Document:

Exhibit
10.1(3)

 

CREDIT SUISSE, NEW YORK BRANCH

11 MADISON AVENUE

NEW YORK, NEW YORK 10010

 

November 8,
2005

 

Fieldstone Investment Funding, LLC

Fieldstone Investment Corporation

11000 Broken Land Parkway

Suite 600

Columbia, Maryland  21044

Attention:  Treasurer

Phone Number:  (410) 772-7275

Fax Number:  (410) 772-7299

 

Re:                               Credit
Suisse, New York Branch – Fieldstone Investment Funding, LLC –

Fieldstone Investment Corporation  Funding Agreement

 

Ladies and Gentleman:

 

1.                                       Reference
is made to that certain Funding Agreement dated as of July 27, 2005, as
amended from time to time (the “Funding Agreement”), among CREDIT
SUISSE, NEW YORK BRANCH (“Facility Agent”), FIELDSTONE INVESTMENT
FUNDING, LLC (the “Borrower”), FIELDSTONE INVESTMENT CORPORATION (the “Servicer”)
and the several CONDUIT LENDERS, COMMITTED LENDERS and GROUP AGENTS party
thereto from time to time.  Capitalized
terms used but not otherwise defined herein shall have the meanings provided in
the Funding Agreement.

 

2.                                       The
Facility Agent, the Borrower, the Servicer and the several Conduit Lenders,
Committed Lenders and Group Agents hereby agree subject to the terms and
conditions of this letter, that (i) the Funding Agreement and the Transaction
Documents are terminated and the Borrower, the Servicer, the Facility Agent and
the several Conduit Lenders, Committed Lenders and Group Agents have no further
obligations thereunder, except for those obligations that by their terms
survive termination of the Funding Agreement, and (ii) the Conduit
Lenders, Committed Lenders and the Borrower shall not enter into any new Loans
under the Funding Agreement.

 

3.                                       This
letter shall inure to the benefit of and be binding upon the parties hereto and
their respective successors and permitted assigns.

 

4.                                       This
letter may be executed in any number of counterparts each of which shall
constitute one and the same instrument, and either party hereto may execute
this letter by signing any such counterpart.

 

[REMAINDER OF
PAGE INTENTIONALLY LEFT BLANK]

 

 

This
letter shall be construed in accordance with, and the obligations, rights and
remedies of the parties hereunder shall be determined under, the substantive
laws of the State of New York (without giving effect to choice of law
principles), except to the extent preempted by Federal law.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CREDIT SUISSE, NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
  Accepted and Agreed:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  FIELDSTONE INVESTMENT FUNDING, LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  FIELDSTONE INVESTMENT CORPORATION

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  ALPINE SECURITIZATION CORP.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  

 

 

	
  CREDIT SUISSE, NEW YORK BRANCH

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:Exhibit 10.2(1)

 

EXECUTION VERSION

 

 

 

MASTER REPURCHASE AGREEMENT

 

CREDIT SUISSE, NEW YORK BRANCH, as administrative
agent (“Administrative Agent”)

 

FIELDSTONE INVESTMENT CORPORATION, as seller (“Seller”),

 

FIELDSTONE MORTGAGE COMPANY, as seller (“Seller”)
and

 

THE SEVERAL CONDUIT BUYERS AND COMMITTED BUYERS PARTY
HERETO FROM TIME TO TIME

 

 

Dated November 8, 2005

 

 

 

 

TABLE OF CONTENTS

 

 

	
  1.

  	
  Applicability

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Program; Initiation of
  Transactions

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Repurchase

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Price Differential

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Margin Maintenance

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Income Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Security Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Payment and Transfer

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Conditions Precedent

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Program; Costs;
  Illegality

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Servicing

  	
   

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Representations
  and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Remedies Upon Default

  	
   

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Reports

  	
   

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Repurchase
  Transactions

  	
   

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Single Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Notices and
  Other Communications

  	
   

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Entire
  Agreement; Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Non assignability

  	
   

  
	
   

  	
   

  	
   

  
	
  23.

  	
  Set-off

  	
   

  

 

i

 

	
  24.

  	
  Binding
  Effect; Governing Law; Jurisdiction

  	
   

  
	
   

  	
   

  	
   

  
	
  25.

  	
  No Waivers, Etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  26.

  	
  Intent

  	
   

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Disclosure
  Relating to Certain Federal Protections

  	
   

  
	
   

  	
   

  	
   

  
	
  28.

  	
  Power of Attorney

  	
   

  
	
   

  	
   

  	
   

  
	
  29.

  	
  Buyers and
  Administrative Agent May Act Through Affiliates

  	
   

  
	
   

  	
   

  	
   

  
	
  30.

  	
  Indemnification;
  Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  31.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  32.

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  
	
  33.

  	
  Recording of
  Communications

  	
   

  
	
   

  	
   

  	
   

  
	
  34.

  	
  Reserved

  	
   

  
	
   

  	
   

  	
   

  
	
  35.

  	
  No
  Proceedings; Waiver of Setoff

  	
   

  
	
   

  	
   

  	
   

  
	
  36.

  	
  Periodic Due
  Diligence Review

  	
   

  
	
   

  	
   

  	
   

  
	
  37.

  	
  Authorizations

  	
   

  
	
   

  	
   

  	
   

  
	
  38.

  	
  Acknowledgement
  Of Anti-Predatory Lending Policies

  	
   

  
	
   

  	
   

  	
   

  
	
  39.

  	
  Documents
  Mutually Drafted

  	
   

  
	
   

  	
   

  	
   

  
	
  40.

  	
  General
  Interpretive Principles

  	
   

  
	
   

  	
   

  	
   

  
	
  41.

  	
  The Administrative
  Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  42.

  	
  Wire Instructions

  	
   

  
	
   

  	
   

  	
   

  
	
  43.

  	
  Joint and Several

  	
   

  
	
   

  	
   

  	
   

  
	
  44.

  	
  Amendments and Waivers

  	
   

  
	
   

  	
   

  	
   

  

 

SCHEDULES

 

	
  Schedule 1 - Representations
  and Warranties with Respect to Purchased Mortgage Loans

  	
   

  

 

Schedule 2 – Authorized Representatives

 

ii

 

EXHIBITS

 

Exhibit A – Form of Transaction Request

 

Exhibit B – Form of Purchase Confirmation

 

Exhibit C – Form of Mortgage Loan Schedule

 

Exhibit D – Form of Officer’s Compliance Certificate

 

Exhibit E – Reserved

 

Exhibit F – Form of Opinion of Sellers’ counsel

 

Exhibit G – Underwriting Guidelines

 

Exhibit H – Officer’s Certificate of the Sellers and Corporate
Resolutions of Sellers

 

Exhibit I – Sellers’ Tax Identification Number

 

Exhibit J – Existing Indebtedness

 

Exhibit K - Escrow Instruction Letter

 

Exhibit L – Reserved

 

Exhibit M – Form of Servicer Notice

 

Exhibit N – Commitments

 

Exhibit O – Mortgage Loan Reports

 

iii

 

PRELIMINARY STATEMENTS

 

WHEREAS,
FIC entered into that certain Funding Agreement dated as of July 25, 2005
by and among FIC, Fieldstone Investment Funding, LLC, Credit Suisse, New York
Branch, as Facility Agent, and the several conduit lenders, committed lenders
and group agents party hereto from time to time (the “Facility”); and

 

WHEREAS,
FIC intends to replace the Facility with this Agreement upon entering into the
Program Agreements.

 

1.     Applicability

 

From time to time the parties hereto may enter into
transactions in which a Seller agrees to transfer to Buyers Mortgage Loans (as
hereinafter defined) against the transfer of funds by Buyers, and each Conduit
Buyer may, at its option, and such Conduit Buyer’s related Committed Buyers
shall be obligated to, transfer to such Seller such Mortgage Loans at a date
certain or on demand, against the transfer of funds by such Seller.  This Agreement is a commitment by Committed
Buyers to engage in the Transactions as set forth herein up to the Maximum
Committed Purchase Price; provided, that the Committed Buyers shall have no
commitment to enter into any Transaction requested which would result in the
aggregate Purchase Price of then outstanding Transactions to exceed the Maximum
Committed Purchase Price.  No more than
one (1) Transaction shall be made by the Buyers on any Business Day.  Each such transaction shall be referred to
herein as a “Transaction” and, unless otherwise agreed in writing, shall
be governed by this Agreement, including any supplemental terms or conditions
contained in any annexes identified herein, as applicable hereunder.

 

2.     Definitions

 

All capitalized terms used herein but not defined
shall have the meanings set forth in the Custodial Agreement.  Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:

 

“Acceptable SPV” means a Person which issues
Structured Securities Debt.

 

“Acceptable State” means any state acceptable
pursuant to Sellers’ Underwriting Guidelines.

 

“Accepted Servicing Practices” means, with
respect to any Mortgage Loan, those mortgage servicing practices of prudent
mortgage lending institutions which service mortgage loans of the same type as
such Mortgage Loan in the jurisdiction where the related Mortgaged Property is
located.

 

“Act of Insolvency” means, with respect to any Person
or its Affiliates, (i) the filing of a petition, commencing, or
authorizing the commencement of any case or proceeding, or the voluntary
joining of any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law relating to the
protection of creditors, or suffering any such petition or proceeding to be
commenced by another which is consented to, not timely contested or results in
entry of an order for relief; (ii) the seeking of the appointment of a

 

 

receiver, trustee, custodian or similar official for such party or an
Affiliate or any substantial part of the property of either; (iii) the
appointment of a receiver, conservator, or manager for such party or an
Affiliate by any governmental agency or authority having the jurisdiction to do
so; (iv) the making or offering by such party or an Affiliate of a
composition with its creditors or a general assignment for the benefit of
creditors; (v) the admission by such party or an Affiliate of such party
of its inability to pay its debts or discharge its obligations as they become
due or mature; or (vi) that any governmental authority or agency or any
person, agency or entity acting or purporting to act under governmental
authority shall have taken any action to condemn, seize or appropriate, or to
assume custody or control of, all or any substantial part of the property of
such party or of any of its Affiliates, or shall have taken any action to
displace the management of such party or of any of its Affiliates or to curtail
its authority in the conduct of the business of such party or of any of its
Affiliates.

 

“Administrative Agent” means Credit Suisse, New
York Branch or any affiliate or successor thereto.

 

“Affiliate” means, with respect to any Person,
any “affiliate” of such Person, as such term is defined in the Bankruptcy Code.

 

“Agency” means Freddie Mac, Fannie Mae or GNMA,
as applicable.

 

“Agency Security” means a mortgage-backed
security issued by an Agency.

 

“Agreement” means this Master Repurchase Agreement,
as it may be amended, supplemented or otherwise modified from time to time.

 

“Alpine” means Alpine Securitization Corp., a
Delaware corporation, and its permitted successors and assigns.

 

“Appraised Value” means the value set forth in
an appraisal made in connection with the origination of the related Mortgage
Loan as the value of the Mortgaged Property.

 

“Asset Tape” means a remittance report on a
monthly basis or requested by Administrative Agent pursuant to Section 17d
hereof containing servicing information, including, without limitation, those
fields reasonably requested by Administrative Agent from time to time, on a
loan-by-loan basis and in the aggregate, with respect to the Purchased Mortgage
Loans serviced by Sellers or any Servicer for the month (or any portion
thereof) prior to the Reporting Date.

 

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

 

“Assignment of Mortgage” means an assignment of
the Mortgage, notice of transfer or equivalent instrument in recordable form,
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect the sale of the Mortgage to Buyers.

 

“Available Collections” means, on any date of
determination, all Collections, together with any investment income from funds
on deposit in the Collection Account; provided

 

2

 

that, Available Collections shall not include any Collections that have
been set aside or removed by the Servicer solely in payment of the Servicer’s
accrued and unpaid servicing fee.

 

“Bailee Letter” has the meaning assigned to
such term in the Custodial Agreement.

 

“Bankruptcy Code” means the United States
Bankruptcy Code of 1978, as amended from time to time.

 

“Bid” has the meaning set forth in Section 4(c) hereof.

 

“BPO” means an opinion of the fair market value
of a Mortgaged Property given by a licensed real estate agent or broker which
generally includes three comparable sales and three comparable listings.

 

“Business Day” means any day other than (A) a
Saturday or Sunday and (B) a public or bank holiday in New York City.

 

“Buydown Amount” has the meaning set forth in Section 5(c) hereof.

 

“Buyers” means, at any time, any of the Conduit
Buyers and the Committed Buyers.

 

“Buying Group” means, at any time, a group
consisting of a Conduit Buyer and such Conduit Buyer’s related Committed Buyers
and the Administrative Agent.

 

“Capital Lease Obligations” means, for any
Person, all obligations of such Person to pay rent or other amounts under a
lease of (or other agreement conveying the right to use) Property to the extent
such obligations are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.

 

“Cash Equivalents” means  (a) securities with maturities of 90
days or less from the date of acquisition issued or fully guaranteed or insured
by the United States Government or any agency thereof, (b) certificates of
deposit and eurodollar time deposits with maturities of 90 days or less from
the date of acquisition and overnight bank deposits of the Administrative Agent
or of any commercial bank having capital and surplus in excess of $500,000,000,
(c) repurchase obligations of the Administrative Agent or of any
commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than seven days with respect to securities
issued or fully guaranteed or insured by the United States Government, (d) commercial
paper of a domestic issuer rated at least A-1 or the equivalent thereof by
S&P or P-1 or the equivalent thereof by Moody’s and in either case maturing
within 90 days after the day of acquisition, (e) securities with
maturities of 90 days or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by

 

3

 

Moody’s, (f) securities with maturities of 90 days or less from
the date of acquisition backed by standby letters of credit issued by the Administrative
Agent or any commercial bank satisfying the requirements of clause (b) of
this definition or (g) shares of money market mutual or similar funds
which invest exclusively in assets satisfying the requirements of clauses (a) through
(f) of this definition.

 

“Change in Control” means:

 

(A)          any
transaction or event as a result of which (i) any Person or Persons own,
beneficially or of record, at least 15% of the outstanding stock of FIC or (ii) FIC
shall cease to own, directly or indirectly, 100% of any of its Subsidiaries; or

 

(B)           the sale,
transfer, or other disposition of all or substantially all of a Seller’s assets
(excluding any such action taken in connection with any securitization
transaction in the ordinary course of business) except the sale, transfer or
other disposition of substantially all of FMC’s assets to FIC.

 

“Code” means the Internal Revenue Code of 1986,
as amended.

 

“Collection Account” means one or more accounts
established by the Servicer for the benefit of Buyers, into which all
collections and proceeds on or in respect of the Mortgage Loans shall be deposited
by Servicer.

 

“Collections” means, with respect to any
Mortgage Loan, all cash collections and other proceeds of such Mortgage Loan
and Repurchase Assets with respect thereto.

 

“Combined Loan to Value Ratio” or “CLTV”
means, with respect to any Second Lien Mortgage Loan, the sum of the original
principal balance of such Mortgage Loan and the outstanding principal balance
of any related first lien as of the date of origination of the Mortgage Loan,
divided by the Appraised Value of the Mortgaged Property as of the origination
date.

 

“Commercial Paper” means the short-term
promissory notes of a Conduit Buyer issued by such Conduit Buyer in the
commercial paper market.

 

“Committed Buyer” means any Person that becomes
a party to the Repurchase Agreement as a “Committed Buyer” hereunder.

 

“Commitment” means, at any time with respect to
each Committed Buyer, the amount set forth opposite such Committed Buyer’s name
on Exhibit N hereto (as such Exhibit N may be amended,
supplemented or otherwise modified and in effect).

 

“Conduit Assignee” means any special purpose
vehicle issuing indebtedness in the commercial paper market that is
administered by Administrative Agent or one of its Affiliates and is rated at
least A-1 by S&P and P-1 by Moody’s.

 

“Conduit Buyer” means any Person that becomes a
party to the Repurchase Agreement as a “Conduit Buyer” hereunder.

 

4

 

“Consolidated Adjusted
Tangible Net Worth” means, for the Sellers, the amount that would,
in conformity with GAAP, equal the stockholder’s equity included on the balance
sheet of the Sellers and their Subsidiaries, plus any preferred stock not
already included in the calculation of stockholder’s equity, plus any
Indebtedness of the Sellers and their Subsidiaries that is fully subordinated
to any obligations arising under this Repurchase Agreement, plus other
comprehensive loss arising from the FASB 133, minus any intangibles or goodwill
(as defined under GAAP), minus any advances between the Sellers and their
Affiliates (other than consolidated subsidiaries or between FIC and FMC), minus
any loans or advances to officers or directors of the Sellers (as reported
under GAAP), minus other comprehensive income arising from FASB 133; provided,
however, that the non-cash effect (gain or loss) of any mark-to-market
adjustments made directly to stockholder’s equity for fluctuation of the value
of financial instruments as mandated under FASB 133 shall be excluded from the
calculation of Consolidated Adjusted Tangible Net Worth.

 

“CP Disruption Event” means the inability of
any Conduit Buyer to raise (whether as a result of a prohibition or any other
event or circumstance whatsoever) funds through the issuance of commercial
paper notes in the United States commercial paper market, including by virtue
of (i) any disruption in the commercial paper market, (ii) insufficient
availability under any enhancement facility entered into by any Conduit Buyer
with respect to this Agreement or (iii) a downgrade of the rating of one or
more financial institutions extending credit to or for the account of any
Buyer.

 

“Credit Grade” means, with respect to a
Mortgagor, the risk category for such Mortgagor as determined in accordance
with the Underwriting Guidelines.

 

“Custodial Agreement” means the custodial
agreement dated as of the date hereof, among Sellers, Administrative Agent and
Custodian as the same may be amended from time to time.

 

“Custodial Fee” means the fee payable by the
Sellers to the Custodian pursuant to the Custodial Agreement.

 

“Custodial Mortgage Loan Schedule” has the
meaning assigned to such term in the Custodial Agreement.

 

“Custodian” means Wells Fargo Bank, National
Association or such other party specified by Administrative Agent and agreed to
by Sellers, which approval shall not be unreasonably withheld.

 

“Defaulted Mortgage Loan” means a Mortgage Loan
(i) as to which any scheduled payment, or part thereof, remains unpaid for
sixty (60) days or more from the original scheduled due date for such payment; (ii) as
to which an Act of Insolvency has occurred and is continuing with respect to
the Mortgagor thereof; (iii) as to which the related Mortgagor has failed
to pay in full the first scheduled payment thereunder; (iv) which has been
identified by a Seller or the Servicer as uncollectible; (v) which,
consistent with the Underwriting Guidelines and the Accepted Servicing
Practices, has been or should be written off as uncollectible; or (vi) as
to which the related Mortgagor is otherwise in default thereunder; provided
that any Mortgage

 

5

 

Loan as to which any scheduled payment remains unpaid in full after the
scheduled due date therefor for more than thirty (30) days, but less than sixty
(60) days, shall not constitute a Defaulted Mortgage Loan unless such Mortgage
Loan is otherwise a Defaulted Mortgage Loan for a reason described in clauses
(i)-(v) above.

 

“Dollars” and “$” means dollars in
lawful currency of the United States of America.

 

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

 

“Effective Date” means the date upon which the
conditions precedent set forth in Section 10 shall have been satisfied.

 

“Electronic Tracking Agreement” means an
Electronic Tracking Agreement among Administrative Agent, Sellers, MERS and
MERSCORP, Inc., to the extent applicable as the same may be amended from
time to time.

 

“Eligible Subservicer” means JPMorgan Chase
Home Finance LLC Bank, National Association, or such other Person as may be approved
in writing as a subservicer of Mortgage Loans by the Administrative Agent
(acting at the direction of the Committed Buyers).

 

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time.

 

“ERISA Affiliate” means any corporation or
trade or business that is a member of any group of organizations (i) described
in Section 414(b) or (c) of the Code of which a Seller is a
member and (ii) solely for purposes of potential liability under Section 302(c)(11)
of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or
(o) of the Code of which a Seller is a member.

 

“Escrow Instruction Letter” means the Escrow
Instruction Letter from Sellers to the Settlement Agent, in the form of Exhibit K
hereto, as the same may be modified, supplemented and in effect from time to
time.

 

“Escrow Payments” means, with respect to any
Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water
rates, sewer rents, municipal charges, mortgage insurance premiums, fire and
hazard insurance premiums, condominium charges, and any other payments required
to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or
any other document.

 

“Event of Default” has the meaning specified in
Section 15 hereof.

 

“Existing Indebtedness” has the meaning
specified in Section 13(a)(24) hereof.

 

“Facility Outstanding Principal” means, at any
time, the aggregate outstanding principal balance of all Mortgage Loans sold to
the Buyers by the Sellers.

 

6

 

“Fannie Mae” means Fannie Mae, the government
sponsored enterprise formerly known as the Federal National Mortgage
Association.

 

“FASB 133” means the Statement of Financial
Accounting Standards No. 133, or any successor statement thereto.

 

“FHA” means the Federal Housing Administration,
an agency within the United States Department of Housing and Urban Development,
or any successor thereto, and including the Federal Housing Commissioner and
the Secretary of Housing and Urban Development where appropriate under the FHA
Regulations.

 

“FIC” means Fieldstone Investment Corporation,
a Maryland corporation, and its permitted successors and assigns.

 

“FICO” means Fair Isaac & Co., or any
successor thereto.

 

“Fidelity Insurance”
means insurance coverage with respect to employee errors, omissions,
dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary,
property (other than money and securities) and computer fraud in an aggregate
amount acceptable to Sellers’ regulators.

 

“Fitch” means Fitch Ratings, Inc., or any successor thereto.

 

“Fixed Rate Mortgage Loan” means a Mortgage
Loan that bears interest at a single fixed rate for its entire term.

