Document:

1/05 SENIOR SECURED CREDIT AGREEMENT

dated as of January 4, 2005

by and among

E-LOAN, INC.

and

JPMORGAN CHASE BANK, N.A.,

as the Agent, Collateral Agent and a Lender,

and

the other Lender(s) parties hereto

$150,000,000 Senior Secured Revolving Credit

	

	 	 	 
	

	

Index of Defined Terms

(continued)

Page

	 	
	
7/04 Credit Agreement
	
1

	
Adjusted GAAP Net Worth
	
2

	
Advance
	
3

	
Advance Rate
	
12

	
Affiliate
	
3

	
Aged Loan
	
20

	
Agency
	
3

	
Agent
	
1

	
Agent’s Fee
	
48

	
Aggregate Committed Sum
	
4

	
Agreement
	
1

	
Alt-A Loan
	
4

	
Appraisal
	
4

	
Approved Investor
	
4

	
Approved Subprime Investor
	
4

	
Authorized Company Representative
	
4

	
AVM
	
4

	
Balance Adjusted Rate
	
36

	
Balances Equivalent Tranche
	
37

	
Base Rate
	
36

	
Base Rate Tranche
	
37

	
Basic Papers
	
5

	
Bloomberg British Bankers Association LIBOR Page
	
33

	
Book Collateral Value
	
5

	
Book HELOC Collateral Value
	
9

	
Book Prime Loan Collateral Value
	
10

	
Book Repurchased Loan Collateral Value
	
11

	
Book Second Lien Loan Collateral Value
	
11

	
Book Subprime Loan Collateral Value
	
12

	
Borrowing
	
5

	
Borrowing Base
	
5

	
Broker’s Price Opinion
	
5

	
Business Day
	
5

	
Cash Equivalents
	
6

	
Ceiling Rate
	
36

	
Central Elements
	
6

	
Change of Control
	
6

	
Change of Executive Management
	
7

	
Class of Borrowings
	
33

	
Collateral
	
7

	
Collateral Confirmation Agreement
	
7

	
Collateral Records
	
8

	
Collateral Support
	
8

 

	 
	 	 	 
	

	 

Index of Defined Terms

(continued)

Page

	
Collateral Value
	
9

	
Commitment
	
12

	
Commitments Cancellation Date
	
31

	
Committed Sum
	
13

	
Company
	
1

	
Company Customer
	
13

	
Company Customer Information
	
13

	
Control
	
3

	
Credit Line
	
13

	
Cumulative Loan-to-Value Ratio
	
13

	
Currency Agreement
	
13

	
Current Appraisal
	
13

	
Current Broker’s Price Opinion
	
14

	
Current Credit Agreement
	
1

	
Custodian
	
14

	
Custodian’s Fees
	
14

	
Custody Agreement
	
14

	
Customer
	
14

	
Debt
	
14

	
Default
	
15

	
Determination Date
	
15

	
Disqualifier
	
1

	
Dry Loan
	
15

	
Effective Date
	
1

	
Electronic Agent
	
15

	
Electronically Submitted
	
15

	
Eligible Assignee
	
100

	
Eligible Collateral
	
1

	
Eligible Single-family Collateral
	
1

	
Equity Interests
	
16

	
ERISA
	
16

	
Eurodollar Reserve Requirements
	
34

	
Event of Default
	
16

	
Facilities
	
16

	
Facilities Papers
	
16

	
Facility
	
16

	
Facility Fee
	
47

	
Fannie Mae
	
16

	
Federal Funds Effective Rate
	
35

	
FHA
	
16

	
FICA
	
16

	
FICO
	
16

	
File
	
16

	
Financial Statements
	
63

 

 

	 
	 	 	 
	

	 

Index of Defined Terms

(continued)

Page

	
Freddie Mac
	
16

	
Free Adjusted Balances Equivalent
	
34

	
Funding Share
	
17

	
GAAP
	
17

	
Ginnie Mae
	
17

	
Governmental Authority
	
17

	
Hazard Insurance Policy
	
17

	
Hedge Agreement
	
18

	
HELOC
	
18

	
HELOC Collateral Value
	
9

	
HLTV Loan
	
18

	
HUD
	
18

	
In Default
	
18

	
Indemnified Liabilities
	
93

	
Indemnified Parties
	
93

	
Index
	
34

	
Interest Rate Protection Agreement
	
18

	
Internal Revenue Code
	
18

	
JPMorgan
	
1

	
JPMorgan Loan Balances
	
35

	
Jumbo Loan
	
18

	
Late Pledged (Seasoned) Loan
	
19

	
Law
	
19

	
Legal Requirement
	
19

	
Lender
	
19

	
Lender Affiliate
	
19

	
LIBOR
	
35

	
Lien
	
19

	
Line
	
19

	
Line Limit
	
19

	
Liquidity
	
19

	
Loan
	
20

	
Loan Papers
	
20

	
Long Warehoused (Aged) Loan
	
20

	
Margin Stock
	
20

	
Market Value
	
20

	
Maturity Date
	
20

	
Maximum Aggregate Commitment
	
20

	
MERS
	
21

	
MERS Designated Loan
	
21

	
MERS Procedures Manual
	
21

	
MERS® System
	
21

	Mortgage	 21
	Mortgage Assignment	 21

 

	 
	 	 	 
	

	 

Index of Defined Terms

(continued)

Page

	
Mortgage Loan
	
21

	
Mortgage Note
	
22

	
Mortgaged Premises
	
22

	
Multiemployer Plan
	
22

	
Nonfunding Lender
	
26

	
Non-owner Occupied Loan
	
22

	
Nonrecourse Debt
	
22

	
Nonrecourse Facility
	
22

	
Note Payment Account
	
22

	
Notices
	
101

	
Obligations
	
23

	
Officer’s Certificate
	
23

	
Operating Subsidiaries
	
23

	
Original Pledge Date
	
23

	
Overdraft Advance
	
48

	
Past Due Rate
	
36

	
Permitted Debt
	
83

	
Permitted Encumbrances
	
23

	
Person
	
23

	
Plan
	
24

	
Pledged Loans
	
24

	
Pledged Loans Curtailment Report
	
24

	
Pledged to the Agent
	
24

	
Prime Loan
	
25

	
Prime Loan Collateral Value
	
10

	
Prime Rate
	
34

	
Principal Balance
	
25

	
Privacy Requirements
	
25

	
Pro Rata
	
26

	
Property
	
26

	
Purchase Commitment
	
27

	
Qualified Subordinated Debt
	
27

	
Rate
	
36

	
Recourse Servicing Agreement
	
27

	
Redemption Amount
	
27

	
Redemption Call
	
27

	
Regulation D
	
27

	
Regulation Q
	
27

	
Regulation U
	
27

	
Regulation X
	
28

	
Repurchased Loan
	
28

	
Repurchased Loan Collateral Value
	
11

	
Request for Borrowing
	
28

	
Required Lenders
	
28

 

	 
	 	 	 
	

	 

Index of Defined Terms

(continued)

Page

	
Second Lien Loan
	
28

	
Second Lien Loan Collateral Value
	
11

	
Security Instruments
	
28

	
Senior Credit Notes
	
28

	
Serviced Loans
	
29

	
Servicer
	
29

	
Servicing Agreement
	
29

	
Servicing Rights
	
29

	
Single-family
	
29

	
Single-family Collateral
	
7

	
Single-family Loan
	
29

	
Single-family Warehouse Advance
	
3

	
Single-purpose Finance Subsidiary
	
29

	
Solvent
	
29

	
Stated Rate
	
36

	
Statement Date
	
29

	
Statement Date Financial Statements
	
63

	
Submission List
	
29

	
Subordination Agreement
	
30

	
Subprime Loan
	
30

	
Subprime Loan Collateral Value
	
12

	
Subsidiary
	
30

	
Super Jumbo Loan
	
30

	
Supplemental Papers
	
30

	
Swing Line
	
30

	
Swing Line Borrowing Due Date
	
30

	
Swing Line Limit
	
31

	
Swing Line Note
	
40

	
Taxes
	
31

	
Termination Date
	
31

	
Total Liabilities
	
31

	
Townhouse or Condo Loan
	
31

	
Tranche
	
37

	
UCC
	
31

	
USA Patriot Act
	
104

	
VA
	
31

	
Warehouse Transmission File
	
31

	
Wet Loan
	
31

	
Wet Warehousing
	
32

	
Wet Warehousing Advance
	
3

	
Wet Warehousing Sublimit
	
33

	
Whole Loans
	
33

 

	 
	 	 	 
	

	 

 

Table of Contents

Page

	
1
	
DEFINITIONS
	
2

	
1.1.
	
Defined Terms
	
2

	
1.2.
	
Definitions of General Application
	
2

	
1.3.
	
Definitions for Interest Calculations
	
33

	
1.4.
	
Other Definitional Provisions.
	
37

	
2
	
THE LENDERS’ COMMITMENTS
	
38

	
2.1.
	
The Lenders’ Commitments to Lend
	
38

	
2.2.
	
Expiration or Termination of the Commitments
	
39

	
2.3.
	
Advances Outstanding May Not Exceed Limits
	
39

	
2.4.
	
Advances to be Requested and Use of Proceeds
	
39

	
2.5.
	
Swing Line Commitment
	
39

	
2.6.
	
Swing Line Borrowings
	
39

	
3
	
GENERAL BORROWING PROCEDURES
	
40

	
3.1.
	
Separate Request for Each Borrowing
	
40

	
3.2.
	
Funding of Advances.
	
40

	
3.3.
	
Time When Submission List(s) and New Collateral Papers (If Any) Due
	
42

	
3.4.
	
If Outstanding Advances Would Exceed the Borrowing Base
	
43

	
3.5.
	
If a Request for Borrowing or New Collateral Papers are Received Late;
	 
	 	
Waiver of Claim for Any Late Funding
	
43

	
4
	
THE SENIOR CREDIT NOTES
	
43

	
5
	
INTEREST, PRINCIPAL AND FEES PAYMENTS
	
44

	
5.1.
	
Interest
	
44

	
5.2.
	
Interest Rates.
	
45

	
5.3.
	
Principal
	
45

	
5.4.
	
Interest (and Principal) Due at Maturity
	
46

	
5.5.
	
Rate of Return Maintenance Covenant
	
46

	
5.6.
	
Chief Credit Officer’s Certificate Conclusive
	
47

	
5.7.
	
Facility Fee
	
47

	
5.8.
	
Agent’s Fee
	
48

	
5.9.
	
Overdraft Advances
	
48

	
5.10.
	
Prepayments
	
48

	
5.11.
	
Payments.
	
49

	
5.12.
	
Pro Rata Distribution of Payments
	
50

	
6
	
COLLATERAL
	
50

	
6.1.
	
Grant of Security Interest
	
50

	
6.2.
	
Further Assurances Concerning Collateral
	
52

	
6.3.
	
Delivery of Additional Collateral or Mandatory Prepayment
	
52

	
6.4.
	
Mandatory Redemption of Subpar Alt-A Collateral for Low Weighted Average
	 
	 	
FICO Scores or of Nonconforming Pledged Loans if Less Than 95%
	 
	 	
Conform with Fannie Mae or Freddie Mac Requirements.
	
53

	
6.5.
	
Mortgaging of Real Property Collateral
	
54

	
6.6.
	
Pledged Loans’ Collection and Servicing Rights
	
55

	
6.7.
	
Rights After Occurrence of Event of Default
	
55

 

	 
	 	i 	 
	

	 

Table of Contents

(continued)

Page

	
6.8.
	
Sale and Agent’s Delivery of Collateral to Approved Investors
	
56

	
6.9.
	
Collateral Sale Proceeds to be Paid to Agent.
	
56

	
6.10.
	
Attorney in Fact Appointment
	
57

	
6.11.
	
Right of Redemption From Pledge
	
58

	
6.12.
	
Return of Collateral at End of Commitment
	
58

	
6.13.
	
Acceptance or Shipping Per Instructions of Returned Collateral is Acquittance
	
58

	
7
	
CONDITIONS PRECEDENT
	
59

	
7.1.
	
Initial Advance
	
59

	
7.2.
	
Each Advance
	
60

	
8
	
REPRESENTATIONS
	
62

	
8.1.
	
Organization; Good Standing; Subsidiaries
	
62

	
8.2.
	
Authorization and Enforceability
	
62

	
8.3.
	
Approvals
	
63

	
8.4.
	
Financial Condition
	
63

	
8.5.
	
Litigation
	
63

	
8.6.
	
Licensing
	
64

	
8.7.
	
Hedge Investments in Mortgage Loans
	
64

	
8.8.
	
Compliance with Applicable Laws
	
64

	
8.9.
	
Regulation U
	
64

	
8.10.
	
Investment Company Act
	
64

	
8.11.
	
Payment of Taxes
	
64

	
8.12.
	
Agreements
	
65

	
8.13.
	
Title to Properties
	
65

	
8.14.
	
The Company’s Address
	
65

	
8.15.
	
ERISA
	
65

	
8.16.
	
Special Representations Concerning Collateral
	
66

	
8.17.
	
Survival
	
72

	
9
	
AFFIRMATIVE COVENANTS
	
72

	
9.1.
	
Pay Senior Credit Notes
	
73

	
9.2.
	
Financial Statements
	
73

	
9.3.
	
Financial Statements Will be Accurate
	
74

	
9.4.
	
Other Reports
	
74

	
9.5.
	
Maintain Existence and Statuses; Conduct of Business
	
76

	
9.6.
	
Compliance with Applicable Laws
	
76

	
9.7.
	
Inspection of Properties and Books; Protection of Company’s
	 
		
Proprietary Information
	
76

	
9.8.
	
Privacy of Customer Information
	
76

	
9.9.
	
Notice of Suits, Etc. and Notice and Approval of Proposed Servicing Transfers
	
77

	
9.10.
	
Payment of Taxes, etc
	
78

	
9.11.
	
Insurance
	
78

	
9.12.
	
Maintain Priority and Perfection of Lender’s Lien
	
78

	
9.13.
	
Subordination of Certain Indebtedness
	
78

	
9.14.
	
Use of Proceeds of Advances
	
78

 

	 
	 	 ii	 
	

	 

Table of Contents

(continued)

Page

	
9.15.
	
Promptly Correct Escrow Imbalances
	
78

	
9.16.
	
MERS Covenants
	
79

	
9.17.
	
Special Affirmative Covenants Concerning Collateral.
	
80

	
9.18.
	
Coordination with Other Lenders/Repo Purchasers and Their Custodians
	
82

	
10
	
NEGATIVE COVENANTS
	
82

	
10.1.
	
Contingent Liabilities
	
82

	
10.2.
	
Conditional Repurchase, Indemnity or Other Recourse Obligations
	
82

	
10.3.
	
Pledging or Assignment of Servicing Rights
	
82

	
10.4.
	
No Reorganization
	
82

	
10.5.
	
Merger; Sale of Assets; Acquisitions
	
82

	
10.6.
	
Permitted Debt
	
83

	
10.7.
	
Financial Covenants
	
84

	
10.8.
	
Special Negative Covenants Concerning Collateral.
	
84

	
11
	
DEFAULTS AND REMEDIES
	
85

	
11.1.
	
Events of Default
	
85

	
11.2.
	
Cure or Waiver
	
88

	
11.3.
	
Remedies.
	
88

	
11.4.
	
Application of Proceeds
	
91

	
11.5.
	
Agent Appointed Attorney-in-Fact
	
91

	
11.6.
	
Right of Setoff
	
92

	
12
	
REIMBURSEMENT OF EXPENSES; INDEMNITY
	
92

	
13
	
RELATIONSHIPS AMONG THE AGENT AND THE LENDERS
	
94

	
13.1.
	
Agent’s Duties
	
94

	
13.2.
	
Actions Requiring All Lenders’ Consent
	
94

	
13.3.
	
Actions Requiring Required Lenders’ Consent
	
95

	
13.4.
	
Agent’s Discretionary Actions
	
96

	
13.5.
	
Lenders’ Cooperation
	
96

	
13.6.
	
Lenders’ Sharing Arrangement
	
97

	
13.7.
	
Lenders’ Acknowledgment
	
97

	
13.8.
	
Agent’s Representations to Lenders
	
97

	
13.9.
	
Agent’s Duty of Care, Express Negligence Waiver and Release
	
97

	
13.10.
	
Calculations of Shares of Principal and Other Sums
	
98

	
13.11.
	
Resignation of the Agent
	
98

	
13.12.
	
Effective Date of Resignation of the Agent
	
99

	
13.13.
	
Successor Agent
	
99

	
13.14.
	
Merger of the Agent
	
99

	
13.15.
	
Participation; Assignment.
	
99

	
14
	
NOTICES
	
101

	
15
	
MISCELLANEOUS
	
103

	
15.1.
	
Terms Binding Upon Successors; Survival of Representations
	
103

	
15.2.
	
Items to Be Satisfactory to the Agent or the Custodian
	
103

	
15.3.
	
Usury Not Intended; Credit or Refund of Any Excess Payments
	
103

	
15.4.
	
This Agreement and the Other Facilities Papers
	
104

 

	 
	 	iii 	 
	

	 

Table of Contents

(continued)

Page

	
15.5.
	
No Waiver
	
104

	
15.6.
	
USA Patriot Act Notification
	
104

	
15.7.
	
Counterpart Execution; Amendments
	
105

	
15.8.
	
Governing Law, Jurisdiction and Venue
	
105

	
15.9.
	
Waiver of Jury Trial
	
105

	
15.10.
	
Relationship of the Parties
	
105

 

 

	 
	 	iv 	 
	

	 

1/05 SENIOR SECURED CREDIT AGREEMENT

Preamble

This 1/05 Senior Secured Credit Agreement (the “1/05 Credit Agreement” and as it may be supplemented, amended or restated, the “Current Credit Agreement” or, within itself, this “Agreement”), whose effective date (the “Effective Date”) is January 4, 2005, among E-LOAN, INC. (the “Company”), a Delaware corporation with its principal office at 6230 Stoneridge Mall Road, Pleasanton, California 94588, JPMORGAN CHASE BANK, N.A.
(“JPMorgan”), a national banking association, acting herein as a Lender (as defined in Section 1.2) and agent and representative of the other Lenders (in that capacity JPMorgan is
called the “Agent”), and such other Lenders as may from time to time be party to this Agreement, recites and provides as follows:

Recitals

The Company has asked the Lenders and the Agent to establish a $150 million senior, secured, revolving line of credit for warehousing the Company’s Single-family mortgage loans, with availability of 100% of the Aggregate Committed Sum to finance Prime Loans, 100% of the Aggregate Committed Sum to finance Dry Loans and limited availability for Wet Loans (60% of the Aggregate Committed Sum for the first four and last three Business Days of the month and 40% on other days), Jumbo Loans (25% of the Aggregate Committed Sum plus any unused portion of the following sublimit for Super Jumbo Loans) and Super Jumbo Loans (10% of the Aggregate Committed Sum), Alt-A Loans (10% of the Aggregate Committed Sum), Second Lien Loans and HELOCs (Prime Loans only, 50% of the Aggregate Committed Sum), Subprime Loans
(15% of the Aggregate Committed Sum), Late Pledged (Seasoned) Loans (5% of the Aggregate Committed Sum), Long Warehoused (Aged) Loans (20% of the Aggregate Committed Sum), Non-owner Occupied Loans (5% of the Aggregate Committed Sum), HLTV Loans ($5 million) and Repurchased Loans (2.5% of the Aggregate Committed Sum), subject to the requirement that at all times at least 95% of all Pledged Loans, excluding Alt-A Loans, Second Lien Loans, Repurchased Loans, Subprime Loans, Jumbo Loans and Super Jumbo Loans, must conform to the underwriting and other requirements of Fannie Mae or Freddie Mac (capitalized terms used in these recitals being defined above or in Section 1), and the Lenders
and the Agent have agreed to do so on the terms and subject to the conditions of this Agreement.

In addition, if and when JPMorgan is no longer the only Lender (as it is on the Effective Date), JPMorgan has agreed to provide a separate revolving swing line of credit in an amount equal to JPMorgan’s Commitment to initially and temporarily finance the Company’s borrowings pending their funding by all of the Lenders pursuant to this Agreement.

 

	 
	 	 	 
	

	 

The Lenders’ and Agent’s agreement to establish and continue the credit line and JPMorgan’s agreement to establish and continue the swing line are each made upon and subject to the terms and conditions of this Agreement. If there is any conflict or inconsistency between these recitals and the following agreements, the latter shall govern and control. If there is any conflict or inconsistency between any of the terms or provisions of this Agreement and any of the other Facilities Papers, this Agreement shall govern and control. If there is any conflict between any provision of this Agreement and any later supplement, amendment, restatement or replacement of it, the latter shall govern and control.

Agreements

In consideration of the premises, the mutual agreements stated below and other good and valuable consideration paid by each party to each other party to this Agreement, the receipt and sufficiency of which each hereby acknowledges, the parties hereby agree as follows.

1  DEFINITIONS

 

1.1.  Defined Terms. Except where otherwise specifically stated, capitalized terms used in this Agreement and the other Facilities Papers have the meanings assigned to them below or elsewhere in this Agreement.

 

1.2.  Definitions of General Application. The terms defined in this Section are generally applicable. For convenience of reference, defined terms relating only to the calculation and payment of interest are defined in Section 1.3.

 

“1/05 Credit Agreement” is defined in this Agreement’s preamble.

“Acceleration Date” is defined in the definition of “Maturity Date”.

“Adjusted GAAP Net Worth” means, on any day:

(a)    the excess of the Company’s total assets over total liabilities on that day — including assets and liabilities of its wholly-owned subsidiaries — each being determined in accordance with GAAP consistent with the accounting principles applied in the preparation of the Financial Statements referred to in Section 8.4;

less    (b)    the value included in the Financial Statements referred to in Section 8.4 for capitalized mortgage loan servicing rights and
capitalized excess mortgage loan servicing fees;

less    (c)     aggregate investments in Subsidiaries and Affiliates included in the Financial Statements referred to in Section 8.4;

less    (d)    net total advances to Subsidiaries and Affiliates outstanding;

less    (e)    goodwill and all other assets not supported by or representative of a tangible asset, which intangible assets would be deemed by HUD to be unacceptable for the purpose of calculating adjusted net worth in accordance with HUD requirements in effect as of such day;

plus    (f)    Qualified Subordinated Debt to the extent due thirty (30) days or more after the Maturity Date.

	 
	 	2 	 
	

	 

“Advance” means a disbursement by the Lenders under the Loan in accordance with the terms of this Agreement — including initial disbursements, readvances of funds previously advanced to the Company and repaid to the Lenders and protective advances made without any requirement for any Request for Borrowing — and is a correlative of “Borrowing”: a Borrowing from the Lenders’ and the Agent’s point of view. Where “Swing Line” prefaces “Advance”, then it means an Advance by JPMorgan under the Swing Line. Each Advance shall be classified by the
Agent as of its initial funding date (or, for Advances made to fund Wet Loans to the extent of the Collateral Values of such Wet Loans as they convert to Dry Loans, on their conversion date) as one or another of the following Classes:

(i)    a “Single-family Warehouse Advance” meaning an Advance made to finance Dry Loans; or

(ii)    a “Wet Warehousing Advance” meaning an Advance made to finance Wet Loans.

“Advance Rate” is defined in the definition of “Collateral Value”.

“Affiliate” means and includes, with respect to a specified Person, any other Person:

(a)    that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with the specified Person (in this definition only, the term “Control” means having the power to set or direct management policies, directly or indirectly);

(b)    that is a director, trustee, partner, member or executive officer of the specified Person or serves in a similar capacity in respect of the specified Person;

(c)    of which the specified Person is a director, trustee, partner, member or executive officer or with respect to which the specified Person serves in a similar capacity and over whom the specified Person, either alone or together with one or more other Persons similarly situated, has Control;

(d)    that, directly or indirectly through one or more intermediaries, is the beneficial owner of twenty percent (20%) or more of any class of equity securities — which does not include any MBS — of the specified Person; or

(e)    of which the specified Person is directly or indirectly the owner of twenty percent (20%) or more of any class of equity securities of the specified Person.

“Aged Loan” is defined in the definition of “Long Warehoused (Aged) Loan”.

“Agency” means Ginnie Mae, Fannie Mae, Freddie Mac, HUD, FHA or VA.

“Agent” is defined in this Agreement’s preamble.

“Agent’s Fee” is defined in Section 5.8.

	 
	 	 3	 
	

	 

“Aggregate Committed Sum” means, on any day, the lesser of (a) the Maximum Aggregate Commitment for that day as stated in Schedule MAC in effect for that day, and (b) the aggregate of the Lenders’ individual Committed Sums for that day as stated in the definition of “Committed Sum” below.

“Agreement” is defined in this Agreement’s preamble.

“Alt-A Loan” means a first Lien Single-family Loan that is not a Prime Loan and has a FICO score of at least 620, a Cumulative Loan-to-Value Ratio of ninety-five percent (95%) or less and that satisfies the underwriting guidelines of, and is eligible for purchase by, an Approved Investor.

“Appraisal” means an appraisal by a licensed appraiser selected in accordance with Agency guidelines and not identified to the Company as an unacceptable appraiser by an Agency, and who is experienced in estimating the value of property of that same type in the community where it is located, and who — unless approved by the Agent on a case-by-case basis — is not a director, officer or employee of the Company or any Affiliate of the Company, or related as a parent, sibling, child or first cousin to any of the Company’s or any such Affiliate’s respective directors or
officers or any of their spouses, a signed copy of the written report of which appraisal is in the possession of the Company or its Servicer.

“Approved Investor” means Ginnie Mae, Fannie Mae, Freddie Mac and any of the Persons listed on Schedule AI, as it may be supplemented or amended from time to time by agreement of the Company and the Agent; provided that if the Agent shall give written notice to the Company of the Agent’s reasonable disapproval of any Approved Investor(s) named in the notice, the investor(s) named shall no longer be Approved Investor(s) from and after the time when the Agent sends that notice to the Company.

“Approved Subprime Investor” means an Approved Investor that is approved by the Agent to purchase, and purchases, Subprime Loans from the Company.

“Authorized Company Representative” means a representative of the Company duly designated by all requisite corporate action to execute any certificate, schedule or other document contemplated or required by this Agreement or the Custody Agreement on behalf of the Company and as its act and deed. A list of Authorized Company Representatives current as of the Effective Date is attached as Schedule AR. The Company will use its best efforts to provide an updating list of Authorized Company Representatives to the Agent and the Custodian promptly following each addition to or subtraction from such list, and the Agent, the Lenders and the Custodian shall be entitled to rely on each such list until such an updating list is received by the Agent and the Custodian.

“AVM” means an automated valuation model used to determine the valuation of Mortgaged Premises securing Second Liens or HELOCs as provided for and described in the Company’s underwriting guidelines

	 
	 	4 	 
	

	 

“Basic Papers” means all of the Loan Papers that must be delivered to the Custodian — in the case of Wet Loans, on or before the fifth (5th) Business Day after the related Advance — in order for any particular item of Collateral to be Eligible Collateral and have Collateral Value. Exhibit C to the Custody Agreement lists the Basic Papers, and reference is here made to the
Custody Agreement for that listing.

“Book Collateral Value” means the Book HELOC Collateral Value, the Book Prime Loan Collateral Value, the Book Repurchased Loan Collateral Value, the Book Second Lien Loan Collateral Value, the Book Subprime Loan Collateral Value, whichever the context requires.

“Book HELOC Collateral Value” is defined in clause (a) of the definition of “Collateral
Value”.

“Book Prime Loan Collateral Value” is defined in clause (b) of the definition of “Collateral Value”.

“Book Repurchased Loan Collateral Value” is defined in clause (c) of the definition of “Collateral Value”.

“Book Second Lien Loan Collateral Value” is defined in clause (d) of the definition of “Collateral Value”.

“Book Subprime Loan Collateral Value” is defined in clause (e) of the definition of “Collateral Value”.

“Borrowing” is a correlative of “Advance”: an Advance from the Company’s point of view. Where “Swing Line” prefaces “Borrowing”, then it means a Borrowing from JPMorgan under the Swing Line. Where “Wet Warehousing” prefaces “Borrowing”, then it means a Borrowing under the Wet Warehousing Sublimit.

“Borrowing Base” means, on any day, the sum of the Collateral Values of all Eligible Collateral then Pledged to the Agent.

“Broker’s Price Opinion” means the written opinion of the value of a tract or parcel of Single-family residential real property securing a Mortgage Loan, issued by a real estate broker duly licensed as such by the jurisdiction in which the subject property is located and that is not an Affiliate of the Company or of any of the Company’s or its Subsidiaries’ or Affiliates’ directors of officers and is not an employee of any of them, selected reasonably and in good faith by the Company.

“Business Day” means any day when both (1) the Agent’s main branch in Houston, Texas is open for regular commercial banking business and (2) federal funds wire transfers can be made.

	 
	 	5 	 
	

	 

“Cash Equivalents” means and includes, on any day:

(a)    any evidence of debt issued by the United States government, or guaranteed as to the timely payment of principal and interest by the United States government, and maturing twelve (12) months or
less after that day;

(b)    commercial paper issued by a corporation (other than an Affiliate of the Company) organized under the laws of any state of the United States of America or of the District of Columbia, rated A1 by
Standard & Poor’s (a division of The McGraw-Hill Companies, Inc.), Prime-1 by Moody’s Investors Service, Inc. or the equivalent rating by another nationally-recognized ratings service acceptable to the Agent, and having a stated maturity date nine (9) months or less after its issue date;

(c)    any certificate of deposit or banker’s acceptance issued by a commercial bank that is a member of the Federal Reserve System and has a combined unimpaired capital and surplus and unimpaired undivided profits of not less than Five Hundred Million Dollars ($500,000,000), and maturing not more than twelve (12) months after that day; and

(d)    any repurchase agreement (i) entered into with any Federal Reserve System member commercial bank of the size referred to in clause c above and (ii) secured by any obligation of the type described in any of clauses (a)-(c)
above and (iii) having a market value on its date of at least one hundred percent (100%) of the repurchase obligation of that commercial bank.

“Central Elements” means and includes the value of a substantial part of the Collateral; the prospects for repayment of each portion of the Loan, both principal and interest, when due; the validity or enforceability of this Agreement, any Senior Credit Note (including the Swing Line Note, if any), the Custody Agreement, the Electronic Tracking Agreement and all securities agreements, mortgages, reimbursement agreements and other contracts between or among the parties now or hereafter executed
evidencing, securing or otherwise relating to the Facilities, and any renewal, extension, rearrangement, increase, supplement, modification or restatement of any of them; the property, principal business operations or financial condition of the Company and any of its Subsidiaries; the ability of the Company and any of its Subsidiaries to fulfill their respective obligations under the foregoing agreements, each taken as a whole, and the Company’s and its Subsidiaries’ prospects of continuing in business as a going concern.

“Change of Control” means and includes:

(a)    a sale of substantially all of the Company’s assets to a Person or related group of Persons;

(b)    the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules of the United States Securities and Exchange Commission thereunder as in effect on the Effective Date), of Equity Interests representing more than twenty percent (20%) of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Company;

	 
	 	 6	 
	

	 

(c)    occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by Persons who were neither (i) nominated by the board of directors of the Company nor (ii) appointed by directors so nominated;

(d)    any event that give holders of preferred Equity Interests or other securities issued pursuant to any shareholders’ rights plan of the Company the right to purchase or convert such securities into Equity Interests of the Company; or

(e)    the acquisition of direct or indirect Control of the Company by any Person or group;

if any, that occurs on or after the Effective Date.

“Change of Executive Management” means the occurrence of any event after which, without the Agent’s prior written consent, any of Christian A. Larsen, Matthew Roberts or Mark E. Lefanowicz shall cease for any reason whatsoever, including death or disability, to be, and to continuously perform the duties of chief executive officer, chief financial officer or president, respectively, of the Company or, if such cessation shall occur as a result of death or disability, no successor satisfactory to the Agent, in its reasonable judgment, shall
have become, and shall have commenced to perform the duties of, chief executive officer, chief financial officer or president, respectively, of the Company within ninety (90) days after such cessation; provided that if any such satisfactory successor shall have been so elected and shall have commenced performance of such duties within such period, then the name of such successor or successors shall be deemed to have been inserted in place of Christian A. Larsen, Matthew Roberts or Mark E. Lefanowicz, as applicable, in this definition.

“Collateral” is any or all collateral (as the context requires) for the Obligations, consisting of the “Single-family Collateral”, which means Pledged Loans, their security, their related Loan Papers and the right to recover under the related Hazard Insurance Policies.

“Collateral Confirmation Agreement” means a collateral confirmation agreement in the form attached as Exhibit F to the Custody Agreement or another form acceptable to the Custodian, duly executed by an Authorized Company Representative and delivered to the Custodian (1) listing Mortgage Loans being Pledged to the Agent (or, in the case of Dry Loans already pledged as Wet Loans, listing
Mortgage Loans whose Basic Papers are being delivered to the Agent) concurrently with the delivery to the Custodian of such collateral confirmation agreement by Company loan number and showing for each the Customer name and original loan amount, (2) certifying that, for each such Pledged Loan, the Basic Papers have been executed and delivered by all appropriate Persons and such Pledged Loan has been originated, closed, funded and sold and assigned to the Company and (3) certifying that the Basic Papers for such Mortgage Loan have been shipped to the Custodian or (in the case of Wet Loans) are in the possession of its closer, the Company or the Company’s Servicer for such Pledged Loan, and that (for all Pledged Loans) one of the latter has possession of the Supplemental Papers therefor.

	 
	 	7 	 
	

	 

“Collateral Records” means books, records, ledger cards, files, papers, documents, instruments, certificates, appraisal reports journals, reports, correspondence, customer lists, information and data that describes, catalogs or lists such information or data, computer printouts, media (tapes, discs, cards, drives, flash memory or any other kind of physical or virtual data or information storage media or systems) and related data processing software (subject to any licensing restrictions) and similar items that at any time evidence or contain information relating to any of the Collateral,
and other information and data that is used or useful for managing and administering the Pledged Loans, together with the nonexclusive right to use (in common with the Company and any other secured party that has a valid and enforceable security interest therein and that agrees that its security interest is similarly nonexclusive) the Company’s operating systems to manage and administer any of the Collateral and any of the related data and information described above, or that otherwise relates to the Collateral, together with the media on which the same are stored to the extent stored with material information or data that relates to property other than the Collateral (tapes, discs, cards, drives, flash memory or any other kind of physical or virtual data or information storage media or systems), and the Company’s rights to access the same, whether exclusive or nonexclusive, to the extent that such access rights may lawfully be transferred or used by the Company’s permittees, and any
computer programs that are owned by the Company (or licensed to the Company under licenses that may lawfully be transferred or used by the Company’s permittees) and that are used or useful to access, organize, input, read, print or otherwise output and otherwise handle or use such information and data.

“Collateral Support” means all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and includes any security agreement or other agreement granting a lien or security interest in such real or personal property, including:

(a)    all Loan Papers, whether now owned or hereafter acquired, related to, and all private mortgage insurance on, any Pledged Loans, and all renewals, extensions, modifications and replacements of any of them;

(b)    all rights, liens, security interests, guarantees, insurance agreements and assignments accruing or to accrue to the benefit of the Company in respect of any Pledged Loan;

(c)    all of the Company’s rights, powers, privileges, benefits and remedies under each and every paper now or hereafter securing, insuring, guaranteeing or otherwise relating to or delivered in connection with any Pledged Loan, including all guarantees, lien priority agreements, security agreements, deeds of trust, collateral assignments, subordination agreements, negative pledge agreements, loan agreements, management agreements, development agreements, design professional agreements, payment, performance or completion bonds, title and casualty insurance policies and mortgage guaranty or insurance contracts;

(d)    all of the Company’s rights, to the extent assignable, in, to and under any and all commitments issued by (i) Ginnie Mae, Fannie Mae, Freddie Mac, another mortgage company or any other investor or any lender or securities issuer to guarantee, purchase or invest in any of the Pledged Loans or any MBS based on or backed by any of them or (ii) any broker or investor to purchase any MBS, whether evidenced by book entry or certificate, representing or secured by any interest in any of the Pledged Loans, together with the proceeds arising from or pursuant to any and all such commitments;

	 
	 	8 	 
	

	 

(e)    all rights under every Hazard Insurance Policy relating to real estate securing a Pledged Loan for the benefit of the creditor of such Pledged Loan, the proceeds of all errors and omissions insurance policies and all rights under any blanket hazard insurance policies to the extent they relate to any Pledged Loan or its security and all hazard insurance or condemnation proceeds paid or payable with respect to any of the Pledged Loans and/or any of the property securing payment of any of the Pledged Loans or covered by any related instrument;

(f)    all present and future claims and rights of the Company to have, demand, receive, recover, obtain and retain payments from, and all proceeds of any nature paid or payable by, any governmental, quasi-governmental or private mortgage guarantor or insurer (including VA, FHA or any other Person) with respect to any of the Pledged Loans; and

(g)    all tax, insurance, maintenance fee and other escrow deposits or payments made by the Customers under such Pledged Loans (the Agent and the Lenders acknowledge that the Company’s rights in such deposits are limited to the rights of an escrow agent and such other rights, if any, in and to such deposits as are accorded by the Pledged Loans and related papers) and all monies, accounts, deposit accounts, payment intangibles and general intangibles, however designated or maintained, constituting or representing so-called “completion escrow” funds or “holdbacks”, and being Pledged Loans’ proceeds recorded
as disbursed but that have not been paid over to the seller of the subject Mortgaged Premises (the purchase of which is financed by such Pledged Loan), but that are instead being held by the Company or by a third party escrow agent pending completion of specified improvements or landscaping requirements for such Mortgaged Premises.

“Collateral Value” means the value of Eligible Collateral for purposes of this Agreement. Collateral (i) that is not duly Pledged to the Agent, (ii) in which the Agent does not have a first and prior perfected Lien (except that in the case of Wet Loans Pledged to the Agent for five (5) or less Business Days, the fact that the Agent does not have possession, directly or through the Custodian, of the Basic Papers therefor shall not affect such Wet Loans’ Collateral Value) or (iii) that is not Eligible Collateral because it does not satisfy in all material respects one or more of the
conditions to eligibility stated for it in this Agreement, shall have zero Collateral Value, and Collateral that at one time satisfied all conditions for eligibility but for which a Disqualifier has occurred shall have zero Collateral Value from the date of that Disqualifier unless and until the Company has cured all applicable Disqualifiers or the Agent has waived them in writing; provided that the reduction for any reason of the Collateral Value of any Collateral that is Pledged to the Agent shall not itself affect or impair the Agent’s security interest in that Collateral. Collateral Values of the types of Eligible Collateral, duly Pledged to the Agent with the Agent having Lien priority and perfection as aforesaid and as to which no such uncured or unwaived Disqualifier has occurred, shall be determined
as follows:

(a)  The “HELOC Collateral Value” on any day of any HELOC Collateral, whether a Dry Loan or a Wet Loan, shall be its “Book HELOC Collateral Value”, which is the least of:

 

	 
	 	 9	 
	

	 

(i)    ninety-five percent (95%) of the lesser of such Pledged Loan’s (x) original principal amount or (y) Principal Balance on that day;

(ii)    ninety-five percent (95%) of the purchase price that the Approved Investor has committed to pay for such Pledged Loan pursuant to the Purchase Commitment covering such Pledged Loan;

(iii)    for a Pledged Loan originated by the Company or any Affiliate, ninety-five percent (95%) of the loan amount at origination less discount points received by the Company or such Affiliate, as stated on the Pledged Loan’s HUD-1 Settlement Statement; and

(iv)    for a Pledged Loan directly or indirectly acquired by the Company from a mortgage broker or a correspondent that is not an Affiliate of the Company, ninety-five percent (95%) of the net purchase price paid therefor by the Company (i.e., net of all origination fees, discounts, refunds and rebates, however and whenever credited or payable to the Company and without regard, however, to any servicing release premium paid by the
Company);

provided that if the Agent shall elect (in its sole and absolute discretion) to mark it to market, or if the Required Lenders direct the Agent to mark it to market, such Pledged Loan’s Collateral Value for that day shall be the lesser of (x) its Book HELOC Collateral Value or (y) ninety-five percent (95%) of its Market Value on that day.

(b)  The “Prime Loan Collateral Value”on any day of any pledged Prime Loan, whether a Dry Loan or a Wet Loan, shall be its “Book Prime Loan Collateral Value”, which is the least of:

 

(i)    ninety-eight percent (98%) of the lesser of such Pledged Loan’s (x) original principal amount or (y) Principal Balance on that day;

(ii)    ninety-eight percent (98%) of the purchase price that the Approved Investor has committed to pay for such Pledged Loan pursuant to the Purchase Commitment covering such Pledged Loan;

(iii)    for a Pledged Loan originated by the Company or any Affiliate, ninety-eight percent (98%) of the loan amount at origination less discount points received by the Company or such Affiliate, as stated on the Pledged Loan’s HUD-1 Settlement Statement; and

(iv)    for a Pledged Loan directly or indirectly acquired by the Company from a mortgage broker or a correspondent that is not an Affiliate of the Company, ninety-eight percent (98%) of the net purchase price paid therefor by the Company (i.e., net of all origination fees, discounts, refunds and rebates, however and whenever credited or payable to the Company and without regard, however, to any servicing release premium paid by the
Company);

provided that if the Agent shall elect (in its sole and absolute discretion) to mark it to market, or if the Required Lenders direct the Agent to mark it to market, such Pledged Loan’s Collateral Value for that day shall be the lesser of (x) its Book Prime Loan Collateral Value or (y) ninety-eight percent (98%) of its Market Value on that day.

	 
	 	 10	 
	

	 

(c)  The “Repurchased Loan Collateral Value” on any day for a pledged Repurchased Loan shall be its “Book Repurchased Loan Collateral Value”, which is the least of:

 

(i)    seventy-five percent (75%) of the lesser of such pledged Repurchased Loan’s (x) original principal amount or (y) Principal Balance, on that day;

(ii)    seventy-five percent (75%) of the net purchase price paid therefor by the Company; and

(iii)    sixty percent (60%) of the value of the Single-family residential real property securing such pledged Repurchased Loan as determined by a Current Appraisal or a Current Broker’s Price Opinion (or, for Second Lien Loans or HELOCs only, by the AVM), net of any senior Lien;

provided that if the Agent shall elect (in its sole and absolute discretion) to mark it to market, or if the Required Lenders direct the Agent to mark it to market, such Pledged Loan’s Collateral Value for that day shall be the lesser of (x) its Book Repurchased Loan Collateral Value or (y) seventy-five percent (75%) of its Market Value on that day.

(d)  The “Second Lien Loan Collateral Value” on any day of any pledged Second Lien Loan (whether or not a Wet Loan and/or a HELOC) shall be its “Book Second Lien Loan Collateral Value”, which is the least of:

 

(i)    ninety-five percent (95%) of the lesser of such pledged Second Lien Loan’s (x) original principal amount or (y) Principal Balance on that day; 

(ii)    ninety-five percent (95%) of the purchase price that the Approved Investor has committed to pay for such pledged Second Lien Loan pursuant to the Purchase Commitment covering such Pledged Loan;

(iii)    for a pledged Second Lien Loan originated by the Company or an Affiliate of the Company, ninety-five percent (95%) of the loan amount at origination less discount points received by the Company or such Affiliate, as stated on the Pledged Loan’s HUD-1 Settlement Statement; or

(iv)    for a pledged Second Lien Loan directly or indirectly acquired by the Company from a mortgage broker or a correspondent that is not an Affiliate of the Company, ninety-five percent (95%) of the net purchase price paid therefor by the Company (i.e., net of all origination fees, discounts, refunds and rebates, however and whenever credited or payable to the Company and without regard, however, to any servicing release premium paid by the
Company);

provided that if the Agent shall elect (in its sole and absolute discretion) to mark it to market, or if the Required Lenders direct the Agent to mark it to market, such Pledged Loan’s Second Lien Loan Collateral Value for that day shall be the lesser of (i) its Book Second Lien Loan Collateral Value or (ii) ninety-five percent (95%) of its Market Value on that day.

	 
	 	11 	 
	

	 

(e)  The “Subprime Loan Collateral Value” on any day of any pledged Subprime Loan (whether or not a Wet Loan) shall be its “Book Subprime Loan Collateral Value”, which is the least of:

 

(i)    ninety-five percent (95%) of the lesser of such pledged Subprime Loan’s (x) original principal amount or (y) Principal Balance on that day;

(ii)    for a pledged Subprime Loan originated by a Company or an Affiliate of a Company, ninety-five percent (95%) of the loan amount at origination less discount points received by the Company or such Affiliate, as stated on the Pledged Loan’s HUD-1 Settlement Statement; or

(iii)    for a pledged Subprime Loan directly or indirectly acquired by a Company from a mortgage broker or a correspondent that is not an Affiliate of the Company, ninety-five percent (95%) of the net purchase price paid therefor by the Company (i.e., net of all origination fees, discounts, refunds and rebates, however and whenever credited or payable to the Company and without regard, however, to any servicing release premium paid by the Company);
or

(iv)    for pledged Subprime Loans that are subject to a Purchase Commitment, ninety-five percent (95%) of the purchase price that the Approved Subprime Investor issuing it will pay for such pledged Subprime Loan as provided for in the Purchase Commitment covering it;

provided that if the Agent shall elect (in its sole and absolute discretion) to mark it to market, or if the Required Lenders direct the Agent to mark it to market, such Pledged Loan’s Subprime Loan Collateral Value for that day shall be the lesser of (i) its Book Subprime Loan Collateral Value or (ii) ninety-five percent (95%) of its Market Value on that day.

(f)  The Collateral Value of any other type of Collateral shall be as is reasonably determined by the Agent.

 

The applicable percentage factor (stated above) for determining the value of any particular item of Collateral is the “Advance Rate” for that Collateral. Each of such values shall be as determined by the Agent — which may accept as correct any value proposed by the Company that is not obviously and materially incorrect on its face — and each determination by the Agent of Collateral Value (and of each element of each such determination, including Market Value) may be computed using any reasonable averaging, interpolation and attribution method and, absent manifest error, shall be
conclusive and binding.

“Commitment” means, for each Lender, its commitment under Section 2.1 to fund its Funding Share of Advances under the Credit Line, limited to such Lender’s Committed Sum. Such term also includes JPMorgan’s Commitment, if any, under Section 2.5 to fund the Swing Line, limited to the Swing Line Limit, upon and subject to the terms of this Agreement.

“Commitments Cancellation Date” is defined in the definition of “Termination Date”.

	 
	 	12 	 
	

	 

“Committed Sum” means, for any day, the maximum amount a Lender is committed on that day to lend to the Company (or for its account) on a revolving credit basis pursuant to this Agreement, on its terms and subject to its conditions. From the Effective Date of this Agreement through the Termination Date or such other date (if any) when all or any of them is changed by operation of the provisions of any agreement or Legal Requirement, the Committed Sums for the Lenders are as set forth on Schedule LC, as it may be amended and restated from time to time.

“Company” is defined in this Agreement’s preamble.

“Company Customer” means any natural person who has applied in writing to the Company for a financial product or service, has obtained any financial product or service from the Company or has a Mortgage Loan that is serviced or subserviced by the Company.

“Company Customer Information” means any information or records in any form (written, electronic or otherwise) containing a Company Customer’s personal information or identity, including the Company Customer’s name, address, telephone number, loan number, loan payment history, delinquency status, insurance carrier or payment information, tax amount or payment information and the fact that the Company Customer has a relationship with the Company.

“Credit Line” means the revolving line of credit established by this Agreement and governed by it and the other Facilities Papers.

“Cumulative Loan-to-Value Ratio” means, as to any Single-family Loan, the ratio of:

(x) the sum of (i) the original principal amount of the Mortgage Note that is Pledged to the Agent and (ii) the original principal sums of all other Mortgage Notes (if any) secured by a mortgage Lien on the same Mortgaged Premises as are the security for such pledged Mortgage Note;

to         (y) the fair market value of such Mortgaged Premises, as such value is shown in the most recent Appraisal or the most recent Current Broker’s Price Opinion, whichever is less (or, for Second Lien Loans or HELOCs only, the value as determined by the AVM)

“Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement for the purpose of hedging the currency risk associated with the Company’s and its Subsidiaries’ operations and not for speculative purposes.

“Current Appraisal” means an Appraisal dated no earlier than one hundred eighty (180) days (or such longer period, if any, as the Agent shall approve) before the relevant Determination Date.

	 
	 	 13	 
	

	 

“Current Broker’s Price Opinion” means a Broker’s Price Opinion dated no earlier than one hundred twenty (120) days (or such longer period, if any, as the Agent shall approve) before the relevant Determination Date.

“Current Credit Agreement” is defined in this Agreement’s preamble.

“Custodian” means JPMorgan, as Custodian under the Custody Agreement, or any successor custodian under the Custody Agreement.

“Custodian’s Fees” are the fees to be paid by the Company to the Custodian for its services under the Custody Agreement, as provided for in the Custody Agreement or by a separate agreement. Such fees are separate from and in addition to other fees to be paid to the Agent or the Lenders provided for in this Agreement.

“Custody Agreement” means the 1/05 Custody Agreement dated as of January 4, 2005 between the Company and JPMorgan, as Custodian, as it may hereafter be supplemented, amended or restated from time to time.

“Customer” means and includes each maker of a Mortgage Note and each cosigner, guarantor, endorser, surety and assumptor thereof, and each mortgagor or grantor under a Mortgage, whether or not such Person has personal liability for its payment of the Mortgage Loan evidenced or secured thereby, in whole or in part.

“Debt” means, with respect to any Person, on any day, the sum of the following (without duplication):

(a)    all of that Person’s debt or other obligations which, in accordance with GAAP, should be included in determining total liabilities as shown on the liabilities side of that Person’s balance sheet for that day;

(b)    all of that Person’s debt or other obligations for borrowed money or for the deferred purchase price of property or services, except that non-recourse MBS Debt arising out of transactions structured to qualify for GAAP sale treatment shall be excluded;

(c)    all of any other Person’s debt or other obligations for borrowed money or for the deferred purchase price of property or services in respect of which such Person is liable — contingently or otherwise — to pay or advance money or property as guarantor, surety, endorser or otherwise (excluding such Person’s contingent liability as endorser of negotiable instruments for collection in the ordinary course of business), or which such Person has agreed to purchase or otherwise acquire; and

(d)    all debt for borrowed money or for the deferred purchase price of property or services secured by a Lien on any property owned or being purchased by that Person (even though that Person has not assumed or otherwise become liable for the payment of such debt) to the extent that such debt would not be otherwise counted as a liability for purposes of determining that Person’s net worth and to the extent that such debt is less than or equal to the net book value of such property;

	 
	 	 14	 
	

	 

(e)    obligations of that Person in respect of any exchange traded or over the counter derivative transaction, including any Hedge Agreement whether entered into for hedging or speculative purposes;

provided that, for purposes of this Agreement, there shall be excluded from the calculation of Debt for that day both (i) such Person’s obligations to pay to another Person any sums collected and held by the subject Person (as loan servicer, escrow agent or collection agent or in a similar capacity) for the account of such other Person, and (ii) the portion of Qualified Subordinated Debt that is not due within one (1) year of that day.

“Default” means the occurrence of any event or existence of any condition that, but for the giving of notice, the lapse of time or both, would constitute an Event of Default.

“Determination Date” means the date as of, or for, which a specified characteristic of a Mortgage Loan or other subject matter is being determined for purposes of a provision of this Agreement or another Facilities Paper.

