlled by, an “investment company”within the meaning of the Investment Company Act of 1940, as amended, or isexempt from all provisions of such Act.

 

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(m)                               ERISA. Each of the Servicer and its ERISA Affiliates is in compliance in allmaterial respects with ERISA, and no Lien exists in favor of the PensionBenefit Guaranty Corporation (or any Benefit Plan) on any of the Collateral.

 

(n)                                 Collections. Only Collections are deposited into the Collection Account.

 

(o)                                 Mortgage Loans. On each Loan Date, Addition Date and Prepayment Date, the Servicerrepresents and warrants that (i) each Mortgage Loan and related propertythat is to be included in the Collateral on such date, as applicable, is anEligible Asset and (ii) each such Mortgage Loan and related propertysatisfies all of the criteria contained in Exhibit D hereto.

 

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ARTICLE IV

 

CONDITIONSPRECEDENT

 

SECTION 4.1.  Conditionsto Effectiveness of this Agreement.  This Agreement shall become effective on thefirst day on which the Facility Agent and the Group Agents shall have receivedthe following documents, instruments and fees, all of which shall be in a formand substance acceptable to the them (such day, the “Effective Date”):

 

(a)                                  A certificate of the Secretary ofeach of the Borrower, the Originator and the Servicer (i) certifying thenames and signatures of the officers and employees authorized on such Person’sbehalf to execute all of the Transaction Documents to which it is a party, (ii) attachinga copy of such Person’s organizational documents, including, as applicable, itscertificate of incorporation or formation, limited liability company agreementand Bylaws, (iii) attaching a copy of transaction resolutions of, asapplicable, the board of directors, board of managers or sole member of suchPerson and (iv) attaching a certificate of good standing of the Secretaryof State of the jurisdiction of organization of such Person.

 

(b)                                 A copy of a proper financingstatement naming the Borrower as the debtor and the Facility Agent, as securedparty, and other similar instruments or documents as may be necessary or, inthe reasonable opinion of the Facility Agent and the Group Agents, desirableunder the Relevant UCC of all appropriate jurisdictions or any comparable lawto perfect the Facility Agent’s security interest in all Collateral.

 

(c)                                  A copy of a proper financingstatement naming FIC as debtor, the Borrower as secured party, and the FacilityAgent as assignee of the secured party, and other similar instruments ordocuments as may be necessary or, in the reasonable opinion of the FacilityAgent and the Group Agents, desirable under the Relevant UCC of all appropriatejurisdictions or any comparable law to perfect the Collateral that is thesubject of the Purchase Agreement.

 

(d)                                 Copies of proper financingstatements, if any, necessary to terminate all security interests and otherrights of any Person in Collateral previously granted by the Borrower and theOriginator, together with copies of executed lien releases, if any, necessaryto terminate all security interests and other rights of any person inCollateral previously granted by the Borrower and the Originator.

 

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(e)                                  Certified copies of requests forinformation or copies, dated a date reasonably near the Effective Date, listingall effective financing statements which name any of the Originator and theBorrower (under their respective present names and any previous names) asdebtor and which are filed both in jurisdictions in which the filings were madepursuant to items (c), (d) and (e) and in those jurisdictions thatwould have been applicable under the Relevant UCC prior to the enactment ofRevised Article 9 thereof, together with copies of such financingstatements (none of which shall cover any Collateral or any other property thatis the subject of the Transaction Documents).

 

(f)                                    Evidence of the establishment of theCollateral Account.

 

(g)                                 Fully executed copies of allTransaction Documents.

 

(h)                                 An opinion of in-house counsel tothe Originator, the Borrower and the Servicer, re:  corporate matters.

 

(i)                                     An opinion of Hogan &Hartson L.L.P., special counsel to the Originator, the Servicer and theBorrower, re:  enforceability of theTransaction Documents to which each is a party and other corporate matters.

 

(j)                                     Opinions of special counsel to theOriginator and the Borrower, re: validity and perfection of the security interests granted by theOriginator and the Borrower under the Transaction Documents, and other matters.

 

(k)                                  An opinion of Hogan &Hartson L.L.P., special counsel to the Originator and the Borrower, re:  nonconsolidation.

 

(l)                                     An opinion of Hogan &Hartson L.L.P., special counsel to the Originator and the Borrower, re:  true sales.

 

(m)                               An opinion of counsel to theCustodian, re:  corporate matters.

 

(n)                                 Evidence that the fees specified inthe Fee Letters for payment on or prior to the Effective Date have been paid tothe related Group Agents.

 

(o)                                 A proforma ServicerReport for June 2005.

 

(p)                                 Such other documents, instruments,certificates, information and opinions of counsel as the Facility Agent and theGroup Agents may reasonably request.

 

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SECTION 4.2.   Conditions to Each Loan.  Each Loan is subject to the followingconditions precedent on the related Loan Date, Addition Date or Prepayment Date(collectively, the “Loan Conditions”):

 

(a)                                  Before and after giving effect tosuch Loan, all of the representations and warranties made by the Borrower, theOriginator and the Servicer in this Agreement and the other TransactionDocuments shall be true and correct;

 

(b)                                 Before and after giving effect tosuch Loan, no Event of Default or Potential Event of Default has occurred andis continuing;

 

(c)                                  The Termination Date has notoccurred;

 

(d)                                 After giving effect to such Loan,the Borrowing Base Test and the Pool Criteria are satisfied;

 

(e)                                  After giving effect to such Loan, (i) theFacility Outstanding Principal does not exceed the Facility Limit and (ii) eachGroup Facility Outstanding Principal shall not exceed the related GroupFacility Limit;

 

(f)                                    After giving effect to such Loan,the aggregate Outstanding Principal Balance of Wet-Ink Mortgage Loans includedin the Collateral shall not exceed the greater of (i) 20% of the FacilityOutstanding Principal and (ii) $100,000,000;

 

(g)                                 After giving effect to such Loan,the aggregate Outstanding Principal Balance of Fixed Rate Mortgage Loansincluded in the Collateral shall not exceed an amount equal to 50% of theOutstanding Principal Balance of all Mortgage Loans included in the Collateral;

 

(h)                                 On the related Loan Date or AdditionDate, as applicable, the Loan shall have an outstanding principal balance of noless than $25,000,000;

 

(i)                                     No event has occurred and iscontinuing that, in the sole discretion of the Facility Agent, is reasonablylikely to result in a Material Adverse Effect;

 

(j)                                     The credit, risk management andcollection policies of the Originator and the Servicer are satisfactory to theFacility Agent, and the Originator and the Servicer have adequate ability tounderwrite Mortgage Loans and to administer the Underwriting Policy and theServicing Standards;

 

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(k)                                  In connection with a Loan Date orAddition Date, the Borrower has delivered or caused to be delivered (i) tothe Facility Agent and each Group Agent a duly completed Loan Notice,substantially free of error, together with all required attachments and suchother additional information as any of them may reasonably request and (ii) tothe Custodian, all documents and other information required to be deliveredpursuant to the Custodial Agreement;

 

(l)                                     In connection with a Loan Date orAddition Date, the Facility Agent and the Group Agents shall have received fromthe Custodian (i) in the case of Wet-Ink Mortgage Loans, a copy of therelated Mortgage Loan Schedule for such Wet-Ink Mortgage Loans, togetherwith a duly completed Wet-Ink Mortgage Loan Trust Receipt and (ii) in thecase of Mortgage Loans other than Wet-Ink Mortgage Loans, (A) a copy of acumulative Mortgage Loan Schedule that reflects the new Mortgage Loans tobe included in the Collateral (other than Wet-Ink Mortgage Loans), (B) copiesof a cumulative Permitted Exception Report and cumulative Fatal ExceptionReport that reflects the new Mortgage Loans to be included in the Collateral(other than Wet-Ink Mortgage Loans) and (C) a copy of a cumulative TrustReceipt that reflects the new Mortgage Loans to be included in the Collateral(other than Wet-Ink Mortgage Loans); and

 

(m)                               In connection with a Loan Date orAddition Date, the Facility Agent and the Group Agents shall otherwise approveof the Mortgage Loans and related property to be included in the Collateral andthe information with respect thereto.

 

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ARTICLE V

 

COVENANTS

 

SECTION 5.1.  AffirmativeCovenants of Borrower. At all times from the Effective Date to the later to occur of (i) theTermination Date or (ii) the date on which the Facility OutstandingPrincipal has been reduced to zero and all other Aggregate Unpaids shall havebeen paid in full, unless the Group Agents shall otherwise consent in writing:

 

(a)                                  Financial Reporting. The Borrower will furnish to the Facility Agent and the Group Agents:

 

(i)                                     Annual Reporting. Within ninety (90) days after the close of the Originator’s fiscal year,audited financial statements for the Originator and the Borrower, in each caseprepared in accordance with GAAP on a consolidated and consolidating basisincluding balance sheets as of the end of such period, related statements ofoperations, shareholder’s/member’s equity and cash flows, accompanied by (A) anunqualified audit report certified by nationally recognized independentcertified public accountants prepared in accordance with GAAP, (B) anymanagement letter prepared by said accountants and (C) a certificate ofsaid accountants that, in the course of the foregoing, nothing has come totheir attention to cause such accountants to believe that any Event of Defaultor Potential Event of Default has occurred, or if, in the opinion of suchaccountants, any Event of Default or Potential Event of Default shall exist,stating the nature and status thereof. No later than sixty (60) days prior to each Scheduled Commitment ExpiryDate, an annual agreed upon procedures report prepared by a nationallyrecognized independent certified public accounting firm using criteria agreedupon between the Facility Agent and the Servicer, and which report shallotherwise be acceptable to the Facility Agent.

 

(ii)                                  Quarterly Reporting. Within thirty (30) days after the close of each fiscal quarter of theOriginator and the Borrower (commencing with the fiscal quarter ending December 31,2005), consolidated and consolidating unaudited balance sheets as at the closeof each such period and consolidated and consolidating related statements ofoperations, shareholder’s/member’s equity and

 

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cashflows for the period from the beginning of such fiscal year to the end of suchquarter, all certified by a senior financial officer of the Originator.

 

(iii)                               Monthly Reporting. On the dates specified in Section 2.10, a copy of a duly completedServicer Report.

 

(iv)                              Compliance Certificate. Together with the financial statements required hereunder and anyServicer Report, a compliance certificate signed by the Originator’s chieffinancial officer stating that (x) the attached financial statements have beenprepared in accordance with GAAP and accurately reflect the financial conditionof the Persons that are the subject of such financial statements as of the timeperiods to which such financial statements relate and (y) no Event of Defaultor Potential Event of Default exists, or if any Event of Default or PotentialEvent of Default exists, stating the nature and status thereof.

 

(v)                                 Shareholders Statements and Reports. Promptly upon the furnishing thereof to the shareholders of theOriginator, copies of all financial statements, reports and proxy statements sofurnished, if any.

 

(vi)                              S.E.C. Filings. Promptly upon the filing thereof, copies of all registration statementsand annual, quarterly, monthly or other regular reports which the Originator orany Affiliate of the Originator files with the Securities and ExchangeCommission, if any.

 

(vii)                           Notice of Certain Events. As soon as possible and in any event within two (2) Business Daysafter the Borrower or any of its Affiliates know or should have known of theoccurrence of an Event of Default or Potential Event of Default or any other eventthat is reasonably likely to result in a Material Adverse Effect, a statementof the chief financial officer or chief accounting officer of the Borrowersetting forth reasonable details of such event and the action which theBorrower proposes to take with respect thereto.

 

(viii)                        Change in Underwriting Policy andDebt Ratings.  Promptly, and no later than three (3) BusinessDays after the date of any material change in the Underwriting Policy, noticeof any such material change and an explanation therefor, together with, if theUnderwriting Policy is not otherwise available on the Originator’s

 

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Internetwebsite, a complete copy of the Underwriting Policy then in effect.  Promptly, and no later than three (3) BusinessDays after the date of any change in the Originator’s public or private debtratings, if any, a written certification of such Originator’s public andprivate debt ratings after giving effect to any such change.

 

(ix)                                ERISA. Promptly after the filing or receiving thereof, copies of all reportsand notices with respect to any Reportable Event (as defined in Title IV ofERISA) which the Borrower, the Originator, the Servicer or any ERISA Affiliateof any of them files under ERISA with the Pension Benefit Guaranty Corporationor the U.S. Department of Labor or which the Borrower, the Originator, theServicer or any ERISA Affiliates of any of them receives from the PensionBenefit Guaranty Corporation or the U.S. Department of Labor.

 

(x)                                   Other Information. Such other reports and information (including non-financial information)as the Facility Agent or the Group Agents may from time to time reasonablyrequest with respect to the Collateral and the Originator, the Borrower, theServicer or any Subsidiary of any of the foregoing.

 

(b)                                 Conduct of Business. The Borrower will carry on and conduct its business in substantially thesame manner and in substantially the same fields of enterprise as it ispresently conducted and will, and will cause the Originator to, do all thingsnecessary to remain duly organized, validly existing and in good standing as adomestic limited liability company or corporation (as applicable) in itsjurisdiction of organization and maintain all requisite authority to conductits business in each jurisdiction in which its business is conducted, except,in the case of the Originator, where the absence of such authority is notreasonably likely to result in a Material Adverse Effect.

 

(c)                                  Compliance with Laws. The Borrower will comply with all laws, rules, regulations, orders,writs, judgments, injunctions, decrees or awards to which it or its respectiveproperties may be subject.

 

(d)                                 Furnishing of Information andInspection of Records.  At itsexpense, the Borrower will furnish to the Facility Agent and the Group Agentsfrom time to time such information with respect to the Collateral as theFacility Agent or the Group Agents may reasonably request, including, withoutlimitation, listings identifying the Obligor and the Outstanding PrincipalBalance for each Mortgage Loan, together with an aging history of the MortgageLoans.  At its expense, the Borrower willat any time and from time to time during regular business

 

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hours and uponreasonable notice permit the Facility Agent and the Group Agents, or theirrespective agents or representatives, (i) to examine and make copies ofand abstracts from all Servicing Records and (ii) to visit the offices andproperties of the Borrower for the purpose of examining the Servicing Recordsand other related systems and information, and to discuss matters relating tothe Collateral or the performance of any such Person hereunder and under theother Transaction Documents to which such Person is a party with any of theofficers, directors, employees or independent public accountants of suchPerson, as applicable, having knowledge of such matters.

 

(e)                                  Keeping of Records and Books ofAccount.  The Borrower will maintain and implementadministrative and operating procedures (including, without limitation, anability to recreate records evidencing the Collateral in the event of thedestruction of the originals thereof), and keep and maintain, all documents,books, records and other information reasonably necessary or advisable for thecollection of the Collateral (including, without limitation, records adequateto permit the daily identification of each outstanding Mortgage Loan and allCollections of and adjustments to each outstanding Mortgage Loan).  The Borrower will give the Facility Agent andthe Group Agents notice of any material change in the administrative andoperating procedures of such Persons, as applicable, referred to in theprevious sentence.

 

(f)                                    Performance and Compliance withMortgage Loan Documents.  The Borrowerwill take no action to hinder or delay the timely and full compliance of theOriginator with all material provisions, covenants and other promises requiredto be observed by the Originator under the Mortgage Loan Documents related tothe Collateral.

 

(g)                                 Underwriting Policy; Servicing. The Borrower will comply in all material respects with the UnderwritingPolicy and Servicing Standards in regard to each Mortgage Loan and relatedCollateral.  Any Mortgage Loan originatedby FIC shall at all times be subserviced by an Eligible Subservicer pursuant toa binding and enforceable agreement between the Servicer and such EligibleSubservicer (copies of which, together with all amendments and modificationsthereto, shall be provided to the Facility Agent and the Group Agents).

 

(h)                                 Collections. The Borrower shall hold in trust and cause all Collections to bedeposited directly into the Collection Account within two (2) BusinessDays after receipt thereof.

 

(i)                                     Sale Treatment. The Borrower will not (i) account for (excluding for tax andaccounting purposes, which shall be in the discretion of the Borrower and theOriginator), or otherwise treat, the transactions contemplated by

 

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the PurchaseAgreement in any manner other than as sales of Mortgage Loans, or (ii) accountfor or otherwise treat the transactions contemplated by this Agreement in anymanner other than as loans made by the Lenders (or the Facility Agent on theirbehalf) secured by the Collateral.  Inaddition, the Borrower shall disclose (in a footnote or otherwise) in all ofits respective financial statements (including any such financial statementsconsolidated with any other Person’s financial statements) that the assets ofthe Originator and the Borrower are not available to satisfy the creditors ofany other Person.

 

(j)                                     Authorized Business. The Borrower shall not engage in any business not permitted by itsCertificate of Formation and Limited Liability Company Agreement as in effecton the Effective Date or as amended from time to time with the prior writtenconsent of the Facility Agent.

 

(k)                                  Organizational Documents. The Borrower shall only amend, alter, change or repeal its Certificateof Formation or Limited Liability Company Agreement with the prior writtenconsent of the Facility Agent (acting at the direction of the RequiredCommitted Lenders).

 

(l)                                     Solvency. The Borrower will at all times have assets sufficient (i) to enableit to pay its debts generally as they become due and (ii) such that itwill not be rendered insolvent by the transactions contemplated herein and inthe other Transaction Documents.

 

(m)                               Enforcement of Purchase Agreement. The Borrower shall use its best efforts to enforce all rights held by itunder the Purchase Agreement and shall not waive any breach of any covenantcontained thereunder without the prior written consent of the Facility Agent(acting at the direction of the Required Committed Lenders).

 

(n)                                 Separate Existence. The Borrower shall at all times until all of the Aggregate Unpaids arepaid in full:

 

(i)                                     maintain accurate and separatebooks, records and accounts, including, but not limited to, payroll andintercompany transaction accounts, maintain the Borrower’s own deposit accountor accounts, separate from those of any other Person, with commercial bankinginstitutions and ensure that (1) the funds of the Borrower will not bediverted to any other Person or for other than limited liability company usesof the Borrower and (2) such funds not be commingled with the funds of anyother Person;

 

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(ii)                                  at all times hold itself out to thepublic and all other Persons as a legal entity separate from its equity ownersand any other Person;

 

(iii)                               have a Board of Directors separatefrom that of its equity owners and any other Person;

 

(iv)                              file its own tax returns, if any, asmay be required under applicable law, to the extent (1) not part of aconsolidated group filing a consolidated return or returns or (2) nottreated as a division for tax purposes of another taxpayer, and pay any taxesso required to be paid under applicable law;

 

(v)                                 not commingle its assets with assetsof any other Person;

 

(vi)                              conduct its business in its own nameand strictly comply with all organizational formalities to maintain itsseparate existence;

 

(vii)                           maintain and issue separatefinancial statements (other than consolidated financial statements as requiredby generally accepted accounting principles and as permitted in the TransactionDocuments) prepared not less frequently than quarterly and prepared inaccordance with the generally accepted accounting principles set forth in theopinions and pronouncements of the Accounting Principles Board of the AmericanInstitute of Certified Public Accountants and statements and pronouncements ofthe Financial Accounting Standards Board or in such other statements by suchaccounting profession as in effect from time to time;

 

(viii)                        pay its own obligations only out ofits own funds;

 

(ix)                                maintain an arm’s lengthrelationship with its Affiliates and its equity owners including but notlimited entering into all material transactions between the Borrower and any ofits Affiliates, whether currently existing or hereafter entered into, only onan arm’s-length basis, it being understood and agreed that the transactionscontemplated in the Transaction Documents meet the requirements of this clause(ix);

 

(x)                                   pay the salaries of its ownemployees, if any and, to the extent that the Borrower shares the same officersor other

 

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employeesas any of its equity owners or Affiliates, the salaries of and the expensesrelated to providing benefits to such officers and other employees shall befairly allocated among such entities, and each such entity shall bear its fairshare of the salary and benefit costs associated with all such common officersand employees;

 

(xi)                                not hold out its credit or assets asbeing available to satisfy the obligations of others;

 

(xii)                             to the extent that the Borrowerjointly contracts with any of its equity owners or Affiliates to do businesswith vendors or service providers or to share overhead expenses, the costsincurred in so doing shall be allocated fairly among such entities, and eachsuch entity shall bear its fair share of such costs;

 

(xiii)                          to the extent that the Borrowercontracts or does business with vendors or service providers where the goodsand services provided are partially for the benefit of any other Person, thecosts incurred in so doing shall be fairly allocated to or among such entitiesfor whose benefit the goods or services are provided, and each such entityshall bear its fair share of such costs;

 

(xiv)                         either maintain office space separatefrom the office space of the Originator or its Affiliates or, to the extentthat the Borrower and any of its equity owners or Affiliates have offices inthe same location, there shall be a fair and appropriate allocation of overheadcosts among them, and each such entity shall bear its fair share of suchexpenses

 

(xv)                            use separate stationery, invoicesand checks;

 

(xvi)                         except as contemplated by theTransaction Documents, not pledge its assets for the benefit of any otherPerson;

 

(xvii)                      correct any known misunderstandingregarding its separate identity;

 

(xviii)                   maintain adequate capital in lightof its contemplated business purpose, transactions and liabilities;

 

(xix)                           cause its Board of Directors to meetat least annually or act pursuant to written consent and keep minutes of suchmeetings and actions and observe all other Delaware limited liability companyformalities;

 

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(xx)                              conduct its affairs strictly inaccordance with its Certificate of Formation and this Agreement and observe allnecessary, appropriate and customary corporate formalities, including, but notlimited to, holding all regular and special meetings of its Board of Directorsand equity owners appropriate to authorize all limited liability companyaction, keeping separate and accurate minutes of its meetings, passing allresolutions or consents necessary to authorize actions taken or to be taken;

 

(xxi)                           not assume or guarantee any of theliabilities of any other Person;

 

(xxii)                        not acquire any securities of itsequity owners;

 

(xxiii)                     cause the Directors, Officers,agents and other representatives of the Borrower to act at all times withrespect to the Borrower consistently and in furtherance of the foregoing and inthe best interests of the Borrower; and

 

(xxiv)                    take, or refrain from taking, as thecase may be, all other actions that are reasonably necessary to be taken or notto be taken in order to comply with this Section 5.1(n).

 

SECTION 5.2.  NegativeCovenants of the Borrower. At all times from the Effective Date to the later to occur of (i) theTermination Date or (ii) the date on which the Facility OutstandingPrincipal has been reduced to zero and all other Aggregate Unpaids shall havebeen paid in full, unless the Group Agents shall otherwise consent in writing:

 

(a)                                  No Sales, Liens, Etc. Except as otherwise provided herein and in the Purchase Agreement, theBorrower will not sell, assign (by operation of law or otherwise) or otherwisedispose of, or create or suffer to exist any Lien upon or the filing of anyfinancing statement with respect to (x) any of the Collateral, or (y)  the Collection Account or assign any right toreceive income in respect thereof (other than the Lien of the Facility Agenthereunder).

 

(b)                                 No Extension or Amendment ofMortgage Loans.  The Borrower will not extend, amend orotherwise modify the terms of any Mortgage Loan, or amend, modify or waive anyterm or condition of any Mortgage Loan Document related thereto, except inaccordance with the Underwriting Policy and the Servicing Standards, withoutthe prior written consent of the Facility Agent and the Group Agents.

 

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(c)                                  No Change in Business, UnderwritingPolicy or Servicing Standards.  The Borrowerwill not make any change in the character of its business or in theUnderwriting Policy or the Servicing Standards, which change would, in eithercase, impair the collectibility of any material portion of the Collateral orotherwise have a Material Adverse Effect.

 

(d)                                 No Mergers, Etc. The Borrower will not consolidate or merge with or into any otherPerson, or sell, lease or loan all or substantially all of its assets to anyother Person.

 

(e)                                  Change in Payment Instructions toObligors; Deposits to Collection Account.  The Borrowerwill not add or terminate any financial institution as the holder of theCollection Account or make any change in procedures regarding payments ofCollections or any change in its instructions to the financial institution holdingthe Collection Account regarding payment and deposits of Collections, withoutthe prior written consent of the Facility Agent and the Group Agents.  The Borrower will not, and will not permitthe Originator or the Servicer to, deposit or otherwise credit, or cause orpermit to be so deposited or credited, to the Collection Account cash or cashproceeds other than Collections of Collateral.

 

(f)                                    Change of Name, Etc. The Borrower will not change its name, identity, corporate form orjurisdiction of organization unless at least ten (10) days prior to theeffective date of any such change it delivers to the Facility Agent suchdocuments, instruments or agreements as are necessary or advisable to reflectsuch change and to continue the perfection of the Facility Agent’s securityinterest in the Collateral.

 

(g)                                 Amendments to Purchase Agreement. The Borrower will not consent to any amendment, modification or waiverof, or supplement to, any provision of the Purchase Agreement, except with theprior written consent of the Group Agents; nor shall the Borrower take anyother action under the Purchase Agreement that is inconsistent with the termsof this Agreement or the Purchase Agreement.

 

(h)                                 Other Debt. Except as provided for herein, the Borrower will not create, incur,assume or suffer to exist any indebtedness, whether current or funded, or anyother liability other than (i) indebtedness of the Borrower under or asspecifically permitted by the Transaction Documents and (ii) otherindebtedness with Persons who have not executed an agreement not to institutean insolvency proceeding against the Borrower in substantially the form of Section 10.8in an amount not to exceed $10,500 at any one time outstanding.