 

“Floating Rate Mortgage Loan” means a Mortgage
Loan that is not a Fixed Rate Mortgage Loan.

 

“FMC” means Fieldstone Mortgage Company, a
Maryland corporation, or its permitted successors and assigns.

 

“Foreclosed Loan” means a Mortgage Loan, the
property securing which has been foreclosed upon by a Seller.

 

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

 

“Full Documentation” means, with respect to a
Mortgage Loan, that the related Mortgagor has provided the highest level of
information to the applicable Seller about its assets, liabilities, income,
credit history and employment history, as determined for “full documentation”
in accordance with the Underwriting Guidelines.

 

“GAAP” means generally accepted accounting
principles in effect from time to time in the United States of America and
applied on a consistent basis.

 

“GNMA” means the Government National Mortgage
Association and any successor thereto.

 

7

 

“Government Securities”
means any security issued or guaranteed as to principal or interest by the
United States, or by a person controlled or supervised by and acting as an
instrumentality of the government of the United States pursuant to authority
granted by the Congress of the United States; or any certificate of deposit for
any of the foregoing.

 

“Governmental Authority” means any nation or
government, any state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions over any
Seller or Buyer, as applicable.

 

“Gross Margin” means, with respect to each
adjustable rate Mortgage Loan, the fixed percentage amount set forth in the
related Mortgage Note.

 

“Guarantee” means, as to any Person, any
obligation of such Person directly or indirectly guaranteeing any Indebtedness
of any other Person or in any manner providing for the payment of any
Indebtedness of any other Person or otherwise protecting the holder of such
Indebtedness against loss (whether by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, or
to take-or-pay or otherwise); provided that the term “Guarantee” shall
not include (i) endorsements for collection or deposit in the ordinary
course of business, or (ii) obligations to make servicing advances for
delinquent taxes and insurance or other obligations in respect of a Mortgaged
Property, to the extent required by Administrative Agent.  The amount of any Guarantee of a Person shall
be deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Guarantee is made or, if not stated
or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.  The terms “Guarantee” and “Guaranteed”
used as verbs shall have correlative meanings.

 

“High Cost Mortgage Loan”
means a Mortgage Loan classified as (a) a “high cost” loan under the Home
Ownership and Equity Protection Act of 1994 or (b) a “high cost,” “threshold,”
“covered,” or “predatory” loan under any other applicable state, federal or
local law (or a similarly classified loan using different terminology under a
law, regulation or ordinance imposing heightened regulatory scrutiny or
additional legal liability for residential mortgage loans having high interest
rates, points and/or fees).

 

“Income” means with respect to any Purchased
Mortgage Loan at any time until repurchased by a Seller, any principal received
thereon or in respect thereof and all interest, dividends or other
distributions thereon.

 

“Indebtedness” means, for any Person, such
Person’s:  (a) obligations for
borrowed money; (b) obligations representing the deferred purchase price
of Property other than accounts payable arising in the ordinary course of such
Person’s business on terms customary in the trade; (c) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from property now or hereafter owned or acquired by such Person; (d) obligations
that are evidenced by notes, acceptances, or other instruments; (e) obligations
under repurchase agreements, sale/buy-back agreements or like arrangements; (f) obligations
(contingent or otherwise) of such Person in respect of letters of credit for
the account of such Person; and (g) Capital Lease Obligations.

 

8

 

“Index” means, with respect to any adjustable
rate Mortgage Loan, the index identified on the Mortgage Loan Schedule and
set forth in the related Mortgage Note for the purpose of calculating the applicable
Mortgage Interest Rate.

 

“Interest Only Adjustment Date” means, with
respect to each Interest Only Loan, the date, specified in the related Mortgage
Note on which the Monthly Payment will be adjusted to include principal as well
as interest.

 

“Interest Only Loan” means a Mortgage Loan
which only requires payments of interest for a period of time specified in the
related Mortgage Note.

 

“Interest Rate Adjustment Date” means the date
on which an adjustment to the Mortgage Interest Rate with respect to each
Mortgage Loan becomes effective.

 

“Interest Rate Protection Agreement” means,
with respect to any or all of the Purchased Mortgage Loans, any short sale of a
US Treasury Security, or futures contract, or mortgage related security, or eurodollar
futures contract, or options related contract, or 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, entered into by a Seller and
an Affiliate of Buyers or such other party acceptable to Administrative Agent
in its sole discretion, which agreement is acceptable to Administrative Agent
in its sole discretion.

 

“Jumbo Mortgage Loan” means an A quality first
lien Mortgage Loan which is not eligible for sale to an Agency.

 

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

 

“LIBOR” means for each day, the rate of
interest (calculated on a per annum basis) equal to the overnight British
Bankers Association Rate as reported on the display designated as “BBAM” “Page DG8
4a” on Bloomberg (or such other display as may replace “BBAM” “Page DG8 4a”
on Bloomberg) on such date of determination, and if such rate shall not be so
quoted, the rate per annum at which Administrative Agent or an Affiliate is
offered Dollar deposits at or about 11:00 a.m., (New York City time), on
such day, by prime banks in the interbank eurodollar market where the
eurodollar and foreign currency exchange operations in respect of its loans are
then being conducted for delivery on such day for an overnight period, and in
an amount comparable to the amount of the Purchase Price of Transactions to be
outstanding on such day.

 

“Lien” means any mortgage, lien, pledge,
charge, security interest or similar encumbrance; provided, however, that a
Lien shall not include Permitted Liens.

 

“Loan to Value Ratio” or “LTV” means the
ratio of (i)(a) with respect to any first lien Mortgage Loan, the original
outstanding principal amount of such Mortgage Loan and (b) with respect to
any Second Lien Mortgage Loan, the outstanding principal amount of any related
first lien as of the date of origination of such Mortgage Loan, to (ii) the
lesser of (a) the Appraised Value of the Mortgaged Property at origination
or (b) if the Mortgaged Property was

 

9

 

purchased within 12 months of the origination of such Mortgage Loan,
the purchase price of the Mortgaged Property.

 

“Margin Call” has the meaning specified in Section 6(a) hereof.

 

“Margin Deadline” has the meaning specified in Section 6(b) hereof.

 

“Margin Deficit” has the meaning specified in Section 6(a) hereof.

 

“Market Value” means, with respect to any
Purchased Mortgage Loan as of any date of determination, the whole-loan
servicing released fair market value of such Purchased Mortgage Loan on such
date as determined by Administrative Agent (or an Affiliate thereof) in its good
faith discretion.

 

“Material Adverse Effect” means (a) a
material adverse change in, or a material adverse effect upon, the operations,
business, properties, condition (financial or otherwise) or prospects of the
Servicer or the Sellers, taken as a whole; (b) a material impairment of
the ability of any of the Sellers or the Servicer to perform under any Program
Agreement; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability of any Program Agreement against Sellers or
the Servicer.

 

“Maximum Aggregate Purchase Price” shall have
the meaning set forth in the Pricing Side Letter.

 

“Maximum Committed Purchase Price” means, at
any time, the sum of the Commitments of the Committed Buyers then in effect.

 

“Maximum Group Purchase Price” shall have the
meaning set forth in the Pricing Side Letter.

 

“MERS” means Mortgage Electronic Registration
Systems, Inc., a corporation organized and existing under the laws of the
State of Delaware, or any successor thereto.

 

“MERS System” means the system of recording
transfers of mortgages electronically maintained by MERS.

 

“Monthly Payment” means the scheduled monthly
payment of principal and/or interest on a Mortgage Loan.

 

“Moody’s” means Moody’s Investors Service, Inc.
or any successors thereto.

 

“Mortgage” means each mortgage, assignment of
rents, security agreement and fixture filing, or deed of trust, assignment of
rents, security agreement and fixture filing, deed to secure debt, assignment
of rents, security agreement and fixture filing, or similar instrument creating
and evidencing a lien on real property and other property and rights incidental
thereto.

 

10

 

“Mortgage File” means, with respect to a
Mortgage Loan, the documents and instruments relating to such Mortgage Loan and
set forth in Exhibit F to the Custodial Agreement.

 

“Mortgage Interest Rate” means the rate of
interest borne on a Mortgage Loan from time to time in accordance with the
terms of the related Mortgage Note.

 

“Mortgage Interest Rate Cap” means, with
respect to an adjustable rate Mortgage Loan, the limit on each Mortgage
Interest Rate adjustment as set forth in the related Mortgage Note.

 

“Mortgage Loan” means any closed-end, fixed or
floating-rate, first lien or Second Lien Mortgage Loan, on a one-to-four-family
residential mortgage or home equity loan evidenced by a promissory note and
secured by a mortgage, which Mortgage Loan has closed and been funded by a Seller,
and which satisfies the requirements set forth in the Underwriting Guidelines
and Section 13(b) hereof; provided, however, that,
except as expressly approved in writing by Administrative Agent, Mortgage Loans
shall not include any “high-LTV” loans (i.e., a mortgage loan having a
loan-to-value ratio in excess of 100% or in excess of such lower percentage set
forth in the Underwriting Guidelines or with respect to Second Lien Mortgage
Loans, a combined loan-to value ratio, in excess of the lower of (i) the
percentage specified in the Underwriting Guidelines or (ii) 100%) or any
High Cost Mortgage Loans and; provided, further, that the origination date with
respect to such Mortgage Loan is no earlier than thirty (30) days prior to the
related Purchase Date.

 

“Mortgage Loan Documents” means the documents
in the related Mortgage File to be delivered to the Custodian.

 

“Mortgage Loan Schedule” means with respect to
any Transaction as of any date, a mortgage loan schedule in the form of
either (a)  Exhibit C attached hereto or (b) a computer
tape or other electronic medium generated by a Seller, and delivered to Administrative
Agent and Custodian, which provides information (including, without limitation,
the information set forth on Exhibit C attached hereto) relating to
the Purchased Mortgage Loans in a format acceptable to Administrative Agent.

 

“Mortgage Loan Schedule and
Exception Report” has the meaning assigned to such term in the
Custodial Agreement.

 

“Mortgage Note” means the promissory note or
other evidence of the indebtedness of a Mortgagor secured by a Mortgage.

 

“Mortgaged Property” means the real property
securing repayment of the debt evidenced by a Mortgage Note.

 

“Mortgagor” means the obligor or obligors on a
Mortgage Note, including any person who has assumed or guaranteed the
obligations of the obligor thereunder.

 

11

 

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

 

“Net Income” means, for any period and any
Person, the net income of such Person for such period as determined in
accordance with GAAP.

 

“Net Worth” means, with respect to any Person,
an amount equal to, on a consolidated basis, such Person’s stockholder equity
(determined in accordance with GAAP).

 

“1934 Act” means the Securities Exchange Act of
1934, as amended from time to time.

 

“Non-Utilization Fee” shall have the meaning
set forth in the Pricing Side Letter.

 

“Notice Date” has the meaning given to it in Section 3(b) hereof.

 

“Obligations” means (a) all of Sellers’
indebtedness, obligations to pay the Repurchase Price on the Repurchase Date,
the Price Differential on each Price Differential Payment Date, and other
obligations and liabilities, to Buyers, their Affiliates or Custodian arising
under, or in connection with, the Program Agreements, whether now existing or
hereafter arising; (b) any and all sums paid by Buyers or on behalf of
Buyers in order to preserve any Purchased Mortgage Loan or its interest
therein; (c) in the event of any proceeding for the collection or
enforcement of any of Sellers’ indebtedness, obligations or liabilities
referred to in clause (a), the reasonable expenses of retaking, holding,
collecting, preparing for sale, selling or otherwise disposing of or realizing
on any Purchased Mortgage Loan, or of any exercise by Buyers of their rights
under the Program Agreements, including, without limitation, attorneys’ fees
and disbursements and court costs; and (d) all of Sellers’ indemnity
obligations to Buyers or Custodian or both pursuant to the Program Agreements.

 

“OFAC” has the meaning set forth in Section 13(a)(28)
hereof.

 

“Official Body” shall mean any government or
political subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of any such government or political
subdivision, or any court, tribunal, grand jury or arbitrator, in each case
whether foreign or domestic.

 

“Outstanding Principal Balance” means, with
respect to any Mortgage Loan at any time, the then outstanding principal amount
thereof.

 

“Participation Percentage” means, with respect
to any Buyer at any time, a fraction, expressed as a percentage, the numerator
of which is such Buyer’s pro rata share of the aggregate outstanding Purchase
Price at such time, as determined by the Administrative Agent, and the
denominator of which is the aggregate outstanding Purchase Price of all Buyers
at such time.

 

“PBGC” means the Pension Benefit Guaranty
Corporation or any entity succeeding to any or all of its functions under
ERISA.

 

12

 

“Permitted Guarantee
Obligations” means (a) mortgage, repurchase and warehouse
facilities whereby Sellers are jointly and severally liable thereunder; (b) mortgage
repurchase and warehouse facilities or other ordinary course transactions whereby
FIC guarantees the obligations of any of its Subsidiaries thereunder; and (c) the
obligations of either Seller pursuant to surety bonds required in connection
with state licensing and branch offices.

 

“Permitted Liens” means (i) liens of
current real property taxes and assessments not yet due and payable, (ii) covenants,
conditions and restrictions, rights of way, easements and other matters of the
public record as of the date of recording being acceptable to mortgage lending
institutions generally and specifically referred to in the lender’s title
insurance policy delivered to the Seller and which does not adversely affect
the Appraised Value of the Mortgaged Property, (iii) in the case of a
Mortgaged Property that is a condominium or an individual unit in a planned
unit development, liens for common charges permitted by statute, (iv) other
matters to which like properties are commonly subject, which do not,
individually or in the aggregate, materially interfere with the benefits of the
security intended to be provided by the related Mortgage or the use, enjoyment,
value or marketability of the related Mortgaged Property.

 

“Person” means an individual, partnership,
corporation (including a business trust), limited liability company, joint
stock company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.

 

 “Plan”
means an employee benefit or other plan established or maintained by any Seller
or any ERISA Affiliate and covered by Title IV of ERISA, other than a
Multiemployer Plan.

 

“Post Default Rate” shall have the meaning set
forth in the Pricing Side Letter.

 

“Price Differential” means with respect to any
Transaction as of any date of determination, an amount equal to the product of (A) the
Pricing Rate for such Transaction and (B) the Purchase Price for such
Transaction, calculated daily on the basis of a 360-day year for the actual
number of days during the period commencing on (and including) the Purchase
Date for such Transaction and ending on (but excluding) the date of
determination.

 

“Price Differential Payment Date” means, with
respect to a Purchased Mortgage Loan, the 5th day of the month
following the related Purchase Date and each succeeding 5th day of
the month thereafter; provided, that, with
respect to such Purchased Mortgage Loan, the final Price Differential Payment
Date shall be the related Repurchase Date; and provided, further, that if any
such day is not a Business Day, the Price Differential Payment Date shall be
the next succeeding Business Day.

 

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

 

“Pricing Side Letter” means that certain
Pricing Side Letter, dated as of the date hereof, between the Administrative
Agent and the Sellers, as the same may be amended from time to time.

 

“Principal” has the meaning given to it in
Annex I.

 

13

 

“Program Agreements” means, collectively, the
Pricing Side Letter, the Servicing Agreement, if any, the Servicer Notice, if
any, the Custodial Agreement, this Agreement and the Electronic Tracking
Agreement, if entered into.

 

“Prohibited Person” has the meaning set forth
in Section 13(a)(28) hereof.

 

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

 

“Purchase Confirmation” means a confirmation of
a Transaction, in the form attached as Exhibit B hereto.

 

“Purchase Date” means the date on which
Purchased Mortgage Loans are to be transferred by the applicable Seller to
Buyers.

 

“Purchase Price” means the price at which each
Purchased Mortgage Loan is transferred by the applicable Seller to Buyers,
which shall equal:

 

(i) on the Purchase Date, the Asset Value of the
Purchased Mortgage Loan on such date; and

 

(ii) on any day after the Purchase Date, except
where Administrative Agent and the Sellers agree otherwise, the amount
determined under the immediately preceding clause (i) decreased by the
amount of any cash applied to reduce the Sellers’ obligations under
clause (ii) of Section 4(b) hereof or under Section 6
hereof.

 

“Purchase Price Percentage” shall have the
meaning set forth in the Pricing Side Letter.

 

“Purchased Mortgage Loans” means the collective
reference to Mortgage Loans together with the Repurchase Assets related to such
Mortgage Loans transferred by the applicable Seller to Buyers in a Transaction
hereunder, listed on the related Mortgage Loan Schedule attached to the
related Transaction Request, which such Mortgage Loans the Custodian has been
instructed to hold pursuant to the Custodial Agreement.

 

“Qualified Insurer” means a mortgage guaranty
insurance company duly authorized and licensed where required by law to
transact mortgage guaranty insurance business and approved as an insurer by
Fannie Mae or Freddie Mac.

 

“Qualified Originator” means an originator of
Mortgage Loans which is acceptable under the Underwriting Guidelines.

 

“Rating Agency”
means each of Moody’s, S&P or Fitch or any successor thereof.

 

“Records” means all instruments, agreements and
other books, records, and reports and data generated by other media for the
storage of information maintained by Sellers or any other person or entity with
respect to a Purchased Mortgage Loan. 
Records shall include the

 

14

 

Mortgage Notes, any
Mortgages, the Mortgage Files, the credit files related to the Purchased
Mortgage Loan and any other instruments necessary to document or service a
Mortgage Loan.

 

“REO Property” means real property acquired by a
Seller, including a Mortgaged Property acquired through foreclosure of a
Mortgage Loan or by deed in lieu of such foreclosure.

 

“Reporting Date” means the 5th day
of each month or, if such day is not a Business Day, the next succeeding
Business Day.

 

“Repurchase Assets” has the meaning assigned
thereto in Section 8 hereof.

 

“Repurchase Date” means the earlier of (i) the
Termination Date, (ii) the date set forth in the applicable Purchase
Confirmation or (iii) the date determined by application of Section 16
hereof.

 

“Repurchase Price” means the price at which
Purchased Mortgage Loans are to be transferred from Buyers to Sellers upon
termination of a Transaction, which will be determined in each case (including
Transactions terminable upon demand) as the sum of the Purchase Price and the
accrued but unpaid Price Differential as of the date of such determination.

 

“Request for Certification” means a notice sent
to the Custodian reflecting the sale of one or more Purchased Mortgage Loans to
Buyers hereunder.

 

“Required Committed Buyers” means, at any time,
Committed Buyers having Commitments at least equal to 66 2/3% of the Maximum
Committed Purchase Price, or, if the Commitments have been terminated, having
at least 66 2/3% of the Purchase Price outstanding with respect to Transactions
hereunder.

 

“Requirement of Law” means, with respect to any
Person, any law, treaty, rule or regulation or determination of an arbitrator,
a court or other governmental authority, applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.

 

“Responsible Officer” means as to any Person,
the chief executive officer or, with respect to financial matters, the chief financial
officer of such Person, or, with respect to any certificates to be provided to
Buyer hereunder, any of the chief executive officer, the chief financial
officer or the treasurer or such Person.

 

“S&P” means Standard & Poor’s
Ratings Services, or any successor thereto.

 

“SEC” means the Securities and Exchange
Commission, or any successor thereto.

 

“Second Lien Mortgage Loan” means a Mortgage
Loan secured by a second lien on the related Mortgaged Property.

 

“Seller” means each of (i) Fieldstone
Investment Corporation, a Maryland corporation, or its permitted successors and
assigns and (ii) Fieldstone Mortgage Company, a Maryland corporation, or
its permitted successors and assigns.

 

15

 

“Servicer” means any servicer approved by
Administrative Agent in its sole discretion, which may be a Seller.

 

“Servicer Advance” has the meaning specified in
Section 7(g) hereof.

 

“Servicer Notice” means the notice acknowledged
by the Servicer substantially in the form of Exhibit M hereto.

 

“Servicing Agreement” means any servicing
agreement entered into among Sellers, Servicer, and/or Eligible Subservicer as
the same may be amended from time to time.

 

 “Settlement
Agent” means, with respect to any Transaction the subject of which is a
Wet-Ink Mortgage Loan, the entity approved by Administrative Agent, in its sole
good-faith discretion, which may be a title company, escrow company or attorney
in accordance with local law and practice in the jurisdiction where the related
Wet-Ink Mortgage Loan is being originated. 
A Settlement Agent is deemed approved unless Administrative Agent
notifies Sellers otherwise at any time electronically or in writing.

 

“SIPA” means the Securities Investor Protection
Act of 1970, as amended from time to time.

 

“Structured Securities
Debt” means any Indebtedness incurred by an Acceptable SPV, provided
that (i) such Indebtedness is non-recourse to any shareholder or equity
owner of such Acceptable SPV, (ii) such Indebtedness is publicly issued or
privately placed pursuant to a 144(a) offering and (iii) such
Indebtedness is rated by at least one of the Rating Agencies.

 

“Subordinated Debt” means, Indebtedness of Sellers
which is (i) unsecured, (ii) no part of the principal of such
Indebtedness is required to be paid (whether by way of mandatory sinking fund,
mandatory redemption, mandatory prepayment or otherwise) prior to the date
which is one year following the Termination Date and (iii) the payment of
the principal of and interest on such Indebtedness and other obligations of Sellers
in respect of such Indebtedness are subordinated to the prior payment in full
of the principal of and interest (including post-petition obligations) on the
Transactions and all other obligations and liabilities of Sellers to Buyers
hereunder on terms and conditions approved in writing (which may be by
facsimile or electronic mail) by Administrative Agent and all other terms and
conditions of which are satisfactory in form and substance to Administrative
Agent.

 

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

 

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

 

16

 

“Test Period” means any calendar quarter.

 

“Transaction” has the meaning set forth in Section 1
hereof.