“Disqualifier” means any of the circumstances or events affecting Collateral that are described on Schedule DQ. 

“Dry Loan” means a Pledged Loan acquired and owned by the Company that has been closed, funded and qualifies without exception as Eligible Single-family Collateral, including satisfying the requirement that all of its Basic Papers have been delivered to the Custodian.

“Effective Date” is defined in this Agreement’s preamble. 

“Electronic Agent” means MERSCORP, Inc. or its successor in interest or assigns.

“Electronic Tracking Agreement” means a written Electronic Tracking Agreement among the Company, the Agent, MERS and the Electronic Agent, in form and substance acceptable to the Company and the Agent, as it may be supplemented, amended, restated or replaced from time to time.

“Electronically Submitted” means that a Request for Borrowing or a payment is submitted in such an electronic form and format that the Agent is not required to enter any of its data manually. 

“Eligible Assignee” is defined in Section 13.15(b).

“Eligible Collateral” is defined on Schedule EC.

“Eligible Single-family Collateral” is defined on Schedule EC.

	 
	 	15 	 
	

	 

“Equity Interests” means shares of common stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974 and any successor statute, as amended from time to time, and all rules and regulations promulgated under it.

“Event of Default” means the occurrence of any of the conditions or events described or referred to in Section 11.

“Facilities” means the credit facilities provided for in this Agreement, and in its singular form, “Facility”, means either (i) the entire (initially) One Hundred Fifty Million Dollar ($150,000,000) senior secured revolving line of credit provided for herein including (from and after the time that another Lender joins in this Agreement as a Lender) the Swing Line or (ii) such line of credit or the Swing Line, whichever the context requires.

“Facilities Papers” means and includes this Agreement, the Senior Credit Notes (including the Swing Line Note, if any), the Custody Agreement and all security agreements, financing statements and other papers now or hereafter executed evidencing, securing or otherwise relating to the Facilities, and any renewal, extension, rearrangement, increase, supplement, modification or restatement of any of them.

“Facility Fee” is defined in Section 5.7.

“Fannie Mae” means the Federal National Mortgage Association and any successor.

“FHA” means the Federal Housing Administration and any successor.

“FICA” means the Federal Insurance Contributions Act.

“FICO” means Fair Isaac Corporation and, where used in this Agreement, refers to the credit scoring system developed by that company or to any other Customer credit scoring system whose use by the Company has been specifically approved in writing by the Agent.

“File” means a file in the possession of the Custodian or its designee (other than the Company or an Affiliate of the Company) containing all of the Basic Papers for the relevant type of Collateral.

“Financial Statements” is defined in Section 8.4.

“Freddie Mac” means the Federal Home Loan Mortgage Corporation and any successor.

	 
	 	16 	 
	

	 

“Funding Share” means, for each Lender, that proportion of each Advance that bears the same ratio to the total amount of the Advance as that Lender’s Committed Sum bears to the Aggregate Committed Sum.

“GAAP” means, for any day, generally accepted accounting principles, applied on a consistent basis, stated in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, or in statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by another entity or entities as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances for that day. The requirement that such principles be applied on a consistent basis means that the accounting principles observed in a current period shall be comparable in all material respects to those applied in an earlier period, with the exception of changes in application to which the Company’s independent certified public accountants have agreed and which changes and their effects are summarized in the subject company’s financial statements following such changes. If (a) during the term of this Agreement any change(s) in such principles occur(s) which materially changes the meaning or effect of any provision of this Agreement and (b) the Company or the Required Lenders regard such change(s) as
adverse to their respective interests, then upon written notice by the Company to the Agent, the parties to this Agreement shall negotiate promptly and in good faith a supplement or amendment to this Agreement to achieve as nearly as possible preservation and continuity of the business substance of this Agreement in light of such change; provided that neither the Agent nor any of the Lenders shall be obligated to commence, continue or conclude any such negotiation or to execute any such supplement or amendment after any Default has occurred (other than a Default caused by such change) and before it has been cured or after any Event of Default has occurred (other than an Event of Default caused by such change) that the Agent has not declared in writing to have been cured or waived.

“Ginnie Mae” means the Government National Mortgage Association and any successor.

“Governmental Authority” means any foreign governmental authority, the United States of America, any state of the United States and any political subdivision of any of the foregoing,
and any agency, department, commission, board, bureau, court or other tribunal.

“Hazard Insurance Policy” means, with respect to each Pledged Loan, the policy of fire and extended coverage insurance required by Section 9.17(c)(1) to be maintained for the related Mortgaged Premises’ improvements (and, if the related Mortgaged Premises are located
in a federally-designated special flood area, federal flood insurance issued in accordance with the Flood Disaster Protection Act of 1973, as amended from time to time or, if repealed, any superseding legislation governing similar insurance coverage, or similar coverage against loss sustained by floods or similar hazards that conforms to the flood insurance requirements prescribed by Fannie Mae guidelines, which may be provided under a separate insurance policy), which insurance may be a blanket mortgage impairment policy maintained by such Pledged Loan’s Servicer in accordance with the terms and conditions of Section 9.17(c)(2).

	 
	 	 17	 
	

	 

“Hedge Agreement” means an Interest Rate Protection Agreement or a Currency Agreement entered into in the ordinary course of the Company’s or any of its Subsidiaries’ businesses to protect the Company against changes in value of assets.

“HELOC” means a Single-family Loan that is an open end revolving home equity line of credit.

“HELOC Collateral Value” is defined in the definition of “Collateral Value”.

“HLTV Loan” means a Single-family Loan whose Cumulative Loan-to-value Ratio exceeds one hundred percent (100%), but does not exceed one hundred twenty-five percent (125%), and that is not eligible for purchase by Ginnie Mae, Fannie Mae or Freddie Mac under one of its Prime Loan purchase programs.

“HUD” means the U.S. Department of Housing and Urban Development and any successor.

“In Default” means that, as to any Mortgage Loan, any Mortgage Note payment or escrow payment is unpaid for thirty (30) days or more after its due date (whether or not the Company has allowed any grace period or extended the due date thereof by any means) or another material default has occurred and is continuing, including the commencement of foreclosure proceedings or the commencement of a case in bankruptcy for any Customer under such Mortgage Loan.

“Indemnified Liabilities” is defined in Section 12(e).

“Indemnified Parties” is defined in Section 12(e).

“Interest Rate Protection Agreement” means, with respect to either (i) any or all of the Pledged Loans or (ii) the Obligations, any short sale of any U.S. Treasury securities, futures contract, mortgage related security, Eurodollar futures contract, options related contract, interest rate swap, cap or collar agreement or similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, that is entered into by the Company and a financial institution and is reasonably
acceptable to the Agent.

“Internal Revenue Code” means the Internal Revenue Code of 1986 or any subsequent federal income tax law or laws, as amended from time to time.

“JPMorgan” is defined in this Agreement’s preamble.

“Jumbo Loan” means a Single-family Loan (whether a Prime Loan or an Alt-A Loan) secured by a first Lien Mortgage whose original principal amount is more than the maximum principal amount eligible for purchase by Fannie Mae or Freddie Mac under their first Lien Single-family Mortgage Loan purchase programs but not more than Six Hundred Fifty Thousand Dollars ($650,000) or, in the case of a Super Jumbo Loan (a Super Jumbo Loan is also a Jumbo Loan), Two Million Dollars ($2,000,000).

	 
	 	18 	 
	

	 

“Late Pledged (Seasoned) Loan” means a Pledged Loan whose Mortgage Note is dated earlier than sixty (60) days (but not more than one hundred twenty (120) days) before its Original Pledge Date.

“Law” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other determination, direction or requirement (including any of the foregoing which relate to environmental standards or controls, energy regulations and occupational safety and health standards or controls) of any (domestic or foreign) arbitrator, court or other Governmental Authority. 

“Legal Requirement” means any law, statute, ordinance, decree, ruling, requirement, order, judgment, rule or regulation (or interpretation of any of them) of any Governmental Authority, and the terms of any license, permit, consent or approval issued by any Governmental Authority.

“Lender” means each of JPMorgan and such other Persons, if any, as from time to time with the consent of the other parties to this Agreement shall be a party to this Agreement as a lender. Persons who are currently Lenders on any day shall be listed as Lenders in Schedule
LC in effect for that day.

“Lender Affiliate” means (a) with respect to any Lender, (i) an Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans
and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

“Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest).

“Line” means a line of credit under this Agreement: the Credit Line or the Swing Line.

“Line Limit” means the maximum principal amount that the Company may borrow and have outstanding under the relevant Line.

“Liquidity” means the Company’s unencumbered and unrestricted cash and Cash Equivalents plus (x) the lesser of the book value or the par value of Eligible Collateral that has either not been pledged to the Agent or any other Person or otherwise encumbered and (y) the sum of the unused borrowing availability under this Agreement or any of the Company’s other committed credit agreements to the extent (if any) that the collateral value of Eligible Collateral that has been pledged to secure the Company’s debt to the lenders under such
credit agreements exceeds the outstanding borrowings thereunder.

	 
	 	19 	 
	

	 

“Loan” means the loan under this Agreement — the sum of all Advances under the Credit Line and under the Swing Line outstanding from time to time — all of which shall be treated and considered as one loan.

“Loan Papers” means the Mortgage Note and all of the other papers related to the establishment of a Pledged Loan and the creation, perfection and maintenance of its lien and lien priority for a particular item of Collateral, including its Basic Papers and its Supplemental Papers and including any papers securing, guaranteeing or otherwise related to or delivered in connection with any Pledged Loan, in a form acceptable to the Agent (including any guaranties, lien priority agreements, security agreements, mortgages, deeds of trust, collateral assignments of the Company’s interest in
underlying obligations or security, subordination agreements, negative pledge agreements, loan agreements and title, mortgage, pool and casualty insurance policies), as any such Loan Paper may be supplemented, amended, restated or replaced from time to time. 

“Long Warehoused (Aged) Loan” or “Aged Loan” means a Mortgage Loan whose Original Pledge Date was more than sixty (60) days, but not more than ninety (90) days, before the relevant Determination Date (being the date on or for which such Mortgage Loan’s Collateral Value is being determined). A Pledged Loan whose Original Pledge
Date was more than ninety (90) days before the relevant Determination Date shall have zero Collateral Value. 

“Margin Stock” has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Market Value” means:

(i)    what the Agent reasonably determines the market value of any Pledged Loan to be, taking into account customary factors, including current market conditions and the fact that such Pledged Loan may be sold or otherwise disposed of under circumstances where the Company is in default under this Agreement; or

(ii)    what the Agent reasonably determines the market value of any other property that is Pledged to the Agent to be.

The Agent’s determination of Market Value hereunder shall be conclusive and binding upon the parties, absent manifest error.

“Maturity Date” means January 3, 2006, or the earlier date (the “Acceleration Date”), if any, to which maturity of the Senior Credit Notes is accelerated pursuant to this Agreement, by order of any Governmental Authority or by operation of law.

“Maximum Aggregate Commitment” means the maximum amount of principal that the Company may have borrowed and outstanding under this Agreement on any day, being the amount set forth in Schedule MAC in effect for that day. The Maximum Aggregate Commitment on the Effective Date is One Hundred Fifty Million Dollars ($150,000,000), the amount shown on Schedule MAC attached to this Agreement. If and when some or all of the Lenders then party to this Agreement agree in writing to increase their Committed Sums — or if a new Lender or Lenders joins the syndicate of Lenders, or if there is both such an increase or a new Lender’s joinder — so that the Aggregate Committed Sum exceeds the Maximum Aggregate Commitment then in effect, the Agent shall execute an updated Schedule MAC reflecting the new Maximum Aggregate Commitment (as an amount equal to the new Aggregate Committed Sum) and deliver it to the Company and the Lenders, and that updated Schedule MAC shall thereupon be substituted for and supersede the prior Schedule MAC.

	 
	 	20 	 
	

	 

“MBS” means a mortgage pass-through security, collateralized mortgage obligation, REMIC or other security that (1) is based on and backed by an underlying pool of Mortgage Loans and (2) provides for payment by its issuer to its holder of specified principal installments and/or a fixed or floating rate of interest on the unpaid balance and for all prepayments to be passed through to the holder, whether issued in certificated or book-entry form and whether or not issued, guaranteed, insured or bonded by Ginnie Mae, Fannie Mae, Freddie Mac, an insurance company, a private issuer or any other
investor.

“MERS” means Mortgage Electronic Registration Systems, Inc. or its successors or assigns.

“MERS Designated Loan” means a Pledged Loan registered to the Company on the MERS® System. 

“MERS Procedures Manual” means the MERS Procedures Manual, as it may be amended from time to time.

“MERS® System” means the Electronic Agent’s mortgage electronic registry system, as more particularly described in the MERS Procedures Manual.

“Mortgage” means a mortgage, deed of trust, deed to secure debt, security deed or other mortgage instrument or similar evidence of lien legally effective in the U.S. jurisdiction where the real property is located to create and constitute a valid and enforceable Lien, subject only to Permitted Encumbrances, on the fee simple or long term ground leasehold estate in improved real
property.

“Mortgage Assignment” means an assignment of a Mortgage, in form sufficient under the Laws of the U.S. jurisdiction where the real property covered by the Mortgage is located to give record notice of the assignment of the Mortgage, perfect the assignment and establish its priority relative to other transactions in respect of the Mortgage assigned (no Mortgage Assignment is required for any
Mortgage that has been originated in the name of MERS and registered under the MERS® System.)

“Mortgage Loan” means any loan evidenced by a Mortgage Note.

	 
	 	 21	 
	

	 

“Mortgage Note” means a promissory note secured by a Mortgage.

“Mortgaged Premises” means the Property securing a Pledged Loan.

“Multiemployer Plan” means any “multiemployer plan”, as defined in Section 4001(a)(3) of ERISA, which is maintained for employees of the Company or any of the Company’s Subsidiary.

“Nonfunding Lender” is defined in the definition of “Pro Rata”.

“Non-owner Occupied Loan” means a Single-family Loan whose Mortgaged Premises are not occupied by one of the relevant Customers as either his or her primary residence or second home.

“Nonrecourse Debt” means debt under Nonrecourse Facilities.

“Nonrecourse Facility” means and includes both (a) a credit or repurchase facility payable solely from the assets sold or pledged to secure such facility and (b) an MBS payable solely from the assets evidenced by or pledged to secure such MBS, under which facility or MBS no purchaser or creditor has recourse to the Company or any of its Operating Subsidiaries if such assets are inadequate or unavailable to pay off such credit or repurchase facility, and neither the Company nor any of its Operating Subsidiaries effectively has any obligation to
directly or indirectly pay any such deficiency.

“Note Payment Account” means the Company’s non-interest bearing demand deposit account no. 00113398961 to be maintained with JPMorgan and to be used for (a) the Agent’s deposits of proceeds of Advances made by the Lenders to the Company, including any Swing Line Advances funded by JPMorgan, and payments constituting the proceeds of principal from any Collateral (other than regular principal and interest payments on the Collateral); (b) the Agent’s deposits of principal and interest payments for the repayment of Advances received from the Company or for the Company’s
account and (c) only if and when (i) no Default has occurred unless it has been either cured by the Company or waived in writing by the Agent and (ii) no Event of Default has occurred unless the Agent has declared in writing that it has been cured or waived, the Agent’s transfer to the Company’s designated operating account (or to a controlled disbursement account maintained by the Company with the Agent) of (x) proceeds of Advances for the purposes permitted under this Agreement and (y) proceeds of sales or other dispositions of released Collateral in excess of the Advance(s) borrowed and then outstanding against such released Collateral. The Note Payment Account is (and shall continuously be) part of the Collateral for the Obligations. The Note Payment Account shall be subject to setoff by the Agent for Pro Rata distribution to the Lenders. The Note Payment Account shall be a blocked account from which the Company shall have no right to directly withdraw funds, but instead such funds may
be withdrawn or paid out only against the order of an authorized officer of the Agent, although under the circumstances described in clause (c) of the first sentence of this definition and subject to the conditions specified in that clause, the Agent shall use diligent and reasonable efforts to cause proceeds of Advances and excess Collateral proceeds that are received as therein described and that are deposited to the Note Payment Account before 3:00 PM on a Business Day to be transferred to an account on which the Company does have withdrawal order authority on that same Business Day or on the Business Day thereafter when the Agent next determines the Lenders’ proportionate shares of an Advance or a distribution of Loan principal paid.

	 
	 	 22	 
	

	 

“Notices” is defined in Section 14.

“Obligations” means all of the Company’s present and future debt, obligations and liabilities under or related to this Agreement, any Senior Credit Note or any of the other Facilities Papers, whether for principal, interest, premium, fees, costs, attorneys’ fees or other obligation or liability, and whether absolute or contingent, and all renewals, extensions, modifications and increases of any of them.

“Officer’s Certificate” means a certificate executed on behalf of the Company or another relevant Person by its (or if it is a partnership, its general partner’s) Board of Director’s Chairman, President, Chief Financial Officer, Treasurer, any of its Executive Vice Presidents or Senior Vice Presidents, its Corporate Secretary, its Controller or such other officer as shall be acceptable to the Agent.

“Operating Subsidiaries” means all Subsidiaries of the Company other than Single-purpose Finance Subsidiaries.

“Original Pledge Date” means the date when a specified item or items of Collateral were first Pledged to the Agent under this Agreement.

“Overdraft Advance” is defined in Section 5.9.

“Permitted Encumbrances” means in respect of the Mortgaged Premises securing a Pledged Loan, (i) tax Liens for real property taxes and government-improvement assessments that are not delinquent; (ii) easements and restrictions that do not materially and adversely affect the title to or marketability of the Mortgaged Premises or prohibit or interfere with the use of the Mortgaged Premises as a one-to-four family residential dwelling; (iii) reservations as to oil, gas or mineral rights, provided such rights do not include the right to remove buildings or other material improvements on or near
the surface of the Mortgaged Premises or to mine or drill on the surface thereof or otherwise enter the surface for purposes of mining, drilling or exploring for, or producing, transporting or otherwise handling oil, gas or other minerals of any kind; (iv) agreements for the installation, maintenance or repair of public utilities, provided such agreements do not create or evidence Liens on the Mortgaged Premises or authorize or permit any Person to file or acquire claims of Liens against the Mortgaged Premises and (v) such other exceptions (if any) as are acceptable under relevant Agency guidelines. 

“Person” means and includes natural persons, corporations, limited liability companies, limited partnerships, registered limited liability partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations — whether or not legal entities — and governments and agencies and political subdivisions of them.

	 
	 	23 	 
	

	 

“Plan” means an employee pension benefit plan of a type described in Section 3(2) of ERISA and which is subject to Title IV of ERISA in respect of which the Company is an “employer” as defined in Section 3(5) of ERISA.

“Pledged Loans” means all Mortgage Loans including all principal thereof and interest thereon from time to time outstanding or paid and all Loan Papers evidencing, securing or otherwise relating to such Mortgage Loans, whether now owned or hereafter acquired, whether or not they initially qualify or continue to qualify as Eligible Collateral:

(i)    that from time to time are Pledged to the Agent or repledged to, deposited with, delivered to, caused to be delivered (or sent) by the Company to, or held by or for, the Agent or the Custodian pursuant to this Agreement or the Custody Agreement (including all Mortgage Loans delivered or caused to be delivered by the Company to the Agent or identified to the Agent as Collateral by any means or method and all Pledged Loans held for the Agent by any securities intermediaries or bailees, and also including all Wet Loans against which any part of any Advance is funded, both before and after the Basic Papers evidencing such Wet Loan
come into possession of the Custodian or any other bailee for the Agent or securities intermediary);

(ii)    in respect of which an Advance or another financial accommodation has been or may be made (1) at the Company’s request (whether written or oral) made or to be made either before, concurrently with or after the delivery or designation of such property as Collateral, or (2) to preserve Collateral or the priority of the Agent’s Lien against Collateral or to otherwise protect the interests of the Lenders in accordance with this Agreement or the other Facilities Papers, including Collateral delivered to the Agent or otherwise identified to the Agent as Collateral when any Advance is outstanding whether or not the Company has
submitted a Request for Borrowing with a Submission List on which such new Collateral is listed; and

(iii)    that have not been specifically redeemed by the Company (or its designee) in accordance with Section 6.11 or sold to and fully paid for by an investor in accordance with Section 6.8;

(although it is not the exclusive method or basis for determining that an Advance has been made against a Pledged Loan, the Agent’s inclusion of the Collateral Value of any Pledged Loan in the Borrowing Base at any time when any Advance is outstanding shall be conclusive evidence (absent manifest error) that such Pledged Loan is Collateral.)

“Pledged Loans Curtailment Report” means a written report from the Company to the Agent listing Pledged Loans on which an unscheduled principal payment, prepayment or reduction of more than an amount equal to one regularly scheduled principal and interest installment payment was made in the preceding month, and their resulting new Principal Balances.

“Pledged to the Agent” means

	 
	 	24 	 
	

	 

(a)    for Single-family Collateral, that the subject Single-family Mortgage Loan has been duly pledged by the Company to the Agent by:

(i)    for Wet Loans, being listed in a Collateral Confirmation Agreement submitted to the Custodian and, on or before five (5) Business Days after it is pledged, being listed in a subsequent Collateral Confirmation Agreement with which its Basic Papers are delivered to the Custodian;

(ii)    for Single-family Mortgage Loans not originally pledged as Wet Loans, being listed in a Collateral Confirmation Agreement with which its Basic Papers are delivered to the Custodian; and

(iii)    such Single-family Mortgage Loan has not been released from the Agent’s Lien;

(b)    for any investment securities or deposit account, that they have been made subject to a control agreement executed by the relevant securities intermediary or depository and the Agent that gives control of such investment securities or deposit account to the Agent (as agent and representative of the Lenders); and

(c)    for any other type of property, that the Company has granted to the Agent a Lien therein and have taken all steps required under applicable Law to perfect such Lien as a first and prior Lien and security interest in all of the Company’s present and future right, title and interest therein.

“Prime Loan” means a Single-family Loan that is eligible for purchase by Ginnie Mae, Fannie Mae or Freddie Mac under their prime mortgage loan programs, or (if it is a Jumbo Loan) eligible for purchase by another Approved Investor.

“Prime Loan Collateral Value” is defined in the definition of “Collateral Value”.

“Principal Balance” means, for any day, the advanced and unpaid principal balance of a Pledged Loan on that day. If a Pledged Loan is listed in the most current Pledged Loans Curtailment Report, then for purposes of this Agreement, the Principal Balance for that Pledged Loan (absent manifest error) shall be its principal balance as shown in that Pledged Loans Curtailment Report.

“Privacy Requirements” means (a) Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., (b) federal regulations implementing such act codified at 12 CFR Parts 40, 216, 332 and 573, (c) the Interagency Guidelines Establishing Standards For Safeguarding Customer Information and codified at 12 CFR Parts 30, 208, 211, 225, 263, 308, 364, 568 and 570 and (d) any other applicable federal, state and local laws, rules, regulations and orders relating to the privacy and security of Company Customer Information, as such statutes, regulations, guidelines, laws, rules and orders may be amended from time to time.

	 
	 	25 	 
	

	 

“Pro Rata” means in accordance with the Lenders’ respective ownership interests in the Loan. On any day, the Lenders will each own that portion of the Loan, both principal and accrued interest, and a corresponding undivided interest in all Collateral and all rights to Collateral proceeds equal to that Lender’s ownership interest in the Loan, that bears the same ratio to the entire advanced and unpaid principal of the Loan then outstanding as (x) that Lender’s Committed Sum bears to the Aggregate Committed Sum if on that day the Lenders are committed to lend under this
Agreement or (y) that Lender’s aggregate outstanding Advances bears to the aggregate principal amount of the Loan outstanding if on or before that day the Lenders’ Commitments have expired or have been terminated and have not been reinstated, subject to this adjustment: if at any time or times when the Lenders’ Commitments are outstanding, any Lender fails to fund any of its Funding Share(s) of any Advance (a “Nonfunding Lender”) and one or more of the other Lenders funds it (electively in accordance with the provisions of Section 2.1), then:

(a)    the respective ownership interests of both (i) the Nonfunding Lender and (ii) the Lender (or Lenders) that funded such Funding Share(s), shall be proportionately decreased and increased, respectively, to the same extent as if their respective Committed Sums were changed in direct proportion to the unreimbursed balance outstanding from time to time thereafter of the amount so funded;

(b)    the Nonfunding Lender’s share of all future distributions of any payments and prepayments on the Senior Credit Notes shall be paid — pro rata among them in accordance with their respective unrecovered balances of such Nonfunding Lender’s Funding Share(s) — to the Lender(s) that so funded such Nonfunding Lender’s Funding Share(s) until all such funding Lender(s) have been fully repaid the amount so funded; and

(c)    such adjustment shall remain in effect until such time as the Lender(s) that funded such Funding Share(s) have been so fully repaid.

If no other Lender funds any of the Nonfunding Lender’s Funding Share, then the Pro Rata ownership interests in the Loan of the Lenders shall be changed, in that case so that each Lender’s Pro Rata ownership interest in the Loan is equal to the ratio of that Lender’s aggregate outstanding Advances to the aggregate outstanding Advances for all Lenders, but the Nonfunding Lender’s share of all subsequent distributions of any payments and prepayments on the Senior Credit Notes shall be paid to the other Lenders — pro rata among them in the ratio that the Pro Rata ownership interest in the Loan owned by each bears to the aggregate Pro Rata Ownership interests in the Loan of all such other Lenders — and the Lenders’ respective Pro Rata ownership interests in the Loan shall be
readjusted after each such payment, until their Pro Rata ownership interests are restored to what they were before any Nonfunding Lender failed to fund. Notwithstanding any such changes in the Lenders’ Pro Rata ownership interests in the Loan due to any Lender’s failure to fund its Funding Share(s) of any Advance(s), such failure to fund shall not diminish any Lender’s Funding Share(s) of subsequent Advances.

“Property” means any interest of a Person in any kind of property, whether real, personal or mixed, tangible or intangible, including the Collateral. 

	 
	 	 26	 
	

	 

“Purchase Commitment” means a written commitment held by the Company from an Approved Investor to buy Collateral and that specifies (a) the type or item(s) of Collateral, (b) a purchase date or purchase deadline date and (c) a purchase price or the criteria by which the purchase price will be determined.

“Qualified Subordinated Debt” means Debt of the Company to any Person (i) the papers evidencing, securing, governing or otherwise related to which Debt impose covenants and conditions on the debtor under them that are no more restrictive or onerous than the covenants and conditions imposed on the Company by this Agreement and (ii) that is subordinated to the Obligations pursuant to a currently effective and irrevocable Subordination Agreement, including standstill and blockage provisions, approved by the Agent.

“Recourse Servicing” means Servicing Rights under a Servicing Agreement with respect to which the servicer is obligated to repurchase or indemnify the holder of the related Mortgage Loans in respect of defaults on such Mortgage Loans at any time during the term of such Mortgage Loans.

“Redemption Amount” means an amount equal to the then current Collateral Value of any item of Collateral to be redeemed, but not less than the then outstanding amount of the Advance made with respect to the Collateral being redeemed, as determined by the Agent.

“Redemption Call” means a written notice from the Agent to the Company stating that the Agent has determined that either (i) the weighted average FICO score of all pledged Alt-A Loans is less than 690 and calling on the Company to redeem lower FICO score pledged Alt-A Loans to correct such deficiency if and as required by Section 6.4, (ii) the weighted average FICO score of all pledged Second Lien Loans and HELOCs is less than 690 and calling on the Company to redeem lower FICO score pledged Second Lien Loans and HELOCs to correct such deficiency if and as required by Section 6.4, or (iii) less than ninety-five percent (95%) of the aggregate Principal Balances of all Pledged Loans — excluding Alt-A Loans, Second Lien Loans, Repurchased Loans, Subprime Loans, Jumbo Loans and Super Jumbo Loans — fully conform to all underwriting and
other requirements for purchase by Fannie Mae or Freddie Mac and calling on the Company to redeem a sufficient number of nonconforming Mortgage Loans to correct such deficiency if and as required by Section 6.4

“Regulation D” means Regulation D promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 204, or any other regulation when promulgated to replace the prior Regulation D and having substantially the same function.

“Regulation Q” means Regulation Q promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 217, or any other regulation when promulgated to replace the prior Regulation Q and having substantially the same function.

“Regulation U” means Regulation U promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other regulation when promulgated to replace the prior Regulation U and having substantially the same function. 

	 
	 	 27	 
	

	 

“Regulation X” means Regulation X promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 224, or any other regulation when promulgated to replace the prior Regulation X and having substantially the same function.

“Repurchased Loan” means a Single-family Mortgage Loan owned by the Company and Pledged to the Agent, none of the makers or mortgagors of which is an Affiliate of the Company or a corporation, partnership or any other entity that is not a natural person or a trust for natural persons, and that was originated or purchased by the Company or an Affiliate of the Company, sold to an investor (either as a Whole Loan or as part of a pool of securitized Mortgage Loans) and subsequently repurchased by the Company due to underwriting errors, delinquencies or breach of representations or warranties
made in connection with such sale.

“Repurchased Loan Collateral Value” is defined in the definition of “Collateral Value”.

“Request for Borrowing” means a request for a Borrowing in the form of Exhibit B (or in another form approved by the Agent) appropriate to the type of Borrowing being requested, duly completed, with all required attachments and signed by the Company. Each Request for Borrowing shall include this sentence: “The Company hereby warrants and represents to the Agent and the Lenders that
none of the Collateral (including Collateral described or referred to in this request) is pledged to any Person other than the Agent or supports any borrowing or repurchase agreement funding other than Borrowings under the Credit Agreement.”

“Required Lenders” means, for any day, the holders of Senior Credit Notes evidencing one hundred percent (100%) of (a) the Aggregate Committed Sum if on that day the Lenders are committed to lend under this Agreement or (b) the aggregate principal amount of the Loan outstanding if on or before that day the Lenders’ Commitments have expired or have been terminated and have not been reinstated; provided that if two (2) or more Lenders in addition to JPMorgan shall join in this Agreement, “Required Lenders” shall mean the holders of Senior Credit Notes evidencing sixty-six and two-thirds percent (66-2/3%) or more of (a) the Aggregate Committed Sum if on that day the Lenders are committed to lend under this Agreement or (b) the aggregate principal amount of the Loan outstanding if on or before that day the Lenders’ Commitments have expired or have been terminated and have not been reinstated.

“Second Lien Loan” means a Prime Loan the Lien against the related Mortgaged Premises is second and inferior to the Lien of a single senior Mortgage Loan.

“Second Lien Loan Collateral Value” is defined in the definition of “Collateral Value”.

“Security Instruments” means any and all papers now or hereafter executed and delivered by the Company or any other Person as security for the Obligations, or otherwise in connection with them, as those papers may be supplemented, amended, restated or replaced from time to time.

“Senior Credit Notes” means (a) promissory notes dated the date of this Agreement, each to be in substantially the form attached as Exhibit A, executed and delivered by the Company, payable to the order of a Lender and in a face principal amount equal to that Lender’s Committed Sum, and that shall evidence the Company’s obligation to repay to the order of that note’s
Lender-payee all Advances funded by that Lender and outstanding from time to time, plus accrued interest on that principal, and (b) all renewals, modifications, extensions, increases and rearrangements of such promissory notes and all substitutions or replacements for them or any of them. The Swing Line Note (if any) is a Senior Credit Note.

	 
	 	 28	 
	

	 

“Serviced Loans” means all Mortgage Loans serviced or required to be serviced by the Company under any Servicing Agreement, irrespective of whether the actual servicing is done by another Person (a subservicer) retained by the Company for that purpose.

“Servicer” means a Person (which may — or shall — mean the Company if the context permits — or requires — it) retained by the owner (or a trustee for the owner) of Mortgage Loans to service them under a Servicing Agreement.

“Servicing Agreement” means, with respect to any Person, the arrangement — whether or not in writing — pursuant to which that Person acts as servicer of Mortgage Loans, whether owned by that Person or by others.

“Servicing Rights” means all of the Company’s rights and interests under any Servicing Agreement, including the rights to (i) service the Serviced Loans that are the subject matter of such Servicing Agreement and (ii) be compensated, directly or indirectly, for doing so.

“Single-family” is a preface that means that a Mortgage Loan is secured by a Mortgage covering real property improved by a one-, two-, three- or four-family residence.

“Single-family Loan” means a Mortgage Loan that is secured by a Mortgage covering real property improved by a one-, two-, three- or four-family residence.

“Single-family Warehouse Advance” is defined in the definition of “Advance”.

“Single-purpose Finance Subsidiary” means a wholly-owned Subsidiary of the Company whose only authorized business is to issue MBS or hold passive investments.

“Solvent” means, for any Person, that (a) the fair market value of its assets exceeds its liabilities, (b) it has sufficient cash flow to enable it to pay its debts as they mature and (c) it does not have unreasonably small capital to conduct its businesses.

“Statement Date” means December 31, 2003, the date of the Company’s most recent audited Financial Statements for a regular financial reporting period before the Effective Date.

“Statement Date Financial Statements” is defined in Section 8.4.

“Submission List” means a listing and description in the form of the appropriate attachment to Exhibit B (or another form acceptable to the Agent) of Collateral that is being Pledged to the Agent — and, for each item of Collateral other than Wet Loans, the File is being sent to the Custodian — by or on behalf of the Company, and or before the date of the related Advance, and
for each item of Collateral listed in which the Company has delivered (or is delivering substantially concurrently with such Submission List) to the Custodian a Warehouse Transmission File.

	 
	 	 29	 
	

	 

“Subordination Agreement” means a written subordination agreement in form and substance satisfactory to and approved by the Agent that subordinates (x) all present and future debts and obligations owing by the Company to the Person signing the Subordination Agreement to (y) the Obligations under this Agreement and the other Facilities Papers, in both right of payment and lien priority, including standstill and blockage provisions approved by the Agent. A form of Subordination Agreement acceptable for the purposes stated in Section 7.1(b) is attached as Exhibit C.

“Subprime Loan” means a Single-family Loan that is not a Prime Loan (including HELOCs) or an Alt-A Loan.

“Subprime Loan Collateral Value” is defined in the definition of “Collateral Value”.

“Subsidiary” means any corporation, association or other business entity (including a trust) in which any Person (directly or through one or more other Subsidiaries or other types of intermediaries), owns or controls:

(a)    more than fifty percent (50%) of the total voting power or shares of stock entitled to vote in the election of its directors, managers or trustees; or

(b)    more than ninety percent (90%) of the total assets and more than ninety percent (90%) of the total equity through the ownership of capital stock (which may be non-voting) or a similar device or indicia of equity ownership.

“Super Jumbo Loan” means a Jumbo Loan whose original principal amount is more than Six Hundred Fifty Thousand Dollars ($650,000) but not more than Two Million Dollars ($2,000,000) or such greater
amount as shall be approved by the Agent on a case-by-case basis.

“Supplemental Papers” means the Loan Papers for a particular item of Collateral other than its Basic Papers.

“Swing Line” means the short term revolving credit facility provided for in Section 2.5 under which the Company may borrow (as “Swing Line Advances”) from JPMorgan to bridge the Company’s daily borrowing requirements under the Credit Line.

“Swing Line Borrowing Due Date” for each Swing Line Borrowing means the fifth (5th) Business Day, or such earlier Business Day as JPMorgan in its sole discretion shall elect, following the Business Day when JPMorgan funds such Borrowing under the Swing Line; provided that JPMorgan agrees not to exercise such discretion to choose a due date in a manner that would materially affect the Company’s
ability to borrow under this Agreement unless a Default has occurred that has not been cured by the Company or declared in writing by the Agent to have been waived or any Event of Default has occurred that the Agent has not declared in writing to have been cured or waived.

	 
	 	30 	 
	

	 

“Swing Line Limit” means, for any day, the lesser of (x) an amount equal to JPMorgan’s Commitment for that day and (y) the Aggregate Committed Sum minus the sum of all Advances outstanding on that day, being the maximum principal that may be borrowed and outstanding on that day under the Swing Line; provided that until another Lender or Lenders shall join this Agreement, the Swing Line Limit shall be zero.

“Swing Line Note” is defined in Section 2.6. The Swing Line Note evidences and shall evidence the Company’s obligation to repay to the order of JPMorgan the principal of all Borrowings funded under the Swing Line and outstanding from time to time, plus accrued
interest on that principal. 

“Taxes” means taxes, levies, deductions, imposts, charges or withholdings, excluding, in the case of each Lender, taxes imposed on its net income, and franchise taxes imposed on it, under the Laws of any applicable Governmental Authority.

“Termination Date” means the earlier of (i) the last Business Day before the Maturity Date, or (ii) the date (if any) when the Lenders’ Commitment to fund Advances under this Agreement is terminated pursuant to this Agreement or by operation of law (the “Commitments Cancellation Date”).

“Total Liabilities” means all liabilities of the Company and its Subsidiaries, including Nonrecourse Debt as, in accordance with GAAP, are reflected on the Company’s consolidated balance sheet, and also including all contingent liabilities and obligations (including Recourse Servicing, recourse sale and other recourse obligations, and guarantee, indemnity and mortgage loan repurchase obligations.)

“Townhouse or Condo Loan” means a Mortgage Loan whose related Mortgaged Premises are a townhouse or a condominium unit and its related undivided interest in common elements of the condominium regime.

“UCC” means the Uniform Commercial Code or similar Laws of the applicable jurisdiction, as amended from time to time. 

“VA” means the Department of Veterans Affairs and any successor.

“Warehouse Transmission File” means a file containing all information concerning such item of Collateral required by the “Warehouse Transmission File Instructions”, as defined and provided for in (and attached as an exhibit to) the Custody Agreement, one of which shall be delivered by the Company to the Custodian for each Pledged Loan on its Original Pledge Date, both by electronic, computer readable transmission in accordance with such Warehouse Transmission File Instructions and by faxing a hard copy thereof to the
Custodian.

“Wet Loan” means a Pledged Loan acquired and owned by the Company:

	 
	 	31 	 
	

	 

(a)    that has been closed by a title agency or closing attorney, funded and would qualify without exception as Eligible Collateral except that some or all of its Basic Papers are in transit to, but have not yet been received by, the Custodian so as to satisfy all requirements to permit the Company to borrow against it pursuant to this Agreement without restriction;

(b)    that the Company reasonably expects to fully qualify as Eligible Collateral when the original Basic Papers have been received by the Custodian;

(c)    as to which the Company actually and reasonably expects that such full qualification can and will be achieved on or before five (5) Business Days after an Advance against such item of Collateral is requested and made under this Agreement (and the Company hereby agrees to take such steps as are reasonably necessary to ensure it achieves full qualification as Eligible Collateral); and 

(d)    for which the Company has delivered to the Custodian a Warehouse Transmission File on or before the date of the related Advance, submission of which to the Custodian shall constitute the Company’s certification to the Custodian, the Agent and the Lenders that a complete File as to such item of Collateral, including the Basic Papers, exists and that such File is in the possession of either the title agent or closing attorney that closed such Pledged Loan, the Company or the Company’s Servicer for such Pledged Loan, or that such File has been shipped to the Custodian.

Each Wet Loan that satisfies the foregoing requirements shall be Eligible Collateral subject to the condition subsequent of physical delivery of its Mortgage Note, Mortgage and all other Basic Papers, together with a Collateral Confirmation Agreement, to the Custodian within five (5) Business Days after funding of the related Borrowing. Each Wet Loan against which the Company requests an Advance shall be irrevocably deemed Pledged to the Agent and shall automatically become pledged Collateral effective on the date of the related Request for Borrowing, and the Company shall take all steps necessary or appropriate to cause the pledge to the Agent and delivery to the Custodian of such Wet Loan and its Basic Papers to be completed, perfected and continued in all respects, including causing the original
promissory note evidencing such pledged Collateral to be physically delivered to the Custodian within five (5) Business Days after the funding of the Advance, whether or not the related Advance is sooner paid, and, if requested by the Agent, to give written notice to any title agent, closing attorney or other Person in possession of the Basic Papers for such Collateral of the Agent’s security interest in it and its security. Upon the Custodian’s receipt of the Basic Papers relative to a Wet Loan accompanied by a Collateral Confirmation Agreement, such Collateral shall no longer be subject to this Agreement’s limitations applicable to Wet Loans (and, as provided in the Custody Agreement, the conversion from Wet Loan status to Dry Loan status shall be made on the same Business Day if the Basic Papers and Collateral Confirmation Agreement are received by the Custodian by 11:00 AM, or on the next Business Day if received after 11:00 AM.)

“Wet Warehousing” means lending to finance Wet Loans.

“Wet Warehousing Advance” is defined in the definition of “Advance”.

	 
	 	 32	 
	

	 

“Wet Warehousing Sublimit” means the maximum amount of principal that may be borrowed and outstanding on any day on or before the Termination Date to finance Wet Loans, being:

(a)    sixty percent (60%) of the Aggregate Committed Sum during either (i) the last three (3) Business Days or (ii) the first four (4) Business Days of any calendar month; and

(b)    forty percent (40%) of the Aggregate Committed Sum on every other day.

“Whole Loans” means Mortgage Loans that are sold or intended to be sold to investors as whole loans, instead of being part of a pool from which MBS are to be created and sold.

1.3.  Definitions for Interest Calculations. For convenience of reference, definitions used in provisions relating to calculation and payment of interest are grouped together in this Section. 

 

“Applicable LIBOR/BAR Margin” means, for the respective Classes of Borrowings:

(a)    the Applicable LIBOR/BAR Margin for that portion of the principal of Borrowings outstanding on any day that is equal to the sum of the Collateral Values of all Dry Loans that are then Pledged to the Agent that are neither HLTV Loans, Subprime Loans nor Repurchased Loans is one percent (1.000%); and

(b)    the Applicable LIBOR/BAR Margin for that portion of the principal of Borrowings outstanding on any day that is equal to the sum of the Collateral Values of all Wet Loans, HLTV Loans or Subprime Loans that are then Pledged to the Agent is one and one-eighth percent (1.125%).

(c)    the Applicable LIBOR/BAR Margin for that portion of the principal of Borrowings outstanding on any day that is equal to the sum of the Collateral Values of all Repurchased Loans then Pledged to the Agent is two and one-half percent (2.500%).

“Balance Adjusted Rate” is defined in the definition of “Rate”.

“Base Rate” is defined in the definition of “Rate”.

“Bloomberg British Bankers Association LIBOR Page” means the display designated as page “LIBOR” on the Bloomberg British Bankers Association rates service or such other internationally recognized service as the Agent shall select from time to time, or such other page, if any, as shall replace the LIBOR page on any such selected service for the purpose of displaying London interbank offered rates of major banks.

“Ceiling Rate” is defined in the definition of “Rate”.

“Class of Borrowings” means a grouping or categorization of Borrowings by the particular Category of Collateral that they were made to finance, i.e. either (i) Dry Loans that are neither HLTV Loans, Subprime Loans nor Repurchased Loans, (ii) Wet Loans, HLTV Loans or Subprime Loans or (iii) Repurchased Loans.

	 
	 	 33	 
	

	 

“Eurodollar Reserve Requirements” means for any day or time period, the stated maximum rate (expressed as a decimal fraction) for all reserves required to be maintained for that day or during that period (including basic, supplemental, marginal and emergency reserves) against “eurocurrency liabilities”, as defined in Regulation D, all as specified by any Governmental Authority, including those imposed under Regulation D. Each determination of Eurodollar Reserve Requirements by the Agent may be computed using any reasonable method and, absent manifest error, shall be conclusive and binding.

“Free Adjusted Balances Equivalent” means, for each day of each calendar month (whether a whole or partial month), the lesser of:

(a)    the sum of (x) the daily average of the collected balances in all demand deposit accounts and non-interest bearing money market accounts maintained by the Company (or maintained by the Company’s Affiliates at the Company’s request) with JPMorgan during that month (although neither the Company nor any of its Affiliates shall have any obligation whatsoever to maintain any deposits with JPMorgan) less all amounts required and applied (or to be applied) (i) to satisfy reserve and deposit insurance requirements allocable to that month and (ii) to compensate JPMorgan for (1)
services rendered to the Company or any of its Affiliates for that month if and to the extent, if any, that such services are not separately billed and paid for, or (2) any agreed reductions for that month in interest, fees and other normal banking charges other than interest and fees that are part of the Obligations to JPMorgan, with each element calculated in accordance with JPMorgan’s system of allocating reserve and deposit insurance requirements, charges for services and reductions in other normal banking charges, and as that system may be changed from time to time without notice plus (y) unless the subject calendar month is January (carryovers from one calendar year to the next are not permitted), an amount equal to such adjusted daily average collected balances for the immediately preceding calendar month (including any similarly unapplied adjusted balances carried over from a prior month or months) not applied to compensate JPMorgan for such services or agreed reductions incurred in such
prior month; and

(b)    the daily average outstanding principal of all Borrowings outstanding during that month.

JPMorgan’s determination of the Free Adjusted Balances Equivalent for any month, unless plainly wrong, shall be conclusive.

“Index” means a standard interest rate used as an index for determining a Rate hereunder. The Indexes used in this Agreement are:

(a)    The “Prime Rate” which means, for any day, the prime rate for that day as announced by JPMorgan. The Prime Rate is a reference rate and does not necessarily represent JPMorgan’s best or lowest rate or a favored rate, and JPMorgan disclaims any statement, representation or warranty to the contrary. Any rate of interest based on the Prime Rate shall be (i) calculated on the 365/365 — or 366/366 in a leap year
— day basis and (ii) adjusted as of the effective date of each change in the Prime Rate.

	 
	 	 34	 
	

	 

(b)    “LIBOR” which means, for any day, the rate of interest per annum that is equal to the rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) determined by JPMorgan to be the average of the interest rates available to it in accordance with the then-existing practices in the interbank market in London, England at approximately 11:00 a.m. London time for that day for the offering to JPMorgan by leading dealers in such interbank market for delivery on that day of one (1) month U.S. dollar deposits of One Million Dollars ($1,000,000); provided that if for any reason the Agent cannot determine such rate for any day, then LIBOR for that day shall be the rate of interest per annum that is equal to the arithmetic mean of the rates appearing on the Bloomberg British Bankers Association LIBOR Page as of 11:00 a.m., London time, on that date for the offering by such institutions as are named therein to prime banks in the Eurodollar
interbank market in London, England, for delivery on that day of one (1) month U.S. dollar deposits of One Million Dollars ($1,000,000).

(c)    The “Federal Funds Effective Rate” which means, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for that day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three (3) federal funds brokers of recognized standing selected by the Agent. If for any reason the Agent shall determine (and its determination shall be conclusive and binding absent manifest error) that it is unable to ascertain for any reason — including the Agent’s inability or failure to obtain sufficient quotations in accordance with the immediately preceding sentence — the Federal Funds Effective Rate for any day, then for each such day that such circumstances exist, the Federal Funds Effective Rate shall be deemed to be equal to the Prime Rate for that day minus one
percent (1%). Any rate of interest based on the Federal Funds Effective Rate shall be (a) computed on the basis of a 360-day year applied for the actual number of days for which the principal amount to which it applies is outstanding and bears interest in accordance with this Agreement at such rate of interest based on the Federal Funds Effective Rate (i.e., on the 365/360 — 366/360 in a leap year — day basis) and (b) adjusted as of the effective date of each change in the Federal Funds Effective Rate.

Should any issue ever arise in any forum or under any circumstances as to the amount of an Index for any then-current or past day, a certificate of the Chief Credit Officer of JPMorgan, stating such Index for that day, absent manifest error, shall conclusively establish what such Index was for that day.

“JPMorgan Loan Balances” means, for any calendar month, the average aggregate outstanding principal balances of the Senior Credit Note(s) held by JPMorgan.

“LIBOR” is defined in clause (b) of the definition of “Index”.

“Prime Rate” is defined in clause (a) of the definition of “Index”.

	 
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“Rate” means an interest rate applicable to the outstanding Borrowings. Each Rate is stated as an annual percentage rate and, except the Ceiling Rate, is the sum of an Index and a Margin. The Rates used in this Agreement are:

(a)    the “Balance Adjusted Rate” which, for any day of the term of the Loan, is a rate per annum equal to the lesser of:

(i)    the Applicable LIBOR/BAR Margin for the relevant Class of Borrowing; and

(ii)    the Ceiling Rate for that day.

(b)    the “Base Rate” which, for each day of the term of the Loan, is a rate per annum equal to the lesser of:

(i)    the sum, rounded upwards, if necessary, to the nearest one-eighth percent (0.125%) of (1) the quotient of (x) LIBOR for that day divided by (y) 1.00 minus the Eurodollar Reserve Requirement for one day loans, plus (2) the Applicable LIBOR/BAR Margin for the relevant Class of Borrowing; and

(ii)    the Ceiling Rate for that day;

(c)    the “Ceiling Rate” which means, on any day, the maximum nonusurious rate of interest permitted for that day by whichever of applicable federal or New York law permits the higher interest rate, stated as a rate per annum;
and

(d)    the “Past Due Rate” which means, on any day, the lesser of:

(i)    the Prime Rate for that day plus two percent (2%) per annum; and

(ii)    the Ceiling Rate for that day.

Each determination by the Agent of any Rate may be computed using any reasonable method and, absent manifest error, shall be conclusive and binding.

“Stated Rate” means:

(i)    on any day, for Loan principal then outstanding that is (1) not past due and (2) less than or equal to the Free Adjusted Balances Equivalent, the Balance Adjusted Rate for that day, compounded annually;

(ii)    on any day, for Loan principal then outstanding that is (1) not past due and (2) greater than the Free Adjusted Balances Equivalent, the Adjusted LIBOR Floating Rate for that day, compounded annually;

(iii)    for each Borrowing as a whole, the weighted average of the interest rates applicable to each of its constituent Tranches; and

	 
	 	36 	 
	

	 

(iv)    for the Loan as a whole, the weighted average of the interest rates applicable to each of the constituent Tranches of each outstanding Borrowing;

provided that if on any day the applicable rate for any such tranche, any such Borrowing as a whole or the Loan as a whole shall exceed the relevant Ceiling Rate for that day, then the Stated Rate therefor shall be reset to equal the Ceiling Rate on that day and shall be set to equal the Ceiling Rate for each day thereafter until the total amount of interest accrued at the Stated Rate on the unpaid balance of that tranche, that Borrowing or the Loan (as applicable) equals the total amount of interest that would have accrued on it if there were no Ceiling Rate.

“Tranche” means a portion of the outstanding principal of the Loan. The Tranches of the Loan (either of which may be zero on any given day) are:

(a)    The “Balances Equivalent Tranche” which is, for each day of each calendar month (whether a whole or partial month) during the term of the Loan, the portion of the Loan that is the sum of the daily averages of the non-past due Borrowings outstanding on each day of that month in each Class of Borrowings, added together in the following order until either the Free Adjusted Balances Equivalent has been reached or all
outstanding Borrowings have been added, whichever occurs first:

	
Priority
	
Class of Borrowings

	
1
	
Dry Loans that are neither Repurchased Loans, HLTV Loans nor Subprime Loans

	
2
	
Wet Loans, HLTV Loans and, Subprime Loans 

	
3
	
Repurchased Loans

(b)    The “Base Rate Tranche” which is, for each day during the term of the Loan, the sum of non-past due Borrowings outstanding on that day (if any) in excess of the Balances Equivalent Tranche for the calendar month in which that day falls.

1.4.  Other Definitional Provisions. 

 

(a)  Accounting terms not otherwise defined shall have the meanings given them under GAAP.

