**Exhibit 10.10(a)**

 

 

 

**MASTER REPURCHASE AGREEMENTDated as of April 10, 2006Among:AAMES INVESTMENT CORPORATION, as a Seller,**

 

**AAMES CAPITAL CORPORATION, as a Seller,**

 

**AAMES FUNDING CORPORATION, as a SellerandGREENWICH CAPITAL FINANCIAL PRODUCTS, INC., as Buyer**

 

 

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**TABLEOF CONTENTS**

 
| 1.     | APPLICABILITY                                                    | 1      |
|--------|------------------------------------------------------------------|--------|
|   |                                                             |   |
| 2.     | DEFINITIONS AND ACCOUNTING MATTERS                               | 1      |
|   |                                                             |   |
| 3.     | THE TRANSACTIONS                                                 | 18     |
|   |                                                             |   |
| 4.     | PAYMENT AND TRANSFER                                             | 23     |
|   |                                                             |   |
| 5.     | TAXES; TAX TREATMENT                                             | 23     |
|   |                                                             |   |
| 6.     | MARGIN MAINTENANCE                                               | 24     |
|   |                                                             |   |
| 7.     | INCOME PAYMENTS                                                  | 25     |
|   |                                                             |   |
| 8.     | SECURITY INTEREST; BUYER’S APPOINTMENT AS  ATTORNEY-IN-FACT | 25     |
|   |                                                             |   |
| 9.     | CONDITIONS PRECEDENT                                             | 28     |
|   |                                                             |   |
| 10.    | RELEASE OF PURCHASED LOANS                                       | 32     |
|   |                                                             |   |
| 11.    | RELIANCE                                                         | 33     |
|   |                                                             |   |
| 12.    | REPRESENTATIONS AND WARRANTIES                                   | 33     |
|   |                                                             |   |
| 13.    | COVENANTS OF SELLER                                              | 38     |
|   |                                                             |   |
| 14.    | REPURCHASE DATE PAYMENTS                                         | 46     |
|   |                                                             |   |
| 15.    | REPURCHASE OF PURCHASED LOANS                                    | 46     |
|   |                                                             |   |
| 16.    | SUBSTITUTION                                                     | 47     |
|   |                                                             |   |
| 17.    | RESERVED                                                         | 47     |
|   |                                                             |   |
| 18.    | EVENTS OF DEFAULT                                                | 47     |
|   |                                                             |   |
| 19.    | REMEDIES                                                         | 50     |
|   |                                                             |   |
| 20.    | DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE                        | 53     |
|   |                                                             |   |
| 21.    | NOTICES AND OTHER COMMUNICATIONS                                 | 53     |
|   |                                                             |   |
| 22.    | USE OF EMPLOYEE PLAN ASSETS                                      | 53     |
|   |                                                             |   |
| 23.    | INDEMNIFICATION AND EXPENSES.                                    | 53     |
|   |                                                             |   |
| 24.    | WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS                       | 55     |
|   |                                                             |   |
| 25.    | REIMBURSEMENT                                                    | 55     |
|   |                                                             |   |
| 26.    | FURTHER ASSURANCES                                               | 55     |
|   |                                                             |   |
| 27.    | TERMINATION                                                      | 55     |
|   |                                                             |   |
| 28.    | SEVERABILITY                                                     | 56     |
|   |                                                             |   |
| 29.    | BINDING EFFECT; GOVERNING LAW                                    | 56     |
|   |                                                             |   |
| 30.    | AMENDMENTS                                                       | 56     |
|   |                                                             |   |
| 31.    | SUCCESSORS AND ASSIGNS                                           | 56     |
|   |                                                             |   |
| 32.    | SURVIVAL                                                         | 56     |
|   |                                                             |   |
| 33.    | CAPTIONS                                                         | 56     |
|   |                                                             |   |
| 34.    | COUNTERPARTS                                                     | 57     |
|   |                                                             |   |
| 35.    | SUBMISSION TO JURISDICTION; WAIVERS                              | 57     |

 

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| 36.    | WAIVER OF JURY TRIAL                        | 57     |
|--------|---------------------------------------------|--------|
|   |                                        |   |
| 37.    | ACKNOWLEDGEMENTS                            | 57     |
|   |                                        |   |
| 38.    | HYPOTHECATION OR PLEDGE OF PURCHASED ITEMS. | 58     |
|   |                                        |   |
| 39.    | ASSIGNMENTS; PARTICIPATIONS.                | 58     |
|   |                                        |   |
| 40.    | SINGLE AGREEMENT                            | 59     |
|   |                                        |   |
| 41.    | INTENT                                      | 59     |
|   |                                        |   |
| 42.    | CONFIDENTIALITY                             | 59     |
|   |                                        |   |
| 43.    | SERVICING                                   | 60     |
|   |                                        |   |
| 44.    | PERIODIC DUE DILIGENCE REVIEW               | 61     |
|   |                                        |   |
| 45.    | SET-OFF                                     | 62     |
|   |                                        |   |
| 46.    | ENTIRE AGREEMENT                            | 62     |

 
| SCHEDULES  |                                          |   |
|------------|-----------------------------------------------|--------|
|       |                                          |   |
| SCHEDULE 1 | Representations and Warranties re: Loans      |   |
|       |                                          |   |
| SCHEDULE 2 | Filing Jurisdictions and Offices              |   |
|       |                                          |   |
| SCHEDULE 3 | Relevant States                               |   |
|       |                                          |   |
| SCHEDULE 4 | Subsidiaries                                  |   |
|       |                                          |   |
| SCHEDULE 5 | List of Financing Facilities                  |   |
|       |                                          |   |
| EXHIBITS   |                                          |   |
|       |                                          |   |
| EXHIBIT A  | Forms of Monthly and Quarterly Certifications |   |
|       |                                          |   |
| EXHIBIT B  | Form of Custodial Agreement                   |   |
|       |                                          |   |
| EXHIBIT C  | Form of Opinion of Counsel to the Seller      |   |
|       |                                          |   |
| EXHIBIT D  | Form of Notice of Transaction Notice          |   |
|       |                                          |   |
| EXHIBIT E  | Underwriting Guidelines                       |   |
|       |                                          |   |
| EXHIBIT F  | Required Fields for Servicing Transmission    |   |
|       |                                          |   |
| EXHIBIT G  | Required Fields for Loan Schedule             |   |
|       |                                          |   |
| EXHIBIT H  | Form of Confidentiality Agreement             |   |
|       |                                          |   |
| EXHIBIT I  | Form of Instruction Letter                    |   |
|            |                                               |        |  |  |

 

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MASTERREPURCHASE AGREEMENT, dated as of April 10, 2006, among Aames InvestmentCorporation, a Maryland corporation, Aames Capital Corporation, a Californiacorporation and Aames Funding Corporation, a California Corporation jointly andseverally as sellers (each, a “Seller” and collectively, the “Seller”or the “Sellers”) and Greenwich Capital Financial Products, Inc., aDelaware corporation (“Buyer”, which term shall include any “Principal”as defined and provided for in Annex I), or as agent pursuant hereto (“Agent”),

 

**1.****             APPLICABILITY**

 

Buyer shall,from time to time, upon the terms and conditions set forth herein, agree toenter into transactions in which Sellers transfer to Buyer Eligible Loansagainst the transfer of funds by Buyer, with a simultaneous agreement by Buyerto transfer to Seller Purchased Loans at a date certain, against the transferof funds by Sellers.  Each suchtransaction shall be referred to herein as a “Transaction”, and, unlessotherwise agreed in writing, shall be governed by this Agreement.

 

**2.****             DEFINITIONS ANDACCOUNTING MATTERS **

 

## (a)           DefinedTerms.  As used herein, the followingterms have the following meanings (all terms defined in this Section 2 or in otherprovisions of this Agreement in the singular to have the same meanings whenused in the plural and vice versa):

##  

“Aames Capital” shall mean Aames Capital Corporation and anypermitted successors and assigns.

 

“Aames Financial” shall mean Aames Financial Corporation and anypermitted successors and assigns. 

 

“Aames Funding” shall mean Aames Funding Corporation and anypermitted successors and assigns.

 

“Aames Investment” shall mean Aames Investment Corporation andany permitted successors and assigns.

 

“AcceptedServicing Practices” shall mean with respect to any Loan, those acceptedand prudent mortgage servicing practices (including collection procedures) ofprudent mortgage lending institutions which service mortgage loans of the sametype as the Loans in the jurisdiction where the related Mortgaged Property islocated, and which are in accordance with Fannie Mae servicing practices andprocedures for MBS pool mortgages, as defined in the Fannie Mae servicingguides including future updates, and in a manner at least equal in quality tothe servicing the Sellers or Sellers’ designee provides to mortgage loans whichthey own in their own portfolio.

 

“AdditionalPurchased Loans” shall have the meaning specified in Section 6(a) hereof.

 

“AdjustedIndebtedness” shall mean, with respect to any Person, the TotalIndebtedness of such Person and its Subsidiaries, less outstanding REITportfolio debt.

 

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“AdjustableRate Loan” shall mean a Loan which provides for the adjustment of theMortgage Interest Rate payable in respect thereto.

 

“AdjustmentDate” shall mean with respect to each Adjustable Rate Loan, the date setforth in the related Note on which the Mortgage Interest Rate on the Loan isadjusted in accordance with the terms of the Note.

 

“Affiliate”means, with respect to any Person, any other Person which, directly orindirectly, controls, is controlled by, or is under common control with, suchPerson, excluding any Person which would otherwise meet the definition ofAffiliate with respect to Aames Investment unless such Person directly ownsmore than 21% of the capital stock of Aames Investment as of November 3,2004.  For purposes of this definition, “control”(together with the correlative meanings of “controlled by” and “under commoncontrol with”) means possession, directly or indirectly, of the power (a) tovote 10% or more of the securities (on a fully diluted basis) having ordinaryvoting power for the directors or managing general partners (or theirequivalent) or such Person, or (b) to directly or indirectly cause thedirection of the management or policies of such Person, whether through theownership of voting securities, by contract, or otherwise.

 

“Agent”shall have the meaning set forth in the preamble to this Agreement.

 

“Agreement”shall mean this Master Repurchase Agreement (including all exhibits, schedulesand other addenda hereto or thereto),****assupplemented by the Pricing Side Letter, as it may be amended, furthersupplemented or otherwise modified from time to time.

 

“ALTA”shall mean the American Land Title Association.

 

“ApplicableMargin” shall have the meaning set forth in the Pricing Side Letter.

 

“AppraisedValue” shall mean the value set forth in an appraisal made in connectionwith the origination of the related Loan as the value of the Mortgaged Property(or the related Cooperative Unit in the case of a Cooperative Loan).

 

“Assignmentof Mortgage” shall mean, with respect to any Mortgage, an assignment of theMortgage, notice of transfer or equivalent instrument in recordable form,sufficient under the laws of the jurisdiction wherein the related MortgagedProperty is located to reflect the assignment of the Mortgage to Buyer.

 

“AttorneyBailee Letter” shall have the meaning assigned to such term in theCustodial Agreement.

 

“BankruptcyCode” shall mean the United States Bankruptcy Code of 1978, as amended fromtime to time.

 

“Best’s”shall mean Best’s Key Rating Guide, as the same shall be amended from time totime.

 

“BreakageCosts” shall have the meaning assigned thereto in Section 3(h) herein.

 

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“BusinessDay” shall mean any day other than (i) a Saturday or Sunday, (ii) a day onwhich the New York Stock Exchange, the Federal Reserve Bank of New York, theCustodian’s offices, banking and savings and loan institutions in the State ofNew York, Connecticut or California, the City of New York or the city or statein which the Custodian’s offices are located are closed, or (iii) a day onwhich trading in securities on the New York Stock Exchange or any other majorsecurities exchange in the United States is not conducted.

 

“CapitalLease Obligations” shall mean, for any Person, all obligations of suchPerson to pay rent or other amounts under a lease of (or other agreementconveying the right to use) Property to the extent such obligations arerequired to be classified and accounted for as a capital lease on a balancesheet of such Person under GAAP, and, for purposes of this Agreement, theamount of such obligations shall be the capitalized amount thereof, determinedin accordance with GAAP.

 

“CashEquivalents” shall mean (a) securities with maturities of 90 days or lessfrom the date of acquisition issued or fully guaranteed or insured by theUnited States Government or any agency thereof, (b) certificates of deposit andeurodollar time deposits with maturities of 90 days or less from the date ofacquisition and overnight bank deposits of any commercial bank having capitaland surplus in excess of $500,000,000, (c) repurchase obligations of anycommercial bank satisfying the requirements of clause (b) of this definition,having a term of not more than seven days with respect to securities issued orfully guaranteed or insured by the United States Government, (d) commercialpaper of a domestic issuer rated at least A-1 or the equivalent thereof byStandard and Poor’s Ratings Group (“S&P”) or P-1 or the equivalent thereofby Moody’s Investors Service, Inc. (“Moody’s”) and in either case maturingwithin 90 days after the day of acquisition, (e) securities with maturities of90 days or less from the date of acquisition issued or fully guaranteed by anystate, commonwealth or territory of the United States, by any politicalsubdivision or taxing authority of any such state, commonwealth or territory orby any foreign government, the securities of which state, commonwealth,territory, political subdivision, taxing authority or foreign government (asthe case may be) are rated at least A by S&P or A by Moody’s, (f)securities with maturities of 90 days or less from the date of acquisitionbacked by standby letters of credit issued by any commercial bank satisfyingthe requirements of clause (b) of this definition or, (g) shares of moneymarket mutual or similar funds which invest exclusively in assets satisfyingthe requirements of clauses (a) through (f) of this definition.

 

“Change ofControl” shall mean, Aames Investment, through its Subsidiaries, does notown (100%) of the outstanding capital stock of Aames Capital or Aames Funding.

 

“Code”shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

“CombinedLoan-to-Value Ratio” or “CLTV” shall mean with respect to any Loan,the ratio of (i) the original outstanding principal amount of the Loan and anyother loan which is secured by a lien on the related Mortgaged Property to (ii)the lesser of (a) the Appraised Value of the Mortgaged Property at originationof such Loan, or (b) if the Mortgaged Property was purchased within twelve (12)months of the origination of the Loan, the purchase price of the MortgagedProperty.

 

“CommonlyControlled Entity” shall mean an entity, whether or not incorporated, which

 

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is undercommon control with the Sellers within the meaning of Section 4001 of ERISA oris part of a group which includes any Seller and which is treated as a singleemployer under Section 414 of the Code.

 

“ConcurrentSecond Lien Loan” shall mean a Second Lien Loan as to which the prior lienon the related Mortgaged Property is secured by financing which was obtained bythe related Mortgagor from the related Seller at the same time that such SecondLien Loan was originated.

 

“Confirmation”shall have the meaning assigned thereto in Section 3(a) hereof.

 

“ContractualObligation” shall mean as to any Person, any material provision of anyagreement, instrument or other undertaking to which such Person is a party orby which it or any of its property is bound or any material provision of anysecurity issued by such Person.

 

“CooperativeCorporation” shall mean with respect to any Cooperative Loan, thecooperative apartment corporation that holds legal title to the relatedCooperative Project and grants occupancy rights to units therein tostockholders through Proprietary Leases or similar arrangements.

 

“CooperativeLoan” shall mean a Loan that is secured by a First Lien on and perfectedsecurity interest in Cooperative Shares and the related Proprietary Leasegranting exclusive rights to occupy the related Cooperative Unit in the buildingowned by the related Cooperative Corporation.

 

“CooperativeProject” shall mean, with respect to any Cooperative Loan, all realproperty and improvements thereto and rights therein and thereto owned by aCooperative Corporation including without limitation the land, separatedwelling units and all common elements.

 

“CooperativeShares” shall mean, with respect to any Cooperative Loan, the shares ofstock issued by a Cooperative Corporation and allocated to a Cooperative Unitand represented by a stock certificate.

 

“CooperativeUnit” shall mean, with respect to a Cooperative Loan, a specific unit in aCooperative Project.

 

“CustodialAgreement” shall mean the Amended and Restated Custodial Agreement, datedas of April 10, 2006, among Sellers, Buyer, and Custodian as the same shall bemodified and supplemented and in effect from time to time.

 

“Custodian”shall mean Deutsche Bank Trust Company Americas, or its successors andpermitted assigns.

 

“CustodianLoan Transmission” shall have the meaning assigned thereto in the CustodialAgreement.

 

“Default”shall mean an Event of Default or any event, that, with the giving of notice orthe passage of time or both, would become an Event of Default.

 

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“DisbursementAccount” shall mean the account established by Buyer pursuant to whichfunds shall be disbursed to fund any Wet Loan.

 

“DocumentDeficiency Repurchased Mortgage Loan” shall mean any Loan that has beenrepurchased by the Sellers pursuant to the terms of any whole loan transfer orpass-through transfer due to document deficiencies, which document deficiencieshave been fully and accurately disclosed to the Buyer and are acceptable to theBuyer in its sole discretion, and which, except for such document deficiencieswould otherwise qualify as an Eligible Loan pursuant to the terms of theProgram Documents.

 

“Dollars”or “$” shall mean lawful money of the United States of America.

 

“Dry Loan”shall mean a first or second lien Loan which is underwritten in accordance withthe Underwriting Guidelines and as to which the related Mortgage File containsall required Loan Documents.

 

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

 

“DueDiligence Review” shall mean the performance by Buyer of any or all of thereviews permitted under Section 44 hereof with respect to any or all of theLoans or the Sellers or related parties, as desired by Buyer from time to time.

 

“EarlyPayment Default Repurchased Mortgage Loan” shall mean any Mortgage Loanwhich has been repurchased by the a Seller pursuant to the terms of any wholeloan transfer or pass-through transfer due to a first or early payment defaultby the related Mortgagor, and which, except for such first or early paymentdefault, would otherwise qualify as an Eligible Loan pursuant to the terms ofthe Program Documents.

 

“EffectiveDate” shall mean the date upon which the conditions precedent set forth inSection 9(a) have been satisfied.

 

“ElectronicTransmission” shall mean the delivery of information in an electronicformat acceptable to the applicable recipient thereof.  An Electronic Transmission shall beconsidered written notice for all purposes hereof (except when a request ornotice by its terms requires execution).

 

“EligibleLoan” shall have the meaning assigned thereto in the Pricing Side Letter.

 

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

 

“ERISAAffiliate” shall mean any corporation or trade or business that is a memberof any group of organizations (i) described in Section 414(b) or (c) of theCode of which any Seller is a member and (ii) solely for purposes of potentialliability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Codeand the lien created under Section 302(f) of ERISA and Section 412(n) of theCode, described in Section 414(m) or (o) of the Code of which any Seller is amember.

 

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“EscrowLetter” shall mean, with respect to any Wet Loan that becomes subject to aTransaction before the end of the applicable rescission period, an escrowagreement or letter, which is fully assignable to the Buyer, stating that inthe event of a Rescission or if for any other reason the Loan fails to fund ona given day, the party conducting the closing is holding all funds which wouldhave been disbursed on behalf of the Mortgagor as agent for and for the benefitof the Buyer and such funds shall be returned to the related Seller not laterthan one Business Day after the date of Rescission or other failure of the Loanto fund on a given day.

 

“EscrowPayments” shall mean, with respect to any Loan, the amounts constitutingground rents, taxes, assessments, water charges, sewer rents, municipalcharges, mortgage insurance premiums, fire and hazard insurance premiums,condominium charges, and any other payments required to be escrowed by theMortgagor with the Mortgagee pursuant to the terms of any Note or Mortgage orany other document.

 

“Event ofDefault” shall have the meaning provided in Section 18 hereof.

 

“Exception”shall have the meaning assigned thereto in the Custodial Agreement.

 

“ExceptionReport” shall mean the exception report prepared by the Custodian pursuantto the Custodial Agreement.

 

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

 

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

 

“First LienLoan” shall mean an Eligible Loan secured by a First Lien on the relatedMortgaged Property, subject only to Permitted Exceptions.

 

“ForeignBuyer” shall mean any Buyer that is not incorporated under the laws of theUnited States, any State thereof, or the District of Columbia.

 

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

 

“FullDocumentation Loan” means a mortgage loan which was underwritten inaccordance with Underwriting Guidelines which require the related Mortgagor tocomplete a detailed application designed to provide pertinent creditinformation and pursuant to which the Mortgagor is required to provide fulldocumentation of the Mortgagor’s income and assets and such information is fullyverified by the related Seller.

 

“GAAP”shall mean generally accepted accounting principles in effect from time to timein the United States of America

 

“GovernmentalAuthority” shall mean with respect to any Person, any nation or government,any state or other political subdivision, agency or instrumentality thereof,any entity exercising executive, legislative, judicial, regulatory oradministrative functions of or pertaining to government and any court orarbitrator having jurisdiction over such Person, any of its

 

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Subsidiariesor any of its properties.

 

“GrossMargin” shall mean with respect to each Adjustable Rate Loan, the fixedpercentage amount set forth in the related Note and the Loan Schedule that isadded to the Index on each Adjustment Date in accordance with the terms of therelated Note to determine the new Mortgage Interest Rate for such Loan.

 

“Guarantee”shall mean, as to any Person, any obligation of such Person directly orindirectly guaranteeing any Indebtedness of any other Person or in any mannerproviding for the payment of any Indebtedness of any other Person or otherwiseprotecting the holder of such Indebtedness against loss (whether by virtue ofpartnership arrangements, by agreement to keep-well, to purchase assets, goods,securities or services, or to take-or-pay or otherwise), provided that the term“Guarantee” shall not include (i) endorsements for collection or deposit in theordinary course of business, or (ii) obligations to make servicing advances fordelinquent taxes and insurance, or other obligations in respect of a MortgagedProperty, to the extent required by the Buyer. The amount of any Guarantee of aPerson shall be deemed to be an amount equal to the stated or determinableamount of the primary obligation in respect of which such Guarantee is made or,if not stated or determinable, the maximum reasonably anticipated liability inrespect thereof as determined by such Person in good faith. The terms “Guarantee”and “Guaranteed” used as verbs shall have correlative meanings.

 

“Income”shall mean, with respect to any Purchased Loan at any time, any principaland/or interest thereon and all dividends, sale proceeds (including, withoutlimitation, any proceeds from the securitization of such Purchased Loan orother disposition thereof) and other collections and distributions thereon(including, without limitation, any proceeds received in respect of mortgageinsurance), but not including any commitment fees, origination fees and/orservicing fees accrued in respect of periods on or after the initial PurchaseDate with respect to such Purchased Loan.

 

“Indebtedness”shall mean, for any Person: (a) obligations created, issued or incurred by suchPerson for borrowed money (whether by loan, the issuance and sale of debtsecurities or the sale of Property to another Person subject to anunderstanding or agreement, contingent or otherwise, to repurchase suchProperty from such Person); (b) obligations of such Person to pay the deferredpurchase or acquisition price of Property or services, other than tradeaccounts payable (other than for borrowed money) arising, and accrued expensesincurred, in the ordinary course of business so long as such trade accountspayable are payable within 90 days of the date the respective goods aredelivered or the respective services are rendered; (c) indebtedness of otherssecured by a Lien on the Property of such Person, whether or not the respectiveindebtedness so secured has been assumed by such Person; (d) obligations(contingent or otherwise) of such Person in respect of letters of credit orsimilar instruments issued or accepted by banks and other financialinstitutions for account of such Person; (e) Capital Lease Obligations of suchPerson; (f) obligations of such Person under repurchase agreements or likearrangements; (g) indebtedness of others Guaranteed by such Person; (h) allobligations of such Person incurred in connection with the acquisition orcarrying of fixed assets by such Person; (i) indebtedness of generalpartnerships of which such Person is a general partner; and (j) any otherindebtedness of such Person by a note, bond, debenture or similar instrument.

 

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“Index”shall mean with respect to each Adjustable Rate Loan, the index identified onthe related Loan Schedule and set forth in the related Note for the purpose ofcalculating the interest rate thereon.

 

“InstructionLetter” shall mean a letter agreement between the related Seller and eachSubservicer substantially in the form of Exhibit I attached hereto.

 

“InsuranceProceeds” shall mean with respect to each Loan, proceeds of insurancepolicies insuring the Loan or the related Mortgaged Property.

 

“InsuredClosing Letter” shall mean, with respect to any Wet Loan that becomessubject to a Transaction before the end of the applicable rescission period, aletter of indemnification from an Approved Title Insurance Company, in anyjurisdiction where insured closing letters are permitted under applicable lawand regulation, addressed to the related Seller, which is fully assignable tothe Buyer, with coverage that is customarily acceptable to Persons engaged inthe origination of mortgage loans, identifying the Settlement Agent coveredthereby, which may be in the form of a blanket letter.

 

“InterestPeriod” shall mean, with respect to any Transaction, the period commencingon the Purchase Date with respect to such Transaction and ending on thecalendar day prior to the related Repurchase Date.  Notwithstanding the foregoing, no InterestPeriod may end after the Termination Date.

 

“InterestRate Protection Agreement” shall mean with respect to any or all of thePurchased Loans, any interest rate swap, cap or collar agreement or any otherapplicable hedging arrangements providing for protection against fluctuationsin interest rates or the exchange of nominal interest obligations, eithergenerally or under specific contingencies entered into by Sellers andreasonably acceptable to Buyer.

 

“InvestmentCompany Act” shall mean the Investment Company Act of 1940, as amended,including all rules and regulations promulgated thereunder.

 

“IRS”shall mean the United States Internal Revenue Service.

 

“LIBO BaseRate” shall mean with respect to each day on which a Transaction isoutstanding (or if such day is not a Business Day, the next succeeding BusinessDay), the rate per annum equal to the rate published by Bloomberg or if suchrate is not available, the rate appearing at page 3750 of the Telerate Screen,as one-month LIBOR on such date, and if such rate shall not be so quoted, therate per annum at which the Buyer is offered Dollar deposits at or about 11:00A.M., New York City time, on such date by prime banks in the interbankeurodollar market where the eurodollar and foreign currency and exchangeoperations in respect of its Transactions are then being conducted for deliveryon such day for a period of one month and in an amount comparable to the amountof the Transactions to be outstanding on such day.

 

“LIBO Rate”shall mean with respect to each Interest Period pertaining to a Transaction, arate (reset on a monthly basis) per annum determined by Buyer in its solediscretion in accordance with the following formula (rounded upwards to thenearest l/100th of one percent), which rate as determined by Buyer shall beconclusive absent manifest error by Buyer:

 

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|   |   LIBO Base Rate                         |   |
|--------|----------------------------------------------------|--------|
|   |   1.00 – LIBO Reserve  Requirements |

 

The LIBO Rateshall be calculated on each Purchase Date and Repurchase Date commencing withthe first Purchase Date.

 

“LIBOReserve Requirements” shall mean for any Interest Period for anyTransaction, the aggregate (without duplication) of the rates (expressed as adecimal fraction) of reserve requirements applicable to the Buyer in effect onsuch day (including, without limitation, basic, supplemental, marginal andemergency reserves under any regulations of the Board of Governors of theFederal Reserve System or other Governmental Authority having jurisdiction withrespect thereto), dealing with reserve requirements prescribed for eurocurrencyfunding (currently referred to as “Eurocurrency Liabilities” in Regulation D ofsuch Board) maintained by a member bank of such Governmental Authority. As ofthe Effective Date, the LIBO Reserve Requirements shall be deemed to be zero.

 

“Lien”shall mean any mortgage, lien, pledge, charge, security interest or similarencumbrance.

 

“Loan”shall mean a first or second lien mortgage loan or Cooperative Loan which theCustodian has been instructed to hold for the Buyer pursuant to the CustodialAgreement, and which Loan includes, without limitation, (i) a Note, the relatedMortgage and all other Loan Documents and (ii) all right, title and interest ofthe Sellers in and to the Mortgaged Property covered by such Mortgage.

 

“LoanDocuments” shall have the meaning assigned thereto in the CustodialAgreement.

 

“LoanSchedule” shall mean a hard copy or electronic format incorporating thefields identified on Exhibit G, any other information required by Buyerand any other additional information to be provided pursuant to the CustodialAgreement.

 

“Loan-to-ValueRatio” or “LTV” shall mean with respect to any Loan, the ratio ofthe outstanding principal amount of such Loan at the time of origination to thelesser of (a) the Appraised Value of the related Mortgaged Property atorigination of such Loan and (b) if the related Mortgaged Property waspurchased within twelve (12) months of the origination of such Loan, thepurchase price of the related Mortgaged Property.

 

“MarginCall” shall have the meaning assigned thereto in Section 6(a) hereof.

 

“MarginDeficit” shall have the meaning assigned thereto in Section 6(a) hereof.

 

“MarketValue” shall mean the value, determined by the Buyer in its sole reasonablediscretion, of the Loans if sold in their entirety to a single third-partypurchaser.  In determining Market Value,the Buyer may take into account (a) customary factors, including, but notlimited to current market conditions and the fact that the Purchased Loans maybe sold under circumstances in which the Sellers, as originators of thePurchased Loans, are in default under this Agreement, and (b) firm takeoutcommitments from investment grade purchasers in favor of the Sellers coveringthe Purchased Loans or mortgage loans substantially similar to the

 

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PurchasedLoans to the extent recently obtained and during similar marketconditions.  The Buyer’s determination ofMarket Value shall be conclusive upon the parties, absent manifest error on thepart of the Buyer.  The Buyer shall havethe right to mark to market the Loans on a daily basis which Market Value withrespect to one or more of the Loans may be determined to be zero. The Sellersacknowledge that the Buyer’s determination of Market Value is for the limitedpurpose of determining the value of Purchased Loans which are subject toTransactions hereunder without the ability to perform customary purchaser’s duediligence and is not necessarily equivalent to a determination of the fairmarket value of the Loans achieved by obtaining competing bids in an orderlymarket in which the originator/servicer is not in default under a revolvingdebt facility and the bidders have adequate opportunity to perform customaryloan and servicing due diligence.  TheMarket Value shall be deemed to be zero with respect to each Loan which is notan Eligible Loan.

 

“MaterialAdverse Effect” shall mean a material adverse effect on (a) the property,business, operations, financial condition or prospects of any Seller, (b) theability of the Sellers to perform their obligations under any of the ProgramDocuments, (c) the validity or enforceability of any of the Program Documents,(d) the rights and remedies of the Buyer under any of the Program Documents,(e) the timely repurchase of the Purchased Loans or payment of other amountspayable in connection therewith or (f) the Purchased Items.

 

“MaximumAggregate Purchase Price” shall mean Seven Hundred Thousand Dollars($700,000,000).

 

“MaximumMortgage Interest Rate” shall mean with respect to each Adjustable RateLoan, a rate that is set forth on the related Loan Schedule and in the relatedNote and is the maximum interest rate to which the Mortgage Interest Rate onsuch Loan may be increased on any Adjustment Date.

 

“MonthlyPayment” shall mean the scheduled monthly payment of principal and intereston a Loan as adjusted in accordance with changes in the Mortgage Interest Ratepursuant to the provisions of the Note for an Adjustable Rate Loan.

 

“Mortgage”shall mean with respect to a Loan, the mortgage, deed of trust or otherinstrument, which creates a First Lien or Second Lien (as indicated on the LoanSchedule) on either (i) with respect to a Loan other than a Cooperative Loan,the fee simple or leasehold estate in such real property or (ii) with respectto a Cooperative Loan, the Proprietary Lease and related Cooperative Shares,which in either case secures the Note.