 

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(i)                                     ERISA Matters. The Borrower will not, and will not permit the Originator to, (i) engageor permit any of its respective ERISA Affiliates to engage in any prohibitedtransaction (as defined in Section 4975 of the Code and Section 406of ERISA) for which an exemption is not available or has not previously beenobtained from the U.S. Department of Labor; (ii) permit to exist anyaccumulated funding deficiency (as defined in Section 302(a) of ERISAand Section 412(a) of the Code) or funding deficiency with respect toany Benefit Plan other than a Multiemployer Plan; (iii) fail to make anypayments to any Multiemployer Plan that the Borrower, the Originator or anyERISA Affiliate of any of them is required to make under the agreement relatingto such Multiemployer Plan or any law pertaining thereto, or permit an ERISAAffiliate of any of them to fail to make any such material payments to anyMultiemployer Plan such ERISA Affiliate is so required to make; (iv) terminateany Benefit Plan so as to result in any liability; or (v) permit to existany occurrence of any reportable event described in Title IV of ERISA whichrepresents a material risk of a liability to the Borrower, the Originator orany ERISA Affiliate of any of them under ERISA or the Code, if such prohibitedtransactions, accumulated funding deficiencies, payments, terminations andreportable events occurring within any fiscal year of any of them, in theaggregate, involve a payment of money or an incurrence of liability by any ofthem or any ERISA Affiliate of any of them.

 

(j)                                     Payments to the Originator. With respect to any Mortgage Loan and related property sold orcontributed by the Originator to the Borrower, the Borrower shall effect suchsale or contribution under, and pursuant to the terms of, the PurchaseAgreement, including, without limitation, the payment by the Borrower ofconsideration equal to the purchase price for such Mortgage Loan and relatedproperty as required by the terms of the Purchase Agreement.

 

(k)                                  Enforcement of Rights and Remedies. The Borrower agrees to take all action (or to refrain from takingaction) reasonably necessary or advisable to enforce its rights and remediesunder the Purchase Agreement and to cause the parties to the Purchase Agreementto comply with their representations, warranties, covenants, duties andobligations.  In determining whether ornot to take action (or to refrain from taking action) under the PurchaseAgreement, the Borrower shall (i) consult with (and, after an Event ofDefault, take direction from) the Facility Agent and the Group Agents and (ii) takeinto account with its own interests the significant interests of the FacilityAgent, the Group Agents and the Lenders under this Agreement and in theCollateral.  Notwithstanding the foregoing,the Borrower shall not be required to take any action (or to refrain fromtaking action) in contravention of applicable laws, rules, regulations and theterms of the Transaction Documents and the Mortgage Loan Documents.  

 

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SECTION 5.3.  Covenantsof the Servicer.  Atall times from the Effective Date to the later to occur of (i) theTermination Date or (ii) the date on which the Facility OutstandingPrincipal has been reduced to zero and all other Aggregate Unpaids shall havebeen paid in full, unless the Group Agents shall otherwise consent in writing:

 

(a)                                  Conduct of Business. The Servicer will, and will cause the Originator to, carry on andconduct its business in substantially the same manner and in substantially thesame fields of enterprise as it is presently conducted and will, and will causethe Originator to, do all things necessary to remain duly incorporated, validlyexisting and in good standing as a domestic corporation in its jurisdiction ofincorporation and maintain all requisite authority to conduct its business ineach jurisdiction in which its business is conducted except, in the case of theOriginator, where the absence of such authority is not reasonably likely toresult in a Material Adverse Effect.

 

(b)                                 Compliance with Laws and Agreements. The Servicer will, and will cause the Originator to, (i) complywith all laws, rules, regulations, orders, writs, judgments, injunctions,decrees or awards to which it or its respective properties may be subject and (ii) performall of its obligations under each Transaction Document, Mortgage Loan andMortgage Loan Document to which it is a party, except where the failure tocomply and/or perform is not reasonably likely to result in a Material AdverseEffect.

 

(c)                                  Furnishing of Information andInspection of Records.  The Servicerwill, and will cause the Originator to, furnish to the Facility Agent and theGroup Agents from time to time such information and reports with respect to theServicer, the Originator and the Collateral as the Facility Agent or the GroupAgents may reasonably request (including, without limitation, listingsidentifying the Obligor and the Outstanding Principal Balance for each MortgageLoan, together with an aging history of the Mortgage Loans).  The Servicer will, and will cause theOriginator to, at any time and from time to time during regular business hoursand upon reasonable notice permit the Facility Agent and the Group Agents, ortheir respective agents or representatives, (i) to examine and make copiesof and abstracts from all Servicing Records and (ii) to visit the officesand properties of the Servicer or the Originator, as applicable, for thepurpose of examining the Servicing Records and other related systems andinformation, and to discuss matters relating to the Collateral or theperformance of any such Person hereunder and under the other TransactionDocuments to which such Person is a party with any of the officers, directors,employees or independent public accountants of such Person, as applicable,having knowledge of such matters.

 

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(d)                                 Keeping of Records and Books ofAccount.  The Servicer will, and will cause theOriginator to, maintain and implement administrative and operating procedures(including, without limitation, an ability to recreate records evidencing theCollateral in the event of the destruction of the originals thereof), and keepand maintain, all documents, books, records and other information reasonablynecessary or advisable for the collection of the Collateral (including, withoutlimitation, records adequate to permit the daily identification of eachoutstanding Mortgage Loan and all Collections of and adjustments to eachoutstanding Mortgage Loan).  The Servicerwill, and will cause the Originator to, give the Facility Agent and the GroupAgents notice of any material change in the administrative and operatingprocedures of such Persons, as applicable, referred to in the previous sentence.

 

(e)                                  Underwriting Policy; Servicing. The Servicer will, and will cause the Originator to, comply in allmaterial respects with the Underwriting Policy and Servicing Standards inregard to each Mortgage Loan and related Collateral.  Any Mortgage Loan originated by FIC shall atall times be subserviced by an Eligible Subservicer pursuant to a binding andenforceable agreement between the Servicer and such Eligible Subservicer(copies of which, together with all amendments and modifications thereto, shallbe provided to the Facility Agent and the Group Agents).

 

(f)                                    Collections. The Servicer shall, and shall cause the Originator and the Borrower to,hold in trust and to cause all Collections to be deposited directly into theCollection Account within two (2) Business Days after receipt thereof.

 

(g)                                 Solvency. The Servicer will at all times have assets sufficient (i) to enableit to pay its debts generally as they become due and (ii) such that itwill not be rendered insolvent by the transactions contemplated herein and inthe other Transaction Documents.

 

(h)                                 No Extension or Amendment ofMortgage Loans.  The Servicer will not, and will not permitthe Originator to, extend, amend or otherwise modify the terms of any MortgageLoan, or amend, modify or waive any term or condition of any Mortgage LoanDocument related thereto, except in accordance with the Underwriting Policy andthe Servicing Standards, without the prior written consent of the FacilityAgent and the Group Agents.

 

(i)                                     No Change in Business, UnderwritingPolicy or Servicing Standards.  The Servicerwill not, and will not permit the Originator to, make any change in thecharacter of its business or in the Underwriting Policy or the

 

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Servicing Standards,which change would, in either case, impair the collectibility of any materialportion of the Collateral or otherwise have a Material Adverse Effect.

 

(j)                                     Change in Payment Instructions toObligors; Deposits to Collection Account.  The Servicerwill not, and will not permit the Originator to, add or terminate any financialinstitution as the holder of the Collection Account or make any change inprocedures regarding payments of Collections or any change in its instructionsto the financial institution holding the Collection Account regarding paymentand deposits of Collections, without the prior written consent of the FacilityAgent and the Group Agents.  The Servicerwill not, and will not permit the Originator to, deposit or otherwise credit,or cause or permit to be so deposited or credited, to the Collection Accountcash or cash proceeds other than Collections or proceeds of Collateral.

 

(k)                                  Maintenance of Insurance. The Servicer shall, and shall cause the Originator to, at all timesmaintain errors and omissions insurance and/or mortgage impairment insuranceand blanket fidelity bond coverage in such amounts as are in effect on theEffective Date (as disclosed to the Facility Agent and the Group Agents inwriting), and shall not reduce such coverage without the prior written consentof the Facility Agent and the Group Agents, and shall also maintain such otherinsurance with financially sound and reputable insurance companies, and withrespect to property and risks of a character usually maintained by Personsengaged in the same or similar business similarly situated, against loss,claims, damage and liability of the kinds and in the amounts customarilymaintained by such Persons.

 

(l)                                     Committed Warehouse Facility. While FIC or an Affiliate of FIC is the Servicer, the Servicer shallcause the Originator to maintain, at all times during the term of thisAgreement, one or more committed loan facilities with one or more nationallyrecognized and established lenders (other than the Facility Agent and itsAffiliates) that, in the aggregate on a committed basis, have an aggregatecommitted amount of funds available to the Originator equal to at least$500,000,000.

 

(m)                               Minimum Consolidated AdjustedTangible Net Worth.  While FIC or an Affiliate of FIC is theServicer, the Servicer shall cause the Originator to maintain, at all times, aminimum Consolidated Adjusted Tangible Net Worth of at least $250,000,000.

 

(n)                                 Indebtedness to ConsolidatedAdjusted Tangible Net Worth Ratio.  While FIC oran Affiliate of FIC is the Servicer, the Servicer shall cause the Originator’s (i) combinedratio of consolidated Indebtedness to Consolidated Adjusted Tangible Net Worthnot to exceed 16:1 at any time and

 

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(ii) combinedratio of consolidated Indebtedness (net of non-recourse Indebtedness) toConsolidated Adjusted Tangible Net Worth not to exceed 10:1 at any time.

 

(o)                                 Maintenance of Liquidity. While FIC or an Affiliate of FIC is the Servicer, the Servicer shallcause the Originator to maintain, on a combined basis, cash, cash equivalentsand unencumbered mortgage loans held for sale or securitization of at least$15,000,000.

 

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ARTICLE VI

 

ADMINISTRATIONAND COLLECTIONS

 

SECTION 6.1.  Appointmentof Servicer.  Theservicing, administering and collection of the Mortgage Loans and relatedCollateral shall be conducted by such Person (the “Servicer”) as may bedesignated from time to time in accordance with this Section 6.1.  Until the Facility Agent (acting at thedirection of the Required Committed Lenders) gives notice to the Borrower ofthe designation of a new Servicer pursuant to the next sentence, FIC is herebydesignated as, and hereby agrees to perform the duties and obligations of, theServicer under this Agreement and the other Transaction Documents.  If an Event of Default has occurred and iscontinuing, the Facility Agent may (with the consent of the Required CommittedLenders), and upon the direction of the Required Committed Lenders the FacilityAgent shall, designate as Servicer any Person (including itself) to succeed FICor any successor Servicer, on the condition in each case that any such Personso designated shall agree in writing to perform the duties and obligations ofthe Servicer pursuant to the terms hereof, and such Person can perform itsobligations under this Agreement and the other Transaction Documents incompliance with all applicable laws, rules or regulations.  If an Event of Default has occurred and iscontinuing, the Facility Agent (acting at the direction of the RequiredCommitted Lenders) may notify any Obligor of the designation of a successorServicer.  FIC may not delegate any ofits rights, duties or obligations hereunder except to an Eligible Subservicerupon notice to the Facility Agent; provided that such delegation shallnot relieve FIC of its duties and obligations as Servicer hereunder and underthe other Transaction Documents.

 

SECTION 6.2.  Dutiesof Servicer.  (a) The Servicer shall take or cause to be taken all such action as may benecessary or advisable to collect amounts due under each Mortgage Loan fromtime to time, with such servicing and collection activities to be in compliancewith all applicable laws, rules and regulations, with reasonable care anddiligence, and in accordance with the Transaction Documents and the ServicingStandards.  In performing its dutieshereunder and under the other Transaction Documents, the Servicer shall (i) take,or refrain from taking, action in accordance with the Servicing Standards, theTransaction Documents and the instructions of the Facility Agent, (ii) complywith all applicable Federal, state and local laws, rules, regulations andorders, (iii) maintain all Federal, state and local licenses, permits andconsents necessary or advisable in each applicable jurisdiction for it toperform its duties as Servicer as described above and (iv) not impair inany manner the rights of the Facility Agent, the Group Agents and the Lendersin any Collateral or proceeds of Collateral. If the Servicer shall discover that it, the

 

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Borrower or the Originator (orany agent on behalf of either of them) has failed to perform such Person’sobligations under any Transaction Document or any Mortgage Loan Document, theServicer shall provide immediate written notice to the Facility Agent and theGroup Agents.

 

Each of the Borrower, the Facility Agent, the Group Agents and theLenders hereby appoints as its agent the Servicer, from time to time designatedpursuant to Section 6.1 hereof, to enforce its respective rights andinterests in, to and under the Collateral, and FIC hereby accepts suchappointment on the Effective Date.  Tothe extent permitted by applicable law, each of the Borrower and FIC (to theextent not then acting as Servicer hereunder) hereby grants to any Servicerappointed hereunder an irrevocable power of attorney to take in the Borrower’sand/or FIC’s name and on behalf of the Borrower or FIC any and all stepsnecessary or desirable, in the reasonable determination of the Servicer, tocollect all amounts due under any and all Collateral, including, withoutlimitation, endorsing the Borrower’s and/or the FIC’s name on checks and otherinstruments constituting the Collateral. The Borrower shall deliver or cause to be delivered to the Servicer, andthe Servicer shall hold in trust for the Borrower, the Facility Agent, theGroup Agents and the Lenders, in accordance with their respective interests,all Servicing Records relating to the Collateral.  Notwithstanding anything to the contrarycontained herein, if an Event of Default has occurred and is continuing, theFacility Agent shall have the absolute and unlimited right to direct theServicer (whether the Servicer is FIC or any other Person) to commence orsettle any legal action to enforce collection of any Mortgage Loan or toforeclose upon or repossess any Collateral. The Servicer shall not make the Facility Agent, the Group Agents or theLenders a party to any litigation relating to a portion of the Collateralwithout the prior written consent of such Person.  The Servicer shall not be liable to theFacility Agent, the Group Agents or the Lenders for any action or inaction thatwas directed by the Facility Agent or the Group Agents; provided thatthe foregoing shall not apply to any failure of the Servicer to follow thedirections of the Facility Agent or in the case of the gross negligence, badfaith or willful misconduct of the Servicer.

 

(b)                                 The Servicer shall, as soon aspracticable following receipt thereof, return to the Person entitled theretoany collections of any indebtedness of any Person which is not related to theCollateral.  If the Servicer is not FICor an Affiliate of FIC, the Servicer, by giving thirty (30) days’ prior writtennotice to the Facility Agent, may revise the Servicing Fee; providedthat such revised Servicing Fee shall be a reasonable fee agreed upon by theServicer and the Facility Agent (acting at the direction of the RequiredCommitted Lenders) on an arms-length basis reflecting rates and termsprevailing at such time.  The Servicer,if other than FIC or an Affiliate of FIC, shall as soon as practicable upondemand, deliver to the Originator all Servicing Records in its possession whichevidence or relate to indebtedness of an Obligor which is not a part of theCollateral.

 

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(c)                                  Notwithstanding anything to thecontrary contained in this Article VI, the Servicer, if not FIC or anAffiliate of FIC, shall have no obligation to collect, enforce or take anyother action described in this Article VI with respect to any indebtednessthat is not included in the Collateral other than to deliver to the Personsentitled thereto the collections and documents with respect to any suchindebtedness as described in Section 6.2(b) hereof.

 

SECTION 6.3.  RightsAfter Designation of New Servicer or an Event of Default.  At any time following the designation of areplacement Servicer pursuant to Section 6.1 hereof or following an Eventof Default:

 

(i)                                     The Facility Agent may (with theconsent of the Required Committed Lenders) or shall, at the direction of theRequired Committed Lenders, direct the underlying mortgage loan borrowers to payall amounts payable under any Mortgage Loan directly to the Facility Agent orits designee for the benefit of the Lenders and Group Agents.

 

(ii)                                  The Borrower and FIC shall, at therequest of the Facility Agent (with the consent of the Required CommittedLenders) and at the Borrower’s expense, give notice of the Facility Agent’ssecurity interest in the Collateral to each Obligor and direct that payments bemade directly to the Facility Agent or its designee.

 

(iii)                               The Borrower and FIC shall, at therequest of the Facility Agent (with the consent of the Required CommittedLenders), (A) assemble all of the Servicing Records, and shall make thesame available to the Facility Agent or its designee at a place selected by theFacility Agent or its designee, and (B) segregate all cash, checks andother instruments received by it from time to time constituting Collections andother proceeds of Collateral in a manner acceptable to the Facility Agent andshall, promptly upon receipt, remit all such cash, checks and instruments, dulyendorsed or with duly executed instruments of transfer, to the Facility Agentor its designee.

 

(iv)                              The Borrower and FIC herebyauthorize the Facility Agent to take any and all steps in the Borrower’s or FIC’sname and on behalf of the Borrower and FIC necessary or desirable, in thereasonable determination of the Facility Agent (with the consent of theRequired Committed Lenders), to collect all amounts due under any and allCollateral, including, without limitation, endorsing the Borrower’s or FIC’sname on checks and other

 

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instrumentsrepresenting Collections and other proceeds of Collateral and enforcing theMortgage Loan Documents relating to the Collateral.

 

SECTION 6.4.   No Liability.  Anything herein to the contrarynotwithstanding, (i) neither the Facility Agent, the Group Agents nor anyof the Lenders shall have any obligation or liability with respect to anyMortgage Loan or related Collateral, nor shall it be obligated to perform anyof the obligations of the Originator thereunder and (ii) neither theBorrower or its Affiliates shall have any liability with respect to any privateplacement memorandum or other disclosure delivered by or on behalf of a ConduitLender to holders of such Conduit Lender’s Commercial Paper.

 

SECTION 6.5.  ServicerIndemnification.  TheServicer shall indemnify and hold harmless the Facility Agent, the Group Agentsand the Lenders and their permitted assigns (and their respective directors,officers, employees and agents), from and against any loss, liability, claim,expense, damage or injury suffered or sustained by reason of any breach by theServicer of any of its representations, warranties or covenants contained inthis Agreement and the other Transaction Documents, including any judgment,award, settlement, reasonable attorneys’ fees and other costs or expensesincurred in connection with the defense of any actual action, proceeding orclaim; provided that the Servicer shall not indemnify any such Person ifsuch acts or omissions were attributable to gross negligence or willfulmisconduct by such Person or its officers, directors, agents or Affiliates; providedfurther that this Section 6.5 shall not apply to any lossesattributable to the financial inability of an Obligor to pay.  The provisions of such indemnity shall rundirectly to and be enforceable by any of the Facility Agent, the Group Agentsand the Lenders.  The provisions of this Section 6.5shall survive the termination of this Agreement.

 

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ARTICLE VII

 

EVENTS OFDEFAULT

 

SECTION 7.1.  Eventsof Default.  Theoccurrence of any one or more of the following events shall constitute an Eventof Default:

 

(a)                                  the Borrower, the Originator or theServicer (if the Servicer is FIC or an Affiliate of FIC) shall fail to make anypayment or deposit to be made by it hereunder or under any of the TransactionDocuments when due hereunder or thereunder; or

 

(b)                                 any representation, warranty,certification or statement made by the Borrower, the Originator or the Servicer(if the Servicer is FIC or an Affiliate of FIC) in this Agreement, any otherTransaction Document to which it is a party or in any other document deliveredpursuant hereto or thereto shall prove to have been incorrect in any materialrespect when made, and such inaccuracy has not been previously remedied inaccordance with Section 2.8 of this Agreement; or

 

(c)                                  the Borrower, the Originator or theServicer (if the Servicer is FIC or an Affiliate of FIC) shall default in theperformance of any material covenant, obligation or undertaking (other thanthose covered by clause (a) above); or

 

(d)                                 failure of the Borrower, theOriginator or the Servicer (if the Servicer is FIC or an Affiliate of FIC) topay when due any amounts due under any agreement to which any such Person is aparty and under which any Indebtedness greater than $20,000,000 ($10,500 in thecase of the Borrower) is governed (after giving effect to any applicable cureperiods); or any Indebtedness owing by the Borrower, the Originator or theServicer (if the Servicer is FIC or an Affiliate of FIC) greater than$20,000,000 ($10,500 in the case of the Borrower) shall be declared to be dueand payable or required to be prepaid (other than by a regularly scheduledpayment) prior to the date of maturity thereof; or

 

(e)                                  any Event of Bankruptcy shall occurwith respect to the Borrower, the Originator or the Servicer (if the Serviceris FIC or an Affiliate of FIC); or

 

(f)                                    the Facility Agent, on behalf of theLenders and the Group Agents, shall, for any reason, fail or cease to have avalid and perfected ownership or security interest in any material portion ofCollateral with respect

 

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thereto (asdetermined by the Facility Agent in its sole good faith discretion) free andclear of any Liens (other than the Lien of the Facility Agent hereunder); or

 

(g)                                 the Purchase Termination Date shallhave occurred under the Purchase Agreement; or

 

(h)                                 any change in the property,business, financial condition or operations of the Borrower, the Originator,the Servicer or any of their affiliates shall occur, and such changeconstitutes a material impairment of any such Person’s ability to perform itsobligations under the Transaction Documents (in each case as determined by theFacility Agent in its sole good faith discretion), or any other condition shallexist which, in the Facility Agent’s sole good faith discretion, constitutes amaterial impairment of the Borrower’s ability to perform its obligations underthe Transaction Documents; or

 

(i)                                     any of the Borrower, the Originatoror the Servicer shall be required to register as an “investment company” underthe Investment Company Act of 1940, as amended; or

 

(j)                                     any report of nationally recognizedindependent auditors of the Originator or the Servicer includes a “goingconcern” or similar qualification; or

 

(k)                                  a notice of Lien has been filedagainst the Borrower, the Originator or the Servicer or any of their ERISAAffiliates covering any portion of the Collateral under Section 412(n) ofthe Code or Section 302(f) of ERISA for a failure to make a requiredinstallment or other payment to a plan to which such provisions apply; or

 

(l)                                     the failure of FIC at any time to bequalified as a “real estate investment trust” as defined in Section 856 ofthe Code; or

 

(m)                               a Change of Control shall haveoccurred; or

 

(n)                                 the failure at any time to have aPerson satisfying the definition of “Eligible Subservicer” obligated to performthe duties of Eligible Subservicer with respect to Mortgage Loans and relatedproperty originated by the Originator; or

 

(o)                                 the Yield Test is not satisfied onany date of determination, and such condition continues unremedied for two (2) BusinessDays; or

 

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(p)                                 the Borrowing Base Test is notsatisfied, and such condition continues unremedied for three (3) consecutiveSettlement Dates; or

 

(q)                                 the Facility Outstanding Principalexceeds 94.5% of the aggregate Market Value of all Mortgage Loans included inthe Collateral, and such condition continues unremedied for two (2) BusinessDays after the Facility Agent provides notice to the Borrower or the Servicer;or

 

(r)                                    any of the Pool Criteria are notsatisfied, and such condition continues unremedied for ten (10) BusinessDays.

 

SECTION 7.2.  RemediesUpon the Occurrence of an Event of Default.  (a)  If an Event of Default has occurredand is continuing, the Facility Agent may (with the consent of the RequiredCommitted Lenders), or at the direction of the Required Committed Lendersshall, by notice to the Borrower and the Servicer, declare the Termination Dateto have occurred; provided, however, that in the case of anyevent described in Section 7.1(e) above, the Termination Date shallbe deemed to have occurred automatically upon the occurrence of suchevent.  At all times after thedeclaration or automatic occurrence of the Termination Date pursuant to this Section 7.2(a),the Base Rate plus 2% shall be the Yield Rate applicable to the FacilityOutstanding Principal and, if an Event of Default has occurred, all AggregateUnpaids shall become immediately due and payable.  If an event or condition shall have occurredwhich constitutes a Potential Event of Default, the Facility Agent may (at thedirection of the Required Committed Lenders), by notice to the Borrower,declare such event or condition a Potential Event of Default.

 

(b)                                 In addition, if the Termination Datehas been declared pursuant to Section 7.2(a), (i) the Facility Agent,on behalf of the Lenders and the Group Agents, shall have all of the rights andremedies provided to a secured creditor under the Relevant UCC and otherapplicable law in respect thereto, (ii) the Facility Limit shall bereduced as of each calendar date thereafter to equal the Facility OutstandingPrincipal as of such date, and (iii) the Facility Agent, at the directionof the Required Committed Lenders, shall take any other action available to itunder this Agreement and the other Transaction Documents (including, but notlimited to, exercising its rights under Section 2.7 and Article VIhereof, under the Custodial Agreement and its rights of control of theCollection Account in accordance with the Account Control Agreement).