 

(b)  Defined terms may be used in the singular or the plural, as the context requires.

 

(c)  Except where otherwise specified, all times of day used in the Facilities Papers are local (U.S. Central Time Zone) times in Houston, Texas.

 

(d)  Unless the context plainly otherwise requires (e.g., if preceded by the word “not”), wherever the word “including” or a similar word is used in the Facilities Papers, it shall be read as if it were written, “including by way of example but without in any way limiting the generality of the foregoing concept or description”.

 

	 
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2  THE LENDERS’ COMMITMENTS

 

2.1.  The Lenders’ Commitments to Lend. Subject to the terms and conditions of this Agreement and provided no Default or Event of Default has occurred that the Agent has not declared in writing to have been cured or waived (or, if one has occurred and not been so declared cured or waived, if all of the Lenders, in their sole discretion and with or without waiving the Default or Event of Default, have elected in writing that lending under this Agreement shall continue nonetheless), the Lenders agree to make revolving credit Advances to the Company through the Termination Date, which the
Company may borrow, repay and (having repaid) reborrow in aggregate principal amounts outstanding on any day of up to the Aggregate Committed Sum for that day. The Lenders’ respective Commitments and the Aggregate Committed Sum are set forth on Schedule LC in effect for that day, as it may have been amended or restated pursuant to this Agreement. Upon the joinder of additional Lender(s), if any, the parties agree to approve in writing revised and updated versions of Schedule LC. The fractions to be applied to determine the respective Funding Shares of the Lenders for any day are their
respective Commitments divided by the Aggregate Committed Sum for that day. Each Lender shall be obligated to fund only that Lender’s own Funding Share of any Advance requested, and no Lender shall be obligated to the Company or any other Lender to fund a greater share of any Advance. No Lender shall be excused from funding its applicable Funding Share(s) of any Advance merely because any other Lender has failed or refused to fund its relevant Funding Share(s) of that or any other Advance. If any Lender fails to fund its Funding Share(s) of any Advance under any Facility, the Agent (in its sole and absolute discretion) may choose to fund the amount that such Nonfunding Lender failed or refused to fund, or the Agent as a Lender and the other Lenders who are willing to do so shall have the right (but no obligation) to do so in the proportion that the Commitment of each bears to the sum of the Commitments of all Lenders that have funded (or are funding) their own Funding Shares of that Advance and
that are willing to fund part of the Funding Share(s) of such Nonfunding Lender. Should the Agent and/or any other Lender(s) fund any or all of the Nonfunding Lender’s Funding Share of any Advance, then the Nonfunding Lender shall have the obligation to deliver such amount to the Agent (for distribution to the Lender(s) who funded it) in collected funds on the next Business Day. Regardless of whether the other Lenders fund the Funding Share(s) of the Nonfunding Lender, the respective ownership interests of the Lenders in the Loan shall be adjusted as provided in the definition of “Pro Rata”. All Advances under this Agreement shall constitute a single debt and all of the Collateral shall be security for all of the Senior Credit Notes and the Obligations. If the unpaid balance of the Loan should ever exceed the Aggregate Committed Sum or any other limitation set forth in this Agreement, such excess shall nevertheless constitute part of the Obligations that are secured by the Collateral
and entitled to all benefits thereof.

 

Notwithstanding anything to the contrary in this Agreement, the parties understand and agree that no Lender or Lenders in addition to JPMorgan will join in this Agreement, and JPMorgan shall be the sole Lender under this Agreement. All references herein to “Agent,” “Lender” or “Lenders” shall mean “JPMorgan” alone. In the event the parties agree to increase the Maximum Aggregate Commitment and in connection with such increase JPMorgan desires to have one or more Lenders in addition to JPMorgan join in this Agreement, the parties shall execute a new agreement governing the transaction involving multiple Lenders, and the provisions of this Agreement relating to joining other lenders in this Agreement shall not be applicable and shall have no force and
effect.

	 
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2.2.  Expiration or Termination of the Commitments. Unless extended in writing or terminated earlier in accordance with this Agreement, the Lenders’ Commitments to lend under this Agreement and the other Facilities Papers (including JPMorgan’s Swing Line Commitment, if any) shall automatically expire at the close of business on the Termination Date, without any requirement for notice or any other action by the Agent, any of the Lenders or any other Person. 

 

2.3.  Advances Outstanding May Not Exceed Limits. On any day, the aggregate amount of Advances outstanding under the Loan shall in no event exceed either the Aggregate Committed Sum or the Borrowing Base for that day. If any such excess shall exist on any day and for any reason, the Company shall immediately repay it or provide additional Collateral, as provided in Section 5.3(c).

 

2.4.  Advances to be Requested and Use of Proceeds. The Company shall request Advances and may use their proceeds only for the general purpose of financing the Company’s Single-family mortgage lending operations and related businesses.

 

2.5.  Swing Line Commitment. In addition to its Commitment under Section 2.1, JPMorgan agrees (effective only from and after another Lender or Lenders become party to this Agreement) to fund revolving credit Swing Line Advances to the Company in principal amounts which do
not on any day exceed the Swing Line Limit for the purpose of initially funding requested Borrowings.

 

2.6.  Swing Line Borrowings. The Company shall have the right to borrow and reborrow under the Swing Line: 

 

(a)  only if the Swing Line Borrowing fully qualifies in all respects for funding as an ordinary Borrowing under this Agreement;

 

(b)  provided that no Default has occurred that has not been cured before it has become an Event of Default, and no Event of Default has occurred that the Agent has not declared in writing to have been waived or cured;

 

(c)  so long as the Swing Line Limit is not exceeded;

 

(d)  provided that the Request for Borrowing against which the Swing Line Borrowing is to be funded is received by JPMorgan by no later than 3:00 PM Houston time (4:00 PM if it requests only a Wet Warehousing Advance and is Electronically Submitted) on the Business Day such Borrowing is to be funded; and

 

(e)  provided that neither the Company nor JPMorgan is aware of any reason why the Borrowing requested by the Request for Borrowing against which the Swing Line Borrowing is to be funded cannot or will not be fully funded by the Lenders on the fifth (5th) Business Day (or such other Business Day as shall be designated by JPMorgan) following the Business Day on which the Request for Borrowing is received by JPMorgan.

 

	 
	 	39 	 
	

	 

All Swing Line Borrowings shall be evidenced by the “Swing Line Note” of the Company dated the date of this Agreement, payable to the order of JPMorgan and in a form acceptable to the Agent and the Company and shall bear interest from the date funded until the date repaid (and accrued interest on them shall be due and payable) at the same rate(s) and on the same days as would be applicable if such Swing Line Borrowings had been funded by the Lenders, instead of having been funded by JPMorgan alone as Swing Line Borrowings.

3  GENERAL BORROWING PROCEDURES

 

3.1.  Separate Request for Each Borrowing. A separate Request for Borrowing shall be made for each Borrowing, which, when appropriately completed and submitted (with, if new Single-family Collateral is being pledged, a Submission List attached) may include requests for Borrowings to finance any type or types of Eligible Collateral.

 

3.2.  Funding of Advances.

 

(a)  Deadline for Requests to be Funded as Regular Advances. If a Request for Borrowing is received before 3:00 PM1 (Central time, as stated in Section 1.4(c)) — 4:001 PM for any Request for Borrowing that requests only a Wet Warehousing Advance and is Electronically Submitted — on a Business Day and fully qualifies in all respects for funding as a regular Advance by the Lenders (including satisfying any applicable requirement of Section 3.3), it shall be funded as a regular Advance on that same Business Day.

 

(The following provisions of this Section 3.2 are inapplicable until a Lender or Lenders in addition to JPMorgan joins this Agreement)

(b)  Deadline for Requests to be Funded as Swing Line Advances. If, after a Lender or Lenders in addition to JPMorgan joins this Agreement, the requirements of Sections 2.6 and 3.3 are satisfied and a Request for Borrowing is received on a Business Day after 3:00 PM but before 4:00 PM, JPMorgan shall fund the Advance requested by making a Swing Line Advance on that same day.

 

(c)  Late Requests. If, after a Lender or Lenders in addition to JPMorgan joins this Agreement, a Request for Borrowing is received by JPMorgan later than 4:00 PM on a Business Day, JPMorgan shall either, at its election, (i) fund the Advance requested by making a Swing Line Loan either on that same day or, at JPMorgan’s election, on the next Business Day, or (ii) arrange for its funding on the next Business Day as a regular Advance. JPMorgan shall have no obligation to fund any such late-requested Advance as a Swing Line Advance if all of the requirements of Sections 2.6 and 3.3 are not satisfied, although JPMorgan may elect to do so. If JPMorgan does not elect to do so, then the Lenders shall fund such requested Advance as a regular Advance on such next succeeding Business Day after the Request for Borrowing is received by the Agent, provided that all conditions to its funding (including the requirements of Section 3.3) are then satisfied.

 

	 
	 	 40	 
	

	 

(d)  Repayment of Swing Line Borrowings. Each Swing Line Advance shall be repaid on its Swing Line Borrowing Due Date by the Agent’s paying over to JPMorgan out of the Note Payment Account, and JPMorgan’s applying against such outstanding Swing Line Borrowing, an amount equal to the proceeds of the Funding Shares funded by all of the other Lenders on that day against the same Request for Borrowing that was initially funded by such Swing Line Advance. If at the time such Swing Line Advance was funded, JPMorgan reasonably believed that no Default or Event of Default had occurred and
was then continuing and that all of the other conditions set forth in Section 2.6 for such Swing Line Advance were satisfied in all material respects, the other Lenders shall be unconditionally and irrevocably obligated to timely fund their respective Funding Shares of the Advance that was so initially funded as a Swing Line Advance, to repay to JPMorgan (and thereby refinance) on the relevant Swing Line Borrowing Due Date all of that Swing Line Advance except only JPMorgan’s Funding Share of it, irrespective of whether in the meantime any Default or Event of Default
has occurred or been discovered, and irrespective of whether in the meantime some or all of the Lenders’ Commitments have lapsed, expired or been canceled, rescinded or terminated with or without cause, or have been waived, released or excused for any reason whatsoever, so that (i) the principal of the Swing Line is paid down by the required amount on each Swing Line Borrowing Due Date — all accrued interest on Swing Line Advances shall be due and payable by the Company to the Agent (for distribution from the Note Payment Account to JPMorgan) on the later of (x) the fifteenth (15th) day of the next month or (y) two (2) Business Days after the Agent bills the Company for such accrued interest — (ii) all Swing Line Advances are converted to regular Advances from the Lenders and (iii) those Advances are evidenced by the Senior Credit Notes other than the Swing Line Note. If any Lender fails to provide its funds to JPMorgan to repay its share of any Swing Line Loan when due (including any
such failure caused by a fed funds wire delay), then that Lender shall also be obligated to pay to JPMorgan interest on the unpaid balance of principal so due to JPMorgan at the Federal Funds Effective Rate from such due date until three (3) Business Days after such due date, and at the Federal Funds Effective Rate plus two percent (2%) from three (3) Business Days after such due date until the date of payment of such principal sum.

 

(e)  Syndication of Advances. 

 

(1)  When a Request for Borrowing is received by the Agent, the Agent shall give notice by fax or, at the Agent’s discretion, email to each Lender of that requested Advance and that Lender’s Funding Share of the requested Advance by 2:00 PM on the Business Day when the requested Advance is to be funded by the Lenders, and each Lender shall cause its Funding Share thereof to be transferred to the Agent by fed funds wire transfer to:

 

JPMorgan Chase Bank, N.A.

ABA number 1130-0060-9

Attention: Mortgage Warehousing — Wanda Carr

Phone: (713) 427-6391

For credit to: E-Loan, Inc.

Account No. 00113398961

JPMorgan Chase Real Estate Wire Transfer Clearing Account

	 
	 	 41	 
	

	 

within two (2) hours after receiving such notice from the Agent or by 4:00 PM, whichever is earlier, so that the Agent receives it in good collected Houston funds on that same Business Day, and the Agent shall deposit such Funding Shares into the Note Payment Account when received.

(2)  If the Agent has not already funded the requested Advance as a Swing Line Advance, then (provided no Default has occurred that has not been cured by the Company or waived in writing by the Agent and no Event of Default has occurred that the Agent has not declared in writing to have been either cured or waived) the Agent shall disburse such Advance to the Company or to its designee(s) for their account.

 

(f)  If the Agent has funded the requested Advance (or any part of it) as a Swing Line Advance, then the Agent shall repay JPMorgan the related Swing Line Advance (except for JPMorgan’s own Funding Share thereof) from the Note Payment Account; provided that if a Lender other than JPMorgan advises the Agent by telephone and confirms the advice by fax that the Lender has placed all of its Funding Share on the federal funds wire to the Agent, the Agent shall continue to keep the Swing Line Advance
outstanding to the extent of that Lender’s Funding Share so wired until the Agent has actually received such share — whereupon the Agent shall deposit such Funding Share when received into the Note Payment Account and repay JPMorgan that still-outstanding portion of the Swing Line Advance from the Note Payment Account — except that the Agent shall have no obligation to continue such portion of any Swing Line Advance outstanding if and to the extent, if any, that doing so would cause the total amount funded by the Agent and outstanding to exceed the Swing Line Limit. 

 

(End of provisions of Section 3.2 that are inapplicable until a Lender or Lenders in addition to JPMorgan joins this Agreement)

3.3.  Time When Submission List(s) and New Collateral Papers (If Any) Due. Unless the Borrowing Base already has sufficient Collateral Value to support both the requested Borrowing and all other outstanding Borrowings, the Company shall (1) deliver to the Agent with the Request for Borrowing one or more signed Submission Lists listing (i) all new Single-family Collateral then being Pledged to the
Agent to support such Borrowing and (ii) the values of the elements for determining the Book Collateral Value of the new Single-family Collateral and the applicable Advance Rates for the respective Categories of Collateral (as specified in Schedule EC) in which such new Single-family Collateral falls, and (2) cause to be delivered to the Custodian all of the Basic Papers relating to the items of new Single-family Collateral listed in such Submission List(s), by the following deadlines:

 

	
If the Number of Files Submitted is:
	
Then the Submission List and Basic Papers are due on:
	
at this time (in Houston)

	
50 files or less
	
the same Business Day as the Request for Borrowing is received by the Agent
	
10:00 AM

	
51-100 files
	
the preceding Business Day
	
2:00 PM

	
for each additional 100 files increment
	
one additional prior Business Day 
	
2:00 PM

	 
	 	42 	 
	

	 

3.4.  If Outstanding Advances Would Exceed the Borrowing Base. If, after giving effect to a requested Borrowing, the outstanding Borrowings would exceed the Borrowing Base, or if the Agent or the Custodian determines (either then or on any later day in the course of reviewing the same) that any such Submission List or Basic Papers submitted to it are incomplete or incorrect in any material respect (provided that if the Custodian reasonably determines that such a condition of incompleteness or incorrectness of Basic Papers is correctable and returns the subject Basic Papers to the Company for corrective action, then the affected Pledged Loan(s) shall not be excluded from the Borrowing Base unless and until the Company fails to correct and return such Basic Papers to the Custodian within ten (10) Business Days after the Custodian sent them) then:

 

(a)  the Agent may withhold the entire Advance until the Company shall have demonstrated (i) to the Agent’s reasonable satisfaction that the Submission Lists submitted and (ii) to the Custodian’s reasonable satisfaction that all required Basic Papers submitted (if any), are in fact not (or are no longer) incomplete or incorrect in any material respect; or

 

(b)  in the case of a Borrowing Base insufficiency, unless the Company instructs the Agent in writing not to fund any of the requested Borrowing, and subject to the provisions and limitations of Sections 2.1 and 2.5, the Agent will fund such lesser amount(s) as the Agent shall determine is (are) supported by the Borrowing Base and will notify the Company of such insufficiency, including the Agent’s calculation of such insufficiency set forth in reasonable detail.

 

3.5.  If a Request for Borrowing or New Collateral Papers are Received Late; Waiver of Claim for Any Late Funding. If either a Request for Borrowing or the Basic Papers for any new Collateral and its related Submission List are submitted late, the Agent will use reasonable efforts to make the requested Advance as a Swing Line Advance on the same Business Day it is requested, although neither the Company nor any other Person shall have any claim or cause of action against the Agent or any of the Lenders if for any reason that funding (or any other funding) does not occur on the same day it is
requested.

 

4  THE SENIOR CREDIT NOTES

 

To evidence the Advances to be made by the Lenders pursuant to this Agreement, the Company agrees to execute and deliver to each Lender a Senior Credit Note in a face principal amount equal to that Lender’s Committed Sum and dated the same date as this Agreement (or dated with such other appropriate date as shall be agreed upon by the Company, that Lender and the Agent if the effective date of that Lender’s joinder in this Agreement is after its Effective Date), and to evidence the Swing Line Advances to be made by JPMorgan, the Company agrees to execute and deliver to JPMorgan the Swing Line Note in face principal amount equal to the Swing Line Limit. If any Lender’s Committed Sum shall be increased for any reason after the Company shall have issued that Lender its Senior Credit Note,
then the Company agrees to execute and deliver to that Lender upon its request a renewal Senior Credit Note in a face principal amount equal to the portion of that Lender’s new Committed Sum and dated the same date that such applicable Committed Sum change becomes (or became) effective. If the Swing Line Limit shall be reduced below what the Swing Line Limit is on the Effective Date for any reason, the maximum Borrowings outstanding under the Swing Line Note then or on any day thereafter shall be limited to the Swing Line Limit on such day, irrespective of the fact that the face principal amount of the Swing Line Note may be greater than that. Notwithstanding any other inconsistent or contrary provision of this Agreement or any of the other Facilities Papers, whether or not — for any reason, at any time or from time to time — the Advances in the aggregate exceed the sum of the face amounts of the Senior Credit Notes, or the Swing Line Advances outstanding exceed the face amount of the
Swing Line Note, such excess shall be due and payable on demand. All Advances are and shall be part of the Obligations and all of the Obligations are and shall be secured by all Collateral.

	 
	 	43 	 
	

	 

5  INTEREST, PRINCIPAL AND FEES PAYMENTS

 

5.1.  Interest. Interest shall accrue and be due and payable as follows:

 

(a)  Each portion of each Borrowing shall bear interest on its advanced and unpaid principal balance at the applicable Stated Rate from the date of the Borrowing until due or repaid (whichever occurs first), and such interest shall be calculated through the last day of each month and shall be due and payable in arrears on the later of (i) the fifteenth (15th) day of the next following month (with the first interest payment due February 15, 2005) or (ii) two (2) Business Days after the Agent bills
the Company for such accrued interest (the Agent agrees to use commercially reasonable efforts to bill the Company for accrued interest by the 15th of each month, but shall have no liability for failing to do so), and all accrued interest then unpaid shall be fully, finally and absolutely due and payable on the Maturity Date.

 

(b)  All past due principal, interest, fees or other sums shall bear interest at the Past Due Rate from their respective due dates until paid, or at such lesser rate (if any) — although not less than the Stated Rate — as the Agent shall elect to be applicable for any one or more days of such period. Without duplication, from the earlier of the Maturity Date or the date of the occurrence (if any) of an Event of Default described in Section 11.1(f), 11.1(g), 11.1(j) or 11.1(o), all advanced and unpaid Loan principal shall bear
interest at the Past Due Rate, or at such lesser rate (if any) — although not less than the Stated Rate — as the Agent shall elect to be applicable for any one or more days of such period.

 

(c)  Except as otherwise specified in this Agreement or any relevant Facilities Papers, interest on any Borrowing, as well as the amount of any fee that is stated as a rate, is to be calculated on the basis of a year of 360 days (i.e., on the 365/360 — or 366/360 in a leap year — day basis), unless that would cause the Ceiling Rate for any day to be exceeded, in which event and to the extent necessary to eliminate or minimize that result, such interest or such fee shall be calculated on the
365/365 — or 366/366 in a leap year — day basis.

 

(d)  All interest and fee rate and amount determinations and calculations by the Agent, absent manifest error, shall be conclusive and binding.

 

	 
	 	 44	 
	

	 

5.2.  Interest Rates. 

 

(a)  Subject to the following rules, and as contemplated in the definition of “Stated Rate” (although in the event of any conflict between such definition and the provisions of this Section, the provisions of this Section shall prevail), the portion of principal of the Loan outstanding on any day when no Event of Default has occurred and is continuing that is equal to the Free Adjusted Balances Equivalent for the month in which such day falls — or if the aggregate Loan principal outstanding on that day is less than such Free Adjusted Balances Equivalent, the entirety of such Loan principal — (such portion being the Balances Equivalent Tranche) shall bear interest at the
Balances Equivalent Rate (compounded annually) applicable for that day to each Class of Borrowings in the Balances Equivalent Tranche:

 

(1)  The Balances Equivalent Rate shall not be available for or applicable to (i) any Loan principal outstanding on any day in excess of the Free Adjusted Balances Equivalent for the month in which that day falls, (ii) any past due Loan principal or (iii) after the occurrence of an Event of Default (unless and until the Event of Default has been declared in writing by the Agent to have been cured or waived), any Loan principal.

 

(2)  To the extent that the Balances Equivalent Tranche exceeds the JPMorgan Loan Balances, the Agent will pay to the Lenders (if any) other than JPMorgan, ratably, interest on such excess at a rate per annum equal to the Balances Equivalent Margin plus the Federal Funds Effective Rate (and the Lenders hereby agree that payment of such interest at that rate is satisfactory); provided that if doing so would violate Regulation Q, on demand made by the Agent — which demand the Agent may make on its own initiative and will make upon the request of any Lender — the Company shall gross-up and pay to the Agent the interest on that portion of the Loan so that the Agent will have the funds to pay the interest due to the other Lender(s) without violating Regulation Q, and the Agent’s obligation to pay such interest due to the other Lender(s) shall be subject to and conditioned upon the Agent’s receiving such funds from the Company. In no event will the Agent ever be obligated to make any payment that would violate Regulation Q.

 

(b)  As is also contemplated in the definition of “Stated Rate”, the unpaid amount of the Borrowings outstanding on any day in excess of the Free Adjusted Balances Equivalent for the month in which such day falls shall bear interest at the Base Rate (compounded annually) applicable for that day to each Class of Borrowings in the Base Rate Tranche.

 

(c)  Notwithstanding any contrary or inconsistent provision of this Section 5.2, all Loan principal outstanding shall bear interest at the Past Due Rate from the date of occurrence of any Event of Default and until it has been declared in a writing signed by the Agent to have been cured or waived and its material consequences (if any) have been wholly cured.

 

5.3.  Principal. The Advances’ outstanding principal amount shall be due and payable in full without notice or demand on the Maturity Date. Before then, the Company agrees to pay the following principal payments to the Agent immediately upon the occurrence of the following events, in each case without notice or demand but without duplication of payment:

 

	 
	 	45 	 
	

	 

(a)  Promptly upon the Company’s becoming entitled and able to collect the proceeds of any sale or other disposition of Collateral, a principal amount equal to the amount so collectable shall be due and payable by the Company to the Agent — although, pursuant to the provisions of Section 6.11, the Agent’s security interest in such Collateral or its proceeds
shall not be released unless and until the Agent has received for deposit into the Note Payment Account the Redemption Amount for such Collateral — and the Company shall cause the entirety of all available Collateral disposition proceeds to be paid to the Agent (or if the Company receives them, the Company shall pay them over to the Agent), with each such payment to be applied first against the principal of Borrowings outstanding under the Swing Line, then against the principal of Borrowings outstanding under the Credit Line, and with the remaining balance (if any) to be transferred from the Note Payment Account into the Company’s own account with JPMorgan (unless either (i) any payment of principal or interest on the Obligations shall then be past due, in which event the Agent may first apply such excess to pay such past due amount and transfer only the balance, if any, remaining after such application to the Company’s own account, or (ii) an Event of Default has occurred that the
Agent has not declared in writing to have been either waived or cured, in which event the Agent shall hold such excess as Collateral and apply it in accordance with the provisions of Section 11.4.) With or after each such payment, the Company shall furnish the Agent and the Custodian with a written reconciliation of the amounts collected by the Company with the amount received by the Agent.

 

(b)  If any Disqualifier occurs in respect of any item of Collateral, unless the Borrowing Base still equals or exceeds the sum of all Borrowings outstanding, the Company shall repay Loan principal to the Agent in an amount — or, unless an Event of Default has occurred that the Agent has not declared in writing to have been cured or waived, furnish substitute Collateral of the same type and having Collateral Value at least — equal to what that item’s Collateral Value would have been on the day when such Disqualifier occurred if there were no Disqualifier as to that item of Collateral.

 

(c)  If for any reason on any day, the Borrowings outstanding exceed the Borrowing Base, then the Company shall repay Loan principal to the Agent in an amount equal to such excess, unless both (i) no Event of Default has occurred that the Agent has not declared in writing to have been cured or waived and (ii) the Company shall Pledge to the Agent substitute Collateral that is not subject to any Disqualifiers and has Collateral Value at least equal to such excess on or before one (1) Business Day after the Company first learned of the existence of such excess; provided that upon the occurrence of any such excess, the Lenders’ obligations to lend, and the Agent’s obligation to disburse, any Advances to or for the account of the Company shall be suspended until such Borrowings excess shall be eliminated by the Company’s either so repaying Loan principal or so pledging additional Collateral.

 

5.4.  Interest (and Principal) Due at Maturity. On the Maturity Date accrued interest (as well as all principal) then unpaid shall be finally due and payable without notice or demand.

 

	 
	 	 46	 
	

	 

5.5.  Rate of Return Maintenance Covenant. If at any time after the date of this Agreement, any Lender that is a bank determines that (i) any applicable law, rule or regulation regarding capital adequacy has been adopted or changed since December 1, 2004 or (ii) its interpretation or administration by any Governmental Authority, central bank or comparable agency has changed since December 1, 2004 and determines that such change or such Lender’s compliance with any request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on that Lender’s capital as a consequence of its obligations under this Agreement 
or any of the other Facilities Papers to a level
below that which that Lender would have achieved but for such adoption, change or compliance (taking into consideration the Lender’s own capital adequacy policies) by an amount the Lender deems to be material, then provided that the Company is given (a) a notice by that Lender or the Agent within ten (10) Business Days of the date when that Lender or the Agent (as the case may be) first learns that such law, rule, regulation has been so adopted, or that its interpretation or administration by a Governmental Authority, central bank or comparable agency has so changed, and (b) a concurrent notice, or a later notice given within thirty (30) days of such date, summarizing the facts triggering the increase and calculations of the increase, then and in that event the interest rate on the principal of that Lender’s portion of the Loan funded and outstanding from time to time shall be increased, commencing thirty (30) days after such notice to the Company, to a rate sufficient to provide that Lender
with a rate of return on its capital equal to that which would have been achieved but for such adoption, change or compliance (taking into consideration that Lender’s own capital adequacy policies) — or if no Loan is then outstanding (or if the Loan is repaid in full before the full amount required to provide that rate of return has been paid) and if written notice of the amount due is given to the Company within such 30-day period or within thirty (30) days after payment in full of the Loan (whichever is later), then the Company shall be liable to pay that Lender on demand an additional interest payment in an amount sufficient to provide that rate of return — but in no event shall any such payment be required or made to the extent, if any, that such payment, if made, when added to all other payments, would produce an interest rate for any period in excess of the Ceiling Rate. In determining the increase in interest rate required to achieve that result, each affected Lender may employ
such assumptions and make such allocations of costs and expenses fairly applicable to the Loan as that Lender reasonably elects and may use any reasonable averaging and attribution method. Any Lender claiming compensation under this Section shall furnish the Company its certificate setting forth the amount or amounts (calculated pursuant to the above-described methods) necessary to compensate the Lender as specified in this Section and the calculations made to determine such amount or amounts. If any Lender shall give notice to the Company claiming compensation under this Section, the Company may elect to terminate this Agreement by giving an irrevocable written notice to the Agent specifying the termination date, and on the termination date so specified, provided that the Obligations are then fully paid and satisfied, this Agreement shall terminate, the Facility Fee shall be prorated on a daily basis and any
paid but unearned portion of the Facility Fee paid shall be credited or refunded to the Company.

 

5.6.  Chief Credit Officer’s Certificate Conclusive. The certificate of the chief credit officer of JPMorgan stating the Past Due Rate, the Base Rate or the Balance Adjusted Rate applicable to one or more Advances shall conclusively establish what the applicable rate was, absent manifest error.

 

5.7.  Facility Fee. The Company agrees to pay to the Agent, for the account of the Lenders (and for the Agent to distribute to them), ratably according to their respective Committed Sums, a cash facility fee (the “Facility Fee”) in an amount equal to twelve and one-half basis points (0.125%) per annum of the Aggregate Committed Sum for the period from the Effective Date to the
Maturity Date. The Facility Fee for the period from the Effective Date through April 30, 2005 shall be due and payable in advance on the Effective Date, and the Facility Fee for each succeeding period of three (3) months (or less) until the Maturity Date shall be due and payable in advance on the fifteenth (15th) day of the first calendar month in each such period, commencing May 15, 2005. If the Aggregate Committed Sum shall be increased or decreased from time to time either pursuant to a provision of this Agreement or by separate agreement among the Company, the Lenders and the Agent (excluding, however, any change occurring as a result of or following the occurrence of a Default or an Event of Default, in respect of which no adjustment of the Facility Fee shall be required except if and to the extent required by the
provisions of Section 15.3), the amount of the
Facility Fee shall be adjusted. If the Aggregate Committed Sum is decreased during any three (3) month period in which the Facility Fee has already been paid, no refund shall be due the Company. If a decrease is made at the end or beginning of each three (3) month period, then the amount of the Facility Fee subsequently due for the ensuing three (3) month period shall be proportionately adjusted based on the new Aggregate Committed Sum. If the Aggregate Committed Sum is increased for the three-month period in which the effective date of the
amendment producing such increase occurs, the Facility Fee shall be adjusted for the unexpired portion of that three-month period by a cash payment by the Company to the Agent (for distribution to the Lenders in the event of an increase in the Aggregate Committed Sum), and the amounts of payments of the Facility Fee subsequently due shall likewise be proportionately adjusted based on the new Aggregate Committed Sum. The Facility Fee is compensation to each Lender for committing to make funds available for revolving credit Advances on the terms and subject to the conditions of this Agreement, and is not compensation for the use or forbearance or detention of money, although this Section (as well as every other Section of this Agreement) is subject to the provisions of Section 15.3. Each calculation by the Agent of the amount of the Facility Fee shall be conclusive and binding absent manifest error. 

	 
	 	47 	 
	

	 

 

5.8.  Agent’s Fee. The Company agrees to pay to the Agent such agent’s fee (the “Agent’s Fee”) as may be provided for in a separate agreement between the Company and the Agent (there will no such separate agreement and no agent’s fee unless and until another Lender joins this Agreement.)

 

5.9.  Overdraft Advances. If, pursuant to this Agreement, the Agent debits any of the Company’s accounts or honors an item presented against any of the Company’s accounts and that debit or direction results in an overdraft, the Agent may, but shall not be obligated to, make an additional advance to fund that overdraft (“Overdraft Advance”). The Company must pay (a) the
outstanding amount of any Overdraft Advance, within one (1) Business Day after the date of the Overdraft Advance and (b) interest on the amount of the Overdraft Advance at a rate per annum equal to the Prime Rate plus two percent (2%) within five (5) Business Days after the date of the Agent’s invoice or, if applicable, within two (2) Business Days after the date of the Agent’s account analysis statement.

 

5.10.  Prepayments. The Company shall have the right to prepay the outstanding Borrowings in whole or in part, from time to time and without premium or penalty.

 

	 
	 	 48	 
	

	 

5.11.  Payments. 

 

(a)  Except as otherwise specifically provided in this Agreement, all payments under this Agreement, on the Senior Credit Notes and under the other Facilities Papers shall be paid (i) to the Agent for deposit in the Note Payment Account, (ii) by not later than 12:00 noon (Central time) if made by electronic funds transfer, or 11:00 AM (Central time) if made by any means requiring the Agent to make manual data entries on the day when due (unless the Agent shall agree to a payment’s being made before a specific later deadline) and (iii) without set-off, counterclaim or deduction, in lawful money of the United States of America in immediately available funds at the principal Houston branch of the Agent, at 712 Main Street, Houston, Texas 77002, or by fed funds wire transfer to:

 

JPMorgan Chase Bank, N.A.

1111 Fannin, 12th Floor

Houston, Texas 77002

ABA number 1130-0060-9

Attention: Mortgage Banking Warehouse Services — Wanda Carr

Phone: (713) 427-6391

Account number 00113398961

For Credit — E-Loan, Inc.

or at such other place as the Agent shall designate from time to time. Whenever any payment to be made under this Agreement, any Senior Credit Note or any of the other Facilities Papers shall be stated to be due on a day that is not a Business Day, the due date for that payment shall be automatically extended to the next day that is a Business Day, and with respect to principal, interest at the applicable rate (determined in accordance with this Agreement) shall continue to accrue during the period of such extension. Unless the Agent, acting in its sole discretion, shall agree otherwise, funds received by the Agent after 2:00 PM on a Business Day shall be deemed for all purposes to have been paid by the Company on the next succeeding Business Day, except that if, after so deeming, any applicable Ceiling
Rate would be exceeded, then solely for the purpose of calculating interest accrued, such funds shall be deemed paid on the date received.

(b)  If and to the extent any payment is not made when due under this Agreement, any Senior Credit Note (including the Swing Line Note) or any of the other Facilities Papers, the Company authorizes the Agent and each Lender (for the Pro Rata account and benefit of all of the Lenders) then or at any time thereafter to charge any amounts so due and unpaid against any or all of the Company’s accounts with the Agent or any of the Lenders; provided that such right to charge the Company’s accounts
shall not apply to any escrow, trust or other deposit accounts designated as being held by the Company on behalf of third party owners of the escrowed funds other than Affiliates of the Company. The Agent agrees to use reasonable efforts to promptly advise the Company of any charge made pursuant to this Section, but its failure to do so will not affect the validity or collectibility of such charge.

 

(c)  Any and all payments by the Company made pursuant to this Agreement or under any Senior Credit Note or other Facilities Papers shall be made free and clear of and without deduction for any and all present or future Taxes. If the Company shall be required by law to deduct any Taxes from or in respect of any sum payable pursuant to this Agreement or under any Senior Credit Note or other Facilities Paper, (i) the sum payable shall be increased as may be necessary so that after making all required deductions, such Lender receives an amount equal to the sum it would have received had no such deductions been made, and (ii) the Company agrees to pay the Taxes to the relevant Governmental Authority.

 

	 
	 	 49	 
	

	 

(d)  Each payment received by the Agent in accordance with this Agreement is valid and effective to satisfy and discharge the Company’s liability under the Facilities Papers to the extent of the payment.

 

5.12.  Pro Rata Distribution of Payments. All payments and prepayments of the Senior Credit Notes, including (subject to Sections 3.2(d) and 5.3(a)) the Swing Line Note, (whether voluntary or involuntary and from whatever source) received by the Agent shall be distributed by the Agent to the Lenders Pro Rata with their respective ownership interests in the Loan as of the date the payment is credited against the Senior Credit Notes in accordance with this Agreement. The distribution from the Agent to each Lender shall be made by the Agent’s initiating a federal funds wire transfer by 3:00 PM on the Business Day when such funds were received, in immediately available funds directly to the Lender or to such account at another financial institution as is designated from time to time by the Lender in writing, and shall be made on the same Business Day received (or deemed received) by the Agent. If the Agent shall fail or refuse to so make the distribution on the same Business Day as the payment was received, then, as
agreed full and adequate compensation therefor, the Agent shall pay the affected Lender(s) interest on the undistributed funds at the Federal Funds Effective Rate.

 

6  COLLATERAL

 

6.1.  Grant of Security Interest. As security for the payment of the Loan and for the payment and performance of all of the Obligations, the Company hereby grants to the Agent, as agent and representative of the Lenders, a first priority security interest in all of the Company’s present and future estate, right, title and interest in and to the following described Collateral (although neither the Lenders nor the Agent assumes any of the Company’s or any other liability or obligation under
or in respect of any Collateral):

 

(a)  Single-family Loans Collateral.

 

(1)  all Pledged Loans;

 

(2)  all Collateral Support;

 

(3)  all rights to deliver Pledged Loans to investors and other purchasers and all proceeds resulting from the disposition of such Collateral pursuant thereto, including the Company’s right and entitlement to receive the entire purchase price paid for Pledged Loans sold;

 

(4)  all Hedge Agreements relating to or constituting any and all of the foregoing, including all rights to payment arising under such Hedge Arrangements;

 

(5)  all Servicing Rights in respect of any of the Pledged Loans; and

 

	 
	 	50 	 
	

	 

(6)  all of the Company’s rights now or hereafter existing in, to or under any MBS secured by, created from or representing any interest in any of the Pledged Loans, whether now owned or hereafter acquired by the Company, and whether such MBS are evidenced by book entry or certificate (the Agent’s Lien against each MBS created from, based on or backed by Pledged Loans shall automatically attach to, cover and affect all of the Company’s right, title and interest in that MBS when issued and its proceeds and the Agent’s Lien against the Pledged Loans from which such MBS was so created shall automatically be released when such MBS is issued, subject to automatic
reinstatement if such issuance is voided or set aside by any court of competent jurisdiction), all right to the payment of monies and non-cash distributions on account of any of such MBS and all new, substituted and additional securities at any time issued with respect thereto;

 

(b)  Related Accounts, Payment Intangibles, General Intangibles

 

(1)  all accounts, payment intangibles, general intangibles, instruments, documents (including documents of title), chattel paper, contract rights and proceeds, whether now or hereafter existing (including all of the Company’s present and future rights to have and receive interest and other compensation, whether or not yet accrued, earned, due or payable), under or arising out of or relating to the Pledged Loans;

 

(2)  all instruments, documents or writings evidencing any such accounts, payment intangibles, general intangibles or proceeds or evidencing any monetary obligation under, or security interest in, any of the Pledged Loans, all other papers delivered to the Agent or the Custodian, and all other rights transferred to the Agent, in respect of any of the Pledged Loans, including, without limitation, the right to collect, have and receive all insurance proceeds (including but not limited to casualty insurance, mortgage insurance, pool insurance and title insurance proceeds) and condemnation awards or payments in lieu of condemnation which may be or become payable in respect of the Mortgaged
Premises encumbered or intended to be encumbered by any Pledged Loan, and other personal property of whatever kind relating to any of the Pledged Loans, in each case whether now existing or hereafter arising, accruing or acquired;

 

(3)  all security for or claims against others in respect of the Pledged Loans;

 

(4)  the nonexclusive right to use (in common with the Company and any other Secured Party that has a valid and enforceable security interest therein and that agrees that its security interest is similarly nonexclusive) the Company’s operating systems to manage and administer the Pledged Loans and any related data and information, together with the media on which the same are stored to the extent stored with material information or data that relates to property other than the Pledged Loans (tapes, discs, cards, drives, flash memory or any other kind of physical or virtual data or information storage media or systems, and the Company’s rights to access the same, whether exclusive
or nonexclusive, to the extent that such access rights may lawfully be transferred or used by the Company’s permittees), and any computer programs that are owned by the Company (or licensed to the Company under licenses that may lawfully be transferred or used by the Company’s permittees) and that are used or useful to access, organize, input, read, print or otherwise output and otherwise handle or use such information and data; and

 

	 
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(c)  all proceeds and rights to proceeds of any sale or other disposition of any or all of the Pledged Loans;

 

(d)  Note Payment Account. the Note Payment Account and all sums from time to time on deposit in it;

 

(e)  Collateral Records. all Collateral Records;

 

(f)  Other Property. any other Property acceptable to the Agent and Pledged to the Agent; and

 

(g)  Other Rights. all rights to have and receive any of the Collateral described above, all accessions or additions to and substitutions for any of such Collateral, together with all renewals and replacements of any of such Collateral, all other rights and interests now owned or hereafter acquired by the Company in, under or relating to any of such Collateral or referred to above and all proceeds of any of such Collateral;

 

provided, that the Agent’s security interest in the Pledged Loans does not extend to, cover or affect any of the mortgage loan Servicer’s right, title or interest in, to or under (a) any Servicing Agreement that the Company, as owner or investor, has entered into, or may hereafter enter into, in good faith with any Person that is not an Affiliate of the Company, as mortgage loan Servicer, to service Mortgage Loans now or hereafter owned or held by the Company, whether or not such Mortgage Loans were heretofore, or are now or hereafter, Pledged to the Agent or (b) the mortgage loan servicing rights under any such mortgage loan servicing agreement between the Company and a contractual mortgage loan
Servicer that is not an Affiliate of the Company; provided further that nothing in this sentence shall be construed to waive, disclaim, impair or otherwise affect the Agent’s security interest (as agent and representative of the Lenders) in any of such Mortgage Loans themselves, including the Agent’s security interest in and to all of the Company’s Servicing Rights affecting or relating to Pledged Loans.

6.2.  Further Assurances Concerning Collateral. In furtherance of the foregoing, the Company (i) hereby agrees to perform, or cause to be performed, such acts and duly to authorize, execute, acknowledge, deliver, file and record (or cause such actions to be taken with respect to) such financing statements, assignments, security agreements, deeds of trust, mortgages, bond powers and supplements, modifications or amendments to any of them, and such other papers as the Agent may reasonably request in order to establish and preserve the priority of, perfect and protect the Liens granted or
intended to be granted to the Agent in and to any and all such Collateral and to preserve and protect the Agent’s rights in respect of all present and future Collateral for the Obligations.

 

6.3.  Delivery of Additional Collateral or Mandatory Prepayment. At least once a week during the term of this Agreement (or more often in the discretion of the Agent if it reasonably determines that market conditions warrant) and whenever a Request for Borrowing is made by the Company (except that the Agent shall have no obligation to make such determination more frequently than once per day), the Agent shall:

 

	 
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(a)  determine the aggregate Collateral Values for the Borrowing Base each (including the Collateral Value of any Collateral pledged on that day) by summing the values of the individual items of Collateral as reported on (and recorded by the Agent from) the Company’s Submission Lists and Pledged Loans Curtailment Reports, valuing at zero Collateral for which the Agent has current actual knowledge that a Disqualifier exists;

 

(b)  issue a statement of the value of each Borrowing Base as so determined; and

 

(c)  provide a copy of that certificate to the Company. 

 

If the Agent shall determine on any day that the Borrowing Base is less than the outstanding Borrowings, then the Company shall immediately (by no later than the next Business Day after the Agent’s request) either: 

(1)  Pledge to the Agent additional Collateral and deliver to the Custodian all Basic Papers for any such additional Collateral (delivery of such Basic Papers to the Custodian may be deferred for up to five (5) Business Days for any Wet Loans Pledged to the Agent as additional Collateral) and/or;

 

(2)  after giving effect to the Collateral Value of any additional Collateral Pledged to the Agent and delivered to the Agent pursuant to Section 6.3(c)(1), pay to the Agent cash for Pro Rata distribution to the Lenders, in aggregate amounts sufficient to cover the sum of the excess of each of (i) the sum of all Borrowings outstanding over (ii) the Collateral Value of the
Borrowing Base

 

provided, that the Company may not elect under the provisions of Section 6.3(c)(1) (and instead must make a cash paydown pursuant to Section 6.3(c)(2)) if any Default or Event of Default has occurred that the Agent has not declared in writing to have been cured or waived.

6.4.  Mandatory Redemption of Subpar Alt-A Collateral for Low Weighted Average FICO Scores or of Nonconforming Pledged Loans if Less Than 95% Conform with Fannie Mae or Freddie Mac Requirements.

 

(a)  If the Agent shall determine on any day that the weighted average FICO score of all pledged Alt-A Loans is less than 690 and make a Redemption Call, the Company shall immediately (by no later than the next Business Day after the Agent’s request) redeem (either by making cash paydowns of outstanding Advances or substituting higher quality Collateral) a sufficient number of lower FICO score pledged Alt-A Loans as shall be required to correct such deficiency.

 

(b)   If the Agent shall determine on any day that the weighted average FICO score of all pledged Second Lien Loans and HELOCs is less than 690 and make a Redemption Call, the Company shall immediately (by no later than the next Business Day after the Agent’s request) redeem (either by making cash paydowns of outstanding Advances or substituting higher quality Collateral) a sufficient number of lower FICO score pledged Second Lien Loans and HELOCS as shall be required to correct such deficiency.

 

	 
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(c)  If the Agent shall determine on any day that less than ninety-five percent (95%) of the aggregate Principal Balances of all Pledged Loans — excluding Alt-A Loans, Second Lien Loans, Repurchased Loans, Subprime Loans, Jumbo Loans and Super Jumbo Loans — conform fully to all underwriting and other requirements for purchase by either Fannie Mae or Freddie Mac, then by no later than five (5) Business Days after the Agent’s request, the Company shall redeem (either by making cash paydowns of outstanding Advances or substituting conforming Collateral) a sufficient number of nonconforming Pledged Loans to correct such deficiency.

 

6.5.  Mortgaging of Real Property Collateral. The Company hereby grants to the Agent a Lien against, and hereby agrees to duly Pledge to the Agent by executing, acknowledging sufficiently for recording and delivering to the Agent or (where appropriate) to a trustee designated by the Agent, a recordable mortgage, deed of trust or security deed (whichever form of real property mortgage instrument is appropriate to the jurisdiction in which the real property is located) — on the standard Fannie Mae/Freddie Mac form, modified appropriately for the purpose, or in another form approved by the
Agent — and in substance approved by the Agent, to cover each lot, parcel, tract or leasehold estate (as the case may be) of present or future real property owned by the Company after foreclosure or conveyance in lieu of foreclosure of any Pledged Loan (or any other Collateral that, while Pledged to the Agent, is or becomes real property under the law of the U.S. jurisdiction where it is located), each of which mortgage instruments shall describe the mortgagee or grantee as “JPMorgan Chase Bank, N.A., as a Lender and as Agent for certain other Lenders” and shall describe the Debt it secures
substantially as follows:

 

All present and future debts and obligations of E-Loan, Inc. to JPMorgan Chase Bank, N.A., as a Lender and as Agent for the other Lenders named therein, and to such other Lenders, under or pursuant to the 1/05 Senior Secured Credit Agreement dated as of January 4, 2005 by and among E-Loan, Inc., JPMorgan Chase Bank, N.A. and others, the principal debt under which credit agreement has a final stated maturity of January 3, 2006, as such credit agreement may have been or may from time to time be supplemented, amended or restated; provided that the principal debt hereby secured shall in no event exceed [state here the amount that is equal to 130% of the value of the mortgaged real estate as shown in its most recent Appraisal or Broker’s Price Opinion, or, for Second Lien Loans or HELOCs only, as determined by the AVM].

While the Agent does not initially intend to record any of such mortgages, deeds of trust or security deeds, the Agent may elect to record — upon prior written notice to the Company, unless an Event of Default has occurred that the Agent has not declared in writing to have been cured or waived, in which case no written notice is necessary — any or all of them at any time or times, and all costs of filing and recordation shall be paid for by the Company, either directly or as reimbursement to the Agent, whichever the Agent shall elect.

	 
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6.6.  Pledged Loans’ Collection and Servicing Rights. So long as no Event of Default shall have occurred that the Agent has not declared in writing to have been cured or waived, the Company shall be entitled to service the Pledged Loans and to receive and collect directly — or cause to be serviced, received and collected through a Servicer or Servicers under one or more Servicing Agreements — all sums payable to the Company in respect of the Pledged Loans (excluding, however sums arising from sales or other dispositions of Pledged Loans, which Section 6.9 requires to be paid to the Agent for application as therein stated); provided that the Company’s rights and obligations to so interim service, or to cause to be so interim serviced, each Pledged Loan shall terminate on the earlier of (i) the Maturity Date or (ii) one (1) month after the Effective Date of this Agreement, although such one-month period shall be automatically extended for
sequential periods of one (1) month each unless the Agent, acting in its sole discretion, gives written notice to the Company (at least five (5) Business Days before the end of any such 1-month period unless Default has occurred that has not been cured or an Event of Default has occurred that the Agent has not declared in writing to have been cured or waived — no advance notice shall be required if a Default or Event of Default shall have occurred and be continuing) stating that such period will not be extended, in which event the Company’s said interim servicing rights will automatically terminate upon expiration of that 1-month period; and provided further that if any Default or Event of Default shall occur at any time, the Company’s rights and obligations to service the Pledged Loans shall
terminate automatically and immediately (unless and to the extent the Agent shall state otherwise by written notice to the Company) without any notice or other action by the Agent or any Lender. Upon any such termination, the Agent is hereby authorized and empowered to sell and transfer such rights to service the Pledged Loans for such price and on such terms and conditions as the Agent shall reasonably determine, and the Company shall have no right to sell or attempt to sell or transfer such rights to service the Pledged Loans. The Company shall perform all acts and take all actions so that the Pledged Loans and all files and documents relating to the Pledged Loans that are held by the Company, together with all escrow amounts relating to the Pledged Loans, are delivered to the successor Servicer. To the extent that the approval of any third party or any other insurer or guarantor is required for any such sale or transfer, the Company will fully cooperate with the Agent to obtain such approval. All
amounts paid by any purchaser of such rights to service the Pledged Loans shall be paid to the Agent for distribution to the Lenders and application to the Loan in the same manner and order as provided for funds received by the Agent pursuant to Section 11.4. The rights to service the Pledged Loans have not been separated from the Pledged Loans and are not subject to pledge or assignment to anyone other than the Agent.

 

6.7.  Rights After Occurrence of Event of Default. After the occurrence of any Event of Default that the Agent has not declared in writing to have been cured or waived, the Agent shall have the following rights (but no obligations):

 

(a)  in its discretion, to demand, sue for, collect or receive and receipt for (in its own name, in the name of the Company or otherwise) any money or property at any time payable or receivable on account of any of the Collateral, in consideration of its transfer or in exchange for it;

 

(b)  to direct — and to take any and all other steps necessary to cause — any Servicer of any of the Collateral to pay over directly to the Agent for the account of the Company (instead of to the Company or any other Person) all sums from time to time due to the Company and to take any and all other actions that the Company or the Agent has the right to take under the Company’s contract with such Servicer; and

 

	 
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(c)  to request that the Company forthwith pay to the Agent at its principal office all amounts thereafter received by the Company upon or in respect of any of the Collateral, advising the Agent as to the sources of such funds, and if the Agent does so request, then the Company shall diligently and continuously thereafter comply with such request.

 

All amounts so received and collected by the Agent shall be paid over to the Lenders for application to pay (i) fees owing under the Facilities Papers (pro rata in the ratio that the fees then owed to each Lender bear to the fees then owed to all Lenders), (ii) the reasonable costs and expenses incurred by the Agent or the Lenders (pro rata in the ratio that the unreimbursed costs and expenses incurred by each of them and then outstanding bears to the unreimbursed costs and expenses incurred by all of them and then outstanding) in collecting or enforcing the Senior Credit Notes and the other Facilities Papers, defending against any claims made in respect of the Facilities Papers or any related transactions, protecting or realizing on Collateral and (iii) accrued and unpaid interest on and principal of the
Senior Credit Notes (for interest, pro rata in the ratio that the then-accrued and unpaid interest due on each Senior Credit Note bears to the then-accrued and unpaid interest due on all Senior Credit Notes, and for principal, pro rata in the ratio that the outstanding balance of each Senior Credit Note bears to the outstanding balances of all Senior Credit Notes).