 

“MortgageFile” shall have the meaning assigned thereto in the Custodial Agreement.

 

“MortgageInterest Rate” means the annual rate of interest borne on a Note, whichshall be adjusted from time to time with respect to Adjustable Rate Loans.

 

“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 collateral securing repayment of the debt evidenced bya Note.

 

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“Mortgagee”shall mean the record holder of a Note secured by a Mortgage.

 

“Mortgagor”shall mean the obligor or obligors on a Note, including any person who has assumedor guaranteed the obligations of the obligor thereunder.

 

“MultiemployerPlan” shall mean a multiemployer plan defined as such in Section 3(37) ofERISA to which contributions have been or are required to be made by any Selleror any ERISA Affiliate and that is covered by Title IV of ERISA.

 

“MV MarginAmount” means, with respect to any Transaction, as of any date ofdetermination, the amount obtained by application of the MV Margin Percentageto the Repurchase Price (reduced by the amount of any accrued and unpaid PriceDifferential) for such Transaction as of such date.

 

“MV MarginPercentage” shall have the meaning assigned thereto in the Pricing SideLetter.

 

“NegativeAmortization” shall mean with respect to each Negative Amortization Loan,that portion of interest accrued at the Mortgage Interest Rate in any monthwhich exceeds the Monthly Payment on the related Loan for such month and which,pursuant to the terms of the Note, is added to the principal balance of theLoan.

 

“NegativeAmortization Loan” shall mean each Loan that may be subject to NegativeAmortization.

 

“Net Income”shall mean, for any period, the net income of any Person for such period asdetermined in accordance with GAAP.

 

“Note”shall mean, with respect to any Loan, the related promissory note together withall riders thereto and amendments thereof or other evidence of indebtedness ofthe related Mortgagor.

 

“Obligations”shall mean (a) all of Sellers’ obligation to pay the Repurchase Price on theRepurchase Date and other obligations and liabilities of Sellers to Buyer, itsAffiliates, the Custodian or any other Person arising under, or in connectionwith, the Program Documents or directly related to the Purchased Loans, whethernow existing or hereafter arising; (b) any and all sums paid by Buyer or onbehalf of Buyer pursuant to the Program Documents in order to preserve anyPurchased Loan or its interest therein; (c) in the event of any proceeding forthe collection or enforcement of any of Sellers’ indebtedness, obligations or liabilitiesreferred to in clause (a), the reasonable expenses of retaking, holding,collecting, preparing for sale, selling or otherwise disposing of or realizingon any Purchased Loan, or of any exercise by Buyer or any Affiliate of Buyer ofits rights under the Program Documents, including without limitation,reasonable attorneys’ fees and disbursements and court costs; and (d) all ofSellers’ indemnity obligations to Buyer pursuant to the Program Documents.

 

“OtherTaxes” shall have the meaning assigned thereto in Section 5(b).

 

“Par MarginAmount” means, with respect to any Transaction, as of any date of

 

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determination,the amount obtained by application of the Par Margin Percentage to theRepurchase Price (reduced by the amount of any accrued and unpaid PriceDifferential) for such Transaction as of such date.

 

“Par MarginPercentage” shall have the meaning assigned thereto in the Pricing SideLetter.

 

“Participants”shall have the meaning assigned thereto in Section 39 hereof.

 

“PaymentAdjustment Date”  With respect toeach Negative Amortization Loan, the date on which Monthly Payments shall beadjusted.  A Payment Adjustment Date withrespect to a Negative Amortization Loan shall occur on the dates specified onthe Loan Schedule.

 

“PBGC”shall mean the Pension Benefit Guaranty Corporation or any entity succeeding toany or all of its functions under ERISA.

 

“PermittedExceptions” shall mean the following exceptions to lien priority: (i) thelien of current real property taxes and assessments not yet due and payable;(ii) covenants, conditions and restrictions, rights of way, easements and othermatters of the public record as of the date of recording acceptable to mortgagelending institutions generally and specifically referred to in the lender’stitle insurance policy delivered to the originator of the Loan and (A) referredto or otherwise considered in the appraisal (if any) made for the originator ofthe Loan or (B) which do not adversely affect the appraised value of theMortgaged Property set forth in such appraisal; (iii) other matters to whichlike properties 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; and (iv)in the case of a Second Lien Loan, a First Lien on the Mortgaged Property.

 

“Person”shall mean any individual, corporation, company, voluntary association,partnership, joint venture, limited liability company, trust, unincorporatedassociation or government (or any agency, instrumentality or politicalsubdivision thereof).

 

“Plan”shall mean an employee benefit or other plan established or maintained byeither a Seller or any ERISA Affiliate and that is covered by Title IV ofERISA, other than a Multiemployer Plan.

 

“PMI Policy”or “Primary Insurance Policy” shall mean a policy of primary mortgageguaranty insurance issued by a Qualified Insurer.

 

“Post-DefaultRate” shall mean, in respect of the Repurchase Price for any Transaction orany other amount under this Agreement, or any other Program Document that isnot paid when due to the Buyer (whether at stated maturity, by acceleration ormandatory prepayment or otherwise), a rate per annum during the period from andincluding the due date to but excluding the date on which such amount is paidin full equal to 2% per annum, plus (a)(i) the Pricing Rate otherwiseapplicable to such Loan or other amount, or (ii) if no Pricing Rate isotherwise applicable, the LIBO Rate plus (b) the Applicable Margin.

 

“PriceDifferential” shall mean, with respect to each Transaction as of any dateof

 

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determination,the aggregate amount obtained by daily application of the Pricing Rate (orduring the continuation of an Event of Default, by daily application of thePost-Default Rate) for such Transaction to the Purchase Price for suchTransaction on a 360-day-per-year basis for the actual number of days elapsedduring the period commencing on (and including) the Purchase Date and ending on(but excluding) the date of determination (reduced by any amount of such PriceDifferential in respect of such period previously paid by Sellers to Buyer withrespect to such Transaction).

 

“PricingRate” shall mean the per annum percentage rate for determination of thePrice Differential as set forth in the Pricing Side Letter.

 

“PricingSide Letter” shall mean the pricing side letter, dated as of April 10,2006, among Sellers and Buyer, as the same may be amended, supplemented ormodified from time to time.

 

“Principal”shall have the meaning assigned thereto in Annex I.

 

“ProgramDocuments” shall mean this Agreement, the Custodial Agreement, anyServicing Agreement, the Pricing Side Letter, any Instruction Letter, theSecuritization Side Letter, any assignment of an Interest Rate ProtectionAgreement, and any other agreement entered into by Sellers, on the one hand,and the Buyer and/or any of its Affiliates or Subsidiaries (or Custodian on itsbehalf) on the other, in connection herewith or therewith.

 

“Property”shall mean any right or interest in or to property of any kind whatsoever,whether real, personal or mixed and whether tangible or intangible.

 

“ProprietaryLease” shall mean the lease on a Cooperative Unit evidencing the possessoryinterest of the owner of the Cooperative Shares in such Cooperative Unit.

 

“PurchaseDate” shall mean, with respect to each Transaction, the date on whichPurchased Loans are sold by Sellers to the Buyer hereunder.

 

“PurchasePrice” shall have the meaning assigned thereto in the Pricing Side Letter.

 

“PurchasedItems” shall have the meaning assigned thereto in Section 8 hereof.

 

“PurchasedLoans” shall mean any of the following assets sold by Sellers to Buyer in aTransaction: the Loans, together with the related Records, Servicing Rights,Sellers’ rights under any related Interest Rate Protection Agreement, Sellers’rights under any Escrow Letters and Insured Closing Letters with respect to theLoans.  Sellers’ rights under any takeoutcommitment related to the Loans and other Purchased Items, such other property,rights, titles or interest as are specified on a related Transaction Notice,and all instruments, chattel paper, and general intangibles comprising orrelating to all of the foregoing.  Theterm “Purchased Loans” with respect to any Transaction at any time shall alsoinclude Additional Purchased Loans delivered pursuant to Section 6(a) hereofand Substitute Loans delivered pursuant to Section 16 hereof.

 

“QualifiedInsurer” shall mean an insurance company duly qualified as such under thelaws of each state in which any Mortgaged Property is located, duly authorizedand licensed in each such state to transact the applicable insurance businessand to write the insurance provided,

 

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and approvedas an insurer by Fannie Mae and Freddie Mac and whose claims paying ability israted in the two highest rating categories by any of the rating agencies withrespect to primary mortgage insurance and in the two highest rating categoriesby Best’s with respect to hazard and flood insurance.

 

“QualifiedOriginator” shall mean (a) Sellers and (b) any other mutually agreed uponoriginator of Loans.

 

“ReacquiredLoans” shall have the meaning assigned thereto in Section 16.

 

“Records”means all instruments, agreements and other books, records, and reports anddata generated by other media for the storage of information maintained bySellers or any other person or entity with respect to a Purchased Loan.  Records shall include, without limitation,the Notes, any Mortgages, the Mortgage Files, the Servicing File, and any otherinstruments necessary to document or service a Loan that is a Purchased Loan,including, without limitation, the complete payment and modification history ofeach Loan that is a Purchased Loan.

 

“REIT”shall mean a qualified real estate investment trust under Section 856 of theCode. 

 

“ReportableEvent” shall mean any of the events set forth in Section 4043(b) of ERISA,other than those events as to which the thirty day notice period is waivedunder subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.  § 2615.

 

“RepurchaseDate”  shall mean the date occurringon (i) the second Business Day following the 15th day of each month followingthe related Purchase Date (or if such date is not a Business Day, the followingBusiness Day), (ii) any other Business Day set forth in the related TransactionNotice and/or the related Confirmation, or (iii) the date determined byapplication of Section 19, as applicable.

 

“RepurchasePrice” shall mean the price at which Purchased Loans are to be transferredfrom Buyer to Sellers upon termination of a Transaction, which will bedetermined in each case (including Transactions terminable upon demand) as thesum of the outstanding Purchase Price for such Purchased Loans and the PriceDifferential as of the date of such determination.

 

“RequiredDocuments” shall have the meaning set forth in the Custodial Agreement.

 

“Requirementof Law” shall mean as to any Person, the certificate of incorporation andby-laws or other organizational or governing documents of such Person, and anylaw, treaty, rule or regulation or determination of an arbitrator or a court orother Governmental Authority, in each case applicable to or binding upon suchPerson or any of its property or to which such Person or any of its property issubject.

 

“Rescission”  shall mean the right of a Mortgagor torescind the related Note and related documents pursuant to applicable law.

 

“ResponsibleOfficer” shall mean, as to any Person, the chief executive officer or, withrespect to financial matters, the chief financial officer or treasurer of suchPerson; provided, that in the event any such officer is unavailable at any timehe or she is required to take any action

 

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hereunder,Responsible Officer shall mean any officer authorized to act on such officer’sbehalf as demonstrated by a certificate of corporate resolution.

 

“RestrictedPayments” shall mean with respect to any Person, collectively, alldividends or other distributions of any nature (cash, securities, assets orotherwise), and all payments, by virtue of redemption or otherwise, on anyclass of equity securities (including, without limitation, warrants, options orrights therefor) issued by such Person, whether such securities are now or mayhereafter be authorized or outstanding and any distribution in respect of anyof the foregoing, whether directly or indirectly.

 

“SecondLien” shall mean with respect to each 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 Loan” shall mean an Eligible Loan secured by the lien on the MortgagedProperty, subject only to one prior lien on such Mortgaged Property securingfinancing obtained by the related Mortgagor and to Permitted Exceptions.

 

“SecuritizationLetter” shall mean that certain letter agreement by and among Sellers andBuyer dated the date hereof, outlining rights and obligations with respect tosecuritizations and whole loan sales of Loans subject to this Agreement fromtime to time.

 

“SecurityRelease Certification” shall mean a security release certification insubstantially the form set forth in Annex 18 to the Custodial Agreement. 

 

“Servicer”shall mean each related Seller in its capacity as servicer or master servicerof the Loans.

 

“ServicingAgreement” shall have the meaning provided in Section 43(c) hereof.

 

“ServicingFile” shall mean with respect to each Loan, the file retained by therelated Seller (in its capacity as Servicer) consisting of all documents that aprudent originator and servicer would have, including copies of the LoanDocuments, all documents necessary to document and service the Loans and anyand all documents required to be delivered pursuant to any of the ProgramDocuments.

 

“ServicingRecords” shall have the meaning assigned thereto in Section 43(b) hereof.

 

“ServicingRights” shall mean contractual, possessory or other rights of any Seller orany other Person, whether arising under the Servicing Agreement, the CustodialAgreement or otherwise, to administer or service a Purchased Loan or to possessrelated Servicing Records.

 

“ServicingTransmission” shall mean a computer-readable magnetic or other electronicformat acceptable to the parties containing the information identified onExhibit F.

 

“SettlementAgent” shall have the meaning assigned thereto in the Custodial Agreement.

 

“SingleEmployer Plan” shall mean any Plan which is covered by Title IV of ERISA,but

 

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which is not aMultiemployer Plan.

 

“Subservicer”shall have the meaning provided in Section 43(c) hereof.

 

“Subsidiary”shall mean, with respect to any Person, any corporation, partnership or otherentity of which at least a majority of the securities or other ownershipinterests having by the terms thereof ordinary voting power to elect a majorityof the board of directors or other persons performing similar functions of suchcorporation, partnership or other entity (irrespective of whether or not at thetime securities or other ownership interests of any other class or classes ofsuch corporation, partnership or other entity shall have or might have votingpower by reason of the happening of any contingency) is at the time directly orindirectly owned or controlled by such Person or one or more Subsidiaries ofsuch Person or by such Person and one or more Subsidiaries of such Person.

 

“SubstituteLoans” has the meaning assigned thereto in Section 16.

 

“TangibleNet Worth” shall mean, with respect to Aames Investment, as of any date ofdetermination, the stockholders equity of Aames Investment, less theconsolidated net book value of all assets of Aames Investment and itsSubsidiaries (to the extent reflected as an asset in the balance sheet of AamesInvestment or any Subsidiary at such date) which will be treated as intangiblesunder GAAP, provided, that residual securities issued by such Aames Investmentor its Subsidiaries shall not be treated as intangibles for purposes of thisdefinition.

 

“TerminationDate” shall mean February 3, 2007, or such earlier date on which thisAgreement shall terminate in accordance with the provisions hereof or byoperation of law.

 

“TotalIndebtedness” shall mean with respect to any Person, for any period, theaggregate consolidated funded Indebtedness of such Person and its Subsidiariesduring such period (including any outstanding warehouse debt and [REITportfolio debt]).

 

“Transaction”has the meaning assigned thereto in Section 1.

 

“TransactionNotice” shall mean a written request by a Seller in the form of ExhibitD hereto, to enter into a Transaction, in a format to be mutually agreedupon among the related Seller and Buyer, which is delivered to Buyer.

 

“TrustReceipt” shall have the meaning provided in the Custodial Agreement.

 

“UnderwritingGuidelines” shall mean the underwriting guidelines of the Sellers attachedas Exhibit E hereto in effect as of the date of this Agreement, as thesame may be amended, supplemented or otherwise modified from time to time inaccordance with terms of this Agreement, and which have been approved in writingby Buyer (including any amendments, supplements or modifications thereto).

 

“UniformCommercial Code” shall mean the Uniform Commercial Code as in effect on thedate hereof in the State of New York; provided that if by reason of mandatoryprovisions of law, the perfection or the effect of perfection or non-perfectionof the security interest in any Purchased Items is governed by the UniformCommercial Code as in effect in a jurisdiction other

 

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than New York,“Uniform Commercial Code” shall mean the Uniform Commercial Code as in effectin such other jurisdiction for purposes of the provisions hereof relating tosuch perfection or effect of perfection or non-perfection.

 

“USC”shall mean the United States Code, as amended.

 

“Wet Loan”shall mean a wet-funded First Lien Loan or Second Lien Loan which isunderwritten in accordance with the Underwriting Guidelines and does notcontain all the required Loan Documents in the Mortgage File, which in order tobe deemed an Eligible Loan shall have the following additional characteristics:

 

(a)           theproceeds thereof have been funded (or, on the Purchase Date supported by aTransaction Notice are being funded) by wire transfer or cashier’s check,cleared check or draft or other form of immediately available funds to theSettlement Agent for such Wet Loan;

 

(b)           therelated Seller expects such Wet Loan to close and become a valid lien securingactual indebtedness by funding to the order of the Mortgagor thereunder;

 

(c)           theproceeds thereof have not been returned to the Buyer from the Settlement Agentfor such Wet Loan;

 

(d)           therelated Seller has not learned that such Wet Loan will not be closed and fundedto the order of the Mortgagor; 

 

(e)           uponrecordation such Loan will constitute a First Lien Loan or Second Lien on thepremises described therein; and

 

(f)            therelated Seller shall have obtained an Insured Closing Letter and an EscrowLetter with respect to such Wet Loan (or, with respect to any MortgagedProperty located in the State of New York, a comparable letter as customarilyprovided for closings occurring in such state).

 

## (b)           AccountingTerms and Determinations.  Except asotherwise expressly provided herein, all accounting terms used herein shall beinterpreted, and all financial statements and certificates and reports as tofinancial matters required to be delivered to the Buyer hereunder shall beprepared, in accordance with GAAP.

##  

## (c)           Interpretation.  The following rules of this subsection (c)apply unless the context requires otherwise. A gender includes all genders. Where a word or phrase is defined, its other grammatical forms have acorresponding meaning.  A reference to asubsection, Section, Annex or Exhibit is, unless otherwise specified, a referenceto a Section of, or annex or exhibit to, this Agreement.  A reference to a party to this Agreement oranother agreement or document includes the party’s successors and permittedsubstitutes or assigns. A reference to an agreement or document (including anyProgram Document) is to the agreement or document as amended, modified,novated, supplemented or replaced, except to the extent prohibited thereby orby any Program Document and in effect from time to time in accordance with theterms thereof.  A reference tolegislation or to a provision of legislation includes a modification orre-enactment of

 

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## it, a legislative provision substituted forit and a regulation or statutory instrument issued under it.  A reference to writing includes a facsimiletransmission and any means of reproducing words in a tangible and permanentlyvisible form.  A reference to conductincludes, without limitation, an omission, statement or undertaking, whether ornot in writing.  The words “hereof”, “herein”,“hereunder” and similar words refer to this Agreement as a whole and not to anyparticular provision of this Agreement. The term “including” is not limiting and means “including withoutlimitation”.  In the computation of periodsof time from a specified date to a later specified date, the word “from” means “fromand including”, the words “to” and “until” each mean “to but excluding”, andthe word “through” means “to and including”.

##  

Except whereotherwise provided in this Agreement, any determination, consent, approval,statement or certificate made or confirmed in writing with notice to Seller byBuyer or an authorized officer of Buyer provided for in this Agreement isconclusive and binds the parties in the absence of manifest error. A referenceto an agreement includes a security interest, guarantee, agreement or legallyenforceable arrangement whether or not in writing related to such agreement.

 

A reference toa document includes an agreement (as so defined) in writing or a certificate,notice, instrument or document, or any information recorded in computer diskform.  Where Seller is required toprovide any document to Buyer under the terms of this Agreement, the relevantdocument shall be provided in writing or printed form unless Buyer requestsotherwise.  At the request of Buyer, thedocument shall be provided in computer disk form or both printed and computerdisk form.

 

This Agreementis the result of negotiations among, and has been reviewed by counsel to, Buyerand Seller, and is the product of all parties. In the interpretation of this Agreement, no rule of construction shallapply to disadvantage one party on the ground that such party proposed or wasinvolved in the preparation of any particular provision of this Agreement orthis Agreement itself.  Except whereotherwise expressly stated, Buyer may give or withhold, or give conditionally,approvals and consents and may form opinions and make determinations at itsabsolute discretion.  Any requirement ofgood faith, discretion or judgment by Buyer shall not be construed to requireBuyer to request or await receipt of information or documentation notimmediately available from or with respect to Seller, a servicer of thePurchased Loans, any other Person or the Purchased Loans themselves.

 

**3.****             THE TRANSACTIONS**

 

## (a)           Buyershall, from time to time enter into Transactions with an aggregate PurchasePrice for all Purchased Loans acquired by Buyer not to exceed the MaximumAggregate Purchase Price, subject to the terms and conditions of the ProgramDocuments, and further subject to the following limitations:  

##  

## (i)            TheBuyer shall enter into Transactions with Aames Investment and Aames Capitalwith respect to Eligible Loans that are Dry Loans on any Business Day, with anaggregate outstanding Purchase Price at any time up to, but not exceeding thelesser of (A) the Maximum Aggregate Purchase Price, less the sum of (1) theaggregate outstanding Purchase Price of any Purchased Loans that are thensubject to Transactions

 

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## between the Buyer and Aames FundingCorporation and (2) the aggregate outstanding Purchase Price of any Wet Loansthat are then subject to Transactions, or (B) the aggregate outstandingPurchase Price of all Purchased Loans then subject to Transactions.  The Buyer shall not be required to enter intomore than one (1) Transaction with respect to Dry Loans in any Business Day.

##  

(ii)           TheBuyer shall enter into Transactions with Aames Funding on any Business Day, withan aggregate outstanding Purchase Price at any time up to, but not exceeding$1,000,000; provided that in connection with any such Transaction between theBuyer and Aames Funding, Aames Funding shall, in addition to transferring thePurchased Loans that are subject to such Transaction to Buyer, pledge to theBuyer Cash Equivalents with a face value equal to the aggregate outstandingprincipal balance of such Purchased Loans. The Buyer shall not be required to enter into more than one (1)Transaction with Aames Funding in any one-week period.

 

(iii)          TheBuyer may, in its sole discretion, enter into up to three (3) Transactions withthe Sellers in any one (1) Business Day with respect to Wet Loans.  

 

## (b)           Unlessotherwise agreed, Sellers shall request that Buyer enter into a Transaction bydelivering (i) a Transaction Notice substantially in the form of Exhibit Dhereto (a “Transaction Notice”), appropriately completed, and a Loan Scheduleto Buyer and Custodian, and (ii) the Mortgage File to Custodian for eachLoan proposed to be included in such Transaction, which Transaction Notice andLoan Schedule must be received no later than 2:00 p.m. (New York City time) oneBusiness Day prior to the requested Purchase Date with respect to Dry Loans andno later than 3:00 p.m. (New York City Time) with respect to Wet Loans. SuchTransaction Notice shall clearly indicate those Loans that are intended to beWet Loans and Dry Loans and include a Loan Schedule in respect of the EligibleLoans that the related Seller proposes to include in the related Transaction.Each Transaction Notice shall specify the proposed Purchase Date, PurchasePrice, Pricing Rate and Repurchase Date. Sellers agree to immediately report toCustodian and the Buyer by facsimile transmission within one Business Day ofdiscovery that any Wet Loans that were previously subject to a Transaction donot close for any reason including, but not limited to, a Rescission.  In the event that the parties hereto desireto enter into a Transaction, the Buyer shall deliver to the related Seller, inelectronic or other format, a “Confirmation” specifying such terms, including,without limitation, the Purchase Date, the Purchase Price, the Pricing Ratetherefor and the Repurchase Date.  Anysuch Confirmation and the related Transaction Notice, together with thisAgreement, shall constitute conclusive evidence of the terms agreed to betweenBuyer and related Seller with respect to the Transaction to which theConfirmation relates.  By entering in toa Transaction with the Buyer, the related Seller consents to the terms setforth in the related Confirmation.  Inthe event of any conflict between this Agreement and a Confirmation, the termsof the Confirmation shall control with respect to the related Transaction.  

##  

## (c)           Pursuantto the Custodial Agreement, the Custodian shall review any Required Documentsdelivered prior to 12:00 p.m. (New York City time) on any Business Day on thesame day.  Not later than 5:30 p.m. (NewYork City time) on each Business Day, the Custodian shall deliver to the Buyer,via Electronic Transmission acceptable to the Buyer, the Custodian LoanTransmission and an Exception Report showing the status of all Loans then heldby the

 

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## Custodian, including but not limited to theWet Loans and Dry Loans which are subject to Exceptions, and the time therelated Loan Documents have been released pursuant to Sections 5(a) or 5(b) ofthe Custodial Agreement.  In addition,the Custodian shall deliver to the Buyer no later than 5:30 p.m. (New York Citytime) by facsimile transmission on each Purchase Date, one or more TrustReceipts (as defined in the Custodial Agreement) relating to either Wet Loansor Dry Loans. The original copies of such Trust Receipts shall be delivered toJPMorgan Chase Bank at Four New York Plaza, Ground Floor, OutsourcingDepartment, New York, New York 10004, Attention: Jennifer John for the accountof Greenwich Capital Markets, telephone number (212) 623-5953, as agent for theBuyer by overnight delivery using a nationally recognized insured overnightdelivery service.

##  

## (d)           (i)Upon a Seller’s request to enter into a Transaction with respect to Dry Loanspursuant to Sections 3(b), Buyer shall, assuming all conditions precedent setforth in this Section 3 and in Sections 9(a) and (b) have been met, andprovided no Default shall have occurred and be continuing, not later than 5:00p.m. (New York City time) on the requested Purchase Date purchase the EligibleLoans included in the related Transaction Notice by transferring, via wiretransfer (pursuant to wire transfer instructions provided by the Seller on orprior to such Purchase Date), the Purchase Price.

##  

(ii)           Upon a Seller’s requestto enter into a Transaction with respect to Wet Loans pursuant to Section 3(b),Buyer may, in its sole discretion, assuming all conditions precedent set forthin this Section 3 and in Sections 9(a) and (b) have been met, and provided noDefault shall have occurred and be continuing, not later than 3:30 p.m. (NewYork City time) on the requested Purchase Date purchase the Eligible Loansincluded in the related Transaction Notice by transferring, via wire transfer(pursuant to wire transfer instructions provided by the Seller on or prior tosuch Purchase Date), the Purchase Price. With respect to any Transaction with respect to Wet Loans, the PurchasePrice shall be disbursed to the Settlement Agent from the DisbursementAccount.  Accordingly, in connection withany Wet Loan, the Sellers shall be required to deposit in the DisbursementAccount prior to the closing of such Loan an amount equal to the excess of (i)the amount required to be remitted in connection with the closing of such Loanover (ii) the related Purchase Price to be paid to such Seller by Buyer forsuch Loan.  No later than one BusinessDay following the related Purchase Date for each Wet Loan, the Sellers shallprovide to the Buyer a complete Loan Data Transmission with respect to each WetLoan subject to a Transaction, which Loan Data Transmission shall contain allfields required for Dry Loans.  The Buyerand the Sellers agree that the procedures for requesting and entering into aTransaction with respect to Wet Loans may be modified from time to time by awritten agreement executed by the Buyer and the Sellers.

 

## (e)           Anythingherein to the contrary notwithstanding, if, on or prior to the determination ofany LIBO Base Rate:

##  

### (i)       theBuyer determines, which determination shall be conclusive, that quotations ofinterest rates for the relevant deposits referred to in the definition of “LIBOBase Rate” in Section 2 are not being provided in the relevant amounts or forthe relevant maturities for purposes of determining rates of interest forTransactions as provided herein; or

###  

### (ii)      theBuyer determines, which determination shall be conclusive, that the

 

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### Applicable Margin plus the relevant rate ofinterest referred to in the definition of “LIBO Base Rate” in Section 2 uponthe basis of which the rate of interest for Transactions is to be determined isnot likely adequately to cover the cost to the Buyer of purchasing and holdingLoans hereunder; or

###  

### (iii)     itbecomes unlawful for Buyer to enter into Transactions with a Pricing Rate basedon the LIBO Base Rate;

###  

then the Buyershall give the related Seller prompt notice thereof and, so long as suchcondition remains in effect, the Buyer shall be under no obligation to purchaseLoans hereunder, and the related Seller shall, at its option, either repurchasesuch Loans or pay a Pricing Rate at a rate per annum as determined by the Buyertaking into account the increased cost to the Buyer of purchasing and holdingthe Loans.

 

## (f)            Sellersshall repurchase Purchased Loans from Buyer on each related Repurchase Date.  Each obligation to repurchase exists withoutregard to any prior or intervening liquidation or foreclosure with respect toany Purchased Loan.  Sellers areobligated to obtain the Purchased Loans from Buyer or its designee (includingthe Custodian) at Sellers’ expense on (or after) the related Repurchase Date.

##  

## (g)           Providedthat the applicable conditions in Sections 9(a) and (b) have been satisfied,Sellers may request that a Purchased Loan that is repurchased by Sellers on theRepurchase Date become subject to a new Transaction by delivering notice ofsuch request to Buyer with a copy to Custodian not later than 11:00 a.m. NewYork City time at least two (2) Business Day prior to any such RepurchaseDate.  Buyer shall purchase the relatedEligible Loans pursuant to the procedures set forth in Section 3(d).  For each new Transaction, unless otherwiseagreed, (y) the accrued and unpaid Price Differential shall be settled in cashon each related Repurchase Date, and (z) the Pricing Rate shall be as set forthin the Pricing Side Letter.

##  

## (h)           Ifthe Sellers intend to repurchase any Loans on any day which is not a RepurchaseDate, the Sellers shall give one (1) Business Day’s prior written noticethereof to the Buyer.  If such notice isgiven, the Repurchase Price specified in such notice shall be due and payableon the date specified therein, together with the Price Differential to suchdate on the amount prepaid.  Such earlyrepurchases shall be in an aggregate principal amount of at least $100,000.

##  

## (i)            IfSellers repurchase Purchased Loans other than as provided in Section 3(h)above, Sellers shall indemnify Buyer and hold Buyer harmless from any actualloss or expense which Buyer may sustain or incur arising from (a) there-employment of funds obtained by Buyer to perform hereunder or from (b) feespayable to terminate the deposits from which such funds were obtained (“BreakageCosts”), in either case, which actual loss or expense shall be equal to theexcess, as reasonably determined by the Lender of (i) its cost of obtainingfunds to perform under such Transactions for the period from the date of suchpayment through the following Repurchase Date over (ii) the amount of interestlikely to be realized by Lender in redeploying the funds no utilized by reasonof such payment for such period.  Buyershall deliver to Sellers a statement setting forth the amount and basis ofdetermination of any Breakage Costs in such detail as determined in good faithby Buyer to be adequate, it being agreed that such

 

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## statement and the method of its calculationshall be adequate and shall be conclusive and binding upon Sellers, absentmanifest error.  The provisions of thisSection 3(i) shall survive termination of this Agreement and the repurchase ofall Purchased Loans subject to Transactions hereunder.

##  

## (j)            Ifany Requirement of Law (other than with respect to any amendment made to theBuyer’s certificate of incorporation and by-laws or other organizational orgoverning documents) or any change in the interpretation or application thereofor compliance by the Buyer with any request or directive (whether or not havingthe force of law) from any central bank or other Governmental Authority madesubsequent to the date hereof:

##  

### (i)       shallsubject the Buyer to any tax of any kind whatsoever with respect to thisAgreement or any Loans purchased pursuant to it (excluding net income taxes) orchange the basis of taxation of payments to the Buyer in respect thereof;

###  

### (ii)      shallimpose, modify or hold applicable any reserve, special deposit, compulsoryadvance or similar requirement against assets held by deposits or otherliabilities in or for the account of Transactions or extensions of credit by,or any other acquisition of funds by any office of the Buyer which is nototherwise included in the determination of the LIBO Base Rate hereunder;

###  

### (iii)     shallimpose on the Buyer any other condition;

###  

and the resultof any of the foregoing is to increase the cost to the Buyer, by an amountwhich the Buyer deems to be material, of effecting or maintaining purchaseshereunder, or to reduce any amount receivable hereunder in respect thereof,then, in any such case, the Sellers shall promptly pay the Buyer suchadditional amount or amounts as will compensate the Buyer for such increasedcost or reduced amount receivable thereafter incurred or shall repurchase allof the Purchased Loans then subject to outstanding Transactions.  Any payment or repurchase made by the Sellersas a result of this paragraph shall not be subject to the provisions of Section3(i).