 

“Transaction Request” means a request from a Seller
to Administrative Agent, in the form attached as Exhibit A hereto,
to enter into a Transaction.

 

“Trust Receipt and Certification” means, with
respect to any Transaction as of any date, a receipt and certification in the
form attached as an exhibit to the Custodial Agreement.

 

“Underwriting Guidelines” means the standards,
procedures and guidelines of the Sellers for underwriting and acquiring
Mortgage Loans, which are set forth in the written policies and procedures of
the Sellers, a copy of which is attached hereto as Exhibit G and
such other guidelines as are identified and approved in writing by Administrative
Agent.

 

“Uniform Commercial Code” means the Uniform
Commercial Code as in effect on the date hereof in the State of New York
or the Uniform Commercial Code as in effect in the applicable jurisdiction.

 

“VA” means the U.S. Department of Veterans
Affairs, an agency of the United States of America, or any successor thereto
including the Secretary of Veterans Affairs.

 

“Violation Deadline” has the meaning assigned thereto
in Section 4(c) hereof.

 

“Weighted
Average CLTV” means, at any time with respect to a group of Purchased Mortgage
Loans, the weighted average of all of the CLTVs for such Purchased Mortgage
Loans, weighted on the basis of the original Outstanding Principal Balance of
such Purchased Mortgage Loans.

 

“Weighted
Average FICO Score” means, at any time with respect to a group of Purchased
Mortgage Loans, the weighted average of all FICO Scores for such Purchased Mortgage
Loans, weighted on the basis of the original Outstanding Principal Balance of
such Purchased Mortgage Loans.

 

“Weighted
Average LTV” means, at any time with respect to a group of Purchased Mortgage
Loans, the weighted average of all of the LTVs for such Purchased Mortgage
Loans, weighted on the basis of the original Outstanding Principal Balance of
such Purchased Mortgage Loans.

 

“Weighted Average Mortgage Interest Rate” means,
at any time with respect to a group of Purchased Mortgage Loans, the weighted
average of all Mortgage interest rates for such Purchased Mortgage Loans,
weighted on the basis of the current Outstanding Principal Balance of such Purchased
Mortgage Loans.

 

“Wet-Ink Documents” means, with respect to any
Wet-Ink Mortgage Loan, the (a) Transaction Request and (b) the
Mortgage Loan Schedule.

 

17

 

“Wet-Ink Mortgage Loan” means a Mortgage Loan
which a Seller is selling to Buyers simultaneously with the origination
thereof.

 

3.     Program;
Initiation of Transactions

 

a.             From time
to time, in the sole discretion of each Conduit Buyer, and as required by such
Conduit Buyer’s related Committed Buyers, such Conduit Buyer may, and such
Committed Buyers shall, purchase from Sellers certain Mortgage Loans that have
been either originated by Sellers or purchased by Sellers from other
originators.  This
Agreement is a commitment by Committed Buyers to  enter into Transactions with the Sellers for an amount equal to the
Maximum Committed Purchase Price.  This
Agreement is neither a commitment by Conduit Buyers to enter into Transactions
with the Sellers nor a commitment by Committed Buyers to enter into
Transactions with the Sellers for amounts exceeding the Maximum Committed
Purchase Price, but rather sets forth the procedures to be used in connection
with periodic requests for Buyers to enter into Transactions with the Sellers.  Each Seller hereby acknowledges that, beyond
the Maximum Committed Purchase Price, Buyers are under no obligation to agree
to enter into, or to enter into, any Transaction pursuant to this Agreement.  All Purchased Mortgage Loans shall exceed or
meet the Underwriting Guidelines, and shall be serviced by Servicer.  The aggregate Purchase Price of Purchased
Mortgage Loans subject to outstanding Transactions shall not exceed the Maximum
Aggregate Purchase Price.  Buyer shall
only be required to enter into Transactions in which the Purchase Price with
respect thereto is at least $25,000,000.

 

b.             With
respect to each Transaction involving Mortgage Loans which are not Wet-Ink
Mortgage Loans, Sellers shall give Administrative Agent and Custodian prior
notice by no later than 11:00 a.m. (New York City time) at least two (2) Business
Days prior to any proposed Purchase Date (the date on which such notice is
given, the “Notice Date”); provided, that the requested Purchase Price
must be an aggregate amount of at least $25 million.  With respect to Wet-Ink Mortgage Loans, Sellers
shall deliver notice of any proposed purchase on or before 3:00 p.m. (New
York City time) on the Purchase Date.  On
the Notice Date, Sellers shall (i) request that Buyers enter into a
Transaction by furnishing to Administrative Agent a Transaction Request, (ii) deliver
to Administrative Agent and Custodian a Mortgage Loan Schedule and (iii) deliver
to Custodian, or the Administrative Agent, with respect to each Wet-Ink
Mortgage Loan, either a Request for Certification and each Mortgage File or
Wet-Ink Documents for each Wet-Ink Mortgage Loan, as applicable, in accordance
with Section 10(b)(3) hereof. Following receipt of such request,
Buyers may enter into such requested Transaction or may notify Sellers of its
intention not to enter into such Transaction in accordance with the conditions
precedent set forth in Section 10 hereof. In the event the Mortgage Loan Schedule provided
by a Seller contains erroneous computer data, is not formatted properly or the
computer fields are otherwise improperly aligned, Administrative Agent shall
provide written or electronic notice to Sellers describing such error and Sellers
shall correct the

 

18

 

computer data, reformat or properly align the computer
fields itself and resubmit the Mortgage Loan Schedule as required herein.  Each Transaction Request shall be irrevocable
and binding on the applicable Seller, and the Sellers shall indemnify the
Buyers against any loss or expense incurred by the Buyers, either directly or
indirectly, as a result of any failure by the applicable Seller to complete
such Transaction, including, without limitation, any actual loss or expense
incurred by the Buyers, either directly or indirectly, by reason of the
liquidation or reemployment of funds acquired by the Buyers (including, without
limitation, funds obtained by Conduit Buyers by issuing Commercial Paper or
promissory notes, obtaining deposits as loans from third parties and
reemployment of funds) for the Buyers to fund such Transaction.

 

c.             Upon the
satisfaction of the applicable conditions precedent set forth in Section 10
hereof, Administrative Agent shall select a Buyer or Buyers (the “Selected
Buyers”) to fund such Transaction and, in its sole discretion, may
subdivide any requested Transaction into several Transactions to be entered
into by one or more Selected Buyers and all of Sellers’ interest in the
Repurchase Assets shall pass to such Selected Buyers on the Purchase Date,
against the transfer of the Purchase Price to Sellers.  The portion of each Transaction made by a
Conduit Buyer shall be in such Conduit Buyer’s sole and absolute discretion,
and any portion of such Transaction not made by the Conduit Buyer of a Buying
Group will be made by the Committed Buyers of such Buying Group.  At its option, any Conduit Buyer shall accept
or reject any such Transaction Request by notice given to the Administrative
Agent by telephone or telecopy.   On each
Purchase Date, the Administrative Agent shall record on its books and records
each Buying Group’s pro rata share of each Transaction made to the applicable
Seller, which records shall be conclusive evidence of Transactions entered into
with the applicable Seller, absent manifest error.  Upon transfer of the Mortgage Loans to Selected
Buyers as set forth in this Section and until termination of any related
Transactions as set forth in Sections 4 or 16 of this Agreement, ownership of
each Mortgage Loan, including each document in the related Mortgage File and
Records, is vested in Selected Buyers; provided that, prior to the recordation
by the Custodian as provided for in the Custodial Agreement record title in the
name of the applicable Seller to each Mortgage shall be retained by the Sellers
in trust, for the benefit of Selected Buyers, for the sole purpose of
facilitating the servicing and the supervision of the servicing of the Mortgage
Loans.

 

d.             With
respect to each Wet-Ink Mortgage Loan, by no later than 12:00 noon, (New York
City time) on the fifth Business Day following the applicable Purchase Date, Sellers
shall cause the related Settlement Agent to deliver to the Custodian the
remaining documents in the Mortgage File.

 

e.             At the request of the Sellers made no later
than forty-five (45) days prior to, but no earlier than sixty (60) days prior
to, the Termination Date of this Agreement, the Administrative Agent may in its
sole discretion extend the Termination Date for a period of 364 additional days
or such other period to be determined by Administrative Agent in its sole
discretion by giving written notice

 

19

 

of such extension to the Sellers.
Any failure by the Administrative Agent to deliver such notice of extension
shall be deemed to be the Administrative Agent’s determination not to extend
the then current Termination Date.

 

4.     Repurchase

 

a.             The
related Seller shall repurchase the related Purchased Mortgage Loans from Buyers
on each related Repurchase Date.  Such
obligation to repurchase exists without regard to any prior or intervening
liquidation or foreclosure with respect to any Purchased Mortgage Loan (but
liquidation or foreclosure proceeds received by Administrative Agent or any
Buyer shall be applied to reduce the Repurchase Price for such Purchased
Mortgage Loan on each Price Differential Payment Date except as otherwise
provided herein).  The related Seller is
obligated to repurchase and take physical possession of the Purchased Mortgage
Loans from Buyers or its designee (including the Custodian) at such Seller’s
expense on the related Repurchase Date.

 

b.             Provided
that no Event of Default shall have occurred and is continuing, and Administrative
Agent has received the related Repurchase Price upon repurchase of the
Purchased Mortgage Loans by the related Seller, Buyers agree to release their ownership
interest hereunder in the Purchased Mortgage Loans (including, the Repurchase
Assets related thereto) at the request of the related Seller.  With respect to payments in full by the
related Mortgagor of a Purchased Mortgage Loan, Sellers agree to (i) provide
Administrative Agent with a copy of a report from the related Servicer
indicating that such Purchased Mortgage Loan has been paid in full, (ii) remit
to Administrative Agent, within two Business Days, the Repurchase Price with
respect to such Purchased Mortgage Loans and (iii)  provide Administrative
Agent a notice specifying each Purchased Mortgage Loan that has been prepaid in
full.  Buyers agree to release their ownership
interest in Purchased Mortgage Loans which have been prepaid in full after
receipt of evidence of compliance with clauses (i) through (iii) of
the immediately preceding sentence.

 

5.     Price
Differential.

 

a.             On each
Business Day that a Transaction is outstanding, the Pricing Rate shall be reset
and, unless otherwise agreed, the accrued and unpaid Price Differential shall
be settled in cash on each related Price Differential Payment Date.  Two Business Days prior to the Price
Differential Payment Date, Administrative Agent shall give Sellers written or
electronic notice of the amount of the Price Differential due on such Price
Differential Payment Date.  On the Price
Differential Payment Date, Sellers shall pay to Administrative Agent the Price
Differential for such Price Differential Payment Date (along with any other
amounts to be paid pursuant to Section 7 hereof), by wire transfer in
immediately available funds.

 

20

 

b.             If
Sellers fail to pay all or part of the Price Differential by 11:00 a.m.
(New York City time) on the related Price Differential Payment Date, with
respect to any Purchased Mortgage Loan, Sellers shall be obligated to pay to the
Administrative Agent (in addition to, and together with, the amount of such
Price Differential) interest on the unpaid Repurchase Price at a rate per annum
equal to the Post Default Rate until the Price Differential is received in full
by the Administrative Agent.

 

6.     Margin
Maintenance

 

a.             If at
any time the Asset Value of the Purchased Mortgage Loans subject to Transactions
is less than the then outstanding Purchase Price for all Transactions (a “Margin
Deficit”), then the Administrative Agent may by notice to Sellers require Sellers
to transfer to Administrative Agent cash in an amount equal to the Margin
Deficit (such requirement, a “Margin Call”) .

 

b.             Any
notice given before 10:00 a.m. (New York City time) on a Business Day
shall be met, and the related Margin Call satisfied, no later than 5:00 p.m.
(New York City time) on such Business Day; notice given after 10:00 a.m.
(New York City time) on a Business Day shall be met, and the related Margin
Call satisfied, no later than 5:00 p.m. (New York City time) on the
following Business Day (the foregoing time requirements for satisfaction of a
Margin Call are referred to as the “Margin Deadlines”).  The failure of any Buyer, on any one or more
occasions, to exercise its rights hereunder, shall not change or alter the
terms and conditions to which this Agreement is subject or limit the right of such
Buyer to do so at a later date.  Sellers
and Buyers each agree that a failure or delay by any Buyer to exercise its
rights hereunder shall not limit or waive such Buyer’s rights under this
Agreement or otherwise existing by law or in any way create additional rights
for Sellers.

 

c.             In the
event that a Margin Deficit exists with respect to any Purchased Mortgage Loan,
the Administrative Agent may retain any funds received by it to which the Sellers
would otherwise be entitled hereunder up to an amount not to exceed the Margin
Deficit and upon providing notice to the Sellers, which funds (i) shall be
held by Administrative Agent against the related Margin Deficit and (ii) may
be applied by Administrative Agent against any Purchased Mortgage Loan for
which the related Margin Deficit remains otherwise unsatisfied.  Notwithstanding the foregoing, the Administrative
Agent retains the right, in its sole discretion, to make a Margin Call in
accordance with the provisions of this Section 6 to the extent that
Administrative Agent has not exercised its rights under this subsection (c).

 

7.     Income
Payments

 

a.             If
Income is paid in respect of any Purchased Mortgage Loan during the term of a
Transaction, such Income shall be the property of Buyers.  Notwithstanding the foregoing, and provided
no Event of Default has occurred and is continuing,

 

21

 

Administrative Agent agrees that if a third-party
Servicer is in place for any Purchased Mortgage Loans, such Servicer shall
deposit such Income to the Collection Account. 
Sellers shall deposit all Income received in its capacity as Servicer of
any Purchased Mortgage Loans or pursuant to the preceding sentence to the
Collection Account in accordance with Section 12(c) hereof.

 

b.             In the
event that an Event of Default has occurred and is continuing, notwithstanding
any provision set forth herein, Sellers shall remit to Administrative Agent all
Income received with respect to each Purchased Mortgage Loan on the related
Price Differential Payment Date or on such other date or dates as Administrative
Agent notifies Sellers in writing.

 

c.             The
Servicer shall be permitted, in its reasonable discretion, to set aside and pay
from the Collection Account any accrued and unpaid servicing fee under any
Servicing Agreement due and owing to it, and such amounts shall not constitute
Available Collections.  All moneys held
by Servicer in the Collection Account shall, to the extent available for
distribution, be distributed by the Servicer on each Price Differential Payment
Date, in the following order of priority:

 

(1)           first,
to the Servicer, to repay any outstanding Servicer Advances;

 

(2)           second,
on a pro rata basis, (A) to the Servicer, the servicing fee under any
Servicing Agreement and other reasonable amounts due and owing to the Servicer (to
the extent any portion of the accrued and unpaid servicing fees have not been
previously set aside from Collections by the Servicer in accordance with the
first sentence of this Section 7(f)) and (ii) to the Custodian, the
Custodial Fee and the reasonable out-of-pocket costs and expenses of the
Custodian not covered by the Custodial Fee;

 

(3)           third,
to the Administrative Agent, on behalf of itself and the Buyers (as applicable)
in an amount sufficient to pay (as applicable and in the following order of priority):

 

A. the Administrative Fee;

 

B. to the Buyers, all accrued and unpaid Price
Differential due and owing to the Buyers for the immediately preceding calendar
month (to be distributed pro rata in proportion to each Buyer’s portions of the
outstanding Purchase Price);

 

C. to the Buyers, all accrued and unpaid fees and
other costs and expenses under the Pricing Side Letter;

 

D. to the Buyers, (i) prior to the Termination
Date, any amount selected by the Sellers in their discretion toward a reduction
of the outstanding Purchase Price, or any amount necessary to reduce the
outstanding Purchase Price to cure an Event of Default or to satisfy the

 

22

 

Margin Deficit and (ii) following the Termination Date, all remaining
Available Collections will be used to reduce the outstanding Purchase Price to
zero;

 

E. to the Administrative Agent and the Buyers, all
costs, expenses and indemnification payments, if any, due and owing to such
Persons under this Agreement and the other Program Agreements; and

 

(4)           fourth,
any remaining funds shall be paid to the Sellers (prior to the Termination Date
if, after giving effect to such payment, no Event of Default shall occur) or to
the Buyers and the Administrative Agent to reduce the outstanding Obligations
to zero (following the Termination Date), to the extent outstanding Obligations
remain due and owing.

 

d.             If on
any Price Differential Payment Date Available Collections are not sufficient to
pay the sum of the amounts described in clauses (2) through (5) above
that are due and payable, the Servicer may, in its sole discretion and solely
to the extent that the Servicer reasonably expects to be reimbursed in full
pursuant to Section 7(f)(1), advance an amount equal to such amounts due
and payable on such Price Differential Payment Date (each, a “Servicer
Advance”).

 

8.     Security
Interest

 

Although the parties intend that all Transactions
hereunder be sales and purchases and not financings, in the event any such
Transactions are deemed to be financings, each Seller hereby pledges to Administrative
Agent for the benefit of the Buyers as security for the performance by such Seller
of its Obligations and hereby grants, assigns and pledges to Administrative
Agent for the benefit of the Buyers a fully perfected first priority security
interest in the Purchased Mortgage Loans, the Records, and all related
servicing rights, the Program Agreements (to the extent such Program Agreements
and Sellers’ right thereunder relate to the Purchased Mortgage Loans), any
Property relating to the Purchased Mortgage Loans, all insurance policies and
insurance proceeds relating to any Purchased Mortgage Loan or the related
Mortgaged Property, including, but not limited to, any payments or proceeds
under any related primary insurance, hazard insurance, Income, the Collection
Account, Interest Rate Protection Agreements, accounts (including any interest
of Sellers in escrow accounts) and any other contract rights, instruments,
accounts, payments, rights to payment (including payments of interest or
finance charges) general intangibles and other assets relating to the Purchased
Mortgage Loans (including, without limitation, any other accounts) or any
interest in the Purchased Mortgage Loans, and any proceeds (including the
related securitization proceeds) and distributions with respect to any of the
foregoing and any other property, rights, title or interests as are specified
on a Transaction Request and/or Trust Receipt and Certification, in all
instances, whether now owned or hereafter acquired, now existing or hereafter
created (collectively, the “Repurchase Assets”); provided, however, as
to any Purchased Mortgage Loan the security interest shall automatically
terminate upon payment in full to Administrative Agent of the Repurchase Price
with respect thereto.  Sellers agree to
execute, deliver and/or file such documents and perform such acts as may be
reasonably necessary to fully perfect Administrative Agent’s security interest
created hereby for the benefit of the Buyers. 
Furthermore, the Sellers

 

23

 

hereby authorize the Administrative Agent to file financing statements
relating to the Repurchase Assets, as the Administrative Agent, at its option,
may deem appropriate.  The Sellers shall
pay the filing costs for any financing statement or statements prepared
pursuant to this Section.

 

9.     Payment
and Transfer

 

Unless otherwise mutually agreed in writing, all
transfers of funds to be made hereunder shall be made in Dollars, in
immediately available funds, without deduction, set-off or counterclaim, to the
party entitled thereto to the account specified in Section 42, or such
other account as such party shall specify to the others in writing..  Each party acknowledges that it has no rights
of withdrawal from the foregoing account. 
All Purchased Mortgage Loans transferred by one party hereto to the
other party shall be in the case of a purchase by Buyers in suitable form for
transfer or shall be accompanied by duly executed instruments of transfer or
assignment in blank and such other documentation as Administrative Agent may
reasonably request.  All Purchased
Mortgage Loans shall be evidenced by a Trust Receipt and Certification.  Any Repurchase Price received by Administrative
Agent after 2:00 p.m. (New York City time) shall be deemed received on the
next succeeding Business Day; provided, that Administrative Agent shall credit
to the Sellers interest, if any, earned on such funds overnight.

 

10.  Conditions
Precedent

 

a.             Initial
Transaction.  As conditions precedent
to the initial Transaction, Administrative Agent shall have received on or
before the day of such initial Transaction the following, in form and substance
satisfactory to Administrative Agent and duly executed by Sellers and each
other party thereto:

 

(1)           Program
Agreements.  The Program Agreements
(including without limitation a Custodial Agreement in a form acceptable to Administrative
Agent) duly executed and delivered by the parties thereto and being in full
force and effect, free of any modification, breach or waiver.

 

(2)           Security
Interest.  Evidence that all other
actions necessary or, in the opinion of Administrative Agent, desirable to
perfect and protect Buyers’ interest in the Purchased Mortgage Loans and other
Repurchase Assets have been taken, including, without limitation, duly
authorized and filed Uniform Commercial Code financing statements on Form UCC-1.

 

(3)           Organizational
Documents.  A certified copy of each Seller’s
charter, bylaws and corporate resolutions approving the Program Agreements and
transactions thereunder (either specifically or by general resolution) and all
documents evidencing other necessary corporate action or governmental approvals
as may be required in connection with the Program Agreements.

 

(4)           Good
Standing Certificate.  A certified
copy of a good standing certificate from the jurisdiction of organization of each
Seller, dated as of no earlier than the date 10 Business Days prior to the
Purchase Date with respect to the initial Transaction hereunder.

 

24

 

(5)           Incumbency
Certificate.  An incumbency
certificate of the corporate secretary of each Seller, certifying the names,
true signatures and titles of the representatives duly authorized to request
transactions hereunder and to execute the Program Agreements.

 

(6)           Opinion
of Counsel.  In-house and outside
counsel opinions of each Seller’s counsel, in form and substance substantially
as set forth in Exhibit F attached hereto.

 

(7)           Underwriting
Guidelines.  A true and correct copy
of the Underwriting Guidelines certified by an officer of Sellers.

 

(8)           Fees.  Payment of any fees due to Administrative
Agent hereunder.