 

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ARTICLE VIII

 

INDEMNIFICATION;EXPENSES; RELATED MATTERS

 

SECTION 8.1.  Indemnitiesby the Borrower. Without limiting any other rights which the Facility Agent, the GroupAgents or the Lenders may have hereunder or under applicable law, the Borrowerhereby agrees to indemnify the Facility Agent, the Group Agents and the Lendersand any of their successors and permitted assigns and their respectiveofficers, directors, agents and employees (collectively, “IndemnifiedParties”) from and against any and all damages, losses, claims,liabilities, costs and expenses, including, without limitation, reasonableattorneys’ fees (which such attorneys may be employees of the Facility Agent orthe Group Agents) and disbursements (all of the foregoing being collectivelyreferred to as “Indemnified Amounts”) awarded against or incurred by anyof them in any action or proceeding between the Borrower and its agents, on theone hand, and any of the Indemnified Parties or between any of the IndemnifiedParties and any third party or otherwise, on the other hand, arising out of oras a result of this Agreement, the other Transaction Documents, the interests,either directly or indirectly, of the Facility Agent, the Group Agents or theLenders in the Collateral or any of the other transactions contemplated herebyor thereby, excluding, however, (i) Indemnified Amounts to the extentresulting from gross negligence, bad faith or willful misconduct on the part ofan Indemnified Party and (ii) recourse (except as otherwise specificallyprovided in this Agreement) for Mortgage Loans that are uncollectible forreasons other than as a result of the actions or omissions of the Borrower andits Affiliates.  Without limiting the generalityof the foregoing, but subject in all respects to the limitations set forth inclauses (i) and (ii) above, the Borrower shall indemnify eachIndemnified Party for Indemnified Amounts relating to or resulting from:

 

(a)                                  any representation or warranty madeby the Borrower or any officers or agents of the Borrower under or inconnection with this Agreement, any of the other Transaction Documents, anyServicer Report or any other information or report delivered by any of thempursuant hereto or thereto, which shall have been false or incorrect in anymaterial respect when made;

 

(b)                                 the failure by the Borrower tocomply with any applicable law, rule, regulation or order with respect to anyitem of Collateral, or the nonconformity of any Mortgage Loan or Mortgage LoanDocument with any such applicable law, rule, regulation or order;

 

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(c)                                  the failure to vest and maintainvested in the Facility Agent, for the benefit of the Lenders and the GroupAgents, an undivided perfected security interest in the Collateral, free andclear of any Lien (other than the Lien of the Facility Agent hereunder);

 

(d)                                 the failure to file, or any delay infiling, financing statements, continuation statements, or other similar instrumentsor documents under the Relevant UCC or other applicable laws with respect toany item of Collateral;

 

(e)                                  any dispute, claim, offset ordefense (other than discharge in bankruptcy) of an Obligor to the payment ofany Mortgage Loan (including, without limitation, a defense based on suchMortgage Loan or related Mortgage Loan Documents not being legal, valid andbinding obligation of such Obligor enforceable against it in accordance withits terms), or any other claim, loss or liability arising in connection with orresulting from such Mortgage Loan;

 

(f)                                    any failure of the Borrower or anyagent of the Borrower to perform its duties or obligations in accordance withthe provisions of this Agreement and the other Transaction Documents;

 

(g)                                 any products liability claim orpersonal injury or property damage suit or other similar or related claim oraction of whatever sort arising out of or in connection with any Mortgage Loan,any Mortgaged Property or the Mortgage Loan Documents, including any violationor alleged violation of any environmental law, rule, regulation or order or anyconsumer credit laws, including, without limitation, laws, rules, regulationsor orders with respect to unfair or deceptive lending practices and predatorylending practices, any truth-in-lending act and real estate procedures act;

 

(h)                                 any Loan made with respect to anyitem of Collateral that does not constitute an Eligible Asset;

 

(i)                                     the failure by the Borrower or anyagent of the Borrower to comply with any term, provision or covenant made by itcontained in this Agreement or any of the other Transaction Documents to whichit is a party;

 

(j)                                     the failure to pay when due anytaxes by the Borrower or its agents, including without limitation, sales,excise or personal property taxes payable in connection with any of theCollateral;

 

(k)                                  any repayment by any IndemnifiedParty of any amount previously distributed in reduction of Facility OutstandingPrincipal which such Indemnified Party believes in good faith is required to bemade;

 

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(l)                                     the commingling of Collections ofCollateral by the Borrower or its agents at any time with other funds that donot constitute Collections or proceeds of Collateral;

 

(m)                               any investigation, litigation orproceeding related to this Agreement, any of the other Transaction Documents,the Mortgage Loan Documents, the use of proceeds of Loans, the Facility Agent’ssecurity interest in the Collateral, or any item of Collateral;

 

(n)                                 the failure of any bank or otherfinancial institution to remit any Collections or proceeds of Collateralpursuant to the instructions of the Servicer, the Borrower or the FacilityAgent (to the extent such Person is entitled to give such instructions inaccordance with the terms hereof and under applicable law) whether by reason ofthe exercise of set-off rights or otherwise (unless the set-off is made by aLender);

 

(o)                                 any inability to obtain any judgmentin or utilize the court or other adjudication system of, any state in which anObligor may be located as a result of the failure of the Borrower or its agentsto qualify to do business or file any notice of business activity report or anysimilar report;

 

(p)                                 any failure of the Borrower to givereasonably equivalent value to the Originator in consideration of the purchaseby the Borrower from the Originator of any Mortgage Loan and related property,or any attempt by any Person to void, rescind or set-aside any such transferand sale (or purported transfer and sale) under statutory provisions or commonlaw or equitable action, including, without limitation, any provision of theBankruptcy Code; or

 

(q)                                 any action taken by the Borrower orits agents in the enforcement or collection of any item of Collateral.

 

SECTION 8.2.  Indemnityfor Reserves and Expenses. (a)  If after the date hereof, the adoption of any Law or bankregulatory guideline or any amendment or change in the interpretation of anyexisting or future Law or bank regulatory guideline by any Official Body chargedwith the administration, interpretation or application thereof, or thecompliance with any directive of any Official Body (in the case of any bankregulatory guideline, whether or not having the force of Law):

 

(i)                                     shall impose, modify or deemapplicable any reserve, special deposit or similar requirement (including,without limitation, any such requirement imposed by the Board of Governors ofthe Federal Reserve System) against assets of, deposits with or for

 

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theaccount of, or credit extended by, any Indemnified Party or shall impose on anyIndemnified Party or on the United States market for certificates of deposit orthe London interbank market any other condition affecting this Agreement, theother Transaction Documents, the ownership, maintenance or financing of theCollateral or payments of amounts due hereunder or its obligation to advancefunds hereunder or under the other Transaction Documents; or

 

(ii)                                  imposes upon any Indemnified Partyany other expense (including, without limitation, reasonable attorneys’ feesand expenses, and expenses of litigation or preparation therefor in contestingany of the foregoing) with respect to this Agreement, the other TransactionDocuments, the ownership, maintenance or financing of the Collateral orpayments of amounts due hereunder or its obligation to advance funds hereunderor otherwise in respect of this Agreement or under the other TransactionDocuments,

 

and the resultof any of the foregoing is to increase the cost to such Indemnified Party ofthis Agreement, the other Transaction Documents, the maintenance or financingof the Collateral, the obligations hereunder, the funding of any Loanshereunder or under the other Transaction Documents, by an amount deemed by suchIndemnified Party to be material, then, on the next succeeding Settlement Dateafter demand therefor by such Indemnified Party through its related GroupAgent, the Borrower shall pay to such Group Agent, for the benefit of suchIndemnified Party, such additional amount or amounts as will compensate suchIndemnified Party for such increased cost or reduction.

 

(b)                                 If any Indemnified Party shall havedetermined that after the date hereof, the adoption of any applicable Law orbank regulatory guideline regarding capital adequacy, or any change therein, orany change in the interpretation thereof by any Official Body, or any directiveregarding capital adequacy (in the case of any bank regulatory guideline,whether or not having the force of law) of any such Official Body, has theeffect of reducing the rate of return on capital of such Indemnified Party (orits parent) as a consequence of such Indemnified Party’s obligations hereunderor with respect hereto to a level below that which such Indemnified Party (orits parent) could have achieved but for such adoption, change, request ordirective (taking into consideration its policies with respect to capitaladequacy) by an amount deemed by such Indemnified Party to be material, thenfrom time to time, on the next Settlement Date after demand therefor by suchIndemnified Party through its Group Agent, the Borrower shall pay to such GroupAgent, for the benefit of such Indemnified Party, such additional amount oramounts as will compensate such Indemnified Party (or its parent) for such

 

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reduction.  The Borrower shall have the same rights underthis Section 8.2 as it has under Section 2.17(b).

 

SECTION 8.3.  Indemnityfor Taxes.  (a) All payments made by the Borrower or the Servicer to the Facility Agent, theGroup Agents or the Lenders under this Agreement and any other TransactionDocument shall be made free and clear of, and without deduction or withholdingfor or on account of, any present or future income, stamp or other taxes,levies, imposts, duties, charges, fees, deductions or withholdings, now orhereafter imposed, levied, collected, withheld or assessed by any Official Bodyafter the Effective Date, excluding (i) taxes imposed on the netincome of the Facility Agent, the Group Agents or any other Indemnified Party,however denominated, and (ii) franchise taxes imposed on the net income ofthe Facility Agent, the Group Agents or any other Indemnified Party, in eachcase imposed: (1) by the United States or any political subdivision ortaxing authority thereof or therein; (2) by any jurisdiction under thelaws of which the Facility Agent, the Group Agents or such Indemnified Party orlending office is organized or in which its lending office is located, managedor controlled or in which its principal office is located or any politicalsubdivision or taxing authority thereof or therein; or (3) by reason ofany, connection between the jurisdiction imposing such tax and the FacilityAgent, the Group Agents such Indemnified Party or such lending office otherthan a connection arising solely from this Agreement or any other TransactionDocument or any transaction hereunder or thereunder (all such non-excludedtaxes, levies, imposts, duties, charges, fees, deductions or withholdings,collectively or individually, “Taxes”). If any such Taxes are required to be withheld from any amounts payableto the Facility Agent, the Group Agents, the Lenders or any Indemnified Partyhereunder, the amounts so payable to the Facility Agent, the Group Agents, theLenders or such Indemnified Party shall be increased to the extent necessary toyield to the Facility Agent, the Group Agents or such Indemnified Party (afterpayment of all Taxes) all amounts payable hereunder at the rates or in theamounts specified in this Agreement and the other Transaction Documents.  The Borrower shall indemnify the FacilityAgent, the Group Agents, the Lenders or any such Indemnified Party for the fullamount of any such Taxes on the next Settlement Date after demand therefor bythe Facility Agent, the Lenders or the Group Agents.

 

(b)                                 Each Indemnified Party that is notincorporated under the laws of the United States of America or a state thereofor the District of Columbia shall:

 

(i)                                     deliver to the Borrower, theFacility Agent and the Group Agents (A) two duly completed copies of IRS Form W-8BENor Form W-8ECI, or successor applicable form, as the case may be, or (B) inthe case of a Lender that is a “United States person”

 

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withinthe meaning of Section 7701(a)(3) of the Code, two duly completedcopies of an IRS Form W-9, or successor applicable form;

 

(ii)                                  deliver to the Borrower, theFacility Agent and the Group Agents two (2) further copies of any suchform or certification on or before the date that any such form or certificationexpires or becomes obsolete and after the occurrence of any event requiring achange in the most recent form previously delivered by it to the Borrower; and

 

(iii)                               obtain such extensions of time forfiling and complete such forms or certifications as may reasonably be requestedby the Borrower, the Facility Agent and the Group Agents;

 

unless, in anysuch case, an event (including, without limitation, any change in treaty, lawor regulation) has occurred prior to the date on which any such delivery wouldotherwise be required which renders all such forms inapplicable or which wouldprevent such Indemnified Party from duly completing and delivering any suchform with respect to it, and such Indemnified Party so advises the Borrower,the Facility Agent and the Group Agents. Each such Indemnified Party so organized shall certify (i) in thecase of an IRS Form W-8BEN or IRS Form W-8ECI, that it is entitled toreceive payments under this Agreement and the other Transaction Documentswithout deduction or withholding of any United States federal income taxes and (ii) inthe case of an IRS Form W-9, that it is entitled to an exemption fromUnited States backup withholding tax. Each Person that becomes a Lender under this Agreement shall, prior tothe effectiveness thereof, be required to provide all of the forms andstatements required pursuant to this Section 8.3.

 

SECTION 8.4.  OtherCosts, Expenses and Related Matters.  (a)  The Borrower agrees, upon receiptof a written invoice, to pay or cause to be paid, and to hold the FacilityAgent, the Group Agents and the Lenders harmless against liability for thepayment of, all reasonable out-of-pocket expenses (including, withoutlimitation, reasonable attorneys’, accountants’ and other third parties’ feesand expenses, any filing fees and expenses incurred by officers or employees ofthe Facility Agent, the Group Agents and the Lenders) or intangible,documentary or recording taxes incurred (A) by or on behalf of theFacility Agent, the Group Agents and the Lenders (i) in connection withthe negotiation, execution, delivery and preparation of this Agreement, theother Transaction Documents and any documents or instruments delivered pursuanthereto and thereto and the transactions contemplated hereby or thereby(including, without limitation, the perfection or protection of the Collateral)and (ii) from time to time relating to any amendments, waivers or consentsunder this Agreement and the other Transaction Documents, and (B) by or onbehalf of the Facility Agent, the Group Agents and the Lenders from

 

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time to time (i) arisingin connection with the enforcement or preservation of the rights of theFacility Agent, the Group Agents and the Lenders (including, withoutlimitation, the perfection of a security interest in and protection of theCollateral under this Agreement), and (ii) arising in connection with anyaudit, dispute, disagreement, litigation or preparation for litigationinvolving this Agreement or any of the other Transaction Documents (all of suchamounts, collectively, “Transaction Costs”).

 

(b)                                 Each Group Agent or IndemnifiedParty shall, after receipt of notice of any event occurring after the datehereof which will entitle an Indemnified Party to compensation pursuant to thisArticle VIII, notify the Borrower in writing.  Any notice by a Group Agent or IndemnifiedParty claiming compensation under this Article VIII and setting forth theadditional amount or amounts to be paid to it hereunder shall be conclusive inthe absence of manifest error.  Indetermining such amount, such Group Agent or any applicable Indemnified Partymay use any reasonable averaging and attributing methods.

 

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ARTICLE IX

 

THE FACILITYAGENT

 

SECTION 9.1.   Appointment.  EachLender and Group Agent hereby irrevocably designates and appoints CSFB asFacility Agent hereunder, and authorizes the Facility Agent to take such actionon its behalf under the provisions of this Agreement and to exercise suchpowers and perform such duties as are expressly delegated to the Facility Agentby the terms of this Agreement, together with such other powers as arereasonably incidental thereto, subject in each case to the approval anddirection of the Required Committed Lenders. Notwithstanding any provision to the contrary elsewhere in thisAgreement, the Facility Agent shall not have any duties or responsibilities,except those expressly set forth herein, or any fiduciary relationship with anyLender or Group Agent, and no implied covenants, functions, responsibilities,duties, obligations or liabilities on the part of the Facility Agent shall beread into this Agreement or the other Transaction Documents or shall otherwiseexist against the Facility Agent.  Inperforming its functions and duties hereunder, the Facility Agent shall actsolely as the agent of the Lenders under the Transaction Documents, and theFacility Agent does not assume, nor shall be deemed to have assumed, anyobligation or relationship of trust or agency with or for any such Person.

 

SECTION 9.2.   Delegation of Duties.  The Facility Agent may execute any of itsduties under this Agreement by or through its subsidiaries, affiliates, agentsor attorneys-in-fact and shall be entitled to advice of counsel concerning allmatters pertaining to such duties.  TheFacility Agent shall not be responsible for the negligence or misconduct (otherthan the gross negligence or willful misconduct) of any agents or attorneys-in-factselected by it with reasonable care.

 

SECTION 9.3.   Exculpatory Provisions.  Notwithstanding any provision of thisAgreement or any other Transaction Document: (i) the Facility Agent shall not have any obligations under thisAgreement or any other Transaction Document other than those specifically setforth herein and therein, and no implied obligations of the Facility Agentshall be read into this Agreement or any other Transaction Document; and (ii) inno event shall the Facility Agent be liable under or in connection with thisAgreement or any other Transaction Document for indirect, special, orconsequential losses or damages of any kind, including lost profits, even ifadvised of the possibility thereof and regardless of the form of action bywhich such losses or damages may be claimed. Neither the Facility Agent nor any of its respective directors,officers, agents or employees shall be liable for any action taken or omittedto be taken in good faith by it or them under or in connection with thisAgreement or any other Transaction Document, except for its or their own grossnegligence or willful misconduct. Without limiting the foregoing, the Facility Agent (a) may consultwith legal counsel (including counsel for the Lenders), independent publicaccountants and other experts selected by it and shall not be liable for anyaction taken

 

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or omitted to be taken in goodfaith by it in accordance with the advice of such counsel, accountants orexperts, (b) shall not be responsible to any party hereto for anystatements, warranties or representations (other than its own statements) madein or in connection with this Agreement or the other Transaction Documents, (c) shallnot be responsible to the parties hereto for the due execution, legality,validity, enforceability, genuineness, sufficiency or value of this Agreementor the other Transaction Documents (other than the legality, validity,enforceability or genuineness of its own execution, authorization andperformance hereof and thereof), (d) shall incur no liability under or inrespect of any of the Commercial Paper or other obligations of the Lendersunder this Agreement or the other Transaction Documents and (e) shallincur no liability under or in respect of this Agreement or the otherTransaction Documents by acting in good faith upon any notice (including noticeby telephone), consent, certificate or other instrument or writing (which maybe by facsimile) believed by it to be genuine and signed or sent by the properparty or parties.  Notwithstandinganything else herein or in the other Transaction Documents, it is agreed thatwhere the Facility Agent may be required under this Agreement or the other TransactionDocuments to give notice of any event or condition or to take any action as aresult of the occurrence of any event or the existence of any condition, theFacility Agent agrees to give such notice or take such action only to theextent that it has actual knowledge of the occurrence of such event or theexistence of such condition, and shall incur no liability for any failure togive such notice or take such action in the absence of such knowledge.

 

SECTION 9.4.   Reliance by Facility Agent.  The Facility Agent shall in all cases be entitledto rely, and shall be fully protected in relying, in good faith, upon any note,writing, resolution, notice, consent, certificate, affidavit, letter,cablegram, telegram, telecopy, telex or teletype message, statement, order orother document or conversation believed by it to be genuine and correct and tohave been signed, sent or made by the proper Person or Persons and upon adviceand statements of legal counsel (including, without limitation, counsel to eachof the Lenders), independent accountants and other experts selected by theFacility Agent.  The Facility Agent shallin all cases be fully justified in failing or refusing to take any action ingood faith under this Agreement, any other Transaction Document or any otherdocument furnished in connection herewith or therewith unless it shall firstreceive such advice or concurrence of the Required Committed Lenders, as itdeems appropriate, or it shall first be indemnified to its satisfaction by theRequired Committed Lenders against any and all liability, cost and expensewhich may be incurred by it by reason of taking or continuing to take any suchaction.  The Facility

 

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Agent shall in all cases befully protected in acting, or in refraining from acting, in good faith underthis Agreement, the other Transaction Documents or any other document furnishedin connection herewith or therewith in accordance with a request of theRequired Committed Lenders, and such request and any action taken or failure toact pursuant thereto shall be binding upon the Group Agents and the Lenders.

 

SECTION 9.5.   Action Upon Certain Events.  To the extent the Facility Agent is entitledto consent to or withhold its consent of any waiver or amendment of thisAgreement or other Transaction Documents in accordance with the terms hereof orthereof or otherwise take action upon the occurrence of an Event of Default orPotential Event of Default, the Facility Agent shall (i) give promptnotice to the Group Agents of any such waiver, amendment, Event of Default orPotential Event of Default of which it is aware and (ii) take such actionwith respect to such waiver, amendment, Event of Default or Potential Event ofDefault as shall be directed by the Required Committed Lenders.

 

SECTION 9.6.   Non-Reliance on Facility Agent.  Each of the parties hereto expresslyacknowledges that neither the Facility Agent, nor any of its officers,directors, employees, agents, attorneys-in-fact or affiliates has made anyrepresentations or warranties to it and that no act by the Facility Agenthereafter taken, including, without limitation, any review of the affairs ofeither the Borrower, the Originator or the Servicer, shall be deemed toconstitute any representation or warranty by the Facility Agent.  Except as expressly provided herein, theFacility Agent shall not have any duty or responsibility to provide any Personother than each Group Agent and each Lender with any credit or otherinformation concerning the business, operations, property, prospects, financialand other condition or creditworthiness of the Borrower, the Originator or theServicer which may come into the possession of the Facility Agent or any of itsofficers, directors, employees, agents, attorneys-in-fact or affiliates.

 

SECTION 9.7.   Indemnification.  The Committed Lenders agree to indemnify theFacility Agent and its officers, directors, employees, representatives andagents (to the extent not reimbursed by the Borrower, the Servicer or theOriginator under the Transaction Documents, and without limiting the obligationof such Persons to do so in accordance with the terms of the TransactionDocuments), on a prorata basis, from and against any and allliabilities, obligations, losses, damages, penalties, actions, judgments,suits, costs, expenses or disbursements of any kind or nature whatsoever(including, without limitation, the reasonable fees and disbursements ofcounsel for the Facility Agent or the affected Person in connection with anyinvestigative, administrative or judicial proceeding commenced or threatened,whether or not the Facility Agent or such affected Person shall be designated aparty thereto) that may at any time be imposed on, incurred by or assertedagainst the Facility Agent or such affected Person as a result of, or arising

 

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out of, or in any way relatedto or by reason of, any of the transactions contemplated hereunder or under theTransaction Documents or any other document furnished in connection herewith ortherewith (but excluding any such liabilities, obligations, losses, damages,penalties, actions, judgments, suits, costs, expenses or disbursementsresulting solely from the gross negligence or willful misconduct of theFacility Agent or such affected Person).

 

SECTION 9.8.   Successor Facility Agent.  The Facility Agent may, upon five (5) days’notice to each Group Agent (with a copy to the Borrower), and the FacilityAgent will, at the direction of the Required Committed Lenders, resign as FacilityAgent; provided, in either case, that a Group Agent or a CommittedLender agrees to become the successor Facility Agent hereunder in accordancewith the next sentence with the approval of the Required CommittedLenders.  If the Facility Agent shall resignas Facility Agent under this Agreement, then the Required Committed Lendersduring such period shall appoint from among the Committed Lenders a successoragent, whereupon such successor agent shall succeed to the rights, powers andduties of the Facility Agent, and the term “Facility Agent” shall mean suchsuccessor agent, effective upon its acceptance of such appointment and itsdelivery of a duly executed counterpart of this Agreement and an acknowledgmentto each Group Agent, and the former Facility Agent’s rights, powers and dutiesas Facility Agent shall be terminated, without any other or further act or deedon the part of such former Facility Agent or any of the parties to thisAgreement.  After the retiring FacilityAgent’s resignation hereunder as Facility Agent, the provisions of this Article IXshall inure to its benefit as to any actions taken or omitted to be taken by itwhile it was Facility Agent under this Agreement.

 

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ARTICLE X

 

MISCELLANEOUS

 

SECTION 10.1.   Term of Agreement.  This Agreement shall terminate on the datefollowing the Termination Date upon which the Facility Outstanding Principalhas been reduced to zero, and all other Aggregate Unpaids have been paid infull, in each case, in cash; provided, however, that (i) therights and remedies of the Facility Agent, the Group Agents and the Lenderswith respect to any representation and warranty made or deemed to be made bythe Borrower or the Servicer pursuant to this Agreement, (ii) theindemnification and payment provisions of Articles VI and VIII hereof, and (iii) theagreements set forth in Sections 10.8 and 10.9 hereof, shall be continuing andshall survive any termination of this Agreement.  On such date following the Termination Datedescribed in the preceding sentence, any funds remaining on deposit in theCollection Account shall be paid to the Borrower.

 

SECTION 10.2.   Waivers; Amendments.  No failure or delay on the part of theFacility Agent, the Group Agents or the Lenders in exercising any power, rightor remedy under this Agreement shall operate as a waiver thereof, nor shall anysingle or partial exercise of any such power, right or remedy preclude anyother further exercise thereof or the exercise of any other power, right orremedy.  The rights and remedies hereinprovided shall be cumulative and nonexclusive of any rights or remediesprovided by law.  Any provision of thisAgreement and the other Transaction Documents may be amended if, but only if,such amendment is in writing and is signed by the parties hereto and/or theretoand the Required Committed Lenders; provided that the Borrower and theServicer agree not to unreasonably withhold consent with respect to anyamendment to this Agreement requested by Standard & Poor’s or Moody’sin connection with any amendment to a Conduit Lender’s asset purchase facilityfor the purpose of modifying the terms and conditions on which the CommittedLenders make purchases thereunder.  TheBorrower agrees that it shall not give any consent or waiver required orpermitted to be given under the Purchase Agreement without the prior writtenconsent of the Facility Agent (acting at the direction of the RequiredCommitted Lenders).