 

If the Buyershall have determined that the adoption of or any change in any Requirement ofLaw (other than with respect to any amendment made to the Buyer’s certificateof incorporation and by-laws or other organizational or governing documents)regarding capital adequacy or in the interpretation or application thereof orcompliance by the Buyer or any corporation controlling the Buyer with anyrequest or directive regarding capital adequacy (whether or not having theforce of law) from any Governmental Authority made subsequent to the datehereof shall have the effect of reducing the rate of return on the Buyer’s orsuch corporation’s capital as a consequence of its obligations hereunder to alevel below that which the Buyer or such corporation (taking into considerationthe Buyer’s or such corporation’s policies with respect to capital adequacy) byan amount deemed by the Buyer to be material, then from time to time, theSeller shall promptly pay to the Buyer such additional amount or amounts aswill thereafter compensate the Buyer for such reduction or shall repurchase allof the Purchased Loans then subject to outstanding Transactions. Any payment orrepurchase made by the Sellers as a result of this paragraph shall not besubject to the provisions of Section 3(i).

 

If the Buyerbecomes entitled to claim any additional amounts pursuant to this subsection,it shall promptly notify the Sellers of the event by reason of which it hasbecome so

 

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entitled.  A certificate as to any additional amountspayable pursuant to this subsection submitted by the Buyer to the Sellers shallbe conclusive in the absence of manifest error.

 

**4.****             PAYMENT ANDTRANSFER**

 

## (a)           Payments.  Except to the extent otherwise providedherein, all payments to be made by the Seller under this Agreement shall bemade in Dollars, in immediately available funds, without deduction, set-off orcounterclaim, to the Buyer at the following account maintained by the Buyer atJPMorgan Chase Bank Account Number 140095961, For the A/C of Greenwich CapitalFinancial Products, Inc., ABA# 021000021, Attn: Brett Kibbe, not later than2:00 p.m., New York City time, on the date on which such payment shall becomedue (each such payment made after such time on such due date to be deemed tohave been made on the next succeeding Business Day). Each Seller acknowledgesthat it has no rights of withdrawal from the foregoing account.

##  

## (b)           Computations.  The Pricing Differential shall be computed onthe basis of a 360-day year for the actual days elapsed (including the firstday but excluding the last day) occurring in the period for which payable.

##  

**5.****             TAXES; TAXTREATMENT**

 

## (a)           Allpayments made by the Sellers under this Agreement shall be made free and clearof, and without deduction or withholding for or on account of, any present orfuture taxes, levies, imposts, deductions, charges or withholdings, and allliabilities (including penalties, interest and additions to tax) with respectthereto imposed by any Governmental Authority, excluding income taxes, branchprofits taxes, franchise taxes or any other tax imposed on the net income bythe United States, a state or a foreign jurisdiction under the laws of which theBuyer is organized or of its applicable lending office, or any politicalsubdivision thereof (collectively, “Taxes”), all of which shall be paidby the related Seller for its own account not later than the date whendue.  If any Seller is required by law orregulation to deduct or withhold any Taxes from or in respect of any amountpayable hereunder, it shall: (a) make such deduction or withholding; (b) paythe amount so deducted or withheld to the appropriate Governmental Authoritynot later than the date when due; (c) deliver to Buyer, promptly, original taxreceipts and other evidence satisfactory to Buyer of the payment when due ofthe full amount of such Taxes; and (d) pay to the Buyer such additional amountsas may be necessary so that such Buyer receives, free and clear of all Taxes, anet amount equal to the amount it would have received under this Agreement, asif no such deduction or withholding had been made.

##  

## (b)           Inaddition, each Seller agrees to pay to the relevant Governmental Authority inaccordance with applicable law any current or future stamp or documentary taxesor any other excise or property taxes, charges or similar levies (including,without limitation, mortgage recording taxes, transfer taxes and similar fees)imposed by the United States or any taxing authority thereof or therein thatarise from any payment made hereunder or from the execution, delivery orregistration of, or otherwise with respect to, this Agreement (“Other Taxes”).

##  

## (c)           EachSeller agrees to indemnify the Buyer for the full amount of Taxes (includingadditional amounts with respect thereto) and Other Taxes, and the full amountof Taxes of any

 

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## kind imposed by any jurisdiction on amountspayable under this Section 5, and any liability (including penalties, interestand expenses) arising therefrom or with respect thereto, provided that theBuyer shall have provided the Seller with evidence, reasonably satisfactory tothe Seller, of payment of Taxes or Other Taxes, as the case may be.

##  

## (d)           AnyForeign Buyer shall provide the Seller with properly completed IRS Form W-8BENor W-8ECI or any successor form prescribed by the IRS, certifying that suchForeign Buyer is entitled to benefits under an income tax treaty to which theUnited States is a party which reduces the rate of withholding tax on paymentsof interest or certifying that the income receivable pursuant to this Agreementis effectively connected with the conduct of a trade or business in the UnitedStates on or prior to the date upon which each such Foreign Buyer becomes aBuyer.  Each Foreign Buyer will resubmitthe appropriate form on the earliest of (A) the third anniversary of the priorsubmission or (B) on or before the expiration of thirty (30) days after thereis a “change in circumstances” with respect to such Foreign Buyer as defined inTreas. Reg. Section 1.1441(e)(4)(ii)(D). For any period with respect to which a Foreign Buyer has failed toprovide the Seller with the appropriate form or other relevant documentpursuant to this Section 5(d) (unless such failure is due to a change intreaty, law, or regulation occurring subsequent to the date on which a formoriginally was required to be provided), such Foreign Buyer shall not beentitled to any “gross-up” of Taxes or indemnification under Section 5(c) withrespect to Taxes imposed by the United States; provided, however,that should a Foreign Buyer, which is otherwise exempt from a withholding tax,become subject to Taxes because of its failure to deliver a form requiredhereunder, the Seller shall take such steps as such Foreign Buyer shallreasonably request to assist such Foreign Buyer to recover such Taxes.

##  

## (e)           Withoutprejudice to the survival or any other agreement of any Seller hereunder, theagreements and obligations of Sellers contained in this Section 5 shall survivethe termination of this Agreement. Nothing contained in this Section 5 shall require Buyer to makeavailable any of its tax returns or other information that it deems to beconfidential or proprietary.

##  

## (f)            Eachparty to this Agreement acknowledges that it is its intent for purposes of U.S.federal, state and local income and franchise taxes to treat each Transactionas indebtedness of Seller that is secured by the Purchased Loans and that thePurchased Loans are owned by Seller in the absence of an Event of Default bySeller.  All parties to this Agreementagree to such treatment and agree to take no action inconsistent with thistreatment, unless required by law.

##  

**6.****             MARGIN MAINTENANCE**

 

## (a)           Ifat any time either (i) the aggregate Market Value of all Purchased Loanssubject to all Transactions is less than the aggregate MV Margin Amount for allsuch Transactions, or (ii) the aggregate unpaid principal balance of thePurchased Loans for all Transactions is less than the aggregate Par MarginAmount for all such Transactions (either such event, a “Margin Deficit”),then the Buyer may, by notice to Sellers, require Sellers in such Transactionsto transfer to the Buyer cash or, at the Buyer’s option (and provided Sellershave additional Eligible Loans), additional Eligible Loans (“AdditionalPurchased Loans”) within one (1) Business Day of such notice by Buyer, sothat both (x) the cash and aggregate Market Value of the Purchased Loans, includingany such Additional Purchased Loans, will thereupon equal or exceed such

 

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## aggregate MV Margin Amount, and (y) the cashand unpaid principal balance of such Purchased Loans, including any suchAdditional Purchased Loans and Purchased Loans, will therefore equal or exceedsuch aggregate Par Margin Amount (either requirement, a “Margin Call”); providedthat if Sellers transfer cash, Buyer shall deposit such cash into anon-interest bearing account until the next succeeding Repurchase Date.

 

## (b)           Noticerequired pursuant to Section 6(a) may be given by any means provided inSection 21 hereof.  Any notice givenon a Business Day preceding 1:00 p.m. (New York City time) shall be met, andthe related Margin Call satisfied, no later than 5:00 p.m. (New York City time)on the same Business Day.  Any noticegiven on a Business Day following 1:00 p.m. (New York City time) shall be met,and the related Margin Call satisfied, no later than 1:00 p.m. (New York Citytime) on the following Business Day.  Thefailure of Buyer, on any one or more occasions, to exercise its rights underthis Section 6, shall not change or alter the terms and conditions to whichthis Agreement is subject or limit the right of Buyer to do so at a laterdate.  Sellers and Buyer each agree thata failure or delay by Buyer to exercise its rights hereunder shall not limit orwaive Buyer’s rights under this Agreement or otherwise existing by law or inany way create additional rights for Sellers.

 

**7.****             INCOME PAYMENTS**

 

Where aparticular term of a Transaction extends over the date on which Income is paidin respect of any Purchased Loan subject to that Transaction, such Income shallbe the property of Buyer. Notwithstanding the foregoing, and provided noDefault has occurred and is continuing, Buyer agrees that Sellers shall beentitled to receive an amount equal to all Income received in respect of thePurchased Loans, whether by Buyer, Custodian or any servicer or any otherPerson, which is not otherwise received by Sellers, to the full extent it wouldbe so entitled if the Purchased Loans had not been sold to Buyer; providedthat any Income received by Sellers while the related Transaction isoutstanding shall be deemed to be held by Sellers solely in trust for Buyerpending the repurchase on the related Repurchase Date.  Provided no Default has occurred, Buyershall, as the parties may agree with respect to any Transaction (or, in theabsence of any such agreement, as Buyer shall reasonably determine in its solediscretion), on the Repurchase Date following the date any Income is receivedby Buyer (or a servicer on its behalf) either (i) transfer (or permit theservicer to transfer) to Sellers such Income with respect to any PurchasedLoans subject to such Transaction, or (ii) if a Margin Deficit then exists,apply the Income payment to reduce the amount, if any, to be transferred toBuyer by Sellers upon termination of such Transaction.  Buyer shall not be obligated to take anyaction pursuant to the preceding sentences (A) to the extent that such actionwould result in the creation of a Margin Deficit, unless prior thereto orsimultaneously therewith Sellers transfer to Buyer cash or Additional PurchasedLoans sufficient to eliminate such Margin Deficit, or (B) if an Event ofDefault with respect to any Seller has occurred and is then continuing at thetime such Income is paid.

 

**8.****             SECURITY INTEREST;BUYER’S APPOINTMENT AS ATTORNEY-IN-FACT**

 

## (a)           EachSeller and Buyer intend that the Transactions hereunder be sales to Buyer ofthe Purchased Loans and not loans from Buyer to any Seller secured by thePurchased Loans.  However, in order topreserve Buyer’s rights under this Agreement in the event that a court or

 

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## other forum recharacterizes the Transactionshereunder as other than sales, and as security for each Seller’s performance ofall of its Obligations, each Seller hereby grants Buyer a fully perfected firstpriority security interest in the following property, whether now existing orhereafter acquired: (i) all Purchased Loans identified on a Transaction Noticedelivered by any Seller to the Buyer and the Custodian from time to time, (ii)all Loan Documents, including without limitation all promissory notes, and allRecords, and any other collateral pledged or otherwise relating to suchPurchased Loans, together with all files, material documents, instruments,surveys (if available), certificates, correspondence, appraisals, computerrecords, computer storage media, Loan accounting records and other books andrecords relating thereto, (iii) all mortgage guaranties and insurance (issuedby governmental agencies or otherwise) and any mortgage insurance certificateor other document evidencing such mortgage guaranties or insurance relating toany Purchased Loans and all claims and payments thereunder, (iv) all otherinsurance policies and insurance proceeds relating to any Purchased Loans orthe related Mortgaged Property, (v) all Interest Rate Protection Agreementsrelating to any or all of the foregoing, (vi) any purchase agreements or otheragreements or contracts relating to or constituting any or all of theforegoing, (vii) all purchase or take-out commitments relating to orconstituting any or all of the foregoing, (viii) all “accounts”, “chattel paper”,“commercial tort claims”, “deposit accounts”, “documents,” “equivalent”, “generalintangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letterof credit rights”, and “securities’ accounts” as each of those terms is definedin the Uniform Commercial Code and all cash and Cash Equivalents and allproducts and proceeds relating to or constituting any or all of the foregoing,(ix) Sellers’ interests under any Escrow Letters and Insured Closing Letterswith respect to any Purchased Loans, (x) all interests in real property ownedby the Sellers or collateralizing any Loans, and (xi) any and all replacements,substitutions, distributions on or proceeds of any or all of the foregoing(collectively the “Purchased Items”). Each Seller acknowledges andagrees that its rights with respect to the Purchased Items (including withoutlimitation, any security interest Sellers may have in the Purchased Loans andany other collateral granted by Sellers to Buyer pursuant to any otheragreement) are and shall continue to be at all times junior and subordinate tothe rights of Buyer hereunder.

##  

## (b)           Atany time and from time to time, upon the written request of the Buyer, and atthe sole expense of the Sellers, the Sellers will promptly and duly execute anddeliver, or will promptly cause to be executed and delivered, such furtherinstruments and documents and take such further action as the Buyer mayreasonably request for the purpose of obtaining or preserving the full benefitsof this Agreement and of the rights and powers herein granted, including,without limitation, the filing of any financing or continuation statementsunder the Uniform Commercial Code in effect in any jurisdiction with respect tothe Purchased Items and the liens created hereby.  The Sellers also hereby authorizes the Buyerto file any such financing or continuation statement without the signature ofthe Sellers to the extent permitted by applicable law. A carbon, photographicor other reproduction of this Agreement shall be sufficient as a financingstatement for filing in any jurisdiction. This Agreement shall constitute a security agreement under applicablelaw.

##  

## (c)           EachSeller agrees that it shall not (i) change the location of its chief executiveoffice/chief place of business from that specified in Section 12(l) hereof,(ii) change its name, identity or corporate structure (or the equivalent) orchange the location where it maintains its records with respect to thePurchased Items, or (iii) reincorporate or reorganize under the laws of

 

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## another jurisdiction unless it shall havegiven the Buyer at least 30 days prior written notice thereof and shall havedelivered to the Buyer all Uniform Commercial Code financing statements andamendments thereto as the Buyer shall request and taken all other actionsdeemed reasonably necessary by the Buyer to continue its perfected status inthe Purchased Items with the same or better priority.

##  

## (d)           EachSeller hereby irrevocably constitutes and appoints Buyer and any officer oragent thereof, with full power of substitution, as its true and lawfulattorney-in-fact with full irrevocable power and authority in the place andstead of such Seller and in the name of such Seller or in its own name, fromtime to time in Buyer’s discretion, for the purpose of carrying out the termsof this Agreement, including without limitation, protecting, preserving andrealizing upon the Purchased Items, to take any and all appropriate action andto execute 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 Purchased Items, to filesuch financing statement or statements relating to the Purchased Loans and thePurchased Items without such Seller’s signature thereon as Buyer at its optionmay deem appropriate, and, without limiting the generality of the foregoing,Seller hereby gives Buyer the power and right, on behalf of such Seller,without assent by, but with notice to, such Seller, if an Event of Defaultshall have occurred and be continuing, to do the following:

##  

### (i)       inthe name of such Seller, or in its own name, or otherwise, to take possessionof and endorse and collect any checks, drafts, notes, acceptances or otherinstruments for the payment of moneys due with respect to any Purchased Loansand to file any claim or to take any other action or proceeding in any court oflaw or equity or otherwise deemed appropriate by Buyer for the purpose ofcollecting any and all such moneys due with respect to any Purchased Loanswhenever payable;

###  

### (ii)      topay or discharge taxes and Liens levied or placed on or threatened against thePurchased Loans;

###  

### (iii)     (A)to direct any party liable for any payment under any Purchased Loans to makepayment of any and all moneys due or to become due thereunder directly to Buyeror as Buyer shall direct; (B) to ask or demand for, collect, receive payment ofand receipt for, any and all moneys, claims and other amounts due or to becomedue at any time in respect of or arising out of any Purchased Loans; (C) tosign and endorse any invoices, assignments, verifications, notices and otherdocuments in connection with any Purchased Loans; (D) to commence and prosecuteany suits, actions or proceedings at law or in equity in any court of competentjurisdiction to collect the Purchased Loans or any proceeds thereof and toenforce any other right in respect of any Purchased Loans; (E) to defend anysuit, action or proceeding brought against Seller with respect to any PurchasedLoans; (F) to settle, compromise or adjust any suit, action or proceedingdescribed in clause (E) above and, in connection therewith, to give suchdischarges or releases as Buyer may deem appropriate; and (G) generally, tosell, transfer, pledge and make any agreement with respect to or otherwise dealwith any Purchased Loans as fully and completely as though Buyer were theabsolute owner thereof for all purposes, and to do, at Buyer’s option andSeller’s expense, at any time, and from time to time, all acts and things whichBuyer deems necessary to protect,

 

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### preserve or realize upon the Purchased Loansand the Purchased Items and Buyer’s Liens thereon and to effect the intent ofthis Agreement, all as fully and effectively as Seller might do.

###  

Each Sellerhereby ratifies all that said attorneys shall lawfully do or cause to be doneby virtue hereof.  This power of attorneyis a power coupled with an interest and shall be irrevocable.

 

Each Selleralso authorizes Buyer, if an Event of Default shall have occurred, from time totime, to execute, in connection with any sale provided for in Section 19 hereof,any endorsements, assignments or other instruments of conveyance or transferwith respect to the Purchased Loans.

 

## (e)           Thepowers conferred on Buyer hereunder are solely to protect Buyer’s interests inthe Purchased Loans and shall not impose any duty upon it to exercise any suchpowers.  Buyer shall be accountable onlyfor amounts that it actually receives as a result of the exercise of suchpowers, and neither it nor any of its officers, directors, employees or agentsshall be responsible to Seller for any act or failure to act hereunder, exceptfor its or their own gross negligence or willful misconduct.

##  

## (f)            Ifthe Seller fails to perform or comply with any of its agreements contained inthe Program Documents and the Buyer may itself perform or comply, or otherwisecause performance or compliance, with such agreement, the reasonableout-of-pocket expenses of the Buyer incurred in connection with suchperformance or compliance, together with interest thereon at a rate per annumequal to the Post-Default Rate, shall be payable by the Seller to the Buyer ondemand and shall constitute Obligations.

##  

## (g)           TheBuyer’s duty with respect to the custody, safekeeping and physical preservationof the Purchased Items in its possession, under Section 9-207 of the UniformCommercial Code or otherwise, shall be to deal with it in the same manner asthe Buyer deals with similar property for its own account. Neither the Buyernor any of its directors, officers or employees shall be liable for failure todemand, collect or realize upon all or any part of the Purchased Items or forany delay in doing so or shall be under any obligation to sell or otherwisedispose of any Purchased Items upon the request of the Seller or otherwise.

##  

## (h)           Allauthorizations and agencies herein contained with respect to the PurchasedItems are irrevocable and powers coupled with an interest.

 

**9.****             CONDITIONSPRECEDENT**

 

## (a)           Asconditions precedent to the initial Transaction, Buyer shall have received onor before the date on which such initial Transaction is consummated thefollowing, in form and substance satisfactory to Buyer and duly executed byeach party thereto (as applicable):

##  

### (i)       ProgramDocuments. The Program Documents duly executed and delivered by the Sellerthereto and being in full force and effect, free of any modification, breach orwaiver.

 

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### (ii)      OrganizationalDocuments.  A good standingcertificate and certified copies of the charter and by-laws (or equivalentdocuments) of each Seller, in each case dated as of a recent date, but in noevent more than ten (10) days prior to the date of such initial Transaction andof all corporate or other authority for the related Seller with respect to theexecution, delivery and performance of the Program Documents and each otherdocument to be delivered by the related Seller from time to time in connectionherewith (and the Buyer may conclusively rely on such certificate until itreceives notice in writing from the Seller to the contrary).

###  

### (iii)     IncumbencyCertificate.  An incumbencycertificate of the secretary of each Seller certifying the names, truesignatures and titles of Seller’s representatives duly authorized to requestTransactions hereunder and to execute the Program Documents and the otherdocuments to be delivered thereunder;

###  

### (iv)     LegalOpinion.  A legal opinion of counselto the Sellers, substantially in the form attached hereto as Exhibit C.

###  

### (v)      Filings,Registrations, Recordings. (i)  Anydocuments (including, without limitation, financing statements) required to befiled, registered or recorded in order to create, in favor of the Buyer, aperfected, first-priority security interest in the Purchased Items, subject tono Liens other than those created hereunder, shall have been properly preparedand executed for filing (including the applicable county(ies) if the Buyerdetermines such filings are necessary in its reasonable discretion),registration or recording in each office in each jurisdiction in which suchfilings, registrations and recordations are required to perfect suchfirst-priority security interest; and (ii) UCC lien searches, dated as of arecent date, in no event more than 14 days prior to the date of such initialTransaction, in such jurisdictions as shall be applicable to the Seller and thePurchased Items, the results of which shall be satisfactory to the Buyer.

###  

### (vi)     Feesand Expenses. The Buyer shall have received all fees and expenses requiredto be paid by the Sellers on or prior to the initial Purchase Date, which feesand expenses may be netted out of any purchase proceeds paid by the Buyerhereunder.

###  

### (vii)    FinancialStatements. The Buyer shall have received the financial statementsreferenced in Section 12(b).

###  

### (viii)   UnderwritingGuidelines. The Buyer and the Sellers shall have agreed upon the currentUnderwriting Guidelines for Loans and the Buyer shall have received a copythereof certified by a Responsible Officer of each Seller.

###  

### (ix)     Consents,Licenses, Approvals, etc. The Buyer shall have received copies certified byeach related Seller of all consents, licenses and approvals, if any, requiredin connection with the execution, delivery and performance by each relatedSeller of, and the validity and enforceability of, the Loan Documents, whichconsents, licenses and approvals shall be in full force and effect.

###  

### (x)      Insurance.The Buyer shall have received evidence in form and substance

 

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### satisfactory to the Buyer showing complianceby the Sellers as of such initial Purchase Date with Section 13(x) hereof.

 

### (xi)     Reserved.

###  

### (xii)    OtherDocuments. The Buyer shall have received such other documents as the Buyeror its counsel may reasonably request.

###  

## (b)           Theobligation of Buyer to enter into each Transaction pursuant to this Agreement(including the initial Transaction) is subject to the following furtherconditions precedent, both immediately prior to any Transaction and also aftergiving effect thereto and to the intended use thereof:

##  

### (i)       NoDefault or Event of Default shall have occurred and be continuing.

###  

### (ii)      Bothimmediately prior to entering into such Transaction and also after givingeffect thereto and to the intended use of the proceeds thereof, therepresentations and warranties made by the Seller in Section 12 and Schedule 1hereof, and in each of the other Program Documents, shall be true and completeon and as of the Purchase Date in all material respects (in the case of therepresentations and warranties in Section 12(v), 12(w) and Schedule 1, solelywith respect to Loans which have not been repurchased by Seller) with the sameforce and effect as if made on and as of such date (or, if any suchrepresentation or warranty is expressly stated to have been made as of aspecific date, as of such specific date). At the request of the Buyer, theBuyer shall have received an officer’s certificate signed by a ResponsibleOfficer of the related Seller certifying as to the truth and accuracy of theabove, which certificate shall specifically include a statement that therelated Seller is in compliance with all governmental licenses andauthorizations and is qualified to do business and in good standing in allrequired jurisdictions.

###  

### (iii)     Thethen aggregate outstanding Purchase Price for all Purchased Loans, when addedto the Purchase Price for the requested Transaction, shall not exceed theMaximum Aggregate Purchase Price.

###  

### (iv)     Subjectto the Buyer’s right to perform one or more Due Diligence Reviews pursuant toSection 44 hereof, the Buyer shall have completed its Due Diligence Review ofthe Loan Documents for each Purchase and such other documents, records,agreements, instruments, Mortgaged Properties or information relating to suchPurchases as the Buyer in its reasonable discretion deems appropriate to reviewand such review shall be satisfactory to the Buyer in its reasonablediscretion.

###  

### (v)      Buyeror its designee shall have received on or before the day of a Transaction withrespect to any Purchased Loans (unless otherwise specified in this Agreement) thefollowing, in form and substance satisfactory to Buyer and (if applicable) dulyexecuted:

###  

#### (a) TheTransaction Notice and Loan Schedule with respect to such

 

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#### PurchasedLoans, delivered pursuant to Section 3(a);

####  

#### (b) The TrustReceipt with respect to such Purchased Loans, with the Loan Schedule attached;and

####  

#### (c) Suchcertificates, customary opinions of counsel or other documents as Buyer mayreasonably request, provided that such opinions of counsel shall not berequired routinely in connection with each Transaction but shall only berequired from time to time as deemed necessary by Buyer in its commerciallyreasonable judgment.

####  

### (vi)     Reserved.

###  

### (vii)    Withrespect to any Loan that was funded in the name of or acquired by a QualifiedOriginator which is an Affiliate of the Sellers, the Buyer may, in its solediscretion, require the Sellers to provide evidence sufficient to satisfy theBuyer that such Loan was acquired in a legal sale, including without limitation,an opinion, in form and substance and from an attorney, in both cases,acceptable to the Buyer in its sole discretion, that such Loan was acquired ina legal sale.

###  

### (viii)   Noneof the following shall have occurred and/or be continuing:

###  

##### (i)            anevent or events resulting in the inability of the Buyer to finance itspurchases of assets with traditional counterparties at rates which would havebeen reasonable prior to the occurrence of such event or events or a materialadverse change in the financial condition of the Buyer which affects (or canreasonably be expected to affect) materially and adversely the ability of theBuyer to fund its obligations under or otherwise comply with the terms of thisAgreement; or

#####  

##### (ii)           anyother event beyond the control of the Buyer which the Buyer reasonablydetermines may result in the Buyer’s inability to perform its obligations underthis Agreement including, without limitation, acts of God, strikes, lockouts,riots, acts of war or terrorism, epidemics, nationalization, expropriation,currency restrictions, fire, communication line failures, computer viruses,power failures, earthquakes, or other disasters of a similar nature to theforegoing.

#####  

### (ix)     Ifany Loans to be purchased hereunder were acquired by the Sellers, such Loansshall conform to the Underwriting Guidelines or the Buyer shall have receivedUnderwriting Guidelines for such Loans acceptable to the Buyer in itsdiscretion.

###  

### (x)      TheBuyer shall have received all information requested from the Sellers relatingto Interest Rate Protection Agreements pursuant to Section 13(aa), and theBuyer shall have determined that such Interest Rate Protection Agreementsadequately protect the Sellers from interest rate fluctuations.

 

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### (xi)     Ifrequested by the Buyer, the Buyer shall have received, no later than 10:00 a.m.three (3) days prior to the requested Purchase Date, an Instruction Letter,executed by the Sellers, with the related Servicing Agreement attached thereto,which such Servicing Agreement shall be in form and substance acceptable toBuyer.

###  

### (xii)    In no event shall Buyer be required to enter into (A) more than three (3)Transactions in any one Business Day, nor (B) any Transaction whose PurchasePrice would be less than $1,000,000.

###  

### (xiii)   Buyershall have determined that all actions necessary or, in the opinion of Buyer,desirable to maintain the Buyer’s perfected interest in the Purchased Loans andother Purchased Items have been taken, including, without limitation, dulyexecuted and filed Uniform Commercial Code financing statements on Form UCC-1.

###  

### (xiv)   Sellersshall have paid to Buyer all fees and expenses owed to Buyer in accordance withthis Agreement and any other Program Document.

###  

### (xv)    Buyeror its designee shall have received any other documents reasonably requested byBuyer.

###  

### (xvi)   Thereis no Margin Deficit at the time immediately prior to entering into a newTransaction.

###  

### (xvii)  Untilsuch time as lien searches with respect to each Seller are delivered to Buyer’scounsel, and such lien searches are in substance satisfactory to Buyer, therelevant Seller shall deliver to Buyer an officer’s certificate, in which suchSeller certifies that the Loans sold to Buyer in connection with suchTransaction are not subject to any Lien; provided that if any such Loan issubject to a Lien, Seller shall instead comply with (xviii) below.

###  

### (xviii)Ifany Loan sold to Buyer in connection with such Transaction is subject to a Lienimmediately prior to the Purchase Date, the related secured party (includingany party that has a precautionary security interest in a Loan) shall havereleased all of its right, title and interest in, to and under such Loan(including, without limitation, any security interest that such secured partyor secured party’s agent may have by virtue of its possession, custody orcontrol thereof), and Seller shall evidence such release by delivering to Buyerand to Custodian (as part of the Mortgage File) a duly executed SecurityRelease Certification and filed Uniform Commercial Code termination statementsin respect of any Uniform Commercial Code filings made in respect of suchLoan.  

 

**10.****          RELEASE OF PURCHASEDLOANS**

 

Upon timelypayment in full of the Repurchase Price and all other Obligations (if any) thenowing with respect to a Purchased Loan, unless a Default or Event of Defaultshall have occurred and be continuing, then (a) Buyer shall be deemed to haveterminated any security interest that Buyer may have in such Purchased Loan andany Purchased Items solely related to such Purchased Loan and (b) with respectto such Purchased Loan, Buyer shall direct Custodian

 

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to releasesuch Purchased Loan and any Purchased Items solely related to such PurchasedLoan to Sellers unless such release and termination would give rise to orperpetuate a Margin Deficit.  Except asset forth in Section 16, Sellers shall give at least one (1) Business Day’sprior written notice to Buyer if such repurchase shall occur on any date otherthan the Repurchase Date in Section 3(i).

 

If suchrelease and termination gives rise to or perpetuates a Margin Deficit, Buyershall notify Sellers of the amount thereof and Sellers shall thereupon satisfythe Margin Call in the manner specified in Section 6.

 

**11.****          RELIANCE**

 

With respectto any Transaction, Buyer may conclusively rely upon, and shall incur noliability to Sellers in acting upon, any request or other communication thatBuyer reasonably believes to have been given or made by a person authorized toenter into a Transaction on Sellers’ behalf.

 

**12.****          REPRESENTATIONS ANDWARRANTIES**

 

Each Sellerrepresents and warrants to the Buyer that throughout the term of thisAgreement:

 

## (a)           Existence.  Each Seller is a corporation duly organized,validly existing and in good standing under the laws of the jurisdiction of itsorganization, (b) has all requisite corporate or other power, and has allgovernmental licenses, authorizations, consents and approvals, necessary to ownits assets and carry on its business as now being or as proposed to beconducted, except where the lack of such licenses, authorizations, consents andapprovals would not be reasonably likely to have a Material Adverse Effect, (c)is qualified to do business and is in good standing in all other jurisdictionsin which the nature of the business conducted by it makes such qualificationnecessary, except where failure so to qualify would not be reasonably likely(either individually or in the aggregate) to have a Material Adverse Effect,and (d) is in compliance in all material respects with all Requirements of Law.