 

(9)           Insurance.  Evidence
that Sellers have added Buyers as additional loss payees under the Sellers’
Fidelity Insurance.

 

b.             All
Transactions.  The obligation of
Buyers to enter into each Transaction pursuant to this Agreement is subject to
the following conditions precedent:

 

(1)           Due
Diligence Review.  Without limiting
the generality of Section 36 hereof, Administrative Agent shall have
completed, to its satisfaction, its due diligence review of the related
Mortgage Loans and Sellers and the Servicer.

 

(2)           Required
Documents.

 

(a)           With
respect to each Purchased Mortgage Loan which is not a Wet-Ink Mortgage Loan,
the Mortgage File has been delivered to the Custodian on or prior to 3:00 p.m.
(New York City time) two (2) Business Days prior to the Purchase Date;

 

(b)           With
respect to each Wet-Ink Mortgage Loan, the Wet-Ink Documents have been
delivered to Administrative Agent or Custodian, as the case may be, by 3:00 p.m.
(New York City time) on the Purchase Date.

 

(3)           Transaction
Documents.  Administrative Agent or
its designee shall have received on or before the day of such Transaction
(unless otherwise specified in this Agreement) the following, in form and
substance satisfactory to Administrative Agent and (if applicable) duly
executed:

 

(a)           A
Transaction Request delivered pursuant to Section 3(c) hereof and a
Purchase Confirmation.

 

(b)           The
Request for Certification and the related Custodial Mortgage Loan Schedule, and
the Trust Receipt.

 

25

 

(c)           Such
certificates, opinions of counsel or other documents as Administrative Agent
may reasonably request.

 

(4)           No Event of Default.  No Event of Default shall have occurred and
be continuing;

 

(5)           Requirements of Law.  Administrative Agent shall not have
determined that the introduction of or a change in any Requirement of Law or in
the interpretation or administration of any Requirement of Law applicable to
Buyers has made it unlawful, and no Governmental Authority shall have asserted
that it is unlawful, for Buyers to enter into Transactions with a Pricing Rate
based on LIBOR.

 

(6)           Representations and Warranties.  Both immediately prior to the related
Transaction and also after giving effect thereto and to the intended use
thereof, the representations and warranties made by each Seller in each Program
Agreement shall be true, correct and complete on and as of such Purchase Date
in all material respects with the same force and effect as if made on and as of
such date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date).

 

(7)           Electronic Tracking Agreement.
To the extent Sellers are selling Mortgage Loans which are registered on the
MERS® System, an Electronic Tracking Agreement entered into, duly executed and
delivered by the parties thereto and being in full force and effect, free of
any modification, breach or waiver.

 

(8)           Material Adverse Effect.  No event has occurred and is continuing that,
under the sole discretion of the Administrative Agent, is reasonably likely to
result in a Material Adverse Effect.

 

(9)           CP Disruption Event.  With respect to a particular Conduit Buyer, a
CP Disruption Event shall not have occurred or be continuing;

 

(10)         Maximum Aggregate Purchase Price.  After giving effect to the requested
Transaction, the aggregate outstanding Purchase Price for all Purchased
Mortgage Loans subject to then outstanding Transactions under this Agreement
shall not exceed the Maximum Aggregate Purchase Price.

 

(11)         Satisfactory Standards. The
credit, risk management and collection policies of the Sellers are satisfactory
to the Administrative Agent, and the Sellers have adequate ability to
underwrite Mortgage Loans and to administer the Underwriting Guidelines and
Accepted Servicing Practices.

 

11.  Program; Costs; Illegality

 

a.             Sellers
shall reimburse Administrative Agent for any of Administrative Agent’s
reasonable out-of-pocket costs, including due diligence review costs and

 

26

 

reasonable attorney’s fees, incurred by Administrative
Agent in determining the acceptability to Administrative Agent of any Mortgage
Loans.  Sellers shall also pay, or
reimburse Administrative Agent if Administrative Agent shall pay, any termination
fee, which may be due any servicer. 
Sellers shall pay the fees and expenses of Administrative Agent’s
counsel in connection with the Program Agreements. Legal fees for any
subsequent amendments to this Agreement or related documents shall be borne by
Sellers.  Sellers shall pay ongoing
custodial and bank fees and expenses, and any other ongoing fees and expenses under
any other Program Agreement.

 

b.             If
Administrative Agent determines that, due to the introduction of, any change
in, or the compliance by Buyers with (i) any eurocurrency reserve
requirement or (ii) the interpretation of any law, regulation or any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be an increase in the
cost to Buyers in engaging in the present or any future Transactions, then
Sellers agree to pay to Administrative Agent, from time to time, upon demand by
Administrative Agent (with a copy to Custodian) the actual cost of additional
amounts as specified by Administrative Agent to compensate Buyers for such
increased costs (the “Additional Costs”),
provided that (A) Administrative Agent delivers to the Sellers a
certificate setting forth in reasonable detail the amount and basis of
determination of such Additional Costs and such certificate as to any
Additional Costs submitted by the Administrative Agent to the Sellers shall be
conclusive in the absence of manifest error and (B) notwithstanding
anything contained herein, neither Seller shall be obligated to compensate
Buyers for any Additional Costs that Buyers become entitled to claim hereunder
for any period prior to the date that is 120 days prior to a notice of
such claim if Buyers or Administrative Agent knew or reasonably would have been
expected to know of the circumstances giving rise to such Additional Costs and
of the fact that such circumstances could be expected to result in a claim for
Additional Costs.

 

c.             Notwithstanding
any other provision herein, if, after the Effective Date, the adoption of any
law or bank regulatory guideline or any amendment or change in the
interpretation of any existing or future Law or bank regulatory guideline by
any Official Body charged with the administration, interpretation or
application thereof, or the compliance with any directive of any Official Body
(in the case of any bank regulatory guideline, whether or not having the force
of Law), shall make it unlawful for any Buyer to acquire or maintain a Mortgage
Loan as contemplated by this Agreement, (i) such Buyer shall, within ten (10) days
after receiving actual knowledge thereof, deliver a certificate to the Sellers
(with a copy to the Administrative Agent) setting forth the basis for such
illegality, which certificate shall be conclusive absent manifest error and (ii) the
commitment of such Buyer hereunder to make a portion of a Mortgage Loan and
continue any portion of a Mortgage Loan as such shall forthwith be suspended,
and such suspension shall remain in effect so long as the circumstance
described above exists.

 

27

 

If circumstances
subsequently change so that it is no longer unlawful for an affected Buyer to
acquire or to maintain a portion of a Mortgage Loan as contemplated hereunder,
such Buyer will, as soon as reasonably practicable after such Buyer knows of
such change in circumstances, notify the Sellers and the Administrative Agent,
and upon receipt of such notice, the obligations of such Buyer to acquire or
maintain its acquisition of portions of Mortgage Loans shall be reinstated.

 

Each Buyer agrees that,
upon the occurrence of any event giving rise to the operation of Section 11(c) with
respect to such Buyer, it will, if requested by the Sellers and to the extent
permitted by law or by the relevant Official Body, endeavor in good faith to
change the office at which it books its portions of Mortgage Loans hereunder if
such change would make it lawful for such Buyer to continue to acquire or to
maintain its acquisition of portions of Mortgage Loans hereunder; provided,
however, that such change may be made in such manner that such Buyer, in its
sole determination, suffers no unreimbursed cost or expense or any other
disadvantage whatsoever.

 

d.             With
respect to any Transaction, Buyer and Administrative Agent may conclusively
rely upon, and shall incur no liability to Sellers in acting upon, any request
or other communication that Buyer or Administrative Agent reasonably believes
to have been given or made by a person on the certificate delivered pursuant to
Section 10(a)(5) hereof.  In
each such case, each Seller hereby waives the right to dispute Administrative
Agent’s record of the terms of the Purchase Confirmation, request or other
communication.

 

e.             Notwithstanding
the assignment of the Program Agreements with respect to each Purchased
Mortgage Loan to Buyers, each Seller agrees and covenants with (x) Buyers and
Administrative Agent to enforce diligently Sellers’ rights and remedies set forth
in the Program Agreements and (y) to provide Administrative Agent with
prompt written notice of any Material Adverse Effect or event which, with the
passage of time, is reasonably likely to become a Material Adverse Effect, by
any party to any Program Agreement and of which any Seller is aware.

 

f.              Any
payments made by Sellers to Administrative Agent shall be free and clear of,
and without deduction or withholding for, any taxes; provided, however, that if
such payer shall be required by law to deduct or withhold any taxes from any
sums payable to Administrative Agent, then such payer shall (A) make such
deductions or withholdings and pay such amounts to the relevant authority in
accordance with applicable law, (B) pay to Administrative Agent the sum
that would have been payable had such deduction or withholding not been made,
and (C) at the time Price Differential is paid, pay to Administrative
Agent all additional amounts as specified by Administrative Agent to preserve
the after-tax yield Administrative Agent would have received if such tax had
not been imposed.

 

28

 

12.  Servicing

 

a.             Sellers,
on Buyers’ behalf, shall contract with Servicer to, or if a Seller is the
Servicer, such Seller shall, service the Mortgage Loans consistent with the
degree of skill and care that such Seller customarily requires with respect to
similar Mortgage Loans owned or managed by it and in accordance with Accepted
Servicing Practices.  The Servicer shall (i) comply
with all applicable Federal, State and local laws and regulations, (ii) maintain
all state and federal licenses necessary for it to perform its servicing
responsibilities hereunder and (iii) not impair the rights of Buyers in
any Mortgage Loans or any payment thereunder. 
Administrative Agent may terminate the servicing of any Mortgage Loan
with the then-existing servicer in accordance with Section 12(e) hereof.

 

b.             Sellers
shall cause the Servicer to hold or cause to be held all escrow funds collected
by Servicer with respect to any Purchased Mortgage Loans in trust accounts and
shall apply the same for the purposes for which such funds were collected.

 

c.             Sellers
shall cause the Servicer to deposit all collections received by Servicer on the
Purchased Mortgage Loans in the Collection Account no later than two (2) Business
Days following receipt.

 

d.             Upon
Administrative Agent’s request, Sellers shall provide promptly to Administrative
Agent (i) a Servicer Notice addressed to and agreed to by the Servicer of
the related Purchased Mortgage Loans, advising such Servicer of such matters as
Administrative Agent may reasonably request, including, without limitation,
recognition by the Servicer of Buyers’ interest in such Purchased Mortgage
Loans and the Servicer’s agreement that upon receipt of notice of an Event of
Default from Administrative Agent, it will follow the instructions of Administrative
Agent with respect to the Purchased Mortgage Loans and any related Income with
respect thereto.

 

e.             Upon
the occurrence of an Event of Default hereunder or a material default under the
Servicing Agreement, Administrative Agent shall have the right to immediately
terminate the Servicer’s right to service the Purchased Mortgage Loans under
the Servicing Agreement without payment of any penalty or termination fee.  Sellers and the Servicer shall cooperate in
transferring the servicing of the Purchased Mortgage Loans to a successor
servicer appointed by Administrative Agent in its sole discretion.

 

f.              If
any Seller should discover that, for any reason whatsoever, any Seller or any
entity responsible to Seller for managing or servicing any such Purchased
Mortgage Loan has failed to materially perform such Seller’s obligations under
the Program Agreements or any of the obligations of such entities with respect
to the Purchased Mortgage Loans, Sellers shall promptly notify Administrative
Agent.

 

29

 

g.             Servicer
may not delegate any of its rights, duties or obligations except to an Eligible
Subservicer upon notice to the Administrative Agent; provided that such
delegation shall not relieve Servicer of its duties and obligations as Servicer
hereunder and under the other Program Agreements or the Servicing Agreement.

 

13.  Representations and Warranties

 

a.             Each
Seller represents and warrants to Buyers and Administrative Agent as of the
date hereof and as of each Purchase Date for any Transaction that:

 

(1)           Seller Existence.  Each Seller has been duly organized and is
validly existing as a corporation in good
standing under the laws of the State of Maryland.

 

(2)           Licenses.  Each Seller is duly licensed or is otherwise
qualified in each jurisdiction in which it transacts business for the business
which it conducts and is not in default of any applicable federal, state or
local laws, rules and regulations unless, in either instance, the failure
to take such action is not reasonably likely (either individually or in the
aggregate) to cause a Material Adverse Effect (hereinbefore defined) and is in
material compliance with such state’s applicable laws, rules and regulations.  FMC has the requisite power and authority and
legal right to originate and purchase Mortgage Loans (as applicable) and to
own, sell and grant a lien on all of its right, title and interest in and to
the Mortgage Loans, and to execute and deliver, engage in the transactions
contemplated by, and perform and observe the terms and conditions of, this
Agreement, each Program Agreement and any Transaction Request or, if applicable,
Purchase Confirmation. FMC is an FHA Approved Mortgagee and VA Approved Lender.  FIC is a qualified REIT as defined by the
Code.

 

(3)           Power.  Each Seller has all requisite corporate or
other power, and has all governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted, except where the lack of such licenses,
authorizations, consents and approvals would not be reasonably likely to have a
Material Adverse Effect.

 

(4)           Due Authorization.  Each Seller has all necessary corporate or
other power, authority and legal right to execute, deliver and perform its
obligations under each of the Program Agreements, as applicable.  This Agreement, any Transaction Request,
Purchase Confirmation and the Program Agreements have been (or, in the case of
Program Agreements and any Transaction Request, Purchase Confirmation not yet
executed, will be) duly authorized, executed and delivered by each Seller and
Servicer, all requisite or other corporate action having been taken, and each
is valid, binding and enforceable against each Seller in accordance with its
terms except as such enforcement may be affected by bankruptcy, by other
insolvency laws, or by general principles of equity.

 

30

 

(5)           Financial Statements.  FIC has heretofore furnished to
Administrative Agent a copy of (a) its consolidated and consolidating
balance sheet for the fiscal year of FIC ended December 31, 2004 and the
related consolidated statements of income and retained earnings and of cash
flows for FIC and its consolidated Subsidiaries for such fiscal year, setting
forth in each case in comparative form the figures for the previous year, with
the opinion thereon of a member of AICPA and (b) its consolidated and
consolidating balance sheet for the fiscal quarters of FIC ended March 31,
2005, June 30, 2005 and September 30, 2005, and the related
consolidated statements of income and retained earnings and of cash flows for FIC
and its consolidated Subsidiaries for such quarterly fiscal periods, setting
forth in each case in comparative form the figures for the previous year.  All such financial statements are complete
and correct and fairly present, in all material respects, the consolidated
financial condition of FIC and its Subsidiaries and the consolidated results of
their operations as at such dates and for such fiscal periods, all in
accordance with GAAP applied on a consistent basis.  Since December 31, 2004, there has been
no material adverse change in the consolidated business, operations or
financial condition of FIC and its consolidated Subsidiaries taken as a whole
from that set forth in said financial statements nor is any Seller aware of any
state of facts which (without notice or the lapse of time) would or could
result in any such material adverse change. 
Each Seller has, on the date of the statements delivered pursuant to
this Section (the “Statement Date”)
no knowledge of any liabilities, direct or indirect, fixed or contingent,
matured or unmatured, or liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by, or reserved against in, said
balance sheet and related statements, and at the present time there are no
material unrealized or anticipated losses from any loans, advances or other commitments
of such Seller except as heretofore disclosed to Administrative Agent in
writing.

 

(6)           Event of Default.  There exists no Event of Default.

 

(7)           Solvency.  Each Seller is solvent and will not be
rendered insolvent by any Transaction and, after giving effect to such
Transaction, will not be left with an unreasonably small amount of capital with
which to engage in its business.  Neither
Seller intends to incur, nor does it believe that it has incurred, debts beyond
its ability to pay such debts as they mature and is not contemplating the
commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator, conservator, trustee
or similar official in respect of such entity or any of its assets.  Sellers are not transferring any Purchased
Mortgage Loans with any intent to hinder, delay or defraud any of their
respective creditors.

 

(8)           No Conflicts.  The execution, delivery and performance by each
Seller and Servicer of this Agreement, any Transaction Request or Purchase
Confirmation hereunder and the Program Agreements do not conflict with any term
or provision of the certificate of incorporation or by-laws of such Seller or
any law, rule, regulation, order, judgment, writ, injunction or decree applicable
to

 

31

 

any Seller of any court, regulatory body,
administrative agency or governmental body having jurisdiction over any Seller,
which conflict would have a Material Adverse Effect and will not result in any
violation of any such mortgage, instrument, agreement or obligation to which any
Seller is a party.

 

(9)           True and Complete Disclosure.  All information, reports, exhibits,
schedules, financial statements or certificates of any Seller or Servicer or
any Affiliate thereof or any of their officers furnished or to be furnished to Administrative
Agent in connection with the initial or any ongoing due diligence of any Seller
or any Affiliate or officer thereof, negotiation, preparation, or delivery of
the Program Agreements are true and complete in all material respects and do
not omit to disclose any material facts necessary to make the statements herein
or therein, in light of the circumstances in which they are made, not
misleading.  All financial statements
have been prepared in accordance with GAAP.

 

(10)         Approvals.  No consent, approval, authorization or order
of, registration or filing with, or notice to any governmental authority or
court is required under applicable law in connection with the execution,
delivery and performance by any Seller of this Agreement, any Transaction
Request, Purchase Confirmation and the Program Agreements.

 

(11)         Litigation.  Except as is disclosed in writing by Sellers
and approved by Administrative Agent in writing, there are no actions, suits or
proceedings pending or, to the knowledge of the Sellers threatened, against or
affecting the Sellers or their respective properties, in or before any court,
arbitrator or other body, which, individually or in the aggregate, is
reasonably likely to result in a Material Adverse Effect.

 

(12)         Material Adverse Change.  There has been no material adverse change in
the business, operations, financial condition, properties or prospects of any Seller
or their Affiliates on a consolidated basis since the date set forth in the
most recent financial statements supplied to Administrative Agent.

 

(13)         Ownership.  Upon payment of the Purchase Price and the
filing of the financing statement and delivery of the Mortgage Files to the
Custodian and the Custodian’s receipt of the related Request for Certification,
Buyers shall become the sole owner of the Purchased Mortgage Loans and related
Repurchase Assets, free and clear of all liens and encumbrances.

 

(14)         Underwriting Guidelines.  The Underwriting Guidelines provided to Administrative
Agent are the true and correct Underwriting Guidelines of the Sellers.

 

(15)         Taxes. Each Seller and its
Subsidiaries have filed all Federal income tax returns and all other material
tax returns that are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to

 

32

 

any assessment received by any of them, except for any
such taxes as are being appropriately contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
have been provided.  The charges,
accruals and reserves on the books of each Seller and its Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of such Seller,
adequate.

 

(16)         Investment Company.  No Seller nor any of its Subsidiaries is an “investment
company”, or a company “controlled” by an “investment company,” within the
meaning of the Investment Company Act of 1940, as amended.

 

(17)         Chief Executive Office; Jurisdiction
or Organization. During the four months immediately preceding July 1,
2001, FMC’s chief executive office is, and has been, located at 11000 Broken
Land Parkway, Suite 600, Columbia, MD 21044.  On the Effective Date, FMC’s jurisdiction of
organization is Maryland.  FIC’s chief
executive office is, and has been, located at 11000 Broken Land Parkway, Suite 600,
Columbia, MD 21044.  On the Effective
Date, FIC’s jurisdiction of organization is Maryland.  The Sellers shall provide Administrative
Agent with thirty days advance notice of any change in any Seller’s chief
executive office or jurisdiction.  During
the preceding five years, neither Seller (a) has been known by or done
business under any other name, corporate or fictitious, except with respect to
FMC, since January 1, 2000 under the name Broad Street Mortgage Co. and (b) has
filed or had filed against it any bankruptcy receivership or similar petitions
nor has it made any assignments for the benefit of creditors.

 

(18)         Location of Books and Records.  The location where Sellers keep their books
and records, including all computer tapes and records relating to the Purchased
Mortgage Loans and the related Repurchase Assets is their chief executive
offices.

 

(19)         Minimum Consolidated Adjusted
Tangible Net Worth.  On the Effective
Date, the Sellers’ Consolidated Adjusted Tangible Net Worth is not less than
$400 million.

 

(20)         ERISA.  Each Plan to which a Seller or its
Subsidiaries make direct contributions, and, to the knowledge of any Seller,
each other Plan and each Multiemployer Plan, is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other Federal or
State law.

 

(21)         Adverse Selection.  No Seller has selected the Purchased Mortgage
Loans in a manner so as to adversely affect Buyers’ interests.

 

(22)         Agreements.  No Seller nor any Subsidiary of such Seller
is a party to any agreement, instrument, or indenture or subject to any
restriction

 

33

 

materially and adversely affecting its business,
operations, assets or financial condition, except as disclosed in the financial
statements described in Section 13(a)(5) hereof.  No Seller nor any Subsidiary of such Seller
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement, instrument, or
indenture which default could have a Material Adverse Effect.  No holder of any Indebtedness in excess of
$20,000,000 of the Sellers or of any of their Subsidiaries has given notice of
any asserted default thereunder.

 

(23)         Other Credit Facilities.  Each Seller hereby represents and warrants
that all credit facilities of the Sellers (other than Structured Securities
Debt) which are presently in effect are listed on Exhibit J (the “Existing Credit Facilities”) hereto.

 

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

 

(25)         No
Reliance.  Each Seller has made its own independent
decisions to enter into the Program Agreements and each Transaction and as to
whether such Transaction is appropriate and proper for it based upon its own
judgment and upon advice from such advisors (including without limitation,
legal counsel and accountants) as it has deemed necessary.  Neither Seller is relying upon any advice
from Buyer or Administrative Agent as to any aspect of the Transactions,
including without limitation, the legal, accounting or tax treatment of such
Transactions.