6.8.  Sale and Agent’s Delivery of Collateral to Approved Investors. Unless an Event of Default has occurred that the Agent has not waived in writing (in which event the Agent’s consent to such shipping or delivery shall be required):

 

(a)  the Company may direct the Custodian to ship or deliver any Pledged Loan to any Approved Investor; and

 

(b)  the Company may direct the Custodian to ship or deliver to any issuer of MBS (including Ginnie Mae, Fannie Mae or Freddie Mac) any Pledged Loan(s) as all or part of a pool from which MBS will be created that are covered by an MBS Purchase Commitment issued by an Approved Investor, and the Agent’s security interest in those Pledged Loans shall automatically terminate when the MBS are created from such pool, although the Agent’s security interest granted by this Agreement in and to — and the Company hereby specifically declares its intent that Collateral covered by this Agreement includes — all of the Company’s present and future (i) right, title and interest in
and to the MBS so created and (ii) rights to demand, have, receive and receipt for such MBS and their proceeds, shall automatically attach when such Pledged Loans are so securitized and the Agent’s security interest in them is thereby automatically terminated, as aforesaid.

 

The Company may also request that the Custodian ship any Pledged Loan(s) to any other investor.

6.9.  Collateral Sale Proceeds to be Paid to Agent.

 

	 
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(a)  Until both (i) an amount equal to the Redemption Amount of the Pledged Loans(s) being sold as a Whole Loan or securitized (or such lesser amount as shall be required to cause the Borrowing Base without such Pledged Loans to at least equal the Advances outstanding) has been paid to the Agent and (ii) information sufficient to enable the Agent to reconcile the sums so paid to the Pledged Loans so being securitized has been provided to the Agent, the Agent shall have (x) a continuing first and prior security interest in such Pledged Loan that is so being sold as a Whole Loan and (y) a first and prior security interest in and control of all of the Company’s right, title and interest
(whenever acquired) in and to each MBS created from any pool of Mortgage Loans that includes such Pledged Loan(s), and the Company shall take all steps necessary to establish, perfect and maintain in the Agent such security interest and its perfection, and control of such MBS.

 

(b)  When the sale is settled of any Pledged Loan sold as a Whole Loan, or of any MBS created from a pool that includes any Pledged Loan, the Company shall cause the investor purchasing such Whole Loan or MBS to pay the Company’s entire net share of the purchase price therefor directly to the Agent, for application as a mandatory prepayment on the Senior Credit Notes and as a repayment of outstanding Advances. If the amount so paid to the Agent is at least equal to the Redemption Amount for the Pledged Loan(s) so sold or securitized, then the Agent will release the relevant Pledged Loan(s) or MBS from the Agent’s Lien (whereupon such Pledged Loan or MBS will no longer be Pledged to
the Agent), and if no Default or Event of Default has occurred that the Agent has not declared in writing to have been cured or waived, the Agent will also transfer from the Note Payment Account to the Company’s designated account any excess of (x) the purchase price so paid to the Agent for the Pledged Loan(s) so sold or securitized over (y) the Redemption Amount for such Pledged Loan(s).

 

(c)  Pledged Loans Shipped for Securitization. Upon shipment or delivery of Pledged Loans to be securitized and pending payment to the Agent of the Redemption Amount therefor on the sale of the resulting MBS, the Company agrees to take all steps necessary to cause the Agent to be identified as the nominal owner of any MBS created from the pool of Mortgage Loans which includes such Pledged Loans in the records of the Federal Reserve Bank or other institution authorized by the issuer (Ginnie Mae, Fannie Mae, Freddie Mac or the securities intermediary holding such MBS for the private issuer, as the case may be) to maintain ownership records in respect of all such MBS, and to cause such arrangements to remain in effect until the Collateral Value of such securitized Mortgage Loans shall have been paid to the Agent (for deposit in the Note Payment Account and distribution to the Lenders for application on the Loan.) 

 

6.10.  Attorney in Fact Appointment. The Company hereby appoints the Agent as its attorney-in-fact to take all such steps in its name and behalf as are necessary or appropriate to (i) obtain and maintain control of such MBS, (ii) establish, maintain or continue perfection of its security interests in such MBS and/or (as the context requires), (iii) enforce, collect or otherwise realize upon
such interests and (iv) take any action and execute any instruments that the Agent deems necessary or advisable to accomplish any of such purposes, and such appointment shall be deemed a power coupled with an interest and shall be irrevocable for so long as any of the Obligations shall be unpaid or any of the Lenders shall have any outstanding commitment to lend or to extend any other financial accommodations to or for the account of the Company.

 

	 
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6.11.  Right of Redemption From Pledge. Provided no Event of Default has occurred that the Agent has not declared in writing to have been cured or waived (provided that the Agent may elect to allow redemption even if an uncured and unwaived Event of Default has occurred if the Agent reasonably believes at that time that doing so would be in the Lenders’ interest), the Company may from time to time
redeem one or more items of Collateral from pledge by either:

 

(a)  paying, or causing to be paid, to the Agent for deposit in Note Payment Account, for application to the outstanding balance of Advances and Pro Rata distribution to the Lenders for their application to prepayment of the principal balances of the Senior Credit Notes, including the Swing Line Note if then outstanding, the Redemption Amount for the item(s) of Collateral to be released; or

 

(b)  delivering substitute Collateral that both (i) is Eligible Collateral and (ii) will, when included with the existing Collateral, increase the Borrowing Base to a value at least equal to the aggregate outstanding Borrowings;

 

after which the Agent shall release the redeemed Collateral to the Company or its designee promptly upon written request made by the Company and at its cost, whereupon such redeemed Collateral will no longer be Pledged to the Agent or included in the Borrowing Base and the Company shall promptly receipt — or shall cause its designee to promptly receipt — for such released Collateral in writing to the Agent. Further, the Agent will execute UCC partial release(s) of such redeemed Collateral — or otherwise appropriately confirm such release in writing — prepared at the Company’s expense if, when and in such form as the Company may reasonably request.

6.12.  Return of Collateral at End of Commitment. If (i) the Lenders’ Commitments to lend shall have expired or been terminated, and (ii) all Advances, interest or other amounts evidenced by the Senior Credit Notes or owing to any of the Lenders or the Agent under this Agreement, the Senior Credit Notes and the other Facilities Papers shall be fully paid and satisfied, then the Agent shall release the Collateral to the Company or its designee promptly upon written request made by the Company and at its cost, whereupon such released Collateral shall no longer be Pledged to the Agent and
the Company shall promptly receipt — or shall cause its designee to promptly receipt — for such released Collateral in writing to the Agent. 

 

6.13.  Acceptance or Shipping Per Instructions of Returned Collateral is Acquittance. Acceptance by the Company of any Collateral delivered to it pursuant to any provision of this Agreement (whether or not the recipient issues a receipt for it) or shipping by the Agent of Collateral in substantial compliance with shipping instructions given by the Company or its designee shall be a complete and full acquittance for the Collateral so delivered or shipped, and the Agent shall thereby be released and discharged from any and all liability or responsibility for it arising then or thereafter (except
liability for the Agent’s own gross negligence or willful misconduct.)

 

	 
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7  CONDITIONS PRECEDENT

 

7.1.  Initial Advance. The obligations of the Lenders to fund their respective Funding Shares of the initial Advance under this Agreement are subject to the Company’s fulfillment of the following conditions precedent:

 

(a)  the Agent shall have received (or be satisfied that it will receive by such deadline as the Agent shall specify) the following, all of which must be satisfactory in form and content to the Agent in its sole discretion:

 

(1)  this Agreement duly executed by all parties;

 

(2)  the Senior Credit Notes, each duly executed by the Company;

 

(3)  UCC financing statements for the Collateral covered by this Agreement, each duly authorized by the Company;

 

(4)  current UCC search reports of a UCC filings search in the office of the Secretary of State of the States of Delaware and California;

 

(5)  the Custody Agreement duly executed by the Company and JPMorgan as Custodian;

 

(6)  copies of the Company’s (i) certificate of incorporation certified by the Secretary of State of the State of Delaware and (ii) bylaws and all amendments certified by such its corporate secretary or assistant secretary, as well as any other information required by Section 326 of the USA Patriot Act or necessary for the Agent or any Lender to verify the identity of the Company as required by Section 326 of the USA Patriot Act in accordance with the requirements summarized in the notice
given in Section 15.5;

 

(7)  If the Company has already begun registering Pledged Loans with MERS, the Company shall have delivered to the Agent the Electronic Tracking Agreement (as defined in the Custody Agreement) duly executed by the Company, Mortgage Electronic Registration Systems, Inc., MERSCorp., Inc. and the
Custodian. 

 

(8)  certificate of existence or authority and good standing for the Company issued by the Secretary of State of the States of Delaware and California;

 

(9)  original resolutions of the Company’s board of directors, certified as of the date of the initial Advance by the Company’s corporate secretary, authorizing the execution, delivery and performance by the Company of this Agreement, the Senior Credit Notes, the Custody Agreement and all other Facilities Papers to be delivered by the Company pursuant to this Agreement;

 

(10)  a certificate of the Company’s corporate secretary as to (i) the incumbency of the officers of the Company executing this Agreement, the Senior Credit Notes, the Custody Agreement, each applicable Request for Borrowing and all other Facilities Papers executed or to be executed by or on behalf of the Company and (ii) the authenticity of their signatures — and specimens of their signatures shall be included in such certificate or set forth on an exhibit attached to it — (the Agent and the Lenders shall be entitled to rely on that certificate until the Company has furnished a new certificate to the Agent, and certifying that attached to such certificate are true and
correct copies of all amendments to the Company’s certificate of incorporation and bylaws since their inception);

 

	 
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(11)  an Officer’s Certificate for the Company dated the date of the initial Advance and certifying truthfully that, after giving effect to that Advance, no Default or Event of Default will exist under this Agreement and that there has been no material adverse change since the Statement Date in any of the Central Elements in respect of the Company or any of its Subsidiaries;

 

(12)  copies of an errors and omissions insurance policy or mortgage impairment insurance policy and blanket bond coverage policy, or certificates in lieu of policies, providing such insurance coverage as is customary for members of the Company’s industry, all in form and content reasonably satisfactory to the Agent;

 

(13)  a favorable written opinion of counsel to the Company dated on or before the date of the initial Advance, addressed to the Lenders and the Agent and in form and substance reasonably satisfactory to the Agent and its legal counsel (a form containing opinions required to be included therein are set forth in Exhibits G-1 and G-2);

 

(14)  payment to the Agent of the Facility Fee (for deposit in the Note Payment Account and Pro Rata distribution to the Lenders), the Custodian’s Fee and all other fees and expenses (including the disbursements and reasonable fees of the Agent’s attorneys, subject to the limitation specified in Section 12(a)) of the Agent accrued and billed for to the date of
the Company’s execution and delivery of this Agreement; and

 

(15)  a copy of the Company’s current underwriting guidelines, including its guidelines relating to the use of AVMs.

 

(b)  All directors and officers of the Company, all shareholders of the Company and all Affiliates of the Company or any of its Subsidiaries, to whom or which the Company shall be indebted either for borrowed money or for any other obligation of Fifty Thousand Dollars ($50,000) or more as of the date of this Agreement, excluding salary, bonus or other compensation obligations, shall have caused such Debt to be Qualified Subordinated Debt, as defined in this Agreement, by executing and causing to
be delivered to the Agent a Subordination Agreement and taking all other steps, if any, required to cause such Debt to be Qualified Subordinated Debt, and the corporate secretary of the Company shall have certified each such Subordination Agreement executed to satisfy the requirements of this Section 7.1(b) to be true, complete and in full force and effect as of the date of the Advance.

 

7.2.  Each Advance. The obligations of the Lenders to fund their respective Funding Shares of the initial Advance and each subsequent Advance under this Agreement are also subject to the satisfaction, in the sole discretion of the Agent, as of the date of each such Advance, of the following additional conditions precedent:

 

	 
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(a)  The Company shall have delivered to the Agent a Request for Borrowing and, if the Borrowing Base is insufficient to support all or part of the requested Borrowing, the Company shall have delivered (i) to the Agent and the Custodian a Submission List and (ii) (except for Wet Warehouse Advances) to the Custodian the Basic Papers, for any new Collateral required to cause the Borrowing Base to at least equal the outstanding Borrowings after giving effect to the requested Borrowing. 

 

(b)  Unless the requested Advance is comprised only of a Wet Warehousing Advance, the Custodian shall have issued its Custodian’s Certification (as defined in the Custody Agreement) relating to the Collateral currently in the Borrowing Base (and the Agent agrees not to unreasonably withhold or delay issuing any such Custodian’s Certification).

 

(c)  If the Company has begun registering Pledged Loans with MERS, the Company shall have delivered to the Agent the Electronic Tracking Agreement (as defined in the Custody Agreement) duly executed by the Company, Mortgage Electronic Registration Systems, Inc., MERSCorp., Inc. and the
Custodian.

 

(d)  The Agent shall have received evidence reasonably satisfactory to it (i) as to the due filing and recording in all appropriate offices of all financing statements, (ii) if there is any Collateral that is of a type that requires the Agent’s interest to be noted by book entry, that such book entry has been duly made and (iii) if there is any Collateral that is “investment property” under the UCC of the State of New York or other applicable Law, that such instruments as are
necessary to give the Agent “control” of such Collateral have been duly executed by the Company and the relevant securities intermediary.

 

(e)  The representations and warranties of the Company contained in Section 8 shall be true and correct in all material respects as if made on and as of the date of each Advance unless specifically stated to relate to an earlier date.

 

(f)  The Company shall have performed all agreements to be performed by it under this Agreement, the Custody Agreement and all other Facilities Papers, and after giving effect to the requested Advance, no Default or Event of Default will exist under this Agreement or any of the other Facilities Papers.

 

(g)  The Company shall not have incurred any material liabilities, direct or contingent, other than in the ordinary course of its business, and no liabilities (whether or not in the ordinary course of business) that adversely and materially affect any of the Central Elements since the dates of the Company’s Financial Statements most recently theretofore delivered to the Agent and distributed to the Lenders. 

 

(h)  The Agent shall have received from counsel for the Company, if requested by the Agent, an updated favorable opinion or opinions, in form and substance satisfactory to the Agent addressed to the Lenders and/or the Agent (whichever the Agent shall specify) and dated as of the date of such Advance, covering and updating such matters that were originally addressed in the opinion issued pursuant to Section 7.1(a)(13) as the Agent may reasonably request.

 

	 
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(i)  The Company shall have paid the Facility Fee and Agent’s Fee (if any) then due and payable in accordance with Sections 5.7 and 5.8 and the Custodian’s fee pursuant to the Custody Agreement.

 

(j)  The Agent shall have received such other documents, if any, as shall be specified by the Agent.

 

8  REPRESENTATIONS

 

The Company hereby represents and warrants to the Agent and the Lenders both (a) as of the date of this Agreement and (b) except as to those specified to relate only to a specific date, again as of the date of each Request for Borrowing, that:

8.1.  Organization; Good Standing; Subsidiaries. The Company is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware. The Company has furnished to the Agent a true and complete copy of its charter or articles of incorporation and its bylaws as in effect as of the date of this Agreement, including all amendments thereto, and agrees to furnish to the
Agent a true and complete copy of any amendment adopted after the Effective Date promptly after it is adopted. The Company warrants and represents that the Company and its Subsidiaries each has the full legal power and authority to own its properties and to carry on its business as currently conducted and each is duly qualified to do business as a foreign corporation and in good standing in each jurisdiction in which the ownership of its property or the transaction of its business makes such qualification necessary, except in jurisdictions, if any, where a failure to be qualified, licensed or in good standing has no material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries. The Company does not have any Subsidiaries except as set forth on Exhibit D
or as have been subsequently disclosed by the Company to the Agent in writing. Exhibit D states the name of each such Subsidiary as of the Effective Date, place of incorporation, each state in which it is qualified as a foreign corporation and the percentage ownership of the capital stock of each such Subsidiary by the Company.

 

8.2.  Authorization and Enforceability. The Company has the power and authority to execute, deliver and perform this Agreement, the Senior Credit Notes, the Custody Agreement and all other Facilities Papers to which it is a party or in which it joins or has joined. The execution, delivery and performance by the Company of this Agreement, the Senior Credit Notes, the Custody Agreement and all other Facilities Papers to which it is a party and the borrowing of the Loan have each been duly and validly authorized by all necessary corporate action on the part of the Company (none of which has been
modified or rescinded, and all of which are in full force and effect) and do not and will not (i) conflict with or violate any Legal Requirement, (ii) conflict with or violate the articles of incorporation or bylaws of the Company, (iii) conflict with or result in a breach of or constitute a default under any agreement, instrument or indenture binding on the Company or (iv) require any consent under any such agreement, instrument or indenture, where the conflict, breach, default or nonconsent could reasonably be expected to have a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries, or result in the creation of any Lien upon any property or assets of the Company except the Lien securing the Obligations, or result in or permit the acceleration of any debt of the Company pursuant to any agreement, instrument or indenture to which the Company is a party or by which the Company or its property may be bound or affected. This Agreement, the Senior
Credit Notes, the Custody Agreement and all other Facilities Papers constitute the legal, valid, and (except as to those Facilities Papers, such as financing statements, that are not contracts) binding obligations of the Company enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other such laws affecting the enforcement of creditors’ rights generally and by equitable principles relating to or affecting enforcement of creditors' rights generally or relief of debtors generally.

 

	 
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8.3.  Approvals. Neither the execution and delivery of this Agreement, the Senior Credit Notes, the Custody Agreement and all other Facilities Papers nor the performance of the Company’s obligations under such Facilities Papers requires any license, consent, approval or other action of any state or federal agency or governmental or regulatory authority other than (i) those that have been obtained or will be obtained by the time required and which remain in full force and effect, (ii) those for which the Company’s failure to obtain them will not have a material adverse effect on any
of the Central Elements in respect of the Company or any of its Subsidiaries and (iii) the filing of the Security Instruments.

 

8.4.  Financial Condition. The balance sheet of the Company (and, to the extent applicable, its Subsidiaries, on a consolidated basis) and the related statements of income, changes in stockholders’ equity and cash flows (“Financial Statements”) for the fiscal year ended on the Statement Date (the “Statement Date Financial Statements”) heretofore furnished to each of the Lenders, fairly present the financial condition of the Company (and its consolidated Subsidiaries) as of the Statement Date and the results of their operations for the fiscal period ended on the Statement Date. On the Statement Date, the Company did not have either any known material liabilities — direct or indirect, fixed or contingent, matured or unmatured — other than the contingent liabilities (if any) set forth on Schedule 8.4 and contingent liability on
endorsements of negotiable instruments for deposit or collection in the ordinary course of business, or any known material liabilities for sales, long-term leases or unusual forward or long-term commitments, which are not disclosed by the Statement Date Financial Statements or reserved against in them or that have not been otherwise disclosed to the Agent in writing. The Company is currently Solvent, and since the Statement Date, (i) there has been no material adverse change in any of the Central Elements related to the Company (and its Subsidiaries), nor is the Company aware of any state of facts which (with or without notice, the lapse of time or both) would or could result in any such material adverse change, and (ii) there have been no material unrealized or anticipated losses from any loans, advances or other commitments of the Company, except for the material adverse changes and losses (if any) that are summarized in Schedule 8.4.

 

8.5.  Litigation. Except as disclosed on Schedule 8.5 or except as disclosed in the Statement Date Financial Statement or the most recent Financial
Statements furnished to the Agent (whichever is more current), there are no actions, claims, suits or proceedings pending, or to the knowledge of the Company, threatened or reasonably anticipated against or affecting the Company or any of its Subsidiaries in any court, before any other Governmental Authority or before any arbitrator or in any other dispute resolution forum which, if adversely determined, could reasonably be expected to result in a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries.

 

	 
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8.6.  Licensing. The Company and the Servicers (if any) of its Mortgage Loans are duly registered as mortgage lenders and servicers in each state in which Mortgage Loans have been or are from time to time originated, to the extent such registration is required by any applicable Legal Requirement, except where the failure to register could not reasonably be expected to result in a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries.

 

8.7.  Hedge Investments in Mortgage Loans. If at any time during the term of this Agreement, the Company is hedging its investments in Mortgage Loans Pledged to the Agent, the Company will prepare its periodic hedge position reports in form, substance and detail reasonably satisfactory to the Agent and provide a copy of each to the Agent and each Lender when issued, and the Company will deliver to the Agent within ten (10) Business Days after the Company’s receipt thereof copies of the Hedge Agreements acquired by the Company and held from time to time to so hedge its investments in
Mortgage Loans Pledged to the Agent (the Company’s right, title and interest in and to all existing and future Hedge Agreements being part of the Collateral that the Company has Pledged to the Agent by operation of Section 6.1(a)(4).)

 

8.8.  Compliance with Applicable Laws. Neither the Company nor any of its Subsidiaries is in violation of any provision of any law, or any judgment, award, rule, regulation, order, decree, writ or injunction of any court, other Governmental Authority or public regulatory body that could reasonably be expected to have a material adverse effect on any of the Central Elements in respect of the Company
or any of its Subsidiaries.

 

8.9.  Regulation U. The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any Borrowings directly or indirectly made available to or received by the Company or for its account will be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock or for the purpose of reducing or retiring any debt which was originally incurred to
purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock or which would constitute this transaction a “purpose credit” within the meaning of Regulation U, as now or hereafter in effect.

 

8.10.  Investment Company Act. The Company is not subject to the rules governing an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

8.11.  Payment of Taxes. The Company has filed (or caused to be filed) all required federal, state and local income, excise, property and other tax returns with respect to its and its Subsidiaries’ operations, all of such returns are true and correct and the Company has paid or caused to be paid — or is protesting by appropriate proceedings diligently pursued and has established adequate reserves therefor — all taxes which are due and owing under applicable law or as shown on any assessment to the extent such taxes have become due, including all applicable FICA payments and
withholding taxes. The amounts reserved as a liability for income taxes and other taxes payable in the financial statements heretofore furnished to the Agent and the Lenders are sufficient for payment of all unpaid federal, state and local income, excise, property and other taxes — whether or not disputed — of the Company and its Subsidiaries accrued for or applicable to the period and on the dates of such financial statements and all prior years and periods, and for which the Company and its Subsidiaries may be liable in their own right or as transferee of the assets of other Person or as successor to any other Person.

 

	 
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8.12.  Agreements. Neither the Company nor any of its Subsidiaries is a party to any agreement, instrument or indenture or subject to any restriction materially and adversely affecting any of the Central Elements except as disclosed in (i) the Statement Date Financial Statements, (ii) Schedule 8.4 or (iii) the more current Financial Statements, if any, that the Company has furnished to the Agent after the Effective Date. Neither the Company nor any such Subsidiary is in default in the performance, observance or fulfillment of any of its obligations, covenants or conditions contained in any agreement, instrument or indenture that could reasonably be expected to have a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries. No holder of the Company’s or any such Subsidiary’s debt or other obligations has given notice of any asserted default that could have a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries. No liquidation or dissolution of the Company is pending or, to the Company’s knowledge, threatened and no liquidation or
dissolution of any Subsidiary is pending or threatened that could have a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries. No receivership, insolvency, bankruptcy, reorganiza-tion or other similar proceedings relative to the Company or any of its properties is pending, or to the Company’s knowledge, threatened. No receivership, insolvency, bankruptcy, reorganiza-tion or other similar proceedings relative to any Subsidiary of the Company or any of its properties is pending, or to the Company’s knowledge, threatened that could have a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries.

 

8.13.  Title to Properties. The Company and each of its Subsidiaries has good, valid, insurable (in the case of real property) and marketable title to (i) all of its material Properties and assets (whether real or personal, tangible or intangible) that are reflected on or referred to in the Statement Date Financial Statements or in the more current Financial Statements (if any) most recently furnished to the Agent after the Effective Date, except for such properties and assets as have been disposed of since the date of such current Financial Statements either in the ordinary course of business
or because they were no longer used or useful in the conduct of its business, and all such Properties and assets are free and clear of all Liens except for (i) the lien of current (nondelinquent) real and personal property taxes and assessments, (ii) covenants, conditions and restrictions, rights of way, easements and other matters to which like properties are commonly subject that do not materially interfere with the use of the property as it is currently being used and (iii) such other Liens, if any, as are disclosed in such Financial Statements and Permitted Encumbrances.

 

8.14.  The Company’s Address. The Company’s chief executive office and principal place of business are at 6230 Stoneridge Mall Road, Pleasanton, California 94588 or at such other address as shall have been set forth in a written notice to the Agent given subsequent to the Effective Date and at least ten (10) Business Days before such notice’s effective date.

 

8.15.  ERISA. The Company does not maintain any Plans except the Plans listed on Schedule 8.15 and agrees to notify the Agent in advance of forming any Plans. The Plans listed on Schedule 8.15 and all other Company employee welfare benefits plans (as defined under Section 3(1) of ERISA) are in substantial compliance with all applicable laws (including ERISA). The Company is not an employer under any Multiemployer Plan or any other Plan subject to Title IV of ERISA. 

 

	 
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8.16.  Special Representations Concerning Collateral. As of the date of this Agreement and as of the date of each Request for Borrowing, that:

 

(a)  The Company is the sole legal and equitable owner (except in the case of MERS Designated Loans, as to which MERS, as nominee for the Company and its successors and assigns, is the record owner), free and clear of all Liens other than Permitted Encumbrances, of all Collateral Pledged to the Agent by the Company.

 

(b)  All Collateral, including all pledged Wet Loans, has been duly authorized and validly issued. 

 

(c)  Each item of Collateral is genuine and what it purports to be.

 

(d)  All of the Collateral, individually and collectively, Pledged to the Agent by the Company complies with all of the requirements of this Agreement and the Custody Agreement and is genuine and what it purports to be.

 

(e)  All information concerning each item or grouping of Collateral listed in any Submission List or in a Warehouse Transmission File sent to the Agent or the Custodian was, is and/or shall be (as applicable) true and complete in all material respects as of the date of such Submission List or Warehouse Transmission File. 

 

(f)  The Company is in compliance with all Legal Requirements relating to each item of Collateral.

 

(g)  All Collateral, including all pledged Wet Loans, has been duly (i) originally issued, or endorsed or assigned, to the Company and (ii) endorsed or assigned by the Company in blank — endorsement in blank is not required when MERS is designated in the Mortgage as the original mortgagee or the nominee of the original mortgagee, its successors and assigns — and delivered (or in the case of Wet Loans, are in the process of being delivered) to the Custodian or endorsed in a manner acceptable to the Agent.

 

(h)  All Basic Papers for each item of Collateral (except for Wet Loans) will be transmitted to the Custodian with the Submission List with which it is submitted.

 

(i)  Each assignment to the Agent of the Lien securing any Collateral will be in proper and sufficient form for recording in the appropriate government office in the U.S. jurisdiction where the related Mortgaged Premises are located (no such assignment is required for any Mortgage that has been originated in the name of MERS and registered under the MERS® system.) Upon and after delivery to the Agent of the Mortgage Note evidencing the particular item of Collateral, the Agent on behalf of the
Lenders will have a duly perfected first priority possessory security interest in such Collateral and for so long as the Agent, the Custodian or another bailee for the Agent retains possession of such note, or takes such other action as is necessary for it to have and maintain a perfected security interest in such note under the UCC, the Agent will have a duly perfected first priority possessory security interest in such Collateral.

 

	 
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(j)  The Company has the full right, power and authority to pledge the Collateral Pledged to the Agent by the Company under this Agreement or pursuant to it, and such Collateral may be further assigned without any requirement for the consent of any other party to the Collateral.

 

 

(k)  The Lien on the real estate described in, or referred to as covered by, each Pledged Loan is a first priority Lien (or, the case of Second Lien Loans or HELOCs, a Lien second in priority to one senior Mortgage), subject only to the Permitted Encumbrances.

 

(l)  All improvements that were considered in determining the appraised value of the Mortgaged Premises securing each Pledged Loan lay wholly within the boundaries and building restriction lines of such Mortgaged Premises, no improvements on adjoining properties encroach upon such Mortgaged Premises and no improvement located on or that is a part of such Mortgaged Premises is in violation of any applicable zoning law or regulation.

 

(m)  Unless it is a Second Lien Loan for which the Company’s underwriting guidelines require only a property report that only lists the senior Lien mortgage, the Pledged Loan is covered by an ALTA mortgage title insurance policy of such other form of title insurance as is acceptable to Fannie Mae or Freddie Mac, issued by and constituting the valid and binding obligation of a title insurer that is (i) generally acceptable to prudent mortgage lenders who regularly purchase Mortgage Loans from the Company comparable to the subject Mortgage Loan, and (ii) is qualified to do business in the jurisdiction where the Mortgaged Premises are located, insuring the holder of the subject Mortgage
Loan as to the first priority of the Lien of the Mortgage on the related Mortgaged Premises, in an amount equal to the original principal amount of the subject Mortgage Loan. As to Pledged Loans other than such Second Lien Loans for which the Company’s underwriting guidelines require only a property report, the Company is the sole named insured of such mortgage title insurance policy, the pledge to the Agent of the Company’s interest in such policy does not require the consent of or notice to the insurer (or such consent has been obtained or notice given), and such policy is and will be in full force and effect and inure to the benefit of the Agent (as agent and representative of the Lenders) as and when such Pledged Loan is Pledged to the Agent. No claims have been made under any such policy of title insurance insuring a Pledged Loan (other than a Second Lien Loan for which the Company’s underwriting guidelines require only a property report), and no prior holder of the Pledged Loan,
including the Company, has done, by act or omission, anything that would impair the coverage of such policy.

 

(n)  The Mortgaged Premises securing such Pledged Loan are capable of being lawfully occupied under applicable Laws, all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of such Mortgaged Premises and, with respect to the use and occupancy of the same, including certificates of occupancy and fire underwriting certificates, have been made or obtained for the appropriate Governmental Authority. 

 

	 
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(o)  Each Pledged Loan that is a Prime Loan or an Alt-A Loan and has a Cumulative Loan-to-Value Ratio greater than eighty percent (80%) is either guaranteed by VA or insured by FHA or private mortgage insurance.

 

(p)  All taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents that have previously become due have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due. The Company has not advanced funds, or induced, solicited or knowingly received any advance of funds by any Person other than the related Customer, directly or indirectly, for the payment of any amount required under the related Loan Papers, except for interest to accrue from the date of the Pledged Loan or the date of disbursement of its proceeds
(whichever is greater) to the day that precedes by a month the due date of such Pledged Loan’s first installment of principal and interest.

 

(q)  The Company has no knowledge of any circumstances or conditions with respect to the Mortgage, the Mortgaged Premises or the Customer in respect of any Pledged Loan (other than the Customer’s credit standing) that can reasonably be expected to cause private institutional investors that regularly invest in the Company’s Mortgage Loans similar to such Pledged Loan to regard such Pledged Loan as an unacceptable investment or adversely affect the value or marketability of the Pledged Loan to other similar institutional investors.

 

(r)  Each Pledged Loan’s Mortgage contains an enforceable provision for acceleration of the maturity of the unpaid principal balance thereof in the event that the Mortgaged Premises are sold or transferred without the prior written consent of the holder thereof.

 

(s)  No Pledged Loan contains provisions pursuant to which monthly payments are paid in whole or in part with funds deposited in any separate account established by the Company, the Customer or anyone on behalf of the Customer, or paid by any source other than the Customer (or, for relocation Mortgage Loans, the Customer’s employer), nor any other similar provisions currently in effect that effectively constitute a “buydown” provision.

 

(t)  No Pledged Loan is a graduated payment Mortgage Loan or has a shared appreciation or other contingent interest feature.

 

(u)  The Company’s acquisition, disposition and collection practices with respect to Single-family Mortgage Loans are and have been in all material respects in accordance with industry custom and practice, and in all respects legal and proper.

 

(v)  If an escrow of funds has been established for a Pledged Loan, it is not prohibited by applicable Law, all escrow deposits and escrow payments have been collected in full compliance with applicable state and federal Law and are in the possession of the Company or have been applied to pay their proper and intended purposes, no escrow deposits or escrow payments or other charges or payments due in respect of such Pledged Loan have been capitalized under its Mortgage Note or Mortgage and no deficiencies exist in connection therewith for which customary arrangements for repayment have not been made.

 

	 
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(w)  All interest rate adjustments in respect of each Pledged Loan have been made in strict compliance with applicable Law and the terms of the related Mortgage Note, and any interest required to be paid pursuant to applicable Law has been properly paid and credited.

 

(x)  No Customer under any Pledged Loan has notified the Company, and the Company has no knowledge, of any relief requested or allowed to the Customer under the Servicemembers’ Civil Relief Act of 2003.

 

(y)  Based on customary residential mortgage industry practices and to the knowledge of the Company, the Mortgaged Property securing each Pledged Loan is free from any and all toxic and hazardous substances and there exists no violation of any applicable environmental Law.

 

(z)  No Pledged Loan was selected as Collateral on any basis that was intended to have a material adverse effect on the Agent or any Lender.

 

(aa)  No Pledged Loan is subject to a bankruptcy plan.

 

(bb)  All Pledged Loans and all related papers included in the Collateral (including all pledged Wet Loans):

 

(1)  were originated by the Company acting in the ordinary course of its business;

 

(2)  have been made in compliance with all applicable requirements of the Real Estate Settlement Procedures Act, the Equal Credit Opportunity Act, the federal Truth-In-Lending Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, related statutes and regulations and all applicable Legal Requirements under usury, truth-in-lending, equal credit opportunity and all other Laws;

 

(3)  are the legal, valid and binding obligations of the respective Customers who made them and are valid and enforceable in accordance with their terms, without any claim, right of rescission, counterclaim, defense or offset, including any claim or defense of usury, except as such enforceability may be limited by bankruptcy and other laws affecting the rights of creditors generally and by principles of equity, excepting rights that, by applicable law, cannot be waived, and neither the operation of any of their respective contract terms nor the exercise of any right thereunder will render any of them partly or wholly unenforceable or subject to any such claim, right of rescission,
counterclaim, defense or offset, and no such claim, right of rescission, counterclaim, defense or setoff has been asserted;

 

(4)  have not been modified or amended and none of their requirements has been waived, except as expressly and completely reflected in the applicable Loan Papers furnished to the Custodian;

 

(5)  to the best of the Company’s knowledge, respectively have fair market values equal to or greater than the collateral values respectively attributed or allocated to them under this Agreement;

 

	 
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(6)  comply with the terms of this Agreement and the Custody Agreement;

 

(7)  were not originated in, and are not subject to the laws of, any jurisdiction whose laws (i) make unlawful their pledge to the Agent pursuant to this Agreement, or their ownership by the Agent or the Lenders following foreclosure of the Agent’s Lien, or conveyance in lieu of foreclosure after any Event of Default or (ii) render the Pledged Loans unenforceable;

 

(8)  are in full force and effect and have not been satisfied or subordinated in whole or in part or rescinded, and the residential real property securing the Pledged Loan has not been partially or completely released from the Lien of the Pledged Loan;

 

(9)  evidence and are each secured by a valid first Lien (or, for Second Lien Loans, by a valid Lien second in priority to the Lien of only one senior Mortgage Loan) in favor of the Company on real property securing the amount owed by the Customer(s) under the related Mortgage, subject only to Permitted Encumbrances, that to the best of the Company’s knowledge has fair market value equal to or greater than the collateral value attributed or allocated under this Agreement to the Pledged Loan secured thereby, the Company has pledged and collaterally assigned all of the Company’s right, title and interest in such Pledged Loan and related Mortgage, and the Agent has a valid and
perfected and enforceable first priority security interest in such Pledged Loan;

 

(10)  are each executed in full accordance with all requirements of the applicable Laws of the jurisdiction in which the Mortgaged Premises are located, with the Mortgage for each being (i) duly acknowledged and sealed by such official and in such manner and form as to be both recordable and effective under such Laws to give such constructive notice to all Persons as shall be necessary to establish and continue the Lien of such Mortgage with the priority that the Company represents it has to the Agent and (ii) so recorded, and with the Mortgage Note, Mortgage and all related papers executed with the genuine original signature(s) of the Customer(s) obligated on such Pledged Loan, and all
parties to each such Pledged Loan had full legal capacity to execute it;

 

(11)   were originated by the Company in the ordinary course of its business, without knowledge that the Pledged Loan was subject to any security interest other than the Lien of the Agent, as agent and representative of the Lenders; the Company has not sold, assigned or pledged any of such Pledged Loans to any person (excluding assignments to MERS as nominee for the Company, its successors and assigns) and the Company has good and marketable title to them free and clear of any encumbrance, equity, loan, pledge, charge, claim or security interest other than the Agent’s Lien, and is the sole owner thereof with full right to pledge them to the Agent;

 

(12)  are secured by Single-family residential property;

 

(13)  are the subject of a Current Appraisal or a Current Broker’s Price Opinion (or, for Second Lien Loans and HELOCs, an AVM), and the Company has in its possession and will make available to the Custodian on request evidence of such value and how it was determined;

 

	 
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(14)  are not subject to the Home Ownership and Equity Protection Act of 1994;

 

(cc)  As to each Pledged Loan and its Loan Papers:

 

(1)  the Company has not waived any default, breach, violation or event permitting acceleration except payment delinquencies that have not been outstanding long enough to cause the Pledged Loan to be In Default;

 

(2)  the related Mortgaged Premises are, to the best of the Company’s knowledge, free of material damage and in good repair and the Company has no actual knowledge that any such Mortgaged Premises have suffered material fire, storm or other casualty damage that is not covered by a Hazard Insurance Policy;

 

(3)  to the best of the Company’s knowledge, no liens or claims have been filed for work, labor or materials affecting the related Mortgaged Premises which are undischarged (whether prior, equal or subordinate to the Lien of the Pledged Loan);

 

(4)  the Loan Papers contain customary and enforceable provisions so as to render the rights and remedies of their holder adequate for the realization against the collateral for the Pledged Loan of the benefits of the security intended to be provided by it;

 

(5)  there is only one original executed Mortgage Note, and (except in the case of Wet Loans) that original has been delivered to the Custodian;

 

(6)  none of its makers or mortgagors is an Affiliate of the Company or any of its or its Subsidiaries’ directors or officers;

 

(dd)  Each Mortgage is a Lien on the premises and property described in it having the priority represented to the Agent, and the description of the Mortgaged Premises in each Mortgage is legally adequate and each item of Collateral has been fully advanced in its face amount.

 

(ee)  No default, and no event that with notice or lapse of time or both would become a default, has occurred and is continuing under any item of Collateral except as to which the Company has given notice to the Agent (by reporting Pledged Loans that are Delinquent Mortgage Loans), and if any such default or event has occurred, it has not continued for more than sixty (60) days, reckoned and counted from the most recent month end (and, if and when any such default or event in respect of any such Delinquent Mortgage Loans continues for more than sixty (60) days, the Company will promptly report that fact to the Agent.)

 

(ff)  All Hazard Insurance Policies covering the premises encumbered by each item of Collateral:

 

	 
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(1)  name the Company or its Servicer as the insured under a standard mortgagee clause;

 

(2)  are in full force and effect;

 

(3)  are in the amount of the full insurable value of the Mortgaged Premises on a replacement cost basis or the unpaid principal amount of the related Pledged Loan, whichever is less;

 

(4)  are the valid and binding obligation of the insurer;

 

(5)  have all premiums due thereon paid;

 

(6)  are required by the related Mortgage to be maintained on the Mortgaged Premises at the Customer’s cost and expense, failing which the holder of the Mortgage is authorized by the express terms of such Mortgage to obtain and maintain such insurance at the Customer’s cost and expense and to obtain reimbursement of such cost from the Customer;

 

(7)  afford insurance against fire and such other risks as are usually insured against in the broad form of extended coverage insurance from time to time available, as well as insurance against flood hazards if required by the terms of any applicable private mortgage insurance or by any applicable Legal Requirement.

 

(gg)  Mortgaged Premises securing Collateral and located in a special flood hazard area designated as such by the Secretary of HUD are covered by special flood insurance as required by the National Flood Insurance Program.

 

(hh)  Each HELOC and each Second Lien Loan that has been Pledged to the Agent for more than fifteen (15) Business Days is covered by a specific Purchase Commitment.

 

(ii)  Each Pledged Loan has been underwritten in material conformance with the Company’s underwriting guidelines in existence as of the date the Pledged Loan was originated, and without regard to changes in such guidelines, if any, adopted by the Company but to which the Agent has objected in writing within ten (10) days after receiving written notice of the change from the Company (and has not withdrawn its objection.) 

 

8.17.  Survival. All representations and warranties by the Company shall survive delivery of the Facilities Papers and the making of Advances, and any investigation at any time made by or on behalf of the Agent or any Lender shall not diminish the Agent’s or such Lender’s right to rely on them.

 

9   AFFIRMATIVE COVENANTS

 

The Company agrees that, for so long as the Commitments are outstanding or any of the Company’s obligations remain to be paid or performed under this Agreement, the Senior Credit Notes or any of the other Facilities Papers, the Company shall, to the extent applicable:

	 
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9.1.  Pay Senior Credit Notes. Punctually pay or cause to be paid when due the principal of, interest on and all other amounts now or hereafter owing under this Agreement, the Senior Credit Notes and the other Facilities Papers in accordance with their respective terms.

 

9.2.  Financial Statements. Deliver to the Agent and to each of the Lenders:

 

(a)  As soon as available and in any event within thirty (30) days after the end of each month, statements of income and changes in its stockholders’ equity (showing, both separately and on a consolidated basis with the Company, those of its Subsidiaries) for the month just ended, and the related balance sheet as at the end of such month, all in reasonable detail, and certified by its chief financial officer that, to the best of his or her knowledge, such financial statements were prepared in accordance with GAAP and present fairly the financial condition and the results of operations for the period covered, subject, however, to year-end audit adjustments and the omission of notes to
the Financial Statements.

 

(b)  As soon as available and in any event within ninety (90) days after the close of each of its fiscal years, audited statements of income, changes in its stockholder’s equity and cash flows (showing, both separately and on a consolidated basis with the Company, those of its Subsidiaries) for such year, and the related balance sheet as at the end of such year (setting forth in comparative form the corresponding figures for the preceding fiscal year), all in reasonable detail, prepared in accordance with GAAP and with all notes, and accompanied by:

 

(1)  a report and opinion of a firm of independent certified public accountants of recognized standing selected by the Company and acceptable to the Agent (as of the Effective Date, PriceWaterhouseCoopers, LLP is acceptable to the Agent), stating that such accountants have audited such financial statements in accordance with generally accepted auditing standards and that, in their opinion, such financial statements present fairly, in all material respects, the financial position of the Company as of the date thereof and the results of its operations and cash flows for the periods covered thereby in conformity with GAAP;

 

(2)  any management letters, management reports or other supplementary comments or reports delivered by such accountants to management or the board of directors of the Company;

 

(3)  if (i) the Company begins servicing Mortgage Loans for others and (ii) such a report is prepared in the ordinary course of the Company’s annual audit, a report and opinion of a firm of independent public accountants that is a member of the American Institute of Certified Public Accountants (as of the Effective Date, PriceWaterhouseCoopers, LLP is acceptable to the Agent) stating that such firm has examined selected documents and records relating to the servicing of Mortgage Loans, including the Pledged Loans covered by this Agreement, in accordance with the Mortgage Bankers Association of America’s Uniform Single Audit Program for Mortgage Bankers, or any successor uniform program, and that, on the basis of such examination, such servicing has been conducted in compliance with the minimum servicing standards identified therein, except for such significant
exceptions or errors in records that, in the opinion of such firm, generally accepted auditing standards requires it to report (if the Company utilizes any subservicer in servicing Mortgage Loans for others, the Company will use reasonable efforts to obtain such a report and opinion in respect of each subservicer for the Company and will furnish those obtained to the Agent); and

 

	 
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(4)  a certificate signed by the chief financial officer of the Company, as applicable, stating that said financial statements fairly present its financial condition and results of operations (and, if applicable, those of its Subsidiaries) as at the end of, and for, such year.

 

The Company also agrees to provide to the Agent such other information related to such annual reports as the Agent may from time to time reasonably request.

(c)  Together with each of the monthly and annual financial statements required by Sections 9.2(a), and 9.2(b) above, a certificate of the Company’s chief financial officer (i) setting forth in reasonable detail all calculations necessary to show that the Company is in compliance with the requirements of Sections 10.7, 10.7(e) and 10.7(f) of this Agreement or, if the Company is not in compliance, showing the extent of noncompliance and specifying the period of noncompliance and what actions the Company proposes to take with respect thereto and (ii) stating that the terms of this Agreement have been reviewed by such officer or under his or her supervision, and that he or she has made or caused to be made under his or her supervision, a review in reasonable detail of the transactions and the condition of the Company during the accounting period covered by such financial statements and that such review does not disclose the existence during or at the end of such accounting period — and that such chief financial officer does not have knowledge of the existence as of the date of the Officer’s Certificate — of any Event of Default or Default or, if any Event of Default or Default
existed or exists, specifying the nature and period of its existence and what action the Company has taken, is taking and proposes to take with respect to it. Each such Officer’s Certificate shall show, in reasonable detail, the computations supporting compliance (or showing noncompliance) with the provisions of Sections 10.7, 10.7(e) and 10.7(f). Exhibit E is a sample form for showing such computations.

 

9.3.  Financial Statements Will be Accurate. The Company agrees that all financial statements and reports of auditors furnished to the Agent and the Lenders will be prepared in accordance with GAAP, applied on a basis consistent with that applied in preparing the Statement Date Financial Statements as at, and for the period then ended (except to the extent otherwise required to conform to good accounting practice), subject, however — for financial statements other than year-end statements — to year-end audit adjustments and the omission of footnotes.

 

9.4.  Other Reports. The Company will promptly furnish to the Agent from time to time information regarding the business and affairs of the Company, including the following and such other information as the Agent may from time to time reasonably request (each report required must be signed by a duly authorized officer of the Company and the Agent will have no responsibility to verify or track any of the items referenced or conclusions stated in such reports or to verify the authority of its signer):

 

(a)  A report of Collateral prepaid in full, on or before one (1) Business Day after prepayment of any one or more items of Collateral is reported to the Company internally or by any Servicer (and the Company, as applicable, will require each such Servicer to promptly make such reports to the Company, as applicable).

 

	 
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(b)  Monthly, if applicable, a report summarizing notices received by the Company requesting or demanding that the Company repurchase (or pay indemnity or other compensation in respect of) Mortgage Loans previously sold or otherwise disposed of by the Company to any investor or other Person pursuant to any express or implied repurchase or indemnity obligation (whether absolute or contingent and whether or not the Company is contesting or intends to contest the request or demand).

 

(c)  Monthly (if applicable), a Pledged Loans Curtailment Report.

 

(d)  If requested by the Agent, a summary report of the Company’s then-outstanding commitments to sell Mortgage Loans to investors.

 

(e)  Weekly (if applicable), a report of Second Lien Loans and HELOCs that have been Pledged to the Agent for more than fifteen (15) Business Days but are not covered by a specific Purchase Commitment.

 

(f)  Such other reports by the Company in respect of the Collateral, in such detail and at such times as the Agent in its reasonable discretion or at the reasonable direction of a Lender may request at any time or from time to time.

 

(g)  Within ten (10) days of the date distributed, the Company will notify the Agent if it has issued any definitive prospectus relating to (i) any security offering by the Company or any of its Subsidiaries (including single-purpose finance Subsidiaries) or (ii) any securities to be based on, backed by or created from any Collateral and to be offered by the Company or any of its Subsidiaries, and, upon the Agent’s request, will provide the Agent with copies thereof.

 

(h)  The Company will notify the Agent (i) when any press release is issued by the Company or any of its Subsidiaries regarding any event or matter that is, or is reasonably likely to be, material to the business operations, earnings, assets or liabilities of the Company, (ii) when any regular or periodic financial reports, or any extraordinary or non-routine filings, if any, shall be filed with the U.S. Securities and Exchange Commission or any successor agency by or on behalf of the Company
or any of its Subsidiaries (including single-purpose finance Subsidiaries) and (iii) when any such filings are made by or in respect of the Company or any of its Subsidiaries relating to any securities that are, or are to be, based on, backed by or created from any Collateral, and upon request of the Agent will provide copies of such press releases or filings.

 

(i)  The Company will promptly notify the Agent in writing of any changes to the Company’s underwriting guidelines. If the Agent deems any change material and objects to it in writing within ten (10) Business Days of receipt of notice of it from the Company, the Company shall not thereafter submit as Collateral, or request any Advance against the Collateral Value of, any Single-family Loan that, in the absence of that change in the underwriting guidelines, would not have satisfied the Company’s underwriting guidelines (and any such Single-family Loan shall have zero Collateral Value.)

 

	 
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9.5.  Maintain Existence and Statuses; Conduct of Business. Preserve and maintain its corporate existence in good standing and all of its rights, privileges, licenses and franchises necessary or desirable in the normal conduct of its business except where the failure to maintain such rights, privileges, licenses or franchises would not have a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries, and the Company will continue in the Prime Loan origination business as one of its core businesses.

 

9.6.  Compliance with Applicable Laws. Comply with all applicable Legal Requirements, the breach of which could reasonably be expected to materially adversely affect any of the Central Elements with respect to the Company and its Subsidiaries, taken as a whole, except where contested in good faith.

 

9.7.  Inspection of Properties and Books; Protection of Company’s Proprietary Information. Permit authorized representatives of the Agent and each Lender to discuss onsite the business, operations, assets and financial condition of the Company and its Subsidiaries with their respective officers, employees and independent accountants and to examine their books of account and make copies or extracts of them, all at such reasonable times as the Agent or any Lender may request, for any or all of the purposes of ordinary diligence, and enforcing the Agent’s and the Lenders’ rights
and performing the Agent’s duties under this Agreement. The Agent or the Lender acting will notify the Company before contacting the Company’s accountants and the Company may have its representatives in attendance at any meetings between the officers or other representatives of the Agent or any Lender and such accountants held in accordance with this authorization. The Agent and the Lenders agree that they will take reasonable steps to prevent disclosure to third parties of any proprietary information obtained from any such inspections and discussions or from any financial statements or reports furnished by the Company to the Agent or the Lenders pursuant to this Agreement and to use commercially reasonable efforts to maintain the confidential nature of such material; provided that this restriction shall
not apply to information that (i) at the time in question has already entered the public domain, (ii) is required to be disclosed by any Legal Requirement (including pursuant to any examination, inspection or investigation by any Governmental Authority having regulatory jurisdiction over the Agent or a Lender), (iii) is furnished by the Agent or any Lender to purchasers or prospective purchasers of participations or interests in the Obligations or any Senior Credit Note so long as such purchasers and prospective purchasers have agreed to be subject to restrictions substantially identical to those contained in this sentence, or (iv) the disclosure of which the Agent and the lenders reasonably and in good faith deem necessary to protect their interests herein.