 

SECTION 10.3.   Notices.  Except as provided below, all communicationsand notices provided for hereunder shall be in writing (including telecopy,electronic mail or similar writing) and shall be given to the other party atits address or telecopy number set forth below or at such other address ortelecopy number as such party may hereafter specify for the purposes of noticeto such party.  Each such notice or othercommunication shall be effective (i) if given by telecopy,

 

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when such telecopy is transmittedto the telecopy number specified in this Section 10.3 and confirmation isreceived (provided that, for purposes of this clause (i), any suchtransmission or confirmation occurring after regular business hours or on anon-Business Day shall be effective on the next succeeding Business Day), (ii) ifgiven by mail three (3) Business Days following such posting, postageprepaid, U.S. certified or registered, (iii) if given by overnightcourier, one (1) Business Day after deposit thereof with a national overnightcourier service, (iv) if given by electronic mail, when transmitted, or (v) ifgiven by any other means, when received at the address specified in this Section 10.3.  However, anything in this Section 10.3to the contrary notwithstanding, the Borrower hereby authorizes each GroupAgent to effect Loans, Funding Period and Yield Rate selections based ontelephonic notices made by any Person which such Group Agent in good faithbelieves to be acting on behalf of the Borrower.  The Borrower agrees to deliver promptly tothe Facility Agent and each Group Agent a written confirmation of eachtelephonic notice signed by an authorized officer of Borrower.  However, the absence of such confirmationshall not affect the validity of such notice. If the written confirmation differs in any material respect from theaction taken by the Facility Agent or the related Group Agent, as applicable,the records of such Person shall govern absent manifest error.

 

If to Alpine:

 

Alpine Securitization Corp.

c/o Credit Suisse, New York Branch

Eleven Madison Avenue

New York, New York  10010

Attention: Anthony Giordano

Telephone: (212) 325-9103

Telecopy:   (212) 325-0873

 

(with a copy to Alpine’s Group Agent)

 

If to theBorrower:

 

Fieldstone Investment Company, LLC

11000 Broken Land Parkway

Suite 600

Columbia, Maryland  21044

Attention: Treasurer

Telephone: (410) 772-7275

Telecopy:   (410) 772-7299

 

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If to the Servicer:

 

Fieldstone Investment Corporation

11000 Broken Land Parkway

Suite 600

Columbia, Maryland  21044

Attention: Treasurer

Telephone: (410) 772-7275

Telecopy:    (410) 772-7299

 

with a copyto:

 

Fieldstone Investment Corporation

11000 Broken Land Parkway

Suite 600

Columbia, Maryland  21044

Attention: General Counsel

Telephone: (410) 772-5108

Telecopy:    (410) 772-7299

 

If to theFacility Agent, Alpine’s Group Agent or Alpine’s Committed Lenders:

 

Credit Suisse, New York Branch

Eleven Madison Avenue

New York, New York  10010

Attention: Anthony Giordano

Telephone: (212) 325-9103

Telecopy:   (212) 325-0873

 

If to theCommitted Lenders, to the related Group Agents on their behalf.

 

SECTION 10.4.   Governing Law; Submission toJurisdiction; Integration. (a)  This Agreement shall be governed by, and construed in accordancewith the laws of the State of New York. Each of the parties hereto hereby submits to the nonexclusivejurisdiction of the United States District Court for the Southern District ofNew York and of any New York state court sitting in The City of New York forpurposes of all legal proceedings arising out of or relating to this Agreementor the transactions contemplated hereby. Each of the parties hereto hereby irrevocably waives, to the fullestextent it may effectively do so, any objection which it may now or hereafterhave to the laying of the venue of any such proceeding brought in such a courtand any claim that any such proceeding brought in such a court has been broughtin an inconvenient forum.  Nothing inthis Section 10.4

 

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shall affect the right of theFacility Agent, the Group Agents or the Lenders to bring any action orproceeding against the Borrower, the Servicer, or their respective propertiesin the courts of other jurisdictions.

 

(b)                                 Each of the parties hereto herebywaives any right to have a jury participate in resolving any dispute, whethersounding in contract, tort or otherwise among any of them arising out of,connected with, relating to or incidental to the relationship between them inconnection with this Agreement or the other Transaction Documents.

 

(c)                                  This Agreement contains the finaland complete integration of all prior expressions by the parties hereto withrespect to the subject matter hereof and shall constitute the entire Agreementamong the parties hereto with respect to the subject matter hereof supersedingall prior oral or written understandings.

 

(d)                                 The Borrower and the Servicer eachhereby appoint CT Corporation, New York, New York as the authorized agent uponwhom process may be served in any action arising out of or based upon thisAgreement, the other Transaction Documents to which such Person is a party orthe transactions contemplated hereby or thereby that may be instituted in theUnited States District Court for the Southern District of New York and of anyNew York State court sitting in The City of New York by the Facility Agent, theGroup Agents or the Lenders or any assignee of any of them.

 

SECTION 10.5.   Severability; Counterparts.  This Agreement may be executed in any numberof counterparts and by different parties hereto in separate counterparts, eachof which when so executed shall be deemed to be an original and all of whichwhen taken together shall constitute one and the same Agreement.  Any provisions of this Agreement which areprohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition orunenforceability in any jurisdiction shall not invalidate or renderunenforceable such provision in any other jurisdiction.

 

SECTION 10.6.   Successors and Assigns.  This Agreement shall be binding on theparties hereto and their respective successors and assigns; provided, however,that neither the Borrower nor the Servicer may assign any of its rights ordelegate any of its duties hereunder or under any of the other TransactionDocuments to which it is a party without the prior written consent of theFacility Agent (acting at the direction of the Required CommittedLenders).  No provision of this Agreementshall in any manner restrict the ability of any Lender to assign, participate,grant security interests in, or otherwise transfer its interest in the Loans,this Agreement

 

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and its security interest inthe Collateral.  Without limiting theforegoing, any Conduit Lender may (with the consent of each of its relatedCommitted Lenders), on one or a series of transactions, transfer all or anyportion of its rights in the Collateral held by it, and its rights andobligations under this Agreement and the other Transaction Documents to whichit is a party, to a Conduit Assignee.

 

SECTION 10.7.   Confidentiality.  (a)  Each of the Borrower and theServicer shall maintain, and shall cause each officer, employee and agent ofitself and its Affiliates to maintain, the Confidential Information, except for(i) Confidential Information that has become publicly available (throughno fault of the Borrower and its Affiliates and only after such ConfidentialInformation has become publicly available) and Confidential Information thathas become generally available through no fault of the Borrower and itsAffiliates that make secured loans (but only after such ConfidentialInformation has become generally available to such financial institutions), (ii) ConfidentialInformation disclosed to legal counsel, accountants, consultants, employees,nationally recognized rating agencies and other professional advisors to theBorrower and its Affiliates who need to know such Confidential Information andare informed of the confidential nature of such Confidential Information, (iii) ConfidentialInformation disclosed as required in order to comply with any law, regulation,order or ruling applicable to the Borrower and its Affiliates (providedthat the Group Agents shall receive notice thereof prior to the disclosure ofsuch Confidential Information (if permitted under applicable law), and thePerson(s) disclosing such Confidential Information shall take all reasonableprecautions, including, if requested by the Group Agents, seeking a protectiveorder to insure confidential treatment of any Confidential Information sodisclosed), (iv) Confidential Information which was in the possession ofthe Borrower and its Affiliates prior to receipt from the Facility Agent, theGroup Agents or the Lenders or (v) Confidential Information disclosed to athird party consented to by the Facility Agent or the applicable Group Agentpursuant to a written agreement of confidentiality in form and substancesatisfactory to the Facility Agent or such Group Agent.  Each of the Borrower and the Servicer herebyconsents to the disclosure of any Confidential Information with respect to itreceived by the Facility Agent, a Group Agent or a Lender to (i) any ofthe Facility Agent, the Group Agents or a Lender, (ii) any nationallyrecognized rating agency providing a rating or proposing to provide a rating toa Conduit Lender’s Commercial Paper, (iii) any placement agent whichproposes to offer and sell a Conduit Lender’s Commercial Paper (but onlyinformation contained in such Conduit Lender’s standard monthly investor reportwhich does not contain the names of the Borrower and its Affiliates), or asotherwise agreed, (iv) any provider of program-wide liquidity or creditsupport facilities to a Conduit Lender, (v) any potential Committed Lenderor (vi) any participant or potential participant; provided, however,in connection with any disclosure made pursuant to clause (iv), (v) or (vi) ofthis sentence, each Person to receive such Confidential Information shall haveentered into a confidentiality

 

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undertaking in form andsubstance satisfactory to the Borrower, the Facility Agent and the GroupAgents.

 

(b)                                 Each of the Facility Agent, theGroup Agents and the Lenders shall maintain, and shall cause each officer,employee and agent of itself and its Affiliates to maintain, theconfidentiality of the Confidential Information, except (i) ConfidentialInformation that has become publicly available (through no fault of theFacility Agent, the Group Agents or a Lender and only after such ConfidentialInformation has become publicly available), (ii) Confidential Informationdisclosed to legal counsel, accountants, consultants, employees, nationallyrecognized rating agencies and other professional advisors to the FacilityAgent, the Group Agents and the Lenders and their Affiliates who need to knowsuch Confidential Information to perform their obligations with respect to theTransaction Documents and are informed of the confidential nature of suchConfidential Information, (iii) Confidential Information disclosed asrequired by law or regulation, (iv) Confidential Information disclosed inconnection with any legal or regulatory process or proceeding to which theFacility Agent, the Group Agents or a Lender or any of their Affiliates issubject; provided that the Facility Agent, the Group Agents or a Lendershall promptly notify the Borrower (if such notice is permitted underapplicable law) of any such proceeding or process requiring production of suchConfidential Information prior to compliance, or (v) Confidential Informationwhich was in the possession of the Facility Agent, the Group Agents or a Lenderprior to receipt from the Borrower or its Affiliates.

 

(c)                                  Each Person party hereto shallprotect such disclosed Confidential Information by using the same degree ofcare, but no less than a reasonable degree of care, to prevent the unauthorizeduse, dissemination or publication of such Confidential Information as suchPerson uses to protect its own Confidential Information of a similar nature.  Each Person party hereto acknowledges thatcertain Confidential Information provided hereunder or under the otherTransaction Documents may be the subject of confidentiality requirements withPersons not party to any of the Transaction Documents (each such third-partyconfidentiality requirement, a “Third-Party Confidentiality Requirement”).  Any party disclosing to another party heretoConfidential Information that is the subject of a Third-Party ConfidentialityRequirement in connection herewith will notify the recipient of such ConfidentialInformation prior to the delivery of such Confidential Information of thenature of any such Third-Party Confidentiality Requirement and provide suchrecipient with a copy of the relevant Third-Party Confidentiality Requirement.  Prior to receipt of any such ConfidentialInformation, such recipient shall execute a confidentiality undertaking in formand substance satisfactory to the Borrower, the relevant Lenders, the Servicer,the Facility Agent and the Group Agents.

 

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SECTION 10.8.   No Bankruptcy Petition Against aConduit Lender.  Eachof the parties hereto hereby covenants and agrees that, prior to the date whichis one year and one day after the payment in full of all outstanding CommercialPaper or other indebtedness of a Conduit Lender, it will not institute against,or join any other Person in instituting against, or knowingly or intentionallyencourage or cooperate with any Person in instituting against, such ConduitLender any bankruptcy, reorganization, arrangement, insolvency or liquidationproceedings or other similar proceeding under the laws of the United States orany state of the United States.

 

SECTION 10.9.   Limited Recourse.  Notwithstanding anything to the contrarycontained herein, the obligations of any Conduit Lender under this Agreementare solely the corporate obligations of such Conduit Lender and, in the case ofobligations of a Conduit Lender other than Commercial Paper, shall be payableat such time as funds are actually received by, or are available to, suchConduit Lender in excess of funds necessary to pay in full all outstandingCommercial Paper and, to the extent funds are not available to pay suchobligations, the claims relating thereto shall not constitute a claim againstsuch Conduit Lender but shall continue to accrue.  Each party hereto agrees that the payment ofany claim (as defined in Section 101 of Title 11 of the Bankruptcy Code)of any such party shall be subordinated to the payment in full of all of such ConduitLender’s Commercial Paper.

 

No recourseunder any obligation, covenant or agreement of a Conduit Lender contained inthis Agreement shall be had against any incorporator, stockholder, officer,director, member, manager, employee or agent of such Conduit Lender, the GroupAgent for such Conduit Lender or any of their Affiliates (solely by virtue ofsuch capacity) by the enforcement of any assessment or by any legal orequitable proceeding, by virtue of any statute or otherwise; it being expresslyagreed and understood that this Agreement is solely a corporate obligation ofsuch Conduit Lender, and that no personal liability whatever shall attach to orbe incurred by any incorporator, stockholder, officer, director, member,manager, employee or agent of such Conduit Lender, the Group Agent for suchConduit Lender or any of their Affiliates (solely by virtue of such capacity)or any of them under or by reason of any of the obligations, covenants oragreements of such Conduit Lender contained in this Agreement, or impliedtherefrom, and that any and all personal liability for breaches by such ConduitLender of any of such obligations, covenants or agreements, either at commonlaw or at equity, or by statute, rule or regulation, of every suchincorporator, stockholder, officer, director, member, manager, employee oragent is hereby expressly waived as a condition of and in consideration for theexecution of this Agreement; provided that the foregoing shall notrelieve any such Person from any liability it might otherwise have as a resultof fraudulent actions

 

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taken or fraudulent omissions made by them or in any case of the grossnegligence, bad faith or willful misconduct of any such Person.

 

SECTION 10.10.   Characterization of the TransactionsContemplated by the Agreement.  It is the intention of the parties that thetransactions contemplated hereby constitute a pledge of the Collateral by theBorrower to the Facility Agent, on behalf of and for the benefit of the Lendersand the Group Agents, to secure repayment of the Aggregate Unpaids.

 

SECTION 10.11.   Waiver of Setoff.  Each of the Facility Agent, the Borrower, theServicer, the Lenders and the Group Agents hereby waives any right of setoff itmay have or to which it may be entitled under this Agreement from time to timeagainst any Conduit Lender or its assets.

 

SECTION 10.12.   CSFB Conflict Waiver.  CSFB acts as Group Agent and as FacilityAgent for Alpine, as issuing and paying agent for Alpine’s Commercial Paper, asprovider of other backup facilities for Alpine, and may provide other servicesor facilities from time to time (the “CSFB Roles”).  Each of the parties hereto herebyacknowledges and consents to any and all CSFB Roles, waives any objections itmay have to any actual or potential conflict of interest caused by CSFB’sacting as the Facility Agent or as a Group Agent or a Committed Lender andacting as or maintaining any of the CSFB Roles, and agrees that in connectionwith any CSFB Role, CSFB may take, or refrain from taking, any action which itin its discretion deems appropriate.

 

SECTION 10.13.   Liability of Group Agents.  Notwithstanding any provision of thisAgreement:  (i) the Group Agentsshall not have any obligations under this Agreement other than thosespecifically set forth herein, and no implied obligations of the Group Agentsshall be read into this Agreement; and (ii) in no event shall the GroupAgents be liable under or in connection with this Agreement for indirect,special, or consequential losses or damages of any kind, including lostprofits, even if advised of the possibility thereof and regardless of the formof action by which such losses or damages may be claimed.  Neither the Group Agents nor any of theirdirectors, officers, agents or employees shall be liable for any action takenor omitted to be taken in good faith by them under or in connection with thisAgreement, except for their own gross negligence or willful misconduct.  Without limiting the foregoing, the GroupAgents (a) may consult with legal counsel (including counsel for theLenders), independent public accountants and other experts selected by it andshall not be liable for any action taken or omitted to be taken in good faithby it in accordance with the advice of such counsel, accountants or experts, (b) shallnot be responsible to the Lenders, the Facility Agent, the Borrower, the otherGroup Agents or the Servicer for any statements, warranties or representationsmade in or in connection with this Agreement or the other

 

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Transaction Documents (otherthan statements made by it), (c) shall not be responsible to the Lenders,the Facility Agent, the Borrower, the other Group Agents or the Servicer forthe due execution, legality, validity, enforceability, genuineness, sufficiencyor value of this Agreement or the other Transaction Documents (other than withrespect to itself), (d) shall incur no liability under or in respect ofany of the Commercial Paper or other obligations of the Lenders under thisAgreement or the other Transaction Documents and (e) shall incur noliability under or in respect of this Agreement or the other TransactionDocuments by acting upon any notice (including notice by telephone), consent,certificate or other instrument or writing (which may be by facsimile) believedby it to be genuine and signed or sent by the proper party or parties.  Notwithstanding anything else herein or inthe other Transaction Documents, it is agreed that where the Group Agents maybe required under this Agreement or the other Transaction Documents to givenotice of any event or condition or to take any action as a result of theoccurrence of any event or the existence of any condition, the Group Agents agreeto give such notice or take such action only to the extent that they haveactual knowledge of the occurrence of such event or the existence of suchcondition, and shall incur no liability for any failure to give such notice ortake such action in the absence of such knowledge.

 

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IN WITNESSWHEREOF, the parties hereto have executed and delivered this Funding Agreementas of the date first written above.

 
|   | FIELDSTONE  INVESTMENT FUNDING, LLC,                |
|--------|-----------------------------------------------------|
|   | as Borrower                                         |
|   |                                                |
|   |                                                |
|   | By:                                                 |   |   |
|   |                                                | Name: |
|   |                                                | Title: |
|   |                                                |   |
|   |                                                |
|   | FIELDSTONE  INVESTMENT CORPORATION,                 |
|   | individually  and as initial Servicer               |
|   |                                                |
|   |                                                |
|   | By:                                                 |   |   |
|   |                                                | Name: |
|   |                                                | Title: |
|   |                                                |   |
|   |                                                |
|   | CREDIT  SUISSE, NEW YORK BRANCH, as  Facility Agent |
|   |                                                |
|   |                                                |
|   | By:                                                 |   |   |
|   |                                                | Name: |
|   |                                                | Title: |
|   |                                                |
|   |                                                |
|   | By:                                                 |   |   |
|   |                                                | Name: |
|   |                                                | Title: |

 

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| The Alpine Lending Group: |                                                                     |
|---------------------------|--------------------------------------------------------------------------|
|                      |                                                                     |
|                      |                                                                     |
|                      | ALPINE  SECURITIZATION CORP.,                                            |
|                      | as a Conduit  Lender                                                     |
|                      |                                                                     |
|                      | By:                                                                      |   |   |
|                      |                                                                     | Name: |
|                      |                                                                     | Title: |
|                      |                                                                     |   |
|                      | By:                                                                      |   |   |
|                      |                                                                     | Name: |
|                      |                                                                     | Title: |
|                      |                                                                     |
|                      | CREDIT  SUISSE, NEW YORK BRANCH, as a  Group Agent                       |
|                      |                                                                     |
|                      | By:                                                                      |   |   |
|                      |                                                                     | Name: |
|                      |                                                                     | Title: |
|                      |                                                                     |
|                      | By:                                                                      |   |   |
|                      |                                                                     | Name: |
|                      |                                                                     | Title: |
|                      |                                                                     |
|                      | CREDIT  SUISSE, NEW YORK BRANCH,  individually and as a Committed Lender |
|                      |                                                                     |
|                      | By:                                                                      |   |   |
|                      |                                                                     | Name: |
|                      |                                                                     | Title: |
|                      |                                                                     |
|                      | By:                                                                      |   |   |
|                      |                                                                     | Name: |
|                      |                                                                     | Title: |

 

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TABLE OFCONTENTS

 
| ARTICLE I DEFINITIONS                                          |
|---------------------------------------------------------------------|
|                                                                |   |
|                                                                |   |
| SECTION 1.1. Certain Defined Terms                             |   |
| SECTION 1.2. Other Terms                                       |   |
| SECTION 1.3. Computation of Time  Periods                      |   |
|                                                                |   |
| ARTICLE II LOANS AND SETTLEMENTS                               |
|                                                                |   |
| SECTION 2.1. Facility                                          |   |
| SECTION 2.2. Loans; Procedures                                 |   |
| SECTION 2.3. Loan Repayment; Yield;  Fees                      |   |
| SECTION 2.4. Optional Prepayments                              |   |
| SECTION 2.5. Application of Payments                           |   |
| SECTION 2.6. Extensions                                        |   |
| SECTION 2.7. Security Interest                                 |   |
| SECTION 2.8. Deemed Collections                                |   |
| SECTION 2.9. Payments and Computations                         |   |
| SECTION 2.10. Reports                                          |   |
| SECTION 2.11. Collection Account                               |   |
| SECTION 2.12. Right of Setoff                                  |   |
| SECTION 2.13. Sharing of Payments,  Etc.                       |   |
| SECTION 2.14. Broken Funding                                   |   |
| SECTION 2.15. Conversion and Continuation of Outstanding Loans |   |
| SECTION 2.16. Illegality                                       |   |
| SECTION 2.17. Inability to Determine Yield Rate                |   |
|                                                                |   |
| ARTICLE III REPRESENTATIONS AND WARRANTIES                     |
|                                                                |   |
| SECTION 3.1. Representations and Warranties of the Borrower    |   |
| SECTION 3.2. Representations and Warranties of the Servicer    |   |
|                                                                |   |
| ARTICLE IV CONDITIONS PRECEDENT                                |
|                                                                |   |
| SECTION 4.1. Conditions to Effectiveness of this Agreement     |   |
| SECTION 4.2. Conditions to Each Loan                           |   |
|                                                                |   |
| ARTICLE V COVENANTS                                            |
|                                                                |   |
| SECTION 5.1. Affirmative Covenants of Borrower                 |   |
| SECTION 5.2. Negative Covenants of the Borrower                |   |

 

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| SECTION 5.3. Covenants of the Servicer                                        |   |
|------------------------------------------------------------------------------------|--------|
|                                                                               |   |
| ARTICLE VI ADMINISTRATION AND COLLECTIONS                                     |
|                                                                               |   |
| SECTION 6.1. Appointment of Servicer                                          |   |
| SECTION 6.2. Duties of Servicer                                               |   |
| SECTION 6.3. Rights After Designation of New Servicer or an  Event of Default |   |
| SECTION 6.4.  No Liability                                                    |   |
| SECTION 6.5. Servicer Indemnification                                         |   |
|                                                                               |   |
| ARTICLE VII EVENTS OF DEFAULT                                                 |
|                                                                               |   |
| SECTION 7.1. Events of Default                                                |   |
| SECTION 7.2. Remedies Upon the Occurrence of an Event of Default              |   |
|                                                                               |   |
| ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS                       |
|                                                                               |   |
| SECTION 8.1. Indemnities by the Borrower                                      |   |
| SECTION 8.2. Indemnity for Reserves and Expenses                              |   |
| SECTION 8.3. Indemnity for Taxes                                              |   |
| SECTION 8.4. Other Costs, Expenses and Related Matters                        |   |
|                                                                               |   |
| ARTICLE IX THE FACILITY AGENT                                                 |
|                                                                               |   |
| SECTION 9.1. Appointment                                                      |   |
| SECTION 9.2. Delegation of Duties                                             |   |
| SECTION 9.3. Exculpatory Provisions                                           |   |
| SECTION 9.4. Reliance by Facility Agent                                       |   |
| SECTION 9.5. Action Upon Certain Events                                       |   |
| SECTION 9.6. Non-Reliance on Facility Agent                                   |   |
| SECTION 9.7. Indemnification                                                  |   |
| SECTION 9.8. Successor Facility Agent                                         |   |
|                                                                               |   |
| ARTICLE X MISCELLANEOUS                                                       |
|                                                                               |   |
| SECTION 10.1. Term of Agreement                                               |   |
| SECTION 10.2. Waivers; Amendments                                             |   |
| SECTION 10.3. Notices                                                         |   |
| SECTION 10.4. Governing Law; Submission to Jurisdiction;  Integration         |   |
| SECTION 10.5. Severability; Counterparts                                      |   |
| SECTION 10.6. Successors and Assigns                                          |   |
| SECTION 10.7. Confidentiality                                                 |   |
| SECTION 10.8. No Bankruptcy Petition Against a Conduit Lender                 |   |

 

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| SECTION 10.9. Limited Recourse                                                     |   |
|-----------------------------------------------------------------------------------------|--------|
| SECTION 10.10. Characterization of the Transactions Contemplated  by the Agreement |   |
| SECTION 10.11. Waiver of Setoff                                                    |   |
| SECTION 10.12. CSFB Conflict Waiver                                                |   |
| SECTION 10.13. Liability of Group Agents                                           |   |

 

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EXHIBITS

 
| SCHEDULE A | Schedule of Definitions                   |   |
|-----------------|------------------------------------------------|--------|
|            |                                           |   |
| EXHIBIT A  | Form of Loan Note                         |   |
|            |                                           |   |
| EXHIBIT B  | Underwriting Policy                            |   |
|            |                                           |   |
| EXHIBIT C  | Form of Loan Notice                       |   |
|            |                                           |   |
| EXHIBIT D  | Mortgage Loan Representations and Warranties   |   |
|            |                                           |   |
| EXHIBIT E  | Form of Servicer Report                   |   |
|            |                                           |   |
| EXHIBIT F  | Schedule of Commitments                   |   |
|            |                                           |   |
| EXHIBIT G  | List of Actions and Suits                      |   |
|            |                                           |   |
| EXHIBIT H  | Location of Records                            |   |
|            |                                           |   |
| EXHIBIT I  | List of Divisions, Subsidiaries and Tradenames |   |

 

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FUNDINGAGREEMENT

 

by and among

 

FIELDSTONEINVESTMENT FUNDING, LLC,

 

as Borrower,

 

FIELDSTONEINVESTMENT CORPORATION,

 

as Servicer,

 

CREDIT SUISSE,NEW YORK BRANCH,

 

as Facility Agent,

 

and

 

THE SEVERAL CONDUIT LENDERS,COMMITTED LENDERS

 AND GROUP AGENTS PARTY HERETO FROM TIME TOTIME

 

Dated as of July 27,2005

 

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SCHEDULE A

 

SCHEDULE OF DEFINITIONS

 

“Account Control Agreement” shall meanthe Blocked Account Control Agreement, dated as of July 27, 2005, betweenthe Borrower, FIC, the Facility Agent, JPMorgan Chase Bank, NationalAssociation, a subservicer and JPMorgan Chase Bank, N.A., as the financialinstitution holding the account that comprises the Collection Account, as thesame may from time to time be amended, supplemented or otherwise modified andin effect.