 

(26)         Plan
Assets. Neither Seller is an
employee benefit plan as defined in Section 3 of Title I of ERISA, or a
plan described in Section 4975(e)(1) of the Code, and the Purchased
Mortgage Loans are not “plan assets” within the meaning of 29 CFR §2510.3-101
in any Seller’s hands.

 

34

 

(27)         Real Estate Investment Trust.  FIC has not engaged in any “prohibited transactions” as defined in Section 857(b)(6)(B)(iii) and
(C) of the Code, which, either in any one instance or in the aggregate, is
reasonably likely to result in a Material Adverse Effect or in any material
impairment of the right or ability of FIC to carry on its business
substantially as now conducted, or in any material liability on the part of
FIC.  FIC for its current “tax year” (as
defined in the Code) is entitled to a dividends paid deduction, as described in
Section 857(b)(2)B) of the Code, with respect to applicable dividends paid
or deemed paid by it with respect to each tax year for which it claims such a
deduction in its Form 1120-REIT filed with the United States Internal
Revenue Service.

 

(28)         No Prohibited Persons. Neither
Seller nor any of their Affiliates, officers, directors, partners or members,
is an entity or person (or to any Seller’s knowledge, owned or controlled by an
entity or person): (i) that is listed in the Annex to, or is otherwise
subject to the provisions of Executive Order 13224 issued on September 24,
2001 (“EO13224”); (ii) whose name appears on the United States
Treasury Department’s Office of Foreign Assets Control (“OFAC”) most
current list of “Specifically Designated National and Blocked Persons” (which
list may be published from time to time in various mediums including, but not
limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who
commits, threatens to commit or supports “terrorism”, as that term is defined
in EO13224; or (iv) who is otherwise affiliated with any entity or person
listed above (any and all parties or persons described in clauses (i) through
(iv) above are herein referred to as a “Prohibited Person”).

 

(29)         Use of Proceeds.  No proceeds of any Transaction will be used
by any Seller in any way which would violate Regulation T, U or X of the Board
of Governors of the Federal Reserve System.

 

b.             With
respect to every Purchased Mortgage Loan, each Seller represents and warrants
to Buyer and Administrative Agent as of the applicable Purchase Date for any
Transaction and each date thereafter that each representation and warranty set
forth on Schedule 1 is true and correct.

 

c.             The
representations and warranties set forth in this Agreement shall survive
transfer of the Purchased Mortgage Loans to Buyers and shall continue for so
long as the Purchased Mortgage Loans are subject to this Agreement.  Upon discovery by Sellers, Servicer,
Administrative Agent or Buyers of any material breach of any of the
representations or warranties set forth in this Agreement, the party
discovering such breach shall promptly give notice of such discovery to the
others.  Subject to Administrative Agent’s
right to determine the Market Value of the Purchased Mortgage Loans, the
Sellers shall have up to five (5) Business Days to verify any alleged
breach of representation or warranty for any Purchased Mortgage Loan.  Administrative Agent has the right to
require, in its unreviewable discretion, Sellers to repurchase within 1
Business Day after receipt of notice from Administrative Agent any Purchased
Mortgage Loan for which a

 

35

 

breach of one or more of the representations and
warranties referenced in Section 13(b) exists and which breach has a
material adverse effect on the value of such Mortgage Loan or the interests of
Buyers.

 

14.  Covenants

 

Each Seller covenants
with each Buyer and Administrative Agent that, during the term of this
facility:

 

a.             Minimum
Consolidated Adjusted Tangible Net Worth. 
The Sellers shall maintain a Consolidated Adjusted Tangible Net Worth of
at least $400 million.

 

b.             Indebtedness
to Consolidated Adjusted Tangible Net Worth Ratio.  The Sellers’ (i) combined ratio of
consolidated Indebtedness to Consolidated Adjusted Tangible Net Worth shall not
exceed 16:1 and (ii) combined ratio of consolidated Indebtedness (net of
non-recourse Indebtedness) to Consolidated Adjusted Tangible Net Worth shall
not exceed 10:1.

 

c.             Litigation.
The Sellers will promptly, and in any event within ten (10) days after
service of process on any of the following, give to Administrative Agent notice
of all actions, suits or proceedings pending or, to the knowledge of the
Sellers threatened, against or affecting the Sellers or their respective
properties, in or before any court, arbitrator or other body, which,
individually or in the aggregate, is reasonably likely to result in a Material
Adverse Effect.

 

d.             Prohibition
of Fundamental Changes.  No Seller shall
enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution) or sell all or substantially all of its assets; provided, that any
Seller may merge or consolidate with (a) any wholly owned subsidiary of such
Seller, or (b) any other Person if such Seller, is the surviving
corporation; and provided further, that if after giving effect thereto, no Event
of Default would exist hereunder.

 

e.             Maintenance
of Profitability.  FIC shall not
permit, for any two consecutive Test Periods, its consolidated Net Income for
any Test Period, before income taxes for such Test Period, distributions made
during such Test Period, and without regard to unrealized gains or losses from
mark to market valuations resulting from Sellers’ Interest Rate Protection
Agreements during such Test Period, to be less than $1.00.

 

f.              Servicer;
Asset Tape.  Sellers shall cause
Servicer to provide to Administrative Agent, electronically, in a format
mutually acceptable to Administrative Agent and Sellers, an Asset Tape by no
later than the Reporting Date.  The
Sellers shall not cause the Purchased Mortgage Loans to be serviced by any
servicer other than a servicer expressly approved in writing by Administrative
Agent, which approval shall be deemed granted by Administrative Agent with
respect to the Sellers with the execution of this Agreement.  The Purchased Mortgage Loans (other than
those Purchased Mortgage Loans sold to

 

36

 

the Buyers by FMC) shall at all times be subserviced
by an Eligible Subservicer pursuant to a binding and enforceable agreement
between the Servicer and such Eligible Subservicer (copies of which, together
with all amendments and modifications thereto, shall be provided to the
Administrative Agent).

 

g.             Reserved.

 

h.             Insurance.  The Sellers will continue to maintain, for
each Seller and its subsidiaries, insurance coverage with respect to employee
dishonesty, forgery or alteration, theft, disappearance and destruction,
robbery and safe burglary, property (other than money and securities) and
computer fraud in an aggregate amount acceptable to Fannie Mae and Freddie Mac.

 

i.              No
Adverse Claims.  The Sellers warrant
and will defend, and shall cause any Servicer to defend, the right, title and interest
of Buyers in and to all Repurchase Assets against all adverse claims and
demands.

 

j.              Assignment.  Except as permitted herein, neither Seller
shall sell, assign, transfer or otherwise dispose of, or grant any option with
respect to, or pledge, hypothecate or grant a security interest in or lien on
or otherwise encumber (except pursuant to the Program Agreements), any of the
Purchased Mortgage Loans or any interest therein, provided that this Section shall
not prevent any transfer of Purchased Mortgage Loans in accordance with the
Program Agreements.

 

k.             Security
Interest.  The Sellers shall do all
things necessary to preserve the Repurchase Assets so that they remain subject
to a first priority perfected security interest hereunder.  Without limiting the foregoing, the Sellers
will comply in all material respects with all rules, regulations and other laws
of any Governmental Authority and cause the Repurchase Assets to comply in all
material respects with all applicable rules, regulations and other laws.  The Sellers will not allow any default for
which any Seller is responsible to occur under any Repurchase Assets or any
Program Agreements and the Sellers shall fully perform or cause to be performed
when due all of its obligations under any Repurchase Assets or the Program
Agreements.

 

l.              Records.

 

(1)           Sellers shall collect and maintain or
cause to be collected and maintained all Records relating to the Purchased
Mortgage Loans in accordance with industry custom and practice for assets
similar to the Purchased Mortgage Loans, including those maintained pursuant to
the preceding subparagraph, and all such Records shall be in Custodian’s
possession unless Administrative Agent otherwise approves.  Sellers will not allow any such papers,
records or files that are an original or an only copy to leave Custodian’s
possession, except for individual items removed in connection with servicing a
specific Mortgage Loan, in which event Sellers will obtain or cause to be
obtained a receipt from a

 

37

 

financially responsible person for any such paper,
record or file.  Sellers of the Purchased
Mortgage Loans will maintain all such Records not in the possession of
Custodian in good and complete condition in accordance with industry practices
for assets similar to the Purchased Mortgage Loans and preserve them against
loss.

 

(2)           For so long as Buyers have an
interest in or lien on any Purchased Mortgage Loan, Seller swill hold or cause
to be held all related Records in trust for Buyers.  Sellers shall notify, or cause to be
notified, every other party holding any such Records of the interests and liens
in favor of Buyers granted hereby.

 

(3)           Upon reasonable advance notice from
Custodian or Administrative Agent, Sellers shall (x) make any and all such
Records available to Custodian or Administrative Agent during normal business
hours to examine any such Records, either by its own officers or employees, or
by agents or contractors, or both, and make copies of all or any portion thereof,
and (y) permit Buyer, Administrative Agent or its authorized agents to
discuss the affairs, finances and accounts of Sellers with its chief operating
officer and chief financial officer and to discuss the affairs, finances and
accounts of Sellers with its independent certified public accountants.

 

m.            Books.  Sellers shall keep or cause to be kept in
reasonable detail books and records of account of their assets and business and
shall clearly reflect therein the transfer of Purchased Mortgage Loans to Buyers.

 

n.             Approvals.  Each Seller shall maintain all licenses,
permits or other approvals necessary for Sellers to conduct their business and
to perform their obligations under the Program Agreements, and Sellers shall
conduct their business strictly in accordance with applicable law.

 

o.             Material
Change in Business.  No Seller shall make
any material change in the nature of its business as carried on at the date
hereof.

 

p.             Underwriting
Guidelines.  The Sellers shall give
Administrative Agent prior notice of all intended material changes, amendments
or modifications to the related Underwriting Guidelines which may affect the
Purchased Mortgage Loans and Administrative Agent shall have three (3) Business
Days following Administrative Agent’s receipt of such notice to notify the
Sellers of Administrative Agent’s approval, which shall not be unreasonably
withheld, or disapproval of the Sellers’ proposed amendments or
modifications.  If Administrative Agent
does not notify the Sellers of Administrative Agent’s disapproval within three (3) Business
Days, the proposed amendments or modifications shall be deemed approved.

 

q.             Distributions.
If an Event of Default has occurred and is continuing, the Sellers shall not
pay any dividends with respect to any capital stock or other

 

38

 

equity interests in such entity, whether now or
hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
any Seller.

 

r.              Applicable
Law.  The Sellers shall comply, in
all material respects, with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority.

 

s.             Existence.  The Sellers shall preserve and maintain their
legal existence and all of their material rights, privileges, licenses and
franchises.

 

t.              Chief
Executive Office; Jurisdiction of Organization.  No Seller shall move its chief executive
office from the address referred to in Section 13(a)(17) or change its
jurisdiction of organization from the jurisdiction referred to in Section 13(a)(17)
unless it shall have provided Administrative Agent 30 days’ prior written
notice of such change.

 

u.             Taxes.  Sellers shall timely file all tax returns that
are required to be filed by it and shall timely pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its income
or profits or on any of its property prior to the date on which penalties
attach thereto, except for any such tax, assessment, charge or levy (i) the
payment of which is being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained or (ii) of which the
Sellers have no knowledge.

 

v.             Transactions
with Affiliates.  The Sellers will
not enter into any transaction, including, without limitation, any purchase,
sale, lease or exchange of property or the rendering of any service, with any
Affiliate which is not also a Seller hereunder, unless such transaction is (a) otherwise
permitted under the Program Agreements, (b) in the ordinary course of such
Seller’s business, or (c) upon fair and reasonable terms no less favorable
to such Seller than it would obtain in a comparable arm’s-length transaction
with a Person which is not an Affiliate, or make a payment that is not
otherwise permitted by this Section to any Affiliate which is not also a
Seller hereunder.

 

w.            Reserved.

 

x.             Indebtedness.
Neither Seller shall enter into any credit agreement or otherwise incur any additional
Indebtedness (1) except as expressly set forth in clause (2) below,
without prior written notice to Administrative Agent (other than (a) pursuant
to Existing Credit Facilities specified on Exhibit J hereto or any
incremental increases thereto, (b) Structured Securities Debt, (c) Permitted
Guarantee Obligations and (d) usual and customary accounts payable for a
mortgage company) or (2) without the prior written consent of
Administrative Agent in its sole good faith discretion with respect to any Seller’s
acquisition or operation of any new line of business unrelated to that of a
REIT or a mortgage

 

39

 

banker.  The
relevant Seller shall provide prompt written notice of any increase in its
Existing Credit Facilities specified on Exhibit J.

 

y.             Hedging.  The Sellers (i) have entered into
Interest Rate Protection Agreements, in accordance with the Sellers’ written
policies regarding hedging, or a letter detailing such policies to be delivered
to the Administrative Agent upon Administrative Agent’s request, with respect
to Purchased Mortgage Loans having terms with respect to protection against
fluctuations in interest rates acceptable to Administrative Agent in its sole
good faith discretion; and (ii) shall give the Administrative Agent prior
notice of all intended material changes, amendments or modifications to the
Sellers’ related written policies regarding hedging or letters delivered to
Administrative Agent detailing such policies.

 

z.             True
and Correct Information.  All
information, reports, exhibits, schedules, financial statements or certificates
of Sellers, any Affiliate thereof or any of their officers furnished to Administrative
Agent hereunder and during Administrative Agent’s diligence of Sellers are and
will be true and complete and do not omit to disclose any material facts
necessary to make the statements herein or therein, in light of the
circumstances in which they are made, not misleading.  All required financial statements,
information and reports delivered by Sellers or Servicer to Administrative
Agent pursuant to this Agreement shall be prepared in accordance with U.S.
GAAP, or, if applicable, to SEC filings, the appropriate SEC accounting
regulations.

 

aa.           Delivery
to Custodian.  Prior to the purchase
of a Mortgage Loan pursuant to this Agreement, the Sellers shall deliver, or
cause to be delivered, to Administrative Agent or Custodian, as applicable, the
documentation set forth in the Custodial Agreement with respect to such
Mortgage Loan.  If upon examination of
the documents included in the related Mortgage File, the Custodian determines
that such documents do not satisfy the requirements set forth in the Custodial
Agreement, the Custodian shall mark such Mortgage Loan as an exception on the
related Mortgage Loan Schedule and Exception Report.

 

bb.          Agency
Approvals; Servicing.  FMC shall
maintain its status with Fannie Mae as an approved lender and Freddie Mac as an
approved seller/servicer, in each case in good standing.  Should FMC, for any reason, cease to possess
all such applicable Agency Approvals, or should notification to the relevant
Agency or to The Department of Housing and Urban Development, FHA or VA be
required, FMC shall so notify Buyer immediately in writing.  Notwithstanding the preceding sentence, FMC
shall take all necessary action to maintain all of their applicable Agency
Approvals at all times during the term of this Agreement and each outstanding
Transaction.  FMC has adequate financial
standing, servicing facilities, procedures and experienced personnel necessary
for the sound servicing of mortgage loans of the same types as may from time to
time constitute Mortgage Loans and in accordance with Accepted Servicing
Practices.

 

cc.           Reserved.

 

40

 

dd.          No
Pledge.  No Seller shall pledge,
transfer or convey any security interest in the Collection Account to any
Person without the express written consent of Administrative Agent.

 

ee.           Non-Structured
Securities Indebtedness to Consolidated Adjusted Tangible Net Worth Ratio.  The Sellers’ ratio of consolidated
Indebtedness less Structured Securities Debt to Consolidated Adjusted Tangible
Net Worth shall not exceed 10:1.

 

ff.            Plan
Assets.  Neither Seller shall be an
employee benefit plan as defined in Section 3 of Title I of ERISA, or a
plan described in Section 4975(e)(1) of the Code and no Seller shall
use “plan assets” within the meaning of 29 CFR §2510.3-101 to engage in this
Repurchase Agreement or any Transaction hereunder.

 

gg.          Maintenance
of Liquidity.  The Sellers shall
maintain cash, Cash Equivalents as well as unencumbered Mortgage Loans held for
sale or securitization of at least $15 million.

 

hh.          Committed
Warehouse Facility.  While FIC or an
Affiliate of FIC is the Servicer, the Servicer shall cause the Sellers to
maintain, at all times during the term of this Agreement, one or more committed
loan facilities with one or more nationally recognized and established lenders
(other than the Administrative Agent and its Affiliates) that, in the aggregate
on a committed basis, have an aggregate committed amount of funds available to
the Sellers equal to at least $500,000,000.

 

15.  Events of Default

 

Each of the following shall constitute an “Event of
Default” hereunder:

 

a.             Payment
Failure.  Failure of any Seller or
Servicer to (i) make any payment of Price Differential or Repurchase Price
or any other sum which has become due, on a Price Differential Payment Date or
a Repurchase Date or otherwise, whether by acceleration or otherwise, under the
terms of this Agreement, or (ii) cure any Margin Deficit when due pursuant
to Section 6 hereof.

 

b.             Cross
Default.  Any Seller shall fail to
pay when due any amounts due under any agreement to which any such Person is a
party and under which any Indebtedness greater than $20,000,000 is governed
(after giving effect to any applicable cure periods); or any Indebtedness owing
by the Sellers greater than $20,000,000 shall be declared to be due and payable
or required to be prepaid (other than by a regularly scheduled payment) prior
to the date of maturity thereof.

 

c.             Assignment.  Assignment or attempted assignment by any Seller
of this Agreement or any rights hereunder without first obtaining the specific
written consent of Administrative Agent, or the granting by any Seller of any
security

 

41

 

interest, lien or other encumbrances on any Purchased
Mortgage Loans to any person other than Buyers.

 

d.             Insolvency.  An Act of Insolvency shall have occurred with
respect to any Seller.

 

e.             Material
Adverse Change.  Any event having a
Material Adverse Effect shall occur, in each case as determined by the
Administrative Agent in its sole good faith discretion.

 

f.              Breach
of Financial Representation or Covenant or Obligation. A breach by any Seller
or Servicer, as applicable, of any of the representations, warranties or
covenants or obligations set forth in Sections 13(a)(1),

13(a)(7), 13(a)(12), 13(a)(19), 13(a)(24), 14a, 14b, 14d, 14e, 14s, 14v, 14x, 14dd,
14ee, 14ff, 14gg or 14hh of this Agreement.

 

g.             Breach
of Non-Financial Representation or Covenant.  A breach by any Seller or Servicer, as
applicable, of any other material representation, warranty or covenant set
forth in this Agreement (and not otherwise specified in Section 15(f) above),
if such breach is not cured within five (5) Business Days (other than the
representations and warranties set forth in Schedule 1, which shall be
considered solely for the purpose of determining the Market Value, the existence
of a Margin Deficit and the obligation to repurchase such Mortgage Loan) unless
(i) such party shall have made any such representations and warranties
with knowledge that they were materially false or misleading at the time made
or (ii) any such representations and warranties have been determined by Administrative
Agent in its sole discretion to be materially false or misleading on a regular
basis.

 

h.             Change
of Control.  The occurrence of a
Change in Control.

 

i.              Failure
to Transfer.  Sellers fail to transfer
the Purchased Mortgage Loans to Buyers on the applicable Purchase Date
(provided Buyers have tendered the related Purchase Price).

 

j.              Judgment.  A final judgment or judgments for the payment
of money in excess of $20,000,000 in the aggregate shall be rendered against any
Seller or any of its Affiliates by one or more courts, administrative tribunals
or other bodies having jurisdiction and the same shall not be satisfied,
discharged (or provision shall not be made for such discharge) or bonded, or a
stay of execution thereof shall not be procured, within 30 days from the date
of entry thereof.

 

k.             Government
Action.  Any Governmental Authority
or any person, agency or entity acting or purporting to act under governmental
authority shall have taken any action to condemn, seize or appropriate, or to
assume custody or control of, all or any substantial part of the Property of
Sellers, Servicer or any Affiliate thereof, or shall have taken any action to
displace the management of Sellers, Servicer or any Affiliate thereof or to
curtail its authority in the conduct of the business of Sellers, Servicer or
any Affiliate thereof, or takes any action in the

 

42

 

nature of enforcement to remove, limit or restrict the
approval of Sellers, Servicer or Affiliate as an issuer, buyer or a
seller/servicer of Mortgage Loans or securities backed thereby, and such action
provided for in this subparagraph k shall not have been discontinued or
stayed within 30 days.

 

l.              Inability
to Perform.  An officer of a Seller
shall admit its inability to, or its intention not to, perform any of the Sellers’
Obligations hereunder.

 

m.            Security
Interest.  This Agreement shall for
any reason cease to create a valid, first priority security interest in any
material portion of the Purchased Mortgage Loans or other Repurchase Assets
purported to be covered hereby.

 

n.             Financial
Statements.  Sellers’ or Servicer’s audited
annual financial statements or the notes thereto or other opinions or conclusions
stated therein shall be qualified or limited by reference to the status of
Sellers or Servicer as a “going concern” or a reference of similar import.

 

o.             Amendments.  Any material amendment is made to the
Underwriting Guidelines which was not previously approved by Buyer pursuant to Section 14(p).

 

p.             REIT
Status.  The failure of FIC to at any
time continue to be qualified as a real estate investment trust as defined in Section 856
of the Code.

 

q.             Eligible
Subservicer.  Except with respect to
FMC, the failure at any time to have a Person satisfying the definition of “Eligible
Subservicer” obligated to perform the duties of Eligible Subservicer with
respect to Mortgage Loans and related property originated by FIC.

 

An Event of Default shall be deemed to be continuing
unless expressly waived by Administrative Agent in writing.