 

9.8.  Privacy of Customer Information. Company Customer Information in the possession of the Agent, other than information independently obtained by the Agent and not derived in any manner from or using information obtained under or in connection with this Agreement, is and shall remain confidential and proprietary information of the Company. Except in accordance with this Section 9.8, the Agent shall not use any Company Customer Information for any purpose, including the marketing of products or services to, or the solicitation of business from, Customers, or disclose any Company Customer Information to any Person, including any of the Agent’s employees, agents or contractors or any third party not affiliated with the Agent. The Agent may use or disclose Company Customer Information only to the extent necessary (i) for examination and audit of the Agent’s activities, books and records by the Agent’s regulatory authorities, (ii) to protect or exercise the Agent’s, the Custodian’s and the Lenders’ rights and privileges or (iii) to carry out the Agent’s, the Custodian’s and the Lenders’ express obligations under this
Agreement and the other Facilities Papers (including providing Company Customer Information to Approved Investors), and for no other purpose; provided that the Agent may also use and disclose the Company Customer Information as expressly permitted by the Company in writing, to the extent that such express permission is in accordance with the Privacy Requirements. The Agent shall take commercially reasonable steps to ensure that each Person to which the Agent intends to disclose Company Customer Information, before any such disclosure of information, agrees to keep confidential any such Company Customer Information and
to use or disclose such Company Customer Information only to the extent necessary to protect or exercise the Agent’s, the Custodian’s and the Lenders’ rights and privileges, or to carry out the Agent’s, the Custodian’s and the Lenders’ express obligations, under this Agreement and the other Facilities Papers (including providing Company Customer Information to Approved Investors). The Agent agrees to maintain an Information Security Program and to assess, manage and control risks relating to the security and confidentiality of Company Customer Information pursuant to such program in the same manner as the Agent does in respect of its own customers’ information, and shall implement the standards relating to such risks in the manner set forth in the Interagency Guidelines
Establishing Standards for Safeguarding Company Customer Information set forth in 12 CFR Parts 30, 208, 211, 225, 263, 308, 364, 568 and 570. Without limiting the scope of the foregoing sentence, the Agent shall use at least the same physical and other security measures to protect all Company Customer Information in the Agent’s possession or control as the Agent uses for its own customers’ confidential and proprietary information.

 

	 
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9.9.  Notice of Suits, Etc. and Notice and Approval of Proposed Servicing Transfers. Give prompt written notice to the Agent of:

 

(a)  any material action, suit or proceeding instituted by or against the Company or any of its Subsidiaries in any federal or state court or before any commission, regulatory body or Governmental Authority, or if any such proceedings are threatened against the Company or any of its Subsidiaries, in a writing containing the applicable details;

 

(b)  the filing, recording or assessment of any material federal, state or local tax lien against the Company or any of its Subsidiaries or any assets of any of them;

 

(c)  the occurrence of any Event of Default hereunder;

 

(d)  the occurrence of any Default which continues for two (2) Business Days;

 

(e)  the occurrence of (i) any event which, with or without notice or lapse of time or both, would constitute a default under any other agreement, instrument or indenture to which the Company or any or its Subsidiaries is a party or to which any of them or any of their properties or assets may be subject which may lead to or result in a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries, or (ii) any other action, event or condition of any nature which may lead to or result in such an effect.

 

To the extent the Company has approval rights concerning transfers of any Servicing Agreement relating to any Pledged Loans, it agrees not to approve or acquiesce in any transfer of such servicing to a Servicer that has not been approved by the Agent.

	 
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9.10.  Payment of Taxes, etc. Pay and discharge or cause to be paid and discharged promptly all taxes, assessments and governmental charges or levies imposed upon it or its Subsidiaries or upon their respective income, receipts or properties before they become past due, as well as all lawful claims for labor, materials and supplies or other things which, if unpaid, could reasonably be expected to become (or result in the placement of) a Lien or charge upon any part of such properties; provided that it and its affected Subsidiaries shall not be required to pay taxes, assessments or governmental charges or levies or claims for labor, materials or supplies that are being contested in good faith and by proper proceedings being reasonably and diligently pursued, execution or enforcement of which has been effectively stayed (by the posting of a bond or other security sufficient to achieve that result, or by any other fully effective means), and for which reserves determined to be adequate (in accordance with GAAP in all material respects) have been set aside on its books.

 

9.11.  Insurance. Maintain liability insurance protecting the Company and fire and other hazard insurance on its respective properties from which it conducts its business, with responsible insurance companies, in such amounts and against such risks as is customarily carried by similar businesses operating in the same vicinity. Copies of such policies shall be furnished to the Agent without charge upon the Agent’s request made from time to time and without cost to the Agent. 

 

9.12.  Maintain Priority and Perfection of Lender’s Lien. Do such things as applicable law requires to maintain the Lender’s Lien on the Collateral as a perfected first priority Lien at all times.

 

9.13.  Subordination of Certain Indebtedness. The Company will cause any and all debt and obligations of the Company to any Affiliate or any shareholder, director or officer of the Company (excluding debt for director’s or office’s salary, bonuses, directors’ fees or other compensation for service) or any Affiliate to be Qualified Subordinated Debt by the execution and delivery by such Affiliate or shareholder, director or officer to the Agent of a Subordination Agreement and the taking of all other steps (if any) required to cause such Debt to be Qualified Subordinated Debt, as
defined in this Agreement, and deliver to the Agent an executed copy of that Subordination Agreement, certified by the corporate secretary of the Company to be true and complete and in full force and effect, as to all such present and future debts and obligations of the Company.

 

9.14.  Use of Proceeds of Advances. Use the proceeds of each Advance solely for the applicable purpose stated in Section 2.4 and for no other purpose.

 

9.15.  Promptly Correct Escrow Imbalances. By no later than five (5) Business Days after learning (from any source) of any material imbalance in any escrow account(s) maintained by the Company (or any subservicer for it), the Company will fully and completely correct and eliminate such imbalance. 

 

	 
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9.16.  MERS Covenants. If the Company has begun registering Pledged Loans with MERS, the Company will:

 

(a)  be a “Member” (as defined in the MERS Agreements) of MERSCORP;

 

(b)  maintain the Electronic Tracking Agreement in full force and effect and timely perform all of its obligations thereunder;

 

(c)  provide the Agent with copies of any new MERS Agreement or any amendment, supplement or other modification of any MERS Agreement (other than the Electronic Tracking Agreement);

 

(d)  not amend, terminate or revoke, or enter into any agreement that is inconsistent with or contradicts any provision of the Electronic Tracking Agreement;

 

(e)  identify to the Agent each Pledged Loan that is registered in the MERS System, at the earlier of the time it is so registered or the time it is pledged or deemed pledged hereunder, as so registered;

 

(f)  at any time at the request of the Agent, take such actions as may be necessary to register the pledge of any Pledged Loan to the Agent on the MERS System;

 

(g)  at the request of the Agent, take such actions as may be requested by the Agent to:

 

(1)  transfer beneficial ownership of any Pledged Loan to the Agent on the MERS System; or

 

(2)  de-register or re-register any Pledged Loan on, or withdraw any Pledged Loan from, the MERS System;

 

(h)  provide the Agent with copies of any or all of the following reports with respect to the Pledged Loans registered on the MERS System at the request of the Agent:

 

(1)  Co-existing Security Interest (MERS form IA);

 

(2)  Release of Security Interest by Interim Funder (MERS form IB); 

 

(3)  Interim Funder Rejects (MERS form IC);

 

(4)  Paid in Full Verification (MERS form DK); and

 

(5)  such other reports as the Agent may request to verify the status of any Pledged Loan on the MERS System;

 

(i)  notify the Agent of any withdrawal or deemed withdrawal of the Company’s membership in the MERS System or any deregistration of any Pledged Loan previously registered on the MERS System; and

 

	 
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(j)  obtain the prior written consent of the Agent before entering into an electronic tracking agreement (other than the Electronic Tracking Agreement) with any other Person.

 

9.17.  Special Affirmative Covenants Concerning Collateral. 

 

(a)  Until all of the Obligations shall have been fully paid and satisfied and the Lenders have no obligation to lend or provide any other financial accommodations to the Company under or otherwise in respect of this Agreement, the Company warrants and will defend the right, title and interest of the Agent in and to the Collateral against the claims and demands of all persons whomsoever. 

 

(b)  The Company will maintain the Lien on the Mortgaged Premises securing each Pledged Loan as a first Lien (or, for Second Lien Loans, as a second Lien), subject only to the Permitted Encumbrances. 

 

(c)  The Company will ensure that the residential real estate securing each Pledged Loan is continuously insured against casualty loss as follows:

 

(1)  the Company shall cause to be maintained with respect to each Pledged Mortgage, one or more Hazard Insurance Policies which provide, at a minimum, the same coverage as a standard form fire and extended coverage insurance policy that is customarily required by other creditors for residential real estate located in the same general geographic area and State that secures that Pledged Mortgage, issued by a company authorized to issue such policies in the state in which the related residential real estate is located and in an amount not less than (x) the maximum insurable value of the improvements to such residential real estate or (y) the principal balance due from the
Customer(s) under the related Pledged Loan, whichever is less; provided that the amount of coverage provided by each Hazard Insurance Policy shall be sufficient to avoid the application of any coinsurance clause for partial losses, although such Hazard Insurance Policies may provide for customary deductible amounts. Each Hazard Insurance Policy shall contain a standard loss payee clause in favor of the Company and its successors and assigns. If any Customer obligated on any Pledged Loan fails to pay any premiums on the Hazard Insurance Policy for the related property, the Company shall pay such premiums out of its own funds and may separately add the amount so paid to the relevant Customer’s obligation as provided by the Mortgage Loan papers, but shall not add that amount to the remaining principal balance of
the Pledged Loan; and

 

(2)  the Company may, in lieu of causing individual Hazard Insurance Policies to be maintained with respect to each residential property pursuant to Section 9.17(c)(1), and shall, to the extent that the related Loan Papers do not require the Customer(s) obligated on them to maintain a Hazard Insurance Policy with respect to the related Mortgaged Premises, maintain one or
more blanket insurance policies covering losses on the Company’s interest in the Pledged Loans resulting from the absence or insufficiency of individual Hazard Insurance Policies. Any such blanket policy shall be in the form and the amount as shall be satisfactory to the Agent. The Company shall pay the premium for such policy on the basis described therein and shall pay from its own funds any deductible amount with respect to claims under such blanket insurance policy relating to the Pledged Loans. However, the Company shall not be required to deposit any deductible amount with respect to claims under individual Hazard Insurance Policies maintained pursuant to Section 9.17(c)(1). If the insurer under such blanket insurance policy shall cease to be acceptable to the Company, the Company shall exercise its best reasonable efforts to obtain from another insurer a replacement policy comparable to such policy.

 

	 
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(d)  The Company agrees to use its best efforts to cause each of its Servicers to keep in force throughout the term of this Agreement (i) a policy or policies of insurance covering errors and omissions for failure to maintain insurance as required by this Agreement and (ii) a fidelity bond. Each such policy and fidelity bond shall be in such form and amount as is generally customary among Persons who service a portfolio of Mortgage Loans having an aggregate principal amount comparable to that of the servicing portfolio of such Servicer or the Company, respectively, and which are generally regarded as servicers acceptable to institutional investors.

 

(e)  The Company shall authorize the Agent to file such UCC financing statements and continuation statements and shall make or cause to be made by any Person such book entries and control agreements with respect to the Collateral as the Agent may reasonably require or request from time to time to perfect or continue perfection of the security interests granted or required to be granted to the Agent (for itself as a Lender and as agent for the other Lenders) pursuant to this Agreement. The Company shall also execute and deliver to the Agent such further instruments of sale, pledge or assignment or transfer, and such powers of attorney, as shall be reasonably required by the Agent from time to
time, and shall do and perform all matters and things necessary or desirable to be done or observed, for the purpose of effectively creating, maintaining and preserving the security and benefits intended to be afforded the Lenders and the Agent under this Agreement, the Senior Credit Notes, the Custody Agreement and the other Facilities Papers. The Agent shall have all the rights and remedies of a secured party (for itself as a Lender and as agent for the other Lenders) under the UCC of the State of New York and any other applicable law, in addition to all rights provided for in this Agreement or the Custody Agreement.

 

(f)  As soon as they become available, the Company will cause to be assembled and delivered to the Custodian all Basic Loan Papers relating to Wet Loans. Without limitation of the foregoing, if original recordation receipts evidencing the recordation of the Mortgage and Mortgage Assignment included in the Pledged Loans have not previously been delivered to the Custodian, the Company will promptly deliver (or cause to be delivered) to the Custodian, either the original recordation receipts or the original recorded Mortgage or Mortgage Assignment showing the recordation data thereon.

 

(g)  The Company shall maintain, at its principal office or in a regional office not disapproved by the Agent, or in the office of a computer service bureau engaged by the Company and not disapproved by the Agent, and upon request shall make available to the Agent (or the Custodian, if the Agent ever ceases to be Custodian) the originals of all Loan Papers and related instruments, and all files, surveys, certificate, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records and other information and data relating to the Collateral that are held by or under the direction or control of the Company or any of its Affiliates and that have not already been provided to
the Agent or the Custodian. 

 

	 
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9.18.  Coordination with Other Lenders/Repo Purchasers and Their Custodians. The Company will provide to the Agent the current name, address and contact information concerning each of the Company’s other mortgage warehouse credit and repurchase facilities (if any), will update such information provided to the Agent as material changes occur, and will cooperate and assist the Agent in exchanging information with such others (and their document custodians or trustees) to prevent conflicting claims to and interests in Collateral between or among lenders or repurchase facilities
counterparties, and promptly correct such conflicting claims as may arise from time to time.

 

10  NEGATIVE COVENANTS

 

The Company agrees that, for so long as the Commitments are outstanding or any of the Company’s obligations remain to be paid or performed under this Agreement, the Senior Credit Notes (including the Swing Line Note) or any of the other Facilities Papers, the Company shall not, either directly or indirectly, without the prior written consent of the Agent:

10.1.  Contingent Liabilities. Assume, guarantee, endorse, or otherwise become liable for the Debt or other obligation of any Person or entity except (a) by endorsement of negotiable instruments for deposit or collection in the ordinary course of business, (b) guaranties of Debt of wholly-owned Subsidiaries and (c) under the Company’s existing contingent liabilities described on Schedule
8.4.

 

10.2.  Conditional Repurchase, Indemnity or Other Recourse Obligations. If the Company shall begin servicing Mortgage Loans, undertake or assume any conditional repurchase, indemnity or other recourse obligations in respect of Mortgage Loans sold which obligations and liabilities, when combined with the Company’s contingent liabilities described and referred to in Section 8.4, constitute contingent liabilities that both (x) are required by FAS-5 either to be accrued as a charge to income or to be disclosed by a note to the Company’s financial statements and (y) aggregate more than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate.

 

10.3.  Pledging or Assignment of Servicing Rights. Pledge, grant a security interest or assign any existing or future rights to service any of the Collateral or to be compensated for servicing any of the Collateral, or pledge or grant to any other Person any security interest in any Servicing Rights at any time Pledged to the Agent.

 

10.4.  No Reorganization. Reincorporate or otherwise reorganize as anything other than a Delaware corporation.

 

10.5.  Merger; Sale of Assets; Acquisitions. Liquidate, dissolve, sell all or substantially all of its assets, consolidate or merge, nor make any material acquisition of all or substantially all assets of any other Person (the Agent’s reasonable, good faith determination of whether an acquisition of assets would be material shall be conclusive and binding), unless:

 

(a)   (i) in the case of a consolidation or merger, it is with a mortgage company and the Company is the survivor or (ii) in the case of an acquisition, it is of assets or securities to be used by the Company in its core mortgage company business, or, if it is not, such acquisition shall have been approved in writing by the Agent;

 

	 
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(b)  in the case of the acquisition of assets or sale of the Company’s assets, such acquisition or sale is in the ordinary course of the Company’s business; or

 

(c)  the sale is of the stock or substantially all of the assets of any wholly-owned Subsidiary established after the Effective Date, or, with the Agent’s prior written consent, any other Subsidiary; and

 

in any case, after giving effect to such a sale, consolidation, merger or acquisition, no Default or Event of Default would exist under this Agreement or any of the other Facilities Papers.

10.6.  Permitted Debt. The Company will not incur, permit to exist or commit to incur any Debt that has not been approved by the Agent in writing in advance, except the following (collectively, the “Permitted Debt”):

 

(a)  the Loan and the other Obligations;

 

(b)  obligations to pay Taxes;

 

(c)  liabilities for accounts payable, non-capitalized equipment or operating leases and similar liabilities incurred in the ordinary course of business;

 

(d)  accrued expenses, deferred credits and loss contingencies that are properly classified as liabilities under GAAP;

 

(e)  Debt incurred in the ordinary course of business to hedge the risk of interest rate fluctuations or any of the Company’s portfolios or pipelines of Mortgage Loans under this Agreement or in respect of other Permitted Debt obligations;

 

(f)  liabilities for capital leases and similar liabilities incurred in the ordinary course of business, up to an aggregate maximum principal amount of Five Hundred Thousand Dollars ($500,000);

 

(g)  the debt described on Schedule SD if and to the extent that it is Qualified Subordinated Debt;

 

(h)  the specific Debt described on Schedule 10.6(h);

 

(i)  other Debt of the Company approved in writing by the Required Lenders (no Lender shall have any obligation to approve any such Debt, and each may approve or disapprove it in such Lender’s sole and absolute discretion);

 

(j)  Debt incurred in connection with the collapsing and repurchasing of securities issued in connection with a securitization of Mortgage Loans the documentation for which specifically contemplates and permits such a repurchasing transaction;

 

	 
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(k)  Debt of Single-purpose Finance Subsidiaries that is Nonrecourse Debt to the Company; and

 

(l)  Debt secured solely by the residual interests of the Company in the income stream to be received under any Mortgage Loan securitization program.

 

10.7.  Financial Covenants. Although compliance or noncompliance with the following financial covenants shall be determined as of the end of a month or year, as the case may be, the Company agrees to use commercially reasonable efforts to comply with them continuously and at all times:

 

(a)  The Company’s Minimum Adjusted GAAP Net Worth. Permit the Adjusted GAAP Net Worth of the Company (on a consolidated basis with its wholly-owned Subsidiaries) to be less on any day than Sixty Million Dollars ($60,000,000).

 

(b)  The Company’s Total Liabilities to Adjusted GAAP Net Worth Ratio. Permit the ratio of:

 

(x)    the Total Liabilities of the Company and its Subsidiaries;

to         (y)    The Adjusted GAAP Net Worth of the Company and its Subsidiaries, on a consolidated basis;

to exceed ten to one (10.00:1.00) at any time.

(c)  GAAP Net Earnings. Earn less than One Dollar ($1) of net earnings, as determined in accordance with GAAP, for any two consecutive (rolling) fiscal quarters, beginning with the six-month period ending March 31, 2005.

 

(d)  Minimum Liquidity. Permit the Liquidity of the Company (on a consolidated basis with its wholly-owned Subsidiaries) to be less on any day than Twelve Million Five Hundred Thousand Dollars ($12,500,000).

 

(e)  Dividend Limitation. Declare or pay any dividend or make any distribution directly or indirectly to the Company’s shareholders when any Default or Event of Default has occurred and is continuing or, immediately after the payment of which dividend or distribution, would exist.

 

(f)  Advances Limitation. Directly or indirectly make any advance to (or decline or defer any payment due from) any stockholder if, at the time of or immediately after such action, (x) the Company’s Adjusted GAAP Net Worth would be less than the minimum specified in Section 10.7(a) or (y) any Default or Event of Default would exist.

 

10.8.  Special Negative Covenants Concerning Collateral. 

 

(a)  Except to correct errors or omissions in Loan Papers, without the written consent of the Agent given on a case-by-case basis, the Company shall not amend or modify, or waive any of the terms and conditions of any Pledged Loans, or settle or compromise any claim in respect of them, or accept other than cash or the exchange of comparable Collateral (which is concurrently Pledged to the Agent by the Company) in liquidation of any Pledged Loans; and

 

	 
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(b)  the Company will not create, incur, grant, assume or suffer to exist any Lien on any of the Collateral, other than in favor of the Agent pursuant to this Agreement.

 

11  DEFAULTS AND REMEDIES

 

11.1.  Events of Default. The occurrence of any of the following conditions or events shall be an Event of Default.

 

(a)  Failure by the Company to pay the principal of any Advance when due pursuant to this Agreement or any Senior Credit Note, whether such Advance has become due because the Maturity Date has occurred through lapse of time or acceleration or by operation of another provision of this Agreement or the Senior Credit Notes; or failure by the Company to pay any installment of interest on any Advance or any other amount owing under this Agreement on or before three (3) Business Days after the due date of such interest.

 

(b)  Failure of the Company or any of its Subsidiaries to pay any other Debt when due, or any default in the payment when due of any principal or interest on any other Debt or in the payment when due of any contingent obligation (other than nonrecourse MBS Debt of any Subsidiary formed for the purpose of issuing such Debt); or breach or default with respect to any other material term of any other debt or of any promissory note, bond, loan agreement, reimbursement agreement, mortgage, indenture or other agreement relating thereto, if the effect of any such failure, default or breach referred to in this Section 11.1(b), is to cause, or to permit the holder or holders of such obligation (or a trustee on behalf of such holder or holders) to cause, debt of the Company or any of its Subsidiaries in the aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000) or more to become or be declared due before its stated maturity. 

 

(c)  Failure of the Company to perform or comply with any term or condition applicable to it contained in any of Sections 9.5, 9.14, 9.17 or 10 of this Agreement or to pay timely the Facility Fee pursuant to Section 5.7, the Agent’s Fees (if any)
pursuant to Section 5.8, the Custodian’s Fee under the Custody Agreement or any other fees under this Agreement or any other Facilities Papers.

 

(d)  Any of the Company’s representations or warranties made in any of the Facilities Papers or in any statement or certificate at any time given by the Company in writing pursuant to this Agreement, the Custody Agreement or any of the other Facilities Papers or in connection with any of the Facilities Papers shall be false or misleading in any material respect on the date as of which made or shall omit to state any information necessary to make the representations and warranties not materially misleading; provided that if any of the Company’s representations in Section 8.16 (titled “Special Representations Concerning Collateral”) for any reason shall be (or shall prove to have been) untrue or incorrect, then such untruth or incorrectness shall not constitute a Default or an Event of Default — although, as provided in the definition thereof, such untruth or incorrectness will be a Disqualifier for all affected items of Collateral, which will each thereupon have zero Collateral Value — unless such untrue or incorrect representation relates to ten (10) or more Pledged Loans or five (5) or more other items of Collateral.

 

	 
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(e)  The Company shall default in the performance of or compliance with any term contained in this Agreement or any of the Facilities Papers other than those referred to above in Sections 11.1(a), 11.1(c) or 11.1(d) or shall default in the performance of or compliance with any term applicable to it contained in the Custody Agreement and such default shall not have been remedied or waived on or before thirty (30) days after receipt of notice from the Agent of such default.

 

(f)  Any of the following occurs:

 

(1)  a court having jurisdiction shall enter a decree or order of relief in respect of the Company or any of its Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar federal or state law now or hereafter in effect, which decree or order is not stayed;

 

(2)  a decree or order of a court having jurisdiction for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the Company or any of its Subsidiaries or over all or a substantial part of their respective property, shall have been entered;

 

(3)  an involuntary appointment shall be made by a court of competent jurisdiction of an interim receiver, trustee or other custodian of the Company or any of its Subsidiaries for all or a substantial part of their respective property; or

 

(4)  a warrant of attachment, execution or similar process against any substantial part of the property of the Company or any of its Subsidiaries shall have been issued;

 

if any such decree, order, appointment or warrant shall not be dismissed, bonded off or discharged on or before sixty (60) days after it first takes effect.

(g)  The Company or any of its Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion to an involuntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; the making by the Company or any of its Subsidiaries of any assignment for the benefit of creditors; or the inability or failure of the Company or any of its Subsidiaries, or the
admission by the Company or any of its Subsidiaries in writing of its inability, to pay its debts as such debts become due.

 

(h)  The Company shall take or omit to take any act (i) that would result in the suspension or loss of any of its statuses, once achieved or any of such statuses of its subservicer, if any, of any Ginnie Mae, Fannie Mae or Freddie Mac Mortgage Loans pools for which the Company is Servicer — as a Ginnie Mae-, Fannie Mae- and Freddie Mac-approved servicer, or (ii) after which the Company or any such relevant subservicer would no longer be in good standing as such, or (iii) after which the Company or any such relevant subservicer would no longer currently satisfy all applicable Ginnie Mae, Fannie Mae and Freddie Mac net worth requirements, if both (x) all of the material effects of such
act or omission shall have not been cured by the Company or waived by the relevant Person (Ginnie Mae, Fannie Mae or Freddie Mac) before termination of such status and (y) it could reasonably be expected to have a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries.

 

	 
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(i)  Any money judgment, writ or warrant of attachment, or similar process involving in any case an amount in excess of Two Hundred Fifty Thousand Dollars ($250,000) shall be entered or filed against the Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days or in any event later than five (5) days before the date of any proposed sale thereunder (unless, in respect of any such case the
judgment debtor or the subject of the writ or warrant of attachment or similar process is one of the Company’s Subsidiaries or such Subsidiary’s property, and such order, case commencement, consent, assignment, inability or failure or admission has no material adverse effect on the Company’s ability to fulfill its obligations under this Agreement, any Senior Credit Note or any other Facilities Paper).

 

(j)  Any order, judgment or decree shall be entered against the Company decreeing the dissolution or split up of the Company, and such order shall remain undischarged or unstayed for a period in excess of sixty (60) days or in any event later than five (5) days before the date when such order, judgment or decree shall become final and nonapplicable, or if the Company shall not be diligently pursuing efforts to have such order discharged, vacated, bonded around or stayed during that time.

 

(k)  Any Plan maintained by the Company or any of its Subsidiaries shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed by an appropriate United States district court to administer any such Plan, or the Pension Benefit Guaranty Corporation (or any successor to it)
shall institute proceedings to terminate any such Plan or to appoint a trustee to administer any such Plan if as of the date thereof the liability of the Company or any of its Subsidiaries (after giving effect to the tax consequences thereof) to the Pension Benefit Guaranty Corporation (or any successor to it) for unfunded guaranteed vested benefits under such Plan exceeds the then-current value of assets accumulated in such Plan by more than Two Hundred Fifty Thousand Dollars ($250,000) (or in the case of a termination involving the Company or any of its Subsidiaries as a “substantial employer”, as
defined in Section 4001(a)(2) of ERISA, the withdrawing employer’s proportionate share of such excess shall exceed such amount), unless any such termination, trustee appointment or proceedings is in respect of any Subsidiary’s Plan and has no material adverse effect on any of the Central Elements relative to the Company or any of its Subsidiaries.

 

(l)  The Company or any of its Subsidiaries as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding Two Hundred Fifty Thousand Dollars ($250,000), unless any such termination, trustee appointment or proceedings is in respect of any Subsidiary’s Plan and has
no material adverse effect on any of the Central Elements relative to the Company or any of its Subsidiaries.

 

	 
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(m)  A Change of Control shall occur without the prior written consent of the Agent.

 

(n)  A Change of Executive Management shall occur.

 

(o)  The Company shall repudiate or purport to disavow its obligations under any of the Facilities Papers or shall contest their validity or enforceability.

 

(p)  The Agent’s security interest in any of the Collateral whose aggregate Collateral Value is less than four percent (4%) of all Advances then outstanding shall become unperfected, of less than a first priority, unenforceable or otherwise impaired and the Company shall fail to cure the same on or before ten (10) Business Days after the Company first learns thereof from any source.

 

(q)  The Agent’s security interest in any of the Collateral whose aggregate Collateral Value is four percent (4%) or more of all Advances then outstanding shall become unperfected, of less than a first priority, unenforceable or otherwise impaired.

 

11.2.  Cure or Waiver. If:

 

(a)  an Event of Default shall occur but subsequently the Required Lenders shall waive the rights of the Lenders and the Agent to exercise remedies on account of such Event of Default (whether temporarily or permanently and whether conditionally or absolutely); provided that neither the Lenders nor the Agent shall have any obligation to do so; and

 

(b)  The Company shall request in writing that the Agent declare such Event of Default to have been cured or waived, whichever of those events has occurred;

 

then the Agent shall make such declaration in writing and shall deliver a copy of the declaration to each of the Company and each Lender. The Agent shall not declare in writing that an Event of Default has been waived unless Lenders whose approval to waive it is required by the applicable provisions of Section 13.3 have in fact done so.

11.3.  Remedies. 

 

(a)  If any of the Events of Default described in Sections 11.1(f), 11.1(g), 11.1(j), 11.1(m), 11.1(n), 11.1(o), 11.1(p) or 11.1(q) shall occur, then the Commitments shall automatically terminate and the unpaid principal amount of and accrued interest on the Senior Credit Notes shall automatically become due and payable, without presentment, demand or other requirements of any kind, all of which are hereby expressly waived by the Company, unless all of the Lenders, each acting in its sole discretion, shall otherwise agree in writing either before or after such automatic event. 

 

(b)  At any time after any Event of Default (other than one of those described in Sections 11.1(f), 11.1(g),
11.1(j), 11.1(m), 11.1(n), 11.1(o), 11.1(p) or 11.1(q), each of which has the automatic effects described in Section 11.3(a)) has occurred that the Agent has not declared in writing to have been cured or waived, the Required Lenders, by written notice to the Company (which may be given by the Agent), may electively (1) terminate the Commitments — in which event the obligation of the
Lenders to make Advances shall immediately terminate — and/or (2) declare all or any portion of the Loan to be due and payable — in which event that portion of the Loan, both advanced and unpaid principal and accrued and unpaid interest on it and all other outstanding amounts, shall immediately be and become due and payable.

 

	 
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(c)  At any time after any Event of Default has occurred that the Agent has not declared in writing to have been cured or waived, the Agent, with the approval or at the direction of the Required Lenders, may also do any of the following:

 

(1)  Foreclose upon or otherwise enforce its security interest in and Lien on the Collateral, or on such portions or elements of it as the Agent shall elect to proceed against from time to time.

 

(2)  Notify any or all Servicers (if any) of the Company’s Pledged Loans and, at the Agent’s option and in its sole discretion, any or all Customers obligated under any or all items of Collateral, that the Collateral has been assigned to the Agent and that all payments thereon are to be made directly to the Agent or such other Person as may be designated by the Agent; settle, compromise, or release, in whole or in part, any amounts owing on the Collateral or any portion of the Collateral, on terms acceptable to the Agent; enforce payment and performance and prosecute any action or proceeding with respect to any and all Collateral; and where any such Collateral is in default,
foreclose on and enforce Liens or security interests in, such Collateral by any available judicial procedure or without judicial process and sell property acquired as a result of any such foreclosure.

 

(3)  Act, or contract with one or more third Persons to act, as Servicer of each item of Collateral requiring servicing and perform all obligations required in connection with any Servicing Agreements to which the Company is a party, and the Company hereby agrees to pay such third Persons’ fees to the extent (if any) that the Agent is unable, despite reasonable efforts made by the Agent in light of the necessity that there be no material break in the continuity of servicing, to contract for such servicing and performance of such obligations for fees equal to or less than the fees under such Servicing Agreements.

 

(4)  Exercise all rights and remedies of a secured creditor under the UCC of the State of Texas, the State of New York, the State of California and any other relevant State, including selling the interests of the Company in the Collateral at public or private sale. The Agent shall give the Company not
less than ten (10) days’ notice of any such public sale or of the date after which private sale may be held. The Company agrees that ten (10) days’ notice shall be reasonable notice. At any such sale any or all of the Collateral may be sold as an entirety or in separate parts, as the Agent may determine. The Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. The Agent is authorized at any such sale, if the Agent deems it advisable so to do, to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or resale of any of the Collateral. The Company specifically agrees that any such sale, whether public or private, of any Collateral
pursuant to the commitment of any investor to purchase such Collateral that was obtained by (or with the approval of) the Company will be commercially reasonable, and if such sale is for the price provided for in such commitment, then such sale shall be held to be for value reasonably equivalent to the value of the Collateral so sold. Upon any such sale, the Agent shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right of whatsoever kind, including any equity or right of redemption, stay or appraisal which the Company has or may have under any rule of law or statute now existing or hereafter adopted. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Agent until the selling price is paid by the purchaser, but the Agent shall not incur any liability in case of such
purchaser’s failure to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. The Agent may, however, instead of exercising the power of sale herein conferred upon it, proceed by a suit or suits at law or in equity to collect all amounts due upon the Collateral or to foreclose the pledge and sell the Collateral or any portion of it under a judgment or decree of a court or courts of competent jurisdiction, or both. Nothing in this Agreement shall be construed as the Company’s waiver of — or agreement to waive — any requirement imposed by applicable law that any sale of the Collateral be commercially reasonable.

 

	 
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(5)  Proceed against the Company on the Senior Credit Notes or any of them with or without, at the Agent’s election, first proceeding against the Collateral.

 

(d)  Neither the Agent nor any of the Lenders shall incur any liability as a result of the sale of the Collateral, or any part of it, at any private sale. The Company hereby waives any claims it may have against the Agent or the Lenders arising by reason of the fact that the price at which the Collateral may have been sold at such private sale was less than the price that might have been obtained at a public sale, less than the price that might have been obtained had the Collateral been sold pursuant to a purchase agreement for it obtained by the Company, or less than the aggregate amount of the outstanding Advances and the unpaid interest accrued on them, even if the Agent accepts the first
offer received and does not offer the Collateral to more than one offeree.

 

(e)  The Company waives any right to require the Agent or any Lender to (1) proceed against any Person, (2) proceed against or exhaust any of the Collateral or pursue its rights and remedies as against the Collateral in any particular order, or (3) pursue any other remedy in its power. Except to the extent, if any, required by applicable Law, the Agent shall not be required to take any steps necessary to preserve any rights of the Company against holders of Mortgages or security interests prior in lien to the Lien of any Mortgage included in the Collateral, to preserve rights against prior parties or to preserve rights against other parties to Mortgage Loan purchase commitments or Servicing
Agreements.

 

(f)  The Agent and the Lenders may, but shall not be obligated to, advance any sums or do any act or thing necessary to uphold and enforce the Lien and priority of any Mortgage or other Lien instrument included in the Collateral or the security intended to be afforded by it, including payment of delinquent taxes or assessments and insurance premiums, or to preserve or reinstate any hedging arrangements or mechanisms. All advances, charges, costs and expenses, including reasonable attorneys’ fees and disbursements, incurred or paid by the Agent in exercising any right, power or remedy conferred by this Agreement or any of the other Facilities Papers, or in its enforcement, together with
interest thereon, at the Stated Rate from the time of demand for its payment until ten (10) days thereafter, and at the Past Due Rate from ten (10) days after demand until repaid, shall become a part of principal balance outstanding under the Senior Credit Notes (Pro Rata with the respective principal balances of the Senior Credit Notes at the time of expenditure) and shall be secured by all security for the Senior Credit Notes.

 

(g)  No failure on the part of the Agent or any Lender to exercise, and no delay in exercising, any right, power or remedy provided under any of the Facilities Papers, at law or in equity shall operate as a waiver of it, nor shall any single or partial exercise by the Agent or any Lender of any right, power or remedy provided under any of the Facilities Papers, at law or in equity preclude any other or further exercise of it or the exercise of any other right, power or remedy. The remedies herein provided are cumulative and are not exclusive of any remedies provided at law or in equity.

 

	 
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11.4.  Application of Proceeds. The proceeds of any sale or other enforcement of the Agent’s security interest in all or any part of the Collateral shall be applied by the Agent:

 

First, to the payment of the costs and expenses of such sale or enforcement, including reasonable compensation to the Agent’s and the Lenders’ counsel and agents, and all expenses, liabilities and advances made or incurred by or on behalf of the Agent in connection therewith;

Second, to the payment of any accrued and unpaid fees and other amounts due (other than principal and interest) under the Senior Credit Notes, this Agreement, the Custody Agreement or the other Facilities Papers;

Third, to the payment of the Swing Line Note (if then outstanding);

Fourth, to the payment of interest accrued and unpaid on the Senior Credit Notes, Pro Rata;

Fifth, to the payment of the outstanding principal balances of the Senior Credit Notes, Pro Rata; and

Finally, to the payment to the Company, or to its successors or assigns, or as a court of competent jurisdiction may direct, of the surplus, if any, then remaining from such proceeds.

If the proceeds of any such sale are insufficient to cover the costs and expenses of such sale, as aforesaid, and the payment in full of the Senior Credit Notes and all other amounts due under the Facilities Papers, then the Company shall remain liable for any deficiency, and shall be obligated to pay it without notice or demand.

11.5.  Agent Appointed Attorney-in-Fact. The Agent is hereby appointed the attorney-in-fact of the Company, with full power of substitution, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instruments that the Agent may deem necessary or advisable to accomplish this Agreement’s purposes, which appointment as attorney-in-fact is coupled with an interest and irrevocable for so long as any of the Obligations or the Commitments are outstanding, although the Agent agrees not to exercise its rights under this power of attorney unless, in
its opinion or the opinion of its legal counsel, an Event of Default has occurred that the Agent has not declared in writing to have been cured or waived. Without limiting the generality of the foregoing, the Agent shall have the right and power, either in the name of the Company or both, or in its own name, to (a) give notices of its security interest as agent and representative of the Lenders in the Collateral to any Person, (b) endorse in blank, to itself or to a nominee all items of Collateral that are transferable by endorsement and are payable to the order of the Company, including canceling, completing or supplying any unneeded, incomplete or missing endorsement of the Company and any related assignment, and (c) receive, endorse, collect and receipt for all checks and other orders made payable to the order of the Company representing any payment of account of the principal of or interest on any Collateral or their proceeds (including any securities), or the proceeds of sale of any of the
Collateral, or any payment in respect of any hedging arrangement or device, and to give full discharge for them.

 

	 
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11.6.  Right of Setoff. In addition to any rights and remedies of the Agent and the Lenders provided by this Agreement and by applicable law, the Lenders shall have the right, without prior notice to the Company — any such notice being expressly waived by the Company to the greatest extent permitted by applicable law — upon any amount’s becoming due from the Company pursuant to this Agreement or any of the other Facilities Papers (whether at the stated maturity, by acceleration or otherwise) to set off and appropriate and apply against such amount any and all Property and
deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Agent, any Lender or any Lender Affiliate to or for the credit or the account of the Company, for the ratable benefit of all Lenders in the proportion that the advanced and unpaid principal balance at the time of the Senior Credit Note(s) held by each bears to the sum of the outstanding principal balances of all of the Senior Credit Notes at the time of the setoff, appropriation or application, irrespective of whether or not the Agent or any Lender shall have made any demand hereunder and whether or not said obligations and liabilities shall have matured; provided that such right of setoff shall not apply to any deposit of escrow monies being held on behalf of the Customers under Pledged Loans or on behalf of other third Persons that are not Affiliates of the Company. The Agent and the Lenders may set off cash, the proceeds of the liquidation of any Collateral and all other sums or obligations owed by the Agent, the Lenders or their Affiliates to the Company against all of the Company’s obligations to the Agent, the Lenders or their Affiliates, whether under this Agreement or any of the other Facilities Papers, whether or not such obligations are then due, without prejudice to the Agent’s, the Lenders’ or their Affiliates’ rights to recover any deficiency. The Lenders agree promptly to notify the Company after any such setoff and application made by the Agent, any Lender or any of Lender Affiliate; provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

12  REIMBURSEMENT OF EXPENSES; INDEMNITY

 

The Company agrees to:

(a)  pay all of the Agent’s and Lender’s, out-of-pocket costs and expenses incurred, including reasonable attorneys’ fees, in connection with the negotiation, documentation, amendment, waiver and administration of this Agreement, the Senior Credit Notes, the Custody Agreement and other Facilities Papers, including up to a maximum of Five Thousand Dollars ($5,000) per year of the cost of audits of Collateral by a third party auditor selected by the Agent;

 

	 
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(b)  pay all of the Agent’s, and each Lender’s, out-of-pocket costs and expenses, including reasonable attorneys’ fees, after the occurrence of any Default or Event of Default in connection with the enforcement of this Agreement, the Senior Credit Notes, the Custody Agreement and other Facilities Papers and the making and repayment of the Advances and the payment of interest thereon;

 

(c)  pay, and hold the Agent, the Lenders and any other owners or holders of any of the Senior Credit Notes harmless from and against, any and all present and future stamp, documentary and other similar taxes with respect to the foregoing matters and save them each harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes;

 

(d)  pay all of the Agent’s Fees and Custodian’s Fees under this Agreement, the Custody Agreement and the other Facilities Papers; and

 

(e)  indemnify, pay, defend and hold harmless the Agent, each Lender, each subsequent owner or holder of any of the Senior Credit Notes and any of their respective officers, directors, employees or agents (the “Indemnified Parties”) from and against the “Indemnified Liabilities”, which means any and all claims, liabilities, obligations, losses, damages, penalties, judgments, suits, costs, expenses and disbursements (including reasonable attorneys’ fees and disbursements) of any kind whatsoever which may be imposed upon, incurred by or asserted against any of the Indemnified Parties in any way relating to or arising out of any of the Facilities Papers or any of the transactions contemplated thereby to the extent that any such Indemnified Liabilities result (directly or indirectly) from any claims made, or any actions, suits or proceedings commenced or threatened, by or on behalf of any creditor (excluding any of the Indemnified Parties), security holder, shareholder, customer (including any Person having any dealings of any kind with the Company), trustee, conservator, receiver, director, officer, employee and/or agent of the Company acting in such capacity, the Company or any Governmental Authority or any other Person; provided that to the extent, if any, that any of such claims, liabilities, etc. is caused by any Indemnified Party’s gross negligence or willful misconduct, the indemnity payable to that Indemnified Party shall be equitably and proportionately reduced, although to the full extent permitted under applicable Law, such indemnity shall not be reduced on account of such claims, liabilities, etc. to any extent (i) owed, in whole or in part, under any claim or theory of strict liability, or (ii) caused or contributed to by any Indemnified Party’s sole or concurrent ordinary negligence that does not amount to gross negligence or willful misconduct, it being the Company’s intention to hereby indemnify the Indemnified Parties against their own strict liability and their own sole or concurrent ordinary negligence.

 

	 
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13  RELATIONSHIPS AMONG THE AGENT AND THE LENDERS

 

13.1.  Agent’s Duties. In its capacity as lead lender and servicer of the Loan and until the Loan is fully paid and satisfied, the Agent shall:

 

(a)  hold the Facilities Papers (other than the Senior Credit Notes, each of which shall be held by and belong solely to its payee) and (by the Custodian’s holding the Collateral as bailee for the Agent, as agent and representative of the Lenders) the Collateral for the benefit of itself and each other Lender, and each Lender (including JPMorgan) shall be deemed to have an interest in the Facilities Papers (other than the Senior Credit Notes, as stated above) and the Collateral on any day in proportion to its Pro Rata interest in the Loan on that day;

 

(b)  send timely bills to the Company for accrued interest, the Facility Fee and other sums due and receive all payments of principal, interest and other sums on account of the Loan or with respect to it;

 

(c)  use reasonable diligence to obtain from the Company and promptly remit to each Lender such Lender’s Pro Rata share of interest, principal and other sums received by the Agent on account of the Loan or with respect to it, in accordance with this Agreement;

 

(d)  use reasonable diligence to recover from the Company all expenses incurred that are reimbursable by the Company, and promptly remit to each Lender its Pro Rata share (if any) thereof;

 

(e)  enforce the terms of this Agreement, including, with the approval or at the direction of all of the Lenders, the remedies afforded the Lenders pursuant to Section 11.3(c);

 

(f)  hold all security interests ratably for itself as a Lender and as agent and representative of the other Lender(s); and

 

(g)  request from the Company, and promptly forward to the other Lenders, such information as the other Lenders may reasonably request Agent to obtain from the Company, consistent with the terms of this Agreement.

 

13.2.  Actions Requiring All Lenders’ Consent. Without the written consent or ratification of all Lenders, the Agent shall not:

 

(a)  increase the Aggregate Committed Sum or increase the maximum principal amount of the Loan above the Aggregate Committed Sum.

 

(b)  agree to any material reduction in the interest rate or fee provisions of this Agreement, excluding the provisions relating to the Agent’s Fee or the Custodian’s Fees.

 

(c)  release any material Lien held under the Facilities Papers other than in accordance with the Facilities Papers.

 

	 
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(d)  accept, and fund any Advance against the value of, any Collateral other than the types listed in Section 6.1.

 

(e)  change any Lender’s Pro Rata share of the Loan other than in accordance with the express provisions of the Facilities Papers.

 

(f)  agree to any change in the nature of the Lenders’ respective Commitments from several to joint, in whole or in part.

 

(g)  agree to any change to the definition of “Required Lenders”. 

 

(h)  extend the Maturity Date, the Termination Date or the due date of any required payment other than in accordance with the express provisions of the Facilities Papers.

 

(i)  agree to any change in this Section or in Section 13.3.

 

13.3.  Actions Requiring Required Lenders’ Consent. Without the written consent or ratification of the Required Lenders, the Agent shall not:

 

(a)  notify the Company that the Commitments are terminated or that the maturity of all or any part of the Loan has been accelerated unless an Event of Default described in any of Sections 11.1(f), 11.1(g), 11.1(j), 11.1(m), 11.1(n), 11.1(o), 11.1(p) or 11.1(q) has occurred.

 

(b)  agree to any change to any of the conditions precedent to Advances specified in Sections 7.1 and 7.2.

 

(c)  exercise any of the remedies for default described in Section 11.3(c). 

 

(d)  waive any material Event of Default under the Facilities Papers.

 

(e)  make or consent to any materially adverse amendment, modification or waiver of any of the terms, covenants, provisions or conditions of the Facilities Papers.

 

(f)  approve any Change of Control.

 

(g)  consent to the Company’s incurring conditional repurchase, indemnity or other recourse obligations in respect of Mortgage Loans sold or any other contingent liabilities described or referred to in Section 10.2 in the aggregate greater than One Million Dollars ($1,000,000).

 

(h)  except as otherwise expressly provided for in this Section, cause or permit any material change in the terms of any affirmative or negative covenants in this Agreement. 

 

(i)  increase the Wet Warehousing Sublimit or any of the respective percentages of the Credit Line that may be borrowed to finance Jumbo Loans or Super Jumbo Loans.

 

	 
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(j)  cause or permit any change in the eligibility standards for Collateral hereunder or change the definition of any type of Eligible Collateral, provided that, notwithstanding any other provision of this Agreement to the contrary, the Agent may in its discretion approve as Eligible Collateral any Collateral that does not satisfy such eligibility standards and that has aggregate Collateral Value of up to Ten Million Dollars ($10,000,000) at the time of approval.

 

(k)  approve the Company’s declaration or payment of any dividend or distribution directly or indirectly to the Company’s shareholders when any Default or Event of Default has occurred and is continuing or, after the payment of which dividend or distribution, would exist, as prohibited by Section 10.7(e).

 

(l)  approve the Company’s making any advance to (or declining or deferring any payment due from) any stockholder if at the time of or immediately after such action the Company’s Adjusted GAAP Net Worth would be less than the minimum amount specified in Section 10.7(a).

 

13.4.  Agent’s Discretionary Actions. Except as provided in Sections 13.2 and 13.3, in its capacity as lead lender and servicer and without seeking or obtaining the consent of any of the other Lenders (although it may elect to obtain such consent before acting it if deems that desirable), the Agent may:

 

(a)  agree or consent to any change in the handling of the Collateral which in the Agent’s reasonable judgment is unlikely to have a material adverse effect on any of the Central Elements in respect of the Company or any of its Subsidiaries;

 

(b)  release, reconvey or change, in whole or in part, any Collateral or Lien which is required to be released or reconveyed in accordance with the Facilities Paper; 

 

(c)  approve any new Approved Investor proposed by the Company with notice to the Lenders (and the Agent will promptly provide to any Lender that requests it a current list of Approved Investors); and

 

(d)  do or perform any act or thing which, in the Agent’s reasonable judgment, is necessary or appropriate to enable the Agent to properly discharge and perform its duties under this Agreement or the Custody Agreement, or which in its reasonable judgment is necessary or appropriate to preserve or protect the validity, integrity or enforceability of the Facilities Papers, the Liens created by the Loan Papers, their priority, the Collateral or any of the Central Elements in respect of the Company, or to preserve and protect the interest of the Lenders in any of the foregoing.

 

13.5.  Lenders’ Cooperation. The Lenders agree to cooperate among themselves and with the Agent and from time to time upon the Agent’s request, to execute and deliver such papers as may be reasonably necessary to enable the Agent, in its capacity as lead lender and servicer, to effectively administer and service the Loan and each Lender’s Senior Credit Note in the manner contemplated by this Agreement.

 

	 
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13.6.  Lenders’ Sharing Arrangement. Each of the Lenders agrees that if it should receive any amount (whether by voluntary payment, realization upon security, the exercise of the right of set-off, or otherwise) which is applicable to the payment of the principal of, or interest or fees on, the Advances, of an amount that with respect to the related sum or sums received (or receivable) by the other Lenders is in greater proportion than that Lender’s Pro Rata ownership of the Loan, then such Lender receiving such excess amount shall purchase from the other Lenders an interest in the
obligations of the Company under this Agreement or any of the Facilities Papers in such amount as shall result in a proportional participation by all of the Lenders in such excess amount; provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery; and further provided that the provisions of this Section 13.6 shall not apply to the Agent’s Fees under this Agreement or to any fees which the Agent or successor custodian might be paid pursuant to the Custody Agreement.

 

13.7.  Lenders’ Acknowledgment. Each Lender other than JPMorgan hereby acknowledges that JPMorgan has made no representations or warranties with respect to the Loan other than as expressly set forth in this Agreement and that JPMorgan shall have no responsibility (in its capacity as a Lender, the Agent, the Custodian or in any other capacity or role) for:

 

(a)  the collectability of the Loan;

 

(b)  the validity, enforceability or any legal effect of any of the Facilities Papers, any Collateral papers or any insurance, bond or similar device purportedly protecting any obligation to the Lenders or any Collateral; or

 

(c)  the financial condition of the Company or any of its Subsidiaries or Affiliates, the status, health or viability of any industry in which any of them is involved, the prospects for repayment of the Loan, the value of any Collateral, the effectiveness of any of the provisions of the Facilities Papers (including the financial covenants, tests and hedging requirements) or any aspect of their implementation or administration at any time to reduce or control risks of any type, to produce returns, profits, yields or spreads or to reduce or control losses or the accuracy of any information supplied by or to be supplied in connection with any of the Company or any of its Subsidiaries or
Affiliates, or otherwise with respect to the Loan, any Collateral or any source of equity or other financing for any of such companies.

 

13.8.  Agent’s Representations to Lenders. The Agent hereby represents and warrants to the Lenders (other than itself) that:

 

(a)  the Agent has delivered to each Lender true copies of the originals of those Facilities Papers which have been specifically requested by that Lender; and

 

(b)  the Agent has no current actual knowledge that any Event of Default has occurred and is continuing on the Effective Date.