 

“AdditionDate” shall have the meaning specified in Section 2.8(c) of theFunding Agreement.

 

“AdditionalMortgage Loan” shall have the meaning specified in Section 2.8(c) ofthe Funding Agreement.

 

“AdministrationFee” shall have the meaning specified in the Facility Agent’s Fee Letter.

 

“Affiliate”shall mean, with respect to any Person, any other Person directly or indirectlycontrolling, controlled by, or under direct or indirect common control with,such Person.  A Person shall be deemed tocontrol another Person if the controlling Person possesses, directly orindirectly, the power to direct or cause the direction of the management orpolicies of the controlled Person, whether through ownership of voting stock,by contract or otherwise.

 

“AggregateCommitment” shall mean, at any time, the sum of the Commitments of theCommitted Lenders then in effect.

 

“AggregateUnpaids” shall mean, at any time, an amount equal to the sum of (i) theaggregate accrued and unpaid Yield with respect to all Funding Periods at suchtime, (ii) the Facility Outstanding Principal at such time, and (iii) allother amounts owed (whether due or accrued) under the Transaction Documents bythe Borrower, the Originator and the Servicer to the Facility Agent, the GroupAgents and the Lenders at such time.

 

“Alpine”shall mean Alpine Securitization Corp., a Delaware corporation, and itspermitted successors and assigns.

 

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“ApplicableMargin” shall have the meaning specified in the Fee Letters.

 

“AvailableCollections” shall mean, on any date of determination, all Collections,together with any investment income from funds on deposit in the CollectionAccount; provided that, Available Collections shall not include anyCollections that have been set aside or removed by the Servicer solely inpayment of the Servicer’s accrued and unpaid Servicing Fee.

 

“BankruptcyCode” shall mean the Bankruptcy Reform Act of 1978 (11 U.S.C. §§ 101et seq.), and the rules, regulations and decisions promulgated thereunder, asamended and in effect, and any successor thereto.

 

“Base Rate”or “BR” for any Lending Group shall mean a rate per annum equal to thehigher of (i) the sum of the Applicable Margin and prime rate of interestannounced by the related Group Agent from time to time, changing when and assaid prime rate changes (such rate not necessarily being the lowest or bestrate charged by such Group Agent) and (ii) the sum of (a) 0.50% and (b) therate equal to the weighted average of the rates on overnight Federal fundstransactions with members of the Federal Reserve System arranged by Federalfunds brokers, as published for such day (or, if such day is not a BusinessDay, for the next preceding Business Day) by the Federal Reserve Bank of NewYork, or, if such rate is not so published for any day that is a Business Day,the average of the quotations for such day for such transactions received bysuch Group Agent from three (3) Federal funds brokers of recognizedstanding selected by it.

 

“BenefitPlan” shall mean any employee benefit plan as defined in Section 3(3) ofERISA in respect of which the Borrower, the Originator or any ERISA Affiliateof the Borrower, or the Originator is, or at any time during the immediatelypreceding six (6) years was, an “employer” as defined in Section 3(5) ofERISA.

 

“Borrower”shall mean Fieldstone Investment Funding, LLC, a Delaware limited liabilitycompany, and its successors and permitted assigns.

 

“BorrowingBase Test” shall mean, on any date of determination, that FacilityOutstanding Principal on such date does not exceed the lesser of (i) 92.5%of the aggregate Market Value of all Eligible Assets held by the Borrower onsuch date and (ii) the Net Eligible Assets Balance on such date.

 

“BR FundingPeriod” shall mean, with respect to a BR Loan for any Lending Group, either(i) prior to the Termination Date, a period of up to thirty (30)

 

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days requested by the Borrower and agreed to by the related LendingGroup, commencing on a Business Day requested by the Borrower and agreed to bythe related Lending Group, or (ii) after the Termination Date, a period ofone (1) day.  If such BR FundingPeriod would end on a day which is not a Business Day, such BR Funding Periodshall end on the next succeeding Business Day.

 

“BR Loan”shall mean a Loan as to which Yield is calculated at the Base Rate.

 

“BusinessDay” shall mean any day excluding Saturday, Sunday and any day on whichbanks in The City of New York are authorized or required by law to close, and,when used with respect to the determination of any Eurodollar Rate or anynotice with respect thereto, any such day which is also a day for trading byand between banks in United States dollar deposits in the London interbankmarket.

 

“CapitalizedLease” of a Person shall mean any lease of property by such Person as lesseewhich would be capitalized on a balance sheet of such Person prepared inaccordance with GAAP.

 

“Change ofControl” shall mean (i) any transaction or event as of a result ofwhich any Person or Persons own, beneficially or of record, at least 15% of theoutstanding stock of FIC, (ii) any transaction or event as a result ofwhich the Originator ceases to own, directly or indirectly, 100% of theBorrower (or FIC shall cease to own, directly or indirectly, 100% of any of itsSubsidiaries) or (iii) the sale, transfer or other disposition of all orsubstantially all of the Originator’s assets (excluding any such action takenin connection with any securitization transaction in the ordinary course of business).

 

“Code”shall mean the Internal Revenue Code of 1986, as amended, and the rules andregulations promulgated thereunder.

 

“Collateral”shall mean, on any date of determination, (i) each and every thenoutstanding Mortgage Loan, (ii) all Related Security with respect thereto,(iii) all Collections with respect thereto, (iv) all rights andremedies of the Borrower in, to and under the Purchase Agreement, the CustodialAgreement and the Collection Account and (v) all Proceeds of theforegoing.

 

“CollectionAccount” shall have the meaning specified in Section 2.11 of theFunding Agreement.

 

“Collections”shall mean, with respect to any Mortgage Loan, all cash collections and otherproceeds of such Mortgage Loan and Related Security with respect

 

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thereto, including, without limitation, all Deemed Collections andproceeds of any prepayment of a Loan pursuant to Section 2.4.

 

“CommercialPaper” shall mean the short-term promissory notes of a Conduit Lenderissued by such Conduit Lender in the commercial paper market.

 

“Commitment”shall mean, at any time with respect to each Committed Lender, the amount setforth opposite such Committed Lender’s name on Exhibit F to the FundingAgreement (as such Exhibit F may be amended, supplemented or otherwisemodified and in effect).

 

“CommitmentExpiry Date” shall mean the earliest to occur of (i) the date on whichall amounts due and owing to the Facility Agent, the Group Agents and theLenders under the Funding Agreement and the other Transaction Documents havebeen paid in full, (ii) the date on which the Aggregate Commitment hasbeen reduced to zero, and (iii) the Scheduled Commitment Expiry Date.

 

“CommittedLender” shall mean any Person that becomes a party to the Funding Agreementas a “Committed Lender” thereunder.

 

“ConduitAssignee” shall mean any special purpose vehicle issuing indebtedness inthe commercial paper market that is administered by a Group Agent or one of itsAffiliates and is rated at least A-1 by S&P and P-1 by Moody’s.

 

“ConduitLender” shall mean any Person that becomes a party to the Funding Agreementas a “Conduit Lender” thereunder.

 

“ConfidentialInformation” shall mean information concerning the confidentiality of theTransaction Documents and all other non-public, confidential or proprietaryinformation with respect to the Borrower, the Originator, the Servicer, theFacility Agent, the Group Agents, the Lenders and any of their Affiliates disclosedor obtained in connection with the structuring, negotiation, execution andperformance of the transactions contemplated in the Transaction Documents.

 

“ConsolidatedAdjusted Tangible Net Worth” shall mean, for the Originator, the amountthat would, in conformity with GAAP, equal the stockholder’s equity included onthe balance sheet of the Originator and its Subsidiaries, plus any preferredstock not already included in the calculation of stockholder’s equity, plus anyIndebtedness of the Originator and its Subsidiaries that is fully subordinated,plus other comprehensive loss arising from FASB 133, minus any intangibles orgoodwill (as defined under GAAP), minus any advances between the Originator andits Affiliates (other than consolidated Subsidiaries), minus any loans or advances

 

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to officers or directors of the Originator (as reported under GAAP),minus other comprehensive income arising from FASB 133; provided thatthe non-cash effect (gain or loss) of any mark-to-market adjustments madedirectly to stockholder’s equity for fluctuation of the value of financialinstruments as mandated under FASB 133 shall be excluded from the calculationof Consolidated Adjusted Tangible Net Worth.

 

“Conversion/ContinuationNotice” shall have the meaning specified in Section 2.15 of theFunding Agreement.

 

“CreditGrade” shall mean, with respect to an Obligor, the risk category for suchObligor as determined in accordance with the Underwriting Policy.

 

“CSFB”shall have the meaning specified in the recitals to the Funding Agreement.

 

“CSFB Roles”shall have the meaning specified in Section 10.12 of the FundingAgreement.

 

“CustodialAgreement” shall mean the Custodial Agreement, dated as of July 27,2005, by and among the Custodian, the Borrower, the Originator and the FacilityAgent, as the same may from time to time be amended, supplemented or otherwisemodified and in effect.

 

“CustodialFee” shall mean the fee payable by the Borrower to the Custodian pursuantto the Custodial Agreement.

 

“CustodialFee Percentage” shall mean the per annum percentage used to calculate theCustodial Fee.

 

“Custodian”shall mean Wells Fargo Bank, National Association, a national bankingassociation, and its permitted successors and assigns.

 

“DeemedCollections” shall mean any Collections on any Mortgage Loan and relatedCollateral deemed to have been received pursuant to Section 2.8(a) or(b) of the Funding Agreement.

 

“DefaultedMortgage Loan” shall mean a Mortgage Loan (i) as to which anyscheduled payment, or part thereof, remains unpaid for sixty (60) days or morefrom the original scheduled due date for such payment; (ii) as to which anEvent of Bankruptcy has occurred and is continuing with respect to the Obligorthereof; (iii) as to which the related Obligor has failed to pay in fullthe first scheduled

 

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payment thereunder; (iv) which has been identified by theBorrower, the Originator or the Servicer as uncollectible; (v) which,consistent with the Underwriting Policy and the Servicing Standards, has beenor should be written off as uncollectible; or (vi) as to which the relatedObligor is otherwise in default thereunder; provided that any MortgageLoan as to which any scheduled payment remains unpaid in full after thescheduled due date therefor for more than thirty (30) days, but less than sixty(60) days, shall not constitute a Defaulted Mortgage Loan unless such MortgageLoan is otherwise a Defaulted Mortgage Loan for a reason described in clauses(i)-(v) above.

 

“EffectiveDate” shall have the meaning specified in Section 4.1 of the FundingAgreement.

 

“EligibleAsset” shall mean, at any time, any Mortgage Loan and related property:

 

(i)                                     as to which all of the representationsand warranties contained in Exhibit D to the Funding Agreement are trueand correct;

 

(ii)                                  which is not a Defaulted MortgageLoan;

 

(iii)                               which (together with the Collectionsand Related Security related thereto) has been the subject of a valid transferand assignment from the Originator to the Borrower of all of the Originator’sright, title and interest therein;

 

(iv)                              which arises pursuant to MortgageLoan Documents with respect to which the applicable Originator and itsAffiliates have performed all obligations required to be performed by suchPerson thereunder;

 

(v)                                 the Obligor of which is (A) aresident of the United States, (B) not an Affiliate of any of the partiesto the Funding Agreement and (C)  not a government or a governmentalsubdivision or agency;

 

(vi)                              which is an “eligible asset” asdefined in Rule 3a-7 under the Investment Company Act of 1940, as amended;

 

(vii)                           the Mortgage Note with respect towhich has been executed by the related Obligor and constitutes an “instrument”within the meaning of Article 9 of the Relevant UCC;

 

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(viii)                        which is denominated and payableonly in United States dollars in the United States;

 

(ix)                                which arises under Mortgage LoanDocuments that, together with such Mortgage Loan, are in full force and effectand constitutes the legal, valid and binding obligation of the related Obligor,enforceable against such Obligor in accordance with its terms and is notsubject to any litigation or any dispute;

 

(x)                                   which (A) satisfies allapplicable requirements of the Underwriting Policy, (B) the Mortgage LoanDocuments with respect to which do not contain any requirement of consent by,or notice to, the related Obligor that is effective under applicable law(taking into account the Relevant UCC) and (C) complies with such otherreasonable criteria and requirements as the Facility Agent may from time totime specify to the Borrower upon five (5) days’ prior written notice;

 

(xi)                                which was generated in the ordinarycourse of the Originator’s business;

 

(xii)                             the assignment of which under thePurchase Agreement by the Originator to the Borrower, and the grant of asecurity interest therein by the Borrower to the Facility Agent, do notviolate, conflict with or contravene any applicable laws, rules, regulations,orders or writs or any contractual provision;

 

(xiii)                          which (together with the relatedMortgage Loan Documents) has not been compromised or adjusted (including by theextension of time for payment or the granting of any discounts, allowances orcredits), or amended, rewritten or otherwise modified, except in accordancewith the Underwriting Policy and the Servicing Standards; provided thatsuch modification is not reasonably likely to have a material adverse effect onthe collectibility of such Mortgage Loan; and

 

(xiv)                         as to which, in the case of aWet-Ink Mortgage Loan, (i) the Borrower, the related Originator and/or theServicer has not learned that such Mortgage Loan did not close and fully fundto the order of the Obligor and (ii) upon recordation, such Mortgage Loanwill constitute a First Lien or Second Lien on the premises described therein.

 

“EligibleSubservicer” shall mean JPMorgan Chase Bank, National Association, or suchother Person as may be approved in writing as a subservicer of

 

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Mortgage Loans by the Facility Agent (acting at the direction of theRequired Committed Lenders).

 

“ERISA”shall mean the Employee Retirement Income Security Act of 1974, as amended,supplemented or otherwise modified and in effect from time to time, and the rules andregulations promulgated thereunder.

 

“ERISAAffiliate” shall mean, with respect to any Person, (i) any corporationwhich is a member of the same controlled group of corporations (within themeaning of Section 414(b) of the Code) as such Person; (ii) atrade or business (whether or not incorporated) under common control (withinthe meaning of Section 414(c) of the Code) with such Person; or (iii) amember of the same affiliated service group (within the meaning of Section 414(n)of the Code) as such Person, any corporation described in clause (i) aboveor any trade or business described in clause (ii) above.

 

“EurodollarLoan” shall mean a Loan as to which Yield is calculated at the EurodollarRate.

 

“EurodollarFunding Period” shall mean, with respect to a Eurodollar Loan for a LendingGroup, prior to the Termination Date, a period commencing on (and including)the related Loan Date and ending on (but excluding) the last day of the SettlementPeriod in which such Loan Date occurred and, subsequently, a period from thelast day of each Settlement Period to the last day of the next succeedingSettlement Period; provided that if such Eurodollar Funding Period wouldexpire on a day that is not a Business Day, such Eurodollar Funding Periodshall expire on the next succeeding Business Day; providedfurther,that if such Eurodollar Funding Period would expire on (a) a day that isnot a Business Day but is a day of the month after which no further BusinessDay occurs in such month, such Eurodollar Funding Period shall expire on thenext preceding Business Day or (b) a Business Day for which there is nonumerically corresponding day in the applicable subsequent calendar month, suchEurodollar Funding Period shall expire on the last Business Day of such month.

 

“EurodollarRate” shall mean, with respect to any specified Eurodollar Funding Periodfor a Lending Group, a rate which exceeds by a rate equal to the ApplicableMargin a rate per annum equal to the sum (rounded upwards, if necessary, to thenext higher 1/100 of 1%) of (A) the rate obtained by dividing (i) theapplicable LIBO Rate by (ii) a percentage equal to 100% minus thereserve percentage used for determining the maximum reserve requirement asspecified in Regulation D of the Board of Governors of the Federal Reserve System(including, without limitation, any margin, emergency, supplemental, special orother reserves) that is applicable to

 

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the related Group Agent during such Eurodollar Funding Period inrespect of eurocurrency or eurodollar funding, lending or liabilities (or, ifmore than one percentage shall be so applicable, the daily average of suchpercentage for those days in such Eurodollar Funding Period during which anysuch percentage shall be applicable) plus (B) the then daily netannual assessment rate (rounded upwards, if necessary, to the nearest 1/100 of1%) as estimated by the related Group Agent for determining the current annualassessment payable by such Group Agent to the Federal Deposit InsuranceCorporation in respect of eurocurrency or eurodollar funding, lending or liabilities.

 

“Event ofBankruptcy” shall mean, with respect to any Person, (i) that suchPerson (a) shall generally not pay its debts as such debts become due or (b) shalladmit in writing its inability to pay its debts generally or (c) shallmake a general assignment for the benefit of creditors; (ii) anyproceeding shall be instituted by or against such Person seeking to adjudicateit as bankrupt or insolvent, or seeking liquidation, winding up,reorganization, arrangement, adjustment, protection, relief or composition ofit or its debts under any law relating to bankruptcy, insolvency orreorganization or relief of debtors, or seeking the entry of an order forrelief or the appointment of a receiver, trustee or other similar official forit or any substantial part of its property, and in the case of any proceeding(in the case of any Person other than the Borrower), such involuntaryproceeding shall not have been stayed or dismissed for ninety (90) days or (iii) suchPerson shall take any action to authorize any of the actions set forth in thepreceding clauses (i) or (ii).

 

“Event ofDefault” shall mean an event described in Section 7.1 of the FundingAgreement.

 

“FacilityAgent” shall mean CSFB, in its capacity as Facility Agent for the benefitof the Lenders under the Transaction Documents, and its permitted successorsand assigns in such capacity.

 

“FacilityLimit” shall mean (i) prior to October 31, 2005, $500,000,000 and(ii) on and after October 31, 2005, $800,000,000; providedthat such amount may not at any time exceed the Aggregate Commitment then ineffect; provided, further, that from and after the TerminationDate, the Facility Limit shall at all times equal the Facility OutstandingPrincipal.

 

“FacilityOutstanding Principal” shall mean, at any time, the aggregate outstandingprincipal balance of all Loans made by the Lenders to the Borrower.

 

“FatalException” shall have the meaning specified in the Custodial Agreement.

 

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“FatalException Report” shall mean, with respect to Mortgage Loans that are (orare intended to be) included in the Collateral, a duly completed schedule deliveredby the Custodian to the Facility Agent and the Group Agents prior to a LoanDate or Addition Date listing all Fatal Exceptions with respect to such MortgageLoans (as such term is defined in the Custodial Agreement).

 

“FeeLetters” shall mean the letter agreements between the Borrower and theGroup Agents for each Lending Group, with respect to the fees to be paid by theBorrower under the Transaction Documents, as amended, supplemented or otherwisemodified and in effect from time to time.

 

“FIC”shall mean Fieldstone Investment Corporation, a Maryland corporation, and itspermitted successors and assigns.

 

“FICO”shall mean Fair Isaac & Co., and its permitted successors and assigns.

 

“FICO Score”shall mean, with respect to an Obligor, a rating level assigned by FICO to suchObligor’s creditworthiness.

 

“Fixed RateMortgage Loan” shall mean a Mortgage Loan that bears interest at a singlefixed rate for its entire term.

 

“FloatingRate Mortgage Loan” shall mean a Mortgage Loan that is not a Fixed RateMortgage Loan.

 

“FullDocumentation” shall mean, with respect to a Mortgage Loan, that therelated Obligor has provided the highest level of information to the Originatorabout its assets, liablities, income, credit history and employment history, asdetermined for “full documentation” in accordance with the Underwriting Policy.

 

“FundingAgreement” shall mean the Funding Agreement, dated as of July 27,2005, by and among the Borrower, the Servicer, the Facility Agent and theLenders, as such agreement may be amended, supplemented or otherwise modifiedand in effect from time to time.

 

“FundingPeriod” shall mean a BR Funding Period or a Eurodollar Funding Period.

 

“GAAP”shall mean generally accepted accounting principles set forth in the opinionsand pronouncements of the Accounting Principles Board of the American Instituteof Certified Public Accountants and statements and pronouncements

 

 

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of the Financial Accounting Standards Board or in such other statementsby such accounting profession as in effect from time to time.

 

“GroupAgent” shall mean each of CSFB and any other Person that becomes a party tothe Funding Agreement as a “Group Agent” thereunder.

 

“GroupFacility Limit” shall mean, in the case of the Lending Group related toCSFB and Alpine, $800,000,000 and, in the case of any other Lending Group, suchamount as is specified in the related assumption agreement or other agreementpursuant to which the Persons in such Lending Group become parties to theFunding Agreement and assume all of the rights and obligations, as applicable,of “Committed Lenders”, “Conduit Lenders” and “Group Agents” thereunder.

 

“GroupFacility Outstanding Principal” shall mean, for each Lending Group, theportion of the Facility Outstanding Principal allocated to such Lending Group.

 

“Indebtedness”shall mean, with respect to any Person, such Person’s (i) obligations forborrowed money, (ii) obligations representing the deferred purchase priceof property other than accounts payable arising in the ordinary course of suchPerson’s business on terms customary in the trade, (iii) obligations,whether or not assumed, secured by liens or payable out of the proceeds or productionfrom property now or hereafter owned or acquired by such Person, (iv) obligationsthat are evidenced by notes, acceptances, or other instruments, (v) obligationsunder repurchase agreements, sale/buy-back agreements or like arrangements, (vi) obligations(contingent or otherwise) of such Person in respect of letters of credit forthe account of such Person and (vii) Capitalized Lease obligations.

 

“IndemnifiedAmounts” shall have the meaning specified in Section 8.1 of theFunding Agreement.

 

“IndemnifiedParties” shall have the meaning specified in Section 8.1 of theFunding Agreement.

 

“Law”shall mean any law (including common law), constitution, statute, treaty,regulation, rule, ordinance, order, injunction, writ, decree or award of anyOfficial Body.

 

“Lender”shall mean, at any time, any of the Conduit Lenders and the Committed Lenders.

 

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“LendingGroup” shall mean, at any time, a group consisting of a Conduit Lender,such Conduit Lender’s related Committed Lenders, and such Conduit Lender’sGroup Agent.

 

“LIBO Rate”shall mean, on any date of determination for any Eurodollar Funding Period forany Lending Group, the rate of interest (calculated on a per annum basis) equalto the overnight British Bankers Association Rate as reported on the displaydesignated as “BBAM” “Page DG8 4A” on Bloomberg (or such other display asmay replace “BBAM” “Page DG8 4A” on Bloomberg) on such date of determination,and if such rate shall not be so quoted, the rate per annum at which therelated Group Agent is offered Dollar deposits at or about 11:00 A.M.(London time), on such day, by prime banks in the interbank eurodollar marketwhere the eurodollar and foreign currency exchange operations in respect of itsloans are then being conducted for delivery on such day for an overnightperiod, in either case in an amount approximately equal to the principalbalance of the Loan to which the Eurodollar Rate is to apply and for a periodof time approximately equal to the applicable Eurodollar Funding Period.  The “date of determination” for anyEurodollar Funding Period shall be the second (2nd) Business Dayprior to the commencement of such Eurodollar Funding Period.

 

“Lien”shall mean a lien, security interest, mortgage, charge, pledge or encumbrance,or other right or claim in, of or on any Person’s rights, assets or propertiesin favor of any other Person (including any financing statement or any similarinstrument under the Relevant UCC filed against such Person’s rights, assets orproperties); provided that a Lien shall not include Permitted Liens.

 

“Loan”shall have the meaning specified in Section 2.1 of the Funding Agreement.

 

“LoanConditions” shall mean the conditions precedent to each Loan specified in Section 4.2of the Funding Agreement.

 

“Loan Date”shall mean, with respect to each Loan, the Business Day on which such Loan ismade by the Lenders.

 

“Loan Note”shall mean the Loan Note in substantially the form of Exhibit A to theFunding Agreement, dated as of July 27, 2005, made by the Borrower, as thesame may from time to time be amended, supplemented or otherwise modified withthe consent of the Facility Agent and the Group Agents.

 

“LoanNotice” shall have the meaning specified in Section 2.2(a) of theFunding Agreement.