##  

## (b)           FinancialCondition.  The Sellers haveheretofore furnished to the Lender a copy of the Annual Report of AamesInvestment on Form 10-K which includes audited consolidated financialstatements at and for the fiscal year ended December 31, 2005 with the opinionthereon of Ernst & Young LLP.  Allsuch financial statements are materially complete and correct and fairly presentthe consolidated financial condition of Aames Investment and its Subsidiariesand the consolidated results of their operations for the fiscal year ended onsaid date, all in accordance with GAAP applied on a consistent basis.  Aames Investment has heretofore furnished tothe Lender a copy of the Quarterly Report of Aames Investment on Form 10-Qwhich includes unaudited consolidated financial statements at and for thefiscal quarter ended September 30, 2005. All such financial statements are materially complete and correct andfairly present the consolidated financial condition of Aames Investment and itsSubsidiaries and the consolidated results of their operations for the fiscalquarter ended on said date, all in accordance with GAAP applied on a consistentbasis. Since December 31, 2005 there has been no development or event nor anyprospective development or event which has had or should

 

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reasonably be expected to have a Material Adverse Effect.

 

## (c)           Litigation.  There are no actions, suits, arbitrations,investigations or proceedings pending or, to its knowledge, threatened againstany Seller or any of its Subsidiaries or Affiliates or affecting any of theproperty thereof before any Governmental Authority, (i) as to whichindividually or in the aggregate there is a reasonable likelihood of an adversedecision which would be reasonably likely to have a Material Adverse Effect(except as set forth on Schedule 5 hereto) or (ii) which questions the validityor enforceability of any of the Program Documents or any action to be taken inconnection with the transactions contemplated thereby and there is a reasonablelikelihood of a Material Adverse Effect or adverse decision.

##  

## (d)           NoBreach.  Neither (a) the executionand delivery of the Program Documents, or (b) the consummation of thetransactions therein contemplated in compliance with the terms and provisionsthereof will conflict with or result in a breach of the charter or by-laws ofthe Seller, or any applicable law, rule or regulation, or any order, writ,injunction or decree of any Governmental Authority, or other material agreementor instrument to which the Seller, or any of its Subsidiaries, is a party or bywhich any of them or any of their property is bound or to which any of them ortheir property is subject, or constitute a default under any such materialagreement or instrument, or (except for the Liens created pursuant to thisAgreement) result in the creation or imposition of any Lien upon any propertyof the Seller or any of its Subsidiaries, pursuant to the terms of any suchagreement or instrument.

##  

## (e)           Action.  The Seller has all necessary corporate orother power, authority and legal right to execute, deliver and perform itsobligations under each of the Program Documents to which it is a party; theexecution, delivery and performance by the Seller of each of the ProgramDocuments to which it is a party has been duly authorized by all necessarycorporate or other action on its part; and each Program Document has been dulyand validly executed and delivered by the Seller and constitutes a legal, validand binding obligation of the Seller, enforceable against the Seller inaccordance with its terms.

##  

## (f)            Approvals.  No authorizations, approvals or consents of,and no filings or registrations with, any Governmental Authority, or any otherPerson, are necessary for the execution, delivery or performance by the Sellerof the Program Documents to which it is a party or for the legality, validityor enforceability thereof, except for filings and recordings in respect of theLiens created pursuant to this Agreement.

##  

## (g)           Taxes.  The Seller and its Subsidiaries have filedall Federal income tax returns and all other material tax returns that arerequired to be filed by them and have paid all taxes due pursuant to suchreturns or pursuant to any assessment received by any of them, except for anysuch taxes, if any, that are being appropriately contested in good faith byappropriate proceedings diligently conducted and with respect to which adequatereserves have been provided. The charges, accruals and reserves on the books ofthe Seller and its Subsidiaries in respect of taxes and other governmentalcharges are, in the opinion of the Seller, adequate. Any taxes, fees and othergovernmental charges payable by Seller in connection with a Transaction and theexecution and delivery of the Program Documents have been paid.

##  

## (h)           InvestmentCompany Act.  Neither the Seller norany of its Subsidiaries is an

 

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## “investment company”, or a company “controlled”by an “investment company”, within the meaning of the Investment Company Act of1940, as amended. The Seller is not subject to any Federal or state statute orregulation which limits its ability to incur indebtedness.

##  

## (i)            NoLegal Bar.  The execution, deliveryand performance of this Agreement, the other Program Documents, the saleshereunder and the use of the proceeds thereof will not violate any Requirementof Law or Contractual Obligation of the Seller or of any of its Subsidiariesand will not result in, or require, the creation or imposition of any Lien(other than the Liens created hereunder) on any of its or their respectiveproperties or revenues pursuant to any such Requirement of Law or ContractualObligation.

##  

## (j)            Compliancewith Law.  No practice, procedure orpolicy employed or proposed to be employed by Seller in the conduct of itsbusiness violates any law, regulation, judgment, agreement, regulatory consent,order or decree applicable to it which, if enforced, would result in either aMaterial Adverse Effect with respect to Seller.

##  

## (k)           NoDefault.  Neither the Seller nor anyof its Subsidiaries is in default under or with respect to any of itsContractual Obligations in any respect which should reasonably be expected tohave a Material Adverse Effect. No Default or Event of Default has occurred andis continuing.

##  

## (l)            ChiefExecutive Office; Chief Operating Office. The Sellers’ chief executive office and chief operating office on the EffectiveDate is located at 350 South Grand Avenue, Los Angeles, California 90071.

##  

## (m)          Locationof Books and Records.  The locationwhere the Seller keeps its books and records including all computer tapes andrecords relating to the Purchased Items is its chief executive office or chiefoperating office or the offices of the Custodian.

##  

## (n)           Trueand Complete Disclosure.  Theinformation, reports, financial statements, exhibits and schedules furnished inwriting by or on behalf of the Seller or any of its Subsidiaries to the Buyerin connection with the negotiation, preparation or delivery of this Agreementand the other Program Documents or included herein or therein or deliveredpursuant hereto or thereto, when taken as a whole, do not contain any untrue statementof material fact or omit to state any material fact necessary to make thestatements herein or therein, in light of the circumstances under which theywere made, not misleading. All written information furnished after the datehereof by or on behalf of the Seller or any of its Subsidiaries to the Buyer inconnection with this Agreement and the other Program Documents and thetransactions contemplated hereby and thereby will be true, complete andaccurate in every material respect, or (in the case of projections) based onreasonable estimates, on the date as of which such information is stated orcertified. There is no fact known to a Responsible Officer that, after dueinquiry, could reasonably be expected to have a Material Adverse Effect that hasnot been disclosed herein, in the other Program Documents or in a report,financial statement, exhibit, schedule, disclosure letter or other writingfurnished to the Buyer for use in connection with the transactions contemplatedhereby or thereby.

 

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## (o)           TangibleNet Worth; Liquidity; Ratio of Total Indebtedness to Tangible Net Worth; Ratioof Adjusted Indebtedness to Tangible Net Worth; Profitability.  (a) Aames Investment’s Tangible Net Worth, ona consolidated basis is equal to or greater than $250,000,000 plus 50%of any subsequent additional capital raised in a public or private offering byAames Investment, and (b) the aggregate amount of the Aames Investment’s cashand Cash Equivalents of (1) cash and loans held for sale and investment(excluding securitized mortgage loans) reduced by (2) the sum of amountsoutstanding on revolving warehouse and repurchase facilities, margin on loansheld for sale and investment (excluding securitized mortgage loans) and loansheld for sale and investment which are ineligible to be pledged by AamesInvestment under any of its revolving warehouse and repurchase facilities in anamount equal to not less than $38,000,000. Aames Investments’s ratio of Total Indebtedness to Tangible Net Worth isnot greater than 20:1.  Aames Investment’sratio of Adjusted Indebtedness to Tangible Net Worth is not greater than7:1.  As of the immediately precedingfiscal quarter, Aames Investment’s Net Income before tax, generated over the previoustwo consecutive fiscal quarters, measured on the last day of each such fiscalquarter, was equal to or greater than $1.00.

##  

## (p)           ERISA.Each Plan to which any Seller or its Subsidiaries make direct contributions,and, to the knowledge of the Seller, each other Plan and each MultiemployerPlan, is in compliance in all material respects with, and has been administeredin all material respects in compliance with, the applicable provisions ofERISA, the Code and any other Federal or State law. No event or condition hasoccurred and is continuing as to which the Seller would be under an obligationto furnish a report to the Buyer under Section 13(a)(v) hereof.

##  

## (q)           Licenses.  The Buyer will not be required as a result ofpurchasing the Loans to be licensed, registered or approved or to obtainpermits or otherwise qualify (i) to do business in any state in which itcurrently so required or (ii) under any state or other jurisdiction’s consumerlending, fair debt collection or other applicable state or other jurisdiction’sstatute or regulation.

##  

## (r)            FilingJurisdictions; Relevant States. Schedule 2 sets forth all of the jurisdictions and filing offices inwhich a financing statement should be filed in order for Buyer to perfect itssecurity interest in the Purchased Items. Schedule 3 sets forth all of thestates or other jurisdictions in which the Seller originates Loans in its ownname or through brokers on the date of this Agreement.

##  

## (s)           TrueSales.  Any and all interest of aQualified Originator in, to and under any Mortgage funded in the name of oracquired by such Qualified Originator or seller which is an Affiliate of theSeller has been sold, transferred, conveyed and assigned to the Seller pursuantto a legal sale and such Qualified Originator retains no interest in such Loan,and if so requested by the Buyer, such sale is covered by an opinion of counselto that effect in form and substance acceptable to the Buyer.

##  

## (t)            NoBurdensome Restrictions.  NoRequirement of Law or Contractual Obligation of the Seller or any of itsSubsidiaries has a Material Adverse Effect.

##  

## (u)           Subsidiaries.  All of the Subsidiaries of the Seller at thedate hereof are listed on Schedule 4 to this Agreement.

##  

## (v)           Originationand Acquisition of Loans.  The Loanswere originated or acquired by

 

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## the Seller, and the origination andcollection practices used by the Seller or Qualified Originator, as applicable,with respect to the Loans have been, in all material respects legal, proper,prudent and customary in the residential mortgage loan origination andservicing business, and in accordance with the Underwriting Guidelines. Withrespect to Loans acquired by the Seller, all such Loans are in conformity withthe Underwriting Guidelines.  Each of theLoans complies with the representations and warranties listed in Schedule 1hereto.

##  

## (w)          NoAdverse Selection.  The Seller usedno selection procedures that identified the Loans as being less desirable orvaluable than other comparable Loans owned by the Seller.

##  

## (x)            SellerSolvent; Fraudulent Conveyance.  Asof the date hereof and immediately after giving effect to each Transaction, thefair value of the assets of the Seller is greater than the fair value of theliabilities (including, without limitation, contingent liabilities if and tothe extent required to be recorded as a liability on the financial statementsof the Seller in accordance with GAAP) of the Seller and the Seller is and willbe solvent, is and will be able to pay its debts as they mature and does notand will not have an unreasonably small capital to engage in the business inwhich it is engaged and proposes to engage. Seller does not intend to incur, orbelieve that it has incurred, debts beyond its ability to pay such debts asthey mature. Seller is not contemplating the commencement of insolvency,bankruptcy, liquidation or consolidation proceedings or the appointment of areceiver, liquidator, conservator, trustee or similar official in respect ofSeller or any of its assets. Seller is not transferring any Loans with anyintent to hinder, delay or defraud any of its creditors.

##  

## (y)           NoBroker.  Seller has not dealt withany broker, investment banker, agent, or other person, except for Buyer, whomay be entitled to any commission or compensation in connection with the saleof Purchased Loans pursuant to this Agreement; provided, that if Sellerhas dealt with any broker, investment banker, agent, or other person, exceptfor Buyer, who may be entitled to any commission or compensation in connectionwith the sale of Purchased Loans pursuant to this Agreement, such commission orcompensation shall have been paid in full by Seller.

##  

## (z)            CurrentFinancing Facilities.  All creditfacilities, repurchase facilities or substantially similar facilities ofSellers which are presently in effect are listed on Schedule 5 attached hereto(the “Existing Financing Facilities”) and no defaults or events ofdefault exist thereunder.  Sellers shallgive Buyer prior notification of any amendment to any financial covenant in anysuch Existing Financing Facility or any modification to any Seller’s borrowingcapacity under any such Existing Financing Facility.

##  

## (aa)         InsuredClosing Letter. As of the date hereof and as of the date of each deliveryof a Wet Loan, the Settlement Agent has obtained an Insured Closing Letter,closing protection letter or similar authorization letter from a nationallyrecognized title insurance company approved by the Buyer (or, with respect toany Mortgaged Property located in the State of New York, a comparable letter ascustomarily provided for closings occurring in such state), copies of whichshall be delivered by the Seller to the Custodian prior to the PurchaseDate.  Among other things, the InsuredClosing Letter covers any losses occurring due to the fraud, dishonesty ormistakes of the closing agent.  TheInsured Closing Letter inures to the benefit of, and the rights thereunder maybe enforced by, the loan originator and its successors and assigns, includingthe

 

37

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## Buyer.

 

## (bb)         EscrowAgreement.  As of the date hereof andas of the date of each delivery of a Wet Loan, the Settlement Agent hasexecuted an escrow agreement or letter stating that in the event of a Rescissionof or if for any reason the Loan fails to fund on a given day, the partyconducting the closing is holding all funds which would have been disbursed onbehalf of the Mortgagor as agent for the benefit of the Buyer and such fundsshall be redeposited in the Disbursement Account for benefit of the Buyer notlater than one Business Day after the date of Rescission or other failure ofthe Loan to fund on a given day.  SuchEscrow Agreement inures to the benefit of, and the rights thereunder may beenforced by, the loan originator and its successors and assigns, including theBuyer.

##  

**13.****          COVENANTS OF SELLER**

 

Each Sellercovenants and agrees with Buyer that during the term of this Agreement:

 

## (a)           FinancialStatements and Other Information; Financial Covenants.

##  

Sellers shalldeliver to the Buyer:

 

### (i)       Assoon as available and in any event within 30 days after the end of the firsttwo months of any quarterly fiscal period, the consolidated balance sheets ofthe Seller and each of the consolidated Subsidiaries of the Seller as at theend of such month and the related unaudited consolidated statements of incomeand retained earnings and of cash flows for the Seller and the consolidatedSubsidiaries of Seller for such month and the portion of the fiscal year throughthe end of such month. Such consolidated financial statements shall fairlypresent the consolidated financial condition and results of operations of theSeller and its Subsidiaries in accordance with GAAP, consistently applied, asat the end of, and for, such month (subject to normal year-end auditadjustments);

###  

### (ii)      Assoon as available and in any event within 45 days after the end of each of thefirst three quarterly fiscal periods of each fiscal year of the Seller, acertification in the form of Exhibit A together with the consolidatedbalance sheets of the Seller and its consolidated Subsidiaries as at the end ofsuch period and the related unaudited consolidated statements of income andretained earnings and of cash flows for the Seller and the consolidatedSubsidiaries of Seller for such period and the portion of the fiscal yearthrough the end of such period, accompanied by a certificate of a ResponsibleOfficer of the Seller, which certificate shall state that said consolidatedfinancial statements fairly present the consolidated financial condition andresults of operations of the Seller and the Subsidiaries of the Seller inaccordance with GAAP, consistently applied, as at the end of, and for, suchperiod (subject to normal year-end audit adjustments);

###  

### (iii)     Assoon as available and in any event within 90 days after the end of each fiscalyear of the Seller, the consolidated balance sheets of the Seller and itsconsolidated Subsidiaries as at the end of such fiscal year and the relatedconsolidated statements of income and retained earnings and of cash flows forthe Seller and its

 

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### consolidated Subsidiaries for such year,setting forth in each case in comparative form the figures for the previous year,accompanied by an opinion thereon of independent certified public accountantsof recognized national standing, which opinion shall not be qualified as toscope of audit or going concern and shall state that said consolidatedfinancial statements fairly present the consolidated financial condition andresults of operations of the Seller and its consolidated Subsidiaries at theend of, and for, such fiscal year in accordance with GAAP, and a certificate ofsuch accountants stating that, in making the examination necessary for theiropinion, they obtained no knowledge, except as specifically stated, of anyDefault or Event of Default;

###  

### (iv)     Fromtime to time such other information regarding the financial condition,operations, or business of the Seller as the Buyer may reasonably request; and

###  

### (v)      Assoon as reasonably possible, and in any event within thirty (30) days after aResponsible Officer knows, or with respect to any Plan or Multiemployer Plan towhich the Seller, or any Subsidiaries of the Seller makes direct contributions,has reason to believe, that any of the events or conditions specified belowwith respect to any Plan or Multiemployer Plan has occurred or exists, astatement signed by a senior financial officer of the Seller setting forth detailsrespecting such event or condition and the action, if any, that the Seller orits ERISA Affiliate proposes to take with respect thereto (and a copy of anyreport or notice required to be filed with or given to PBGC by the Seller or anERISA Affiliate with respect to such event or condition):

###  

###### a.             anyreportable event, as defined in Section 4043(b) of ERISA and the regulationsissued thereunder, with respect to a Plan, as to which PBGC has not byregulation or otherwise waived the requirement of Section 4043(a) of ERISA thatit be notified within thirty (30) days of the occurrence of such event(provided that a failure to meet the minimum funding standard of Section 412 ofthe Code or Section 302 of ERISA, including, without limitation, the failure tomake on or before its due date a required installment under Section 412(m) ofthe Code or Section 302(e) of ERISA, shall be a reportable event regardless ofthe issuance of any waivers in accordance with Section 412(d) of the Code); andany request for a waiver under Section 412(d) of the Code for any Plan;

######  

###### b.             thedistribution under Section 4041(c) of ERISA of a notice of intent to terminateany Plan or any action taken by the Seller or an ERISA Affiliate to terminateany Plan;

######  

###### c.             theinstitution by PBGC of proceedings under Section 4042 of ERISA for thetermination of, or the appointment of a trustee to administer, any Plan, or thereceipt by the Seller or any ERISA Affiliate of a notice from a MultiemployerPlan that such action has been taken by PBGC with respect to such MultiemployerPlan;

######  

###### d.             thecomplete or partial withdrawal from a Multiemployer Plan by

 

39

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###### the Seller or any ERISA Affiliate thatresults in liability under Section 4201 or 4204 of ERISA (including theobligation to satisfy secondary liability as a result of a purchaser default)or the receipt by the Seller or any ERISA Affiliate of notice from aMultiemployer Plan that it is in reorganization or insolvency pursuant toSection 4241 or 4245 of ERISA or that it intends to terminate or has terminatedunder Section 4041A of ERISA;

######  

###### e.             theinstitution of a proceeding by a fiduciary of any Multiemployer Plan againstthe Seller or any ERISA Affiliate to enforce Section 515 of ERISA, whichproceeding is not dismissed within 30 days; and

######  

###### f.              theadoption of an amendment to any Plan that, pursuant to Section 401(a)(29) ofthe Code or Section 307 of ERISA, would result in the loss of tax-exempt statusof the trust of which such Plan is a part if the Seller or an ERISA Affiliatefails to timely provide security to such Plan in accordance with the provisionsof said Sections.

######  

The Sellerwill furnish to the Buyer, at the time it furnishes each set of financialstatements pursuant to paragraphs (a)(ii-v) above, a certificate of aResponsible Officer of the Seller to the effect that, to the best of suchResponsible Officer’s knowledge, the Seller during such fiscal period or yearhas observed or performed all of its covenants and other agreements, andsatisfied every material condition, contained in this Agreement and the otherProgram Documents to be observed, performed or satisfied by it, and that suchResponsible Officer has obtained no knowledge of any Default or Event ofDefault except as specified in such certificate (and, if any Default or Eventof Default has occurred and is continuing, describing the same in reasonabledetail and describing the action the Seller has taken or proposes to take withrespect thereto).

 

## (b)           Litigation.  The Seller will promptly, and in any eventwithin seven (7) days after service process on any of the following, give tothe Buyer notice of all legal or arbitrable proceedings affecting the Seller orany of its Subsidiaries that questions or challenges the validity or enforceabilityof any of the Program Documents or as to which there is a reasonable likelihoodof an adverse determination which would result in a Material Adverse Effect.

##  

## (c)           Existence,Etc.  Each of the Seller and itsSubsidiaries will:

##  

### (i)       preserveand maintain its legal existence and all of its material rights, privileges,licenses and franchises (other than Subsidiaries which are not material to thebusiness of the Sellers);

###  

### (ii)      complywith the requirements of all applicable laws, rules, regulations and orders ofGovernmental Authorities (including, without limitation, truth in lending, realestate settlement procedures and all environmental laws) if failure to complywith such requirements would be reasonably likely (either individually or inthe aggregate) to have a Material Adverse Effect;

###  

### (iii)     keepadequate records and books of account, in which complete entries will be madein accordance with GAAP consistently applied;

 

40

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### (iv)     notmove its chief executive office or chief operating office from the addressesreferred to in Section 12(l) unless it shall have provided the Buyer 30 daysprior written notice of such change (other than Subsidiaries which are notmaterial to the business of the Sellers);

###  

### (v)      payand discharge all taxes, assessments and governmental charges or levies imposedon it or on its income or profits or on any of its Property prior to the dateon which penalties attach thereto, except for any such tax, assessment, chargeor levy the payment of which is being contested in good faith and by properproceedings and against which adequate reserves are being maintained; and

###  

### (vi)     permitrepresentatives of the Buyer, during normal business hours upon three (3)Business Days’ prior written notice at a mutually desirable time or at any timeduring the continuance of an Event of Default, to examine, copy and makeextracts from its books and records, to inspect any of its Properties, and todiscuss its business and affairs with its officers, all to the extentreasonably requested by the Buyer.

###  

## (d)           Prohibitionof Fundamental Changes.  Seller shallnot at any time, directly or indirectly, (i) enter into any transaction ofmerger or consolidation or amalgamation, or liquidate, wind up or dissolveitself (or suffer any liquidation, winding up or dissolution) or sell all orsubstantially all of its assets without Buyer’s prior consent; or (ii) form orenter into any partnership, joint venture, syndicate or other combination whichwould have a Material Adverse Effect with respect to Seller.

##  

## (e)           MarginDeficit. If at any time there exists a Margin Deficit, the Seller shallcure the same in accordance with Section 6 hereof.

##  

## (f)            Notices.Seller shall give notice to Buyer promptly in writing of any of the following:

##  

### (i)       Uponthe Seller becoming aware of, and in any event within one (1) Business Dayafter the occurrence of any Default, Event of Default or any event of defaultor default under any Program Document or other material agreement of theSeller;

###  

### (ii)      upon,and in any event within three (3) Business Days after, service of process onthe Seller or any of its Subsidiaries, or any agent thereof for service ofprocess, in respect of any legal or arbitrable proceedings affecting the Selleror any of its Subsidiaries (i) that questions or challenges the validity orenforceability of any of the Program Documents or (ii) in which the amount incontroversy exceeds $1,000,000;

###  

### (iii)     uponthe Seller becoming aware of any default related to any Purchased Items, anyMaterial Adverse Effect and any event or change in circumstances which shouldreasonably be expected to have a Material Adverse Effect;

###  

### (iv)     uponthe Seller becoming aware during the normal course of its business that theMortgaged Property in respect of any Loan or Loans with an aggregate unpaid

 

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### principal balance of at least $1,000,000 hasbeen damaged by waste, fire, earthquake or earth movement, windstorm, flood,tornado or other casualty, or otherwise damaged so as to materially andadversely affect the value of such Loan;

###  

### (v)      uponthe entry of a judgment or decree against the Seller or any of its Subsidiariesin an amount in excess of $1,000,000;

###  

### (vi)     anymaterial change in the insurance coverage required of Seller or any otherPerson pursuant to any Program Document, with copy of evidence of sameattached;

###  

### (vii)    anymaterial dispute, licensing issue, litigation, investigation, proceeding orsuspension between Seller or its Subsidiaries, on the one hand, and anyGovernmental Authority or any other Person; and

###  

### (viii)   anymaterial change in accounting policies or financial reporting practices ofSeller or its Subsidiaries.

###  

Each noticepursuant to this Section 13(f) (other than (vi) above) shall be accompanied bya statement of a Responsible Officer of the Seller, setting forth details ofthe occurrence referred to therein and stating what action the Seller has takenor proposes to take with respect thereto.

 

## (g)           Servicing.  Except as provided in Section 43, the Sellershall not permit any Person other than the Seller to service Loans without theprior written consent of the Buyer, which consent shall not be unreasonablywithheld.

##  

## (h)           UnderwritingGuidelines.  Seller shall not permitany material modifications to be made to the Underwriting Guidelines that willimpact either the Buyer or the Purchased Loans without the prior consent ofBuyer (such consent not to be unreasonably withheld).  Seller agrees to deliver to Buyer copies ofthe Underwriting Guidelines in the event that any changes are made to theUnderwriting Guidelines following the Closing Date.

##  

## (i)            Linesof Business.  Seller shall not engageto any substantial extent in any line or lines of business activity other thanthe businesses generally carried on by it as of the Effective Date.

##  

## (j)            Transactionswith Affiliates.  The Seller will not(i) enter into any transaction, including, without limitation, any purchase,sale, lease or exchange of property or the rendering of any service, with anyAffiliate unless such transaction is (a) pursuant to such Seller’s executiveloan program as approved from time to time by its Board of Directors, (b)otherwise permitted under this Agreement, (c) in the ordinary course of theSellers’ business and (d) upon fair and reasonable terms no less favorable tothe Sellers than it would obtain in a comparable arm’s length transaction witha Person which is not an Affiliate, or (ii) make a payment that is nototherwise permitted by this Section (j) to any Affiliate.

##  

## (k)           Defenseof Title.  Seller warrants and willdefend the right, title and interest of Buyer in and to all Purchased Itemsagainst all adverse claims and demands of all Persons whomsoever.

 

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## (l)            Preservationof Purchased Items. Seller shall do all things necessary to preserve thePurchased Items so that such Purchased Items remain subject to a first priorityperfected security interest hereunder. Without limiting the foregoing, Sellerwill comply with all applicable laws, rules and regulations of any GovernmentalAuthority applicable to Seller or relating to the Purchased Items and cause thePurchased Items to comply with all applicable laws, rules, regulations of anysuch Governmental Authority.  Seller willnot allow any default to occur for which Seller is responsible under anyPurchased Items or any Program Documents and Seller shall fully perform orcause to be performed when due all of its obligations under any Purchased Itemsor the Program Documents.

##  

## (m)          NoAssignment.  Seller shall not sell,assign, transfer or otherwise dispose of, or grant any option with respect to,or pledge, hypothecate or grant a security interest in or lien on or otherwiseencumber (except pursuant to the Program Documents), any of the Purchased Loansor any interest therein, provided that this Section 13(m) shall notprevent any contribution, assignment, transfer or conveyance of Purchased Loansin accordance with the Program Documents.

##  

## (n)           Limitationon Sale of Assets. Sellers shall not convey, sell, lease, assign, transferor otherwise dispose of (collectively, “Transfer”), all or substantially all ofits Property, business or assets (including, without limitation, receivablesand leasehold interests) whether now owned or hereafter acquired or allow anySubsidiary to Transfer substantially all of its assets to any Person; provided,that (a) the Sellers may after prior written notice to the Buyer allow suchaction with respect to any Subsidiary which is not a material part of theSellers’ overall business operations and (b) the foregoing shall not prohibitthe Sellers from securitizing or selling any Loan.

##  

## (o)           Limitationon Distributions.  Without the Buyer’sconsent, the Sellers shall not make any payment on account of, or set apartassets for a sinking or other analogous fund for the purchase, redemption,defeasance, retirement or other acquisition of, any stock or senior orsubordinate debt of any Seller, whether now or hereafter outstanding, or makeany other distribution in respect thereof, either directly or indirectly,whether in cash or property or in obligations of any Seller.

##  

## (p)           Maintenanceof Liquidity.  The Sellers shallinsure that, as of the end of each calendar month, the difference between (1)the aggregate amount of Aames Investment’s cash, Cash Equivalents and loansheld for sale and investment (excluding securitized mortgage loans), reduced by(2) the sum of amounts outstanding on Aames Investment’s revolving warehouseand repurchase facilities, margin on loans held by Aames Investment for saleand investment (excluding securitized mortgage loans) and loans held by AamesInvestment for sale and investment which are ineligible to be pledged by AamesInvestment under any of its revolving warehouse and repurchase facilities shallbe equal to not less than $38,000,000.  

##  

## (q)           Maintenanceof Tangible Net Worth.  The Sellersshall not permit the Tangible Net Worth of Aames Investment at any time to beless than the sum of (1) $250,000,000, plus (2) 50% of any additionalsubsequent additional capital raised in a public or private offering by AamesInvestment.

 

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## (r)            Maintenanceof Profitability.  The Sellers shallnot permit Aames Investment’s Net Income before tax, generated over any twoconsecutive fiscal quarters, measured on the last day of each fiscal quarter,to be less than $1.00.

##  

## (s)           Maintenanceof Ratio of Total Indebtedness to Tangible Net Worth.  The Sellers shall not permit Aames Investment’sratio of Total Indebtedness to Tangible Net Worth at any time to be greaterthan 20.00 to 1.00.

##  

## (t)            Maintenanceof Ratio of Adjusted Indebtedness to Tangible Net Worth.  The Sellers shall not permit Aames Investment’sratio of Adjusted Indebtedness to Tangible Net Worth at any time to be greaterthan 7 to 1.00.

##  

## (u)           RestrictedPayments.  The Seller shall not makeany Restricted Payments following an Event of Default.

##  

## (v)           ServicingTransmission.  The Seller shallprovide to the Buyer on a monthly basis no later than 11:00 a.m. New York Citytime two (2) Business Days prior to each Repurchase Date (or such other dayrequested by Buyer) (i) the Servicing Transmission, on a loan-by-loan basis andin the aggregate, with respect to the Loans serviced hereunder by the Sellerwhich were funded prior to the first day of the current month, summarizing theSeller’s delinquency and loss experience with respect to Loans serviced by theSeller (including, in the case of the Loans, the following categories: current,30-59, 60-89, 90-119, 120-180 and 180+) and (ii) any other informationreasonably requested by the Buyer with respect to the Loans.

##  

## (w)          NoAmendment or Compromise.  WithoutBuyer’s prior written consent, none of Seller or those acting on Seller’sbehalf shall amend or modify, or waive any term or condition of, or settle orcompromise any claim in respect of, any item of the Purchased Loans, anyrelated rights or any of the Program Documents, provided that Seller may amendor modify a Loan if such amendment or modification does not affect the amountor timing of any payment of principal or interest, extend its scheduledmaturity date, modify its interest rate, or constitute a cancellation ordischarge of its outstanding principal balance and does not materially and adverselyaffect the security afforded by the real property, furnishings, fixtures, orequipment securing the Loan.

##  

## (x)            Maintenanceof Property; Insurance.  The Sellershall keep all property useful and necessary in its business in good workingorder and condition.  The Seller shallmaintain errors and omissions insurance and/or mortgage impairment insuranceand blanket bond coverage in such amounts as are in effect on the EffectiveDate (as disclosed to Buyer in writing) and shall not reduce such coveragewithout the written consent of the Buyer, 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 entitiesengaged in the same or similar business similarly situated, against loss,damage and liability of the kinds and in the amounts customarily maintained bysuch entities.