 

16.  Remedies Upon Default

 

In the event that an Event of Default shall have
occurred:

 

a.             Administrative
Agent may, at its option (which option shall be deemed to have been exercised
immediately upon the occurrence of an Act of Insolvency of any Seller or any
Affiliate), declare an Event of Default to have occurred hereunder and, upon
the exercise or deemed exercise of such option, the Repurchase Date for each
Transaction hereunder shall, if it has not already occurred, be deemed
immediately to occur (except that, in the event that the Purchase Date for any
Transaction has not yet occurred as of the date of such exercise or deemed
exercise, such Transaction shall be deemed immediately canceled).  Administrative Agent shall (except upon the
occurrence of an Act of Insolvency) give notice to Sellers of the exercise of
such option as promptly as practicable.

 

43

 

b.             If
Administrative Agent exercises or is deemed to have exercised the option
referred to in subparagraph (a) of this Section, (i) Sellers’
obligations in such Transactions to repurchase all Purchased Mortgage Loans, at
the Repurchase Price therefor on the Repurchase Date determined in accordance
with subparagraph (a) of this Section, shall thereupon become
immediately due and payable, (ii) all Income paid after such exercise or
deemed exercise shall be retained by Administrative Agent and applied, in Administrative
Agent’s sole discretion, to the aggregate unpaid Repurchase Prices for all
outstanding Transactions and any other amounts owing by Sellers hereunder, and (iii) Sellers
shall immediately deliver to Administrative Agent the Mortgage Files relating
to any Purchased Mortgage Loans subject to such Transactions then in Sellers’
possession or control.

 

c.             Administrative
Agent also shall have the right to obtain physical possession, and to commence
an action to obtain physical possession, of all Records and files of Sellers
relating to the Purchased Mortgage Loans and all documents relating to the
Purchased Mortgage Loans (including, without limitation, any legal, credit or
servicing files with respect to the Purchased Mortgage Loans) which are then or
may thereafter come in to the possession of Sellers or any third party acting
for Sellers.  To obtain physical
possession of any Purchased Mortgage Loans held by Custodian, Administrative
Agent shall present to Custodian a Trust Receipt and Certification.  Buyer and Administrative Agent shall be
entitled to specific performance of all agreements of Sellers contained in this
Agreement.

 

d.             Administrative
Agent shall have the right to direct all servicers then servicing any Purchased
Mortgage Loans to remit all collections thereon to Administrative Agent, and if
any such payments are received by Sellers, Seller shall not commingle the
amounts received with other funds of Sellers and shall promptly pay them over
to Administrative Agent.  Administrative
Agent shall also have the right to terminate any one or all of the servicers
then servicing any Purchased Mortgage Loans with or without cause.  In addition, Administrative Agent shall have
the right to immediately sell the Purchased Mortgage Loans and liquidate all
Repurchase Assets.  Such disposition of
Purchased Mortgage Loans may be, at Administrative Agent’s option, on either a
servicing-released or a servicing-retained basis.  Buyers shall be entitled to place the
Purchased Mortgage Loans in a pool for issuance of mortgage-backed securities
at the then-prevailing price for such securities and to sell such securities
for such prevailing price in the open market. 
Administrative Agent shall also be entitled to sell any or all of such
Mortgage Loans individually for the prevailing price. Administrative Agent shall
also be entitled, in its sole discretion to elect, in lieu of selling all or a
portion of such Purchased Mortgage Loans, to give the Sellers credit for such
Purchased Mortgage Loans and the Repurchase Assets in an amount equal to the
Market Value of the Purchased Mortgage Loans against the aggregate unpaid
Repurchase Price and any other amounts owing by the Sellers hereunder.

 

e.             Upon
the happening of one or more Events of Default, Administrative Agent may apply
any proceeds from the liquidation of the Purchased Mortgage Loans

 

44

 

and Repurchase Assets to the Repurchase Prices
hereunder and all other Obligations in the manner Administrative Agent deems
appropriate in its sole discretion.

 

f.              Sellers
shall be liable to Buyers and Administrative Agent for (i) the amount of
all reasonable legal or other expenses (including, without limitation, all
costs and expenses of Buyers and Administrative Agent in connection with the
enforcement of this Agreement or any other agreement evidencing a Transaction,
whether in action, suit or litigation or bankruptcy, insolvency or other
similar proceeding affecting creditors’ rights generally, further including,
without limitation, the reasonable fees and expenses of counsel (including the
costs of internal counsel of Buyers and Administrative Agent) incurred in
connection with or as a result of an Event of Default, (ii) damages in an
amount equal to the cost (including all fees, expenses and commissions) of
entering into replacement transactions and entering into or terminating hedge
transactions in connection with or as a result of an Event of Default, and (iii) any
other loss, damage, cost or expense directly arising or resulting from the
occurrence of an Event of Default in respect of a Transaction.

 

g.             To
the extent permitted by applicable law, Sellers shall be liable to Buyers and
Administrative Agent for interest on any amounts owing by Sellers hereunder,
from the date Sellers become liable for such amounts hereunder until such
amounts are (i) paid in full by Sellers or (ii) satisfied in full by
the exercise of Buyers’ or Administrative Agent’s rights hereunder.  Interest on any sum payable by Sellers under
this Section 16(g) shall be at a rate equal to the Post-Default Rate.

 

h.             Buyers
and Administrative Agent shall have, in addition to its rights hereunder, any
rights otherwise available to it under any other agreement or applicable law.

 

i.              Buyers
and Administrative Agent may exercise one or more of the remedies available to them
immediately upon the occurrence of an Event of Default and, except to the
extent provided in subsections (a) and (d) of this Section, at any
time thereafter without notice to Sellers. 
All rights and remedies arising under this Agreement as amended from
time to time hereunder are cumulative and not exclusive of any other rights or
remedies which Buyers and Administrative Agent may have.

 

j.              Buyers
and Administrative Agent may enforce their rights and remedies hereunder
without prior judicial process or hearing, and each Seller hereby expressly
waives any defenses such Seller might otherwise have to require Buyers or
Administrative Agent to enforce their rights by judicial process.  Each Seller also waives any defense (other
than a defense of payment or performance) such Seller might otherwise have
arising from the use of nonjudicial process, enforcement and sale of all or any
portion of the Repurchase Assets, or from any other election of remedies.  Each Seller recognizes that nonjudicial
remedies are

 

45

 

consistent with the usages of the trade, are
responsive to commercial necessity and are the result of a bargain at arm’s
length.

 

k.             Administrative
Agent shall have the right to perform reasonable due diligence with respect to each
Seller and the Mortgage Loans, which review shall be at the expense of Sellers.

 

17.  Reports

 

a.             Notices.  The Sellers shall immediately furnish to
Administrative Agent, notice of the occurrence of any Event of Default
hereunder or material default or breach by the Sellers or Servicer of any
obligation under any Program Agreement or any material contract or agreement of
the Sellers or Servicer or the occurrence of any event or circumstance that
such party reasonably expects will, with the passage of time, become an Event
of Default or such a default or breach by such party and the following:

 

(1)           as soon as available and in any event
within thirty (30) calendar days after the end of each calendar month, the
unaudited consolidated and consolidating balance sheets of FIC and its
consolidated Subsidiaries as at the end of such period and the related
unaudited consolidated statements of income and retained earnings and of cash
flows for FIC and its consolidated Subsidiaries for such period and the portion
of the fiscal year through the end of such period, accompanied by a certificate
of a Responsible Officer of FIC, which certificate shall state that said
consolidated financial statements fairly present in all material respects the
consolidated financial condition and results of operations of FIC and its
consolidated Subsidiaries in accordance with GAAP, consistently applied, as at
the end of, and for, such period (subject to normal year-end adjustments);

 

(2)           as soon as available and in any event
within ninety (90) days after the end of each fiscal year of FIC, the
consolidated and consolidating balance sheets of FIC and its consolidated
Subsidiaries as at the end of such fiscal year and the related consolidated statements
of income and retained earnings and of cash flows for FIC and its consolidated
Subsidiaries for such year, setting forth in each case in comparative form the
figures for the previous year, accompanied by an opinion thereon of independent
certified public accountants, a member of AICPA, which opinion shall not be
qualified as to scope of audit or going concern and shall state that said
consolidated and consolidating financial statements fairly present the
consolidated financial condition and results of operations of FIC and its
respective consolidated Subsidiaries as at the end of, and for, such fiscal
year in accordance with GAAP;

 

(3)           such other prepared statements that Administrative
Agent may reasonably request;

 

(4)           if applicable, copies of any 10-Ks, 10-Qs,
registration statements and other “corporate finance” SEC filings (other
than 8-Ks) by Sellers,

 

46

 

within 5 Business Days of their filing with the
SEC; provided, that, Sellers or any Affiliate will provide Administrative Agent
and Credit Suisse First Boston Corporation with a copy of the annual 10-K filed
with the SEC by Sellers or their Affiliates, no later than 90 days after
the end of the year;

 

(5)           as soon as available, and in any
event within thirty (30) days of receipt, copies of relevant portions of all
final written Agency, FHA, VA, Governmental Authority and investor audits,
examinations, evaluations, monitoring reviews and reports of its operations
(including those prepared on a contract basis) which provide for or relate to (i) material
corrective action required or (ii) material sanctions proposed, imposed or
required, including without limitation notices of defaults, notices of
termination of approved status, notices of imposition of supervisory agreements
or interim servicing agreements, and notices of probation, suspension, or
non-renewal;

 

(6)           from time to time such other
information regarding the financial condition, operations, or business of the Sellers
as Administrative Agent may reasonably request;

 

(7)           as soon as reasonably possible, and
in any event within thirty (30) days after a Responsible Officer of any Seller
knows, or with respect to any Plan or Multiemployer Plan to which any Seller or
any of its Subsidiaries makes direct contributions, has reason to believe, that
any of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of such Seller setting forth details respecting such event or
condition and the action, if any, that such Seller or its ERISA Affiliate
proposes to take with respect thereto (and a copy of any report or notice
required to be filed with or given to PBGC by such Seller or an ERISA Affiliate
with respect to such event or condition);

 

(8)           any reportable event, as defined in Section 4043(c) of
ERISA and the regulations issued thereunder, with respect to a Plan, as to
which PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within thirty (30) days of the occurrence of such
event (provided that a failure to meet the minimum funding standard of Section 412
of the Code or Section 302 of ERISA, including, without limitation, the
failure to make on or before its Due Date a required installment under Section 412(m)
of the Code or Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with Section 412(d) of
the Code); and any request for a waiver under Section 412(d) of the
Code for any Plan;

 

(9)           the distribution under Section 4041(c) of
ERISA of a notice of intent to terminate any Plan or any action taken by the
any Seller or an ERISA Affiliate to terminate any Plan;

 

(10)         the institution by PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer any

 

47

 

Plan, or the receipt by the any Seller or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has been taken
by PBGC with respect to such Multiemployer Plan;

 

(11)         the complete or partial withdrawal from
a Multiemployer Plan by any Seller or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) that would have
a Material Adverse Effect or the receipt by any Seller or any ERISA Affiliate
of notice from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate
or has terminated under Section 4041A of ERISA;

 

(12)         the institution of a proceeding by a
fiduciary of any Multiemployer Plan against any Seller or any ERISA Affiliate
to enforce Section 515 of ERISA, which proceeding is not dismissed within
thirty (30) days;

 

(13)         the adoption of an amendment to any
Plan that would result in the loss of tax-exempt status of the trust of which
such Plan is a part if the related Seller or an ERISA Affiliate fails to
provide timely security to such Plan in accordance with the provisions of Section 401(a)(29)
of the Code or Section 307 of ERISA.

 

(14)         As soon as reasonably possible, notice
of any of the following events:

 

(a)           change
in the insurance coverage required of Sellers, Servicer or any other Person
pursuant to any Program Agreement, with a copy of evidence of same attached;

 

(b)           immediately
following notice or knowledge of any material litigation against any Seller;

 

(c)           any
material dispute, litigation, investigation, proceeding or suspension between any
Seller or Servicer, on the one hand, and any Governmental Authority;

 

(d)           any
material change in accounting policies or financial reporting practices of any Seller
or Servicer;

 

(e)           the
occurrence of any material employment dispute and a description of the strategy
for resolving it that has the possibility of resulting in a Material Adverse
Effect;

 

(f)            with
respect to any Purchased Mortgage Loan, immediately upon receipt of notice or
knowledge thereof, that the underlying Mortgaged Property has been damaged by
waste, fire, earthquake or earth movement, windstorm,

 

48

 

flood, tornado or other casualty, or otherwise damaged so as to affect
adversely the value of such Mortgaged Loan;

 

(g)           any
material issues raised upon examination of Sellers or Sellers’ facilities by
any Governmental Authority;

 

(h)           any
material change in the Indebtedness of any Seller, including, without
limitation, any material default, renewal, non-renewal, termination, increase
in available amount or decrease in available amount related thereto;

 

(i)            promptly
upon receipt of notice or knowledge of (i) any default related to any
Repurchase Asset, (ii) any lien or security interest (other than security
interests created hereby or by the other Program Agreements) on, or claim
asserted against, any of the Purchased Mortgage Loans; and

 

(j)            any
other event, circumstance or condition that has resulted, or has a possibility
of resulting, in a Material Adverse Effect with respect to any Seller or
Servicer.

 

b.             Officer’s
Certificates.  Sellers will furnish
to Administrative Agent, at the time Sellers furnish each set of financial
statements pursuant to Section 17(a)(1) or (2) above, a certificate
of a Responsible Officer of each Seller in the form of Exhibit D
hereto certifying that, as of the date of such financial statements and as of
the date of such certificates, such Seller is in compliance with all the terms
of this Agreement and setting forth the basis for such compliance, including
the calculation of each financial ratio and covenant required to be satisfied
herein.

 

c.             Compliance
Certificate.  For each month, FIC
shall deliver to Administrative Agent a compliance certificate certifying Sellers’
compliance with the covenants in Section 14(a), (b), (e), (ee) and (gg)
above and setting forth its calculation thereof and identifying all Mortgage
Loans purchased by Buyers and held by Custodian pending repurchase.

 

d.             Mortgage
Loan Reports.  The Sellers will
furnish to Administrative Agent, in the form of Exhibit O hereto,
monthly electronic Mortgage Loan performance data, including, without
limitation, delinquency reports, pool analytic reports and static pool reports
(i.e., delinquency, foreclosure and net charge-off reports) and monthly
stratification reports summarizing the characteristics of the Purchased
Mortgage Loans.

 

e.             Asset
Tape.  Sellers shall provide to Administrative
Agent, electronically, in a format mutually acceptable to Administrative Agent
and Sellers, an Asset Tape by no later than the Reporting Date.

 

f.              Other.
Sellers shall deliver to Administrative Agent any other reports or information
reasonably requested by Administrative Agent or as otherwise required pursuant
to this Agreement.

 

49

 

18.  Repurchase Transactions

 

Each Buyer may, in its sole election, engage in
repurchase transactions with the Purchased Mortgage Loans or otherwise pledge,
hypothecate, assign, transfer or otherwise convey the Purchased Mortgage Loans
with a counterparty of such Buyer’s choice. 
Unless an Event of Default shall have occurred, no such transaction
shall relieve Buyers of their obligations to transfer Purchased Mortgage Loans
to Sellers pursuant to Section 4 hereof, or of Buyers’ obligation to
credit or pay Income to, or apply Income to the obligations of, Sellers
pursuant to Section 7 hereof.  In
the event any Buyer engage in a repurchase transaction with any of the
Purchased Mortgage Loans or otherwise pledges or hypothecates any of the
Purchased Mortgage Loans, such Buyer shall have the right to assign to such Buyer’s
counterparty any of the applicable representations or warranties herein and the
remedies for breach thereof, as they relate to the Purchased Mortgage Loans
that are subject to such repurchase transaction.

 

19.  Single Agreement

 

Buyers, Administrative Agent and each Seller
acknowledge that, and have entered hereunto, and will enter into each
Transaction hereunder, in consideration of and in reliance upon the fact that,
all Transactions hereunder constitute a single business and contractual
relationship and have been made in consideration of each other.  Accordingly, each of Buyers, Administrative
Agent and each Seller agrees (i) to perform all of its obligations in
respect of each Transaction hereunder, and that a default in the performance of
any such obligations shall constitute a default by it in respect of all
Transactions hereunder, (ii) that each of them shall be entitled to set-off
claims and apply property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions hereunder and (iii) that
payments, deliveries and other transfers made by either of them in respect of
any Transaction shall be deemed to have been made in consideration of payments,
deliveries and other transfers in respect of any other Transactions hereunder,
and the obligations to make any such payments, deliveries and other transfers
may be applied against each other and netted.

 

20.  Notices and Other Communications

 

Any and all notices (with the exception of Transaction
Requests or Purchase Confirmations, which shall be delivered via facsimile or
electronically only), statements, demands or other communications hereunder may
be given by a party to the other by mail, facsimile, messenger or otherwise to
the address specified below, or so sent to such party at any other place
specified in a notice of change of address hereafter received by the other.  All notices, demands and requests hereunder
may be made orally, to be confirmed promptly in writing, or by other
communication as specified in the preceding sentence.

 

50

 

If to a
Seller:

 

Fieldstone Mortgage Company

11000 Broken Land Parkway

Suite 600

Columbia, MD  21044

Attention:  Treasurer

Phone Number:  410-772-7275

Fax Number:  443-367-2172

 

mkrebs@fmcmortgage.com

 

Fieldstone Investment Corporation

11000 Broken Land Parkway

Suite 600

Columbia, MD  21044

Attention:  Treasurer

Phone Number:  410-772-7275

Fax Number:  443-367-2172

 

mkrebs@fmcmortgage.com

 

with a
copy to:

 

Kevin Gralley

Hogan & Hartson, LLP

111 S. Calvert St., Suite 1600

Baltimore, MD  21202

Phone Number:  410-659-2738

Fax Number:  410-539-6981

 

kggralley@hhlaw.com

 

If to Administrative Agent:

 

Credit Suisse, New York Branch 

11 Madison Avenue, 5th Floor

New York, NY 10010

Attention:  Joseph Soave and Alex Smith

Phone Number:  (212) 325-9103

Fax Number:          (212) 325-0873

 

51

 

with a
copy to:

 

Credit Suisse, New York Branch 

Eleven Madison Avenue

New York, NY 10010

Attention: Legal Department

 

21.  Entire Agreement; Severability

 

This Agreement shall supersede any existing agreements
between the parties containing general terms and conditions for repurchase
transactions.  Each provision and
agreement herein shall be treated as separate and independent from any other
provision or agreement herein and shall be enforceable notwithstanding the
unenforceability of any such other provision or agreement.

 

22.  Non assignability

 

The Program Agreements
are not assignable by any Seller.  Buyers
may from time to time assign all or a portion of its rights and obligations
under this Agreement and the Program Agreements; provided, however
that Administrative Agent shall maintain as agent of Sellers, for review by
Sellers upon written request, a register of assignees and a copy of an executed
assignment and acceptance by Buyers and assignee (“Assignment and Acceptance”),
specifying the percentage or portion of such rights and obligations
assigned.  Upon such assignment, (a) such
assignee shall be a party hereto and to each Program Agreement to the extent of
the percentage or portion set forth in the Assignment and Acceptance, and shall
succeed to the applicable rights and obligations of Buyers hereunder, and (b) Buyers
shall, to the extent that such rights and obligations have been so assigned by
it to either (i) an Affiliate of a Buyer which assumes the obligations of such
Buyer or (ii) to another Person approved by Sellers (such approval not to
be unreasonably withheld) which assumes the obligations of any Buyer, be
released from its obligations hereunder and under the Program Agreements.  Unless otherwise stated in the Assignment and
Acceptance, Sellers shall continue to take directions solely from Administrative
Agent unless otherwise notified by Administrative Agent in writing.  Administrative Agent may distribute to any
prospective assignee any document or other information delivered to Administrative
Agent by Sellers.

 

23.  Set-off

 

a.             In addition to any rights and remedies of Buyers and
Administrative Agent provided by law, Buyers and Administrative Agent shall
have the right, without prior notice to Sellers, any such notice being expressly
waived by Sellers to the extent permitted by applicable law, upon any amount
becoming due and payable by Sellers hereunder (whether at the stated maturity,
by acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all 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 Buyers or any branch or
agency thereof to or for the credit or the account of Sellers.  Administrative Agent agrees promptly to
notify Sellers after any such set-off and application made by Buyers or

 

52

 

Administrative
Agent; provided, that the failure to give such notice shall not affect the
validity of such set-off and application.

 

b.             If any Buyer (a “Benefited Buyer”) shall at any
time receive any payment of all or part of the Obligations owed to such Buyer,
or Price Differential in respect thereof, or receive any assets in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to events
or proceedings of the nature referred to in Section 15(d), or otherwise),
in a greater proportion than any such payment to or asset received by any other
Buyer, if any, in respect of such other Buyer’s Transactions, such Price
Differential or such other Obligations, such Benefited Buyer shall purchase for
cash from the other Buyers a participating interest in such portion of each
such other Buyer’s Transactions, or shall provide such other Buyers with the
benefits of any such asset, or the proceeds thereof, as shall be necessary to
cause such Benefited Buyer to share the excess payment or benefits of such
asset or proceeds ratably with each of the Buyers based upon the respective
aggregate Purchase Prices of the Transactions held by them; provided, however,
that if all or any portion of such excess payment or benefits is thereafter recovered
from such Benefited Buyer, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.  Each Seller agrees that each
Buyer so purchasing a portion of another Buyer’s Transactions and any
participant may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Buyer were
the direct holder of such portion.

 

24.  Binding Effect; Governing Law; Jurisdiction

 

a.             This
Agreement shall be binding and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.  Each Seller acknowledges that the obligations
of Buyers and Administrative Agent hereunder or otherwise are not the subject
of any guaranty by, or recourse to, any direct or indirect parent or other
Affiliate of Buyers or Administrative Agent. 
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY,
THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS
PRINCIPLES THEREOF.