 

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“MarketValue” shall mean, with respect to any Mortgage Loan as of any date ofdetermination, the whole-loan fair market value of such Mortgage Loan on suchdate as determined by the Facility Agent in its sole discretion; providedthat (i) the Market Value of any Mortgage Loan included in the Collateralfor more than one (1) year after its related Loan Date will be zero and (ii) theMarket Value of any Wet-Ink Mortgage Loan with respect to which a Trust Receipthas not been issued by the Custodian to the Facility Agent and the Group Agentson and after the fifth (5th) day following the related Loan Date orAddition Date, as applicable, will be zero.

 

“MaterialAdverse Effect” shall mean (i) a material adverse change in, or amaterial adverse effect upon, the operations, business, properties, condition(financial or otherwise) or prospects of the Originator, the Servicer or theBorrower, taken as a whole, (ii) a material impairment of the ability ofany of the Borrower, the Servicer or the Originator to perform its obligationsunder the Transaction Documents to which it is a party and to avoid an Event ofDefault, (iii) a material adverse effect upon the collectibility of the Collateral,the interests of the Facility Agent, the Group Agents or the Lenders or uponthe legality, validity, binding effect or enforceability of any TransactionDocument against the Originator, the Servicer or the Borrower.

 

“Moody’s”shall mean Moody’s Investors Service, Inc., and its successors andassigns.

 

“Mortgage”shall mean each mortgage, assignment of rents, security agreement and fixturefiling, or deed of trust, assignment of rents, security agreement and fixturefiling, deed to secured debt, assignment of rents, security agreement andfixture filing, or similar instrument creating and evidencing a lien on realproperty and other property and rights incidental thereto.

 

“MortgageFile” shall mean, with respect to a Mortgage Loan, the documents andinstruments relating to such Mortgage Loan as set forth on Annex A to theCustodial Agreement.

 

“MortgageLoan” shall mean a closed-end, fixed or floating-rate, first lien or secondlien mortgage loan on a one-to-four family residential mortgage evidenced by apromissory note and secured by a Mortgage, which mortgage loan has closed andbeen funded by the related Originator, satisfies the requirements of theUnderwriting Policy and with respect to which the Custodian has been instructedto hold such mortgage loan pursuant to and in accordance with the CustodialAgreement.  A Mortgage Loan shall includean Additional Mortgage Loan and a Substituted Mortgage Loan.

 

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“MortgageLoan Documents” shall mean, with respect to a Mortgage Loan, the documentscomprising the Mortgage File for such Mortgage Loan.

 

“MortgageLoan Release Amount” shall mean, with respect to any Mortgage Loan that isthe subject of Section 2.8 of the Funding Agreement, an amount selected bythe Borrower that is less than or equal to the Outstanding Principal Balance ofsuch Mortgage Loan and with respect to which, after giving effect to suchrelease from the Collateral, the Borrowing Base Test would be satisfied.

 

“MortgageLoan Schedule” shall mean, with respect to any Loan, a mortgage loan schedule eitherin the form attached to the related Loan Notice in Exhibit C to theFunding Agreement or a computer tape or other electronic medium generated bythe Servicer and delivered to the Facility Agent, the Group Agents and theCustodian, which list provides information relating to the Mortgage Loans relatedto such Loan in a format acceptable to the Facility Agent and the Group Agents.

 

“MortgageNote” shall mean the original executed promissory note or other evidence ofindebtedness of an Obligor with respect to a Mortgage Loan.

 

“MortgagedProperty” shall mean the real property (including all improvements,buildings, fixtures, building equipment and personal property thereon and alladditions, alterations and replacements made at any time with respect to theforegoing) and all other property and collateral securing repayment of theindebtedness evidenced by a Mortgage Loan and Mortgage Note.

 

“MultiemployerPlan” shall mean a “multiemployer plan” as defined in Section 4001(a)(3) ofERISA which is or was at any time during the current year or the immediatelypreceding five years contributed to by the Borrower, the Originator or anyERISA Affiliate of the Borrower or the Originator on behalf of its employees.

 

“NetEligible Assets Balance” shall mean, at any time, the aggregate OutstandingPrincipal Balance of all Eligible Assets included in the Collateral at suchtime.

 

“Obligor”shall mean a Person obligated to make payments under a Mortgage Loan orMortgage Note (including, but not limited to, any Person who has assumed orguaranteed the obligations of the obligor or mortgagor thereunder).

 

“OfficialBody” shall mean any government or political subdivision or any agency,authority, bureau, central bank, commission, department or instrumentality

 

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of any such government or political subdivision, or any court,tribunal, grand jury or arbitrator, in each case whether foreign or domestic.

 

“Originator”shall mean FIC.

 

“OutstandingPrincipal Balance” shall mean, with respect to any Mortgage Loan at anytime, the then outstanding principal amount thereof.

 

“PermittedException” shall have the meaning specified in the Custodial Agreement.

 

“PermittedException Report” shall mean, with respect to Mortgage Loans that are (orare intended to be) included in the Collateral, a duly completed schedule deliveredby the Custodian to the Facility Agent and the Group Agents prior to a LoanDate or Addition Date listing all Permitted Exceptions with respect to such MortgageLoans (as such term is defined in the Custodial Agreement).

 

“PermittedInvestments” shall mean (i)  any investment described as an “EligibleInvestment” in the Subservicing Agreement and (ii) any other investmentsagreed upon between the Borrower and the Facility Agent.

 

“PermittedLiens” shall mean (i) liens of current real property taxes andassessments not yet due and payable, (ii) covenants, conditions andrestrictions, rights of way, easements and other matters of the public recordas of the date of recording being acceptable to mortgage lending institutionsgenerally and specifically referred to in the lender’s title insurance policydelivered to the Originator and which do not adversely affect the AppraisedValue of the Mortgaged Property, (iii) in the case of a Mortgaged Propertythat it a condominium or an individual unit in a planned unit development,liens for common charges permitted by statute, (iv) other matters to whichlike properties are commonly subject which do not, individually or in theaggregate, materially interfere with the benefits of the security intended tobe provided by the related Mortgage or the use, enjoyment, value or marketabilityof the related Mortgaged Property.

 

“Person”shall mean any corporation, limited liability company, natural person, firm,joint venture, partnership, trust, unincorporated organization, enterprise,government or any department or agency of any government.

 

“PoolCriteria” shall mean at any time with respect to the Mortgage Loans andrelated property that are included in the Collateral at such time:

 

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(a)                                  theWeighted Average Mortgage Interest Rate of all Fixed Rate Mortgage Loans isgreater than or equal to 7.5%;

 

(b)                                 theWeighted Average Mortgage Interest Rate of all Floating Rate Mortgage Loans isgreater than or equal to 7%;

 

(c)                                  theWeighted Average FICO Score of all Fixed Rate Mortgage Loans is greater than orequal to 675;

 

(d)                                 theWeighted Average FICO Score of all Floating Rate Mortgage Loans is greater thanor equal to 630;

 

(e)                                  theOutstanding Principal Balance of all Fixed Rate Mortgage Loans having FICOScores that are less than or equal to 500 is less than or equal to 1% of theOutstanding Principal Balance of all Fixed Rate Mortgage Loans;

 

(f)                                    theOutstanding Principal Balance of all Floating Rate Mortgage Loans having FICOScores that are less than or equal to 500 is less than or equal to 0.50% of theOutstanding Principal Balance of all Floating Rate Mortgage Loans;

 

(g)                                 theOutstanding Principal Balance of all Fixed Rate Mortgage Loans having FICOScores that are less than or equal to 550 is less than or equal to 3% of theOutstanding Principal Balance of all Fixed Rate Mortgage Loans;

 

(h)                                 theOutstanding Principal Balance of all Floating Rate Mortgage Loans having FICOScores that are less than or equal to 550 is less than or equal to 15% of theOutstanding Principal Balance of all Floating Rate Mortgage Loans;

 

(i)                                     theOutstanding Principal Balance of all Fixed Rate Mortgage Loans having FICOScores that are less than or equal to 600 is less than or equal to 10% of theOutstanding Principal Balance of all Fixed Rate Mortgage Loans;

 

(j)                                     theOutstanding Principal Balance of all Floating Rate Mortgage Loans having FICOScores that are less than or equal to 600 is less than or equal to 30% of theOutstanding Principal Balance of all Floating Rate Mortgage Loans;

 

(k)                                  theWeighted Average LTV of all Fixed Rate Mortgage Loans is less than 87%;

 

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(l)                                     theWeighted Average LTV of all Floating Rate Mortgage Loans is less than 85%;

 

(m)                               theOutstanding Principal Balance of all Fixed Rate Mortgage Loans having an LTVthat is greater than or equal to 95% but less than or equal to 100% is less than40% of the Outstanding Principal Balance of all Fixed Rate Mortgage Loans;

 

(n)                                 theOutstanding Principal Balance of all Floating Rate Mortgage Loans having an LTVthat is greater than or equal to 95% but less than or equal to 100% is lessthan 15% of the Outstanding Principal Balance of all Floating Rate MortgageLoans;

 

(o)                                 theWeighted Average CLTV of all Fixed Rate Mortgage Loans is less than 95%;

 

(p)                                 theWeighted Average CLTV of all Floating Rate Mortgage Loans is less than 95%;

 

(q)                                 theOutstanding Principal Balance of all Fixed Rate Mortgage Loans having a CLTVthat is greater than or equal to 95% but less than or equal to 100% is lessthan 40% of the Outstanding Principal Balance of all Fixed Rate Mortgage Loans;

 

(r)                                    theOutstanding Principal Balance of all Floating Rate Mortgage Loans having a CLTVthat is greater than or equal to 95% but less than or equal to 100% is lessthan 60% of the Outstanding Principal Balance of all Floating Rate MortgageLoans;

 

(s)                                  theOutstanding Principal Balance of all Fixed Rate Mortgage Loans having anoriginal Outstanding Principal Balance that is less than or equal to $50,000 isless than 20% of the Outstanding Principal Balance of all Fixed Rate MortgageLoans;

 

(t)                                    theOutstanding Principal Balance of all Floating Rate Mortgage Loans having anoriginal Outstanding Principal Balance that is less than or equal to $50,000 isless than 5% of the Outstanding Principal Balance of all Floating Rate MortgageLoans;

 

(u)                                 theOutstanding Principal Balance of all Fixed Rate Mortgage Loans having anoriginal Outstanding Principal Balance that is less than or equal to

 

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$100,000 is less than 45% of the Outstanding Principal Balance of allFixed Rate Mortgage Loans;

 

(v)                                 theOutstanding Principal Balance of all Floating Rate Mortgage Loans having anoriginal Outstanding Principal Balance that is less than or equal to $100,000is less than 10% of the Outstanding Principal Balance of all Floating Rate MortgageLoans;

 

(w)                               theOutstanding Principal Balance of all Fixed Rate Mortgage Loans having a CreditGrade of “A” is greater than or equal to 95% of the Outstanding PrincipalBalance of all Fixed Rate Mortgage Loans;

 

(x)                                   theOutstanding Principal Balance of all Floating Rate Mortgage Loans having aCredit Grade of “A” is greater than or equal to 90% of the OutstandingPrincipal Balance of all Floating Rate Mortgage Loans;

 

(y)                                 theOutstanding Principal Balance of all Fixed Rate Mortgage Loans having a CreditGrade of “D” is less than or equal to 0.50% of the Outstanding PrincipalBalance of all Fixed Rate Mortgage Loans;

 

(z)                                   theOutstanding Principal Balance of all Floating Rate Mortgage Loans having aCredit Grade of “D” is less than or equal to 1% of the Outstanding PrincipalBalance of all Floating Rate Mortgage Loans;

 

(aa)                            theOutstanding Principal Balance of all Fixed Rate Mortgage Loans with respect towhich the related Obligors have provided Full Documentation is greater than 55%of the Outstanding Principal Balance of all Fixed Rate Mortgage Loans;

 

(bb)                          theOutstanding Principal Balance of all Floating Rate Mortgage Loans with respectto which the related Obligors have provided Full Documentation is greater than40% of the Outstanding Principal Balance of all Floating Rate Mortgage Loans;

 

(cc)                            theOutstanding Principal Balance of all Fixed Rate Mortgage Loans with respect towhich the related Obligors are required to pay interest only on scheduledpayment dates for a particular period of time (and which period of time has notended) is less than 10% of the Outstanding Principal Balance of all Fixed RateMortgage Loans;

 

(dd)                          theOutstanding Principal Balance of all Floating Rate Mortgage Loans with respectto which the related Obligors are required to pay interest

 

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only on scheduled payment dates for a particular period of time (andwhich period of time has not ended) is less than 75% of the OutstandingPrincipal Balance of all Floating Rate Mortgage Loans;

 

(ee)                            theOutstanding Principal Balance of all Fixed Rate Mortgage Loans with respect towhich the related Obligor occupies the related Mortgaged Property is greaterthan or equal to 93% of the Outstanding Principal Balance of all Fixed RateMortgage Loans;

 

(ff)                                theOutstanding Principal Balance of all Floating Rate Mortgage Loans with respectto which the related Obligor occupies the related Mortgaged Property is greaterthan or equal to 90% of the Outstanding Principal Balance of all Floating RateMortgage Loans;

 

(gg)                          theOutstanding Principal Balance of all Fixed Rate Mortgage Loans with respect towhich the related Mortgaged Property is designated for single-family use isgreater than or equal to 65% of the Outstanding Principal Balance of all FixedRate Mortgage Loans;

 

(hh)                          theOutstanding Principal Balance of all Floating Rate Mortgage Loans with respectto which the related Mortgaged Property is designated for single-family use isgreater than or equal to 65% of the Outstanding Principal Balance of allFloating Rate Mortgage Loans;

 

(ii)                                  theOutstanding Principal Balance of all Fixed Rate Mortgage Loans with respect towhich the related Mortgaged Property is designated for other than single-familyuse is less than or equal to 35% of the Outstanding Principal Balance of allFixed Rate Mortgage Loans;

 

(jj)                                  theOutstanding Principal Balance of all Floating Rate Mortgage Loans with respectto which the related Mortgaged Property is designated for other thansingle-family use is less than or equal to 35% of the Outstanding PrincipalBalance of all Fixed Rate Mortgage Loans;

 

(kk)                            theOutstanding Principal Balance of all Fixed Rate Mortgage Loans that are alsoSecond Lien Mortgage Loans is less than or equal to 40% of the OutstandingPrincipal Balance of all Fixed Rate Mortgage Loans;

 

(ll)                                  thereare no Floating Rate Mortgage Loans that are also Second Lien Mortgage Loans;

 

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(mm)                      theOutstanding Principal Balance of all Fixed Rate Mortgage Loans with respect towhich the related Mortgaged Property is located in the State of California isless than or equal to 42% of the Outstanding Principal Balance of all FixedRate Mortgage Loans;

 

(nn)                          theOutstanding Principal Balance of all Floating Rate Mortgage Loans with respectto which the related Mortgaged Property is located in the State of Californiais less than or equal to 55% of the Outstanding Principal Balance of all FloatingRate Mortgage Loans;

 

(oo)                          theOutstanding Principal Balance of all Fixed Rate Mortgage Loans with respect towhich the related Mortgaged Property is located in a particular state of theUnited States or the District of Columbia (other than the State of California)is less than or equal to 12% of the Outstanding Principal Balance of all FixedRate Mortgage Loans; and

 

(pp)                          theOutstanding Principal Balance of all Floating Rate Mortgage Loans with respectto which the related Mortgaged Property is located in a particular state of theUnited States or the District of Columbia (other than the State of California)is less than or equal to 15% of the Outstanding Principal Balance of allFloating Rate Mortgage Loans.

 

“PotentialEvent of Default” shall mean an event which but for the lapse of time orthe giving of notice, or both, would constitute an Event of Default.

 

“Prepayment”shall mean a prepayment by the Borrower of any portion of the FacilityOutstanding Principal in accordance with Section 2.4(b) of theFunding Agreement.

 

“PrepaymentConditions” shall mean, with respect to any Collateral that is to bereleased from the Lien of the Facility Agent on any Prepayment Date, (i) allof the conditions to Loans specified in Sections 4.2(a)-(g), (i) and (j)shall be satisfied in full, as if references to “Loan” therein were“Prepayment”, and references to “Loan Notice” were “Prepayment Notice”, (ii) theBorrower shall have delivered a duly completed Prepayment Notice in accordancewith Section 2.4(b) and (iii) the Collateral subject to such releaseis otherwise reasonably acceptable to the Facility Agent and the Group Agents.

 

“PrepaymentDate” shall have the meaning specified in Section 2.4(b) of theFunding Agreement.

 

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“PrepaymentNotice” shall have the meaning specified in Section 2.4(b) of theFunding Agreement.

 

“Proceeds”shall mean “proceeds” as defined in the Relevant UCC.

 

“Pro RataShare” shall mean, for any Lending Group, the percentage equivalent of afraction, the numerator of which is the related Group Facility Limit, and thedenominator of which is the Facility Limit.

 

“PurchaseAgreement” shall mean the FIC Mortgage Loan Sale and Purchase Agreement,dated as of July 27, 2005, between FIC, as seller, and the Borrower, aspurchaser, as the same may from time to time be amended, supplemented orotherwise modified and in effect.

 

“PurchaseTermination Date” shall have the meaning specified in each PurchaseAgreement.

 

“RatingAgencies” shall mean Standard & Poor’s and Moody’s.

 

“Recipient”shall have the meaning specified in Section 2.13 of the Funding Agreement.

 

“RelatedSecurity” shall mean, with respect to any Mortgage Loan, all rights of theBorrower in, to and under the following:

 

(a)  allMortgage Loan Documents related to such Mortgage Loan, including withoutlimitation the Mortgage Note and all other promissory notes or instruments, allServicing Records, all Mortgaged Property and any other collateral pledged orotherwise relating to such Mortgage Loan, together with all files, materialdocuments, instruments, surveys, certificates, correspondence, appraisals,computer records, computer storage media, Mortgage Loan accounting records andother books and records relating thereto, and all rights under the provisionsof, and rights to access, use and possess, the Mortgage Loan Documents;

 

(b)  allmortgage guaranties and insurance (issued by governmental agencies orotherwise) and any mortgage insurance certificate or other document evidencingsuch mortgage guaranties or insurance relating to such Mortgage Loan and allclaims and payments thereunder;

 

(c)  allother insurance policies and insurance proceeds relating to such Mortgage Loanor related Mortgaged Property;

 

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(d)  allinterest rate protection agreements relating to any or all of the foregoing;

 

(e)  allpurchase or take-out commitments relating to or constituting any or all of theforegoing;

 

(f)  allpurchase agreements or other agreements or contracts relating to orconstituting any or all of the foregoing;

 

(g)  all“accounts”, “chattel paper”, “commercial tort claims”, “deposit accounts”,“documents,” “equipment”, “general intangibles”, “goods”, “instruments”,“inventory”, “investment property”, “letter of credit rights”, “securities’accounts” and “security interest”, as each of those terms is defined in theRelevant UCC and all cash and cash equivalents and all products and proceedsrelating to or constituting any or all of the foregoing;

 

(h)  allinterests in real property collateralizing such Mortgage Loan;

 

(i)  anyand all replacements, substitutions, distributions on or proceeds of any or allof the foregoing; and

 

(k)  all Proceeds of any of the foregoing.

 

“RelevantUCC” shall mean, with respect to any relevant state, the Uniform CommercialCode as from time to time in effect in such state.

 

“RenewalConditions” shall mean, with respect to the extension of any ScheduledCommitment Expiry Date by a Committed Lender pursuant to Section 2.6 ofthe Funding Agreement, (i) the negotiation, execution and delivery oflegal documentation in form and substance acceptable to such Committed Lender, (ii) inthe judgment of such Committed Lender, the satisfactory completion of anyinvestigation or due diligence regarding the Collateral or the Borrower, theOriginator or the Servicer requested by such Committed Lender (including thedelivery of the agreed upon procedures report relating to such Scheduled CommitmentExpiry Date described in Section 5.1(a)(i) of the Funding Agreement),(iii) an Event of Default or Potential Event of Default has not occurred, (iv) allof the representations and warranties of the Borrower, the Originator and theServicer under the Transaction Documents are true and correct on the ScheduledCommitment Expiry Date then in effect (unless a representation and warrantyspeaks to an earlier date, in which case such representation and warranty shallbe true and correct as of such earlier date), (v) the Facility Agent, therelated Group Agent, the related Conduit Lender and such Committed Lender havenot become aware of any information or any other matter relating

 

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to the Borrower, the Originator or the Servicer, or relating to theperformance of all or a portion of the Collateral, which is inconsistent withany information or other matters previously disclosed by the Borrower, theOriginator or the Servicer and (vi) the absence of any event or conditionprior to the Scheduled Commitment Expiry Date then in effect that, in the solediscretion of such Committed Lender, could have a Material Adverse Effect or amaterial adverse effect on any portion of the Collateral or on the business,operations, property, condition (financial or otherwise) or prospects of suchCommitted Lender, its related Conduit Lender, its related Group Agent, theBorrower, the Originator, the Servicer and/or their respective Affiliates.

 

“RequiredCommitted Lenders” shall mean, at any time, Committed Lenders havingCommitments at least equal to 66 2/3% of the Aggregate Commitment, or, if theCommitments have been terminated, having at least 66 2/3% of the Facility OutstandingPrincipal.

 

“ScheduledCommitment Expiry Date” shall mean July 26, 2006, as such date may beextended pursuant to Section 2.6 of the Funding Agreement.

 

“Servicer”shall mean, at any time, the Person then authorized pursuant to Section 6.1of the Funding Agreement to service, administer and collect the Mortgage Loansand related Collateral.

 

“ServicerAdvance” shall have the meaning specified in Section 2.5(b) ofthe Funding Agreement.

 

“ServicerReport” shall mean a report in substantially the form attached to theFunding Agreement as Exhibit E or in such other form as is mutually agreedto by the Borrower, the Servicer, the Facility Agent and the Group Agents,delivered by the Servicer to the Facility Agent and the Group Agents inaccordance with Section 2.10 of the Funding Agreement.

 

“ServicingFee” shall mean the fees payable by the Lenders to the Servicer on eachSettlement Date in an amount equal to the product of the Servicing FeePercentage multiplied by the daily average Outstanding Principal Balanceof all Mortgage Loans included in the Collateral during the immediatelypreceding Settlement Period.  Such feeshall accrue from the Effective Date to the later of the Termination Date orthe date on which all Aggregate Unpaids are permanently reduced to zero.

 

“ServicingFee Percentage” shall mean 0.50% per annum.

 

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“ServicingRecords” shall mean, with respect to a Mortgage Loan, all servicingrecords, including but not limited to any and all servicing agreements, files, documents,records, data bases, licenses, software, computer tapes, copies of computertapes, proof of insurance coverage, insurance policies, appraisals, otherclosing documentation, payment history records, and any other records orelectronic media relating to or evidencing the servicing and collection of suchMortgage Loan.

 

“ServicingStandards” shall mean, with respect to any Mortgage Loan, the servicing andadministration of such Mortgage Loan for which the Servicer or its agent isresponsible hereunder (a) in the same manner in which, and with the samecare, skill, prudence and diligence with which, the Servicer or such agent, asapplicable, generally services and administers similar mortgage loans withsimilar obligors (i) for other third-parties, giving due consideration tocustomary and usual standards of practice of prudent institutional residentialmortgage lenders servicing their own loans or (ii) held in the Servicer’sor its agent’s own portfolio, as applicable, whichever standard is higher, (b) witha view to the maximization of the recovery on such Mortgage Loans on a netpresent value basis and the best interests of the Originator and any Person towhich such Mortgage Loan may be transferred by the Originator or any lenderproviding financing to such Person, (c) without regard to: (i) anyrelationship that the Servicer or its agent or any Affiliate thereof may havewith the related Obligor or any other party to the transaction; (ii) theright of the Servicer or its agent to receive compensation or other fees forits services rendered pursuant to this Agreement; (iii) the obligation ofthe Servicer or its agent to make Servicer Advances; (iv) the ownership,servicing or management by the Servicer or its agent or any Affiliate thereoffor others of any other mortgage loans or mortgaged properties; and (v) anydebt the Servicer or any Affiliate of the Servicer or its agent has extended tothe related Obligor or any Affiliate of such Obligor and (d) in accordancewith applicable state, local and federal laws, rules and regulations.

 

“SettlementDate” shall mean the fifth (5th) Business Day of each calendarmonth.

 

“SettlementPeriod” shall mean a calendar month.

 

“Standard &Poor’s” or “S&P” shall mean Standard & Poor’s RatingsServices, a division of The McGraw-Hill Companies, Inc., and itssuccessors and assigns.

 

“SubservicingAgreement” shall mean the Servicing Agreement, dated as of July 27,2005, between the Borrower, as owner, FIC, as servicer and JPMorgan Chase Bank,National Association, as subservicer, as the same may from time to time beamended, supplemented or otherwise modified and in effect.

 

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“Subsidiary”of a Person shall mean any Person more than 50% of the outstanding votinginterests of which shall at any time be owned or controlled, directly orindirectly, by such Person or by one or more Subsidiaries of such Person or anysimilar business organization which is so owned or controlled.