 

	 
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13.9.  Agent’s Duty of Care, Express Negligence Waiver and Release.  At all times until the Loan has been paid in full, the Agent shall exercise the same degree of care in handling the Loan and its Collateral as JPMorgan exercises with respect to loans that are held solely by JPMorgan for its own account, and the Agent, in its capacity as lead lender and servicer shall have no
responsibility to the Lenders other than to exercise such standard of care and, in any event, JPMorgan shall have no liability with respect to any other Lender’s Pro Rata interest in the Loan except for JPMorgan’s own fraud, gross negligence or willful misconduct. Except in the case of its own fraud, gross negligence or willful misconduct, neither the Agent, any Lender, nor any of their officers, directors, employees, attorneys or agents shall be liable for any action taken or omitted to be taken by it or them under this Agreement, the Custody Agreement or any of the other Facilities Papers reasonably believed by it or them to be within the discretion or power conferred upon it or them by the Facilities Papers or be responsible for consequences of any error of judgment, the Lenders expressly intending to hereby waive and release all present and future claims and rights against the Agent (i) owed, in whole or in part, under any claim or theory of strict liability, or (ii) for damages or
injuries caused or contributed to by any Indemnified Party’s sole or concurrent ordinary negligence that does not amount to gross negligence or willful misconduct, it being the Lenders’ intention to hereby indemnify the Indemnified Parties against the Indemnified Parties’ own strict liability and the Indemnified Parties’ own sole or concurrent ordinary negligence. Except as otherwise specifically and expressly set forth in this Agreement, the Agent shall not be responsible in any manner to anyone for the effectiveness, enforceability, genuineness, validity or the due execution of this Agreement, any supplement, amendment or restatement of it or of any other Facilities
Papers or for any representation, warranty, document, certificate, report or statement made or furnished in, under or in connection with this Agreement or any of the other Facilities Papers or be under any obligation to anyone to ascertain or to inquire as to the performance or observation of any of the terms, covenants or conditions of this Facilities Agreement or of the other Facilities Papers on the part of the Company or anyone else. Without limiting the generality of the foregoing provisions of this Section, the Agent, in its capacities as lead lender, servicer and Custodian, may seek and rely upon the advice of legal counsel in taking or refraining to take any action under any of the Facilities Papers or otherwise in respect of the Loan, its Collateral and its parties, and shall be fully protected in relying upon such advice.

 

13.10.  Calculations of Shares of Principal and Other Sums. Except as provided to the contrary in Section 5.5 (“Rate of Return Maintenance Covenant”), Section
5.8 (“Agent’s Fee”), Section 11.4 (“Application of Proceeds”), Section 12 (“Reimbursement of Expenses; Indemnity”) and Section 6 of the Custody Agreement (“Custodian’s Fees”), JPMorgan’s and each other Lender’s respective shares of principal, interest and other sums received by the Agent on account of the Loan or with respect to it shall be calculated on the basis of each Lender’s (including JPMorgan’s) respective Pro Rata ownership interests in the Loan from time to time.

 

13.11.  Resignation of the Agent. The Agent, or any agent or agents hereafter appointed, at any time may resign by giving written notice of resignation to the Company and the Lenders and complying with the applicable provisions of this Section 13. Upon receiving such notice
of resignation, with the Company’s consent, which consent shall not unreasonably be delayed or withheld (provided that the Company’s consent shall not be required if a Default has occurred that has not been cured by the Company or declared in writing by the Agent to have been waived or any Event of Default has occurred that the Agent has not declared in writing to have been cured or waived), a successor Agent shall be promptly appointed by all of the Lenders by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Agent and one copy to the successor Agent.

 

	 
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13.12.  Effective Date of Resignation of the Agent. No resignation of the Agent shall be effective until both (i) sixty (60) days have elapsed after notice to the Company and the Lenders of the Agent’s election to resign and (ii) a successor agent has been appointed pursuant to the provisions of this Section 13 and has accepted the appointment as provided in Section 13.11; provided that if such appointment has not been so made or if the Agent’s duties have not been assumed by the appointed successor on or before ninety (90) days after the date of the Agent’s said notice of resignation, the Agent may cease acting as agent and
representative of the Lenders hereunder, and shall have no further responsibility therefor, at the close of business on the tenth (10th) Business Day after such ninety-day period.

 

13.13.  Successor Agent. Any successor Agent appointed as provided in this Section shall execute and deliver to the Company, the Lenders and to its predecessor Agent an instrument accepting such appointment, and thereupon the resignation of the predecessor Agent shall become effective and such successor Agent, without any further act, deed or conveyance, shall become vested with all the rights and obligations of its predecessor, with like effect as if originally named as the Agent; provided that upon the written request of the Company, all of the Lenders or the successor Agent, the resigning Agent shall execute and deliver (a) an instrument transferring to such successor Agent all of the rights of the resigning Agent and (b) to such successor Agent such instruments as are necessary to transfer the Collateral to such successor Agent (including assignments of all Collateral or Facilities Papers). Upon the request of any such successor Agent made from time to time, the Company shall execute any and all papers which the successor Agent shall request or require to more fully and certainly vest in and confirm to such successor Agent all such rights.

 

13.14.  Merger of the Agent. Any Person into which the Agent may be merged or converted or with which it may be consolidated, or any Person surviving or resulting from any merger, conversion or consolidation to which the Agent shall be a party or any Person succeeding to the commercial banking business of the Agent, shall be the successor Agent without the execution or filing of any paper or any further act on the part of any of the parties.

 

13.15.  Participation; Assignment. 

 

(a)  Participations. Each Lender reserves the rights (i) with prior notice to and consent of the Agent, to sell to any bank, savings and loan, savings bank, credit union, other deposit-taking financial institution or commercial lending institution, participations in all or any part of such Lender’s Advances, Senior Credit Note or Commitment and (ii) with or without notice to the Company or the Agent, and without any requirement for consent from either the Company or the Agent, to sell participations to its own Lender Affiliates or to pledge any or all of its interests under this Agreement
to the Federal Reserve Bank. Participants shall have no rights under the Facilities Papers other than certain voting rights as provided below. Each Lender shall be entitled to obtain (on behalf of its participants) the benefits of this Agreement with respect to all participants in its Advances outstanding from time to time; provided that the Company shall not be obligated to pay any amount in excess of the amount that would be due to such Lender calculated as though no participation had been made. No Lender shall sell any participating interest of less than Five Million Dollars ($5,000,000) except to its own Lender Affiliates. No Lender shall sell any participating interest under which the participant shall have any rights to approve any amendment, modification or waiver of any Facilities Papers, except to the
extent such amendment, modification or waiver (i) extends the due date for payment of any amount in respect of principal, interest or fees — other than the Agent’s fees or Custodian’s fees — under the Facilities Papers or (ii) reduces the interest rate or the amount of principal or fees applicable to the Loan (except such reductions as are contemplated by this Agreement). In those cases (if any) where a Lender grants rights to any of its participants to approve amendments, modifications or waivers of any Facilities Papers pursuant to the immediately preceding sentence, such Lender must include a voting mechanism as to all such approval rights in the relevant participation agreement(s) whereby a readily-determinable fraction of such Lender’s portion of the Loan (whether held by such Lender or participated) shall control the vote for all of such Lender’s portion of the Loan; provided, that if no such voting mechanism is provided for or is fully and immediately effective, then the vote of such Lender itself shall be the vote for all of such Lender’s portion of the Loan. Except in the case of the sale of a participating interest to a Lender, the relevant participation agreement shall not permit the participant to transfer, pledge, assign, sell any subparticipation in or otherwise alienate or encumber its participation interest in the Loan.

 

	 
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(b)  Assignments. Without any requirements for further consent of the Company, any Lender may assign any or all of its rights and obligations under the Facilities Papers to its own Lender Affiliates, and with the prior written consent of the Agent and (unless an Event of Default has occurred that the Agent has not declared in writing to have been cured or waived) the Company, which consent of the Company will not be unreasonably withheld, and at no cost to the Company or the Agent, any Lender may assign any or all of its rights and obligations under the Facilities Papers to any
“Eligible Assignee” — which means (a) a commercial bank having total assets in excess of One Billion Dollars ($1,000,000,000) or (b) a finance company, insurance company or other financial institution or fund, acceptable to the Agent, that is regularly engaged in making, purchasing or investing in loans and has total assets in excess of One Billion Dollars ($1,000,000,000); provided that (1) no such assignment to any Eligible Assignee shall result in a Lender’s having an aggregate Committed Sum of less than Five Million Dollars ($5,000,000), (2) no such consent shall result in there being more than a total of ten (10) Lenders (a participant is not a Lender), and (3) each such assignment shall be substantially in the form of Exhibit F, with the assignor to exchange its Senior Credit Note(s) for
new Senior Credit Note(s) and the Eligible Assignee to receive new Senior Credit Note(s) and with the assignor to have no further right or obligation with respect to the rights and obligations assigned to and assumed by the Eligible Assignee. The Company agrees that, as to any assignment to any Lender Affiliate or if the Company consents to any such assignment to an Eligible Assignee, the Company will cooperate with the prompt execution and delivery of documents reasonably necessary to such assignment process to the extent that the Company incurs no cost or expense that is not paid by the assigning Lender, including the issuance of new Senior Credit Note(s) to the assignor (if retaining an interest hereunder) and the Eligible Assignee immediately upon delivery to the Company of the assignor’s Senior Credit Note(s). Upon such assignment, the assignee shall be a Lender for all purposes under this Agreement and the other Facilities Papers, if the assignment is an assignment of all of the
assignor’s interest in the Loan and its security, the assignor shall be automatically released from all of its obligations and liabilities hereunder, and, whether it is such a complete assignment or only a partial assignment, the Committed Sums shall be adjusted appropriately, and the parties agree to approve in writing a revised and updated version of Schedule LC.

 

(c)  If any interest in this Agreement is so transferred to any Person that is organized under the Legal Requirements of any jurisdiction other than the United States of America or any State thereof, the transferor Lender shall cause such Person, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Lender (for the benefit of the transferor Lender, the Agent and the Company) that under applicable laws no taxes will be required to be withheld by the Agent and the
Company or the transferor Lender with respect to any payments to be made to such Person under this Agreement, (ii) to furnish to each of the transferor Lender, the Agent and the Company two duly completed copies of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Person claims entitlement to complete exemption from U. S. federal withholding tax on all interest
payments hereunder) and (iii) to agree (for the benefit of the transferor Lender, the Agent, the Company) to provide the transferor Lender, the Agent, the Company a new Form 4224 or Form 1001 upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws and regulations and amendments duly exe-cuted and completed by such Person and to comply from time to time with all applicable Legal Requirements with regard to such withholding tax exemption.

 

	 
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(d)  The Company shall not be required to incur any cost or expense incident to any sale to a Person of any interest in the Facilities pursuant to this Section and all such costs and expenses shall be for the account of the Lender selling its rights in the Loan to such Person. 

 

(e)  The Agent and the Lenders are the only Beneficiaries of this Section. Other than the provisions of Section 13.15, this Section is intended to bind and benefit only JPMorgan and the other Lenders, and does not benefit and shall not be enforceable by the Company or any
other Person whatsoever.

 

14  NOTICES

 

All notices, demands, consents, requests and other communications required or permitted to be given or made hereunder (collectively, “Notices”), except as otherwise specifically provided in this Agreement, shall be in writing and shall be either (a) delivered in person, or (b) mailed, by certified, registered or express mail, postage prepaid, addressed to the respective parties hereto at their respective addresses specified below, or (c) sent in a prepaid overnight delivery envelope via a nationally-recognized courier service (such as Federal Express, Airborne Express, United Parcel
Service, Purolator, DHL Worldwide Express or Network Courier Service) that provides weekday next-day delivery service to the addressee’s location, (d) telecopied to their respective telecopy numbers (with a paper copy mailed the same day as aforesaid) as hereinafter set forth or (e) emailed and displayed or acknowledged as received as hereinafter set forth; provided that any party may change its address for notice by designating such party’s new address in a Notice to the sending party given at least five (5) Business Days before it shall become effective. All Notices shall be conclusively deemed to have been
properly given or served when received in person, regardless of how sent. Regardless of when received, all Notices shall be conclusively deemed to have been properly given or served if addressed in accordance with this Section and (1) if mailed, on the second (2nd) Business Day after being deposited in the mails, or (2) if sent by nationally-recognized courier service, on the next Business Day or (3) if faxed before the close of business at the recipient’s location on a Business Day, when faxed — or if faxed after the close of business at the recipient’s location or on a day that is not a Business Day, on the next Business Day thereafter — to the fax number set forth below (provided that a paper copy is mailed on the same day as aforesaid) or (4) if e-mailed, when either (a) the text of such Notice is legibly displayed on the recipient’s computer monitor or any text-containing files attached are available to the recipient and readily available to be read by the recipient or
(b) the recipient by any means or method acknowledges receipt of such e-mail:

	 
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If to the Company:

E-Loan, Inc.

6230 Stoneridge Mall Road

Pleasanton, California 94588

Attention: Mark Lefanowicz, President and Chief Operating Officer

Telephone: (925) 730-2100

Fax:  (925) 520-6200

email: markl@eloan.com 

with a copy to:

E-Loan, Inc.

6230 Stoneridge Mall Road

Pleasanton, California 94588

Attention: General Counsel

Telephone: (925) 847-6331

Fax: (925) 520-1099

email: edg@eloan.com 

If to the Agent:

JPMorgan Chase Bank, N.A.

707 Travis, 6th Floor North

Houston, Texas 77002 (for messenger deliveries)

P. O. Box 2558

Houston, Texas 77252 (for mail deliveries)

Attention: Cynthia E. Crites, Corporate Mortgage

            Finance Group

Telephone: (713) 216-4425

Fax:  (713) 216-1567, with fax copy to (713) 216-3198 attention: Julie Lowery

email:  cynthia.e.crites@jpmorganchase.com and julie.lowery@jpmorganchase.com 

	 
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with a copy to:

JPMorgan Chase Bank, N.A.

1111 Fannin, 12th Floor

Houston, Texas 77002

Attention: Ms. Bea Delgado, Mortgage Banking Warehouse Services

Telephone: (713) 427-6455

Fax:  (713) 427-6453

email:  bea.r.delgado@jpmorganchase.com

If to JPMorgan in its capacity as a Lender:

JPMorgan Chase Bank, N.A.

ABA No. 113000609

707 Travis, 6th Floor North

Houston, Texas 77002

Attention: Cynthia E. Crites, Corporate Mortgage

Finance Group

Telephone:  (713) 216-4425

Fax:   (713) 216-1567, with fax copy to (713) 216-3198 attention: Julie Lowery

email:   cynthia.e.crites@jpmorganchase.com and julie.lowery@jpmorganchase.com

If to the other Lenders, at the addresses shown on Schedule 14.

15  MISCELLANEOUS

 

15.1.  Terms Binding Upon Successors; Survival of Representations. The terms and provisions of this Agreement shall bind and benefit the parties hereto and their respective successors and assigns; provided that the Company may not assign or delegate any of their rights, benefits or duties under any of this Agreement, and any attempted assignment made without the written consent or written confirmation of
all the Lenders shall be void. All representations, warranties, covenants and agreements herein contained on the part of the Company shall survive the making of any Advance and the execution of the Senior Credit Notes and shall be effective so long as the Commitments are outstanding or any obligation of the Company hereunder or under the Senior Credit Notes or any of the other Facilities Papers remains to be paid or performed.

 

15.2.  Items to Be Satisfactory to the Agent or the Custodian. All items required by this Agreement or the Custody Agreement to be delivered to the Agent or to the Custodian shall be in form and content reasonably satisfactory to the Agent or the Custodian (as the case may be) and the Agent or the Custodian may reject any of them that do not meet the requirements of this Agreement or the Custody Agreement.

 

15.3.  Usury Not Intended; Credit or Refund of Any Excess Payments. It is the intent of the Company and the Agent in the exe-cution and performance of this Agreement and the other Credit Papers to contract in strict compliance with the usury laws of the State of New York and the United States of America from time to time in effect. In furtherance of that purpose, the parties to this Agreement stipulate and agree that none of the terms and provisions contained in this Agreement or the other Credit Papers
shall ever be construed to create a contract to pay for the use, forbearance or detention of money with interest at a rate in excess of the Ceiling Rate and that for purposes hereof “interest” shall include the aggregate of all charges which con-stitute interest under such laws that are contracted for, charged, taken, reserved or received under this Agreement or any of the other Credit Papers. In the event that the maturity of any Senior Credit Note is accelerated by reason of any election of the Agent resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes in-terest may never include more than the maximum nonusurious amount permitted by applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled auto-matically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on such Senior Credit Note (or,
if such Senior Credit Note shall have been paid in full, refunded to the payor of such interest). THE PROVISIONS OF THIS SECTION SHALL CONTROL OVER ALL OTHER PROVISIONS OF THIS AGREEMENT, THE SENIOR CREDIT NOTES AND THE OTHER CREDIT PAPERS THAT MAY BE IN APPARENT CONFLICT HEREWITH. In the event the Agent shall ever collect monies which are deemed to con-stitute interest at a rate in excess of the Ceiling Rate then in effect, all such sums deemed to constitute interest in excess of the Ceiling Rate shall be immediately returned to the payor (or, at the option of the holders of the Senior Credit Notes, credited against the unpaid principal of the Senior Credit Notes) upon such determination.

 

	 
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15.4.  This Agreement and the Other Facilities Papers. The parties intend that the Facilities Papers be read together and construed as if they were a single document. However, in the event of any inconsistency or conflict between this Agreement and any of the other Facilities Papers, this Agreement shall govern and control.

 

15.5.  No Waiver. No waiver of any Default or Event of Default shall be deemed to be a waiver of any other Default or Event of Default. No failure to exercise or delay in exercising any power or right under any Facilities Papers shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No course of dealing between the Company and the Agent or any of the Lenders shall operate as a
waiver of any rights of the Agent or any of the Lenders. No amend-ment, modification or waiver of any provision of any Facilities Papers nor consent to any departure therefrom shall be effec-tive unless it is in writing and signed by the Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Except as otherwise specifically provided in this Agreement, no notice to or demand on the Company or any other Person shall entitle the Company or any other Person to any other or further notice or demand in similar or other circum-stances.

 

15.6.  USA Patriot Act Notification. Each Lender hereby notifies the Company that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “USA Patriot Act”), it is required to obtain, verify and record information that
identifies the Company, including the name and address of the Company and other information that will allow such Lender to identify the Company in accordance with the USA Patriot Act.

 

15.7.  Counterpart Execution; Amendments. This Agreement may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. This Agreement may not be amended, modified or supplemented unless such amendment, modification or supplement is set forth in a writing signed by the parties hereto.

 

	 
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15.8.  Governing Law, Jurisdiction and Venue. This Agreement, the Senior Credit Notes and the other Credit Papers shall be governed by and construed in accordance with the laws of the State of New York (without reference to its conflicts of laws principles) and the United States of America from time to time in effect. The Company, the Lenders and the Agent each hereby irrevocably submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York, Manhattan Division and, only if such U.S. District Court refuses (or has no) jurisdiction, the
supreme courts of New York, for purposes of all legal proceedings arising out of or relating to the Credit Papers and all related transactions. To the fullest extent permitted by applicable law, the Company, the Lenders and the Agent each irrevocably waives any objection which he, she or it may now or hereafter have to the laying of venue for any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. New York, New York shall be a proper place of venue for suit hereon. Nothing herein shall affect any applicable right of any party at any time to initiate any suit in the United States District Court for the Southern District of New York, Manhattan Division, or to remove any pending suit to that Court. Nothing herein shall affect the right of the Agent to accomplish service of process in any manner permitted by applicable law or to commence legal proceedings or otherwise proceed against the Company in any other
jurisdiction or court.

 

15.9.  Waiver of Jury Trial. THE COMPANY, THE AGENT AND THE LENDERS EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SENIOR CREDIT NOTE OR ANY OF THE OTHER FACILITIES PAPERS OR THE TRANSACTIONS CONTEMPLATED HEREBY. This waiver of right to trial by jury is separately given, knowingly and voluntarily, by the Company, the Agent and the Lenders, and this waiver is intended to encompass individually each instance and each issue as to which the right of a
jury trial would otherwise accrue. The Agent and the Lenders are each hereby authorized and requested to submit this Agreement to any court having jurisdiction over the subject matter and the parties hereto, so as to serve as conclusive evidence of the foregoing waiver of the right to jury trial. Further, the Company hereby certifies that no representative or agent of any Lender or the Agent has represented, expressly or otherwise, to any member, manager, officer, agent or representative of the Company that any Lender or the Agent will not seek to enforce this waiver of right to jury trial provision.

 

	 
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15.10.  Relationship of the Parties. This Agreement provides for the making of Advances by the Lenders (through the Agent) in their capacities as lenders, to the Company, as a borrower, and for the payment of interest and repayment of principal by the Company to the Lenders (through the Agent). The relationship between (a) the Lenders and the Agent and (b) the Company is limited to that of creditor and secured party, on the one hand, and debtor, on the other hand. The provisions in this Agreement and the other Facilities Papers for compliance with financial covenants and
delivery of financial statements are intended solely for the benefit of the Lenders and the Agent to protect their interests as lenders and lenders’ agent, respectively, in assuring payment of interest and repayment of principal, and nothing contained in this Agreement or any of the other Facilities Papers shall be construed as permitting or obligating any Lender or the Agent to act as a financial or business advisor or consultant to the Company, as permitting or obligating any Lender or the Agent to control the Company or to conduct the Company’s operations, as creating any fiduciary obligation on the part of any Lender or the Agent to the Company, or as creating any joint venture, agency, or other relationship between or among any of the parties other than as explicitly and specifically stated in this Agreement. The Company acknowledges that it has had the opportunity to obtain the advice of experienced counsel of its own choosing in connection with the negotiation and execution of this
Agreement and the other Facilities Papers and to obtain the advice of such counsel with respect to all matters contained in the Facilities Papers including the provision for waiver of trial by jury. The Company further acknowledges that it is experienced with respect to financial and credit matters and has made its own independent decisions to apply to the Lenders for credit and to execute and deliver this Agreement and the other Facilities Papers.

 

(The remainder of this page is intentionally blank; signature pages follow.)

	 
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EXECUTED as of the Effective Date.

 

	 E-LOAN, INC.
	 
	 
	
 By: /s/ Matthew Roberts

	
 Name: Matthew Roberts

	
 Title: Chief Financial Officer

	 
	 
	 

 

	  
	 	107 	 
	

	 

 

 

 

	 JPMORGAN CHASE BANK, N.A.,
	 as the Agent and as a Lender
	 
	
 By: /s/ Cynthia E. Crites

	
 Name: Cynthia E. Crites

	
 Title: Senior Vice President

	 
	 
	 

                           

Exhibits:

Exhibit A   -    Senior Credit Note form

Exhibit B   -    Requests for Borrowing forms with Submission List forms

Exhibit C   -    form of Subordination Agreement

Exhibit D   -    list of the Company’s Subsidiaries

Exhibit E   -    form of Officer’s Certificate as to compliance or noncompliance with

                      certain financial covenants

Exhibit F   -    form of Assignment and Assumption Agreement

Exhibit G-1                 -    opinion of outside counsel

Exhibit G-2                 -    opinion of inhouse counsel

Schedules:

Schedule AI                                       -    List of Approved Investors

Schedule AR                                      -    list of Authorized Company Representatives

Schedule DQ                                     -    Disqualifiers

Schedule EC                                      -    Eligible Collateral

Schedule LC           -    the Lenders’ Committed Sums

Schedule SD                    -    the Company’s existing subordinated debt

Schedule MAC                -    current Maximum Aggregate Commitment

Schedule 8.4                    -    Summary of contingent liabilities and of material adverse changes

                                 and material unrealized losses since the Statement Date

Schedule 8.5           -    Pending Litigation

Schedule 8.15         -    the Company’s Plans

Schedule 10.6(h)              -    specific permitted Debt

Schedule 14                                       -    list of Lenders and Addresses for Notices

	

	 	108 	 
	

	 

EXHIBIT A

TO 1/05 CREDIT AGREEMENT

(The “1/05 [Lender name] Senior Credit Note”)

$_______________    Houston, TexasJanuary 4, 2005

FOR VALUE RECEIVED, E-LOAN, INC., a Delaware corporation (“Maker” or the “Company”), promises to pay to the order of [Lender Name] (“Payee”), a [Lender entity form], at the main Houston branch of JPMorgan Chase Bank, N.A., 712 Main Street, Houston, Harris County, Texas 77002, or at such other place as the Agent may hereafter designate in writing, in immediately available funds and in lawful money of the United States of America, the principal sum of [Lender’s Committed Sum] (or the unpaid balance of all principal advanced against this note, if that amount is less), together with interest on the unpaid principal balance of this note from time to time outstanding until maturity at the applicable rate(s) provided for in the Credit Agreement (or at such lesser rate, if any, as the holder of this note — the “Holder”, whether or not Payee is such holder — may in its sole discretion from time to time elect to be applicable for any day or days), and interest on all
past due amounts, both principal and accrued interest, at the Past Due Rate; provided that for the full term of this note the interest rate produced by the aggregate of all sums paid or agreed to be paid to Holder for the use, forbearance or detention of the debt evidenced hereby shall not exceed the Ceiling Rate.

1.    Definitions. In addition to the definitions given above, the definitions given in the 1/05 Senior Secured Credit Agreement dated January 4, 2005, as it may be supplemented, amended or restated from time to time (the “Credit
Agreement”) among (a) Maker, (b) JPMorgan Chase Bank, N.A. (for itself as a Lender and as Agent for the other Lenders) and (c) the other Lender(s) party thereto, for capitalized terms that are used in this note shall apply here as well as there.

2.    Rates Change Automatically and Without Notice. Without notice to Maker or any other Person and to the full extent allowed by applicable law from time to time in effect, the Stated Rate, the Past Due Rate and the Ceiling Rate shall each automatically fluctuate upward and downward as and in the amount by which the interest rate applicable to this note as provided for in the Credit Agreement, the Past Due Rate as defined in the Credit Agreement and such maximum nonusurious rate of interest permitted by applicable law, respectively,
fluctuate.

3.    Calculation of Interest. Interest on the amount of each advance against this note shall be computed on the amount of that advance and from the date it is made. All interest rate determinations and calculations by the Holder, absent manifest error, shall be conclusive and binding.

4.    Excess Interest Will be Refunded or Credited. If, for any reason whatever, the interest paid or received on this note during its full term produces a rate which exceeds the Ceiling Rate, Holder shall refund to the payor or, at Holder’s option, credit against the principal of Senior Credit Note such portion of said interest as shall be necessary to cause the interest paid on this note to produce a rate equal to the Ceiling Rate.

	 
	 	 1 of 4	 
	

	 

5.    Interest Will be Spread. To the extent (if any) necessary to avoid violation of applicable usury laws (or to minimize the extent of the violation if complete avoidance is impossible for any reason, it being the intent and purpose of Maker and all Holders to comply strictly with all applicable usury and other laws), all sums paid or agreed to be paid to Holder for the use, forbearance or detention of the indebtedness evidenced hereby shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread in
equal parts throughout the full term of this note, so that the interest rate is uniform throughout the full term of this note.

6.    Payment Schedule. Interest on and principal of this note shall be due and payable as provided in Sections 5.1, 5.3 and 5.11 of the Current Credit Agreement.

7.    Prepayment. Maker may prepay this note in whole or in part without penalty or fee. Prepayments shall be applied first to accrued interest, the balance to principal.

8.    The 1/05 Credit Agreement, this Note and its Security. This note is one of the Senior Credit Notes, as such term is defined in the Credit Agreement, is issued pursuant to the Credit Agreement (to which reference is made for all purposes) and may be referred to as the “1/05 [Lender name] Senior Credit Note”, and as it
may hereafter be renewed, extended, rearranged, increased, decreased, modified or replaced in accordance with the Credit Agreement may be referred to as the “Current [Lender Name] Senior Credit Note”. Holder is entitled to the benefits of and security provided for in the Credit Agreement-. Such security includes, among other security, the security interests granted by Section 6.1 of the Current Credit Agreement.

9.    Revolving Credit. Upon and subject to the terms and conditions of the Credit Agreement, Maker may borrow, repay and reborrow against this note under the circumstances, in the manner and for the purposes specified in the Credit Agreement, but for no other purposes. Advances against this note by Payee or other Holder shall be governed by the terms of the Credit Agreement. The unpaid principal balance of this note at any time shall be the total of all principal lent or advanced against this note less the sum of all principal payments
and permitted prepayments made on this note by or for the account of Maker. Absent manifest error, Holder’s computer records shall on any day conclusively evidence the unpaid balance of this note and its advances and payments history posted up to that day. All loans and advances and all payments and permitted prepayments made hereon may be (but are not required to be) endorsed by or on behalf of Holder on the schedule which is attached as Annex I hereto (which is hereby made a part hereof for all purposes) or otherwise recorded in Holder’s computer or manual records; pro-vided, that any failure to make notation of
(a) any principal advance or accrual of interest shall not cancel, limit or otherwise affect Maker’s obliga-tions or any Holder’s rights with respect to that advance or accrual, or (b) any payment or permitted prepayment of principal or interest shall not cancel, limit or otherwise affect Maker’s entitle-ment to credit for that payment as of the date of its receipt by Holder.

10.    Defaults and Remedies. Any Event of Default under the Credit Agreement or any other Facilities Papers shall constitute an Event of Default under this note and all other Facilities Papers and shall have the consequences provided for in the Credit Agreement which may include acceleration of the indebtedness evidenced hereby. Subject to the terms of the Credit Agreement, Holder or the Agent may waive any default without waiving any other prior or subsequent default. Holder or the Agent may remedy any default without waiving the default
remedied. Holder’s or the Agent’s failure to exercise any right, power or remedy upon any default shall not be construed as a waiver of such default or as a waiver of the right to exercise any such right, power or remedy at a later date. No single or partial exercise by Holder or the Agent of any right, power or remedy hereunder shall exhaust it or shall preclude any other or future exercise of it, and every such right, power or remedy under this note may be exercised at any time and from time to time. No modification or waiver of any provision of this note nor consent to any departure by Maker from its terms shall be effective unless it is in writing and signed by Holder (or, if authorized for that purpose by the Credit Agreement, the Agent), and then such waiver or consent shall be effective only in the specific instance given, for the purposes for which given and to the extent therein specified.

	 
	 	2 of 4 	 
	

	 

11.    Legal Costs. If any Holder or the Agent retains an attorney in connection with any such default or to collect, enforce or defend this note or any papers intended to secure or guarantee it in any lawsuit or in any probate, reorganization, bankruptcy or other proceeding, or if Maker or anyone claiming by, through or under Maker sues any Holder in connection with this note or any such papers and does not prevail, then Maker agrees to pay to each such Holder and the Agent, respectively, in addition to principal and interest, all
reasonable costs and expenses incurred by such Holder or the Agent in trying to collect this note or in any such suit or proceeding, including reasonable attorneys’ fees.

12.    Waivers. Maker and any and all co-makers, endorsers (other than the Holder or the Payee), guarantors and sureties severally waive notice (including, but not limited to, notice of intent to accelerate and notice of acceleration, notice of protest and notice of dishonor), demand, presentment for payment, protest, diligence in collecting and the filing of suit for the purpose of fixing liability and consent that the time of payment hereof may be extended and re-extended from time to time without notice to any of them. Each such Person
agrees that his, her or its liability on or with respect to this note shall not be affected by any release of or change in any guaranty or security at any time existing or by any failure to perfect or maintain perfection of any lien against or security interest in any such security or the partial or complete unenforceability of any guaranty or other surety obligation, in each case in whole or in part, with or without notice and before or after maturity. 

13.    Not Purpose Credit. None of the proceeds of this note shall ever be used, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock or for the purpose of reducing or retiring any debt which was originally incurred to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock or which would constitute this transaction a “purpose credit” within the meaning of Regulation U, as now or hereafter in effect.

14.    Governing Law, Jurisdiction and Venue. This note shall be governed by and construed in accordance with the laws of the State of New York and the United States of America from time to time in effect. Maker and all endorsers (other than the Holder or the Payee), guarantors and sureties each hereby irrevocably submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York, Manhattan Division, and the state district courts of New York County, New York, for purposes of all legal
proceedings arising out of or relating to this note, the debt evidenced hereby or any loan agreement, security agreement, guaranty or other papers or agreements relating to this note. To the fullest extent permitted by law, Maker and all endorsers (other than the Holder or the Payee), guarantors and sureties each irrevocably waives any objection which he, she or it may now or hereafter have to the laying of venue for any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. New York, New York shall be a proper place of venue for suit on or in respect of this note. Nothing herein shall affect the right of Maker, the Payee or any Holder at any time to initiate any suit in the United States District Court for the Southern District of New York, Manhattan Division, or to remove any pending suit to that Court.

 

	 
	 	3 of 4 	 
	

	 

	 E-LOAN, INC., as maker
	 
	 
	
 By:_________________________________

	
 Name:______________________________

	
 Title:________________________________

	 
	 
	 

 

	
 

	 	4 of 4 	 
	

	 

ANNEX 1

to $____________

E-Loan, Inc.

1/05 [Lender’s name] Senior Credit Note

LOANS AND PAYMENTS OF PRINCIPAL AND INTEREST

	
  Date of Payment or Advance
	
Payment Applied on (or advance vs.) Principal
	
Payment Applied on Interest
	
Principal Balance
	
Interest Paid to
	
Name of Person Making Notation

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 

	
 

	 	5 	 
	

	 

EXHIBIT B

TO 1/05 CREDIT AGREEMENT

Request for Borrowing

[Letterhead of the Company]

[date]

JPMorgan Chase Bank, N.A.

707 Travis, 6th Floor North

Houston, Texas 77002

Attention: Cynthia E. Crites, Corporate Mortgage Finance Group

Ladies and Gentlemen:

E-LOAN, INC. (the “Company”) and JPMORGAN CHASE BANK, N.A. as a lender and as agent (the “Agent”) for the other lender(s) who are parties to it as lenders, and such other lenders (all such lenders, including JPMorgan Chase Bank, N.A. being herein called the “Lenders”) together executed a 1/05 Senior Secured Credit Agreement dated January 4, 2005 (which, as it may have been or may hereafter be supplemented, amended or restated from time to time, is called the
“Current Credit Agreement”). Any term defined in the Current Credit Agreement and used in this Request for Borrowing shall have the meaning given to it in the Current Credit Agreement.

The Company currently qualifies under the Current Credit Agreement for, and hereby requests, an Advance or Advances as set forth below to be made on _________________, 20___ (or, if the Agent is closed that day, on the next day when it is not). 

 

 

	 Single-family Warehouse Advance (Dry)	 $_____________
	 Wet Warehousing Advance	 $_____________
	 Total Borrowing	 $_____________

                

After giving effect as required by the Credit Agreement to the requested Advance, the Borrowing Base will equal or exceed the outstanding principal balance of the Loan and such balance will not exceed the Aggregate Committed Sum.

(Check the block for each of the following paragraphs that is applicable.)

 

|_|    This Borrowing Request includes a request for a Single-family Warehouse Advance. If the Current Credit Agreement requires new Collateral to support the requested Advance, (i) the Company has attached and submits herewith the relevant Submission List(s) and (ii) the Basic Papers for all items of Collateral described or referred to therein have been submitted — or are being submitted concurrently herewith — to the Custodian.

	 
	 	B-1 	 
	

	 

|_|    This Borrowing Request includes a request for a Wet Warehouse Advance. If the Current Credit Agreement requires new Collateral to support the requested Advance, the Company has attached and submits herewith the relevant Submission List(s) (the Basic Papers for all such Wet Loans will be delivered to the Custodian on or before five (5) Business Days after funding of the requested Advance).

|_|    the Company has attached and submits herewith Submission List(s) for such new Collateral (the Basic Papers for all such Wet Loans will be delivered to the Custodian on or before five (5) Business Days after funding of the requested Advance).

The Company hereby grants to the Agent a security interest in all such new Collateral and (as to Collateral) all related Loan Papers, and they are hereby made subject to the security interest to the Agent created by the Current Credit Agreement, for the Pro Rata benefit of the Lenders, effective immediately.

The proceeds of the Advance should be deposited in the Company’s Note Payment Account number 00113398961 with JPMorgan Chase Bank, N.A..

The Company acknowledges that the Agent and the Lenders will rely on the truth of each statement in this request and its attachments in funding the requested Advance.

No Default has occurred under the Facilities Papers that has not been cured by the Company or declared in writing by the Agent to have been waived, and no Event of Default has occurred under the Facilities Papers that the Agent has not declared in writing to have been cured or waived. There has been no material adverse change in any of the Central Elements in respect of the Company or any of its Subsidiaries since the date of the Company’s most recent annual audited Financial Statements that have been delivered to the Agent.

All items that the Company is required to furnish to the Agent, its designated custodian or the Lenders for this requested Advance and otherwise have been delivered, or will be delivered before this requested Advance is funded, in all respects as required by the Current Credit Agreement and the other Facilities Papers. All Collateral papers described or referred to in the Submission List(s) (if any) submitted to the Agent with this Request for Borrowing conform in all respects with all applicable requirements of the Current Credit Agreement and the other Facilities Papers.

There has been no change in the information furnished to the Agent or any Lender to enable it to verify the identity of the Company as required by Section 326 of the USA Patriot Act except as follows:       (none)        .

The Company hereby warrants and represents to the Agent and the Lenders that none of the Collateral (including, but not limited to, Collateral described or referred to in this request) is pledged to any Person other than the Agent or supports any borrowing or repurchase agreement funding other than Borrowings under the Current Credit Agreement.

	 
	 	 B-2	 
	

	 

The undersigned officer hereby certifies that all of the Company’s representations and warranties (a) in the Current Credit Agreement and all of the other Facilities Papers (except only to the extent that (i) such a representation or warranty speaks to a specific date or (ii) the facts on which a representation or warranty is based have been changed by transactions or conditions contemplated or expressly permitted by the Facilities Papers), (b) in this Request for Borrowing, are true and correct on the date of this Request for Borrowing and (c) that the Company qualifies for funding of the requested Advance.

 

	 E-LOAN, INC. 
	 
	
 By:_________________________________

	
 Name:______________________________

	
 Title:________________________________

	 
	 
	 

 

Attached:

Submission List (for Eligible Single-family Collateral, Dry Loans and/or Wet Loans)

	 
 

	 	 B-3	 
	

	 

SUBMISSION LIST FOR SINGLE FAMILY COLLATERAL

Date:________

TO:

JPMorgan Chase Bank, N.A.

1111 Fannin, 12th Floor

Houston, Texas 77002

Attention: Ms. Wanda Carr, Mortgage Banking Warehouse Services

Phone: (713) 427-6391

Fax: (713) 427-6449

email: wanda.carr@jpmorganchase.com

FROM:

E-Loan, Inc.

6230 Stoneridge Mall Road

Pleasanton, California 94588

Attention:____________                            

Phone: ______________

Fax: ________________

email: _______________           

E-Loan, Inc. submits the following list of Single-family Loans in support of the Request for Borrowing dated __________ to which this Submission List is attached and hereby pledges them to the Agent (for itself and as agent for the other Lenders):

	
BRANCH NUMBER
	
LOAN NUMBER
	
BORROWER OR CUSTOMER NAME
	
NOTE DATE
	
NOTE LOAN AMOUNT
	
LOAN TYPE

	 	 	 	 	 	
 

	 	 	 	 	 	
 

	 	 	 	 	 	
 

	 	 	 	 	 	
 

	 	 	 	 	 	
 

	 	 	 	 	 	
 

	 	 	 	 	 	
 

	 	 	 	 	 	
 

	 	 	 	 	 	
 

	 	 	 	 	 	
 

	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 

	
 

	 	B-4 	 
	

	 

EXHIBIT C

TO 1/05 CREDIT AGREEMENT

SUBORDINATION OF DEBT AGREEMENT IN

FAVOR OF THE AGENT AND LENDERS

UNDER 1/05 SENIOR SECURED CREDIT AGREEMENT

_________________, 200__

	TO:	JPMorgan Chase Bank, N.A. (“JPMorgan”), as a lender and as Agent and representative (the “Agent”) of the lenders (the “Lenders”)

707 Travis Street, 6th Floor North

Houston, Texas 77002

The undersigned (each of whom is hereinafter referred to as a “Creditor”), creditors of E-Loan, Inc. (the “Company”), a Delaware corporation, desire that JPMorgan and the other Lenders named in the 1/05 Senior Secured Credit Agreement dated January 4, 2005 among the Company, the Agent and the Lenders — such credit agreement, as it may have been or may hereafter be
supplemented, amended or restated being hereinafter called the “Credit Agreement” — extend or continue to extend such financial accommodations to the Company as the Company may request and as the Lenders and the Agent may deem proper. For the purpose of inducing the Lenders to grant, continue or renew such financial accommodations, and in consideration thereof, the undersigned Creditors irrevocably, unconditionally and presently agree as follows:

1.    Amount of the Debt Subordinated Herein. The Company is presently indebted to the Creditors in the principal amounts set forth below:

	
Creditor
	
Principal Amount of Company Debt

	 	
$

	 	 
	 	 
	
 Total
	
$

2.    Subordination. All claims of each Creditor against the Company now or hereafter existing are and shall be at all times SUBJECT, SUBORDINATE AND INFERIOR, both in right of payment and lien priority, to any and all claims, whether now or hereafter existing and however created or evidenced, which the Agent or the Lenders has or may have
against the Company arising out of or relating to the Credit Agreement (and all extensions, renewals, increases, decreases, modifications, replacements and substitutions of or for any such claims, such claims and all such extensions, etc. being herein called the “Senior Obligations”), for so long as any Senior Obligations shall exist. So long as no Default or Event of Default shall have occurred under the Credit Agreement and so long as no other default shall have occurred in payment or performance of any of the Senior Obligations, payments of interest and principal on the claims of Creditors may be made at their respective scheduled maturity dates (it being understood that no prepayment shall be made of such claims and no modification or acceleration, for default or otherwise, of such
maturity dates shall be permitted). If a Default or an Event of Default shall occur under the Credit Agreement or if any other default shall occur in payment or performance of any of the Senior Obligations, then and for so long as (a) such Default shall not have been cured or waived before it has become an Event of Default or (b) the Agent shall not have declared in writing that such Event of Default or other default (if any) has been cured or waived, no payment of interest or premium on any of the claims of Creditors and no payment of principal of any of the claims of creditors, whether or not then due, shall be made without the prior written consent of the Agent, and any payment made during such time shall (i) be held in trust for the benefit of the Lenders, and (ii) immediately be paid over by its recipient to the Agent for application on the obligations of the Company to the Lenders and the Agent in accordance with the provisions of the Credit Agreement, without notice or demand. The subordination
of claims of Creditors made hereby shall remain in effect so long as there shall be outstanding any Senior Obligation of the Company to any of the Lenders or the Agent (for this purpose, the Company shall be deemed obligated to the Lenders and the Agent so long as any of the Lenders shall have outstanding any commitment under the Credit Agreement or any other Facilities Papers to make any loan or extend any other financial accommodations to the Company or any of its successors, whether or not any such loan or financial accommodation shall have been made, advanced or extended.)

	 
	 	-1- 	 
	

	 

3.    Enforcement or Assignment of Subordinated Debt or Liens. For so long as any claim of the Agent or any Lender against the Company or any commitment of any of the Lenders to extend credit or other financial accommodations to the Company is in existence, the Creditors and each of them will not (i) sue upon, any claim or claims now or hereafter existing which they or any of them may hold against the Company or any of its Affiliates (an “Affiliate” being an entity that directly or indirectly controls, is controlled by or is under common control with, the Company); (ii) sell, assign, transfer, pledge, hypothecate or encumber such claim or claims except expressly subject to this Agreement; (iii) enforce any lien they or any of them may now or in the future have on any property, real or personal, of the Company or any other party to the Credit Agreement, as security for the payment of any debt owing by the Company or such party to them or any one or more of them until the Senior Obligations shall have been fully paid and satisfied and/or (iv) join in or in any way directly or indirectly induce any petition in bankruptcy, assignment for the benefit of creditors or creditors’ agreement, except as directed by the Agent or the Lenders.

4.    Direction to Pay Over Claims and Assignment. In case of any assignment by the Company for the benefit of creditors, or in the case of any bankruptcy proceedings instituted by or against the Company, or in case of the appointment of any receiver for the Company’s business or assets, or in case of any dissolution or winding up of the affairs of the Company, the Company and any assignee, trustee in bankruptcy, receiver or other person or persons in charge, are hereby directed to pay to the Agent the full amount of all of the
Agent’s and the Lenders’ claims against the Company before making any payment of principal or interest to the undersigned Creditors, or any of them, and insofar as it may be necessary to accomplish that purpose, the undersigned Creditors, and each of them, hereby sell, transfer, set over and assign to the Agent and the Lenders all claims they may now or hereafter have against the Company and in any security therefor, and the proceeds thereof, and all rights to any payments, dividends or other distributions arising therefrom. If any of the undersigned Creditors does not file a proper claim or proof of debt in the form required in such proceeding prior to thirty (30) days before the expiration of the time to file such claim in such proceeding, then the Agent has the right (but no obligation) to do so and is hereby authorized to file an appropriate claim or claims for and on behalf of such person.

	 
	 	-2- 	 
	

	 

5.    Subrogation. Upon the payment by them in full of all Senior Obligations, the Creditors shall be subrogated to the rights of the Lenders to receive payments or distributions of cash, property or securities of the Company applicable to Senior Obligations until the Creditors’ claims shall have been paid in full, and, for the purposes of such subrogation, no payments or distributions of cash, property or securities to or for the benefit of the Creditors pursuant to this Agreement which would otherwise have been paid to the Lenders
shall be deemed to be a payment by the Company to or for the account of the Creditors, it being understood that the provisions of this Subordination Agreement are solely for the purpose of defining the relative rights of the Lenders and the Creditors.

If any payment or distribution to which the Creditors would otherwise have been entitled but for the provisions of this Agreement shall have been applied, pursuant to the provisions of these terms of subordination, to the payment of all amounts payable under the Senior Obligations, then and in such case, the Creditors shall be entitled to receive from the Lenders at the time outstanding any payments or distributions received by the Lenders in excess of the amount sufficient to pay all amounts under or in respect of the Senior Obligations in full.

6.    Obligations to Creditors not Impaired; Provisions Define Relative Rights. The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the Creditors on the one hand and the Lenders on the other hand. Nothing contained in this Agreement shall (i) impair or affect, as among the Company and its creditors (other than the Lenders and the Creditors), the obligation of the Company to pay the claims of the Creditors when the same shall become due and payable in accordance with their terms,
or (ii) affect the relative rights against the Company of the Creditors and the other creditors of the Company (other than the Lenders) or (iii) prevent any Creditor from exercising all remedies otherwise permitted by applicable law upon default under the instrument or instruments governing the Creditors’ claims, pursuant to the rights, if any, under this Agreement of the Lenders to receive cash, property and securities otherwise payable or deliverable to the Lenders or the Agent.

7.    Proofs of Claim. The Creditors may file such proofs of claim and other papers or documents or may be necessary or advisable in order to have their claims allowed in any judicial proceedings relative to the Company (or any other obligor on the Creditors’ claims, including any guarantor), its creditors or its property. If any Creditor has not been paid in full, such Creditor shall (i) file such claim, proof of claim or similar instrument on behalf of the Lenders as the Lenders’ interests may appear and (ii) take all such
other actions as may be appropriate to insure that all payments and distributions made in respect of any such proceedings are made to the Lenders as their interests may appear.

	 
	 	 -3-	 
	

	 

8.    Agreement Unaffected by Changes, Etc. Without consent of, notice to or incurring responsibility to any Creditor and without impairing or releasing any Creditor’s covenants and obligations hereunder, upon or without any terms or conditions and in whole or in part, the Lenders may (i) change any payment due date or amount, (ii) renew, change or increase any Senior Obligations or any aspect of the security therefor, (iii) sell, exchange, release, surrender, realize upon or otherwise deal in any manner or order any present or future
security for any Senior Obligations, (iv) release anyone in any manner or capacity liable on or for any Senior Obligations, (v) exercise or not exercise any rights against the Company, any Creditor or anyone else, (vi) settle or compromise any of the Senior Obligations or subordinate any part of them to any other part and/or (vii) apply any sums received from anyone to any part of the Senior Obligations, and the provisions of this Agreement shall apply to the Senior Obligations as changed, extended, renewed, altered or increased in any respect and in any manner.

9.    Liability. For violation of this Agreement, the undersigned Creditors shall be jointly and severally liable to the Agent and the Lenders for all loss and damage sustained by reason of such breach, and upon any such violation, the Agent and the Lenders may accelerate the maturity of its claims against the Company, at their option.

10.    Automatic Reinstatement. If at any time any payment made on the Senior Obligations must be returned for any reason (including the order of any bankruptcy court), this Agreement shall be automatically reinstated to the same effect as if the affected payment(s) had not been made.

11.    Governing Law, Binding Effect and Assignments. This Agreement shall be governed in all respects by the laws of the State of New York and shall bind and benefit the undersigned, the Agent, the Lenders and the Company, their respective heirs, executors, administrators, personal representatives, trustees, receivers, conservators, successors and assigns and anyone claiming by, through or under any of them. This Agreement and any claim or claims of the Agent or any of the Lenders pursuant hereto may be assigned by the Agent or such
Lender (as the case may be), in whole or in part, at any time, without notice to any of the undersigned Creditors or the Company.

(The remainder of this page is intentionally blank; unnumbered signature page(s) follow.)

	 
 

	 	-4- 	 
	

	 

	 
	
 _________________________________

	 
	
 By:______________________________

	
 Name:___________________________

	
 Title:_____________________________

	 
	
 Date:_____________________________

	 

                       

	 
 

	 	5 	 
	

	 

	 
	
 _________________________________

	 
	
 By:______________________________

	
 Name:___________________________

	
 Title:_____________________________

	 
	
 Date:_____________________________

	 

	 
 

	 	 -6-	 
	

	 

	 
	
 _________________________________

	 
	
 By:______________________________

	
 Name:___________________________

	
 Title:_____________________________

	 
	
 Date:_____________________________

	 

                       

	 
 

	 	-7- 	 
	

	 

ACCEPTANCE OF SUBORDINATION OF

DEBT AGREEMENT BY THE COMPANY

E-Loan, Inc. (the “Company” in the Subordination of Debt Agreement set forth on the face hereof), hereby (i) represents and warrants to the Agent and the Lenders that it is presently indebted to the persons executing said Subordination of Debt Agreement in the aggregate principal amount of $            , (ii) accepts and consents to such Subordination of Debt Agreement, (iii) agrees to be bound by all of the provisions thereof and (iv) agrees to recognize all priorities
and other rights granted thereby to JPMorgan Chase Bank, N.A. (in its capacities as a Lender and as the Agent) and the other Lenders, and their respective successors and assigns, and to perform in accordance therewith.

	 
	
 E-LOAN, INC.

	 
	
 By:______________________________

	
 Name:___________________________

	
 Title:_____________________________

	 
	
 Date:_____________________________

	 

	
 

	 	-8- 	 
	

	 

EXHIBIT D

TO 1/05 CREDIT AGREEMENT

List of Subsidiaries of the Company as of the Effective Date

	
Subsidiary
	
Place of Organization
	
States where qualified as a foreign organization
	
The Company’s percentage of equity ownership 

	
Operating Subsidiaries
	 	 	 
	
Escrow Closing Services, Inc.
	
Delaware
	
AL, CA, CO, CN, FL, ID, IL, IO, IN, KS, KY, ME, MD, MA, MI, MS, MO, MN, NV, NH, NM, NY, NC, OH, OK, OR, PA, RI, TN, UT, VT, VA, WA, WI
	
100%

	
E-Loan International, Inc.
	
British Virgin Islands
	
Not applicable
	
100%

	
Single Purpose Finance Subsidiaries
	 	 	 
	
E-Loan Auto Fund One, LLC
	
Delaware
	
CA
	
100%

 

	
 

	 	 -1-	 
	

	 

EXHIBIT E

TO 1/05 CREDIT AGREEMENT

Form of Officer’s Certificate with computations

to show compliance or non-compliance with

certain financial covenants

OFFICER’S CERTIFICATE

AGENT:           JPMORGAN CHASE BANK, N.A.

COMPANY:     E-LOAN, INC.