 

b.             EACH
SELLER HEREBY WAIVES TRIAL BY JURY.  EACH
SELLER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY COURT
OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM
AGREEMENTS IN ANY ACTION OR PROCEEDING.  EACH
SELLER HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO,
EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW
YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE
PROGRAM AGREEMENTS.

 

53

 

25.  No Waivers, Etc.

 

No express or implied waiver of any Event of Default
by either party shall constitute a waiver of any other Event of Default and no
exercise of any remedy hereunder by any party shall constitute a waiver of its
right to exercise any other remedy hereunder. 
No modification or waiver of any provision of this Agreement and no
consent by any party to a departure herefrom shall be effective unless and
until such shall be in writing and duly executed by both of the parties
hereto.  Without limitation on any of the
foregoing, the failure to give a notice pursuant to Section 6(a), 16(a) or
otherwise, will not constitute a waiver of any right to do so at a later date.

 

26.  Intent

 

a.             The
parties recognize that each Transaction is a “repurchase agreement” as
that term is defined in Section 101 of Title 11 of the United States
Code, as amended (except insofar as the type of Purchased Mortgage Loans
subject to such Transaction or the term of such Transaction would render such
definition inapplicable), and a “securities contract” as that term is defined
in Section 741 of Title 11 of the United States Code, as amended
(except insofar as the type of assets subject to such Transaction would render
such definition inapplicable).

 

b.             It
is understood that either party’s right to liquidate Purchased Mortgage Loans
delivered to it in connection with Transactions hereunder or to exercise any
other remedies pursuant to Section 16 hereof is a contractual right to
liquidate such Transaction as described in Sections 555 and 559 of
Title 11 of the United States Code, as amended.

 

c.             The
parties agree and acknowledge that if a party hereto is an “insured
depository institution,” as such term is defined in the Federal Deposit
Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a
“qualified financial contract,” as that term is defined in FDIA and any
rules, orders or policy statements thereunder (except insofar as the type of
assets subject to such Transaction would render such definition inapplicable).

 

d.             It
is understood that this Agreement constitutes a “netting contract” as
defined in and subject to Title IV of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (“FDICIA”) and each payment entitlement and
payment obligation under any Transaction hereunder shall constitute a “covered
contractual payment entitlement” or “covered contractual payment
obligation”, respectively, as defined in and subject to FDICIA (except
insofar as one or both of the parties is not a “financial institution”
as that term is defined in FDICIA).

 

e.             This Agreement is intended to be a “repurchase agreement”
and a “securities contract,” within the meaning of Section 555 and Section 559
under the Bankruptcy Code.

 

54

 

27.  Disclosure Relating to Certain Federal
Protections

 

The parties acknowledge that they have been advised
that:

 

a.             in
the case of Transactions in which one of the parties is a broker or dealer
registered with the SEC under Section 15 of the 1934 Act, the Securities
Investor Protection Corporation has taken the position that the provisions of
the SIPA do not protect the other party with respect to any Transaction
hereunder;

 

b.             in
the case of Transactions in which one of the parties is a government securities
broker or a government securities dealer registered with the SEC under Section 15C
of the 1934 Act, SIPA will not provide protection to the other party with
respect to any Transaction hereunder; and

 

c.             in
the case of Transactions in which one of the parties is a financial
institution, funds held by the financial institution pursuant to a Transaction
hereunder are not a deposit and therefore are not insured by the Federal
Deposit Insurance Corporation or the National Credit Union Share Insurance Fund,
as applicable.

 

28.  Power of Attorney

 

Each Seller hereby authorizes Administrative Agent to
file such financing statement or statements relating to the Repurchase Assets
without Sellers’ signature thereon as Administrative Agent, at its option, may
deem appropriate.  Each Seller hereby
appoints Administrative Agent as Sellers’ agent and attorney-in-fact to execute
any such financing statement or statements in Sellers’ name and to perform all
other acts which Administrative Agent deems appropriate to perfect and continue
its ownership interest in and/or the security interest granted hereby, if
applicable, and to protect, preserve and realize upon the Repurchase Assets,
including, but not limited to, the right to endorse notes, complete blanks in
documents, transfer servicing, and sign assignments on behalf of Sellers as its
agent and attorney-in-fact.  This agency
and power of attorney is coupled with an interest and is irrevocable without Administrative
Agent’s consent.  Notwithstanding the
foregoing, the power of attorney hereby granted may be exercised only during
the occurrence and continuance of any Event of Default hereunder. Sellers shall
pay the filing costs for any financing statement or statements prepared
pursuant to this Section 28.

 

29.  Buyers and Administrative Agent May Act
Through Affiliates

 

Buyers and Administrative
Agent may, from time to time, designate one or more affiliates for the purpose
of performing any action hereunder.

 

30.  Indemnification; Obligations

 

a.             Each
Seller agrees to hold Buyer, Administrative Agent and each of their respective
Affiliates and their officers, directors, employees, agents and advisors (each,
an “Indemnified Party”) harmless from and indemnify each Indemnified
Party (and will reimburse each Indemnified Party as the same is incurred)
against all liabilities, losses, damages, judgments, costs and expenses
(including, without

 

55

 

limitation, reasonable fees and expenses of counsel)
of any kind which may be imposed on, incurred by, or asserted against any
Indemnified Party relating to or arising out of this Agreement, any Transaction
Request, Purchase Confirmation, any Program Agreement or any transaction
contemplated hereby or thereby resulting from anything other than the
Indemnified Party’s gross negligence or willful misconduct.  Each Seller also agrees to reimburse each
Indemnified Party for all reasonable expenses in connection with the
enforcement of this Agreement and the exercise of any right or remedy provided
for herein, any Transaction Request, Purchase Confirmation and any Program
Agreement, including, without limitation, the reasonable fees and disbursements
of counsel.  Each Seller’s agreements in
this Section 30 shall survive the payment in full of the Repurchase Price
and the expiration or termination of this Agreement.  Each Seller hereby acknowledges that its
obligations hereunder are recourse obligations of such Seller and are not
limited to recoveries each Indemnified Party may have with respect to the
Purchased Mortgage Loans.  Each Seller
also agrees not to assert any claim against Buyers, Administrative Agent or any
of their Affiliates, or any of their respective officers, directors, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
facility established hereunder, the actual or proposed use of the proceeds of
the Transactions, this Agreement or any of the transactions contemplated thereby.  THE FOREGOING INDEMNITY AND AGREEMENT NOT TO
ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.

 

b.             Without
limitation to the provisions of Section 4, if any payment of the
Repurchase Price of any Transaction is made by Sellers other than on the then
scheduled Repurchase Date thereto as a result of an acceleration of the
Repurchase Date pursuant to Section 16 or for any other reason, Sellers
shall, upon demand by Administrative Agent, pay to Administrative Agent an
amount sufficient to compensate Buyers or Administrative Agent for any losses,
costs or expenses that it may reasonably incur as of a result of such payment.

 

c.             Without
limiting the provisions of Section 30(a) hereof, if Sellers fail to
pay when due any costs, expenses or other amounts payable by them under this
Agreement, including, without limitation, fees and expenses of counsel and
indemnities, such amount may be paid on behalf of Sellers by Administrative
Agent, in its sole discretion.

 

31.  Counterparts

 

This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall together constitute one and the same instrument.

 

56

 

32.  Confidentiality

 

This Agreement and its terms, provisions, supplements
and amendments, and notices hereunder, are proprietary to Buyers,
Administrative Agent and Agent and shall be held by Sellers in strict
confidence and shall not be disclosed to any third party without the written
consent of Buyers and Administrative Agent except for (i) disclosure to
Sellers’ direct and indirect Affiliates and Subsidiaries, attorneys or
accountants, but only to the extent such disclosure is necessary and such
parties agree to hold all information in strict confidence, (ii)  disclosure
required by law, rule, regulation or order of a court or other regulatory body
including, without limitation, the SEC, (iii) disclosure to Persons
performing due diligence investigations of Sellers in connection with merger or
acquisition transactions or in connection with any initial public offering
involving the Sellers or their Affiliates, or (iv) disclosure in
connection with any initial public offering involving the Sellers or their
Affiliates only with respect to (a) the existence of this Repurchase
Agreement, (b) the Maximum Aggregate Purchase Price, (c) the range or
average of the calculation of the Purchase Price or Price Differential, (d) the
restrictive covenants set forth in Section 14, (e) the sub-limits
related to Wet-Ink Mortgage Loans, (f) the Termination Date, (g) the
date of this Agreement and (h) the aggregate Purchase Price of outstanding
Transactions as of a certain date, or (v) disclosure to Sellers’ current
and prospective warehouse lenders; and provided that, in no event shall either
Seller disclose to any current or prospective warehouse lenders any other terms
other than those referred to in (iv)(a), (b) and (d) above, including
without limitation, any information with respect to the calculation of the
Purchase Price, Price Differential or any fees, without the express written
consent of Administrative or as is otherwise permitted pursuant to this Section 32.  Notwithstanding the foregoing or anything to
the contrary contained herein or in any other Program Agreement, the parties
hereto may disclose to any and all Persons, without limitation of any kind, the
federal, state and local tax treatment of the Transactions, any fact relevant
to understanding the federal, state and local tax treatment of the
Transactions, and all materials of any kind (including opinions or other tax
analyses) relating to such federal, state and local tax treatment and that may
be relevant to understanding such tax treatment; provided that Sellers may not
disclose the name of or identifying information with respect to Buyers,
Administrative Agent or Agent or any pricing terms (including, without
limitation, the Pricing Rate, Purchase Price Percentage and Purchase Price) or
other nonpublic business or financial information (including any sublimits and
financial covenants) that is unrelated to the federal, state and local tax
treatment of the Transactions and is not relevant to understanding the federal,
state and local tax treatment of the Transactions, without the prior written
consent of the Buyers and Administrative Agent.

 

33.  Recording of Communications

 

Buyers, Administrative Agent and Sellers shall have
the right (but not the obligation) from time to time to make or cause to be
made tape recordings of communications between its employees and those of the
other party with respect to Transactions. 
Buyers, Administrative Agent and Sellers consent to the admissibility of
such tape recordings in any court, arbitration, or other proceedings.  The parties agree that a duly authenticated
transcript of such a tape recording shall be deemed to be a writing
conclusively evidencing the parties’ agreement.

 

57

 

34.  Reserved

 

35.  No Proceedings; Waiver of Setoff

 

Each of the
Administrative Agent, the Buyers and Sellers hereby agrees that it will not
institute against, or join any other Person in instituting against any Buyer,
any proceedings of the type referred to in the definition of “Act of Insolvency”
hereunder until one year and one day shall have elapsed since the last day on
which any Commercial Paper remains outstanding.

 

Each of the
Administrative Agent, the Sellers, the Servicer, and the Buyers hereby waive
any right of setoff it may have or to which it may be entitled under this
Agreement from time to time against any Buyer or its assets.

 

36.  Periodic Due Diligence Review

 

Each Seller acknowledges that Buyers and
Administrative Agent have the right to perform continuing due diligence reviews
with respect to the Sellers and the Mortgage Loans, for purposes of verifying
compliance with the representations, warranties and specifications made
hereunder, or otherwise, and each Seller agrees that upon reasonable (but no
less than one (1) Business Day’s) prior notice unless an Event of Default
shall have occurred, in which case no notice is required, to Sellers, Buyers,
Administrative Agent or their authorized representatives will be permitted
during normal business hours to examine, inspect, and make copies and extracts
of, the Mortgage Files and any and all documents, records, agreements,
instruments or information relating to such Mortgage Loans in the possession or
under the control of Sellers and/or the Custodian.  Sellers also shall make available to Buyers
and Administrative Agent a knowledgeable financial or accounting officer for
the purpose of answering questions respecting the Mortgage Files and the
Mortgage Loans.  Without limiting the
generality of the foregoing, each Seller acknowledges that Buyers may purchase
Mortgage Loans from Sellers based solely upon the information provided by Sellers
to Buyers and Administrative Agent in the Mortgage Loan Schedule and the
representations, warranties and covenants contained herein, and that Buyers and
Administrative Agent, at their option, have the right at any time to conduct a
partial or complete due diligence review on some or all of the Mortgage Loans
purchased in a Transaction, including, without limitation, ordering Broker’s
price opinions, new credit reports and new appraisals on the related Mortgaged
Properties and otherwise re-generating the information used to originate such
Mortgage Loan.  Buyers may underwrite
such Mortgage Loans themselves or engage a mutually agreed upon third party
underwriter to perform such underwriting. 
Each Seller agrees to cooperate with Buyers, Administrative Agent and
any third party underwriter in connection with such underwriting, including,
but not limited to, providing Buyers, Administrative Agent and any third party
underwriter with access to any and all documents, records, agreements,
instruments or information relating to such Mortgage Loans in the possession,
or under the control, of Sellers.  Each Seller
further agrees that Sellers shall pay all out-of-pocket costs and expenses
incurred by Buyers and Administrative Agent in connection with Buyers’ or
Administrative Agent’s activities pursuant to this Section 36 (“Due
Diligence Costs”).

 

58

 

37.  Authorizations

 

Any of the persons whose signatures and titles appear
on Schedule 2 are authorized, acting singly, to act for Sellers, Buyers or
Administrative Agent, as the case may be, under this Agreement.

 

38.  Acknowledgement Of Anti-Predatory Lending
Policies

 

Buyers have in place internal policies and procedures
that expressly prohibit its purchase of any High Cost Mortgage Loan.

 

39.  Documents Mutually
Drafted

 

The Sellers, the Buyers and
the Administrative Agent
agree that this Agreement each other Program Agreement prepared in connection
with the Transactions set forth herein have been mutually drafted and
negotiated by each party, and consequently such documents shall not be
construed against either party as the drafter thereof.

 

40.  General Interpretive Principles.

 

For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:

 

a.             the
terms defined in this Agreement have the meanings assigned to them in this
Agreement and include the plural as well as the singular, and the use of any
gender herein shall be deemed to include the other gender;

 

b.             accounting
terms not otherwise defined herein have the meanings assigned to them in
accordance with generally accepted accounting principles;

 

c.             references
herein to “Articles”, “Sections”, “Subsections”, “Paragraphs”, and other
subdivisions without reference to a document are to designated Articles,
Sections, Subsections, Paragraphs and other subdivisions of this Agreement;

 

d.             a
reference to a Subsection without further reference to a Section is a
reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to Paragraphs
and other subdivisions;

 

e.             the
words “herein”, “hereof”, “hereunder” and other words of similar import refer
to this Agreement as a whole and not to any particular provision;

 

f.              the
term “include” or “including” shall mean without limitation by reason of
enumeration; and

 

g.             all
times specified herein or in any other Program Document (unless expressly
specified otherwise) are local times in New York, New York unless otherwise
stated.

 

59

 

41.  The Administrative Agent

 

a.             Appointment. 
Each Buyer hereby irrevocably designates and appoints the Administrative
Agent as the Administrative Agent of such Buyer under this Agreement and the
other Program Agreements, and each such Buyer irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Program Agreements and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Program
Agreements, together with such other powers as are reasonably incidental
thereto including, without limitation, all discretionary and ministerial rights
of the Buyer hereunder.  The signature of
the Administrative Agent, delivered pursuant to this Agreement, shall be
binding on the Buyers hereunder and shall have the same effect as if signed by
the Buyers hereunder.  Notwithstanding
any provision to the contrary elsewhere in this Agreement, the Administrative
Agent shall not have any duties or responsibilities to any Buyer, except those
expressly set forth herein, or any fiduciary relationship with any Buyer, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Program Agreement or
otherwise exist by any Buyer against the Administrative Agent.  The designation and appointment of the
Administrative Agent shall not release any Buyer from its obligations under
this Agreement.

 

b.             Delegation of Duties.  The Administrative Agent may execute any of
its duties under this Agreement and the other Program Agreements by or through
agents or attorneys-in- fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties.  The Administrative Agent shall not be
responsible for the negligence to misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.

 

c.             Exculpatory Provisions.  Neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken
by it or such Person under or in connection with this Agreement or any other
Program Agreement (except for its or such Person’s own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Buyers
for any recitals statements, representations or warranties made by the Sellers
or any officer thereof contained in this Agreement or any other Program
Agreement or in any certificate, report, statements or other document referred
to or provided for in, or received by the Administrative Agent under or in
connection with, this Agreement or any other Program Agreement or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Program Agreement or for any failure of the Sellers
to perform their obligations hereunder or thereunder.  The Administrative Agent shall not be under
any obligation to any Buyer to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Program Agreement, or to inspect the properties, books
or records of the Sellers.  The parties
expressly acknowledge that (a) Administrative Agent’s obligations under
the Agreement shall not include a guarantee of performance by its Principal or
Principals and (b) the other party’s remedies shall not include a right of
setoff in respect of rights or obligations, if any, of Administrative Agent
arising in other transactions in which Administrative Agent is acting as
principal.

 

60

 

d.             Reliance by Administrative Agent.  The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Transaction Request,
writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex, or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to the Sellers or any other
party to this Agreement), independent accountants and other experts selected by
the Administrative Agent.  The
Administrative Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Program Agreement unless it shall
first receive such advice or concurrence of the Required Committed Buyers as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Buyers against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.  The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement and the other Program Agreement in accordance with a request of Required
Committed Buyers, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Buyers and all future holders of
the Purchased Mortgage Loans.

 

e.             Notices. 
Any (i) notices, requests, confirmations, Mortgage Loan Schedules,
Trust Receipts, Income, cash or additional Mortgage Loans to be received by any
Buyer and (ii) judgments, approvals, agreements, determinations or notices
to be made by any Buyer under this Agreement shall be delivered to and made by
the Administrative Agent. 
Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Event of Default hereunder unless the
Administrative Agent has received notice from a Buyer or the Sellers referring
to this Agreement, describing such Event of Default and stating that such
notice is a “notice of default”.  In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Buyers. 
The Administrative Agent shall take such action with respect to such Event
of Default as shall be reasonably directed by the Required Committed Buyers;
provided that unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Event of Default as it shall deem advisable in the best interests of the
Buyers.  The Administrative Agent shall
provide to the Buyers, on each Business Day, the rate of the Pricing
Differential and, not later than the opening of business on the Business Day
following the receipt thereof by the Administrative Agent, a copy of the most
recent margin base report.

 

f.              Non-Reliance on Administrative Agent and Other
Buyers.  Each Buyer expressly
acknowledges that neither the Administrative Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to its and that no act by the Administrative
Agent hereinafter taken, including any review of the affairs of the Sellers,
shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Buyer.  Each
Buyer represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Buyer, and based on
such documents and information as it deemed appropriate, made its own appraisal
of and investigation into the business, operations, property, financial and
other condition and creditworthiness of the Sellers and made its own decision
to enter into Transactions and purchase its Interests hereunder and enter into
this Agreement.  Each Buyer also
represents that it will,

 

61

 

independently and
without reliance upon the Administrative Agent or any other Buyer, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Program Agreements, and to
make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other conditions and
creditworthiness of the Sellers.  Except
for notices, reports and other documents expressly required to be furnished to
the Buyers by the Administrative Agent hereunder or other under the other
Program Agreement, the Administrative Agent shall not have any duty or
responsibility to provide any Buyer with any credit or other information concerning
the business, operations, property, condition (financial or otherwise),
prospects or creditworthiness of the Sellers which may come into the possession
of the Administrative Agent or any of its officers, directors, employees,
agents attorneys-in-fact or Affiliates.

 

g.             Indemnification. 
The Buyers agree to indemnify the Administrative Agent in its capacity
as such (to the extent not reimbursed by the Sellers and without limiting or
expanding the obligation of the Sellers to do so), ratably according to their
respective Participation Percentages in effect on the date on which
indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the
Repurchase Price) be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of, this Agreement, any
of the other Program Agreements or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Administrative Agent under or in connection with
any of the foregoing; provided that no Buyer shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the Administrative Agent’s gross negligence or willful misconduct.  The agreements in this Section shall
survive the payment of the Repurchase Prices and all other amounts payable
hereunder.

 

h.             Administrative Agent in Its Individual Capacity.  The Administrative Agent and its Affiliates
may purchase assets from, make loans to, accept deposits from and generally
engage in any kind of business with the Sellers as though the Administrative
Agent were not the Administrative Agent hereunder and under the other Program
Agreements.  With respect to the
Transactions entered into by it and the Interests purchased made by it, the
Administrative Agent shall have the same rights and powers under this Agreement
and the other Program Agreements as any Buyer and may exercise the same as
though it were not the Administrative Agent, and the terms “Buyer” and “Buyers”
shall include the Administrative Agent in its individual capacity.

 

i.              Successor Administrative Agent.  The Administrative Agent may resign as
Administrative Agent upon 30 days’ notice to the Buyers.  If the Administrative Agent shall resign as
Administrative Agent under this Agreement and the other Program Agreements,
then the Required Committed Buyers shall appoint from among the Buyers a
successor Administrative Agent for the Buyers, which successor Administrative
Agent shall be approved by the Sellers (unless an Event of Default has occurred
and is continuing), and any such successor Administrative Agent shall succeed
to the rights, powers and duties of the Administrative Agent, and the term “Administrative
Agent” shall mean such successor

 

62

 

Administrative
Agent effective upon such appointment and approval, and the former
Administrative Agent’s rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Purchased Mortgage Loans or the Interests.  If no successor Administrative Agent has been
appointed and shall have accepted such appointment within 30 days after the
retiring Administrative Agent’s giving notice of its resignation, then the
retiring Administrative Agent, on behalf of the Buyers, may appoint a
Administrative Agent which shall be a Buyer or a commercial bank organized
under the laws of the United States of America or any State thereof and having
a combined capital and surplus of at least $100,000,000 and which shall (unless
and Event of Default has occurred and is continuing) be reasonably acceptable
to the Sellers.  Upon the acceptance of
any appointment as the Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations, under this Agreement and
the other Program Agreements.  After any
retiring Administrative Agent’s resignation as Administrative Agent, the
provisions of this Section 36 shall inure to the benefit as to any actions
taken or omitted to be taken by it while it was Buyer under this Agreement and
the other Program Agreements.