 

“SubstitutedMortgage Loan” shall have the meaning specified in Section 2.8(c) ofthe Funding Agreement.

 

“Taxes”shall have the meaning specified in Section 8.3 of the Funding Agreement.

 

“TerminationDate” shall mean the earliest of (i) the Business Day designated bythe Borrower to the Facility Agent and the Group Agents as the Termination Dateat any time following thirty (30) days’ written notice to the Facility Agentand the Group Agents, (ii) the day upon which a Termination Date isdeclared or automatically occurs relating to an Event of Default pursuant to Section 7.2(a) ofthe Funding Agreement, (iii) the Commitment Expiry Date or (iv) thePurchase Termination Date.

 

“Third-PartyConfidentiality Agreement” shall have the meaning specified in Section 10.7(c) ofthe Funding Agreement.

 

“TransactionCosts” shall have the meaning specified in Section 8.4(a) of theFunding Agreement.

 

“TransactionDocuments” shall mean, collectively, the Funding Agreement, the PurchaseAgreement, the Custodial Agreement, the Account Control Agreement, the FeeLetters, the Subservicing Agreement and all of the other instruments, reports,agreements, certificates and other documents executed and delivered by theOriginator, the Servicer or the Borrower in connection with any of theforegoing, in each case, as the same may be amended, restated, supplemented orotherwise modified from time to time.

 

“TrustReceipt” shall mean a duly completed trust receipt issued by the Custodianto the Facility Agent and the Group Agents in accordance with the CustodialAgreement in the form attached to the Custodial Agreement as Exhibit 1.

 

“UnderwritingPolicy” shall mean the standards, procedures and guidelines of theOriginator for underwriting and acquiring Mortgage Loans, which are set forthin the written policies and procedures of the Originator, a copy of which isattached to the Funding Agreement as Exhibit B, and such other guidelinesas are

 

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identified to and approved in writing by the Facility Agent, asmodified and in effect from time to time in compliance with the Funding Agreement.

 

“U.S.”or “United States” shall mean the United States of America and itsterritories.

 

“WeightedAverage CLTV” shall mean, at any time with respect to a group of MortgageLoans that are included in the Collateral, the weighted average of all of theCLTVs for such Mortgage Loans, weighted on the basis of the originalOutstanding Principal Balance of such Mortgage Loans.

 

“WeightedAverage FICO Score” shall mean, at any time with respect to a group ofMortgage Loans that are included in the Collateral, the weighted average of allFICO Scores for such Mortgage Loans, weighted on the basis of the original OutstandingPrincipal Balance of such Mortgage Loans.

 

“WeightedAverage LTV” shall mean, at any time with respect to a group of MortgageLoans that are included in the Collateral, the weighted average of all of theLTVs for such Mortgage Loans, weighted on the basis of the original OutstandingPrincipal Balance of such Mortgage Loans.

 

“WeightedAverage Mortgage Interest Rate” shall mean, at any time with respect to agroup of Mortgage Loans that are included in the Collateral, the weightedaverage of all Mortgage Interest Rates for such Mortgage Loans, weighted on thebasis of the current Outstanding Principal Balance of such Mortgage Loans.

 

“Wet-InkMortgage Information” shall mean, with respect to any Wet-Ink MortgageLoan, all of the information required to be delivered by or on behalf of theBorrower to the Custodian prior to a Loan Date or Addition Date pursuant to theCustodial Agreement.

 

“Wet-InkMortgage Loan” shall mean a “closed” Mortgage Loan that is fully funded andfor which all funds have been disbursed that does not contain an originalMortgage Note and all of the other required Mortgage Loan Documents in therelated Mortgage File and with respect to which a Trust Receipt including suchMortgage Loan has not been delivered by the Custodian to the Facility Agent andthe Group Agents in accordance with the Custodial Agreement.  A Wet-Ink Mortgage Loan shall be considered aWet-Ink Mortgage Loan until the later of five (5) days from the relatedLoan Date and the date on which the Custodian has issued a Trust Receipt withrespect to such Mortgage Loan.

 

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“Wet-InkMortgage Loan Trust Receipt” shall mean a duly completed trust receiptdelivered by the Custodian to the Facility Agent and the Group Agents prior tothe related Loan Date or Addition Date, a form of which is attached to theCustodial Agreement as Exhibit 14.

 

“Yield”shall mean, with respect to any Funding Period:

 
| (YR x FOP x AD) |
|-----------------|
| YD              |

 

where:

 
| YR     |   | =      |   | the Yield Rate applicable to such Funding  Period;                                                                                          |
|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                        |
| FOP    |   | =      |   | the portion of the Facility Outstanding  Principal allocated to such Funding Period;                                                        |
|   |   |   |   |                                                                                                                                        |
| AD     |   | =      |   | the actual number of days during such  Funding Period; and                                                                                  |
|   |   |   |   |                                                                                                                                        |
| YD     |   | =      |   | either (i) if the Yield Rate is the  Eurodollar Rate, 360 or (ii) if the Yield Rate is the Base Rate, 365 or  366, as applicable; |

 

provided, however,that no provision of the Transaction Documents shall require the payment orpermit the collection of Yield in excess of the maximum amount permitted by applicablelaw; and provided, further, that Yield shall not be consideredpaid by any distribution if, at any time, such distribution is rescinded ormust be returned for any reason.

 

“Yield Rate”shall mean, with respect to any Loan, either the Eurodollar Rate or the BaseRate.

 

“Yield Test”shall mean, for any Settlement Period, the weighted average coupon of allMortgage Loans included in the Collateral during such Settlement Period(weighted based on the aggregate Outstanding Principal Balance of each MortgageLoan) minus (i) the Servicing Fee Percentage, (ii) theCustodial Fee Percentage and (iii) the weighted average interest rate onall Loans outstanding during such Settlement Period (weighted based on theaggregate outstanding principal balance of each Loan), is greater than or equalto 1.5%.

 

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EXHIBIT A

 

FORM OFLOAN NOTE

 
| $800,000,000  July 27, 2005 | New York, New York |
|----------------------------------|--------------------|

 

FOR VALUERECEIVED, FIELDSTONE INVESTMENT FUNDING, LLC, a Delaware limited liabilitycompany (the Borrower”), hereby promises to pay to the order of CREDIT SUISSE,NEW YORK BRANCH, as facility agent (in such capacity, the “Facility Agent”) forthe benefit of the several lenders and group agents party to the FundingAgreement (defined below), at the principal office of the Facility Agent in NewYork, New York, in lawful money of the United States of America, and inimmediately available funds, the principal sum of Eight Hundred Million Dollars($800,000,000) (or such lesser amount as shall equal the aggregate unpaidprincipal amount of the Loans made by the Lenders to the Borrower under theFunding Agreement), on the dates and in the principal amounts provided in theFunding Agreement, and to pay interest on the unpaid principal amount of eachsuch Loan and all other Aggregate Unpaids, at such office, in like money andfunds, for the period commencing on the date of such Loan until such Loan shallbe paid in full, at the rates per annum and on the dates provided in theFunding Agreement.

 

The date,amount and interest rate of each Loan made by the Lenders to the Borrower, andeach payment made on account of the principal thereof, shall be recorded by theFacility Agent on its books and, prior to any transfer of this Loan Note,endorsed by the Facility Agent on the schedule attached hereto or anycontinuation thereof; provided that the failure of the Facility Agent tomake any such recordation or endorsement shall not affect the obligations ofthe Borrower to make a payment when due of any amount owing under the FundingAgreement or hereunder.

 

This Loan Noteis the Loan Note referred to in the Funding Agreement dated as of July 27,2005 (as amended, supplemented or otherwise modified and in effect from time totime, the “Funding Agreement”) between the Borrower, the Facility Agent,Fieldstone Investment Corporation, as servicer and the several Lenders andGroup Agents party thereto from time to time. Capitalized terms used but notdefined in this Loan Note have the respective meanings assigned to them in, orincorporated by reference into, the Funding Agreement.

 

The Borroweragrees to pay all costs of collection and enforcement (including reasonableattorneys’ fees and disbursements of counsel to the Facility Agent, the Lendersand the Group Agents) in respect of this Loan Note when incurred, including,without limitation, reasonable attorneys’ fees through appellate proceedings.

 

A-1

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Notwithstandingthe pledge of the Collateral, the Borrower hereby acknowledges, admits andagrees that the Borrower’s obligations under this Loan Note are recourseobligations of the Borrower to which the Borrower pledges its full faith andcredit.

 

The Borrower,and any indorsers or guarantors hereof, (a) severally waive diligence,presentment, protest and demand and also notice of protest, demand, dishonorand nonpayments of this Loan Note, (b) expressly agree that this LoanNote, or any payment hereunder, may be extended from time to time, and consentto the acceptance of further Collateral, the release of any Collateral for thisLoan Note, the release of any party primarily or secondarily liable hereon, and(c) expressly agree that it will not be necessary for the Facility Agent,the Lenders and the Group Agents, in order to enforce payment of this LoanNote, to first institute or exhaust its remedies against the Borrower or anyother party liable hereon or against any Collateral for this Loan Note.  No extension of time for the payment of thisLoan Note, or any installment hereof, made by agreement by the Facility Agentwith any Person now or hereafter liable for the payment of this Loan Note,shall affect the liability under this Loan Note of the Borrower, even if theBorrower is not a party to such agreement; provided that the FacilityAgent and the Borrower, by written agreement between them, may affect theliability of the Borrower.

 

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Any referenceherein to the Facility Agent shall be deemed to include and apply to everysubsequent holder of this Loan Note. Reference is made to the Funding Agreement for provisions concerningprepayments, Collateral, events of default, acceleration and other materialterms affecting this Loan Note.

 

The Borrowerhereby acknowledges and agrees that the Borrower will be liable to the FacilityAgent, the Lenders and the Group Agents for all representations, warranties,covenants and liabilities of the Borrower hereunder and under the FundingAgreement.

 

Anyenforcement action relating to this Loan Note may be brought by motion forsummary judgment in lieu of a complaint pursuant to Section 3213 of theNew York Civil Practice Law and Rules. The Borrower hereby submits to New York jurisdiction with respect to anyaction brought with respect to this Loan Note and waives any right with respectto the doctrine of forumnonconveniens with respect tosuch transactions.

 

This Loan Noteshall be governed by and construed in accordance with the laws of the State ofNew York. The Borrower agrees that any action or proceeding brought to enforceor arising out of this Loan Note may be commenced in the Supreme Court of theState of New York, Borough of Manhattan, or in the District Court of the UnitedStates for the Southern District of New York.

 

 
|   | FIELDSTONE  INVESTMENT FUNDING, LLC, |
|--------|--------------------------------------|
|   | as Borrower                          |
|   |                                 |
|   |                                 |
|   | By:                                  |   |   |
|   |                                 | Name: |
|   |                                 | Title: |

 

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EXHIBIT D

 

MORTGAGE LOAN

REPRESENTATIONS AND WARRANTIES

 

**Representationsand Warranties with respect to Mortgage Loans**

 

As to eachMortgage Loan that forms part of the Collateral under the Funding Agreement,the Borrower shall be deemed to make the following representations andwarranties to the Facility Agent, the Group Agents and the Lenders as of thedates specified in the Funding Agreement and as of each date the Net EligibleAssets Balance is determined:

 

(a)                                  PaymentsCurrent.  No payment required underthe Mortgage Loan is more than thirty (30) days past due from the related DueDate therefor, and the first contractually due Monthly Payment shall have beenmade on its Due Date, all in accordance with the terms of the Mortgage LoanDocuments.

 

(b)                                 NoOutstanding Charges.  All taxes,governmental assessments, insurance premiums, water, sewer and municipalcharges, leasehold payments or ground rents which previously became due andowing have been paid.  Neither theBorrower nor any of its Affiliates has advanced funds, or induced, solicited orknowingly received any advance of funds by a party other than the Obligor,directly or indirectly, for the payment of any amount required under theMortgage Loan, except for interest accruing from the date of the Mortgage Noteor date of disbursement of the proceeds of the Mortgage Loan, whichever isearlier, to the day which precedes by one month the Due Date of the firstinstallment of principal and interest thereunder.  There are no defaults in the Obligor’s compliancewith the terms of the Mortgage securing the Mortgage Loan.

 

(c)                                  OriginalTerms Unmodified.  The terms of theMortgage Note and Mortgage have not been impaired, waived, altered or modifiedin any respect, from the date of origination, except by a written instrumentwhich has been recorded, if necessary to protect the interests of the FacilityAgent, the Group Agents and the Lenders, and which has been delivered to theCustodian and the terms of which are reflected in the Mortgage Loan Schedule.The substance of any such waiver, alteration or modification has been approvedby the title insurer, to the extent required, and its terms are reflected onthe Mortgage Loan Schedule. No Obligor in respect of the Mortgage Loan has beenreleased, in whole or in part, except in connection with an assumptionagreement approved by the title insurer, to the extent required by such policy,and which assumption agreement is part of the Mortgage File delivered to theCustodian and the terms of which are reflected in the Mortgage Loan Schedule.

 

(d)                                 NoDefenses.  The Mortgage Loan is notsubject to any right of rescission, set-off, counterclaim or defense,including, without limitation, the defense of usury, nor will the operation ofany of the terms of the Mortgage Note or the Mortgage, or the exercise of anyright thereunder, render either the Mortgage Note or the Mortgageunenforceable, in whole or in part and no such right of rescission, set-off,counterclaim or defense has been asserted with respect thereto, and no Obligorin respect of the Mortgage Loan was a debtor in any state or Federal bankruptcyor insolvency proceeding at the

 

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time the Mortgage Loan was originated. The Borrower has no knowledge nor has it received any notice that anyObligor in respect of the Mortgage Loan is a debtor in any state or federalbankruptcy or insolvency proceeding.

 

(e)                                  HazardInsurance.  The Mortgaged Property isinsured by a fire and extended perils insurance policy, issued by a QualifiedInsurer, and such other hazards as are customary in the area where theMortgaged Property is located and to the extent consistent with theUnderwriting Policy, against earthquake and other risks insured against byPersons operating like properties in the locality of the Mortgaged Property, inan amount not less than the greatest of (i) 100% of the replacement costof all improvements to the Mortgaged Property, (ii) the outstandingprincipal balance of the Mortgage Loan or (iii) the amount necessary toavoid the operation of any co-insurance provisions with respect to theMortgaged Property, and consistent with the amount that would have beenrequired as of the date of origination in accordance with the UnderwritingPolicy. If any portion of the Mortgaged Property is in an area identified byany Official Body as having special flood hazards, and flood insurance isavailable, a flood insurance policy meeting the current guidelines of theFederal Emergency Management Agency is in effect with a generally acceptableinsurance carrier, in an amount representing coverage not less than the leastof (1) the outstanding principal balance of the Mortgage Loan and, withrespect to any Second Lien Mortgage Loan, the outstanding principal balance ofthe related First Lien Mortgage Loan, (2) the full insurable value of theMortgaged Property, and (3) the maximum amount of insurance availableunder the National Flood Insurance Act of 1968, as amended by the FloodDisaster Protection Act of 1974. All such insurance policies (collectively, the“hazard insurance policy”) contain a standard mortgagee clause naming theOriginator, its successors and assigns (including, without limitation,subsequent owners of the Mortgage Loan), as mortgagee, and may not be reduced,terminated or canceled without thirty (30) days’ prior written notice to themortgagee. No such notice has been received by the Borrower or its Affiliates.All premiums due on such insurance policy prior to the date of thisrepresentation have been paid. The related Mortgage obligates the Obligor tomaintain all such insurance and, at such Obligor’s failure to do so, authorizesthe mortgagee to maintain such insurance at the Obligor’s cost and expense andto seek reimbursement therefor from such Obligor. Where required by state lawor regulation, the Obligor has been given an opportunity to choose the carrierof the required hazard insurance, provided the policy is not a “master” or“blanket” hazard insurance policy covering a condominium, or any hazard insurancepolicy covering the common facilities of a planned unit development. The hazardinsurance policy is the valid and binding obligation of the insurer and is infull force and effect.  The Borrower hasnot engaged in, and has no knowledge of the Obligor’s having engaged in, anyact or omission that would impair the coverage of any such policy, the benefitsof the endorsement provided for herein, or the validity and binding effect ofeither including, without limitation, no unlawful fee, commission, kickback orother unlawful compensation or value of any kind has been or will be received,retained or realized by any attorney, firm or other Person, and no suchunlawful items have been received, retained or realized by the Borrower.

 

(f)                                    Compliancewith Applicable Laws.  Any and allrequirements of any federal, state or local law including, without limitation,usury, truth-in lending, real

 

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estate settlement procedures, consumer credit protection, equal creditopportunity or disclosure laws applicable to the Mortgage Loan have beencomplied with, the consummation of the transactions contemplated hereby willnot involve the violation of any such laws or regulations, and the Borrowershall maintain or shall cause its agents to maintain in its possession,available for the inspection of the Facility Agent and the Group Agents, andshall deliver to the Facility Agent and the Group Agents, upon demand, evidenceof compliance with all such requirements.

 

(g)                                 NoSatisfaction of Mortgage.  TheMortgage has not been satisfied, cancelled, subordinated or rescinded, in wholeor in part, and the Mortgaged Property has not been released from the lien ofthe Mortgage, in whole or in part, nor has any instrument been executed thatwould effect any such release, cancellation, subordination or rescission.  The Borrower has not waived the performanceby the Obligor of any action, if the Obligor’s failure to perform such actionwould cause the Mortgage Loan to be in default, nor has Borrower waived anydefault resulting from any action or inaction by the Obligor.

 

(h)                                 Locationand Type of Mortgaged Property.  TheMortgaged Property is located in an Acceptable State as identified in theMortgage Loan Schedule and consists of a single parcel of real propertywith a detached single family residence erected thereon, or a two-to four-family dwelling, or an individual condominium unit in a low-rise condominiumproject, or an individual unit in a planned unit development or a de minimisplanned unit development;  providedthat any condominium unit or planned unit development shall conform with theapplicable Fannie Mae and Freddie Mac requirements regarding such dwellings orshall conform to underwriting guidelines acceptable to the Facility Agent inits sole discretion and that no residence or dwelling is a mobile home. Noportion of the Mortgaged Property is used for commercial purposes; providedthat the Mortgaged Property may be a mixed use property if such MortgagedProperty conforms to underwriting guidelines acceptable to the Facility Agentin its sole discretion.

 

(i)                                     ValidFirst or Second Lien.  The Mortgageis a valid, subsisting, enforceable and perfected (a) with respect to eachFirst Lien Mortgage Loan, first priority lien and first priority securityinterest, or (b) with respect to each Second Lien Mortgage Loan, secondpriority lien and second priority security interest, in each case, on the realproperty included in the Mortgaged Property, including all buildings on theMortgaged Property and all installations and mechanical, electrical, plumbing,heating and air conditioning systems located in or annexed to such buildings,and all additions, alterations and replacements made at any time with respectto the foregoing. The lien of the Mortgage is subject only to:

 

a.                                       the lien of current real propertytaxes and assessments not yet due and payable;

 

b.                                      covenants, conditions andrestrictions, rights of way, easements and other matters of the public recordas of the date of recording acceptable to prudent mortgage lending institutionsgenerally and specifically referred to in the lender’s title insurance policydelivered to the originator of the Mortgage Loan and (x) referred to orotherwise

 

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considered in theappraisal made for the originator of the Mortgage Loan or (y) which do notadversely affect the Appraised Value of the Mortgaged Property set forth insuch appraisal;

 

c.                                       other matters to which likeproperties are commonly subject which do not materially interfere with thebenefits of the security intended to be provided by the Mortgage or the use,enjoyment, value or marketability of the related Mortgaged Property;

 

d.                                      with respect to each Mortgage Loanwhich is a Second Lien Mortgage Loan a first lien on the Mortgaged Property;and

 

e.                                       in the case of a Mortgaged Propertythat is a condominium or an individual unit in a planned unit development,liens for common charges permitted by statute.

 

Any securityagreement, chattel mortgage or equivalent document related to and delivered inconnection with the Mortgage Loan establishes and creates a valid, subsistingand enforceable (A) first lien and first priority security interest withrespect to each Mortgage Loan which is indicated by the Borrower to be a FirstLien Mortgage Loan (as reflected on the related Mortgage Loan Schedule), or (B) secondlien and second priority security interest with respect to each Mortgage Loanwhich is indicated by the Borrower to be a Second Lien Mortgage Loan (asreflected on the related Mortgage Loan Schedule), in either case, on theproperty described therein and the Borrower has full right to pledge and granta security interest in the same to the Facility Agent for the benefit of theGroup Agents and the Lenders.  TheMortgaged Property was not, as of the date of origination of the Mortgage Loan,subject to a mortgage, deed of trust, deed to secure debt or other securityinstrument creating a lien subordinate to the lien of the Mortgage.

 

(j)                                     Validityof Mortgage Documents.  The MortgageNote and the Mortgage and any other agreement executed and delivered by anObligor, if applicable, in connection with a Mortgage Loan are genuine, andeach is the legal, valid and binding obligation of the maker thereof enforceablein accordance with its terms. All parties to the Mortgage Note, the Mortgageand any other such related agreement had legal capacity to enter into theMortgage Loan and to execute and deliver the Mortgage Note, the Mortgage andany such agreement, and the Mortgage Note, the Mortgage and any other suchrelated agreement have been duly and properly executed by such related parties.All information supplied by, on behalf of, or concerning the Obligor is true,accurate and complete and does not contain any statement that is or will beinaccurate in any material respect.  TheBorrower (or an agent on its behalf) has reviewed all of the documentsconstituting the Mortgage File and has made such inquiries as it deemsnecessary to make and confirm the accuracy of the representations set forthherein. To the best of Borrower’s knowledge, except as disclosed to FacilityAgent and the Group Agents in writing, all tax identifications and propertydescriptions are legally sufficient, and tax segregation, where required, hasbeen completed.

 

(k)                                  FullDisbursement of Proceeds.  There isno further requirement for future advances by the Originator and its Affiliatesunder the Mortgage Loan, and any

 

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and all requirements as to completion of any on-site or off-siteimprovement and as to disbursements of any escrow funds therefor have beencomplied with. All costs, fees and expenses incurred in making or closing theMortgage Loan and the recording of the Mortgage were paid, and the Obligor isnot entitled to any refund of any amounts paid or due under the Mortgage Noteor Mortgage.

 

(l)                                     Ownership.  The Borrower is the sole owner and holder ofthe Mortgage Loan.  All Mortgage Loansacquired by the Borrower from third parties (including affiliates) wereacquired in a sale or contribution pursuant to which such third party sold,transferred, conveyed and assigned to the Borrower all of its right, title andinterest in, to and under such Mortgage Loan and related property and retainedno direct interest in such Mortgage Loan and related property.  In connection with such sale, such thirdparty received reasonably equivalent value and fair consideration.  The Mortgage Loan has not been assigned orpledged by the Borrower (other than in connection with the transaction that isthe subject of the Funding Agreement), and the Borrower has good, indefeasibleand marketable title thereto, and has full right to pledge and grant a securityinterest such Mortgage Loan to the Facility Agent for the benefit of the GroupAgents and the Lenders free and clear of any Lien.

 

(m)                               DoingBusiness.  All parties that have hadany interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee orotherwise, are (or, during the period in which they held and disposed of suchinterest, were) (i) in compliance with any and all applicable licensingrequirements of the laws of the state wherein the Mortgaged Property islocated, and (ii) either (A) organized under the laws of such state, (B) qualifiedto do business in such state, (C) a federal savings and loan association,a savings bank or a national bank having a principal office in such state, or (D) notdoing business in such state.

 

(n)                                 LTV.  As of the date of origination of the MortgageLoan, the LTV and CLTV (if applicable) are as identified on the relatedMortgage Loan Schedule.

 

(o)                                 TitleInsurance.  The Mortgage Loan iscovered by either (i) an attorney’s opinion of title and abstract oftitle, the form and substance of which is acceptable to prudent mortgagelending institutions making mortgage loans in the area wherein the MortgagedProperty is located or (ii) an ALTA mortgagee’s title insurance policy orother generally acceptable form of policy or insurance acceptable to Fannie Maeor Freddie Mac and each such title insurance policy is issued by a titleinsurer acceptable to Fannie Mae or Freddie Mac and qualified to do business inthe jurisdiction where the Mortgaged Property is located, insuring theOriginator and its successors and assigns (including the Borrower), as to thefirst or second priority lien of the Mortgage, as applicable in the originalprincipal amount of the Mortgage Loan, subject only to the exceptions containedin paragraph (i) of this Exhibit D, as applicable, and in the case ofadjustable rate Mortgage Loans, against any loss by reason of the invalidity orunenforceability of the lien resulting from the provisions of the Mortgageproviding for adjustment to the Mortgage Interest Rate and Monthly Payment.Where required by state law or regulation, the Obligor has been given theopportunity to choose the carrier of the required mortgage title insurance.Additionally, such lender’s title insurance policy

 

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affirmatively insures ingress and egress and against encroachments byor upon the Mortgaged Property or any interest therein. The title policy doesnot contain any special exceptions (other than the standard exclusions) forzoning and uses and has been marked to delete the standard survey exception orto replace the standard survey exception with a specific survey reading.  The Originator and its successors and assigns(including the Borrower) are the sole insureds of such lender’s title insurancepolicy, and such lender’s title insurance policy is valid and remains in fullforce and effect and will be in force and effect upon the consummation of thetransactions contemplated by this Agreement. No claims have been made under such lender’s title insurance policy, andno prior holder or servicer of the related Mortgage, including the Borrower,has done, by act or omission, anything which would impair the coverage of suchlender’s title insurance policy, including, without limitation, no unlawfulfee, commission, kickback or other unlawful compensation or value of any kindhas been or will be received, retained or realized by any attorney, firm orother Person, and no such unlawful items have been received, retained orrealized by the Borrower or its Affiliates.