##  

## (y)           FurtherIdentification of Purchased Items. The Seller will furnish to the Buyer from time to time statements and schedulesfurther identifying and describing the Purchased Items and such other reportsin connection with the Purchased Items as the Buyer may

 

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## reasonably request, all in reasonable detail.

##  

## (z)            LoanDetermined to be Defective.  Upondiscovery by Seller or the Buyer of any breach of any representation orwarranty listed on Schedule 1 hereto applicable to any Loan, the partydiscovering such breach shall promptly give notice of such discovery to theother.

##  

## (aa)         InterestRate Protection Agreements.  Upon theBuyer’s request, the Seller shall deliver to the Buyer any and all informationrelating to Interest Rate Protection Agreements.

##  

## (bb)         Certificateof a Responsible Officer of the Seller. At the time that the Sellers deliver financial statements to the Buyerin accordance with Section 13(a) hereof, the Sellers shall forward to the Buyera certificate of a Responsible Officer of Aames Investment which demonstratesthat Aames Investment is in compliance with the covenants set forth in Sections13(p)-(t) and (aa).

##  

## (cc)         Reserved.

##  

## (dd)         Maintenanceof Papers, Records and Files.  Sellershall acquire, and Seller shall build, maintain and have available, a completefile in accordance with lending industry custom and practice for each PurchasedLoan.  Seller will maintain all suchRecords not in the possession of Custodian in good and complete condition inaccordance with industry practices and preserve them against loss ordestruction.

##  

### (i)       Sellershall collect and maintain or cause to be collected and maintained all Recordsrelating to the Purchased Loans in accordance with industry custom andpractice, including those maintained pursuant to the preceding subsection, andall such Records shall be in Custodian’s possession unless Buyer otherwiseapproves.  Seller will not cause orauthorize any such papers, records or files that are an original or an onlycopy to leave Custodian’s possession, except for individual items removed inconnection with servicing a specific Loan, in which event Seller will obtain orcause to be obtained a receipt from the Custodian for any such paper, record orfile.

###  

### (ii)      Forso long as Buyer has an interest in or lien on any Purchased Loan, Seller willhold or cause to be held all related Records in trust for Buyer.  Seller shall notify, or cause to be notified,every other party holding any such Records of the interests and liens grantedhereby.

###  

### (iii)     Uponreasonable advance notice from Custodian or Buyer, Seller shall (x) make anyand all such Records available to Custodian or Buyer to examine any suchRecords, either by its own officers or employees, or by agents or contractors,or both, and make copies of all or any portion thereof, (y) permit Buyer or itsauthorized agents to discuss the affairs, finances and accounts of Seller withits respective chief operating officer and chief financial officer and todiscuss the affairs, finances and accounts of Seller with its independentcertified public accountants.

###  

## (ee)         Maintenanceof Licenses. Seller shall (i) maintain all licenses, permits or otherapprovals necessary for Seller to conduct its business and to perform itsobligations under the Program Documents, (ii) remain in good standing under thelaws of each state in which it

 

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## conducts business or any Mortgage Property islocated, and (iii) shall conduct its business strictly in accordance withapplicable law.

##  

## (ff)           Taxes,Etc.  The Seller shall pay anddischarge or cause to be paid and discharged, when due, all taxes, assessmentsand governmental charges or levies imposed upon the Seller or upon its incomeand profits or upon any of its property, real, personal or mixed (includingwithout limitation, the Purchased Loans) or upon any part thereof, as well asany other lawful claims which, if unpaid, might become a Lien upon suchproperties or any part thereof, except for any such taxes, assessments andgovernmental charges, levies or claims as are appropriately contested in goodfaith by appropriate proceedings diligently conducted and with respect to whichadequate reserves are provided.  TheSeller shall file on a timely basis all federal, and material state and localtax and information returns, reports and any other information statements orschedules required to be filed by or in respect of it.

##  

## (gg)         Useof Custodian.  Without the priorwritten consent of Buyer, Seller shall use no third party custodian as documentcustodian other than the Custodian with respect to third party purchasers,prospective third party purchasers, lenders and prospective third party lenderswith respect to loans of the same type as the Purchased Loans.

##  

## (hh)         Changeof Fiscal Year.  Seller will not atany time, directly or indirectly, except upon ninety (90) days’ prior writtennotice to Buyer, change the date on which Seller’s fiscal year begins fromSeller’s current fiscal year beginning date.

##  

## (ii)           [Deliveryof Servicing Rights and Servicing Records. With respect to the Servicing Rights of each related Purchased Loan,Seller shall deliver such Servicing Rights to Buyer on the related PurchaseDate.  With respect to the ServicingRecords and the physical servicing of the Purchased Loans, the Seller shalldeliver such Servicing Records to the designee of Buyer, within seventy-five(75) days of a Purchase Date, unless otherwise stated in writing by Buyer;provided that on each Repurchase Date that is subject to a new Transaction,such delivery requirement is deemed restated for such new Transaction (and theimmediately preceding delivery requirement is deemed to be rescinded) in theabsence of directions to the contrary from Buyer, and a new 75-day period isdeemed to commence as of such Repurchase Date. Seller’s transfer of the Servicing Rights and Servicing Records underthis Section shall be in accordance with customary standards in the industry.]

 

**14.****          REPURCHASE DATEPAYMENTS**

 

On eachRepurchase Date, Sellers shall remit or shall cause to be remitted to Buyer theRepurchase Price together with any other Obligations then due and payable.

 

**15.****          REPURCHASE OFPURCHASED LOANS**

 

Upon discoveryby any Seller of a breach of any of the representations and warranties setforth on Schedule 1 to this Agreement, Sellers shall give prompt writtennotice thereof to Buyer.  Upon any suchdiscovery by Buyer, Buyer will notify Sellers. It is understood and agreed that the representations and warranties setforth in Schedule 1 with respect to the Purchased Loans shall survivedelivery of the respective Mortgage Files to the Custodian and shall inure tothe benefit of Buyer.  The fact thatBuyer has conducted or has failed to conduct any partial or

 

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complete duediligence investigation in connection with its purchase of any Purchased Loanshall not affect Buyer’s right to demand repurchase as provided under thisAgreement.  Sellers shall, within two (2)Business Days of the earlier of Sellers’ discovery or any Seller receivingnotice with respect to any Purchased Loan of (i) any breach of a representationor warranty contained in Schedule 1, or (ii) any failure to deliver anyof the items required to be delivered as part of the Mortgage File within thetime period required for delivery pursuant to the Custodial Agreement, promptlycure such breach or delivery failure in all material respects.  If within two (2) Business Days after theearlier of Sellers’ discovery of such breach or delivery failure or any Sellerreceiving notice thereof that such breach or delivery failure has not beenremedied by Sellers, Sellers shall promptly upon receipt of writteninstructions from Buyer, at Buyer’s option, either (i) repurchase suchPurchased Loan at a purchase price equal to the Repurchase Price with respectto such Purchased Loan by wire transfer to the account designated by Buyer, or(ii) transfer comparable Substitute Loans to Buyer, as provided in Section 16hereof.

 

**16.****          SUBSTITUTION**

 

Sellers may,subject to agreement with and acceptance by Buyer upon one (1) Business Day’snotice, substitute other assets which are substantially the same as thePurchased Loans (the “Substitute Loans”) for any Purchased Loans.  Such substitution shall be made by transferto Buyer of such Substitute Loans and transfer to Sellers of such PurchasedLoans (the “Reacquired Loans”) along with the other information to beprovided with respect to the applicable Substitute Loan as described in theform of Transaction Notice.  Uponsubstitution, the Substitute Loans shall be deemed to be Purchased Loans, theReacquired Loans shall no longer be deemed Purchased Loans, Buyer shall bedeemed to have terminated any security interest that Buyer may have had in theReacquired Loans and any Purchased Items solely related to such ReacquiredLoans to Seller unless such termination and release would give rise to orperpetuate a Margin Deficit. Concurrently with any termination and release described in this Section16, Buyer shall execute and deliver to Sellers upon request and Buyer hereby authorizesSeller to file and record such documents as Seller may reasonably deemnecessary or advisable in order to evidence such termination and release.

 

**17.****          RESERVED**

 

**18.****          EVENTS OF DEFAULT**

 

Each of thefollowing events shall constitute an Event of Default (an “Event of Default”)hereunder:

 

## (a)           aSeller fails to transfer the Purchased Loans to Buyer on the applicablePurchase Date (provided Buyer has tendered the related Purchase Price);

##  

## (b)           aSeller either fails to repurchase the Purchased Loans on the applicableRepurchase Date or fails to perform its obligations under Section 6;

##  

## (c)           aSeller shall default in the payment of any other amount payable by it hereunderor under any other Program Document after notification by the Buyer of suchdefault, and such default shall have continued unremedied for three BusinessDays; or

 

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## (d)           anyrepresentation, warranty or certification made or deemed made herein or in anyother Program Document by a Seller or any certificate furnished to the Buyerpursuant to the provisions thereof, shall prove to have been false ormisleading in any material respect as of the time made or furnished (other thanthe representations and warranties set forth in Schedule 1 which shall beconsidered solely for the purpose of determining the Market Value of the Loans;unless (i) a Seller shall have made any such representations and warrantieswith knowledge that they were materially false or misleading at the time madeor (ii) any such representations and warranties have been determined by theBuyer in its sole discretion to be materially false or misleading on a regularbasis); or

##  

## (e)           theSellers shall fail to comply with the requirements of Section 13(c)(i),Section 13(d), Section 13(f)(i) or (iii), Sections 13(k) through13(t) or Section 13(x) hereof; or the Sellers shall default in theperformance of its obligations under Section 13(e) hereof, and suchdefault shall continue unremedied for a period of one (1) Business Day; or theSellers shall otherwise fail to observe or perform any other agreementcontained in this Agreement or any other Program Document and such failure toobserve or perform shall continue unremedied for a period of five (5) BusinessDays; or

##  

## (f)            anyfinal, judgment or judgments or order or orders for the payment of money inexcess of $2,000,000 in the aggregate (to the extent that it is, in thereasonable determination of Buyer, uninsured and provided that any insurance orother credit posted in connection with an appeal shall not be deemed insurancefor these purposes) shall be rendered against Seller or any of Seller’sAffiliates/Subsidiaries by one or more courts, administrative tribunals orother bodies having jurisdiction over them and the same shall not be discharged(or provisions shall not be made for such discharge), satisfied, or bonded, ora stay of execution thereof shall not be procured, within sixty (60) days fromthe date of entry thereof and Seller or any of Seller’sAffiliates/Subsidiaries, as applicable, shall not, within said period of sixty(60) days, appeal therefrom and cause the execution thereof to be stayed duringsuch appeal;

##  

## (g)           aSeller shall admit in writing its inability to, or intention not to, performany of such Seller’s Obligations, or Buyer shall have determined in good faiththat any Seller is unable to meet its commitments;

##  

## (h)           aSeller or any of Sellers’ Affiliates/Subsidiaries files a voluntary petition inbankruptcy, seeks relief under any provision of any bankruptcy, reorganization,moratorium, delinquency, arrangement, insolvency, readjustment of debt,dissolution or liquidation law of any jurisdiction whether now or subsequentlyin effect; or consents to the filing of any petition against it under any suchlaw; or consents to the appointment of or taking possession by a custodian,receiver, conservator, trustee, liquidator, sequestrator or similar officialfor a Seller or any of Sellers’ Affiliates/Subsidiaries, or of all or any partof a Seller’s or Sellers’ Affiliates’/Subsidiaries’ Property; or makes anassignment for the benefit of a Seller or Sellers’  Affiliates’/Subsidiaries’ creditors;

##  

## (i)            Acustodian, receiver, conservator, liquidator, trustee, sequestrator or similarofficial for a Seller, or any of Sellers’ Affiliates/Subsidiaries, or of any ofSellers’, or their respective Property (as a debtor or creditor protectionprocedure), is appointed or takes possession of such Property; or Seller or anyof Seller’s Affiliates/Subsidiaries generally fails to

 

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## pay Sellers’ or Sellers’ Affiliates’/Subsidiaries’debts as they become due; or a Seller or any of Sellers’Affiliates/Subsidiaries is adjudicated bankrupt or insolvent; or an order forrelief is entered under the Federal Bankruptcy Code, or any successor or similarapplicable statute, or any administrative insolvency scheme, against a Selleror any of Sellers’ Affiliates/Subsidiaries; or any of Sellers’ or Sellers’Affiliates’/Subsidiaries’ Property is sequestered by court or administrativeorder; or a petition is filed against any Seller or any of Sellers’Affiliates/Subsidiaries under any bankruptcy, reorganization, arrangement,insolvency, readjustment of debt, dissolution, moratorium, delinquency orliquidation law of any jurisdiction, whether now or subsequently in effect;

##  

## (j)            AnyGovernmental Authority or any person, agency or entity acting or purporting toact under governmental authority shall have taken any action to condemn, seizeor appropriate, or to assume custody or control of, all or any substantial partof the Property of any Seller or any of Sellers’ Affiliates/Subsidiaries, orshall have taken any action to displace the management of any Seller or any ofSellers’ Affiliates/Subsidiaries or to curtail its authority in the conduct ofthe business of any Seller or any of Sellers’ Affiliates/Subsidiaries, or takesany action in the nature of enforcement to remove, limit or restrict theapproval of any Seller or any of Sellers’ Affiliates/Subsidiaries as an issuer,buyer or a seller/servicer of Loans or securities backed thereby, and suchaction provided for in this subsection (j) shall not have been discontinued orstayed within thirty (30) days;

##  

## (k)           AnyProgram Document shall for whatever reason (including an event of defaultthereunder) be terminated, this Agreement shall for any reason cease to createa valid, first priority security interest or ownership interest upon transferin any of the Purchased Loans or Purchased Items purported to be covered herebyor any of Sellers’ material obligations (including Sellers’ Obligationshereunder shall cease to be in full force and effect, or the enforceabilitythereof shall be contested by the Sellers;

##  

## (l)            AnyMaterial Adverse Effect shall have occurred, as determined by Buyer in its solediscretion;

##  

## (m)          (i)any Person shall engage in any “prohibited transaction” (as defined in Section406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any material“accumulated funding deficiency” (as defined in Section 302 of ERISA), whetheror not waived, shall exist with respect to any Plan or any Lien in favor of thePBGC or a Plan shall arise on the assets of the Buyer or any CommonlyControlled Entity, (iii) a Reportable Event shall occur with respect to, orproceedings shall commence to have a trustee appointed, or a trustee shall beappointed, to administer or to terminate, any Single Employer Plan, whichReportable Event or commencement of proceedings or appointment of a trustee is,in the reasonable opinion of the Buyer, likely to result in the termination ofsuch Plan for purposes of Title IV of ERISA, (iv) any Single Employer Planshall terminate for purposes of Title IV of ERISA, (v) the Seller or anyCommonly Controlled Entity shall, or in the reasonable opinion of the Buyer islikely to, incur any liability in connection with a withdrawal from, or theinsolvency or reorganization of, a Multiemployer Plan or (vi) any other eventor condition shall occur or exist with respect to a Plan; and in each case inclauses (i) through (vi) above, such event or condition, together with allother such events or conditions, if any, could reasonably be expected to have aMaterial Adverse Effect;

 

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## (n)                                 AChange of Control shall have occurred without the prior consent of the Buyer ora material change in the management of the Sellers shall have occurred whichhas not been approved by Buyer;

##  

## (o)                                 Sellersshall grant, or suffer to exist, any Lien on any Purchased Items except theLiens contemplated hereby; or the Liens contemplated hereby shall cease to befirst priority perfected Liens on the Purchased Items in favor of the Buyer orshall be Liens in favor of any Person other than Buyer;

##  

## (p)                                 Buyershall reasonably request, specifying the reasons for such request, reasonableinformation, and/or written responses to such requests, regarding the financialwell-being of Seller and such reasonable information and/or responses shall nothave been provided within three (3) Business Days of such request;

##  

## (q)                                 Sellersor any Subsidiary or Affiliate of Sellers shall default under, or fail toperform as required under, or shall otherwise breach the terms of anyinstrument, agreement or contract between the Seller or such other entity, onthe one hand, and the Buyer or any of the Buyer’s Affiliates on the other; orthe Seller or any Subsidiary or Affiliate of the Seller shall default under, orfail to perform as requested under, the terms of any repurchase agreement, loanand security agreement or similar credit facility or agreement for borrowedfunds entered into by the Seller or such other entity and any third party,which default or failure entitles any party to require acceleration orprepayment of any indebtedness thereunder; and

##  

## (r)                                    AamesInvestment shall fail to maintain its status as a REIT.

##  

**19.****                               REMEDIES**

 

Upon theoccurrence of an Event of Default, Buyer, at its option (which option shall bedeemed to have been exercised immediately upon the occurrence of an Event ofDefault pursuant to Section 18(g), (h), (i) or (j) hereof), shall have theright to exercise any or all of the following rights and remedies:

 

## (a)                                  (i)  TheRepurchase Date for each Transaction hereunder shall, if it has not alreadyoccurred, be deemed immediately to occur (provided that, in the event that thePurchase Date for any Transaction has not yet occurred as of the date of suchexercise or deemed exercise, such Transaction shall be deemed immediatelycanceled). Sellers’ obligations hereunder to repurchase all Purchased Loans atthe Repurchase Price therefor on the Repurchase Date in such Transactions shallthereupon become immediately due and payable; all Income then held by theSeller for the benefit of Buyer and all Income paid after such exercise ordeemed exercise shall be remitted to and retained by Buyer and applied to theaggregate Repurchase Price and any other amounts owing by Sellers hereunder;Sellers shall immediately deliver to Buyer or its designee any and all originalpapers, Servicing Records and files relating to the Purchased Loans subject tosuch Transaction then in Sellers’ possession and/or control; and all right,title and interest in and entitlement to such Purchased Loans and ServicingRights thereon shall be deemed transferred to Buyer or its designee.

##  

### (ii)  Buyershall have the right to (A) sell, on or following the Business Day followingthe date on which the Repurchase Price became due and payable pursuant to

 

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### Section 19(a)(i) without notice or demand ofany kind, at a public or private sale and at such price or prices as Buyer mayreasonably deem satisfactory any or all Purchased Loans and/or (B) in its solediscretion elect, in lieu of selling all or a portion of such Purchased Loans,to give Seller credit for such Purchased Loans in an amount equal to the MarketValue of the Purchased Loans against the aggregate unpaid Repurchase Price andany other amounts owing by Seller hereunder. Sellers shall remain liable toBuyer for any amounts that remain owing to Buyer following a sale and/or creditunder the preceding sentence. The proceeds of any disposition of PurchasedLoans shall be applied first to the reasonable costs and expensesincurred by Buyer in connection with or as a result of an Event of Default; secondto Breakage Costs, if any, costs of cover and/or related hedging transactions; thirdto the aggregate Repurchase Prices; and fourth to all other Obligations.

###  

### (iii)  Buyershall have the right to terminate this Agreement and declare all obligations ofSeller to be immediately due and payable, by a notice in accordance withSection 21 hereof.

###  

### (iv)  Theparties recognize that it may not be possible to purchase or sell all of thePurchased Loans on a particular Business Day, or in a transaction with the samepurchaser, or in the same manner because the market for such Purchased Loansmay not be liquid. In view of the nature of the Purchased Loans, the partiesagree that liquidation of a Transaction or the underlying Purchased Loans doesnot require a public purchase or sale and that a good faith private purchase orsale shall be deemed to have been made in a commercially reasonable manner. Accordingly,Buyer may elect the time and manner of liquidating any Purchased Loan andnothing contained herein shall obligate Buyer to liquidate any Purchased Loanon the occurrence of an Event of Default or to liquidate all Purchased Loans inthe same manner or on the same Business Day or constitute a waiver of any rightor remedy of Buyer. Notwithstanding the foregoing, the parties to thisAgreement agree that the Transactions have been entered into in considerationof and in reliance upon the fact that all Transactions hereunder constitute asingle business and contractual obligation and that each Transaction has beenentered into in consideration of the other Transactions.

###  

### (v)  Tothe extent permitted by applicable law, the Seller waives all claims, damagesand demands it may acquire against the Buyer arising out of the exercise by theBuyer of any of its rights hereunder, other than those claims, damages anddemands arising from the gross negligence or willful misconduct of the Buyer. Ifany notice of a proposed sale or other disposition of Purchased Items shall berequired by law, such notice shall be deemed reasonable and proper if given atleast 10 days before such sale or other disposition.

 

## (b)                                 EachSeller hereby acknowledges, admits and agrees that Sellers’ obligations underthis Agreement are joint and several recourse obligations of the Sellers towhich each Seller pledges its full faith and credit. In addition to its rightshereunder, Buyer shall have the right to proceed against any of any Seller’sassets which may be in the possession of Buyer, any of Buyer’s Affiliates ortheir respective designees (including the Custodian), including the right toliquidate such assets and to set-off the proceeds against monies owed bySellers to Buyer

 

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## pursuant to this Agreement. Buyermay set off cash, the proceeds of the liquidation of the Purchased Loans andAdditional Purchased Loans, any other Purchased Items and their proceeds andall other sums or obligations owed by Buyer to Sellers against all of Sellers’obligations to Buyer, whether under this Agreement, under a Transaction, orunder any other agreement between the parties, or otherwise, whether or notsuch obligations are then due, without prejudice to Buyer’s right to recoverany deficiency.

##  

## (c)                                  Buyershall have the right to obtain physical possession of the Servicing Records andall other files of Seller relating to the Purchased Loans and all documentsrelating to the Purchased Loans which are then or may thereafter come into thepossession of any Seller or any third party acting for any Seller and Sellersshall deliver to Buyer such assignments as Buyer shall request.

##  

## (d)                                 Buyershall have the right to direct all Persons servicing the Purchased Loans totake such action with respect to the Purchased Loans as Buyer determinesappropriate.

##  

## (e)                                  Buyershall, without regard to the adequacy of the security for the Obligations, beentitled to the appointment of a receiver by any court having jurisdiction,without notice, to take possession of and protect, collect, manage, liquidate,and sell the Purchased Loans and any other Purchased Items or any portionthereof, collect the payments due with respect to the Purchased Loans and anyother Purchased Items or any portion thereof, and do anything that Buyer isauthorized hereunder or by law to do. Seller shall pay all costs and expensesincurred by Buyer in connection with the appointment and activities of suchreceiver.

##  

## (f)                                    Buyermay, at its option, enter into one or more Interest Rate Protection Agreementscovering all or a portion of the Purchased Loans, and the Seller shall beresponsible for all damages, judgments, costs and expenses of any kind whichmay be imposed on, incurred by or asserted against the Buyer relating to orarising out of such Interest Rate Protection Agreements; including withoutlimitation any losses resulting from such Interest Rate Protection Agreements.

##  

## (g)                                 Inaddition to all the rights and remedies specifically provided herein, Buyershall have all other rights and remedies provided by applicable federal, state,foreign, and local laws, whether existing at law, in equity or by statute,including, without limitation, all rights and remedies available to a purchaseror a secured party, as applicable, under the Uniform Commercial Code.

##  

Except as otherwiseexpressly provided in this Agreement, Buyer shall have the right to exerciseany of its rights and/or remedies without presentment, demand, protest orfurther notice of any kind other than as expressly set forth herein, all ofwhich are hereby expressly waived by Seller.

 

Buyer mayenforce its rights and remedies hereunder without prior judicial process orhearing, and each Seller hereby expressly waives, to the extent permitted bylaw, any right Seller might otherwise have to require Buyer to enforce itsrights by judicial process. Seller also waives, to the extent permitted by law,any defense Seller might otherwise have to the Obligations, arising from use ofnonjudicial process, enforcement and sale of all or any portion

 

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of thePurchased Loans and any other Purchased Items or from any other election ofremedies. Seller recognizes that nonjudicial remedies are consistent with theusages of the trade, are responsive to commercial necessity and are the resultof a bargain at arm’s length.

 

Sellers shallcause all sums received by it with respect to the Purchased Loans to bedeposited with such Person as Buyer may direct after receipt thereof. Sellersshall be liable to Buyer for the amount of all expenses (plus interest thereonat a rate equal to the Post-Default Rate), and Breakage Costs including,without limitation, all costs and expenses incurred within thirty (30) days ofthe Event of Default in connection with hedging or covering transactions relatedto the Purchased Loans, conduit advances and payments for mortgage insurance.

 

**20.****                               DELAYNOT WAIVER; REMEDIES ARE CUMULATIVE**

 

No failure onthe part of Buyer to exercise, and no delay in exercising, any right, power orremedy hereunder shall operate as a waiver thereof, nor shall any single orpartial exercise by Buyer of any right, power or remedy hereunder preclude anyother or further exercise thereof or the exercise of any other right, power orremedy. All rights and remedies of Buyer provided for herein are cumulative andin addition to any and all other rights and remedies provided by law, theProgram Documents and the other instruments and agreements contemplated herebyand thereby, and are not conditional or contingent on any attempt by Buyer toexercise any of its rights under any other related document. Buyer may exerciseat any time after the occurrence of an Event of Default one or more remedies,as they so desire, and may thereafter at any time and from time to timeexercise any other remedy or remedies.

 

**21.****                               NOTICESAND OTHER COMMUNICATIONS**

 

Except asotherwise expressly permitted by this Agreement, all notices, requests andother communications provided for herein and under the Custodial Agreement(including, without limitation, any modifications of, or waivers, requests orconsents under, this Agreement) shall be given or made in writing (including,without limitation, by telex or telecopy) delivered to the intended recipientat the “Address for Notices” specified below its name on the signature pageshereof); or, as to any party, at such other address as shall be designated bysuch party in a written notice to each other party. Except as otherwiseprovided in this Agreement and except for notices given by the Seller underSection 3(b) (which shall be effective only on receipt), all suchcommunications shall be deemed to have been duly given when transmitted bytelex or telecopier or personally delivered or, in the case of a mailed notice,upon receipt, in each case given or addressed as aforesaid.

 

**22.****                               USEOF EMPLOYEE PLAN ASSETS**

 

No assets ofan employee benefit plan subject to any provision of the Employee RetirementIncome Security Act of 1974, as amended (“ERISA”) shall be used byeither party hereto in a Transaction.

 

**23.****                               INDEMNIFICATIONAND EXPENSES.**

 

## (a)                                  TheSellers agree to hold the Buyer, and its Affiliates and their officers,directors, employees, agents and advisors (each an “Indemnified Party”)harmless from and indemnify any

 

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## Indemnified Party against allliabilities, losses, damages, judgments, costs and expenses of any kind whichmay be imposed on, incurred by or asserted against such Indemnified Party(collectively, the “Costs”) relating to or arising out of this Agreement, anyother Program Document or any transaction contemplated hereby or thereby, orany amendment, supplement or modification of, or any waiver or consent under orin respect of, this Agreement, any other Program Document or any transactioncontemplated hereby or thereby, that, in each case, results from anything otherthan any Indemnified Party’s gross negligence or willful misconduct. Withoutlimiting the generality of the foregoing, the Sellers agree to hold anyIndemnified Party harmless from and indemnify such Indemnified Party againstall Costs with respect to all Loans relating to or arising out of any violationor alleged violation of any environmental law, rule or regulation or anyconsumer credit laws, including without limitation laws with respect to unfairor deceptive lending practices and predatory lending practices, the Truth inLending Act and/or the Real Estate Settlement Procedures Act, that, in eachcase, results from anything other than such Indemnified Party’s grossnegligence or willful misconduct. In any suit, proceeding or action brought byan Indemnified Party in connection with any Loan for any sum owing thereunder,or to enforce any provisions of any Loan, the Seller will save, indemnify andhold such Indemnified Party harmless from and against all expense, loss ordamage suffered by reason of any defense, set-off, counterclaim, recoupment orreduction of liability whatsoever of the account debtor or obligor thereunder,arising out of a breach by the Sellers of any obligation thereunder or arisingout of any other agreement, indebtedness or liability at any time owing to orin favor of such account debtor or obligor or its successors from the Sellers. TheSellers also agree to reimburse an Indemnified Party as and when billed by suchIndemnified Party for all such Indemnified Party’s costs and expenses incurredin connection with the enforcement or the preservation of such IndemnifiedParty’s rights under this Agreement, any other Program Document or anytransaction contemplated hereby or thereby, including without limitation thereasonable fees and disbursements of its counsel. The Sellers herebyacknowledge that, the obligations of the Sellers under this Agreement arerecourse obligations of the Sellers.

##  

## (b)                                 TheSellers agree to pay as and when billed by the Buyer all of the out-of pocketcosts and expenses incurred by the Buyer in connection with the development,preparation and execution of, and any amendment, supplement or modification to,this Agreement, any other Program Document or any other documents prepared inconnection herewith or therewith. The Sellers agree to pay as and when billedby the Buyer all of the out-of-pocket costs and expenses incurred in connectionwith the consummation and administration of the transactions contemplatedhereby and thereby including, without limitation, (i) all the reasonable fees,disbursements and expenses of counsel to the Buyer and (ii) all the duediligence, inspection, testing and review costs and expenses incurred by theBuyer with respect to Purchased Items under this Agreement, including, but notlimited to, those costs and expenses incurred by the Buyer pursuant to Sections23, 39 and 44 hereof other than any costs and expenses incurred in connectionwith the Buyer’s rehypothecation of the Purchased Loans prior to an Event ofDefault. Sellers also agree not to assert any claim against Buyer or any of itsAffiliates, or any of their respective officers, directors, employees,attorneys and agents, on any theory of liability, for special, indirect,consequential or punitive damages arising out of or otherwise relating to theProgram Documents, the actual or proposed use of the proceeds of theTransactions, this Agreement or any of the transactions contemplated hereby orthereby. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLYAPPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR

 

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## WILLFUL MISCONDUCT) OF THEINDEMNIFIED PARTIES.

##  

## (c)                                  IfSellers fail to pay when due any costs, expenses or other amounts payable bythem under this Agreement, including, without limitation, reasonable fees andexpenses of counsel and indemnities, such amount may be paid on behalf ofSellers by Buyer, in its sole discretion and Sellers shall remain liable forany such payments by Buyer. No such payment by Buyer shall be deemed a waiverof any of Buyer’s rights under the Program Documents.

##  

## (d)                                 Withoutprejudice to the survival of any other agreement of Sellers hereunder, the covenantsand obligations of Sellers contained in this Section 23 shall survive thepayment in full of the Repurchase Price and all other amounts payable hereunderand delivery of the Purchased Loans by Buyer against full payment therefor.

##  

**24.****                               WAIVEROF REDEMPTION AND DEFICIENCY RIGHTS**

 

Each Sellerhereby expressly waives, to the fullest extent permitted by law, every statuteof limitation on a deficiency judgment, any reduction in the proceeds of anyPurchased Items as a result of restrictions upon Buyer or Custodian containedin the Program Documents or any other instrument delivered in connectiontherewith, and any right that it may have to direct the order in which any ofthe Purchased Items shall be disposed of in the event of any dispositionpursuant hereto.