SUBJECT PERIOD:            _____________ended___________,200__ 

DATE:      ___________,200__ 

 

This certificate is delivered to the Agent under the 1/05 Senior Secured Credit Agreement dated as of January 4, 2005 (as supplemented, amended or restated from time to time, the “Current Credit Agreement”), among the Company, the Agent and the financial institutions now or hereafter parties thereto (the “Lenders”). Unless they are otherwise defined in this request, terms defined in the Current Credit Agreement have the same meanings here as there.

The undersigned officer of the Company certifies to the Agent and the Lenders that on the date of this certificate that:

1.    The undersigned is an incumbent officer of the Company, holding the title stated below the undersigned’s signature below.

2.    The Company’s financial statements that are attached to this certificate were prepared in accordance with GAAP (except that interim — i.e., other than annual — financial statements exclude notes to financial statements and statements of changes to stockholders’ equity and are subject to year-end adjustments) and (subject to the aforesaid proviso as to interim financial statements) present fairly the Company’s financial
position and results of operations as of _____________for that month (the “Subject Period”) and for the year to that date.

3.    The undersigned officer of the Company supervised a review of the Company’s activities during the Subject Period in respect of the following matters and has determined the following: (a) except to the extent that (i) a representation or warranty speaks to a specific date or (ii) the facts on which a representation or warranty is based have changed by transactions or conditions contemplated or expressly permitted by the Facilities Papers, the representations and warranties of the Company in Section 8 of the Current Credit Agreement are true and correct in all material respects, other than for the changes, if any, described on the attached Annex A; (b) the Company has complied with all of its obligations under the Facilities Papers, other than for the deviations, if any, described on the attached Annex A; (c) no Event of Default has occurred that has not been declared by the Agent in writing to have been cured or waived, and no Default has occurred that has not been cured before it became an Event of Default, other than those Events of Default and/or Defaults, if any, described on the attached Annex A and (d) compliance by the
Company with the financial covenants in Section 10.7 of the Current Credit Agreement is accurately calculated on the attached Annex A.

	 
	 	E-1 	 
	

	 

 

	 
	
 E-LOAN, INC.

	 
	
 By:______________________________

	
 Name:___________________________

	
 Title:_____________________________

	 
	
 

	 

	 
 

	 	E-2 	 
	

	 

ANNEX A TO OFFICER’S CERTIFICATE

1.    Describe deviations from compliance with obligations, if any — clause 3(b) of attached Officer’s Certificate — if none, so state:

2.    Describe Defaults or Events of Default, if any — clause 3(c) of attached Officer’s Certificate — if none, so state:

3.    Calculate compliance with covenants in Section 10.7 — clause 3(d) of attached Officer’s
Certificate:

(a)  Section 10.7(a). The Company’s Adjusted GAAP Net Worth as of ________ is $__________________ (the minimum under Section 10.7(a) is $60,000,000.)

 

(b)  Section 10.7(b). The Company’s Total Liabilities to Adjusted GAAP Net Worth ratio as of ___________ is _____:1.00 (the maximum ratio under Section
10.7(b) is 10.00:1.00)

 

(c)  Section 10.7(c). The Company’s GAAP net earnings the two consecutive (rolling) fiscal quarters ending __________, 200__ was $__________ (beginning with the two quarter period ending March 31, 2005, the minimum under Section 10.7(c) is $1.)

 

(d)  Section 10.7(d). The Company’s Liquidity as of __________________ is $___________. (The minimum Liquidity under Section 10.7(d) is
$12,500,000.) 

 

(e)  Section 10.7(e). The Company has not declared or paid any dividend or made any distribution directly or indirectly to the Company’s shareholders when, or immediately after, the payment of which, any Default or Event of Default existed.

 

	 
	 	E-3 	 
	

	 

(f)  Section 10.7(f). The Company has not directly or indirectly made any advance to (or declined or deferred any payment due from) any stockholder where at the time of or immediately after such action (x) the Company’s Adjusted GAAP Net Worth was or would be less than the minimum specified in clause (a) above or (y) any Default or Event of Default existed or would exist.

 

	
 

	 	E-4 	 
	

	 

EXHIBIT F

TO 1/05 CREDIT AGREEMENT

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including any letters of
credit, guarantees, and Swing Line loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1.    Assignor:                ______________________________

2.    Assignee:                ______________________________

                    [and is a Lender Affiliate of [identify Lender]]

3.    Company(ies):                                      ______________________________

4.    Agent                                                     ______________________, as the agent and representative of the Lenders under the Credit Agreement

5.    Credit Agreement:    The [amount] Credit Agreement dated as of _______ among [name of Company(ies)], the Lenders parties thereto and
[name of                                                                                                Agent], as Agent

	 
 

	 	F-1 	 
	

	 

6.     Assigned Interest:

 

	
Aggregate Amount of Commitment/Loans for all Lenders
	
Amount of Commitment/Loans Assigned
	
Percentage Assigned of Commitment/Loan

	
$
	
$
	
%

Effective Date: _____________ ___, 20___ [TO BE INSERTED BY THE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR

							[NAME OF ASSIGNOR]

By:______________________________

Title:

ASSIGNEE

[NAME OF ASSIGNEE]

By:______________________________

Title:

	  
	 	 F-2	 
	

	 

[Consented to and] Accepted:

[NAME OF AGENT], as 

Agent

By_________________________________

Title:

[Consented to:] 

[NAME OF RELEVANT PARTY]

By________________________________

Title:

	 
 

	 	F-3 	 
	

	 

ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties. 

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit
Agreement or any other Facilities Paper, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Facilities Papers or any collateral thereunder, (iii) the financial condition of the Company(ies), any of its (their) Subsidiaries or Affiliates or any other Person obligated in respect of any Facilities Papers or (iv) the performance or observance by the Company(ies), any of its (their) Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Facilities Paper.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement that are required to be satisfied by it in order to acquire the Assigned Interest and become a Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 9.2 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Agent or any other Lender, and (v) if it is a Person that is organized under the Legal Requirements of any jurisdiction other than the United States of America or any State thereof, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Facilities Papers, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Facilities Papers are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment
and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

	
 

	 	 F-4	 
	

	 

EXHIBIT G-1

TO 1/05 CREDIT AGREEMENT

(Form of Opinions of Outside Legal Counsel)

 

1.    The Credit Agreement is effective to create in favor of the Agent a security interest in the Collateral as security for the Obligations.

 

2.    The Financing Statement is in proper form for filing in the Filing Office. Upon the filing of the Financing Statement in the Filing Office, the security interest referred to in Opinion 1 above will be perfected in that portion of all the Collateral with respect to which a security interest may be perfected by filing a financing statement. 

 

3.    When the Agent or its duly designated bailee (other than the Company) takes possession of the Mortgage Notes, the security interest referred to in Opinion 1 above in such Mortgage Notes will be perfected.

 

4.    Each of the Principal Facilities Papers has been duly executed and delivered by the Company and is a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its respective terms.

 

5.    The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

 

	 
	 	  	 
	

	 

EXHIBIT G-2

TO 1/05 CREDIT AGREEMENT

(Form of Opinions of In-House Legal Counsel)

 

1.    E-LOAN has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, and based solely on certificates of public officials, is duly qualified and in good standing in the State of California, with corporate power and authority to own its properties and to conduct its business, including the performance of its obligations under the Credit Agreement, as such properties are presently owned and such business is presently conducted. 

 

2.    The Principal Facilities Papers have been duly authorized, executed and delivered by E-LOAN.

 

3.    The execution, delivery and performance of the Principal Facilities Papers by E-LOAN and the performance of the Transactions by E-LOAN do not (A) violate E-LOAN's certificate of incorporation or bylaws, or (B) conflict with, or result in any breach or result in a default under any existing obligation of E-LOAN under any agreement filed as an exhibit or incorporated by reference into E-LOAN's most recent Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q (collectively, "E-LOAN's Reports"); or (C) result in the creation or imposition of any lien upon any of its properties (except for the liens and security interests
created by the Principal Facilities Papers), or (D) violate any law, order, rule, or regulation, applicable to E-LOAN or its properties, of any federal or state regulatory body, any court, administrative agency, or other governmental instrumentality having jurisdiction over E-LOAN.

 

4.    No consent, license, approval or authorization, or registration or declaration with any governmental or regulatory authority, bureau or agency is necessary in connection with the execution, delivery or performance by E-LOAN of the Principal Facilities Papers, except for such consents, licenses, approvals or authorizations, or registrations as are in full force and effect on the date hereof.

 

5.    To my knowledge, all legal proceedings required to be described by Regulation S-K, promulgated under the Securities Exchange Act of 1934, as amended, have been described in E-LOAN's Reports.

	 
	 	 	 
	

	 

SCHEDULE AI

TO 1/05 CREDIT AGREEMENT

APPROVED INVESTORS

Federal National Mortgage Corporation

Federal Home Loan Mortgage Corporation

Government National Mortgage Corporation

Aurora Loan Services

Bear Stearns

Belvedere Trust

Chase

Citicorp

Countrywide Home Loans

CSFB

E*TRADE Mortgage

GMAC

Greenwich Capital

IndyMac

Provident Bank

RFC

Sovereign Bank

Wachovia

Washington Mutual

	

	 	 	 
	

	

SCHEDULE AR

TO 1/05 CREDIT AGREEMENT

AUTHORIZED COMPANY REPRESENTATIVES

LIST EFFECTIVE AS OF JANUARY 4, 2005

	
Name
	
Title
	
Specimen Signature

	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

The above listed Persons are Authorized Company Representatives, as defined in the 1/05 Senior Secured Credit Agreement dated January 4, 2005 (as supplemented, amended or restated from time to time, the “Current Credit Agreement”) among E-Loan, Inc. (the “Company”), JPMorgan Chase Bank, N.A. (“JPMorgan”), as a lender and as agent and representative (the “Agent”) of the other lenders party thereto, and such other lenders (together with JPMorgan, the “Lenders”) as of the effective date of this list stated above. Lenders and the Agent, as well as the Custodian under the 1/05 Custody Agreement dated January 4, 2005 between the Company and JPMorgan, as documents custodian (the
“Custodian”) shall be entitled to rely on this list until it is superseded by a newer list signed and furnished by the Company to the Agent and the Custodian.

The term “Limited” in the above table means that the referenced officer has authority to endorse promissory notes and to execute assignments of Mortgages on behalf of the Company, but is not an authorized Company signer or authorized to bind the Company for other purposes under the Current Credit Agreement or any of the other Facility Papers, as defined in the Current Credit Agreement (although neither the Lenders, the Agent nor the Custodian has or shall have any obligation to the Company and any other Person to determine that any Authorized Representative is authorized to execute any particular instrument or instruments executed by such Authorized Representative.)

	

	 	 	 
	

	

SCHEDULE DQ

TO 1/05 CREDIT AGREEMENT

DISQUALIFIERS

“Disqualifier” means any of the following events; after the occurrence of any Disqualifier, unless the Agent shall have waived it, or declared it cured, in writing, the Collateral Value of the affected Collateral for Borrowing Base purposes shall be (i) limited as specified below (as, for example, in Paragraph
11below) or (ii) where no specific limitation is stated below (as, for example, in Paragraph 1 below), such Collateral Value shall be zero:

	1.  	any event occurs, or is discovered to have occurred, after which the affected Collateral fails to satisfy any element of the definition of “Collateral”.

 

	2.  	in respect of any item of Collateral, for any reason whatsoever any of the Company’s special representations concerning Collateral set forth in Section 8.16 applicable to that type of Collateral shall become untrue, or shall be discovered to be untrue, in any respect that is material to the value or collectibility of that item of Collateral, considered either by itself or together with other items of Collateral.

 

	3.  	any Pledged Loan shall become In Default.

 

	4.  	any Pledged Loan for any reason shall ceased to be covered by a Purchase Commitment acceptable to the Agent and the Company shall fail to cause it to be covered by another Purchase Commitment acceptable to the Agent on or before ten (10) Business Days after such initial coverage is lost;

 

	5.  	five (5) Business Days shall have elapsed after an Advance shall have been funded against the Collateral Value of a Wet Loan without all of the Wet Loan’s Basic Papers having been received by the Custodian; provided that if the Wet Loan’s Basic Papers were received by the Custodian, but were found by the Custodian to have been deficient in some manner which, in the Custodian’s reasonable determination represents a condition correctable by the Company within ten (10) Business Days’ time and the Custodian then returns the Basic Paper to the Company for such corrective action, then such Pledged Loan shall not be disqualified by this provision and the provisions of the Custody Agreement pertaining to the return
by the Custodian of a Basic Paper for correction, collection or other action shall apply.

 

	6.  	for any Pledged Loan, any Basic Paper shall have been sent to the Company or its designee for correction, collection or other action and shall not have been returned to the Custodian on or before ten (10) Business Days after it was so sent to the Company.

 

	7.  	any Pledged Loan shall be assumed by (or otherwise become the liability) of — or the real property securing it shall become owned by — any corporation, partnership or any other entity that is not a natural person or a trust for natural persons.

 

	 
	 	DQ-1 	 
	

	 

	8.  	any Pledged Loan shall be assumed by (or otherwise become the liability of) — or the real property securing it shall become owned by — an Affiliate of the Company or any of its or its Subsidiaries’ directors or officers.

 

	9.  	any Pledged Loan shipped to an investor shall not be paid for or returned to the Custodian or the Agent (whichever shipped it) on or before forty-five (45) days after it is shipped.

 

	10.  	on any day described in the first column of the following table, the sum of the Collateral Values of all Pledged Loans that are Wet Loans shall exceed an amount equal to the percentage of the Aggregate Committed Sum on that day shown in the second column, in which event the aggregate Collateral Value for that day of all Pledged Loans that are Wet Loans shall be the amount that is equal to that percentage of the Aggregate Committed Sum.

 

	
Day (on or before the Termination Date) of a calendar month
	
Maximum Percentage of Aggregate Committed Sum that may be Wet Loans

	
A day that is not one of the first four (4) or last three (3) Business Days
	
 

40%

	
A day that is one of the first four (4) or last three (3) Business Days
	
 

60%

	11.  	on any day, the sum of the Collateral Values of all pledged Alt-A Loans shall exceed an amount equal to an amount equal to ten percent (10%) of the Aggregate Committed Sum on that day — in which event the aggregate Collateral Value for that day of all pledged Alt-A Loans shall be an amount equal to ten percent (10%) of the Aggregate Committed Sum.

 

	12.  	on any day, the sum of the Collateral Values of all pledged Mortgage Loans that are Second Lien Loans or HELOCs shall exceed an amount equal to an amount equal to fifty percent (50%) of the Aggregate Committed Sum on that day — in which event the aggregate Collateral Value for that day of all pledged Mortgage Loans that are Second Lien Loans or HELOCs shall be an amount equal to fifty percent (50%) of the Aggregate Committed Sum.

 

	13.  	on any day, the sum of the Collateral Values of all pledged HLTV Loans shall exceed Five Million Dollars ($5,000,000) — in which event the aggregate Collateral Value for that day of all pledged HLTV Loans shall be Five Million Dollars ($5,000,000).

 

	14.  	any HLTV Loan shall cease to be covered by a specific Purchase Commitment and such coverage shall not be reinstated or replaced within five (5) Business Days thereafter. 

 

	15.  	any Second Lien Loan or HELOC that is required to be covered by a Purchase Commitment pursuant to Section 8.16(hh) and was covered as required shall cease to be covered by a specific Purchase Commitment and such coverage shall not be reinstated or replaced within five (5) Business Days thereafter.

 

	 
	 	DQ-2 	 
	

	 

	16.  	on any day, the sum of the Collateral Values of all pledged Subprime Loans shall exceed an amount equal to an amount equal to fifteen percent (15%) of the Aggregate Committed Sum on that day — in which event the aggregate Collateral Value for that day of all pledged Subprime Loans shall be an amount equal to fifteen percent (15%) of the Aggregate Committed Sum. 

 

	17.  	on any day, the sum of the Collateral Values of all pledged Repurchased Loans shall exceed an amount equal to an amount equal to two and one-half percent (2.5%) of the Aggregate Committed Sum on that day — in which event the aggregate Collateral Value for that day of all pledged Repurchased Loans shall be an amount equal to two and one-half percent (2.5%) of the Aggregate Committed Sum.

 

	18.  	on any day, the sum of the Collateral Values of all Long Warehoused (Aged) Loans (i.e., pledged more than sixty (60) days, but not more than ninety (90) days, before that day) shall exceed an amount equal to twenty percent (20%) of the Aggregate Committed Sum on that day — in which event the aggregate Collateral Value for that day of all Long Warehoused (Aged) Loans shall be an amount equal to twenty percent (20%) of the Aggregate Committed Sum.

 

	19.  	on any day, the sum of the Collateral Values of all Late Pledged (Seasoned) Loans (i.e. originated more than sixty (60) days, but not more than one hundred twenty (120) days, before its Original Pledge Date) shall exceed an amount equal to five percent (5%) of the Aggregate Committed Sum on that day — in which event the aggregate Collateral Value for that day of all Late Pledged (Seasoned) Loans shall be an amount equal to five percent (5%) of the Aggregate Committed Sum.

 

	20.  	more than ninety (90) days shall have elapsed since the Original Pledge Date of any Pledged Loan (except that for Repurchased Loans, the relevant date is the date it was first Pledged to the Agent as a Repurchased Loan.)

 

	21.  	more than forty-five (45) days shall have elapsed since the Original Pledged Date of any Subprime Loan. 

 

	22.  	on any day, the sum of the Collateral Values of all Pledged Loans that are Jumbo Loans (including Super Jumbo Loans) shall exceed an amount equal to the sum of (x) twenty-five percent (25%) of the Aggregate Committed Sum on that day plus (y) ten percent (10%) of the Aggregate Committed Sum minus the sum of the Collateral Values of all Super Jumbo Loans that are Pledged to the Agent on that day — in which event the aggregate Collateral Value for that day of all Pledged Loans that are Jumbo Loans shall be an amount equal to the sum of (x) twenty-five percent (25%) of the Aggregate Committed Sum on that day plus (y) ten percent (10%) of the Aggregate Committed Sum minus the sum of the Collateral Values of all Super Jumbo Loans that are Pledged to the Agent on that day. 

 

	 
	 	DQ-3 	 
	

	 

	23.  	on any day, the sum of the Collateral Values of all Pledged Loans that are Super Jumbo Loans shall exceed an amount equal to ten percent (10%) of the Aggregate Committed Sum on that day — in which event the aggregate Collateral Value for that day of all Pledged Loans that are Super Jumbo Loans shall be an amount equal to ten percent (10%) of the Aggregate Committed Sum.

 

	24.  	on any day, the sum of the Collateral Values of all pledged Single-family Loans that are Non-owner Occupied Loans shall exceed five percent (5%) of the Aggregate Committed Sum on that day — in which event the aggregate Collateral Value for that day of all pledged Single-family Loans that are Non-owner Occupied Loans shall be five percent (5%) of the Aggregate Committed Sum. 

 

	25.  	on any day, the sum of the Collateral Values of all pledged Townhouse or Condo Loans shall exceed twenty percent (20%) of the Aggregate Committed Sum on that day — in which event the aggregate Collateral Value for that day of all pledged Townhouse or Condo Loans shall be twenty percent (20%) of the Aggregate Committed Sum.

 

	26.  	if on any day the weighted average FICO Score of all pledged Alt-A Loans is less than 690, then and until such weighted average FICO Score is 690 or higher, Alt-A Loans with FICO Scores of 690 or less that are Pledged to the Agent on or after that day shall have zero Collateral Value.

 

	27.  	if on any day less than ninety-five percent (95%) of the aggregate Principal Balances of all Pledged Loans — excluding Alt-A Loans, Second Lien Loans, Repurchased Loans, Subprime Loans, Jumbo Loans and Super Jumbo Loans — conform fully to all underwriting and other requirements for purchase by either Fannie Mae or Freddie Mac, then and until at least ninety-five percent (95%) of all such Pledged Loans do so conform, Single-family Loans other than Alt-A Loans, Second Lien Loans, Repurchased Loans, Subprime Loans, Jumbo Loans and Super Jumbo Loans that do not so conform and that are Pledged to the Agent on or after than day shall have zero Collateral Value.

 

	
 

	 	DQ-4 	 
	

	

SCHEDULE EC

TO 1/05 CREDIT AGREEMENT

ELIGIBLE COLLATERAL

“Eligible Collateral” means and includes the following category of Collateral (such category and each of its subcategories being herein collectively called a “Category”) defined and described as follows:

“Eligible Single-family Collateral”, which means an amortizing Prime Loan (including Second Lien Loans), Alt-A Loan or Subprime Loan with an original term to its stated maturity of thirty (30) years or less, or a Prime Loan that is a HELOC, and that satisfies all applicable requirements of this Agreement for a Prime Loan, Alt-A Loan or Subprime Loan as applicable. Unless it is a Second Lien Loan or a HELOC, it must be secured by a first priority Lien on its related Mortgaged Premises, and if it is a Second Lien Loan, or if it is a HELOC that is not secured by a first priority Lien on its
related Mortgaged Premises, it must be secured by a Mortgage that is second in priority to a single first Lien Mortgage Loan. It may be a Repurchased Loan. It may bear interest at a fixed interest rate, at a fluctuating interest rate or at a fixed or fluctuating interest rate for part of its term followed, respectively, by a fluctuating or fixed interest rate for the remainder of its term. Even though it has been Pledged to the Agent and is therefore Collateral, no Single-family Loan shall be Eligible Collateral:

	1.  	unless and until the Custodian has issued its Custodian’s Certification (as defined in the Custody Agreement) concerning it;

 

	2.  	the Mortgaged Premises securing which are a mobile home or manufactured housing;

 

	3.  	that contains or is otherwise subject to any contractual restriction or prohibition on the free transferability of such Mortgage Loan, all Liens securing it and all related rights (other than Legal Requirements requiring notification to its obligor(s) of any transfer of it or of its servicing or administration), either absolutely or as security;

 

	4.  	if any of its owners-mortgagors is a corporation, partnership or any other entity that is not a natural person or a trust for natural persons;

 

	5.  	if any of its owner-mortgagors is an Affiliate of the Company or any of the Company’s or any such Affiliate’s directors or officers;

 

	6.  	whose related Mortgaged Premises are not covered by a Hazard Insurance Policy;

 

	7.  	that is a construction, rehabilitation or commercial loan;

 

	8.  	that is not covered by a Purchase Commitment or Hedge Agreement acceptable to the Agent; 

 

	9.  	that is a Second Lien Loan but is not a Prime Loan;

 

	10.  	that is a HELOC but is not a Prime Loan;

 

	 
	 	EC-1 	 
	

	 

	11.  	that is an Alt-A Loan that is not covered by a Purchase Commitment issued by an Approved Investor or does not comply in any material respect with that Approved Investor’s underwriting guidelines;

 

	12.  	that is an HLTV Loan that is not covered by a Purchase Commitment issued by an Approved Investor or does not comply in any material respect with that Approved Investor’s underwriting guidelines;

 

	13.  	that is a Second Mortgage Loan or a HELOC with a FICO score less than 680; 

 

	14.  	that is an Alt-A Loan with a FICO score less 620;

 

	15.  	that is an Alt-A Loan with a Cumulative Loan-to-value Ratio higher than ninety-five percent (95%); 

 

	16.  	that was originated more than one hundred twenty (120) days before its Original Pledge Date;

 

	17.  	that is In Default;

 

	18.  	in connection with the origination of which a policy of single-premium life insurance on the life of a mortgagor, borrower or guarantor was purchased;

 

	19.  	that (i) is subject to the special Truth-in-Lending disclosure requirements imposed by Section 32 of Regulation Z of the Federal Reserve Board (12 C.F.R. § 226.32) or any similar state or local Law relating to high interest rate credit or lending transactions or (ii) contains any term or condition, or involves any loan origination practice, that (1) has been defined as “predatory”, “covered”, “threshold” or a similar term under any such applicable federal, state or local law, (2) has been expressly categorized as an “unfair” or “deceptive” term, condition or practice in any such applicable federal, state or local law (or the regulations promulgated thereunder) or (3) by the terms of such Law exposes (x) assignees of Mortgage Loans to possible civil or criminal liability or damages or (y) exposes any Lender or the Agent to regulatory action or enforcement
proceedings, penalties or other sanctions.

 

	20.  	that the Company or any Affiliate has previously warehoused with any other Person, whether under a lending arrangement or an arrangement involving a sale in contemplation of a subsequent further sale to (or securitization by) a secondary mortgage market purchaser, whether with or without the Company’s having any conditional repurchase or other recourse obligation, and that was rejected or became ineligible or disqualified to be lent against or purchased and held by such other Person; provided that this provision shall not be construed or applied to disqualify a Pledged Loan simply because it was purchased by the Company out of a pool of Serviced Loans or from a Whole Loan investor for whose Mortgage Loans the Company is a
Servicer pursuant to the Company’s (or an Affiliate’s) obligation or election as Servicer to do so;

 

	21.  	that the Company or any Affiliate sold and transferred, or attempted to sell and transfer, to any other Person; provided that this provision shall not be construed or applied to disqualify a Pledged Loan simply because it was purchased by the Company out of a pool of Serviced Loans or from a Whole Loan investor for whose Mortgage Loans the Company is a Servicer pursuant to the Company’s (or an Affiliate’s) obligation or election as Servicer to do so;

 

	 
	 	EC-2 	 
	

	 

	22.  	that is an HLTV Loan that has a Cumulative Loan-to-Value Ratio greater than one hundred twenty-five percent (125%).

 

	23.  	that is a Prime Loan or an Alt-A Loan and has a Cumulative Loan-to-Value Ratio greater than eighty percent (80%) but is neither guaranteed by VA nor insured by FHA or private mortgage insurance (the Agent and the Custodian may rely on the Company’s representation and warranty in Section 8.16(o) as to whether the condition that such Pledged Loans be so guaranteed or insured is satisfied for any such Pledged Loan.).

 

	24.  	That is a Subprime Loan and has a credit grade under Company Underwriting Guidelines lower then “C”.

 

	25.  	That is a Subprime Loan that does not comply with the underwriting guidelines of a specific Approved Second Lien Loan Investor.

 

	26.  	That is both a Repurchased Loan and a Wet Loan. 

 

	
 

	 	 EC-3	 
	

	

SCHEDULE LC

TO 1/05 CREDIT AGREEMENT

The Lenders’ Committed Sums

(in dollars)

	
Lender
	
Committed Sum

	
JPMorgan
	
$150,000,000

	
Aggregate Committed Sum
	
$150,000,000

	

	 	 	 
	

	

SCHEDULE SD

TO 1/05 CREDIT AGREEMENT

List of Existing Subordinated Debt of the Company

None

	

	 	 	 
	

	

SCHEDULE MAC

TO 1/05 CREDIT AGREEMENT

(Updates of this Schedule are effective only if signed by a Vice President

or more senior officer of JPMorgan Chase Bank, N.A., Agent — no signature

required for initial Schedule attached to 1/05 Credit Agreement)

The Maximum Aggregate Commitment from and after the following dates is as follows:

	
 Maximum Aggregate Commitment
	
From and after
	
Update certified effective by the undersigned officer of JPMorgan Chase Bank, N.A., Agent

	
$150,000,000
	
Effective Date of 1/05 Senior Secured Credit Agreement
	
By:_________________________________ Name:______________________________ Title:_______________________________

	

	 	 	 
	

	

SCHEDULE 8.4

TO 1/05 CREDIT AGREEMENT

MATERIAL ADVERSE CHANGES AND CONTINGENT LIABILITIES

1.    Material adverse changes and material unrealized losses since the Statement Date, as referred to in Section 8.4: None.

	2.  	Contingent liabilities as of the Effective Date, as referred to in Section 8.4: None

	

	 	 	 
	

	

SCHEDULE 8.5

TO 1/05 CREDIT AGREEMENT

PENDING AND THREATENED LITIGATION

(AS OF DECEMBER 31, 2004)

Pending Litigation:

IPO Litigation: (Kassin v. E-LOAN, Inc. et al; Krauss v. E-LOAN, Inc. et al.; Robertson v. E-LOAN, Inc. et al.; Napoli v. E-LOAN, Inc. et al.; Yong Xin Cai v. E-LOAN, Inc. et al.)

E-Loan, Inc. (“E-LOAN”) has been named as a defendant in five related lawsuits filed in the Federal District Court for the Southern District of New York between August 10, 2001 and September 25, 2001. The lawsuits purport to be class actions filed on behalf of the plaintiffs and others similarly situated. They name as defendants E-LOAN, Christian Larsen, Janina Pawlowski, Frank Siskowski, The Goldman Sachs Group, Inc., FleetBoston Robertson Stephens, Inc., Merrill Lynch Pierce Fenner & Smith, Inc., Credit Suisse First Boston Corp. and J.P. Morgan Chase & Co., some of which were involved in E-LOAN’s initial public offering. The complaints have since been consolidated into a single action. The Consolidated Amended Complaint alleges, among other things, that the underwriters of
E-LOAN’s initial public offering violated Section 12(a) of the Securities Act of 1933 by receiving excessive and undisclosed commissions and fees, and by entering into unlawful private agreements with brokers' customers, and that all defendants violated Section 11 of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 under the Securities Exchange Act of 1934 by making material false and misleading statements in E-LOAN’s initial public offering prospectus concerning brokers' commissions and private agreements with brokers' customers. The plaintiffs seek to recover damages on behalf of all those who purchased or otherwise acquired E-LOAN securities during the respective class period. Similar complaints have been filed against over 300 other issuers that have had initial public offerings since 1998 and all such actions have been included in a single coordinated proceeding.  In July 2002, the issuers in the consolidated cases, including E-LOAN, filed motions to dismiss
the consolidated amended complaints for failure to state a claim, which was denied as to E-LOAN and most of the other issuers on February 19, 2003. On October 9, 2002, E-LOAN's individual defendants were dismissed, without prejudice, from the lawsuit, pursuant to a stipulated agreement with the plaintiffs. 

On June 25, 2003, a committee of E-LOAN’s Board of Directors conditionally approved a proposed partial settlement with the plaintiffs in this matter. The settlement would provide, among other things, a release of E-LOAN and of the individual defendants for the conduct alleged in the action to be wrongful in the Amended Complaint. E-LOAN would agree to undertake other responsibilities under the partial settlement, including agreeing to assign away, not assert, or release certain potential claims E-LOAN may have against its underwriters. Any direct financial impact of the proposed settlement is expected to be borne by E-LOAN’s insurers. The committee agreed to approve the settlement subject to a number of conditions, including the participation of a substantial number of other Issuer Defendants in
the proposed settlement, the consent of E-LOAN’s insurers to the settlement, and the completion of acceptable final settlement documentation. Furthermore, the settlement is subject to a hearing on fairness and approval by the Court overseeing the IPO Litigations.  Due to the inherent uncertainties of litigation, and because the settlement has not yet been approved by the Court, the ultimate outcome of the matter cannot be predicted.

	 
	 	 	 
	

	 

Baker v. Century Financial Group et al.

On March 16, 2004, E-LOAN received a Fourth Amended Petition in the case of Baker v. Century Financial Group, Inc., et al. in the Circuit Court of Clay County, Missouri, case no. CV100-004294 CC. The Fourth Amended Petition added E-LOAN (among others) as one of 95 mortgage company defendants in the lawsuit, which was filed as a class action. The complaint alleges that the defendants charged and received fees and charges in violation of Missouri’s Second Mortgage Loan Act, on second mortgage loans made by the defendants to Missouri residents. The complaint seeks certification as a class action, actual and punitive
damages in an unspecified amount, injunctive relief and attorneys’ fees and costs. On April 9, 2004, the court entered an order extending the time for E-LOAN and the other non-bank defendants to file a response to the complaint. E-LOAN has not yet filed a response to the complaint. The case is pending.

Threatened Litigation:

EEOC Claims

On February 19, 2004, Charge of Discrimination claims were filed with the U.S. Equal Employment Opportunity Commission by two former employees of E-LOAN. The claims allege discrimination and violation of Title VII of the Civil Rights Act in connection with the termination of their employment with E-LOAN. E-LOAN filed its response to the charges, denying the allegations. No response has been received from the EEOC.

	

	 	 	 
	

	

SCHEDULE 8.15

TO 1/05 CREDIT AGREEMENT

THE COMPANY’S PLANS

The following is a summary of employee benefits and plans which may constitute Plans, as defined in the Agreement:

Medical, Dental and Disability

E-LOAN offers medical and dental benefit plans and disability insurance to its employees. 

401(k) Plan 

Employees who are at least 18 years of age are eligible to participate in 401(k) on the first day of their employment. E-LOAN's 401(k) plan is a retirement tool available to regular employees. Currently, E-LOAN's 401(k) plan is administered through Invesmart and offers many different funds for employees to choose from. Employees decide how much of their salary they want to put into the plan. Employees may contribute up to either a percentage or flat dollar amount of eligible salary (in whole percentages or dollars). Contributions are deducted automatically from each paycheck. E-LOAN matches up to $1,000 in contributions for employees.

Employee Stock Option Plan 

Regular full-time employees are eligible to participate in E-LOAN'S 1997 Stock Plan, a stock option plan, upon their hire. The amount of stock options to be granted is determined during the hiring process. The option purchase price is determined by the closing stock price on the employee's date of hire. Typically, options become exercisable over a four-year period, with twenty five percent of the options become exercisable upon the 12-month anniversary of hire and the remaining options vesting monthly over the following 36 months. Terms vary for officers and directors.

Executive Bonus Plan

Executives are eligible to receive quarterly and annual bonuses based on various performance goals established by E-LOAN's Compensation Committee.

	

	 	 	 
	

	

SCHEDULE 10.6(h)

TO 1/05 CREDIT AGREEMENT

Permitted Debt

as of January 4, 2005

Permitted Debt of E-Loan, Inc.

	
Lender
	
Amount
	
Expiration Date

	
Greenwich Capital Financial Products
	
$500 million
	
3/14/05

	
Warehouse Bank, a unit of GMAC Bank
	
$ 75 million
	
3/31/05

	
Merrill Lynch Mortgage Capital Inc. (Auto)
	
$ 10 million
	
7/13/05

	
Merrill Lynch Mortgage Capital Inc. (Mrtg)
	
$100 million
	
2/04/05

Permitted Debt of E-Loan Auto Fund One LLC

	
Lender
	
Amount
	
Expiration Date

	
Merrill Lynch Bank USA
	
$800 million
	
7/13/05

Permitted Debt of the Company and its Subsidiaries

Instruments and agreements that the Company and its Subsidiaries enter into from time to time to manage exposure related to interest rate fluctuations, in connection with its hedging policy.

	

	 	 	 
	

	

SCHEDULE 14

TO 1/05 CREDIT AGREEMENT

Lenders’ Addresses for Notice

As of January 4, 2005

(JPMorgan’s address appears in Section 14.)SECURITIES PURCHASE AGREEMENT

      This  Securities  Purchase  Agreement  (this  "Agreement")  is dated as of
January 3, 2005,  among Zone4Play,  Inc., a Nevada  corporation (the "Company"),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").

      WHEREAS,  subject to the terms and  conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below),  and Rule
506  promulgated  thereunder,  the  Company  desires  to  issue  and sell to the
Purchasers,  and the Purchasers,  severally and not jointly,  desire to purchase
from the Company,  in the aggregate,  up to 4 million shares of Common Stock (as
defined below) on the Closing Date (as defined below).

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement,  and for  other  good and  valuable  consideration  the  receipt  and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

      1.1  Definitions.  In  addition  to the terms  defined  elsewhere  in this
Agreement,  for all purposes of this  Agreement,  the  following  terms have the
meanings indicated in this Section 1.1:

      "Action" shall have the meaning ascribed to such term in Section 3.1(j).

      "Affiliate" means any Person that,  directly or indirectly  through one or
more  intermediaries,  controls or is controlled  by or is under common  control
with a Person  as such  terms are used in and  construed  under  Rule 144.  With
respect to a Purchaser,  any investment  fund or managed account that is managed
on a discretionary  basis by the same investment  manager as such Purchaser will
be deemed to be an Affiliate of such Purchaser.

      "Closing"  means the closing of the  purchase and sale of the Common Stock
pursuant to Section 2.1.

      "Closing Date" means the Trading Day when all of the Transaction Documents
have been  executed and delivered by the  applicable  parties  thereto,  and all
conditions precedent to (a) the Purchasers'  obligations to pay the Subscription
Amount  and (b) the  Company's  obligations  to  deliver  the  Shares  have been
satisfied or waived.

      "Closing Price" means on any particular date (a) the last reported closing
price per share of Common Stock on such date on the Trading  Market (as reported
by  Bloomberg  L.P.  ), or (b) if there is no such price on such date,  then the
closing price on the Trading Market on the date nearest  preceding such date (as
reported by Bloomberg L.P., (c) if the Common Stock is not then listed or quoted
on the Trading  Market and if prices for the Common  Stock are then  reported in
the "pink  sheets"  published  by the Pink  Sheets LLC  (formerly  the  National
Quotation Bureau Incorporated (or a similar organization or agency succeeding to
its functions of reporting prices)),  the most recent bid price per share of the
Common  Stock so  reported,  or (d) if the  shares of Common  Stock are not then
publicly traded,  the fair market value of a share of Common Stock as determined
by a qualified independent appraiser selected in good faith by the Purchasers of
a majority in interest of the Shares then outstanding.

<PAGE>

      "Commission" means the United States Securities and Exchange Commission.

      "Common Stock" means the common stock of the Company, $0.001 par value per
share,  and any  securities  into  which  such  common  stock may  hereafter  be
reclassified.

      "Common  Stock  Equivalents"  means any  securities  of the Company or the
Subsidiaries  which  would  entitle  the  holder  thereof to acquire at any time
shares of Common Stock, including without limitation, any debt, preferred stock,
rights,  options,  warrants or other  instrument that is at any time convertible
into or exchangeable  for, or otherwise  entitles the holder thereof to receive,
shares of Common Stock.

      "Company  Counsel" means Sichenzia Ross Friedman Ference LLP, with offices
at 1065 Avenue of the Americas,  New York, New York 10018,  Tel: (212) 930-9700,
Fax: (212) 930-9725.

      "Disclosure  Schedules"  means the  Disclosure  Schedules  of the  Company
attached hereto and incorporated herein.

      "Effective  Date" means the date that a  Registration  Statement  is first
declared effective by the Commission.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

      "Intellectual  Property  Rights"  shall have the meaning  ascribed to such
term in Section 3.1(o).

      "Liens" means a lien,  charge,  security interest,  encumbrance,  right of
first refusal, preemptive right or other similar restriction.

      "Material  Adverse Effect" shall have the meaning ascribed to such term in
Section 3.1(b).

      "Material Permits" shall have the meaning ascribed to such term in Section
3.1(m).

      "OTCBB" means the Over-The-Counter Bulletin Board.

      "Per Share Purchase Price" equals $1.50, subject to adjustment for reverse
and forward stock splits, stock dividends,  stock combinations and other similar
transactions of the Common Stock that occur after the date of this Agreement.

      "Person"  means  an  individual  or   corporation,   partnership,   trust,
incorporated or  unincorporated  association,  joint venture,  limited liability
company,  joint stock company,  government (or an agency or subdivision thereof)
or other legal entity of any kind.

      "Proceeding"  means an action,  claim,  suit,  investigation or proceeding
(including,  without limitation, an investigation or partial proceeding, such as
a deposition).

                                       2
<PAGE>

      "Registration  Statement"  means  a  registration  statement  meeting  the
requirements  set forth in the  Registration  Rights  Agreement and covering the
resale by the Purchasers of the Shares or a portion  thereof (as provided for in
the Registration Rights Agreement).

      "Registration  Rights Agreement" means the Registration  Rights Agreement,
dated  as of the date of this  Agreement,  by and  among  the  Company  and each
Purchaser, in the form of Exhibit A hereto.

      "Required  Approvals"  shall  have the  meaning  ascribed  to such term in
Section 3.1(e).

      "Rule 144" means Rule 144  promulgated by the  Commission  pursuant to the
Securities  Act, as such Rule may be amended  from time to time,  or any similar
rule or regulation  hereafter adopted by the Commission having substantially the
same effect as such Rule.

      "SEC  Reports"  shall have the  meaning  ascribed  to such term in Section
3.1(h).

      "Securities Act" means the Securities Act of 1933, as amended.

      "Shares"  means the  shares of Common  Stock  issued or  issuable  to each
Purchaser pursuant to this Agreement.

      "Subscription  Amount" means, as to each Purchaser,  the amounts set forth
below such Purchaser's  signature block on the signature page hereto,  in United
States dollars and in immediately available funds.

      "Subsidiary" shall mean the subsidiaries of the Company, if any, set forth
on Schedule 3.1(a).

      "TRP"  shall mean  Thelen  Reid & Priest LLP with  offices  located at 875
Third Avenue, New York, New York 10022.

      "Trading Day" means a day on which the Common Stock is traded on a Trading
Market.

      "Trading Market" means each of the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question: OTCBB,
the American Stock Exchange,  the New York Stock  Exchange,  the Nasdaq National
Market or the Nasdaq SmallCap Market.

      "Transaction  Documents" means this Agreement and the Registration  Rights
Agreement and any other documents or agreements  executed in connection with the
transactions contemplated hereunder.

                                  ARTICLE II.
                                PURCHASE AND SALE

      2.1 Closing.  On the Closing Date, each and every Purchaser shall purchase
from the Company,  severally and not jointly with the other Purchasers,  and the
Company shall issue and sell to each Purchaser,  (a) a number of Shares equal to
such  Purchaser's  Subscription  Amount divided by the Per Share Purchase Price.
The  aggregate  Subscription  Amounts for Shares sold  hereunder  shall be up to
$6,000,000.  Upon satisfaction or waiver of the conditions set forth in Sections
2.2(a),  (b), (c) and (d), the Closing shall occur at the offices of TRP or such
other location as the parties shall mutually agree.

                                       3
<PAGE>

      2.2 Deliveries; Closing Conditions.

            (a) On the Closing  Date,  the Company  shall deliver or cause to be
delivered to each Purchaser the following:

                  (i) this Agreement duly executed by the Company;

                  (ii) a copy of duly executed irrevocable  instructions,  which
            shall  be  satisfactory  in  form  and  substance  to  each  of  the
            Purchasers, to the Company's transfer agent instructing the transfer
            agent to deliver, on an expedited basis, a certificate  evidencing a
            number  of  Shares  equal to such  Purchaser's  Subscription  Amount
            divided by the Per Share Purchase  Price,  registered in the name of
            such Purchaser;

                  (iii) the  Registration  Rights Agreement duly executed by the
            Company; and

                  (iv) a  legal  opinion  of  Company  Counsel,  in the  form of
            Exhibit B attached hereto.

            (b) On the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:

                  (i) this Agreement duly executed by such Purchaser;

                  (ii) such Purchaser's  Subscription Amount by wire transfer to
            the account as specified in writing by the Company; and

                  (iii) the Registration  Rights Agreement duly executed by such
            Purchaser.

            (c) All  representations and warranties of the other party contained
herein shall remain true and correct in all material  respects as of the Closing
Date and all covenants of the other party shall have been performed if due prior
to such date.

            (d) From the date hereof to the Closing Date,  trading in the Common
Stock shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company,  which suspension shall
be terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities  generally shall not have been suspended or limited on any
Trading  Market,  nor shall a general  commercial  banking  moratorium have been
declared  either by the United States or New York State  authorities,  nor shall
there have occurred any material  outbreak or escalation of hostilities or other
national or  international  calamity of such  magnitude in its effect on, or any
material  adverse  change in, any financial  market which,  in each case, in the
reasonable  judgment of Purchasers  representing a majority of the  Subscription
Amounts  made by all  Purchasers,  makes  it  impracticable  or  inadvisable  to
purchase the Shares at the Closing.

                                       4
<PAGE>

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of the Company. Except as otherwise set
forth  under the  corresponding  section of the  Disclosure  Schedules  attached
hereto,  which Disclosure  Schedules shall be deemed a part hereof,  the Company
hereby  represents and warrants as of the date hereof and as of the Closing Date
to each Purchaser as follows:

            (a) Subsidiaries. All of the direct and indirect Subsidiaries of the
Company  are set  forth on  Schedule  3.1(a).  Except  for Mix TV,  in which the
Company owns a 50.1% interest, the Company owns, directly or indirectly,  all of
the capital stock or other equity interests of each Subsidiary free and clear of
any Liens,  and all the issued and  outstanding  shares of capital stock of each
Subsidiary  are validly  issued and are fully paid,  non-assessable  and free of
preemptive and similar rights to subscribe for or purchase such  securities.  If
the Company has no subsidiaries, then references in the Transaction Documents to
the Subsidiaries will be disregarded.

            (b)  Organization  and  Qualification.  Each of the  Company and the
Subsidiaries  is an entity duly  incorporated  or otherwise  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
incorporation  or  organization  (as  applicable),  with the requisite power and
authority to own and use its  properties and assets and to carry on its business
as currently  conducted  except where failure to be so  qualified,  organized or
have such  power  and  authority  would not  reasonably  be  expected  to have a
Material  Adverse  Effect  (as  defined  below).  Neither  the  Company  nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate  or articles of  incorporation,  bylaws or other  organizational  or
charter documents. Each of the Company and the Subsidiaries is duly qualified to
conduct  business  and is in good  standing  as a foreign  corporation  or other
entity in each  jurisdiction  in which the nature of the  business  conducted or
property  owned by it makes  such  qualification  necessary,  except  where  the
failure to be so  qualified or in good  standing,  as the case may be, would not
have or reasonably be expected to result in (i) a material adverse effect on the
legality,  validity  or  enforceability  of  any  Transaction  Document,  (ii) a
material  adverse  effect on the  results of  operations,  assets,  business  or
financial  condition of the Company and the  Subsidiaries,  taken as a whole, or
(iii) a  material  adverse  effect on the  Company's  ability  to perform in any
material  respect  on a timely  basis  its  obligations  under  any  Transaction
Document (any of (i), (ii) or (iii), a "Material  Adverse  Effect"),  and to the
knowledge  of the  Company,  no  Proceeding  has  been  instituted  in any  such
jurisdiction  revoking,  limiting or curtailing  or seeking to revoke,  limit or
curtail such power and authority or qualification.

            (c)  Authorization;  Enforcement.  The  Company  has  the  requisite
corporate  power and  authority  to execute and deliver  this  Agreement  and to
consummate the transactions contemplated by each of the Transaction Documents to
which it is a party and otherwise to carry out its obligations  thereunder.  The
execution,  delivery and  performance by the Company of each of the  Transaction
Documents to which it is a party and the  consummation by it of the transactions
contemplated  thereby have been duly  authorized by all necessary  action on the
part of the  Company  and no  further  action  is  required  by the  Company  in
connection therewith other than in connection with the Required Approvals.  Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly  executed by the Company and, when  delivered in accordance  with the
terms hereof,  will constitute the valid and legally  binding  obligation of the
Company  enforceable against the Company in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization,  moratorium and
other laws of general  application  affecting  enforcement of creditors'  rights
generally,  (ii) as limited by laws  relating  to the  availability  of specific
performance,  injunctive  relief or other  equitable  remedies  and (iii) as the
rights to  indemnification  or  contribution  hereunder  and  thereunder  may be
limited by applicable law.

                                       5
<PAGE>

            (d) No Conflicts.  The  execution,  delivery and  performance by the
Company of the  Transaction  Documents to which it is a party,  the issuance and
sale of the Shares and the consummation by the Company of the other transactions
contemplated  thereby  do not and  will not (i)  conflict  with or  violate  any
provision  of the  Company's  or any  Subsidiary's  certificate  or  articles of
incorporation,  bylaws or other  organizational  or charter  documents,  or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default)  under,  result in the creation of any Lien
upon any of the properties or assets of the Company or any  Subsidiary,  or give
to others any rights of  termination,  amendment,  acceleration  or cancellation
(with or  without  notice,  lapse of time or both)  of,  any  agreement,  credit
facility,  debt or other  instrument  evidencing a Company or Subsidiary debt or
otherwise or other  understanding  to which the Company or any  Subsidiary  is a
party  or by  which  any  property  or  material  asset  of the  Company  or any
Subsidiary is bound, or (iii) subject to the Required  Approvals,  conflict with
or  result  in a  violation  of any  law,  rule,  regulation,  order,  judgment,
injunction,  decree or other restriction of any court or governmental  authority
to which the Company or a  Subsidiary  is subject  (including  federal and state
securities  laws and  regulations),  or by which  any  property  or asset of the
Company or a Subsidiary is bound,  or (iv) violate the terms of any agreement by
which the Company or any  Subsidiary  is bound or to which any property or asset
of the Company or any Subsidiary is bound; except in the case of each of clauses
(ii), (iii) and (iv), such as would not have or reasonably be expected to result
in a Material Adverse Effect.

            (e) Filings,  Consents and Approvals. The Company is not required to
obtain any consent,  waiver,  authorization  or order of, give any notice to, or
make any filing or registration  with, any court or other federal,  state, local
or  other  governmental  authority  or  other  Person  in  connection  with  the
execution, delivery and performance by the Company of the Transaction Documents,
other than (i) filings required pursuant to Section 4.4 of this Agreement,  (ii)
the  filing  with  the   Commission  of  the   Registration   Statement,   (iii)
application(s)  to each applicable  Trading Market for the listing of the Shares
for trading thereon in the time and manner required thereby,  (iv) the filing of
Form D with the  Commission  and such  filings as are  required to be made under
applicable  state  securities  laws,  (v) any other filings  required to be made
pursuant to the terms of the Registration Rights Agreement, and (vi) the notices
set forth on Schedule 3.1(e) (collectively, the "Required Approvals").

                                       6
<PAGE>

            (f)  Issuance  of the Shares.  The Shares have been duly  authorized
and,  when issued and paid for in accordance  with the terms of the  Transaction
Documents,  will be duly and validly issued, fully paid and nonassessable,  free
and clear of all  Liens  imposed  by the  Company  other  than  restrictions  on
transfer provided for in the Transaction  Documents and under applicable federal
and state  securities  laws.  The Company has reserved from its duly  authorized
capital stock the maximum number of shares of Common Stock issuable  pursuant to
this Agreement.

            (g)  Capitalization.  Since  September 30, 2004, the Company has not
issued any capital stock other than  pursuant to the exercise of employee  stock
options under the Company's stock option plans, the issuance of shares of Common
Stock to employees  pursuant to the Company's  employee  stock purchase plan and
pursuant to the conversion or exercise of outstanding  Common Stock  Equivalents
outstanding.  No Person has any right of first refusal,  preemptive right, right
of  participation,  or any  similar  right to  participate  in the  transactions
contemplated  by the Transaction  Documents.  Except as a result of the purchase
and sale of the Shares,  and except for warrants and shares  issuable to certain
advisors listed on Schedule 3.1(g), there are no outstanding options,  warrants,
script rights to subscribe to, calls or commitments of any character  whatsoever
relating  to,  or  securities,   rights  or  obligations   convertible  into  or
exchangeable  for, or giving any Person any right to  subscribe  for or acquire,
any  shares  of Common  Stock,  or  contracts,  commitments,  understandings  or
arrangements  by which the Company or any  Subsidiary  is or may become bound to
issue additional shares of Common Stock, or securities or rights  convertible or
exchangeable  into shares of Common Stock. The issue and sale of the Shares will
not obligate the Company to issue shares of Common Stock or other  securities to
any Person  (other  than the  Purchasers)  and will not result in a right of any
holder of Company  securities  to adjust the exercise,  conversion,  exchange or
reset  price under such  securities.  All of the  outstanding  shares of capital
stock of the Company are validly issued, fully paid and nonassessable, have been
issued in compliance  with all federal and state  securities  laws,  and none of
such  outstanding  shares were issued in violation of any  preemptive  rights or
similar rights to subscribe for or purchase  securities.  No further approval or
authorization  of any  shareholder,  the Board of  Directors  of the  Company or
others is required for the issuance and sale of the Shares.  Except as disclosed
in the SEC Reports, there are no shareholders  agreements,  voting agreements or
other similar  agreements  with respect to the Company's  capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any
of the Company's shareholders.