 

(p)                                 NoDefaults.  There is no delinquency inpayments of more than thirty (30) days past the related Due Date or otherdefault, breach, violation or event of acceleration existing under the Mortgageor the Mortgage Note and no event has occurred which, with the passage of timeor with notice and the expiration of any grace or cure period, would constitutea default, breach, violation or event of acceleration, and neither Borrower norits predecessors-in-interest have waived any default, breach, violation orevent of acceleration.  With respect toeach Mortgage Loan that is indicated by the Borrower to be a Second LienMortgage Loan (as reflected in the related Mortgage Loan Schedule) (i) theFirst Lien is in full force and effect, (ii) there is no default, breach,violation or event of acceleration existing under such First Lien mortgage orthe related mortgage note, (iii) no event which, with the passage of timeor with notice and the expiration of any grace or cure period, would constitutea default, breach, violation or event of acceleration thereunder, and either (A) theFirst Lien mortgage contains a provision which allows or (B) applicablelaw requires, the mortgagee under the second lien Mortgage Loan to receivenotice of, and affords such mortgagee an opportunity to cure any default bypayment in full or otherwise under the First Lien mortgage.

 

(q)                                 NoMechanics’ Liens.  There are nomechanics’ or similar liens or claims which have been filed for work, labor ormaterial (and no rights are outstanding that under the law could give rise tosuch liens) affecting the Mortgaged Property which are or may be liens priorto, or equal or coordinate with, the lien of the Mortgage.

 

(r)                                    Locationof Improvements; No Encroachments. All improvements that were considered in determining the Appraised Valueof the Mortgaged Property lie wholly within the boundaries and buildingrestriction lines of the Mortgaged Property, and no improvements on adjoiningproperties encroach upon the Mortgaged Property. No improvement located on or beingpart of the Mortgaged Property is in violation of any applicable zoning andbuilding law, ordinance or regulation.

 

(s)                                  Origination;Payment Terms.  The Mortgage Loan wasoriginated by or in conjunction with a mortgagee approved by the Secretary of Housingand Urban

 

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Development pursuant to Sections 203 and 211 of the National HousingAct. Principal payments on the Mortgage Loan commenced (or will commence) nomore than sixty (60) days after funds were disbursed in connection with theMortgage Loan.  Other than with respectto interest only Mortgage Loans, provided that no Mortgage Note may result innegative amortization, the Mortgage Note is payable on the first day of eachmonth in equal monthly installments of principal and interest, whichinstallments of interest, with respect to adjustable rate Mortgage Loans, aresubject to change due to the adjustments to the Mortgage Interest Rate on eachInterest Rate Adjustment Date, with interest calculated and payable in arrears,sufficient to amortize the Mortgage Loan fully by the stated maturity date,over an original term of not more than thirty (30) years from commencement ofamortization. The Due Date of the first payment under the Mortgage Note is nomore than sixty (60) days from the date of the Mortgage Note.

 

(t)                                    CustomaryProvisions.  The Mortgage Note has astated maturity. The Mortgage contains customary and enforceable provisionssuch as to render the rights and remedies of the holder thereof adequate forthe realization against the Mortgaged Property of the benefits of the securityprovided thereby, including, (i) in the case of a Mortgage designated as adeed of trust, by trustee’s sale, and (ii) otherwise by judicialforeclosure. Upon default by an Obligor on a Mortgage Loan and foreclosure on,or trustee’s sale of, the Mortgaged Property pursuant to the proper procedures,the holder of the Mortgage Loan will be able to deliver good and merchantabletitle to the Mortgaged Property. There is no homestead or other exemptionavailable to an Obligor which would interfere with the right to sell theMortgaged Property at a trustee’s sale or the right to foreclose the Mortgage.The Mortgage Note and Mortgage are on forms acceptable to Freddie Mac or FannieMae.  No Mortgage Loan provides fornegative amortization.

 

(u)                                 Occupancyof the Mortgaged Property.  TheMortgaged Property is lawfully occupied under applicable law.  All inspections, licenses and certificatesrequired to be made or issued with respect to all occupied portions of theMortgaged Property and, with respect to the use and occupancy of the same,including but not limited to certificates of occupancy and fire underwritingcertificates, have been made or obtained from the appropriate authorities.  The Borrower has not received notificationfrom any Official Body that the Mortgaged Property is in materialnon-compliance with such laws or regulations, is being used, operated oroccupied unlawfully or has failed to have or obtain such inspection, licensesor certificates, as the case may be.  TheBorrower has not received notice of any violation or failure to conform withany such law, ordinance, regulation, standard, license or certificate. Withrespect to any Mortgage Loan originated with an “owner-occupied” Mortgagedproperty, the Obligor represented at the time of origination of the MortgageLoan that the Obligor would occupy the Mortgaged Property as the Obligor’sprimary residence.

 

(v)                                 NoAdditional Collateral.  The MortgageNote is not and has not been secured by any collateral except the lien of thecorresponding Mortgage and the security interest of any applicable securityagreement or chattel mortgage referred to in clause (i) above.

 

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(w)                               Deedsof Trust.  If the Mortgage is a deedof trust, a trustee, authorized and duly qualified under applicable law toserve as such, has been properly designated and currently so serves and isnamed in the Mortgage, and no fees or expenses are or will become payable bythe Custodian, the Borrower or their Affiliates to the trustee under the deedof trust, except in connection with a trustee’s sale after default by theObligor.

 

(x)                                   Deliveryof Mortgage Loan Documents; Transfer of Mortgage Loans.  All documents required to be delivered to theCustodian under the Custodial Agreement as of the date of this representationhave been delivered.  The Facility Agentor its agent is in possession of a true, complete and accurate Mortgage File incompliance with the Custodial Agreement, except for such documents theoriginals of which have been delivered to the Custodian.  Except with respect to Mortgage Loansregistered with MERS, the Assignment of Mortgage is in recordable form and isacceptable for recording under the laws of the jurisdiction in which theMortgaged Property is located.

 

(y)                                 Due-On-Sale.  The Mortgage contains an enforceableprovision for the acceleration of the payment of the unpaid principal balanceof the Mortgage Loan in the event that the Mortgaged Property is sold ortransferred without the prior written consent of the mortgagee thereunder.

 

(z)                                   NoBuydown Provisions; No Graduated Payments or Contingent Interests.  The Mortgage Loan does not contain provisionspursuant to which Monthly Payments are paid or partially paid with fundsdeposited in any separate account established by Borrower or its Affiliates,the Obligor, or anyone on behalf of the Obligor, or paid by any source otherthan the Obligor nor does it contain any other similar provisions which mayconstitute a “buydown” provision.  TheMortgage Loan is not a graduated payment mortgage loan, and the Mortgage Loandoes not have a shared appreciation or other contingent interest feature.

 

(aa)                            Consolidationof Future Advances.  Any futureadvances made to the Obligor prior to origination of the Mortgage Loan havebeen consolidated with the outstanding principal amount secured by theMortgage, and the secured principal amount, as consolidated, bears a singleinterest rate and single repayment term. The lien of the Mortgage securing the consolidated principal amount isexpressly insured as having (A) first lien priority with respect to eachMortgage Loan which is indicated by the Borrower to be a First Lien MortgageLoan (as reflected on the related Mortgage Loan Schedule), or (B) secondlien priority with respect to each Mortgage Loan which is indicated by theBorrower to be a Second Lien Mortgage Loan (as reflected on the relatedMortgage Loan Schedule), in either case, by a title insurance policy, anendorsement to the policy insuring the mortgagee’s consolidated interest or byother title evidence acceptable to Fannie Mae and Freddie Mac.  The consolidated principal amount does notexceed the original principal amount of the Mortgage Loan.

 

(bb)                          MortgagedProperty Undamaged.  The MortgagedProperty is undamaged by waste, fire, earthquake or earth movement, windstorm,flood, tornado or other casualty so as to affect adversely the value of theMortgaged Property as security 

 

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for the Mortgage Loan or the use for which the premises were intended,and each Mortgaged Property is in good repair. There have not been any condemnation proceedings with respect to theMortgaged Property and the Borrower has no knowledge of any such proceedings.

 

(cc)                            CollectionPractices; Escrow Deposits; Interest Rate Adjustments.  The origination and collection practices usedby the Originator, the Servicer and the Borrower with respect to the MortgageLoan have been in all respects in compliance with the Servicing Standards,applicable laws and regulations, and have been in all respects legal andproper. With respect to escrow deposits and Escrow Payments (other than withrespect to each Second Lien Mortgage Loan and for which the mortgagee under theFirst Lien is collecting Escrow Payments) all such payments are in thepossession of, or under the control of, the Originator and there exist nodeficiencies in connection therewith for which customary arrangements forrepayment thereof have not been made. All Escrow Payments have been collectedin full compliance with state and federal law. An escrow of funds is notprohibited by applicable law and has been established in an amount sufficientto pay for every item that remains unpaid and has been assessed but is not yetdue and payable. No escrow deposits or Escrow Payments or other charges orpayments due to the Originator have been capitalized under the Mortgage or theMortgage Note.  All Mortgage InterestRate adjustments have been made in strict compliance with state and federal lawand the terms of the related Mortgage Note. Any interest required to be paidpursuant to state, federal and local law has been properly paid and credited.

 

(dd)                          Conversionto Fixed Interest Rate.  No MortgageLoan listed on a Mortgage Loan Schedule as a Floating Rate Mortgage Loanis convertible to a Fixed Rate Mortgage Loan.

 

(ee)                            OtherInsurance Policies.  No action,inaction or event has occurred and no state of facts exists or has existed thathas resulted or will result in the exclusion from, denial of, or defense tocoverage under any applicable special hazard insurance policy, PMI Policy orbankruptcy bond, irrespective of the cause of such failure of coverage. Inconnection with the placement of any such insurance, no commission, fee, orother compensation has been or will be received by the Borrower or itsAffiliates or by any officer, director, or employee of the Borrower or itsAffiliates or any designee of the Borrower or any corporation in which theBorrower or its Affiliates or any officer, director, or employee had afinancial interest at the time of placement of such insurance.

 

(ff)                                ServicemembersCivil Relief Act.  The Obligor hasnot notified the Borrower or its Affiliates, and the Borrower and itsAffiliates have no knowledge, of any relief requested or allowed to the Obligorunder the Servicemembers Civil Relief Act of 2003.

 

(gg)                          Appraisal.  The Mortgage File contains an appraisal ofthe related Mortgaged Property which appraisal is either (i) an automatedappraisal acceptable to Fannie Mae or Freddie Mac or (ii) signed prior tothe approval of the Mortgage Loan application by a qualified appraiser, dulyappointed by the Originator, who had no interest, direct or indirect in theMortgaged Property or in any loan made on the security

 

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thereof, and whose compensation is not affected by the approval ordisapproval of the Mortgage Loan, and the appraisal and appraiser both satisfythe requirements of Fannie Mae or Freddie Mac and Title XI of the FederalInstitutions Reform, Recovery, and Enforcement Act of 1989 as amended and theregulations promulgated thereunder, all as in effect on the date the MortgageLoan was originated.

 

(hh)                          DisclosureMaterials.  The Obligor has executeda statement to the effect that the Obligor has received all disclosurematerials required by applicable law with respect to the making of adjustablerate mortgage loans, and such statement is maintained in the related MortgageFile.

 

(ii)                                  Constructionor Rehabilitation of Mortgaged Property. No Mortgage Loan was made in connection with the construction orrehabilitation of a Mortgaged Property or facilitating the trade-in or exchangeof a Mortgaged Property.

 

(jj)                                  NoDefense to Insurance Coverage.  Noaction has been taken or failed to be taken, no event has occurred and no stateof facts exists or has existed on or prior to the date of origination (whetheror not known to the Originator on or prior to such date) which has resulted orwill result in an exclusion from, denial of, or defense to coverage under anyprivate mortgage insurance (including, without limitation, any exclusions,denials or defenses which would limit or reduce the availability of the timelypayment of the full amount of the loss otherwise due thereunder to the insured)whether arising out of actions, representations, errors, omissions, negligence,or fraud of the Originator, the related Obligor or any party involved in theapplication for such coverage, including the appraisal, plans andspecifications and other exhibits or documents submitted therewith to theinsurer under such insurance policy, or for any other reason under suchcoverage, but not including the failure of such insurer to pay by reason ofsuch insurer’s breach of such insurance policy or such insurer’s financialinability to pay.

 

(kk)                            Capitalizationof Interest.  The Mortgage Note doesnot by its terms provide for the capitalization or forbearance of interest.

 

(ll)                                  NoEquity Participation.  No documentrelating to the Mortgage Loan provides for any contingent or additionalinterest in the form of participation in the cash flow of the MortgagedProperty or a sharing in the appreciation of the value of the Mortgaged Property.The indebtedness evidenced by the Mortgage Note is not convertible to anownership interest in the Mortgaged Property or the Obligor and the Originatorhas not financed nor does it own directly or indirectly, any equity of any formin the Mortgaged Property or the Obligor.

 

(mm)                      Proceedsof Mortgage Loan.  The proceeds ofthe Mortgage Loan have not been and shall not be used to satisfy, in whole orin part, any debt owed or owing by the Obligor to the Originator or anyAffiliate or correspondent of the Originator, except in connection with arefinanced Mortgage Loan; provided that no such refinanced Mortgage Loanshall have been originated pursuant to a streamlined mortgage loan refinancingprogram.

 

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(nn)                          NoException.  Other than as noted bythe Custodian on the Exception Report, no Exception (as defined in theCustodial Agreement) exists with respect to the Mortgage Loan which isreasonably likely to materially adversely affect the Mortgage Loan or the Lienof the Facility Agent therein (as determined by the Facility Agent in its solediscretion and which, in the case of a Wet-Ink Mortgage Loan, has not beencured within seven (7) days of the related Loan Date or Addition Date, asapplicable).

 

(oo)                          MortgageSubmitted for Recordation.  TheMortgage either has been or will promptly be submitted for recordation in theappropriate governmental recording office of the jurisdiction where theMortgaged Property is located.

 

(pp)                          DocumentsGenuine.  Such Mortgage Loan and allaccompanying collateral documents are complete and authentic and all signaturesthereon are genuine. Such Mortgage Loan is a “closed” loan fully funded by theOriginator.

 

(qq)                          BonaFide Loan.  Such Mortgage Loan arosefrom a bonafide loan, complying with all applicable state andFederal laws and regulations, to persons having legal capacity to contract andis not subject to any defense, set-off or counterclaim.

 

(rr)                                Description.  Each Mortgage Loan conforms to thedescription thereof as set forth on the related Mortgage Loan Schedule deliveredto the Custodian, the Facility Agent and the Group Agents.

 

(ss)                            Locatedin U.S.  No collateral (including,without limitation, the related real property and the dwellings thereon andotherwise) relating to a Mortgage Loan is located in any jurisdiction otherthan in one of the fifty (50) states of the United States of America or theDistrict of Columbia.

 

(tt)                                UnderwritingPolicy.  Each Mortgage Loan has beenoriginated in accordance with the Underwriting Policy (including allsupplements or amendments thereto) previously provided to the Facility Agentand the Group Agents.

 

(uu)                          PrimaryMortgage Guaranty Insurance.  EachMortgage Loan is insured as to payment defaults by a policy of primary mortgageguaranty insurance in the amount required under the related Mortgage LoanDocuments where applicable, and all provisions of such primary mortgageguaranty insurance have been and are being complied with, such policy is infull force and effect, and all premiums due thereunder have been paid.  Each Mortgage Loan which is represented tohave, or to be eligible for, FHA insurance is insured, or eligible to beinsured, pursuant to the National Housing Act. Each Mortgage Loan which isrepresented by the Borrower or its Affiliates to be guaranteed, or to beeligible for guaranty, by the VA is guaranteed, or eligible to be guaranteed,under the provisions of Chapter 37 of Title 38 of the United States Code. As toeach FHA insurance certificate or each VA guaranty certificate, the Originatorhas complied with applicable provisions of the insurance for guaranty contractand federal statutes and regulations, all premiums or other charges due inconnection with such insurance or guarantee have been paid, there has been noact or omission which would or

 

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may invalidate any such insurance or guaranty, and the insurance orguaranty is, or when issued, will be, in full force and effect with respect toeach Mortgage Loan. There are no defenses, counterclaims, or rights of setoffaffecting the Mortgage Loans or affecting the validity or enforceability of anyprivate mortgage insurance or FHA insurance applicable to the Mortgage Loans orany VA guaranty with respect to the Mortgage Loans.

 

(vv)                          HOEPA;Predatory Lending Regulations.  NoMortgage Loan is (a) subject to the provisions of the Homeownership andEquity Protection Act of 1994, as amended, (b) a “high cost” mortgageloan, “covered” mortgage loan or “predatory” mortgage loan or any othercomparable term, no matter how defined, under any federal, state or local law,or (c) subject to any comparable federal, state or local statutes orregulations or any other statute or regulation providing for heightenedscrutiny or assignee liability to holders of such mortgage loans.   No predatory, abusive or deceptive lendingpractices, including but not limited to, the extension of credit to a mortgagorwithout regard for the mortgagor’s ability to repay the Mortgage Loan and theextension of credit to a mortgagor which has no tangible net benefit to themortgagor, were employed in connection with the origination of the MortgageLoan.

 

(ww)                      Valueof Mortgaged Property.   The Borrowerhas no knowledge of any circumstances existing that should reasonably beexpected to adversely affect the value or the marketability of the MortgagedProperty or the Mortgage Loan.

 

(xx)                              MERSMortgage Loans.   With respect toeach MERS Mortgage Loan, a Mortgage Identification Number has been assigned byMERS and such Mortgage Identification Number is accurately provided on theMortgage Loan Schedule.  The relatedAssignment of Mortgage to MERS has been duly and properly recorded.  With respect to each MERS Mortgage Loan, theBorrower has not received any notice of liens or legal actions with respect tosuch Mortgage Loan and no such notices have been electronically posted by MERS.

 

(yy)                          FirstLien Consent.   With respect to eachSecond Lien Mortgage Loan, either no consent for the Mortgage Loan is requiredby the holder of the First Lien or such consent has been obtained and iscontained in the Mortgage File.

 

(zz)                              Suitability.   No specific circumstances or conditionsexist with respect to the Mortgage, the Mortgaged Property, the Obligor or theObligor’s credit standing that could reasonably be expected to (i) causethe Mortgage Loan to be more likely to become past due in comparison to similarMortgage Loans or (iii) adversely affect the value or marketability of theMortgage Loan in comparison to similar Mortgage Loans.

 

(aaa)                      EnvironmentalMatters.   The Mortgaged Property isfree from any and all toxic or hazardous substances and there exists noviolation of any local, state or federal environmental law, rule orregulation.

 

(bbb)                   Wet-InkMortgage Loans.  With respect to eachMortgage Loan that is a Wet-Ink Mortgage Loan, the Settlement Agent has beeninstructed in writing to

 

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hold the related Mortgage Loan Documents as agent and bailee for FacilityAgent or the Facility Agent’s agent and to promptly forward such Mortgage LoanDocuments in accordance with the provisions of the Custodial Agreement.

 

(ccc)                      GroundLeases.   With respect to each groundlease to which the Mortgaged Property is subject (a “Ground Lease”): (i) theObligor is the owner of a valid and subsisting interest as tenant under theGround Lease; (ii) the Ground Lease is in full force and effect,unmodified and not supplemented by any writing or otherwise; (iii) allrent, additional rent and other charges reserved therein have been paid to theextent that they are payable to the date hereof; (iv) the Obligor enjoysthe quiet and peaceful possession of the estate demised thereby, subject to anysublease; (v) the Obligor is not in default under any of the terms thereofand there are no circumstances that, with the passage of time or the giving ofnotice or both, would constitute an event of default thereunder; (vi)  thelessor under the Ground Lease is not in default under any of the terms orprovisions thereof on the part of the lessor to be observed or performed; (vii) thelessor under the Ground Lease has satisfied all of its repair or constructionobligations, if any, to date pursuant to the terms of the Ground Lease; (viii) theremaining term of the Ground Lease extends not less than ten (10) yearsfollowing the maturity date of such Mortgage Loan; and (ix) the execution,delivery and performance of the Mortgage do not require the consent (other thanthose consents which have been obtained and are in full force and effect)under, and will not contravene any provision of or cause a default under, theGround Lease.

 

*********************Definitions*********************

 

“AcceptableState” shall mean any state acceptable pursuant to the Sellers’Underwriting Guidelines.

 

“AppraisedValue” shall mean the value set forth in an appraisal made in connectionwith the origination of the related Mortgage Loan as the value of the MortgagedProperty.

 

“Assignmentof Mortgage” shall mean an assignment of the Mortgage, notice of transferor equivalent instrument in recordable form, sufficient under the laws of thejurisdiction wherein the related Mortgaged Property is located to reflect thesale of the Mortgage.

 

“CLTV”shall mean, with respect to any Mortgage Loan, the ratio of (a) theoriginal outstanding principal amount of such Mortgage Loan and any othermortgage loan that is secured by a lien on the related Mortgaged Property to (b) thelesser of (i) the Appraised Value of the Mortgaged Property at originationor (ii) if the Mortgaged Property was purchased within twelve (12) monthsof the origination of the Mortgage Loan, the purchase price of the MortgagedProperty.

 

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

 

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“EscrowPayments” shall mean, with respect to any Mortgage Loan, the amountsconstituting ground rents, taxes, assessments, water rates, sewer rents,municipal charges, mortgage insurance premiums, fire and hazard insurancepremiums, condominium charges, and any other payments required to be escrowedby the Mortgagor with the mortgagee pursuant to the Mortgage or any otherdocument.

 

“Fannie Mae”shall mean Fannie Mae, or any successor thereto.

 

“First Lien”shall mean, with respect to a Mortgaged Property, the lien of the mortgage,deed of trust or other instrument securing a mortgage note which creates afirst lien on the Mortgaged Property.

 

“First LienMortgage Loan” shall mean a Mortgage Loan secured by a First Lien on therelated Mortgaged Property.

 

“FreddieMac” shall mean Freddie Mac, or any successor thereto.

 

“InterestRate Adjustment Date” shall mean, with respect to a Mortgage Loan, the dateon which an adjustment to the Mortgage Interest Rate of such Mortgage Loanbecomes effective.

 

“LTV”shall mean, with respect to any Mortgage Loan, the ratio of the originaloutstanding principal amount of the Mortgage Loan to the lesser of (a) theAppraised Value of the Mortgaged Property at origination or (b) if theMortgaged Property was purchased within twelve (12) months of the originationof the Mortgage Loan, the purchase price of the Mortgaged Property.

 

“MERS”shall mean MERSCORP, Inc., a Delaware corporation, and its permittedsuccessors and assigns.

 

“MERSMortgage Loan” shall mean any Mortgage Loan as to which the relatedMortgage or Assignment of Mortgage has been recorded in the name of MERS, asagent for the holder from time to time of the Mortgage Note, and which isidentified as a MERS Mortgage Loan on the related Mortgage Loan Schedule.

 

“MonthlyPayment” shall mean the scheduled monthly payment of principal and intereston a Mortgage Loan.

 

“MortgageInterest Rate” shall mean the rate of interest borne on a Mortgage Loanfrom time to time in accordance with the terms of the related Mortgage Note.

 

“QualifiedInsurer” shall mean a mortgage guaranty insurance company duly authorizedand licensed where required by law to transact mortgage guaranty insurancebusiness and approved as an insurer by Fannie Mae or Freddie Mac.

 

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“SecondLien” shall mean, with respect to a Mortgaged Property, the lien of themortgage, deed of trust or other instrument securing a mortgage note whichcreates a second lien on the Mortgaged Property.

 

“SecondLien Mortgage Loan” shall mean a Mortgage Loan secured by a Second Lien onthe related Mortgaged Property.

 

“SettlementAgent” shall mean, with respect to any transaction the subject of which isa Wet-Ink Mortgage Loan, the entity approved by the Facility Agent, in its solegood faith discretion, which may be a title company, escrow company or attorneyin accordance with local law and practice in the jurisdiction where the relatedWet-Ink Mortgage Loan is being originated. A Settlement Agent is deemed approved by the Facility Agent unless theFacility Agent notifies the Borrower otherwise in writing.

 

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EXHIBIT F

 

SCHEDULE OF COMMITMENTS

 
| Credit  Suisse, New York Branch |   | $ | 500,000,000 |   |
|---------------------------------|--------|---|-------------|--------|

 

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