 

**25.****                               REIMBURSEMENT**

 

All sumsreasonably expended by Buyer in connection with the exercise of any right orremedy provided for herein shall be and remain Sellers’ obligation (unless andto the extent that Sellers are the prevailing party in any dispute, claim oraction relating thereto). Sellers agree to pay, with interest at thePost-Default Rate to the extent that an Event of Default has occurred, thereasonable out-of-pocket expenses and reasonable attorneys’ fees incurred byBuyer and/or Custodian in connection with the preparation, negotiation,enforcement (including any waivers), administration and amendment of theProgram Documents (regardless of whether a Transaction is entered intohereunder), the taking of any action, including legal action, required orpermitted to be taken by Buyer (without duplication to Buyer) and/or Custodianpursuant thereto, any “due diligence” or loan agent reviews conducted by Buyeror on its behalf or by refinancing or restructuring in the nature of a “workout.”

 

**26.****                               FURTHERASSURANCES**

 

Sellers agreeto do such further acts and things and to execute and deliver to Buyer suchadditional assignments, acknowledgments, agreements, powers and instruments asare reasonably required by Buyer to carry into effect the intent and purposesof this Agreement and the other Program Documents, to perfect the interests ofBuyer in the Purchased Items or to better assure and confirm unto Buyer itsrights, powers and remedies hereunder and thereunder.

 

**27.****                               TERMINATION**

 

This Agreementshall remain in effect until the Termination Date. However, no such terminationshall affect Sellers’ outstanding obligations to Buyer at the time of suchtermination.

 

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Sellers’obligations under Section 3(i), 3(j) Section 5, Section 12 and Section 23 andany other reimbursement or indemnity obligation of Seller to Buyer pursuant tothis Agreement or any other Program Documents shall survive the terminationhereof.

 

**28.****                               SEVERABILITY**

 

If anyprovision of any Program Document is declared invalid by any court of competentjurisdiction, such invalidity shall not affect any other provision of theProgram Documents, and each Program Document shall be enforced to the fullestextent permitted by law.

 

**29.****                               BINDINGEFFECT; GOVERNING LAW**

 

This Agreementshall be binding and inure to the benefit of the parties hereto and theirrespective successors and assigns, except that Seller may not assign ortransfer any of its respective rights or obligations under this Agreement or anyother Program Document without the prior written consent of Buyer. THISAGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OFTHE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLESTHEREOF (EXCEPT FOR SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

**30.****                               AMENDMENTS**

 

Except asotherwise expressly provided in this Agreement, any provision of this Agreementmay be modified or supplemented only by an instrument in writing signed by theSeller and the Buyer and any provision of this Agreement may be waived by theBuyer.

 

**31.****                               SUCCESSORSAND ASSIGNS**

 

This Agreementshall be binding upon and inure to the benefit of the parties hereto and theirrespective successors and permitted assigns.

 

**32.****                               SURVIVAL**

 

The obligationsof the Sellers under Sections 3(h), 3(i), 5, 23 and 25 hereof and any otherreimbursement or indemnity obligation of Seller to Buyer pursuant to thisAgreement or any other Program Document shall survive the repurchase of theLoans hereunder and the termination of this Agreement. In addition, eachrepresentation and warranty made, or deemed to be made by a request for apurchase, herein or pursuant hereto shall survive the making of suchrepresentation and warranty, and the Buyer shall not be deemed to have waived,by reason of purchasing any Loan, any Default that may arise by reason of suchrepresentation or warranty proving to have been false or misleading,notwithstanding that the Buyer may have had notice or knowledge or reason tobelieve that such representation or warranty was false or misleading at thetime such purchase was made.

 

**33.****                               CAPTIONS**

 

The table ofcontents and captions and section headings appearing herein are included

 

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solely forconvenience of reference and are not intended to affect the interpretation ofany provision of this Agreement.

 

**34.****                               COUNTERPARTS**

 

This Agreementmay be executed in any number of counterparts, all of which taken togethershall constitute one and the same instrument, and any of the parties hereto mayexecute this Agreement by signing any such counterpart.

 

**35.****                               SUBMISSIONTO JURISDICTION; WAIVERS**

 

**EACH PARTYHERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:**

 

**(A)****                               SUBMITSFOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THISAGREEMENT AND/OR ANY OTHER PROGRAM DOCUMENT, OR FOR RECOGNITION AND ENFORCEMENTOF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTIONOF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATESOF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANYTHEREOF;**

 

**(B)****                               CONSENTSTHAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THEEXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVETO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCHACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TOPLEAD OR CLAIM THE SAME;**

 

**(C)****                               AGREESTHAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BYMAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLYSIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITSSIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE BUYER SHALL HAVE BEENNOTIFIED; AND**

 

**(D)****                               AGREESTHAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANYOTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHERJURISDICTION.**

 

**36.****                               WAIVEROF JURY TRIAL**

 

**EACH OFTHE SELLERS AND THE BUYER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENTPERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGALPROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOANDOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.**

 

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**37.****                               ACKNOWLEDGEMENTS**

 

Each Sellerhereby acknowledges that:

 

## (a)                                  ithas been advised by counsel in the negotiation, execution and delivery of thisAgreement and the other Program Documents to which it is a party;

##  

## (b)                                 theBuyer has no fiduciary relationship to the Seller; and

##  

## (c)                                  nojoint venture exists among or between the Buyer and the Seller.

##  

**38.****                               HYPOTHECATIONOR PLEDGE OF PURCHASED ITEMS.**

 

The Buyershall have free and unrestricted use of all Loans and Purchased Items andnothing in this Agreement shall preclude the Buyer from engaging in repurchasetransactions with the Loans and Purchased Items or otherwise pledging,repledging, transferring, hypothecating, or rehypothecating the Loans andPurchased Items. Nothing contained in this Agreement shall obligate the Buyerto segregate any Loans or Purchased Items delivered to the Buyer by theSellers.

 

**39.****                               ASSIGNMENTS;PARTICIPATIONS.**

 

## (a)                                  TheSellers may assign any of their rights or obligations hereunder only with theprior written consent of the Buyer. The Buyer may assign or transfer to anybank or other financial institution that makes or invests in repurchaseagreements or loans or any Affiliate of the Buyer all or any of its rightsunder this Agreement and the other Program Documents.

##  

## (b)                                 TheBuyer may, in accordance with applicable law, at any time sell to one or moreentities (“Participants”) participating interests in this Agreement, itsagreement to purchase Loans, or any other interest of the Buyer hereunder andunder the other Program Documents. In the event of any such sale by the Buyerof participating interests to a Participant, the Buyer’s obligations under thisAgreement to the Sellers shall remain unchanged, the Buyer shall remain solelyresponsible for the performance thereof and the Sellers shall continue to dealsolely and directly with the Buyer in connection with the Buyer’s rights andobligations under this Agreement and the other Program Documents. The Sellersagree that if amounts outstanding under this Agreement are due or unpaid, orshall have been declared or shall have become due and payable upon theoccurrence of an Event of Default, each Participant shall be deemed to have theright of set-off in respect of its participating interest in amounts owingunder this Agreement to the same extent as if the amount of its participatinginterest were owing directly to it as a Buyer under this Agreement; provided,that such Participant shall only be entitled to such right of set-off if itshall have agreed in the agreement pursuant to which it shall have acquired itsparticipating interest to share with the Buyer the proceeds thereof. The Buyeralso agrees that each Participant shall be entitled to the benefits of Sections3(h), 3(i) and 23 with respect to its participation in the Loans and PurchasedItems outstanding from time to time; provided, that the Buyer and allParticipants shall be entitled to receive no greater amount in the aggregatepursuant to such Sections than the Buyer would have been entitled to receivehad no such transfer occurred.

##  

## (c)                                  TheBuyer may furnish any information concerning the Sellers or any of theirSubsidiaries in the possession of Buyer from time to time to assignees andParticipants

 

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## (including prospectiveassignees and Participants) only after notifying the Sellers in writing andsecuring signed confidentiality statements (a form of which is attached heretoas Exhibit H) and only for the sole purpose of evaluating assignments orparticipations and for no other purpose.

##  

## (d)                                 TheSellers agree to cooperate with the Buyer in connection with any suchassignment and/or participation, to execute and deliver replacement notes, andto enter into such restatements of, and amendments, supplements and othermodifications to, this Agreement and the other Program Documents in order togive effect to such assignment and/or participation. The Sellers further agreeto furnish to any Participant identified by the Buyer to the Sellers copies ofall reports and certificates to be delivered by the Sellers to the Buyerhereunder, as and when delivered to the Buyer.

##  

**40.****                               SINGLEAGREEMENT**

 

Sellers andBuyer acknowledge that, and have entered hereinto and will enter into eachTransaction hereunder in consideration of and in reliance upon the fact that,all Transactions hereunder constitute a single business and contractualrelationship and have been made in consideration of each other. Accordingly,Sellers and Buyer each agree (i) to perform all of their obligations in respectof each Transaction hereunder, and that a default in the performance of anysuch obligations shall constitute a default by it in respect of allTransactions hereunder, and (ii) that payments, deliveries and other transfersmade by any of them in respect of any Transaction shall be deemed to have beenmade in consideration of payments, deliveries and other transfers in respect ofany other Transaction hereunder, and the obligations to make any such payments,deliveries and other transfers may be applied against each other and netted.

 

**41.****                               INTENT**

 

Sellers andBuyer recognize that each Transaction is a “repurchase agreement” as that termis defined in Section 101 of Title 11 of the USC, and a “securities contract”as that term is defined in Section 741 of Title 11 of the USC.

 

It isunderstood that Buyer’s right to liquidate the Purchased Loans delivered to itin connection with the Transactions hereunder or to accelerate or terminatethis Agreement or otherwise exercise any other remedies pursuant to Section 19hereof is a contractual right to liquidate, accelerate or terminate suchTransaction as described in Sections 555 and 559 of Title 11 of the USC.

 

**42.****                               CONFIDENTIALITY**

 

The ProgramDocuments and their respective terms, provisions, supplements and amendments,and transactions and notices thereunder, are proprietary to Buyer and shall beheld by Sellers in strict confidence and shall not be disclosed to any thirdparty without the consent of Buyer except for (i) disclosure to Sellers’ directand indirect parent companies, directors, attorneys, agents or accountants,provided that such attorneys or accountants likewise agree to be bound by thiscovenant of confidentiality, or are otherwise subject to confidentialityrestrictions or (ii) upon prior written notice to Buyer, disclosure required bylaw, rule, regulation or order of a court or other regulatory body or (iii)upon prior written notice to Buyer, disclosure to any approved hedgecounterparty to the extent necessary to obtain any Interest Rate Protection

 

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Agreementhereunder or (iv) any disclosures or filing required under Securities andExchange Commission (“SEC”) or state securities’ laws; provided thatin the case of (ii), (iii) and (iv), Sellers shall take reasonable actions toprovide Buyer with prior written notice; providedfurther that inthe case of (iv), the Sellers shall not file any of the Program Documents otherthan the Agreement with the SEC or state securities office unless Sellers shallhave provided at least thirty (30) days (or such lesser time as may be demandedby the SEC or state securities office) prior written notice of such filing toBuyer. Notwithstanding anything herein to the contrary, each party (and eachemployee, representative, or other agent of each party) may disclose to any andall persons, without limitation of any kind, the tax treatment and taxstructure of the transaction and all materials of any kind (including opinionsor other tax analyses) that are provided to it relating to such tax treatmentand tax structure. For this purpose, tax treatment and tax structure shall notinclude (i) the identity of any existing or future party (or any Affiliate ofsuch party) to this Agreement or (ii) any specific pricing information or othercommercial terms, including the amount of any fees, expenses, rates or paymentsarising in connection with the transactions contemplated by this Agreement. Buyeracknowledges that this Agreement may be filed with the Securities and ExchangeCommission; provided that, the Sellers shall redact any pricing and otherconfidential provisions, including, without limitation, the amount of anycommitment fee, non-usage fee, Price Differential and Purchase Price from suchfiled Agreement.

 

**43.****                               SERVICING**

 

## (a)                                  TheSeller covenants to maintain or cause the servicing of the Purchased Loans tobe maintained in conformity with Accepted Servicing Practices. In the eventthat the preceding language is interpreted as constituting one or moreservicing contracts, each such servicing contract shall terminate automaticallyupon the earliest of (i) an Event of Default, or (ii) the date on which all theObligations have been paid in full, or (iii) the transfer of servicing to anyentity approved by the Buyer and the assumption thereof by such entity.

##  

## (b)                                 Duringthe period any Seller is servicing the Purchased Loans, (i) the Sellers agreethat Buyer is the owner of all servicing records, including but not limited toany and all servicing agreements, files, documents, records, data bases,computer tapes, copies of computer tapes, proof of insurance coverage,insurance policies, appraisals, other closing documentation, payment historyrecords, and any other records relating to or evidencing the servicing of suchLoans (the “Servicing Records”), and (ii) the Sellers grant the Buyer asecurity interest in all servicing fees and rights relating to the PurchasedLoans and all Servicing Records to secure the obligation of the Sellers or itsdesignee to service in conformity with this Section 43 and any other obligationof Sellers to the Buyer. The Sellers covenant to safeguard such ServicingRecords and to deliver them promptly to the Buyer or its designee (includingthe Custodian) at the Buyer’s request. It is understood and agreed by theparties that prior to an Event of Default, the Sellers shall retain theservicing fees with respect to the Purchased Loans.

##  

## (c)                                  Ifthe Loans are serviced by any other third party servicer (such third partyservicer, the “Subservicer”) the Sellers shall provide a copy of the relatedservicing agreement with a properly executed Instruction Letter to the Buyer atleast three (3) Business Days prior to the applicable Purchase Date or the dateon which the Subservicer shall begin subservicing the Loans, which shall be inthe form and substance acceptable to Buyer (the “Servicing

 

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## Agreement”) and shall haveobtained the written consent of the Buyer for such Subservicer to subservicethe Loans. Initially, the Subservicer shall be Aames Funding.

##  

## (d)                                 TheSellers agree that upon the occurrence of an Event of Default, the Buyer mayterminate the Sellers in their capacity as servicer and terminate any ServicingAgreement and Sellers shall transfer such servicing to the Buyer or itsdesignee, at no cost or expense to the Buyer. In addition, the Sellers shallprovide to the Buyer an Instruction Letter from the Sellers to the effect thatupon the occurrence of an Event of Default, the Buyer may terminate anySubservicer or Servicing Agreement and direct that collections with respect tothe Loans be remitted in accordance with the Buyer’s instructions. The Sellersagree to cooperate with the Buyer in connection with the transfer of servicing.

##  

## (e)                                  Afterthe Purchase Date, until the Repurchase Date, the Sellers will have no right tomodify or alter the terms of the Loan or consent to the modification oralteration of the terms of any Loan, and the Sellers will have no obligation orright to repossess any Loan or substitute another Loan, except as provided inany Custodial Agreement.

##  

## (f)                                    TheSellers shall permit the Buyer to inspect upon reasonable prior written noticeat a mutually convenient time, the Seller’s or its Affiliate’s servicingfacilities, as the case may be, for the purpose of satisfying the Buyer thatthe Sellers or its Affiliate, as the case may be, has the ability to servicethe Loans as provided in this Agreement. In addition, with respect to any Subservicerwhich is not an Affiliate of the Sellers, the Sellers shall use their bestefforts to enable the Buyer to inspect the servicing facilities of suchSubservicer.

##  

**44.****                               PERIODICDUE DILIGENCE REVIEW**

 

The Sellersacknowledges that the Buyer has the right to perform continuing due diligencereviews with respect to the Loans, for purposes of verifying compliance withthe representations, warranties, covenants and specifications made hereunder orunder any other Program Document, or otherwise, and the Seller agrees that uponreasonable (but no less than one (1) Business Day’s) prior notice to theSellers (provided that upon the occurrence of a Default or an Event of Default,no such prior notice shall be required), the Buyer or its authorizedrepresentatives will be permitted during normal business hours to examine,inspect, make copies of, and make extracts of, the Mortgage Files, theServicing Records and any and all documents, records, agreements, instrumentsor information relating to such Loans in the possession, or under the control,of the Sellers and/or the Custodian. The Sellers also shall make available tothe Buyer a knowledgeable financial or accounting officer for the purpose ofanswering questions respecting the Mortgage Files and the Loans. Withoutlimiting the generality of the foregoing, the Sellers acknowledge that theBuyer shall purchase Loans from the Sellers based solely upon the informationprovided by the Sellers to the Buyer in the Loan Schedule and therepresentations, warranties and covenants contained herein, and that the Buyer,at its option, has the right, at any time to conduct a partial or complete duediligence review on some or all of the Purchased Loans, including, withoutlimitation, ordering new credit reports, new appraisals on the relatedMortgaged Properties and otherwise re-generating the information used tooriginate such Loan. The Buyer may underwrite such Loans itself or engage athird party underwriter to perform such underwriting. The Sellers agree tocooperate with the Buyer and any third party underwriter in connection withsuch underwriting, including, but not limited to,

 

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providing theBuyer and any third party underwriter with access to any and all documents, records,agreements, instruments or information relating to such Loans in thepossession, or under the control, of the Sellers. In addition, the Buyer hasthe right to perform continuing Due Diligence Reviews of the Sellers, theirAffiliates, directors, and their respective Subsidiaries and the officers,employees and significant shareholders thereof. The Sellers and Buyer furtheragree that all out-of-pocket costs and expenses incurred by the Buyer inconnection with the Buyer’s activities pursuant to this Section 44 shall bepaid by the Sellers.

 

**45.****                               SET-OFF**

 

In addition toany rights and remedies of the Buyer provided by this Agreement and by law, theBuyer shall have the right, without prior notice to the Sellers, any suchnotice being expressly waived by the Sellers to the extent permitted byapplicable law, upon any amount becoming due and payable by the Sellershereunder (whether at the stated maturity, by acceleration or otherwise) toset-off and appropriate and apply against such amount any and all Property anddeposits (general or special, time or demand, provisional or final), in anycurrency, and any other credits, indebtedness or claims, in any currency, ineach case whether direct or indirect, absolute or contingent, matured orunmatured, at any time held or owing by the Buyer or any Affiliate thereof toor for the credit or the account of the Sellers. The Buyer may set-off cash,the proceeds of the liquidation of any Purchased Items and all other sums orobligations owed by the Buyer or its Affiliates to Seller against all ofSellers’ obligations to the Buyer or its Affiliates, whether under thisAgreement or under any other agreement between the parties or between Sellerand any Affiliate of the Buyer, or otherwise, whether or not such obligationsare then due, without prejudice to the Buyer’s or its Affiliate’s right torecover any deficiency. The Buyer agrees promptly to notify the Sellers afterany such set-off and application made by the Buyer; provided that the failureto give such notice shall not affect the validity of such set-off andapplication.

 

**46.****                               JOINTAND SEVERAL LIABILITY; CROSS-DEFAULT.**

 

Each Sellerhereby acknowledges and agrees that the Sellers are jointly and severallyliable to the Buyer for all representations, warranties, covenants, obligationsand liabilities of either Seller hereunder. Each Seller hereby furtheracknowledges and agrees that any Default, Event of Default or breach of arepresentation, warranty or covenant by either Seller under this Agreement ishereby considered a Default, Event of Default or breach by each Seller, asapplicable. Each Seller hereby waives any defense to their obligations underthis Agreement based upon or arising out of the disability or other defense orcessation of liability of one Seller versus another. A Seller’s subrogationclaim arising out of payments to Buyer shall constitute a capital investment inanother Seller subordinated to any claims of Buyer and equal to a ratable shareof the equity interests in such Seller.

 

**47.****                               ENTIREAGREEMENT**

 

This Agreementand the other Program Documents embody the entire agreement and understandingof the parties hereto and thereto and supersede any and all prior agreements,arrangements and understandings relating to the matters provided for herein andtherein. No alteration, waiver, amendments, or change or supplement heretoshall be binding or effective

 

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unless thesame is set forth in writing by a duly authorized representative of each partyhereto.

 

[SIGNATURE PAGEFOLLOWS]

 

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IN WITNESSWHEREOF, the parties hereto have caused this Agreement to be duly executed anddelivered as of the day and year first above written.

 

 
| **AAMES INVESTMENT CORPORATION**, a  Maryland corporation, as Seller                                                                                     |       | **AAMES CAPITAL CORPORATION**, a  California corporation, as Seller                                                                                      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                               | ** ** | ** **                                                                                                                                               |
| ** **                                                                                                                                               | ** ** | ** **                                                                                                                                               |
| By:                                                                                                                                                      | ** ** | ** **                                                                                                                                               | ** ** | By: | ** ** | ** ** |
| Name:                                                                                                                                                    | ** ** | ** **                                                                                                                                               | ** ** | Name: | ** ** | ** ** |
| Title:                                                                                                                                                   | ** ** | ** **                                                                                                                                               | ** ** | Title: | ** ** | ** ** |
| ** **                                                                                                                                               | ** ** | ** **                                                                                                                                               |
| ** **                                                                                                                                               | ** ** | ** **                                                                                                                                               |
| Address for Notices:                                                                                                                                     | ** ** | Address for Notices:                                                                                                                                     |
| 350 South Grand Avenue  Los Angeles, California 90071  Attention: Chief Financial Officer  Telecopier No.: (323) 210-5036  Telephone No.: (323) 210-4855 | ** ** | 350 South Grand Avenue  Los Angeles, California 90071  Attention: Chief Financial Officer  Telecopier No.: (323) 210-5036  Telephone No.: (323) 210-4855 |
|                                                                                                                                                     | ** ** |                                                                                                                                                     |
| With a copy to:                                                                                                                                          | ** ** | With a copy to:                                                                                                                                          |
| Attention: Vice President/Treasury  Telecopier No.: (323) 210-5044  Telephone No.: (323) 210-5385                                                        | ** ** | Attention: Vice President/Treasury  Telecopier No.: (323) 210-5044  Telephone No.: (323) 210-5385                                                        |
|                                                                                                                                                     | ** ** |                                                                                                                                                     |
| With a copy to:                                                                                                                                          | ** ** | With a copy to:                                                                                                                                          |
| Attention: General Counsel  Telecopier No.: (323) 210-5026  Telephone No.: (323) 210-4871                                                                | ** ** | Attention: General Counsel  Telecopier No.: (323) 210-5026  Telephone No.: (323) 210-4871                                                                |
|                                                                                                                                                          |            |                                                                                                                                                          |  |  |  |  |  |  |  |  |

 

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| **AAMES FUNDING CORPORATION**, a  California corporation, as Seller                                                                                      |       | **GREENWICH CAPITAL FINANCIAL  PRODUCTS, INC.**, a Delaware corporation, as  Buyer and Agent, as applicable                 |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                               |       | ** **                                                                                                                  |
| ** **                                                                                                                                               |       | ** **                                                                                                                  |
| By:                                                                                                                                                      | ** ** | ** **                                                                                                                  |   | By: | ** ** | ** ** |
| Name:                                                                                                                                                    | ** ** | ** **                                                                                                                  |   | Name: | ** ** | ** ** |
| Title:                                                                                                                                                   | ** ** | ** **                                                                                                                  |   | Title: | ** ** | ** ** |
| ** **                                                                                                                                               |       | ** **                                                                                                                  |
| ** **                                                                                                                                               |       | ** **                                                                                                                  |
| Address for Notices:                                                                                                                                     |       | Address for Notices to the Buyer:                                                                                           |
| 350 South Grand Avenue  Los Angeles, California 90071  Attention: Chief Financial Officer  Telecopier No.: (323) 210-5036  Telephone No.: (323) 210-4855 |       | 600 Steamboat Road  Greenwich, Connecticut 06830  Attention: Tony Palmisano  Telephone: (203) 618-2341  Fax: (203) 422-4718 |
| ** **                                                                                                                                               |       | ** **                                                                                                                  |
| With a copy to:                                                                                                                                          |       | With a copy to:                                                                                                             |
| Attention: Vice President/Treasury  Telecopier No.: (323) 210-5044  Telephone No.: (323) 210-5385                                                        |       | Attention: James Esposito  Telephone: (203) 625-6072  Fax: (203) 422-4072                                                   |
| ** **                                                                                                                                               |       | ** **                                                                                                                  |
| With a copy to:                                                                                                                                          |       | ** **                                                                                                                  |
| ** **                                                                                                                                               |       | ** **                                                                                                                  |
| With a copy to:                                                                                                                                          |       | ** **                                                                                                                  |
| Attention: General Counsel  Telecopier No.: (323) 210-5026  Telephone No.: (323) 210-4871                                                                |       | ** **                                                                                                                  |
|                                                                                                                                                          |            |                                                                                                                             |  |  |  |  |  |  |  |  |

 

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**ANNEXI**

 

**BUYERACTING AS AGENT**

 

This Annex Iforms a part of the Master Repurchase Agreement dated as of April 10, 2006 (the“Agreement”) among Aames Investment Corporation, Aames CapitalCorporation, Aames Funding Corporation and Greenwich Capital FinancialProducts, Inc. This Annex I sets forth the terms and conditions governing alltransactions in which the Buyer selling assets or buying assets, as the casemay be (“Agent”), in a Transaction is acting as agent for one or morethird parties (each, a “Principal”). Capitalized terms used but notdefined in this Annex I shall have the meanings ascribed to them in theAgreement.

 

1.                                       AdditionalRepresentations. Agent hereby makes the following representations, whichshall continue during the term of any Transaction: Principal has dulyauthorized Agent to execute and deliver the Agreement and the other ProgramDocuments on its behalf, has the power to so authorize Agent and to enter intothe Transactions contemplated by the Agreement and the other Program Documentsand to perform the obligations of Seller or the Buyer, as the case may be,under such Transactions, and has taken all necessary action to authorize suchexecution and delivery by Agent and such performance by it.

 

2.                                       Identificationof Principals. Agent agrees (a) to provide the other party, prior to thedate on which the parties agree to enter into any Transaction under theAgreement, with a written list of Principals for which it intends to act asAgent (which list may be amended in writing from time to time with the consentof the other party) and (b) to provide the other party, before the close ofbusiness on the next business day after orally agreeing to enter into a Transaction,with notice of the specific Principal or Principals for whom it is acting inconnection with such Transaction. If (i) Agent fails to identify such Principalor Principals prior to the close of business on such next business day or (ii)the other party shall determine in its sole discretion any Principal orPrincipals identified by Agent are not acceptable to it, the other party mayreject and rescind any Transaction with such Principal or Principals, return toAgent any Purchased Loans or portion of the Purchase Price, as the case may be,previously transferred to the other party and refuse any further performanceunder such Transaction, and Agent shall immediately return to the other partyany portion of the Purchase Price or Purchased Loans, as the case may be,previously transferred to Agent in connection with such Transaction; provided,however, that (A) the other party shall promptly (and in any event within onebusiness day) notify Agent of its determination to reject and rescind suchTransaction and (B) to the extent that any performance was rendered by anyparty under any Transaction rejected by the other party, and such party shallremain entitled to any Price Differential or other amounts that would have beenpayable to it with respect to such performance if such Transaction had not beenrejected. The other party acknowledges that Agent shall not have any obligationto provide it with confidential information regarding the financial status ofits Principals; Agent agrees, however, that it will assist the other party inobtaining from Agent’s Principals such Information regarding the financialstatus of such Principals as the other party may reasonably request.

 

3.                                       Limitationof Agent’s Liability. The parties expressly acknowledge that if the

 

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representationsof Agent under the Agreement, including this Annex I, are true and correct inall material respects during the term of any Transaction and Agent otherwisecomplies with the provisions of this Annex I, then (a) Agent’s obligationsunder the Agreement shall not include a guarantee of performance by itsPrincipal or Principals; provided that Agent shall remain liable forperformance pursuant to Section 10 of the Agreement, and (b) the other party’sremedies shall not include a right of setoff in respect of rights orobligations, if any, of Agent arising in other transactions in which Agent isacting as principal.

 

4.                                       MultiplePrincipals.

 

(a)                                  Inthe event that Agent proposes to act for more than one Principal hereunder,Agent and the other party shall elect whether (i) to treat Transactions underthe Agreement as transactions entered into on behalf of separate Principals or(ii) to aggregate such Transactions as if they were transactions by a singlePrincipal. Failure to make such an election in writing shall be deemed anelection to treat Transactions under the Agreement as transactions on behalf ofa single Principal.

 

(b)                                 Inthe event that Agent and the other party elect (or are deemed to elect) totreat Transactions under the Agreement as transactions on behalf of separatePrincipals, the parties agree that (i) Agent will provide the other party,together with the notice described in Section 2(b) of this Annex I, noticespecifying the portion of each Transaction allocable to the account of each ofthe Principals for which it is acting (to the extent that any such Transactionis allocable to the account of more than one Principal); (ii) the portion ofany individual Transaction allocable to each Principal shall be deemed aseparate Transaction under the Agreement; (iii) the margin maintenanceobligations of Seller under Section 6(a) of the Agreement shall be determinedon a Transaction-by-Transaction basis (unless the parties agree to determinesuch obligations on a Principal-by-Principal basis); and (iv) Buyer’s remediesunder the Agreement upon the occurrence of an Event of Default shall bedetermined as if Agent had entered into a separate Agreement with the otherparty on behalf of each of its Principals.

 

(c)                                  Inthe event that Agent and the other party elect to treat Transactions under theAgreement as if they were transactions by a single Principal, the parties agreethat (i) Agent’s notice under Section 2(b) of this Annex I need only identifythe names of its Principals but not the portion of each Transaction allocableto each Principal’s account; (ii) the margin maintenance obligations of Sellerunder Section 6(a) of the Agreement shall, subject to any greater requirementimposed by applicable law, be determined on an aggregate basis for allTransactions entered into by Agent on behalf of any Principal; and (iii) Buyer’sremedies upon the occurrence of an Event of Default shall be determined as ifall Principals were a single Buyer.

 

(d)                                 Notwithstandingany other provision of the Agreement (including, without limitation, this AnnexI), the parties agree that any Transactions by Agent on behalf of an employeebenefit plan under ERISA shall be treated as Transactions

 

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on behalf ofseparate Principals in accordance with Section 4(b) of this Annex I (and allmargin maintenance obligations of the parties shall be determined on aTransaction-by-Transaction basis).

 

5.                                       Interpretationof Terms. All references to “Buyer” in the Agreement shall, subject to theprovisions of this Annex I (including, among other provisions, the limitationson Agent’s liability in Section 3 of this Annex 1), be construed to reflectthat (i) each Principal shall have, in connection with any Transaction orTransactions entered into by Agent on its behalf, the rights, responsibilities,privileges and obligations of a “Buyer”, directly entering into suchTransaction or Transactions with the other party under the Agreement, and (ii)Agent’s Principal or Principals have designated Agent as their sole agent forperformance of Buyer’s obligations to Seller, and for receipt of performance bySeller of its obligations to Buyer, in connection with any Transaction orTransactions under the Agreement (including, among other things, as Agent foreach Principal in connection with transfers of Loans, securities, cash or otherproperty and as agent for giving and receiving all notices under theAgreement). Both Agent and its Principal or Principals shall be deemed “parties”to the Agreement and all references to a “party” or “either party” in theAgreement shall be deemed revised accordingly.

 

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**Schedule 1**

 

**REPRESENTATIONSAND WARRANTIES RE: LOANS**

 

**Eligible Loans**

 

As to eachLoan that is subject to a Transaction hereunder (and the related Mortgage,Note, Assignment of Mortgage and Mortgaged Property), each Seller shall bedeemed to make the following representations and warranties to Buyer as of thePurchase Date and as of each date such Loan is subject to a Transaction:

 

## (a)                                  Loansas Described. The information set forth in the Loan Schedule with respectto the Loan is complete, true and correct in all material respects.