            (h) SEC  Reports;  Financial  Statements.  Except  as set  forth  in
Schedule  3.1(h),  the Company has filed all reports  required to be filed by it
under the Exchange Act,  including without  limitation,  those filed pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (the
foregoing materials, including the exhibits thereto, being collectively referred
to  herein  as the "SEC  Reports")  on a timely  basis or has  received  a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension.  As of their respective dates, the SEC Reports
complied in all material  respects with the requirements of the Exchange Act and
the rules and regulations of the Commission promulgated thereunder,  and none of
the SEC Reports,  when filed,  contained any untrue statement of a material fact
or omitted to state a material fact  required to be stated  therein or necessary
in order to make the statements  therein,  in light of the  circumstances  under
which they were made, not  misleading.  The financial  statements of the Company
included  in the SEC Reports  comply as to form in all  material  respects  with
applicable  accounting  requirements  and  the  rules  and  regulations  of  the
Commission  with  respect  thereto  as in  effect  at the time of  filing.  Such
financial  statements  have been  prepared  in  accordance  with  United  States
generally  accepted  accounting  principles applied on a consistent basis during
the periods  involved  ("GAAP"),  except as may be  otherwise  specified in such
financial  statements or the notes thereto and except that  unaudited  financial
statements may not contain all footnotes required by GAAP, and fairly present in
all material respects the financial position of the Company and its consolidated
subsidiaries  as of and for the dates thereof and the results of operations  and
cash  flows  for the  periods  then  ended,  subject,  in the case of  unaudited
statements, to normal, immaterial, year-end audit adjustments.

                                       7
<PAGE>

            (i)  Material   Changes.   Since   December  31,  2003,   except  as
specifically  disclosed  in the SEC  Reports,  (i)  there  has  been  no  event,
occurrence or development  that has had or that would  reasonably be expected to
result in a Material  Adverse  Effect,  (ii) the  Company has not  incurred  any
liabilities (contingent or otherwise) other than (A) liabilities incurred in the
ordinary  course of business  consistent  with past practice and (B) liabilities
not required to be reflected in the Company's  financial  statements pursuant to
GAAP or required to be disclosed in filings made with the Commission,  (iii) the
Company  has not  altered  its method of  accounting,  (iv) the  Company has not
declared or made any dividend or  distribution  of cash or other property to its
shareholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its  capital  stock and (v) the  Company has not issued any equity
securities to any officer,  director or Affiliate,  except  pursuant to existing
Company  stock  option  plans.  The  Company  does not have  pending  before the
Commission any request for confidential treatment of information.

            (j)  Litigation.  There  is no  action,  suit,  inquiry,  notice  of
violation or proceeding pending or, to the knowledge of the Company, threatened,
nor,  to  the  knowledge  of  the  Company,  is  any  investigation  pending  or
threatened,  against the  Company,  any  Subsidiary  or any of their  respective
properties  before or by any court,  arbitrator,  governmental or administrative
agency or  regulatory  authority  (federal,  state,  county,  local or  foreign)
(collectively,  an "Action")  which (i)  challenges  the  legality,  validity or
enforceability of any of the Transaction  Documents or the Shares or (ii) would,
if there were an unfavorable decision,  have or reasonably be expected to result
in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor to the
knowledge of the Company,  any director or officer  thereof,  is or has been the
subject of any Action  involving  a claim of  violation  of or  liability  under
federal or state  securities laws or a claim of breach of fiduciary duty.  There
has not been,  and to the  knowledge of the Company,  there is not pending,  any
investigation  by the Commission  involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration  statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.

            (k) Labor  Relations.  No material  labor dispute  exists or, to the
knowledge of the Company,  is imminent  with respect to any of the  employees of
the Company or any Subsidiary  which would reasonably be expected to result in a
Material Adverse Effect.

                                       8
<PAGE>

            (l)  Compliance.  Neither the Company nor any  Subsidiary  (i) is in
default  under or in violation  of (and no event has occurred  that has not been
waived that, with notice or lapse of time or both,  would result in a default by
the Company or any  Subsidiary  under),  nor has the  Company or any  Subsidiary
received  written notice of a claim that it is in default under,  any indenture,
loan or credit  agreement or any other  agreement or instrument to which it is a
party or by  which it or any of its  properties  is bound  (whether  or not such
default or violation has been waived),  (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is in violation of any statute,
rule or regulation of any governmental  authority,  including without limitation
all foreign, federal, state and local laws applicable to its business, except in
each case as would not have a Material Adverse Effect.

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates,  authorizations  and permits  issued by the  appropriate  federal,
state,  local or foreign  regulatory  authorities  necessary  to  conduct  their
respective businesses as described in the SEC Reports,  except where the failure
to possess such permits  would not have or reasonably be expected to result in a
Material Adverse Effect  ("Material  Permits"),  and neither the Company nor any
Subsidiary  has  received  any  written  notice of  proceedings  relating to the
revocation or modification of any Material Permit.

            (n) Title to Assets.  The  Company and the  Subsidiaries  have good,
marketable  and fee  simple  title to all real  property  owned by them  that is
material to the business of the Company and the  Subsidiaries and valid title in
all  personal  property  owned by them that is material  to the  business of the
Company and the Subsidiaries,  in each case free and clear of all Liens,  except
for Liens as do not  materially  affect  the value of such  property  and do not
materially  interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries and Liens for the payment of federal,  state
or other  taxes,  the  payment of which is  neither  delinquent  nor  subject to
penalties.  Any real property and facilities held under lease by the Company and
the Subsidiaries are held by them under valid, subsisting and enforceable leases
and no landlord for any such real  property or facility has notified the Company
or any such Subsidiary that any of them are in default under any such lease.

            (o) Patents and Trademarks.  The Company and the Subsidiaries  have,
or have rights to use, all patents, patent applications,  trademarks,  trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights  necessary  or  material  for use in  connection  with  their  respective
businesses  as  described  in the SEC  Reports  and which the failure to so have
would have a Material Adverse Effect (collectively,  the "Intellectual  Property
Rights").  Neither the Company nor any  Subsidiary has received a written notice
that the  Intellectual  Property  Rights used by the  Company or any  Subsidiary
violates or  infringes  upon the rights of any Person.  To the  knowledge of the
Company,  all such Intellectual  Property Rights are enforceable and there is no
known  existing  infringement  by  another  Person  of any  of the  Intellectual
Property Rights of others which would have a Material Adverse Effect.

            (p)  Insurance.  The  Company  and the  Subsidiaries  are insured by
insurers of recognized  financial  responsibility  against such losses and risks
and in such  amounts as the Company  believes  are prudent and  customary in the
businesses in which the Company and the  Subsidiaries  are engaged.  Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to
renew its existing  insurance  coverage as and when such coverage  expires or to
obtain  similar  coverage from similar  insurers as may be necessary to continue
its business without a significant increase in cost.

                                       9
<PAGE>

            (q) Transactions With Affiliates and Employees.  Except as set forth
in the SEC Reports and in Schedule 3.1(q),  none of the officers or directors of
the Company and, to the  knowledge of the Company,  none of the employees of the
Company  is  presently  a party  to any  transaction  with  the  Company  or any
Subsidiary  (other than for  services as  employees,  officers  and  directors),
including  any  contract,  agreement  or  other  arrangement  providing  for the
furnishing  of  services  to or by,  providing  for  rental of real or  personal
property to or from,  or  otherwise  requiring  payments to or from any officer,
director or such  employee or, to the  knowledge  of the Company,  any entity in
which any officer,  director, or any such employee has a substantial interest or
is an officer,  director,  trustee or partner, in each case in excess of $60,000
other than (i) for payment of salary or consulting  fees for services  rendered,
(ii)  reimbursement for expenses incurred on behalf of the Company and (iii) for
other  benefits  under  benefit  or  pension  plans  sponsored  by the  Company,
including without limitation stock option agreements under any stock option plan
of the Company.

            (r) Sarbanes-Oxley;  Internal Accounting Controls. The Company is in
material  compliance with all provisions of the Sarbanes-Oxley Act of 2002 which
are  applicable  to it as of  the  Closing  Date.  To  the  extent  required  by
applicable law, the Company and the  Subsidiaries  maintain a system of internal
accounting  controls  sufficient  to  provide  reasonable   assurance  that  (i)
transactions  are executed in accordance with  management's  general or specific
authorizations,   (ii)   transactions   are  recorded  as  necessary  to  permit
preparation  of financial  statements  in  conformity  with GAAP and to maintain
asset  accountability,  (iii) access to assets is permitted  only in  accordance
with  management's  general or  specific  authorization,  and (iv) the  recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate  action is taken with respect to any  differences.  To
the extent required by applicable  law, the Company has  established  disclosure
controls  and  procedures  (as  defined  in  Exchange  Act Rules  13a-15(e)  and
15d-15(e)) for the Company and designed such disclosure  controls and procedures
to ensure that  material  information  relating to the  Company,  including  its
Subsidiaries,  is made known to the  certifying  officers by others within those
entities.  To the extent  required by applicable  law, the Company's  certifying
officers  have  evaluated  the  effectiveness  of  the  Company's  controls  and
procedures  as of the end of the  period  covered  by its  most  recently  filed
periodic  report  under  the  Exchange  Act (the  date of such  evaluation,  the
"Evaluation  Date").  To the extent  required  by  applicable  law,  the Company
presented in its most recently filed periodic  report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date and
since the  Evaluation  Date,  there  have  been no  significant  changes  in the
Company's internal control over financial  reporting (as defined in Exchange Act
Rules  13a-15(f) and 15d-15(f)) or, to the best of the Company's  knowledge,  in
other factors that could significantly affect the Company's internal controls.

            (s) Certain Fees.  Other than as set forth in footnote 1 in Schedule
3.1(g),  no brokerage or finder's fees or commissions  are or will be payable by
the Company or any  Subsidiary to any broker,  financial  advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the  transactions  contemplated  by  this  Agreement.  To the  knowledge  of the
Company,  the  Purchasers  shall have no obligation  with respect to any fees or
with  respect to any claims  made  against  the Company by or on behalf of other
Persons  for  fees of a type  contemplated  in this  Section  that may be due in
connection with the transactions contemplated by this Agreement.

                                       10
<PAGE>

            (t) Private  Placement.  Assuming  the  accuracy  of the  Purchasers
representations  and warranties set forth in Section 3.2, no registration  under
the  Securities  Act is  required  for the offer  and sale of the  Shares by the
Company to the Purchasers as contemplated  hereby.  The issuance and sale of the
Shares  hereunder does not  contravene the rules and  regulations of the Trading
Market.

            (u) Investment Company.  The Company is not, and is not an Affiliate
of, and immediately  after receipt of payment for the Shares,  will not be or be
an Affiliate of, an  "investment  company"  within the meaning of the Investment
Company Act of 1940, as amended.

            (v) Registration Rights. Except as set forth in Schedule 3.1 (v), no
person has any right to cause the Company to effect the  registration  under the
Securities Act of any securities of the Company.

            (w) Listing and Maintenance Requirement.  The Company's Common Stock
is registered pursuant to Section 12(g) of the Exchange Act, and the Company has
taken no action  designed  to, or which to its  knowledge  is likely to have the
effect of,  terminating the  registration of the Common Stock under the Exchange
Act nor has the Company received any written notification that the Commission is
contemplating terminating such registration.

            (x) Application of Takeover  Protections.  The Company and its Board
of Directors have taken no action, to render  inapplicable any laws of its state
of  incorporation  that is or could become  applicable  to the  Purchasers  as a
result  of the  Purchasers  and the  Company  fulfilling  their  obligations  or
exercising  their  rights under the  Transaction  Documents,  including  without
limitation the Company's issuance of the Shares and the Purchasers' ownership of
the Shares  and there is no control  share  acquisition,  business  combination,
poison pill  (including  any  distribution  under a rights  agreement)  or other
similar anti takeover provision under the Company's Certificate of Incorporation
(or similar charter documents).

            (y)  Disclosure.  Except as set forth in Schedule  3.1(y) and except
for  terms of the  Transaction  Documents  and the  fact  that  the  Company  is
considering  consummating the  transactions  contemplated  therein,  the Company
confirms that, neither the Company nor any other Person acting on its behalf has
provided any of the  Purchasers or their agents or counsel with any  information
that  constitutes or might  constitute  material,  non-public  information.  The
Company  understands and confirms that the Purchasers will rely on the foregoing
representations  and  covenants in effecting  transactions  in securities of the
Company.  All disclosure provided to the Purchasers  regarding the Company,  its
business and the transactions  contemplated  hereby,  including the Schedules to
this  Agreement,  furnished  by or on behalf of the Company  with respect to the
representations  and warranties made herein are true and correct with respect to
such representations and warranties and do not contain any untrue statement of a
material fact or omit to state any material fact  necessary in order to make the
statements  made therein,  in light of the  circumstances  under which they were
made,  not  misleading.  The Company  acknowledges  and agrees that no Purchaser
makes  or has  made  any  representations  or  warranties  with  respect  to the
transactions  contemplated  hereby  other than those  specifically  set forth in
Section 3.2 hereof.

                                       11
<PAGE>

            (z) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations  and warranties  set forth in Section 3.2,  neither the Company,
nor any of its  affiliates,  nor any Person  acting on its or their  behalf has,
directly or  indirectly,  made any offers or sales of any  security or solicited
any  offers to buy any  security,  under  circumstances  that  would  cause this
offering of the Shares to be integrated  with prior offerings by the Company for
purposes  of  the  Securities  Act  or  any  applicable   shareholder   approval
provisions,  including,  without limitation,  under the rules and regulations of
the Trading Market.

            (aa) Solvency. Based on the financial condition of the Company as of
the  Closing  Date after  giving  effect to the  receipt  by the  Company of the
proceeds from the sale of the Shares hereunder,  (i) the Company's fair saleable
value of its assets exceeds the amount that will be required to be paid on or in
respect of the Company's  existing debts and other liabilities  (including known
contingent  liabilities)  as they  mature;  (ii)  the  Company's  assets  do not
constitute  unreasonably  small capital to carry on its business for the current
fiscal  year as now  conducted  and as proposed to be  conducted  including  its
capital needs taking into account the  particular  capital  requirements  of the
business  conducted by the  Company,  and  projected  capital  requirements  and
capital  availability  thereof;  and (iii) the current cash flow of the Company,
together with the proceeds the Company would  receive,  were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be  sufficient to pay all amounts on or in respect of its debt when such amounts
are  required to be paid.  The Company does not intend to incur debts beyond its
ability to pay such debts as they  mature  (taking  into  account the timing and
amounts of cash to be payable on or in respect of its debt).

            (bb) Form SB-2 Eligibility.  The Company is eligible to register the
resale of its Common Stock by the Purchasers under Form SB-2  promulgated  under
the Securities Act.

            (cc) Taxes.  Except for matters that would not,  individually  or in
the  aggregate,  have or reasonably be expected to result in a Material  Adverse
Effect, the Company and each Subsidiary has filed all necessary  federal,  state
and foreign  income and  franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.

            (dd) General Solicitation. Neither the Company nor any person acting
on behalf of the  Company  has  offered or sold any of the Shares by any form of
general solicitation or general advertising.  The Company has offered the Shares
for sale only to the Purchasers and certain other "accredited  investors" within
the meaning of Rule 501 under the Securities Act.

            (ee) Foreign  Corrupt  Practices.  Neither the  Company,  nor to the
knowledge  of the  Company,  any agent or other  person  acting on behalf of the
Company,  has (i) directly or  indirectly,  used any corrupt  funds for unlawful
contributions,  gifts,  entertainment  or other  unlawful  expenses  related  to
foreign  or  domestic  political  activity,  (ii) made any  unlawful  payment to
foreign or  domestic  government  officials  or  employees  or to any foreign or
domestic  political  parties or campaigns from corporate funds,  (iii) failed to
disclose  fully any  contribution  made by the  Company  (or made by any  person
acting on its behalf of which the  Company is aware)  which is in  violation  of
law, or (iv)  violated in any  material  respect  any  provision  of the Foreign
Corrupt Practices Act of 1977, as amended.

                                       12
<PAGE>

            (ff)  Auditor.  The  Company's  auditors  are set forth on  Schedule
3.1(ff) of the Disclosure Schedule.  To the Company's  knowledge,  such auditors
are independent auditors as required by the Securities Act.

            (gg) Acknowledgment  Regarding  Purchasers'  Purchase of Shares. The
Company further  acknowledges that no Purchaser is acting as a financial advisor
or  fiduciary of the Company (or in any similar  capacity)  with respect to this
Agreement and the transactions contemplated hereby.

      3.2  Representations  and  Warranties of the  Purchasers.  Each  Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

            (a)  Organization;  Authority.  Such  Purchaser  is an  entity  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its organization with full right, corporate or partnership power
and authority to enter into and to consummate the  transactions  contemplated by
the Transaction Documents and otherwise to carry out its obligations thereunder.
The execution,  delivery and  performance by such Purchaser of the  transactions
contemplated  by this  Agreement  have been  duly  authorized  by all  necessary
corporate  or similar  action on the part of such  Purchaser.  Each  Transaction
Document to which it is party has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Purchaser,  enforceable against
it in  accordance  with its terms,  except  (i) as limited by general  equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general  application  affecting  enforcement of creditors'  rights
generally,  (ii) as limited by laws  relating  to the  availability  of specific
performance,  injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

            (b) Investment  Intent.  Such Purchaser  understands that the Shares
are "restricted  securities"  and have not been registered  under the Securities
Act or any  applicable  state  securities  law and is  acquiring  the  Shares as
principal for its own account for  investment  purposes only and not with a view
to or for  distributing  or reselling  such Shares or any part  thereof,  has no
present  intention of distributing  any of such Shares and has no arrangement or
understanding  with any other persons  regarding the distribution of such Shares
(this  representation  and warranty not limiting such Purchaser's  right to sell
the Shares  pursuant to the  Registration  Statement or otherwise in  compliance
with applicable  federal and state securities laws). Such Purchaser is acquiring
the Shares hereunder in the ordinary course of its business. Such Purchaser does
not have any agreement or understanding, directly or indirectly, with any Person
to distribute any of the Shares.

            (c)  Purchaser  Status.  At the time such  Purchaser was offered the
Shares, it was, and at the date hereof it is an "accredited  investor" under the
Securities Act.

                                       13
<PAGE>

            (d) Experience of Such Purchaser.  Such  Purchaser,  either alone or
together  with its  representatives,  has  such  knowledge,  sophistication  and
experience in business and  financial  matters so as to be capable of evaluating
the merits and risks of the  prospective  investment  in the Shares,  and has so
evaluated  the merits and risks of such  investment.  Such  Purchaser is able to
bear the economic  risk of an investment in the Shares and, at the present time,
is able to afford a complete loss of such investment.

            (e) General  Solicitation.  Such  Purchaser  is not  purchasing  the
Shares as a result of any advertisement,  article, notice or other communication
regarding the Shares  published in any  newspaper,  magazine or similar media or
broadcast  over  television  or radio or  presented  at any seminar or any other
general solicitation or general advertisement.

            (f)  Purchasers  Acting  Individually.   Such  Purchaser  is  acting
severally as an individual  and is not acting  together with any other Person or
other Purchaser as a group.

            (g) Opportunity to Conduct Due Diligence. Such Purchaser was granted
the opportunity to conduct due diligence prior to entering into the transactions
contemplated by this Agreement.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

            (a) Each of the Purchasers  hereby  acknowledges that the Shares may
only be disposed of in  compliance  with state and federal  securities  laws. In
connection  with any  transfer of Shares  other than  pursuant  to an  effective
registration  statement  or Rule 144,  to the  Company or to an  Affiliate  of a
Purchaser or in connection with a pledge as contemplated in Section 4.1(b),  the
Company may require the transferor  thereof to provide to the Company an opinion
of counsel selected by the transferor and reasonably  acceptable to the Company,
the form and substance of such opinion shall be reasonably  satisfactory  to the
Company, to the effect that such transfer does not require  registration of such
transferred  Shares  under  the  Securities  Act.  As a  condition  of any  such
transfer, any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement, as applicable.

            (b) The Purchasers  agree to the imprinting,  so long as is required
by this Section 4.1(b), of a legend on any of the Shares in the following form:

            THESE  SHARES  HAVE NOT BEEN  REGISTERED  WITH  THE  SECURITIES  AND
            EXCHANGE  COMMISSION  OR THE  SECURITIES  COMMISSION OF ANY STATE IN
            RELIANCE UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE SECURITIES
            ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"),  AND,  ACCORDINGLY,
            MAY  NOT  BE  OFFERED  OR  SOLD  EXCEPT  PURSUANT  TO  AN  EFFECTIVE
            REGISTRATION  STATEMENT  UNDER THE  SECURITIES ACT OR PURSUANT TO AN
            AVAILABLE  EXEMPTION  FROM, OR IN A TRANSACTION  NOT SUBJECT TO, THE
            REGISTRATION  REQUIREMENTS  OF THE  SECURITIES ACT AND IN ACCORDANCE
            WITH  APPLICABLE  STATE  SECURITIES  LAWS  AS  EVIDENCED  BY A LEGAL
            OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,  THE SUBSTANCE
            OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SHARES
            MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN ACCOUNT WITH A
            REGISTERED  BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
            THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE
            SECURITIES ACT.

                                       14
<PAGE>

            (c) The Company  acknowledges  and agrees that a Purchaser  may from
time to time pledge  pursuant to a bona fide margin  agreement with a registered
broker-dealer  or grant a  security  interest  in some or all of the Shares to a
financial institution that is an "accredited investor" as defined in Rule 501(a)
under the  Securities  Act and who agrees to be bound by the  provisions of this
Agreement and the Registration Rights Agreement and, if required under the terms
of such  arrangement,  such Purchaser may transfer  pledged or secured Shares to
the pledgees or secured parties.  Such a pledge or transfer would not be subject
to approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith.  Further, no
notice shall be required of such pledge. At the appropriate Purchaser's expense,
the Company will execute and deliver such reasonable  documentation as a pledgee
or secured party of Shares may reasonably request in connection with a pledge or
transfer of the  Shares,  including,  if the Shares are subject to  registration
pursuant to the Registration Rights Agreement, the preparation and filing of any
required prospectus  supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.

            (d) Certificates  evidencing the Shares shall not contain any legend
(including  the legend set forth in Section  4.1(b)),  (i) while a  registration
statement  (including the  Registration  Statement)  covering the resale of such
security is effective  under the  Securities  Act, or (ii) following any sale of
such Shares  pursuant to Rule 144, or (iii) if such Shares are eligible for sale
under Rule  144(k),  or (iv) if such  legend is not  required  under  applicable
requirements  of the  Securities  Act (including  judicial  interpretations  and
pronouncements  issued by the Staff of the Commission).  The Company shall cause
its counsel to issue a legal opinion to the Company's  transfer  agent  promptly
after the Effective  Date if required by the Company's  transfer agent to effect
the removal of the legend  hereunder.  The Company  agrees  that  following  the
Effective  Date or at such time as such legend is no longer  required under this
Section  4.1(d),  it will,  no later than seven (7) Trading Days  following  the
delivery by a  Purchaser  to the Company or the  Company's  transfer  agent of a
certificate  representing  Shares,  issued with a restrictive legend (such date,
the "Legend Removal Date"), deliver or cause to be delivered to such Purchaser a
certificate representing such Shares that is free from all restrictive and other
legends.  The  Company  may  not  make  any  notation  on its  records  or  give
instructions to any transfer agent of the Company that enlarge the  restrictions
on transfer set forth in this Section.

                                       15
<PAGE>

            (e) In addition to such Purchaser's  other available  remedies,  the
Company shall pay to a Purchaser, in cash, as partial liquidated damages and not
as a  penalty,  for each  $1,000 of Shares  (based on the  Closing  Price of the
Common Stock on the date  certificate(s)  representing such Shares are submitted
to the Company's  transfer agent) subject to Section 4.1(d),  $5 per Trading Day
(increasing to $10 per Trading Day ten (10) Trading Days after such damages have
begun to accrue) for each  Trading Day after the Legend  Removal Date until such
certificate  is delivered  to such  Purchaser.  Nothing  herein shall limit such
Purchaser's  right to pursue actual damages for the Company's failure to deliver
certificates  representing any Shares as required by the Transaction  Documents,
and such Purchaser  shall have the right to pursue all remedies  available to it
at  law or in  equity  including,  without  limitation,  a  decree  of  specific
performance and/or injunctive relief.

            (f)  Each  Purchaser,  severally  and not  jointly  with  the  other
Purchasers,  agrees that the removal of the restrictive legend from certificates
representing  Shares as set forth in this  Section  4.1 is  predicated  upon the
Company's  reliance that the Purchaser  will sell any Shares  pursuant to either
the  registration  requirements of the Securities Act,  including any applicable
prospectus delivery requirements, or an exemption therefrom.

            (g) Until 45 days after the  Effective  Date,  the Company shall not
undertake  a reverse or forward  stock split or  reclassification  of the Common
Stock without the prior written consent of the Purchasers  holding a majority in
interest of the Shares.

      4.2 Furnishing of Information.  As long as any Purchaser owns Shares,  the
Company  covenants to timely file (or obtain  extensions in respect  thereof and
file within the applicable grace period) all reports required to be filed by the
Company  after the date  hereof  pursuant  to the  Exchange  Act. As long as any
Purchaser  owns  Shares,  if the Company is no longer  required to file  reports
pursuant to the  Exchange Act (or if such  filings are not  otherwise  generally
available  on the Internet  free of charge),  it will prepare and furnish to the
Purchasers  (upon receipt of a written  request) and make publicly  available in
accordance  with Rule 144(c) such  information as is required for the Purchasers
to sell the Shares under Rule 144. The Company  further  covenants  that it will
take such further action as any holder of Shares may reasonably request,  all to
the extent  required from time to time to enable such Person to sell such Shares
without  registration  under the  Securities  Act within the  limitation  of the
exemptions provided by Rule 144.

      4.3  Integration.  The Company  shall not sell,  offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Shares  in a manner  that  would  require  the  registration  under  the
Securities  Act of the sale of the  Shares to the  Purchasers  or that  would be
integrated  with the offer or sale of the Shares for  purposes  of the rules and
regulations  of any  Trading  Market  such  that it  would  require  shareholder
approval  prior to the  closing of such  other  transaction  unless  shareholder
approval is obtained before the closing of such subsequent transaction.

      4.4 Securities Laws Disclosure;  Publicity.  Provided that the Company has
received  each item  required  to be  delivered  by each  Purchaser  pursuant to
Section 2.2(b),  the Company shall, by 9:00 a.m. Eastern time on the Trading Day
following  the Closing Date,  issue a press release or file a Current  Report on
Form 8-K in each case reasonably  acceptable to Weiss, Peck & Greer Investments,
a division of Robeco USA, LLC  ("WPG"),  disclosing  the  material  terms of the
transactions  contemplated  hereby.  Neither the Company nor any Purchaser shall
issue any press release with respect to the transaction  contemplated  hereby or
otherwise  make any such  public  statement  without  the prior  consent  of the
Company,  with  respect to any press  release of any  Purchaser,  or without the
prior consent of WPG,  with respect to any press  release of the Company,  which
consent  shall  not  unreasonably  be  withheld,  except if such  disclosure  is
required by law, in which case the disclosing  party shall promptly  provide the
other  party  with  prior  notice of such  public  statement  or  communication;
provided,  however, that only such portions of any press release to be issued by
the Company that  specifically  reference the  transactions  contemplated by the
Transaction  Documents  shall be  provided  to WPG and be subject to their prior
consultation and approval.  Notwithstanding the foregoing, the Company shall not
publicly  disclose  the  name  of any  Purchaser,  or  include  the  name of any
Purchaser in any filing with the Commission or any regulatory  agency or Trading
Market,  without  the prior  written  consent of such  Purchaser,  except (i) as
required by federal securities law in connection with the registration statement
contemplated by the  Registration  Rights  Agreement and (ii) to the extent such
disclosure is required by law or Trading Market  regulations,  in which case the
Company  shall  provide  the  Purchasers  with prior  notice of such  disclosure
permitted under subclause (i) or (ii).

                                       16
<PAGE>

      4.5  Shareholders  Rights  Plan.  No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring  Person" under any shareholders  rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the  provisions of any such plan or  arrangement,  by
virtue of receiving Shares under the Transaction Documents.

      4.6 Non-Public  Information.  Except as may be required to comply with the
terms and conditions of this  Agreement,  the Company  covenants and agrees that
neither it nor any other Person  acting on its behalf will provide any Purchaser
or its  agents  or  counsel  with  any  information  that the  Company  believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be  relying  on the  foregoing  representations  in  effecting  transactions  in
securities of the Company.

      4.7 Use of Proceeds.  Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Shares hereunder for
general corporate and strategic purposes, including, but not limited to, working
capital and in connection  with  acquisitions,  joint ventures and other similar
transactions,  and not for the satisfaction of any portion of the Company's debt
(other than payment of trade  payables in the ordinary  course of the  Company's
business and prior practices), to redeem any Company equity or equity equivalent
securities or to settle any outstanding litigation.

      4.8  Indemnification  of  Purchasers.  Subject to the  provisions  of this
Section  4.8,  the Company  will  indemnify  and hold the  Purchasers  and their
directors,  officers,  shareholders,  partners,  employees and agents  (each,  a
"Purchaser Party") harmless from any and all losses,  liabilities,  obligations,
claims, contingencies, damages, costs and expenses, including without limitation
all  judgments,  amounts  paid  in  settlements,   court  costs  and  reasonable
attorneys'  fees and costs of  investigation  that any such Purchaser  Party may
suffer  or incur as a result  of or  relating  to (a) any  breach  of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other  Transaction  Documents  or (b) any action  instituted
against (i) a Purchaser, or any of them or their respective Affiliates or (ii) a
Purchaser  Party,  by any  shareholder of the Company who is not an Affiliate of
such  Purchaser or  Purchaser  Party,  with  respect to any of the  transactions
contemplated  by the Transaction  Documents  (unless such action is based upon a
breach of such Purchaser's representation,  warranties,  covenants or agreements
under  the  Transaction  Documents  or any  agreements  or  understandings  such
Purchaser  or a  Purchaser  Party  may have  with any  such  shareholder  or any
violations by the Purchaser or a Purchaser Party of state or federal  securities
laws or any conduct by such  Purchaser  or a Purchaser  Party which  constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall
be brought  against any  Purchaser  Party in respect of which  indemnity  may be
sought  pursuant to this  Agreement,  such Purchaser Party shall promptly notify
the  Company  in  writing,  and the  Company  shall have the right to assume the
defense thereof with counsel of its own choosing. Any Purchaser Party shall have
the right to employ  separate  counsel in any such action and participate in the
defense  thereof,  but the fees and  expenses  of such  counsel  shall be at the
expense of such  Purchaser  Party  except to the extent that (i) the  employment
thereof has been  specifically  authorized  by the Company in writing,  (ii) the
Company has failed after a reasonable  period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of
such separate  counsel,  a material  conflict on any material  issue between the
position of the Company and the position of such  Purchaser  Party.  The Company
will not be liable to any  Purchaser  Party  under  this  Agreement  (i) for any
settlement by an Purchaser  Party effected  without the Company's  prior written
consent,  which shall not be  unreasonably  withheld or delayed;  or (ii) to the
extent,  but only to the  extent  that a loss,  claim,  damage or  liability  is
attributable  to any  Purchaser  Party's  breach of any of the  representations,
warranties,  covenants or agreements made by the Purchasers in this Agreement or
in the other Transaction Documents.

                                       17
<PAGE>

      4.9  Reservation of Common Stock.  As of the date hereof,  the Company has
reserved  and the Company  shall  continue to reserve and keep  available at all
times, free of preemptive  rights, a sufficient number of shares of Common Stock
for the  purpose of  enabling  the  Company  to issue  Shares  pursuant  to this
Agreement.

      4.10  Listing  of  Common  Stock.   The  Company   hereby  agrees  to  use
commercially reasonable efforts to maintain the listing of the Common Stock on a
Trading Market, and as soon as reasonably practicable following the Closing (but
not later than the earlier of the Effective  Date and the first  anniversary  of
the Closing Date) to list all of the Shares on such Trading Market.  The Company
further  agrees,  if the Company  applies to have the Common Stock traded on any
other Trading  Market,  it will include in such  application all of the Shares ,
and will take such other action as is necessary to cause all of the Shares to be
listed on such other  Trading  Market as promptly as possible.  The Company will
take all action  commercially  reasonable  and  necessary  to (a)  continue  the
listing  and trading of its Common  Stock on a Trading  Market and (b) comply in
all respects with the Company's  reporting,  filing and other  obligations under
the bylaws or rules of such Trading Market.

      4.11 Equal Treatment of Purchasers.  No consideration  shall be offered or
paid to any  Person  to amend or  consent  to a waiver  or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also  offered  to  all  of  the  parties  to  the  Transaction  Documents.   For
clarification  purposes,  this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated  separately by each Purchaser,  and
is  intended  to treat  the  Purchasers  as a class  and shall not in any way be
construed as the Purchasers  acting in concert or as a group with respect to the
purchase, disposition or voting of Shares or otherwise.

                                       18
<PAGE>

      4.12 Delivery of Shares After Closing. The Company shall deliver, or cause
to be delivered, the Shares purchased by each Purchaser to such Purchaser within
three (3) Trading Days of the Closing Date.

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1 Fees and  Expenses.  Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party  incident  to the  negotiation,  preparation,  execution,
delivery and performance of this Agreement, except that the Company shall pay up
to an  aggregate  of  $20,000  for the  fees and  expenses  of TRP  incurred  in
connection with the transactions  contemplated hereby. The Company shall pay all
stamp  and other  taxes and  duties  levied in  connection  with the sale of the
Shares.

      5.2  Entire  Agreement.  The  Transaction  Documents,  together  with  the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

      5.3 Notices.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication  is delivered via facsimile with  confirmation  of
receipt at the facsimile number set forth on the signature pages attached hereto
prior to 6:30 p.m.  (New York City time) on a Trading  Day, (b) the next Trading
Day after the date of transmission, if such notice or communication is delivered
via facsimile with  confirmation of receipt at the facsimile number set forth on
the signature  pages attached hereto on a day that is not a Trading Day or later
than 6:30 p.m.  (New York City time) on any Trading Day, (c) the second  Trading
Day following the date of mailing, if sent by a nationally  recognized overnight
courier service in the United States, or (d) upon actual receipt by the party to
whom such  notice is required  to be given.  The  address  for such  notices and
communications shall be as set forth on the signature pages attached hereto.

      5.4 Amendments;  Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument  signed, in the case of an amendment,  by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom  enforcement  of any such waiver is sought.  No waiver of any default  with
respect to any provision,  condition or  requirement of this Agreement  shall be
deemed to be a  continuing  waiver in the  future or a waiver of any  subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise  any right  hereunder in
any manner impair the exercise of any such right.

                                       19
<PAGE>

      5.5  Construction.  The headings herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict construction will be applied against any party.

      5.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written  consent of each  Purchaser.  Any Purchaser may assign
any or all of its  rights  under  this  Agreement  to any  Person  to whom  such
Purchaser  assigns or transfers any Shares,  provided such transferee  agrees in
writing to be bound,  with respect to the transferred  Shares, by the provisions
hereof that apply to the "Purchasers."

      5.7 No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.

      5.8 Governing Law. All questions  concerning the  construction,  validity,
enforcement  and  interpretation  of this  Agreement  shall be  governed  by and
construed and enforced in accordance  with the internal laws of the State of New
York,  without regard to the principles of conflicts of law thereof.  Each party
hereby  irrevocably  submits  to the  exclusive  jurisdiction  of the  state and
federal  courts  sitting in the City of New York,  borough of Manhattan  for the
adjudication  of any dispute  hereunder  or in  connection  herewith or with any
transaction  contemplated  hereby or discussed herein (including with respect to
the enforcement of any of the  Transaction  Documents),  and hereby  irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit,  action or  proceeding  is  improper or  inconvenient  venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents  to process  being  served in any such suit,  action or  proceeding  by
mailing a copy thereof via  registered or certified  mail or overnight  delivery
(with  evidence of  delivery) to such party at the address in effect for notices
to it under this  Agreement and agrees that such service shall  constitute  good
and sufficient  service of process and notice thereof.  Nothing contained herein
shall be  deemed to limit in any way any right to serve  process  in any  manner
permitted  by law. The parties  hereby  waive all rights to a trial by jury.  If
either party shall commence an action or proceeding to enforce any provisions of
this Agreement,  then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its reasonable attorneys fees and expenses and
other  costs and  expenses  incurred  with the  investigation,  preparation  and
prosecution of such action or proceeding.

      5.9 Survival.  The representations and warranties herein shall survive the
Closing and delivery of the Shares until the third anniversary hereof.

                                       20
<PAGE>

      5.10   Execution.   This   Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

      5.11  Severability.  If any  provision  of  this  Agreement  is held to be
invalid or unenforceable in any respect,  the validity and enforceability of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

      5.12  Rescission and  Withdrawal  Right.  Notwithstanding  anything to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part without prejudice to its future actions and rights.

      5.13  Replacement of Shares.  If any certificate or instrument  evidencing
any Shares is mutilated,  lost, stolen or destroyed,  the Company shall issue or
cause to be  issued  in  exchange  and  substitution  for and upon  cancellation
thereof,  or  in  lieu  of  and  substitution  therefor,  a new  certificate  or
instrument,  but only upon receipt of evidence  reasonably  satisfactory  to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under  such  circumstances  shall  also  pay any  reasonable  third-party  costs
associated with the issuance of such replacement Shares.

      5.14  Remedies.  In  addition to being  entitled  to  exercise  all rights
provided herein or granted by law,  including  recovery of damages,  each of the
Purchasers  and the Company will be entitled to specific  performance  under the
Transaction  Documents.  The  parties  agree that  monetary  damages  may not be
adequate  compensation  for  any  loss  incurred  by  reason  of any  breach  of
obligations  described in the  foregoing  sentence and hereby agrees to waive in
any action for specific  performance  of any such  obligation the defense that a
remedy at law would be adequate.

      5.15 Payment Set Aside.  To the extent that the Company makes a payment or
payments to any Purchaser  pursuant to any  Transaction  Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such  enforcement  or exercise or any part thereof are  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside,  recovered
from, disgorged by or are required to be refunded,  repaid or otherwise restored
to the  Company,  a  trustee,  receiver  or  any  other  person  under  any  law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

                                       21
<PAGE>

      5.16  Independent  Nature  of  Purchasers'  Obligations  and  Rights.  The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers  are in any way acting in concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Document.  Each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose.  The Company has elected to provide all Purchasers  with the same terms
and Transaction  Documents for the convenience of the Company and not because it
was required or requested to do so by the Purchasers.

      5.17  Liquidated  Damages.  The Company's  obligations  to pay any partial
liquidated  damages or other amounts owing under the Transaction  Documents is a
continuing  obligation of the Company and shall not  terminate  until all unpaid
partial liquidated damages and other amounts have been paid  notwithstanding the
fact that the instrument or security  pursuant to which such partial  liquidated
damages or other amounts are due and payable shall have been canceled.

                            (Signature Pages Follow)

                                       22
<PAGE>

IN WITNESS  WHEREOF,  the parties  hereto have caused this  Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

ZONE4PLAY, INC.                                            Address for Notice:
                                                           ------------------

By:     /s/ Shimon Citron                                  103 Faulk Road
       ------------------------------------                Wilmington, DE  19803
       Name: Shimon Citron
       Title: Chief Executive Officer

With a copy to (which shall not constitute notice):

SICHENZIA ROSS FRIEDMAN FERENCE LLP
1065 Avenue of the Americas
New York, New York  10018
Tel:   (212) 930-9700
Fax:   (212) 930-9725

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES FOR PURCHASERS FOLLOW]

                                       23
<PAGE>

          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Investing Entity:  Ivy MA Holdings
                          ----------------
Signature of Authorized Signatory of Investing Entity:  /s/ Douglas Topky
                                                       ------------------
Name of Authorized Signatory:  Douglas Topky
                              --------------
Title of Authorized Signatory:  Portfolio Manager
                                -----------------

Address for Notice of Investing Entity:    Haystark Capital
                                           850 Third Avenue
                                           c/o First New York Securities
                                           8th Floor
                                           NY, NY 10022      ATTN: Doug Topky

Address for Delivery of Shares for Investing Entity (if not same as above):

                                           Lehman Brothers
                                           745 7th Avenue
                                           3rd Floor
                                           NY, NY 10019

Subscription Amount: $150,000
Shares: 100,000
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       24
<PAGE>

          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Investing Entity:  Haystack Capital LP
                          --------------------
Signature of Authorized Signatory of Investing Entity:  /s/ Douglas Topky
                                                       ------------------
Name of Authorized Signatory:  Douglas Topky
                              --------------
Title of Authorized Signatory:  Managing Member
                                ---------------

Address for Notice of Investing Entity:    Haystack Capital
                                           850 Third Avenue
                                           c/o First New York Securities
                                           8th Floor
                                           NY, NY 10022      ATTN: Doug Topky

Address for Delivery of Shares for Investing Entity (if not same as above):

                                           Lehman Brothers
                                           745 7th Avenue
                                           3rd Floor
                                           NY, NY 10019

Subscription Amount: $450,000
Shares: 300,000
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       24
<PAGE>

          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Investing Entity:  First New York Securities LLC
                          ------------------------------
Signature of Authorized Signatory of Investing Entity:  /s/ Donald Erenberg
                                                       --------------------
Name of Authorized Signatory:  Donald Erenberg
                              ----------------
Title of Authorized Signatory:  Managing Member
                                ---------------

Address for Notice of Investing Entity:
         850 Third Avenue, 17th Floor
         NYC, NY 10022

Address for Delivery of Shares for Investing Entity (if not same as above):

Subscription Amount: $300,000
Shares: 200,000
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       24
<PAGE>

          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Investing Entity:  Charles Beeler
                          ---------------
Signature of Authorized Signatory of Investing Entity:  /s/ Charles Beeler
                                                       -------------------
Name of Authorized Signatory:  Charles Beeler
                              ---------------
Title of Authorized Signatory:  Partner
                                -------

Address for Notice of Investing Entity:
         Charles Beeler
         301 Yale Road
         Menlo Park, CA 94025

Address for Delivery of Shares for Investing Entity (if not same as above):

         Same as above

Subscription Amount: $75,000
Shares: 50,000
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       24
<PAGE>

          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Investing Entity:  Thomas H. Peterson
                          -------------------
Signature of Authorized Signatory of Investing Entity:  /s/ Thomas H. Peterson
                                                       -----------------------
Name of Authorized Signatory:  Thomas H. Peterson
                              -------------------
Title of Authorized Signatory:  /s/ Thomas H. Peterson
                                ----------------------

Address for Notice of Investing Entity:
         702 Casita Way
         Los Altos, CA 94022

Address for Delivery of Shares for Investing Entity (if not same as above):

Subscription Amount: $75,000
Shares: 50,000
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       24
<PAGE>

          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Investing Entity:  David Sappir
                           ------------
Signature of Authorized Signatory of Investing Entity:  /s/ David Sappir
                                                       -----------------
Name of Authorized Signatory:  David Sappir
                               ------------
Title of Authorized Signatory:  NA
                               -------------

Address for Notice of Investing Entity:
         c/o Punk Ziegel
         520 Madison Ave
         NY, NY 10022

Address for Delivery of Shares for Investing Entity (if not same as above):

Subscription Amount: $750,000
Shares: 500,000
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       24
<PAGE>

          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Investing Entity:  Graham Partners, LP
                          --------------------
Signature of Authorized Signatory of Investing Entity:  /s/ Harold Berry
                                                       -----------------
Name of Authorized Signatory:  Harold Berry
                              -------------
Title of Authorized Signatory:  Portfolio Manager
                                -----------------

Address for Notice of Investing Entity:
         200 Park Avenue - Suite 3960
         New York, NY 10166

Address for Delivery of Shares for Investing Entity (if not same as above):

Subscription Amount: $399,999.00
Shares: 266,666
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       24
<PAGE>

          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF,  the undersigned have caused this Securities  Purchase
Agreement to be duly executed by their respective  authorized  signatories as of
the date first indicated above.

Name of Investing Entity:  WPG Software Fund, LP
                          ----------------------
Signature of Authorized Signatory of Investing Entity:
                                                /s/ George Boyd / /s/ Ben Taylor
                                                --------------------------------
Name of Authorized Signatory:  George Boyd / Ben Taylor
                              -------------------------
Title of Authorized Signatory:  Head of Equity / Managing Director
                                ----------------------------------

Address for Notice of Investing Entity:
         WPG Software Fund, L.P.
         c/o Weiss, Peck & Greer Investments
         909 Third Avenue, 32nd Floor
         New York, NY 10022

Address for Delivery of Shares for Investing Entity (if not same as above):

Subscription Amount: $1,500,000
Shares: 1,000,000
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       24
<PAGE>

          [PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

         IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

Name of Investing Entity:  Erinch R. Ozada
                          ----------------
Signature of Authorized Signatory of Investing Entity:  /s/ Erinch R. Ozada
                                                       --------------------
Name of Authorized Signatory:  Erinch R. Ozada
                              ----------------
Title of Authorized Signatory:
                              ------------------

Address for Notice of Investing Entity:
         c/o Zecher Capital                 Also send notices to:
         237 Park Ave - Suite 900           Mr. Christopher Trapp
         New York, NY 10017                 UBS Securities, LLC
                                            1285 Ave. of the Americas
                                            New York, NY 10019

Address for Delivery of Shares for Investing Entity (if not same as above):

Subscription Amount: $25,000
Shares: 16,666
EIN Number:

                           [SIGNATURE PAGES CONTINUE]

                                       24
<PAGE>

                                  SCHEDULES TO
                          SECURITIES PURCHASE AGREEMENT

dated as of January 3, 2005 by and, among Zone4Play,  Inc., a Nevada corporation
(the  "Company"),  and each purchaser  identified on the signature  pages hereto
(each,  including its successors and assigns, a "Purchaser" and collectively the
"Purchasers")

<PAGE>

                                 SCHEDULE 3.1(A)

                          SUBSIDIARIES OF THE COMPANY.

1.    The following companies are wholly-owned subsidiaries of the Company:

      Zone4Play (UK), Ltd.
      Zone4Play (Israel), Ltd.

2.    The Company owns a 50.1% interest in Mix TV, Ltd.

<PAGE>

                                 SCHEDULE 3.1(E)

                         NOTICES REQUIRED OF THE COMPANY

None

<PAGE>

                                 SCHEDULE 3.1(G)

              WARRANTS AND SHARES TO BE ISSUED TO CERTAIN ADVISORS

The following warrants and shares are to be issued:

To Punk Ziegel  pursuant to an agreement  on August 19, 2004 25,000  warrants at
$.80 per share

To  Benchmark  Consulting  pursuant to an  agreement on December 16, 2004 50,000
shares

To Portfolio PR pursuant to an agreement on July 14, 2004.  8,824 shares for the
fourth  quarter of 2004 and  thereafter  $7500 worth of shares per quarter until
June 30, 2005

To Punk Ziegel pursuant to an agreement on August 19, 2004 Up to 80,000 warrants
at $1.50 per share(1)

----------
1 This does not include cash fee paid to Punk Ziegel & Company as placement
agent on December 23, 2004 in the aggregate amount of 6% cash of the gross
proceeds.

<PAGE>

                                 SCHEDULE 3.1(H)

                                   SEC REPORTS

As part of the  SEC's  comments  on the  Company's  registration  statement  the
Company filed with the SEC on Form SB-2 on November 3, 2004, the SEC advised the
Company  that it did not intend to  declare  the Form SB-2  effective  until the
Company had filed an appropriate  Form 8-K and any comments issued in connection
with  that 8-K had been  cleared.  The SEC noted  that  because  the 8-K  should
include disclosure equivalent to a Form 10 or 10-SB, the SEC would subject it to
the SEC's  standards  of  review  selection  and the SEC may  issue  substantive
comments in connection with that review.

The SEC noted  that the  Company  entered  into a reverse  merger  with Old Goat
Enterprises, Inc. as described in the Form 8-K filed February 6, 2004. To be the
successor  issuer to the  reporting  obligation  under Rule  12g-3(a)  under the
Exchange  Act,  Rule,   12b-2  under  the  Exchange  Act  requires  "the  direct
acquisition of the assets  comprising a going business." A "blank check" company
such as Old Goat  Enterprises  does not satisfy that  criteria.  The SEC permits
"back door" registration  under the Exchange Act where a formerly  non-reporting
company  first  presents  disclosure  in a Commission  filing about itself after
completion of a merger  transaction.  However,  when the formerly  non-reporting
company  mergers with a "blank check' company,  it must file,  within 15 days of
the succession,  a Form 10 or Form 10Q-SB,  which include at a minimum  complete
audited  and pro forma  financial  statements  required  by these  forms.  Other
information about the accounting survivor such as a management's  discussion and
analysis, business description and management should also be provided.

The  Company  filed a Form 8-K  with  the SEC in  response  to this  request  on
December 21, 2004

Other late filings of the Company include:

o     Form 10-QSB for the quarter ended December 31, 2002 (File No. 333-91356)
o     Form 10-QSB for the quarter ended September 30, 2003 (File No. 333-91356)

<PAGE>

                                 SCHEDULE 3.1(Q)

                          TRANSACTIONS WITH AFFILIATES

The Company,  Two Way TV and Winner.com  (UK), Ltd. have entered into a contract
for  deployment  of fixed odds  service on the UK cables  under the Winner brand
whereby  the  revenues  of the  venture  will be split as  follows:  each of the
Company and Two Way have a 45% share and Winner has a 10% share.  Shimon Citron,
who is the Company's Chief Executive Officer, owns 60 % of Winner.com (UK), Ltd.
Half of these Winner.com shares, 30%, are being held in trust on behalf of other
shareholders by Mr. Citron.

<PAGE>

                                 SCHEDULE 3.1(V)

                               REGISTRATION RIGHTS

To Punk Ziegel pursuant to an agreement on August 19, 2004
25,000 shares with registration rights

To Benchmark Consulting on December 16, 2004
50,000 shares with piggyback registration rights

To Portfolio PR on July 14, 2004.
8,824 shares for the fourth quarter of 2004 and thereafter $7500 worth of shares
per quarter until June 30, 2005 with piggyback registration rights

To Punk Ziegel pursuant to an agreement on August 19, 2004 Up to 80,000 shares
with registration rights

Weiss Peck & Greer on August 12, 2004
1,650,000 shares with registration rights

<PAGE>

                                SCHEDULE 3.1(FF)

                             THE COMPANY'S AUDITORS

Kost Forer Gabbay & Kasierer a member of Ernst & Young Global
Tel Aviv, Israel

<PAGE>

                                  SCHEDULE 4.7

                                 USE OF PROCEEDS

None

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