##  

## (b)                                 PaymentsCurrent. Except with respect to any Early Payment Default Repurchased Loan,the first Monthly Payment shall have been made prior to the second scheduledMonthly Payment becoming due.

##  

## (c)                                  NoOutstanding Charges. There are no defaults in complying with the terms ofthe Mortgage securing the Loan, and all taxes, governmental assessments,insurance premiums, water, sewer and municipal charges, leasehold payments orground rents which previously became due and owing have been paid, or an escrowof funds has been established in an amount sufficient to pay for every suchitem which remains unpaid and which has been assessed but is not yet due andpayable. Neither the Seller nor the Qualified Originator from which the Selleracquired the Loan has advanced funds, or induced, solicited or knowinglyreceived any advance of funds by a party other than the Mortgagor, directly orindirectly, for the payment of any amount required under the Loan, except forinterest accruing from the date of the Note or date of disbursement of theproceeds of the Loan, whichever is more recent, to the day which precedes byone month the Due Date of the first installment of principal and interestthereunder.

##  

## (d)                                 OriginalTerms Unmodified. The terms of the Note and Mortgage have not been impaired,waived, altered or modified in any respect, from the date of origination;except by a written instrument which has been recorded, if necessary to protectthe interests of the Buyer, and which has been delivered to the Custodian andthe terms of which are reflected in the Loan Schedule. The substance of anysuch waiver, alteration or modification has been approved by the title insurer,to the extent required by the title insurance policy, and its terms arereflected on the Loan Schedule. No Mortgagor in respect of the 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 the Custodianand the terms of which are reflected in the Loan Schedule.

##  

## (e)                                  NoDefenses. The Loan is not subject to any right of rescission, setoff,counterclaim or defense, including without limitation the defense of usury, norwill the operation of any of the terms of the Note or the Mortgage, or theexercise of any right thereunder, render either the 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 noMortgagor in respect of the Loan was a debtor in any state or Federalbankruptcy or insolvency proceeding at the time the Loan was originated.

 

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## (f)                                    HazardInsurance. The Mortgaged Property is insured by a fire and extended perilsinsurance policy, issued by a Qualified Insurer, and such other hazards as arecustomary in the area where the Mortgaged Property is located, and to theextent required by the Seller as of the date of origination consistent with theUnderwriting Guidelines, 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 cost of allimprovements to the Mortgaged Property, (ii) either (A) the outstandingprincipal balance of the Loan with respect to each First Lien Loan or (B) withrespect to each Second Lien Loan, the sum of the outstanding principal balanceof the First Lien Loan and the outstanding principal balance of the Second LienLoan, (iii) the amount necessary to avoid the operation of any co-insuranceprovisions with respect to the Mortgaged Property, and consistent with theamount that would have been required as of the date of origination inaccordance with the Underwriting Guidelines or (iv) the amount necessary tofully compensate for any damage or loss to the improvements that are a part ofsuch property on a replacement cost basis. If any portion of the MortgagedProperty is in an area identified by any federal Governmental Authority ashaving special flood hazards, and flood insurance is available, a floodinsurance policy meeting the current guidelines of the Federal InsuranceAdministration is in effect with a generally acceptable insurance carrier, inan amount representing coverage not less than the least of (1) the outstandingprincipal balance of the Loan, (2) the full insurable value of the MortgagedProperty, and (3) the maximum amount of insurance available under the FloodDisaster Protection Act of 1973, as amended. All such insurance policies(collectively, the “hazard insurance policy”) contain a standard mortgageeclause naming the Seller, its successors and assigns (including withoutlimitation, subsequent owners of the Loan), as mortgagee, and may not bereduced, terminated or canceled without 30 days’ prior written notice to themortgagee. No such notice has been received by the Seller. All premiums due andowing on such insurance policy have been paid. The related Mortgage obligatesthe Mortgagor to maintain all such insurance and, at such Mortgagor’s failureto do so, authorizes the mortgagee to maintain such insurance at the Mortgagor’scost and expense and to seek reimbursement therefor from such Mortgagor. Whererequired by state law or regulation, the Mortgagor has been given anopportunity to choose the carrier of the required hazard insurance, providedthe policy is not a “master” or “blanket” hazard insurance policy covering acondominium, or any hazard insurance policy covering the common facilities of aplanned unit development. The hazard insurance policy is the valid and bindingobligation of the insurer and is in full force and effect. The Seller has notengaged in, and has no knowledge of the Mortgagor’s having engaged in, any actor omission which would impair the coverage of any such policy, the benefits ofthe 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 Seller.

##  

## (g)                                 Compliancewith Applicable Laws. Any and all requirements of any federal, state orlocal law including, without limitation, usury, truth-in-lending, allapplicable predatory and abusive lending, real estate settlement procedures,consumer credit protection, equal credit opportunity or disclosure lawsapplicable to the origination and servicing of such Loan have been compliedwith, the consummation of the transactions contemplated hereby will not involvethe violation of any such laws or regulations, and the Seller shall maintain orshall cause its agent to maintain in its possession, available for theinspection of the Buyer, and shall deliver to the

 

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## Buyer, upon two Business Days’request, evidence of compliance with all such requirements.

##  

## (h)                                 NoSatisfaction of Mortgage. The Mortgage has not been satisfied, canceled,subordinated or rescinded, in whole or in part, and the Mortgaged Property hasnot been released from the lien of the Mortgage, in whole-or in part, nor has anyinstrument been executed that would effect any such release, cancellation,subordination or rescission other than in the case of a release of a portion ofthe land comprising a Mortgaged Property or a release of a blanket Mortgagewhich release will not cause the Loan to fail to satisfy the UnderwritingGuidelines. The Seller has not waived the performance by the Mortgagor of anyaction, if the Mortgagor’s failure to perform such action would cause the Loanto be in default, nor has the Seller waived any default resulting from anyaction or inaction by the Mortgagor.

##  

## (i)                                     Locationand Type of Mortgaged Property. The Mortgaged Property is located in thestate identified in the Loan Schedule and consists of a single parcel of realproperty with a detached single family residence erected thereon, or a two- tofour-family dwelling, or an individual condominium unit in a condominiumproject, or an individual unit in a planned unit development or a de minimisplanned unit development, provided, however, that any condominium unit orplanned unit development shall conform with the applicable Fannie Mae andFreddie Mac requirements regarding such dwellings, that a de minimus percentageof the Loans may be Cooperative Loans and that no residence or dwelling is a mobilehome or a manufactured dwelling. No portion of the Mortgaged Property is usedfor commercial purposes.

##  

## (j)                                     ValidLien. The Mortgage (including any Negative Amortization which may arisethereunder) is a valid, subsisting, enforceable and perfected (A) first lienand first priority security interest with respect to each Loan which isindicated by the Seller to be a First Lien (as reflected on the Loan Schedule),or (B) second lien and second priority security interest with respect to eachLoan which is indicated by the Seller to be a Second Lien (as reflected on theLoan Schedule), in either case, on the real property included in the MortgagedProperty, including all buildings on the Mortgaged Property and allinstallations and mechanical, electrical, plumbing, heating and airconditioning systems located in or annexed to such buildings, and alladditions, alterations and replacements made at any time with respect to theforegoing and with respect to Cooperative Loans, including the ProprietaryLease and the Cooperative Shares. The lien of the Mortgage is subject only to:

##  

## (1)                                  thelien of current real property taxes and assessments not yet due and payable;

 

(2)                                  covenants,conditions and restrictions, rights of way, easements and other matters of thepublic record as of the date of recording acceptable to prudent mortgagelending institutions generally and specifically referred to in the lender’stitle insurance policy delivered to the originator of the Loan and (a) referredto or otherwise considered in the appraisal made for the originator of the Loanor (b) which do not adversely affect the Appraised Value of the relatedMortgaged Property set forth in such appraisal;

 

(3)                                  othermatters to which like properties are commonly subject which do not materially interferewith the benefits of the security intended to be provided by the Mortgage orthe use, enjoyment, value or marketability of the related Mortgaged Property;and

 

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(4)                                  withrespect to each Loan which is indicated by the Seller to be a Second Lien Loan(as reflected on the Loan Schedule) a First Lien on the Mortgaged Property.

 

Any securityagreement, chattel mortgage or equivalent document related to and delivered inconnection with the Loan establishes and creates a valid, subsisting andenforceable (A) first lien and first priority security interest with respect toeach Loan which is indicated by the Seller to be a First Lien (as reflected onthe Loan Schedule), or (B) second lien and second priority security interestwith respect to each Loan which is indicated by the Seller to be a Second LienLoan (as reflected on the Loan Schedule), in either case, on the propertydescribed therein and the Seller has full right to pledge and assign the sameto the Buyer. Except with respect to any First Lien Loan which was originatedin connection with a Concurrent Second Lien Loan, the Mortgaged Property wasnot, as of the date of origination of the Loan, subject to a mortgage, deed oftrust, deed to secure debt or other security instrument creating a liensubordinate to the lien of the Mortgage.

 

(k)                                  Validityof Mortgage Documents. The Note and the Mortgage and any other agreementexecuted and delivered by a Mortgagor or guarantor, if applicable, inconnection with a Loan are genuine, and each is the legal, valid and bindingobligation of the maker thereof enforceable in accordance with its terms. Allparties to the Note, the Mortgage and any other such related agreement hadlegal capacity to enter into the Loan and to execute and deliver the Note, theMortgage and any such agreement, and the Note, the Mortgage and any other suchrelated agreement have been duly and properly executed by such related parties.No fraud, error, omission, misrepresentation, negligence or similar occurrencewith respect to a Loan has taken place on the part of any Person, including,without limitation, the Mortgagor, any appraiser, any builder or developer, orany other party involved in the origination of the Loan. The Seller has reviewedall of the documents constituting the Servicing File and has made suchinquiries as it deems necessary to make and confirm the accuracy of therepresentations set forth herein.

##  

(l)                                     FullDisbursement of Proceeds. The proceeds of the Loan have been fullydisbursed and there is no further requirement for future advances thereunder,and any 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 theLoan and the recording of the Mortgage were paid, and the Mortgagor is notentitled to any refund of any amounts paid or due under the Note or Mortgage.

##  

(m)                               Ownership.The Seller is the sole owner and holder of the Loan. All Loans acquired by theSeller from third parties (including affiliates) were acquired in a true andlegal sale pursuant to which such third party sold, transferred, conveyed andassigned to the Seller all of its right, title and interest in, to and undersuch Loan and retained no interest in such Loan. In connection with such sale,such third party received reasonably equivalent value and fair considerationand, in accordance with GAAP and for federal income tax purposes, reported thesale of such Loan to the Seller as a sale of its interests in such Loan. TheLoan is not assigned or pledged, and the Seller has good, indefeasible andmarketable title thereto, and has full right to transfer, pledge and assign theLoan to the Buyer free and clear of any encumbrance, equity, participationinterest, lien, pledge, charge, claim or security interest, and has full rightand authority subject to no interest or participation of, or agreement with,any other party, to assign, transfer and pledge each Loan pursuant to thisAgreement and following the pledge of each

 

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Loan, the Buyer will hold such Loan free and clear of any encumbrance,equity, participation interest, lien, pledge, charge, claim or securityinterest except any such security interest created pursuant to the terms ofthis Agreement.

##  

(n)                                 DoingBusiness. All parties which have had any interest in the Loan, whether asmortgagee, assignee, pledgee or otherwise, are (or, during the period in whichthey held and disposed of such interest, were) (i) in compliance with any andall applicable licensing requirements of the laws of the state wherein theMortgaged Property is located, and (ii) either (A) organized under the laws ofsuch state, (B) qualified to do business in such state, (C) a federal savingsand loan association, a savings bank or a national bank having a principaloffice in such state or (D) not doing business in such state.

##  

(o)                                 LTV.As of the date of origination of the Loan, the LTV and CLTV (if applicable) areas identified on the Loan Schedule. No First Lien Loan has an LTV greater than100% and no First Lien Loan which is not a Full Documentation Loan has an LTVgreater than 90%.

##  

(p)                                 TitleInsurance. The Loan is covered by either (i) an attorney’s opinion of titleand abstract of title, the form and substance of which is acceptable to prudentmortgage lending institutions making mortgage loans in the area wherein theMortgaged Property is located or (ii) an ALTA lender’s title insurance policyor other generally acceptable form of policy or insurance acceptable to FannieMae or 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 the Seller,its successors and assigns, as to the first priority lien of the Mortgage inthe original principal amount of the Loan (including, to the extent a Noteprovides for Negative Amortization, the maximum amount of Negative Amortizationin accordance with the Mortgage), subject only to the exceptions contained inclauses (1), (2), (3) and, with respect to each Loan which is indicated by theSeller to be a Second Lien Loan (as reflected on the Loan Schedule) clause (4)of paragraph (j) of this Part I of Schedule 1, and in the case of AdjustableRate Loans, against any loss by reason of the invalidity or unenforceability ofthe lien resulting from the provisions of the Mortgage providing for adjustmentto the Mortgage Interest Rate and Monthly Payment and Negative Amortization. Whererequired by state law or regulation, the Mortgagor has been given theopportunity to choose the carrier of the required mortgage title insurance. Additionally,such lender’s title insurance policy affirmatively insures ingress and egressand against encroachments by or upon the Mortgaged Property or any interesttherein. The title policy does not contain any special exceptions (other thanthe standard exclusions) for zoning and uses and has been marked to delete thestandard survey exception or to replace the standard survey exception with aspecific survey reading. The Seller, its successors and assigns, are the soleinsureds of such lender’s title insurance policy, and such lender’s titleinsurance policy is valid and remains in full force and effect and will be inforce and effect upon the consummation of the transactions contemplated by thisAgreement. No claims have been made under such lender’s title insurance policy,and no prior holder or servicer of the related Mortgage, including the Seller,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 or

 

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realized by the Seller.

##  

(q)                                 NoDefaults. There is no default, breach, violation or event of accelerationexisting under the Mortgage or the Note and no event has occurred which, withthe passage of time or with notice and the expiration of any grace or cureperiod, would constitute a default, breach, violation or event of acceleration,and neither the Seller nor its predecessors have waived any default, breach,violation or event of acceleration. With respect to each Loan which isindicated by the Seller to be a Second Lien Loan (as reflected on the LoanSchedule) (i) the First Lien is in full force and effect, (ii) there is nodefault, breach, violation or event of acceleration existing under such FirstLien mortgage or the related mortgage note, (iii) no event which, with thepassage of time or with notice and the expiration of any grace or cure period,would constitute a default, breach, violation or event of accelerationthereunder, and either (A) the First Lien mortgage contains a provision whichallows or (B) applicable law requires, the mortgagee under the second lien Loanto receive notice of, and affords such mortgagee an opportunity to cure anydefault by payment in full or otherwise under the First Lien mortgage.

##  

(r)                                    NoMechanics’ Liens. At origination, there were no mechanics’ or similar liensor claims which have been filed for work, labor or material (and no rights areoutstanding that under the law could give rise to such liens) affecting theMortgaged Property which are or may be liens prior to, or equal or coordinatewith the lien of the Mortgage.

##  

(s)                                  Locationof Improvements; No Encroachments. All improvements which were consideredin determining the Appraised Value of the Mortgaged Property lie wholly withinthe boundaries and building restriction lines of the Mortgaged Property, and noimprovements on adjoining properties encroach upon the Mortgaged Property. Noimprovement located on or being part of the Mortgaged Property is in violationof any applicable zoning and building law, ordinance or regulation.

##  

(t)                                    Origination;Payment Terms. The Loan was originated by or in conjunction with amortgagee approved by the Secretary of Housing and Urban Development pursuantto Sections 203 and 211 of the National Housing Act, a savings and loanassociation, a savings bank, a commercial bank, credit union, insurance companyor similar banking institution which is supervised and examined by a federal orstate authority. Principal payments on the Loan commenced no more than sixty(60) days after funds were disbursed in connection with the Loan. The MortgageInterest Rate is adjusted, with respect to Adjustable Rate Loans, on eachInterest Rate Adjustment Date to equal the Index plus the Gross Margin (roundedup or down to the nearest .125%), subject to the Mortgage Interest Rate Cap. TheMortgage Interest Rate is adjusted, with respect to Adjustable Rate Loans, oneach Interest Rate Adjustment Date to equal the Index plus the Gross Margin(rounded up or down to the nearest .125%), subject to the Mortgage InterestRate Cap. With respect to each Loan that is not a Negative Amortization Loan,the Mortgage Note is payable on the first day of each month in equal monthlyinstallments of principal and interest, which installments of interest, withrespect to an Adjustable Rate Mortgage Loan, are subject to change due to theadjustments to the Mortgage Interest Rate on each Adjustment Date, withinterest calculated and payable in arrears, sufficient to amortize the Assetfully by the stated maturity date, over an original term of not more than 30years from commencement of amortization. With respect to each NegativeAmortization Loan, the related Note requires a Monthly Payment which issufficient during the period following each Payment

 

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Adjustment Date, to fully amortize the outstanding principal balance asof the first day of such period (including any Negative Amortization) over thethen remaining term of such Note and to pay interest at the related MortgageInterest Rate; provided, that the Monthly Payment shall not increase to anamount that exceeds 107.5% of the amount of the Monthly Payment that was dueimmediately prior to the Payment Adjustment Date; provided, further, that thepayment adjustment cap shall not be applicable with respect to the adjustmentmade to the Monthly Payment that occurs in a year in which the Loan has beenoutstanding for a multiple of five (5) years and in any such year the MonthlyPayment shall be adjusted to fully amortize the Loan over the remaining term. TheDue Date of the first payment under the Note is no more than 60 days from thedate of the Note.

##  

(u)                                 CustomaryProvisions. The Note has a stated maturity. The Mortgage contains customaryand enforceable provisions such as to render the rights and remedies of theholder thereof adequate for the realization against the Mortgaged Property ofthe benefits of the security provided thereby, including, (i) in the case of aMortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwiseby judicial foreclosure. Upon default by a Mortgagor on a Loan and foreclosureon, or trustee’s sale of, the Mortgaged Property pursuant to the properprocedures, the holder of the Loan will be able to deliver good and merchantabletitle to the Mortgaged Property. There is no homestead or other exemptionavailable to a Mortgagor which would interfere with the right to sell theMortgaged Property at a trustee’s sale or the right to foreclose the Mortgage.

##  

(v)                                 Conformancewith Underwriting Guidelines and Agency Standards. The Loan wasunderwritten in accordance with the applicable Underwriting Guidelines. TheNote and Mortgage are on forms similar to those used by Freddie Mac or FannieMae and the Seller has not made any representations to a Mortgagor that areinconsistent with the mortgage instruments used. Any Concurrent Second LienLoan was underwritten in accordance with the Seller’s Underwriting Guidelinesfor the Seller’s “80-20” program, a copy of which guidelines has been providedto the Buyer.

##  

(w)                               Occupancyof the Mortgaged Property. As of the Purchase Date the Mortgaged Propertyis either vacant or lawfully occupied under applicable law. All inspections,licenses and certificates required to be made or issued with respect to alloccupied portions of the Mortgaged Property and, with respect to the use andoccupancy of the same, including but not limited to certificates of occupancyand fire underwriting certificates, have been made or obtained from theappropriate authorities. The Seller has not received written notification fromany governmental authority 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. The Seller has not received notice of anyviolation or failure to conform with any such law, ordinance, regulation,standard, license or certificate. Except as otherwise set forth in the LoanSchedule, the Mortgagor represented at the time of origination of the Loan thatthe Mortgagor would occupy the Mortgaged Property as the Mortgagor’s primaryresidence.

##  

(x)                                   NoAdditional Collateral. The Note is not and has not been secured by anycollateral except the lien of the corresponding Mortgage and the securityinterest of any applicable security agreement or chattel mortgage referred toin clause (j) above.

 

I-10

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(y)                                 Deedsof Trust. In the event the Mortgage constitutes a deed of trust, a trustee,authorized and duly qualified under applicable law to serve as such, has beenproperly designated and currently so serves and is named in the Mortgage, andno fees or expenses are or will become payable by the Custodian or the Buyer tothe trustee under the deed of trust, except in connection with a trustee’s saleafter default by the Mortgagor.

##  

(z)                                   Deliveryof Mortgage Documents. If the Loan is a Dry Loan, the Note, the Mortgage,the Assignment of Mortgage and any other documents required to be deliveredunder the Custodial Agreement for each Loan have been delivered to theCustodian. The Seller or its agent is in possession of a complete, true andmaterially accurate Mortgage File in compliance with the Custodial Agreement,except for such documents the originals of which have been delivered to theCustodian.

##  

(aa)                            Transferof Loans. The Assignment of Mortgage is in recordable form and isacceptable for recording under the laws of the jurisdiction in which the MortgagedProperty is located.

##  

(bb)                          Due-On-Sale.The Mortgage contains an enforceable provision for the acceleration of thepayment of the unpaid principal balance of the Loan in the event that theMortgaged Property is sold or transferred without the prior written consent ofthe mortgagee thereunder.

##  

(cc)                            NoBuydown Provisions; No Graduated Payments or Contingent Interests. The Loandoes not contain provisions pursuant to which Monthly Payments are paid orpartially paid with funds deposited in any separate account established by theSeller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by anysource other than the Mortgagor nor does it contain any other similarprovisions which may constitute a “buydown” provision. The Loan is not agraduated payment mortgage loan and the Loan does not have a sharedappreciation or other contingent interest feature.

##  

(dd)                          Consolidationof Future Advances. Any future advances made to the Mortgagor prior to theorigination of the Loan have been consolidated with the outstanding principalamount secured by the Mortgage, and the secured principal amount, asconsolidated, bears a single interest rate and single repayment term. The lienof the Mortgage securing the consolidated principal amount is expressly insuredas having (A) first lien priority with respect to each Loan which is indicatedby the Seller to be a First Lien (as reflected on the Loan Schedule), or (B)second lien priority with respect to each Loan which is indicated by the Sellerto be a Second Lien Loan (as reflected on the Loan Schedule), in either case,by a title insurance policy, an endorsement to the policy insuring themortgagee’s consolidated interest or by other title evidence acceptable toFannie Mae and Freddie Mac. The consolidated principal amount does not exceedthe original principal amount of the Loan plus any Negative Amortization.

##  

(ee)                            MortgagedProperty Undamaged. The Mortgaged Property (and with respect to anyCooperative Loan, the Cooperative Unit) is undamaged by waste, fire, earthquakeor earth movement, windstorm, flood, tornado or other casualty so as to affectadversely the value of the Mortgaged Property as security for the Loan or theuse for which the premises were intended and each Mortgaged Property is in goodrepair. There have not been any condemnation proceedings

 

I-11

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with respect to the Mortgaged Property and the Seller has no knowledgeof any such proceedings.

##  

(ff)                                CollectionPractices; Escrow Deposits: Interest Rate Adjustments. The origination andcollection practices used by the originator, each servicer of the Loan and theSeller with respect to the Loan have been in all material respects incompliance with Accepted Servicing Practices, applicable laws and regulations,and have been in all respects legal and proper. With respect to escrow depositsand Escrow Payments (other than with respect to each Loan which is indicated bythe Seller to be a Second Lien Loan and for which the mortgagee under the FirstLien is collecting Escrow Payments (as reflected on the Loan Schedule)), allsuch payments are in the possession of, or under the control of, the Seller andthere exist no deficiencies in connection therewith for which customaryarrangements for repayment thereof have not been made. All Escrow Payments havebeen collected in full compliance with state and federal law. An escrow offunds is not prohibited by applicable law and has been established in an amountsufficient to pay for every item that remains unpaid and has been assessed butis not yet due and payable. No escrow deposits or Escrow Payments or othercharges or payments due the Seller have been capitalized under the Mortgage orthe Note. All Mortgage Interest Rate adjustments have been made in strictcompliance with state and federal law and the terms of the related Note. Anyinterest required to be paid pursuant to state, federal and local law has beenproperly paid and credited.

##  

(gg)                          Conversionto Fixed Interest Rate. With respect to Adjustable Rate Loans, the Loan isnot convertible to a fixed interest rate Loan.

##  

(hh)                          OtherInsurance Policies. No action, inaction or event has occurred and no stateof facts exists or has existed that has resulted or will result in theexclusion from, denial of, or defense to coverage under any applicable specialhazard insurance policy, PMI Policy or bankruptcy bond, irrespective of thecause of such failure of coverage. In connection with the placement of any suchinsurance, no commission, fee, or other compensation has been or will bereceived by the Seller or by any officer, director, or employee of the Selleror any designee of the Seller or any corporation in which the Seller or anyofficer, director, or employee had a financial interest at the time ofplacement of such insurance.

##  

(ii)                                  Servicepersons’Civil Relief Act. The Mortgagor has not notified the Seller, and the Sellerhas no knowledge, of any relief requested or allowed to the Mortgagor under theServicepersons’ Civil Relief Act.

##  

(jj)                                  Appraisal.The Mortgage File contains an appraisal of the related Mortgaged Propertysigned prior to the approval of the Loan application by a qualified appraiser,duly appointed by the Seller or the Qualified Originator, who had no interest,direct or indirect in the Mortgaged Property or in any loan made on thesecurity thereof, and whose compensation is not affected by the approval ordisapproval of the Loan, and the appraisal and appraiser both satisfy therequirements of Fannie Mae or Freddie Mac and Title XI of the Federal InstitutionsReform, Recovery, and Enforcement Act of 1989 as amended and the regulationspromulgated thereunder, all as in effect on the date the Loan was originated.

##  

(kk)                            DisclosureMaterials. The Mortgagor has executed a statement to the effect that

 

I-12

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the Mortgagor has received all disclosure materials required byapplicable law with respect to the making of adjustable rate mortgage loans,and the Seller maintains such statement in the Mortgage File.

##  

(ll)                                  Constructionor Rehabilitation of Mortgaged Property. No Loan was made in connectionwith the construction or rehabilitation of a Mortgaged Property or facilitatingthe trade-in or exchange of a Mortgaged Property.

##  

(mm)                      NoDefense to Insurance Coverage. No action has been taken or failed to betaken, no event has occurred and no state of facts exists or has existed on orprior to the Purchase Date (whether or not known to the Seller on or prior tosuch date) which has resulted or will result in an exclusion from, denial of,or defense to coverage under any private mortgage insurance (including, withoutlimitation, any exclusions, denials or defenses which would limit or reduce theavailability of the timely payment of the full amount of the loss otherwise duethereunder to the insured) whether arising out of actions, representations,errors, omissions, negligence, or fraud of the Seller, the related Mortgagor orany party involved in the application for such coverage, including theappraisal, plans and specifications and other exhibits or documents submittedtherewith to the insurer under such insurance policy, or for any other reasonunder such coverage, but not including the failure of such insurer to pay byreason of such insurer’s breach of such insurance policy or such insurer’sfinancial inability to pay.

##  

(nn)                          Capitalizationof Interest. The Note does not by its terms provide for the capitalizationor forbearance of interest.

##  

(oo)                          NoEquity Participation. No document relating to the Loan provides for anycontingent or additional interest in the form of participation in the cash flowof the Mortgaged Property or a sharing in the appreciation of the value of theMortgaged Property. The indebtedness evidenced by the Note is not convertibleto an ownership interest in the Mortgaged Property or the Mortgagor and theSeller has not financed nor does it own directly or indirectly, any equity ofany form in the Mortgaged Property or the Mortgagor.

##  

(pp)                          WithdrawnLoans. If the Loan has been released to the Seller pursuant to a Requestfor Release as permitted under Section 5 of the Custodial Agreement, then thepromissory note relating to the Loan was returned to the Custodian within 10days (or if such tenth day was not a Business Day, the next succeeding BusinessDay).

##  

(qq)                          NoException. Other than as noted by the Custodian on the Exception Report; noException exists (as defined in the Custodial Agreement) with respect to theLoan which would materially adversely affect the Loan or the Buyer’s securityinterest, granted by the Seller, in the Loan as determined by the Buyer in itssole discretion.

##  

(rr)                                QualifiedOriginator. The Loan has been originated by, and, if applicable, purchasedby the Seller from, a Qualified Originator.

##  

(ss)                            MortgageSubmitted for Recordation. The Mortgage has been submitted for recordationin the appropriate governmental recording office of the jurisdiction where theMortgaged Property is located.

 

I-13

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(tt)                                FirstLien Consent. With respect to each Loan which is a Second Lien Loan, (i) ifthe related first lien provides for negative amortization, the LTV wascalculated at the maximum principal balance of such first lien that couldresult upon application of such negative amortization feature, and (ii) eitherno consent for the Loan is required by the holder of the first lien or suchconsent has been obtained and is contained in the Mortgage File.

##  

(uu)                          AcceptableInvestment. No specific circumstances or conditions exist with respect tothe Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor’s creditstanding that should reasonably be expected to (i) cause private institutionalinvestors which invest in Loans similar to the Loan to regard the Loan as anunacceptable investment, (ii) cause the Loan to be more likely to become pastdue in comparison to similar Loans, or (iii) adversely affect the value ormarketability of the Loan in comparison to similar Loans;

##  

(vv)                          EnvironmentalMatters. The Mortgaged Property is free from any and all toxic or hazardoussubstances and there exists no violation of any local, state or federalenvironmental law, rule or regulation;

##  

(ww)                      GroundLeases. With respect to each ground lease to which the Mortgaged Propertyis subject (a “Ground Lease”): (i) the Mortgagor is the owner of a valid andsubsisting interest as tenant under the Ground Lease; (ii) the Ground Lease isin full force and effect, unmodified and not supplemented by any writing orotherwise; (iii) all rent, additional rent and other charges reserved thereinhave been paid to the extent they are payable to the date hereof; (iv) theMortgagor enjoys the quiet and peaceful possession of the estate demisedthereby, subject to any sublease; (v) the Mortgagor is not in default under anyof the terms thereof and there are no circumstances which, with the passage oftime or the giving of notice or both, would constitute an event of defaultthereunder; (vi)  the lessor under theGround Lease is not in default under any of the terms or provisions thereof onthe part of the lessor to be observed or performed; (vii) the lessor under theGround Lease has satisfied all of its repair or construction obligations, ifany, to date pursuant to the terms of the Ground Lease; (viii) the remainingterm of the Ground Lease extends not less than ten (10) years following thematurity date of such Loan; and (ix) the execution, delivery and performance ofthe Mortgage do not require the consent (other than those consents which have beenobtained and are in full force and effect) under, and will not contravene anyprovision of or cause a default under, the Ground Lease;

##  

(xx)                              Valueof Mortgaged Property. The Seller has no knowledge of any circumstancesexisting that should reasonably be expected to adversely affect the value orthe marketability of the Mortgaged Property or the Loan or to cause the Loan toprepay during any period materially faster or slower than the Loans originatedby the Seller generally;

##  

(yy)                          HOEPA.No Loan is (a) subject to the provisions of the Homeownership and EquityProtection Act of 1994 as amended (“HOEPA”), (b) a “high cost” mortgage loan, “covered”mortgage loan, “high risk home” mortgage loan, or “predatory” mortgage loan orany other comparable term, no matter how defined under any federal, state orlocal law, (c) subject to any comparable federal, state or local statutes orregulations, or any other statute or regulation providing for heightenedregulatory scrutiny or assignee liability to holders of such mortgage loans, or(d) a High Cost Loan or Covered Loan, as applicable (as such terms are definedin the current Standard & Poor’s LEVELS® Glossary Revised, Appendix E);

 

I-14

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(zz)                              NoPredatory Lending. No predatory, abusive or deceptive lending practices,including but not limited to, the extension of credit to a mortgagor withoutregard for the mortgagor’s ability to repay the Loan and the extension ofcredit to a mortgagor which has no tangible net benefit to the mortgagor, wereemployed in connection with the origination of the Loan;

##  

(aaa)                      GeorgiaMortgage Loans. No Loan which is secured by a Mortgaged Property which islocated in the state of Georgia was originated prior to March 7, 2004; and

##  

(bbb)                   CooperativeLoans. With respect to each Cooperative Loan, each original UCC financingstatement, continuation statement or other governmental filing or recordationnecessary to create or preserve the perfection and priority of the firstpriority lien and security interest in the Cooperative Shares and ProprietaryLease has been timely and properly made. Any security agreement, chattelmortgage or equivalent document related to the Cooperative Loan and deliveredto the Seller or its designee establishes in the Seller a valid and subsistingperfected first lien on and security interest in the Mortgaged Propertydescribed therein, and the Seller has full right to sell and assign the same.

 

I-15

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**Schedule 2**

 

**Filing Jurisdictions and Offices**

 

Aames Investment Corporation: State of Maryland

 

Aames Capital Corporation: State of California

 

Aames Funding Corporation: State of California, State of New York, NewYork County

 

I-16

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**Schedule 3**

 

**Relevant States**

 

Arizona

California

Colorado

Connecticut

District of Columbia

Delaware

Florida

Georgia

Hawaii

Iowa

Idaho

Illinois

Indiana

Kansas

Kentucky

Louisiana

Massachusetts

Maryland

Maine

Michigan

Minnesota

Missouri

Mississippi

North Carolina

Nebraska

New Hampshire

New Jersey

New Mexico

Nevada

New York

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Virginia

Washington

Wisconsin

 

I-17

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West Virginia

Wyoming

 

I-18

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**Schedule 4**

 

**Subsidiaries**

 

**SUBSIDIARIESOF AAMES INVESTMENT CORPORATION**

 
| **Name of Subsidiary**                       | ** ** | **Jurisdiction of Organization** |
|----------------------------------------------|------------|----------------------------------|
| Aames  Capital Acceptance Corp.              |       | Delaware                         |
| Aames  Capital Corporation                   |       | California                       |
| Aames  Financial Corporation                 |       | California                       |
| Aames  Funding Corporation                   |       | California                       |
| Aames  Investment Acceptance Corporation     |       | Delaware                         |
| Aames  Holding Corporation                   |       | California                       |
| AaRCs, LLC                                   |       | Pennsylvania                     |
| One Stop  Mortgage, Inc.                     |       | Wyoming                          |
| Oxford  Aviation Corporation, Inc.           |       | California                       |
| Rossmore  Financial Insurance Services, Inc. |       | California                       |
| Serrano  Insurance Services                  |       | Nevada                           |
| Windsor  Management Co.                      |       | California                       |
| Windsor  Management of Washington Inc.       |       | Washington                       |

 

I-19

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**Schedule 5**

 

**Litigation**

 

1.                                       *Webb v. Aames Investment Corporation, et. al.* brought in theUnited States District Court, Central District of California. Consumer allegesviolation of the Fair Credit Reporting Act. Specifically, he claims that Aames,after obtaining his consumer report not initiated by him, failed to make a firmoffer of credit in the advertisement mailed to him and failed to provide therequired disclosures in a clear and conspicuous manner.

 

2.                                       *Cooper v. Aames Invesment Corporation, et. al.* brought inthe United States District Court, Eastern District of Wisconsin. This putativeclass action alleges violation of the Fair Credit Reporting Act. Specifically,lead plaintiff claims that Aames failed to make a firm offer of credit in theadvertisement mailed to her.

 

3.                                       *Federal Trade Commission.*On April 27, 2004, Aames FinancialCorporation received a civil investigative demand from the Federal TradeCommission that, although not alleging any wrongdoing, sought documents and datarelating to Aames Financial’s business and lending practices. The demand wasissued pursuant to an April 8, 2004 resolution of the FTC authorizingnon-public investigations of various unnamed subprime lenders and loan brokersto determine whether there have been violations of certain consumer protectionlaws. Aames Financial believes it is in material compliance under applicableconsumer protection laws. Aames Financial has cooperated and intends tocontinue to cooperate fully with the FTC in this investigation.

 

4.                                       *State of Iowa.*In September 2004, Aames Financial received aCivil Investigative Demand and Notice to Proceed from the Office of theAttorney General of Iowa, that, although not alleging any wrongdoing, soughtdocuments and data relating to our business and lending practices in Iowa. AamesFinancial has cooperated and intends to continue to cooperate fully with theOffice of the Attorney General of Iowa in this investigation.

 

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**Schedule 6**

 

**List of Financing Facilities**

 
| **Lender**     | ** ** | **Size of Facility** | ** **  | **Expiration Date** |
|----------------|------------|----------------------|-------------|---------------------|
| Lehman         |       | $                    | 500,000,000 |                | 1/17/07 |
| Morgan Stanley |       | $                    | 500,000,000 |                | 12/1/06 |
| Countrywide    |       | $                    | 300,000,000 |                | 4/30/06 |
| Citigroup      |       | $                    | 200,000,000 |                | 9/29/06 |
| Bear Stearns   |       | $                    | 500,000,000 |                | 8/4/06 |

 

I-21

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**EXHIBITA**

 

**QUARTERLYCERTIFICATION**

 

I,                                                    ,                                     ofAames Investment Corporation, do hereby certify that

 

(i)                                     eachof Aames Investment Corporation, Aames Capital Corporation and Aames FundingCorporation (each, a “Sellers” and jointly and severally, the “Sellers”) is incompliance with all provisions and terms of the Master Repurchase Agreement,dated as of April 10, 2006, by and among Greenwich Capital Financial Products,Inc. and the Sellers;

 

(ii)                                  noDefault has occurred thereunder;

 

(iii)                               therehave not been any modifications to the Underwriting Guidelines that have notbeen approved by Buyer;

 

(iv)                              alladditional modifications to the Underwriting Guidelines since the date of themost recent disclosure to Buyer of any modification to the UnderwritingGuidelines are set forth herewith; and

 

(v)                                 (a)Aames Investment’s Tangible Net Worth, on a consolidated basis is equal to or greaterthan $250,000,000 plus 50% of any subsequent additional capital raised in apublic or private offering by Aames Investment, and (b) the aggregate amount ofthe Aames Investment’s cash and Cash Equivalents of (1) cash and loansheld for sale and investment (excluding securitized mortgage loans) reduced by(2) the sum of amounts outstanding on revolving warehouse and repurchasefacilities, margin on loans held for sale and investment (excluding securitizedmortgage loans) and loans held for sale and investment which are ineligible tobe pledged by Aames Investment under any of its revolving warehouse andrepurchase facilities in an amount equal to not less than $38,000,000. AamesInvestments’s ratio of Total Indebtedness to Tangible Net Worth is not greaterthan 20:1. Aames Investment’s ratio of Adjusted Indebtedness to Tangible NetWorth is not greater than 7:1. As of the immediately preceding fiscal quarter,Aames Investment’s Net Income before tax, generated over the previous twoconsecutive fiscal quarters, measured on the last day of each such fiscalquarter, was equal to or greater than $1.00; and

 

(vi)                              AamesInvestment Corporation has maintained its REIT Status continuously from theEffective Date through the date hereof.

###  

IN WITNESSWHEREOF, I have signed this certificate.

 

A-2-1

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Date:                                ,200    

 
|   | AAMES INVESTMENT CORPORATION |
|--------|------------------------------|
|   |                         |
|   |                         |
|   | By:                          |   | , as Administrator |
|   |                         |
|   |                         |
|   |                         |   |
|   | Name:                        |
|   | Title:                       |
|        |                              |  |  |  |

 

A-2-2

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**EXHIBITB**

 

**FORMOF CUSTODIAL AGREEMENT**

 

B-1

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**EXHIBITC**

 

**FORMOF OPINION OF COUNSEL TO THE SELLER**

 
|   |   | (date) |
|--------|--------|--------|

 

Greenwich Capital Financial Products, Inc.600 Steamboat RoadGreenwich, Connecticut 06830

 

Dear Sirs andMesdames:

 

You haverequested [our] [my] opinion, as counsel to Aames Investment Corporation, aMaryland corporation, Aames Capital Corporation, a California corporation andAames Funding Corporation, a California Corporation (each, a “Seller” andjointly and severally, the “Seller” or the “Sellers”), with respect to certainmatters in connection with respect to certain matters in connection with (i)the Master Repurchase Agreement, dated as of April 10, 2006 (the “RepurchaseAgreement”), by and among the Sellers and Greenwich Capital Financial Products,Inc. (the “Buyer”), (ii) the Custodial Agreement, dated as of April 10, 2006,by and among the Sellers, Deutsche Bank Trust Company Americas (the “Custodian”),and the Buyer, (iii) the Pricing Side Letter, dated as of April 10, 2006, byand among the Buyer and the Sellers, and (iv) the Securitization Side Letter,dated as of April 10, 2006 (the “Securitization Side Letter”), by and among theBuyer, the Sellers and Greenwich Capital Markets, Inc. Items (i)-(iv) above arecollectively referred to herein as the “Program Documents”. Capitalized termsnot otherwise defined herein have the meanings set forth in the RepurchaseAgreement.

 

[We] [I] haveexamined the following documents:

 

1.                                       theRepurchase Agreement;

 

2.                                       CustodialAgreement;

 

3.                                       thePricing Side Letter;

 

4.                                       theSecuritization Side Letter;

 

5.                                       suchother documents, records and papers as we have deemed necessary and relevant asa basis for this opinion.

 

The documentsreferred to in items in 1 through 6 shall be referred to herein as the “ProgramDocuments.” To the extent [we] [I] have deemed necessary and proper, [we] [I]have relied upon the representations and warranties of the Seller contained inthe Agreement. [We] [I] have assumed the authenticity of all documentssubmitted to me as originals, the genuineness of all signatures, the legalcapacity of natural persons and the conformity to the originals of alldocuments.

 

Based upon theforegoing, it is [our] [my] opinion that:

 

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1.                                       EachSeller is a corporation duly organized, validly existing and in good standingunder the laws of the state of [state] and is qualified to transact businessin, duly licensed and is in good standing under, the laws of each state inwhich any Mortgaged Property is located to the extent necessary to ensure theenforceability of each Loan and the servicing of each Loan pursuant to theAgreement.

 

2.                                       EachSeller has the corporate power to engage in the transactions contemplated bythe Program Documents and all requisite corporate power, authority and legalright to execute and deliver the Program Documents and observe the terms andconditions of such instruments. Each Seller has all requisite corporate powerto enter into Transactions under the Repurchase Agreement and to grant asecurity interest in the Purchased Items pursuant to the Repurchase Agreement.

 

3.                                       Theexecution, delivery and performance by each Seller of the Program Documents, andthe sale by each related Seller of the Purchased Items under the RepurchaseAgreement have been duly authorized by all necessary corporate action on thepart of the Sellers. Each of the Program Documents have been executed anddelivered by each Seller and are legal, valid and binding agreementsenforceable in accordance with their respective terms against such Seller,subject to bankruptcy laws and other similar laws of general applicationaffecting rights of creditors and subject to the application of the rules ofequity, including those respecting the availability of specific performance,none of which will materially interfere with the realization of the benefitsprovided thereunder or with the Buyer’s security interest in the Loans.

 

4.                                       Noconsent, approval, authorization or order of, and no filing or registrationwith, any court or governmental agency or regulatory body is required on thepart of any Seller for the execution, delivery or performance by the Sellers ofProgram Documents or for the borrowings by the Sellers under the RepurchaseAgreement or the granting of a security interest to the Buyer in the PurchasedItems, pursuant to the Repurchase Agreement.

 

5.                                       Theexecution, delivery and performance by the Sellers of, and the consummation ofthe transactions contemplated by, the Program Documents do not and will not (a)violate any provision of any Seller’s charter or by-laws, (b) violate anyapplicable law, rule or regulation, (c) violate any order, writ, injunction ordecree of any court or governmental authority or agency or any arbitral awardapplicable to the Seller of which I have knowledge (after due inquiry) or (d)result in a breach of, constitute a default under, require any consent under,or result in the acceleration or required prepayment of any indebtednesspursuant to the terms of, any agreement or instrument of which I have knowledge(after due inquiry) to which any Seller is a party or by which it is bound orto which it is subject, or (except for the Liens created pursuant to the RepurchaseAgreement) result in the creation or imposition of any Lien upon any Propertyof the Sellers pursuant to the terms of any such agreement or instrument.

 

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6.                                       Thereis no action, suit, proceeding or investigation pending or, to the best of[our] [my] knowledge, threatened against the Seller which, in [our] [my]judgment, either in any one instance or in the aggregate, would be reasonablylikely to result in any material adverse change in the properties, business orfinancial condition, or prospects of the Seller or in any material impairmentof the right or ability of the Seller to carry on its business substantially asnow conducted or in any material liability on the part of the Seller or which woulddraw into question the validity of the Program Documents or the Loans or of anyaction taken or to be taken in connection with the transactions contemplatedthereby, or which would be reasonably likely to impair materially the abilityof the Seller to perform under the terms of the Repurchase Agreement, theCustodial Agreement or the Loans.

 

7.                                       TheRepurchase Agreement is effective to create, in favor of the Buyer, a validsecurity interest under the Uniform Commercial Code in all of the right, titleand interest of the Seller in, to and under the Purchased Items as collateralsecurity for the payment of the Secured Obligations (as defined in theRepurchase Agreement), except that (a) such security interests will continue inthe Purchased Items after their sale, exchange or other disposition only to theextent provided in Section 9-306 of the Uniform Commercial Code, (b) thesecurity interests in Purchased Items in which the Seller acquires rights afterthe commencement of a case under the Bankruptcy Code in respect of any Sellermay be limited by Section 552 of the Bankruptcy Code.

 

8.                                       Whenthe Notes are delivered to the Custodian, endorsed in blank by a dulyauthorized officer of any Seller, the security interest referred to inparagraph 7 above in the Notes will constitute a fully perfected first prioritysecurity interest in all right, title and interest of the Sellers therein, inthe Loan evidenced thereby and in the Seller’s interest in the relatedMortgaged Property.

 

(a)                                  Uponthe filing of financing statements on Form UCC-1 naming the Buyer as “SecuredParty” and the Seller as “Debtor”, and describing the Purchased Items, in thejurisdictions and recording offices listed on Schedule 1 attached hereto, thesecurity interests referred to in paragraph 8 above will constitute fullyperfected security interests under the Uniform Commercial Code in all right,title and interest of the Sellers in, to and under such Purchased Items, whichcan be perfected by filing under the Uniform Commercial Code.

 

(b)                                 TheUCC Search Report sets forth the proper filing offices and the proper debtorsnecessary to identify those Persons who have on file in the jurisdictionslisted on Schedule 1 financing statements covering the Filing Collateral as ofthe dates and times specified on Schedule 2. Except for the matters listed onSchedule 2, the UCC Search Report identifies no Person who has filed in anyFiling Office a financing statement describing the Filing Collateral prior tothe effective dates of the UCC Search Report.

 

9.                                       Neitherthe Sellers nor any of their Subsidiaries is an “investment

 

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company”, or acompany “controlled” by an “investment company”, within the meaning of theInvestment Company Act of 1940, as amended. The Sellers are not subject to anyFederal or state statute or regulation which limits their ability to incurindebtedness.

 

10.                                 TheAssignments of Mortgage are in recordable form, except for the insertion of thename of the assignee, and upon the name of the assignee being inserted, areacceptable for recording under the laws of the state where each relatedMortgaged Property is located.

 

11.                                 EachSeller is duly registered as a [                              ]in each state in which Loans were originated to the extent such registration isrequired by applicable law, and has obtained all other licenses andgovernmental approvals in each jurisdiction to the extent that the failure toobtain such licenses and approvals would render any Loan unenforceable or wouldmaterially and adversely affect the ability of the Seller to perform any of itsobligations under, or the enforceability of, the Program Documents.

 

12.                                 Assumingthat all other elements necessary to render a Loan legal, valid, binding andenforceable were present in connection with the execution, delivery andperformance of each Loan (including completion of the entire Loan fully,accurately and in compliance with all applicable laws, rules and regulations)and assuming further that no action was taken in connection with the execution,delivery and performance of each Loan (including in connection with the sale ofthe related Mortgaged Property) that would give rise to a defense to thelegality, validity, binding effect and enforceability of such Loan, nothing inthe forms of such Loans, as attached hereto as Exhibit A, would render suchLoans other than legal, valid, binding and enforceable.

 

13.                                 Assumingtheir validity, binding effect and enforceability in all other respects(including completion of the entire Loan fully, accurately and in compliancewith all applicable laws, rules and regulations), the forms of Loans attachedhereto as Exhibit A are in sufficient compliance with                   lawand Federal consumer protection laws so as not to be rendered void or voidableat the election of the Mortgagor thereunder.

 

14.                                 TheRepurchase Agreement is a “repurchase agreement” and a “securities contract”within the meaning of Bankruptcy Code Section[s] 101(47) [and 741(7)], and therights of the Buyer contained in Section [9] thereof to setoff mutual debts andclaims, and in Section [35] thereof to liquidate, terminate and accelerate theRepurchase Agreement, in the event of the bankruptcy of any Seller will not bestayed, avoided, or otherwise limited by operation of any provision of theBankruptcy Code or by order of a court or administrative agency in anyproceeding thereunder, including without limitation the automatic stayprovisions of Bankruptcy Code Section 362(a) pursuant to Sections 362(b)[(6)and] (7) thereof.

 

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Very truly yours,

 

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**EXHIBITD**

 

**FORMOF TRANSACTION NOTICE**

 
|   |   | [insert  date] |
|--------|--------|----------------|

 

Greenwich Capital Financial Products, Inc.600 Steamboat RoadGreenwich, Connecticut 06830Attention:                                                   

 

TransactionNotice No.:                                          

 

Ladies/Gentlemen:

 

Reference ismade to the Master Repurchase Agreement, dated as of April 10, 2005 (the “RepurchaseAgreement”; capitalized terms used but not otherwise defined herein shall havethe meaning given them in the Repurchase Agreement), among Aames InvestmentCorporation, Aames Capital Corporation, Aames Funding Corporation (each, a “Seller”,and jointly and severally, the “Seller” or “Sellers”) and Greenwich CapitalFinancial Products, Inc. (the “Buyer”).

 

In accordancewith Section 3(b) of the Repurchase Agreement, the undersigned Seller herebyrequests that you, the Buyer, agree to enter into a Transaction with us inconnection with our delivery of Loans on                                           [insertrequested Purchase Date, which in the case of Dry Loans must be at least two(2) Business Days following the date of the request] (the “Purchase Date”), inconnection with which we shall sell to you the Loans set forth on the LoanSchedule attached hereto. The Purchase Price shall be                [insertapplicable Purchase Price pursuant to the terms of the Pricing Side Letter],the Pricing Rate shall be                [insertapplicable Pricing Rate pursuant to the terms of the Pricing Side Letter], andthe Seller agrees to repurchase such Loans on                       [insertrequested Repurchase Date] at the Repurchase Price.

 

The Sellerhereby certifies, as of such Purchase Date, that:

 

1.                                       noDefault or Event of Default has occurred and is continuing on the date hereofnor will occur after giving effect to such Transaction as a result of suchTransaction;

 

2.                                       eachof the representations and warranties made by the Seller in or pursuant to theProgram Documents is true and correct in all material respects on and as ofsuch date (in the case of the representations and warranties in respect ofLoans, solely with respect to Loans being purchased on the Purchase Date) as ifmade on and as of the date hereof (or, if any such representation or warrantyis expressly stated to have been made as of a specific date, as of suchspecific date);

 

3.                                       theSeller is in compliance with all governmental licenses and

 

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authorizations and is qualifiedto do business and is in good standing in all required jurisdictions; and

 

4.                                       theSeller has satisfied all conditions precedent in Sections 9(a) and (b) of theRepurchase Agreement and all other requirements of the Program Documents.

 

Theundersigned duly authorized officer of Seller further represents and warrantsthat (1) the documents constituting the Custodial File (as defined in theCustodial Agreement) with respect to the Loans that are the subject of theTransaction requested herein and more specifically identified on the mortgageloan schedule or computer readable magnetic transmission delivered to both theBuyer and the Custodian in connection herewith (the “Receipted Loans”) [withrespect to Dry Loans: have been or are hereby submitted] [with respect to WetLoans: shall be delivered, within                 (      )days of the date of the execution of this Transaction Notice] to Custodian andsuch Required Documents are to be held by the Custodian for the Buyer, (2) allother documents related to such Receipted Loans (including, but not limited to,mortgages, insurance policies, loan applications and appraisals) have been orwill be created and held by Seller in trust for Buyer, (3) all documentsrelated to such Receipted Loans withdrawn from Custodian shall be held in trustby Seller for Buyer, and (4) upon Buyer’s wiring of the Purchase Price pursuantto Section 3(d) of the Repurchase Agreement, Buyer will have agreed to theterms of the Transaction as set forth herein and purchased the Receipted Loansfrom Seller.

 

Seller herebyrepresents and warrants that (x) the Receipted Loans have an unpaid principalbalance as of the date hereof of $                        and(y) the number of Receipted Loans is                     .

 
|   | Very  truly yours, |
|--------|--------------------|
|   |               |
|   |               |
|   | By:                |   |   |
|   | Name:              |
|   | Title:             |

 

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**EXHIBITE**

 

**UNDERWRITINGGUIDELINES**

 

[Underwriting guidelines to be attached]

 

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**EXHIBITF**

 

**REQUIREDFIELDS FOR SERVICING TRANSMISSION**

 

[Required fields to be provided by Buyer]

 

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**EXHIBITG**

 

**REQUIREDFIELDS FOR LOAN SCHEDULE**

 

[Required fields to be provided by Buyer]

 

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**EXHIBITH**

 

**FORMOF CONFIDENTIALITY AGREEMENT**

 

In connectionwith your consideration of a possible or actual acquisition of a participatinginterest (the “Transaction”) in an advance, note or commitment of GreenwichCapital Financial Products, Inc. (“Buyer”) pursuant to a Master RepurchaseAgreement among Aames Investment Corporation, Aames Capital Corporation, AamesFunding Corporation (each, a “Seller” and jointly and severally, the “Seller”or the “Sellers”) and Buyer dated as of April 10, 2006, you have requested theright to review certain non-public information regarding the Seller that is inthe possession of Buyer. In consideration of, and as a condition to, furnishingyou with such information and any other information (whether communicated inwriting or communicated orally) delivered to you by Buyer or its affiliates,directors, officers, employees, advisors, agents or “controlling persons”(within the meaning of the Securities Exchange Act of 1934, as amended (the “1934Act”)) (such affiliates and other persons being herein referred to collectivelyas Buyer “Representatives”) in connection with the consideration of aTransaction (such information being herein referred to as “Evaluation Material”),Buyer hereby requests your agreement as follows:

 

1.                                       TheEvaluation Material will be used solely for the purpose of evaluating apossible Transaction with Buyer involving you or your affiliates, and unlessand until you have completed such Transaction pursuant to a definitiveagreement between you or any such affiliate and Buyer, such Evaluation Materialwill be kept strictly confidential by you and your affiliates, directors,officers, employees, advisors, agents or controlling persons (such affiliatesand other persons being herein referred to collectively as “yourRepresentatives”), except that the Evaluation Material or portions thereof maybe disclosed to those of your Representatives who need to know such informationfor the purpose of evaluating a possible Transaction with Buyer (it beingunderstood that prior to such disclosure your Representatives will be informedof the confidential nature of the Evaluation Material and shall agree to be boundby this Agreement). You agree to be responsible for any breach of thisAgreement by your Representatives.

 

2.                                       Theterm “Evaluation Material” does not include any information which (i) at thetime of disclosure or thereafter is generally known by the public (other thanas a result of its disclosure by you or your Representatives) or (ii) was orbecomes available to you on a nonconfidential basis from a person not otherwisebound by a confidential agreement with Buyer or its Representatives or is nototherwise prohibited from transmitting the information to you. As used in thisAgreement, the term “person” shall be broadly interpreted to include, withoutlimitation, any corporation, company, joint venture, partnership or individual.

 

3.                                       Inthe event that you receive a request to disclose all or any part of theinformation contained in the Evaluation Material under the terms of a valid andeffective subpoena or order issued by a court of competent jurisdiction, youagree to (i) immediately notify Buyer and the Seller of the existence,terms and circumstances surrounding such a request, (ii) consult with theSeller on the advisability of taking legally available steps to resist ornarrow such request, and (iii) if disclosure of such

 

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information is required,exercise your best efforts to obtain an order or other reliable assurance thatconfidential treatment will be accorded to such information.

 

4.                                       Unlessotherwise required by law in the opinion of your counsel, neither you nor yourRepresentative will, without our prior written consent, disclose to any personthe fact that the Evaluation Material has been made available to you.

 

5.                                       Youagree not to initiate or maintain contact (except for those contacts made inthe ordinary course of business) with any officer, director or employee of theSeller regarding the business, operations, prospects or finances of the Selleror the employment of such officer, director or employee, except with theexpress written permission of the Seller.

 

6.                                       Youunderstand and acknowledge that the Seller is not making any representation orwarranty, express or implied, as to the accuracy or completeness of theEvaluation Material or any other information provided to you by Buyer. TheSeller, its respective affiliates or Representatives, nor any of its respectiveofficers, directors, employees, agents or controlling persons (within themeaning of the 1934 Act) shall have any liability to you or any other person(including, without limitation, any of your Representatives) resulting fromyour use of the Evaluation Material.

 

7.                                       Youagree that neither Buyer or the Seller has not granted you any license,copyright, or similar right with respect to any of the Evaluation Material orany other information provided to you by Buyer.

 

8.                                       Ifyou determine that you do not wish to proceed with the Transaction, you willpromptly deliver to Buyer all of the Evaluation Material, including all copiesand reproductions thereof in your possession or in the possession of any ofyour Representatives.

 

9.                                       Withoutprejudice to the rights and remedies otherwise available to the Seller, theSeller shall be entitled to equitable relief by way of injunction if you or anyof your Representatives breach or threaten to breach any of the provisions ofthis Agreement. You agree to waive, and to cause your Representatives to waive,any requirement for the securing or posting of any bond in connection with suchremedy.

 

10.                                 Thevalidity and interpretation of this Agreement shall be governed by, andconstrued and enforced in accordance with, the laws of the State of New Yorkapplicable to agreements made and to be fully performed therein (excluding theconflicts of law rules). You submit to the jurisdiction of any court of theState of New York or the United States District Court for the Southern Districtof the State of New York for the purpose of any suit, action, or otherproceeding arising out of this Agreement.

 

11.                                 Thebenefits of this Agreement shall inure to the respective successors and assignsof the parties hereto, and the obligations and liabilities assumed in thisAgreement by the parties hereto shall be binding upon the respective successorsand assigns.

 

12.                                 Ifit is found in a final judgment by a court of competent jurisdiction (not

 

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subject to further appeal) thatany term or provision hereof is invalid or unenforceable, (i) the remainingterms and provisions hereof shall be unimpaired and shall remain in full forceand effect and (ii) the invalid or unenforceable provision or term shall bereplaced by a term or provision that is valid and enforceable and that comesclosest to expressing the intention of such invalid or unenforceable term orprovision.

 

13.                                 ThisAgreement embodies the entire agreement and understanding of the parties heretoand supersedes any and all prior agreements, arrangements and understandingsrelating to the matters provided for herein. No alteration, waiver, amendments,or change or supplement hereto shall be binding or effective unless the same isset forth in writing by a duly authorized representative of each party and maybe modified or waived only by a separate letter executed by the Seller and youexpressly so modifying or waiving such Agreement.

 

14.                                 Forthe convenience of the parties, any number of counterparts of this Agreementmay be executed by the parties hereto. Each such counterpart shall be, andshall be deemed to be, an original instrument, but all such counterparts takentogether shall constitute one and the same Agreement.

 

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Kindly executeand return one copy of this letter which will constitute our Agreement withrespect to the subject matter of this letter.

 
|   | **GREENWICH  CAPITAL FINANCIAL PRODUCTS,  INC.** |
|--------|--------------------------------------------------|
|   |                                             |
|   |                                             |
|   | By:                                              |   |   |

 

 

Confirmed and agreed to

 

this            dayof                            ,200   .

 
| By:    |   |   |
|--------|--------|--------|
| Name   |
| Title: |

 

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**EXHIBITI**

 

**FORMOF INSTRUCTION LETTER**

 

[Required fields to be provided by Buyer]

 

                      , 200   

 

                                          ,as Subservicer

                                          

                                          

Attention:                                    

 

Re:                               MasterRepurchase Agreement, dated as of April 10, 2006 by and among Greenwich CapitalFinancial Products, Inc., (“Buyer”), and Aames Investment Corporation,Aames Capital Corporation and Aames Funding Corporation (each, a “Seller”and together, the “Seller” or the “Sellers”)

 

Ladies and Gentlemen:

 

Pursuant tothe Master Repurchase Agreement, dated as of April 10, 2006 (the “RepurchaseAgreement”), among the Buyer and the Sellers, you are hereby notified that:(i) the undersigned Seller has sold to the Buyer the assets described on Schedule1 hereto (the “Eligible Assets”), (ii) each of the Eligible Assetsis subject to a security interest in favor of the Buyer, and (iii) effective asof the delivery of this letter to the Subservicer, unless otherwise notified bythe Buyer in writing, any payments or distributions made with respect to suchEligible Assets shall be remitted immediately by the Subservicer in accordancewith the Buyer’s wiring instructions provided below:

 
| Bank:        |   | JPMorgan Chase Bank                                                     |
|--------------|--------|-------------------------------------------------------------------------|
| Account No.: |   | 140095961                                                               |
| ABA No.:     |   | 021000021                                                               |
| Attn:        |   | Brett Kibbe                                                             |
| Reference:   |   | For the A/C of Greenwich Capital Financial  Products, Inc. – Aames |

 

Uponnotification by the Buyer of an occurrence of an Event of Default, theSubservicer shall remit all collections with respect to the Eligible Asset inaccordance with the Buyer’s instructions. The Subservicer also acknowledges itsconsent to terminate such Servicing Agreement upon notification by the Buyer ofan occurrence of an Event of Default.

 

Please acknowledgereceipt of this instruction letter by signing in the signature block below andforwarding an executed copy to the Buyer promptly upon receipt. Any notices tothe Buyer should be delivered to the following address:                                    Attention:                           ,Telephone:                           ,Facsimile:                         .

 

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|   | Very truly yours,                 |
|--------|-----------------------------------|
|   |                              |
|   | AA**MES INVESTMENT  CORPORATION** |
|   |                              |
|   | By:                               |   |   |
|   | Name:                             |
|   | Title:                            |
|   |                              |
|   | AA**MES CAPITAL CORPORATION**     |
|   |                              |
|   | By:                               |   |   |
|   | Name:                             |
|   | Title:                            |
|   |                              |
|   | AA**MES FUNDING CORPORATION**     |
|   |                              |
|   | By:                               |   |   |
|   | Name:                             |
|   | Title:                            |

 

 

ACKNOWLEDGED:

 

                                                                                       ,as Subservicer]

 

 
| By:        |
|------------|
| Name:      |
| Title:     |
| Telephone: |
| Facsimile: |

 

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