 

j.              Rights and Obligations of Sellers Not Affected.  It is understood that the provisions of this Section 36
are intended to control the relationship between the Administrative Agent on
the one hand and Buyers on the other hand, and nothing set forth herein shall
be deemed to diminish or add to any rights of Sellers hereunder or to impose
additional obligations on Sellers, except that any dealings by the Sellers with
the Administrative Agent shall be deemed to satisfy such requirement to deal
with the Buyer hereunder.

 

k.             Action Upon Certain Events.  To the extent the Administrative Agent is
entitled to consent to or withhold its consent of any waiver or amendment of
this Agreement or other Program Agreements in accordance with the terms hereof
or thereof or otherwise take action upon the occurrence of an Event of Default,
the Administrative Agent shall (i) give prompt notice to the Buyers of any
such waiver, amendment, Event of Default of which it is aware and (ii) take
such action with respect to such waiver, amendment, Event of Default as shall
be directed by the Required Committed Buyers.

 

l.              Additional Representations.  Administrative Agent hereby makes the
following representations, which shall continue during the term of any
Transaction:  Each Principal has duly
authorized Administrative Agent to execute and deliver the Agreement on its
behalf, has the power to so authorize Administrative Agent and to enter into
the Transactions contemplated by the Agreement and to perform the obligations
of Sellers or Buyers, as the case may be, under such Transactions, and has
taken all necessary action to authorize such execution and delivery by
Administrative Agent and such performance by it.

 

m.            Identification of Principals.  Administrative Agent agrees (a) to
provide the other party, prior to the date on which the parties agree to enter
into any Transaction under the Agreement, with a written list of Principals for
which it intends to act as Administrative Agent (which list may be amended in
writing from time to time with the consent of the other party), and (b) to
provide the other party, before the close of business on the next business day
after orally

 

63

 

agreeing to enter
into a Transaction, with notice of the specific Principal or Principals for
whom it is acting in connection with such Transaction.  If (i) Administrative Agent fails to
identify such Principal or Principals prior to the close of business on such
next business day or (ii) the other party shall determine in its sole
discretion that any Principal or Principals identified by Administrative Agent
are not acceptable to it, the other party may reject and rescind any
Transaction with such Principal or Principals, return to Administrative Agent
any Purchased Mortgage Loan or portion of the Purchase Price, as the case may
be, previously transferred to the other party and refuse any further
performance under such Transaction, and Administrative Agent shall immediately
return to the other party any portion of the Purchase Price or Purchased
Mortgage Loans, as the case may be, previously transferred to Administrative
Agent in connection with such Transaction; provided, however,
that (A) the other party shall promptly (and in any event within one
business day) notify Administrative Agent of its determination to reject and
rescind such Transaction and (B) to the extent that any performance was
rendered by any party under any Transaction rejected by the other party, such
party shall remain entitled to any Price Differential or other amounts that
would have been payable to it with respect to such performance if such
Transaction had not been rejected.  The
other party acknowledges that Administrative Agent shall not have any
obligation to provide it with confidential information regarding the financial
status of its Principals; Administrative Agent agrees, however, that it will
assist the other party in obtaining from Administrative Agent’s Principals such
information regarding the financial status of such Principals as the other
party may reasonably request.

 

n.             Multiple Principals.

 

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

 

(b)                                 In
the event that Administrative Agent and the other party elect (or are deemed to
elect) to treat Transactions under the Agreement as transactions on behalf of
separate Principals, the parties agree that (i) Administrative Agent will
provide the other party, together with the notice described in clause (b) of
Subsection m of this Section 41, notice specifying the
portion of each Transaction allocable to the account of each of the Principals
for which it is acting (to the extent that any such Transaction is allocable to
the account of more than one Principal); (ii) the portion of any
individual Transaction allocable to each Principal shall be deemed a separate
Transaction under the Agreement; (iii) the margin maintenance obligations
of Sellers under Section 6(a) of the Agreement shall be determined on
a Transaction-by-Transaction basis (unless the parties agree to determine such
obligations on a Principal-by-Principal basis); and (iv) Buyers’ and
Sellers’ remedies under the Agreement upon the occurrence of an Event of
Default shall be determined as if Administrative Agent had entered into a

 

64

 

separate Agreement with the other party on behalf of
each of its Principals.

 

(c)                                  In
the event that Administrative Agent and the other party elect to treat
Transactions under the Agreement as if they were transactions by a single
Principal, the parties agree that (i) Administrative Agent’s notice under clause
(b) of Subsection m of this Section 41 need only
identify the names of its Principals but not the portion of each Transaction
allocable to each Principal’s account; (ii) the margin maintenance
obligations of Sellers under Section 6(a) of the Agreement shall,
subject to any greater requirement imposed by applicable law, be determined on
an aggregate basis for all Transactions entered into by Administrative Agent on
behalf of any Principal; and (iii) Buyers’ and Sellers’ remedies upon the
occurrence of an Event of Default shall be determined as if all Principals were
a single Seller or Buyer, as the case may be.

 

(d)                                 Notwithstanding
any other provision of the Agreement, the parties agree that any Transactions
by Administrative Agent on behalf of an employee benefit plan under ERISA shall
be treated as Transactions on behalf of separate Principals in accordance with
Subsection n(b) of this Section 41 (and all margin maintenance
obligations of the parties shall be determined on a Transaction-by-Transaction
basis).

 

o.             Interpretation of Terms.  All references to “Seller” or “Buyer”, as the
case may be, in the Agreement shall, subject to the provisions of this Section 41
(including, among other provisions, the limitations on Administrative Agent’s
liability in Subsection c of this Section 41), be construed to
reflect that (i) each Principal shall have, in connection with any
Transaction or Transactions entered into by Administrative Agent on its behalf,
the rights, responsibilities, privileges and obligations of a “Seller”
or “Buyer”, as the case may be, directly entering into such Transaction
or Transactions with the other party under the Agreement, and (ii) Administrative
Agent’s Principal or Principals have designated Administrative Agent as their
sole agent for performance of Sellers’ obligations to Buyers or Buyers’
obligations to Sellers, as the case may be, and for receipt of performance by
Buyers of their obligations to Sellers or Sellers of its obligations to Buyers,
as the case may be, in connection with any Transaction or Transactions under
the Agreement (including, among other things, as Administrative Agent for each
Principal in connection with transfers of Securities, cash or other property
and as agent for giving and receiving all notices under the Agreement).  Both Administrative Agent and its Principal
or Principals shall be deemed “parties” to the Agreement and all
references to a “party” or “either party” in the Agreement shall be
deemed revised accordingly.

 

42.  Wire Instructions

 

a.             Any
amounts to be transferred by the Buyers or the Administrative Agent to Sellers
hereunder shall be sent by wire transfer in immediately available finds to the
account of Sellers at:

 

65

 

JPMorgan Chase Bank,
National Association

ABA# 021000021

Account # 00113326327

Account Name: FIC Operating
Account

 

b.             Any
amounts to be transferred by Sellers to the Administrative Agent (for the
account of the Buyers) hereunder shall be sent by wire transfer in immediately
available funds to the account of the Administrative Agent at:

 

Bank of New York

ABA#  021-000-018

Account # 890-038-7025

Account Name:  Alpine Securitization
Corp.

 

c.             Any
amounts to be transferred by the Administrative Agent to the Buyers hereunder
shall be sent by wire transfer in immediately available funds to the account of
the applicable Buyers at:

 

Bank of New York

ABA#  021-000-018

Account # 890-038-7025

Account Name:  Alpine Securitization
Corp.

 

d.             Amounts
received after 2:00 p.m., New York City time, on any Business Day shall be
deemed to have been paid and received on the next succeeding Business Day.

 

43.  Joint and Several

 

Sellers, Administrative
Agent and Buyers hereby acknowledge and agree that the Sellers are each jointly
and severally liable to Buyers and Administrative Agent for all of their
respective obligations hereunder.

 

44.  Amendments and Waivers

 

Neither this Agreement
nor any other Program Agreement, nor any terms hereof or thereof may be
amended, supplemented, waived or modified except in accordance with the
provisions of this Section 44.  The
Required Committed Buyers may, or with the written consent of the Required Committed
Buyers, the Administrative Agent, may, from time to time (i) enter into
with Sellers written amendments, supplements or modifications hereto and to the
other Program Agreements for the purpose of adding any provisions to this
Agreement or the other Program Agreements or changing in any manner the rights
of Buyers or of Sellers hereunder or thereunder or (ii) waive, on such
terms and conditions as the Required Committed Buyers or the Administrative
Agent, as the case may be, may specify in such instrument, any of the
requirements of this Agreement or the other Program Agreements or any Event of
Default and its consequences; provided, however, that no such waiver and no
such amendment, supplement or modification shall (i) reduce the amount or
extend the scheduled Repurchase Date or of any

 

66

 

installment
thereof, or reduce the stated rate of any Price Differential or any fee payable
hereunder or extend the scheduled date of any payment thereof, or modify or
increase the types of Mortgage Loans eligible for a Transaction hereunder, in
each case without the consent of each Buyer affected thereby, or (ii) amend,
modify or waive any provision of this Section 44 or amend the definitions
of “Pricing Rate”, “Purchase Price Percentage”, “Asset Value”,
or reduce the percentage specified in the definition of Required Committed Buyers,
or consent to the assignment or transfer by the Sellers of any of their rights
and obligations under this Agreement and the other Program Agreement, or
release or subordinate the interests of the Administrative Agent or any Buyer
in the Purchased Mortgage Loans, in each case without the written consent of
all the Buyers.  Any such waiver and any
such amendment, supplement or modification shall apply equally to each of the
Buyers and shall be binding upon Sellers, the Buyers, the Administrative Agent
and all future holders of Purchased Mortgage Loans and the Interests.  In the case of any waiver, Sellers, the
Buyers, and the Administrative Agent shall be restored to their former
positions and rights hereunder and under the other Program Agreements, and any
Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Event of Default or impair
any right consequent thereon.

 

[Signature Page Follows]

 

67

 

IN WITNESS WHEREOF, each
party has caused its name to be signed hereto by its respective officers
thereunto duly authorized as of the date first above written.

 

 

	
   

  	
  FIELDSTONE
  MORTGAGE COMPANY,

  
	
   

  	
  as Seller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIELDSTONE
  INVESTMENT CORPORATION,

  
	
   

  	
  as Seller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CREDIT SUISSE, NEW YORK BRANCH, as Administrative

  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

	
  The Alpine
  Lending Group:

  	
   

  
	
   

  	
   

  
	
   

  	
  ALPINE
  SECURITIZATION CORP.,

  
	
   

  	
  as a Conduit
  Buyer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CREDIT SUISSE, NEW YORK BRANCH, individually and

  as a Committed Buyer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

SCHEDULE 1

 

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO
PURCHASED MORTGAGE LOANS

 

With respect to those representations and warranties
which are made to the best of each Seller’s knowledge, if it is discovered by
the Sellers, the Buyers or the Administrative Agent that the substance of such
representation and warranty is inaccurate and such inaccuracy materially and
adversely affects the value of the related Mortgage Loan or the interest of the
Buyers, notwithstanding the Sellers’ lack of knowledge with respect to the
substance of such representation and warranty, such inaccuracy shall be deemed
a breach of the applicable representation and warranty.

 

(a)           Payments Current.  No payment required under the Mortgage Loan
is delinquent more than 30 days nor has any payment under the Mortgage Loan
been delinquent more than 30 days at any time since the origination of the
Mortgage Loan.  The first Monthly Payment
shall be made, or shall have been made, with respect to the Mortgage Loan on
its Due Date or within the grace period, all in accordance with the terms of
the related Mortgage Note.

 

(b)           No Outstanding Charges.  All taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges, leasehold payments or
ground rents which previously became due and owing have been paid.  Neither Sellers nor the Qualified Originator
from which Sellers acquired the Mortgage Loan has advanced funds, or induced,
solicited or knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount required under
the Mortgage Loan, except for interest accruing from the date of the Mortgage
Note or date of disbursement of the proceeds of the Mortgage Loan, whichever is
earlier, to the day which precedes by one month the Due Date of the first
installment of principal and interest thereunder.

 

(c)           Original Terms Unmodified.  The terms of the Mortgage Note and Mortgage
have not been impaired, waived, altered or modified in any respect, from the
date of origination; except by a written instrument which has been recorded, if
necessary to protect the interests of Buyers, and which has been delivered to
the Custodian and the terms of which are reflected in the Mortgage Loan
Schedule.  The substance of any such
waiver, alteration or modification has been approved by the title insurer, to
the extent required, and its terms are reflected on the Mortgage Loan
Schedule.  No Mortgagor in respect of the
Mortgage Loan has been released, in whole or in part, except in connection with
an assumption agreement approved by the title insurer, to the extent required
by such policy, and which assumption agreement is part of the Mortgage File
delivered to the Custodian and the terms of which are reflected in the Mortgage
Loan Schedule.

 

(d)           No Defenses.  The Mortgage Loan is not subject to any right
of rescission, set-off, counterclaim or defense, including, without limitation,
the defense of usury, nor will the operation of any of the terms of the
Mortgage Note or the Mortgage, or the exercise of any right thereunder, render
either the Mortgage Note or the Mortgage unenforceable, in whole or in part and
no such right of rescission, set-off, counterclaim or defense has been asserted
with respect

 

1-1

 

thereto, and to
the best of Sellers’ knowledge, since the date of origination of the Mortgage
Loan, the Mortgaged Property has not been subject to any bankruptcy proceeding
or foreclosure proceeding and the Mortgagor has not filed for protection under
applicable bankruptcy laws.  Seller has
no knowledge nor has it received any notice that any Mortgagor in respect of
the Mortgage Loan is a debtor in any state or federal bankruptcy or insolvency
proceeding.

 

(e)           Hazard Insurance.  The Mortgage Loan obligates the Mortgagor
thereunder to maintain a hazard insurance policy issued by a Qualified Insurer
(“hazard insurance”) in an amount at
least equal to the lesser of (i) the amount necessary to fully compensate
for any damage or loss to the improvements which are part of such Mortgaged
Property on a replacement cost basis and (ii) the outstanding principal
balance of the Mortgage Loan, in either case in an amount sufficient to avoid
the application of any “co-insurance provisions and consistent with the amount
that would have been required as of the date of origination in accordance with
the Underwriting Guidelines”, and, if it was in place at origination of the
Mortgage Loan, flood insurance, at the Mortgagor’s cost and expense.  If the Mortgaged Property is in an area identified
by any federal Governmental Authority in the Federal Register as having special
flood hazards, a flood insurance policy is in effect which met the requirements
of Federal Emergency Management Agency at the time such policy was issued.  The Mortgage obligates the Mortgagor to
maintain the hazard insurance and, if applicable, flood insurance policy at the
Mortgagor’s cost and expense, and on the Mortgagor’s failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor’s cost and expense, and to seek reimbursement therefor from the
Mortgagor.  The Mortgaged Property is
covered by hazard insurance.  The Hazard
Insurance policies contain a standard mortgagee clause naming the applicable
Seller, its successors and assigns (including, without limitation, subsequent
owners of the Mortgage Loan), as mortgagee, and may not be reduced, terminated
or canceled without 30 days’ prior written notice to the mortgagee.  No such notice has been received by
Sellers.  All premiums on such insurance
policy have been paid.  Where required by
state law or regulation, the Mortgagor has been given an opportunity to choose
the carrier of the required hazard insurance, provided the policy is not a “master”
or “blanket” hazard insurance policy covering a condominium, or any hazard
insurance policy covering the common facilities of a planned unit
development.  The hazard insurance policy
is the valid and binding obligation of the insurer and is in full force and
effect.  The applicable Seller has not
engaged in, and has no knowledge of the Mortgagor’s having engaged in, any act
or omission which would impair the coverage of any such policy, the benefits of
the endorsement provided for herein, or the validity and binding effect of either
including, without limitation, no unlawful fee, commission, kickback or other
unlawful compensation or value of any kind has been or will be received,
retained or realized by any attorney, firm or other Person, and no such
unlawful items have been received, retained or realized by Sellers.

 

(f)            Compliance with Applicable Laws.  Any and all requirements of any federal,
state or local law including, without limitation, usury, truth-in-lending, real
estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to the Mortgage Loan have been
complied with, the consummation of the transactions contemplated hereby will
not involve the violation of any such laws or regulations, and Seller shall
maintain or shall cause its agent to maintain in its possession, available for
the inspection of Buyers or Administrative Agent, and shall deliver to
Administrative Agent, upon demand, evidence of compliance with all such
requirements.

 

1-2

 

(g)           No Satisfaction of Mortgage.  The Mortgage has not been satisfied,
canceled, subordinated (except in the case of a Second Lien Mortgage Loan, to
the first Mortgage Loan) or rescinded, in whole or in part (except for a
release that does not materially impair the security of the Mortgage Loan or a
release the effect of which is reflected in the loan-to-value ratio for the
Mortgage Loan as set forth in the Mortgage Loan Schedule), and the Mortgaged
Property has not been released from the lien of the Mortgage, in whole or in
part, nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission. 
The applicable Seller has not waived the performance by the Mortgagor of
any action, if the Mortgagor’s failure to perform such action would cause the
Mortgage Loan to be in default, nor has Seller waived any default resulting
from any action or inaction by the Mortgagor.

 

(h)           Location and Type of Mortgaged
Property.  The Mortgaged Property is
located in an Acceptable State as identified in the Mortgage Loan Schedule and
consists of either (i) a single parcel of real property or (ii) more
than one parcel of real property (as determined for tax purposes only) which
parcels are contiguous and are subject to a single deed or title, in each case,
with a detached single family residence erected thereon, or a two- to
four-family dwelling, or an individual condominium unit in a low-rise
condominium project, or an individual unit in a planned unit development or a
de minimis planned unit development; provided, however, that any condominium
unit or planned unit development shall conform with the applicable Fannie Mae
and Freddie Mac requirements regarding such dwellings or shall conform to
underwriting guidelines acceptable to Administrative Agent in its sole
discretion and that no residence or dwelling is a mobile home.  No portion of the Mortgaged Property is used
for commercial purposes; provided, that, the Mortgaged Property may be a mixed
use property if such Mortgaged Property conforms to underwriting guidelines
acceptable to Administrative Agent in its sole discretion.

 

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

 

(1)           the lien of current real property
taxes and assessments not yet due and payable;

 

(2)           covenants, conditions and
restrictions, rights of way, easements and other matters of the public record
as of the date of recording acceptable to prudent mortgage lending institutions
generally and specifically referred to in Buyer’s title insurance policy
delivered to the originator of the Mortgage Loan and (a) referred to or
otherwise considered in the appraisal made for the originator of the Mortgage
Loan or (b) which do not adversely affect the Appraised Value of the
Mortgaged Property set forth in such appraisal;

 

1-3

 

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

 

(4)           with respect to each Mortgage Loan
which is a Second Lien Mortgage Loan a first lien on the Mortgaged Property;
and

 

(5)           in the case of a Mortgaged Property
that is a condominium or an individual unit in a planned unit development,
liens for common charges permitted by statute.

 

Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Mortgage Loan
establishes and creates a valid, subsisting and enforceable (i) with
respect to each first lien Mortgage Loan, first priority lien and first
priority security interest, or (ii) with respect to each Second Lien
Mortgage Loan, second priority lien and second priority security interest, in
each case, on the property described therein and Seller has full right to
pledge and assign the same to Buyers.

 

(j)            Validity of Mortgage Documents.  The Mortgage Note and the Mortgage and any
other agreement executed and delivered by a Mortgagor, if applicable, in
connection with a Mortgage Loan are genuine, and each is the legal, valid and
binding obligation of the maker thereof enforceable in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar laws relating to or
affecting the rights of creditors generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).  All parties to the Mortgage
Note, the Mortgage and any other such related agreement had legal capacity to
enter into the Mortgage Loan and to execute and deliver the Mortgage Note, the
Mortgage and any such agreement, and the Mortgage Note, the Mortgage and any
other such related agreement have been duly and properly executed by such
related parties.

 

(k)           Full Disbursement of Proceeds.  There is no further requirement for future
advances under the Mortgage Loan, and any and all requirements as to completion
of any on-site or off-site improvement and as to disbursements of any escrow
funds therefor have been complied with. 
All costs, fees and expenses incurred in making or closing the Mortgage
Loan and the recording of the Mortgage were paid, and the Mortgagor is not
entitled to any refund of any amounts paid or due under the Mortgage Note or
Mortgage.

 

(l)            Ownership.  The applicable Seller is the sole owner of
record and holder of the Mortgage Loan. 
The Mortgage Loan is not assigned or pledged except as provided in this
Agreement and Sellers have good and marketable title thereto, and have full
right to pledge and assign the Mortgage Loan to Buyers or their designees free
and clear of any encumbrance, equity, participation interest, lien, pledge,
charge, claim or security interest, and has full right and authority subject to
no interest or participation of, or agreement with, any other party, to sell
each Mortgage Loan pursuant to this Agreement.

 

(m)          Doing Business.  All parties which have had any interest in
the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are
(or, during the period in which they held and disposed of such interest, were) (i) in
compliance with any and all applicable

 

1-4

 

licensing
requirements of the laws of the state wherein the Mortgaged Property is
located, and (ii) either (A) organized under the laws of such state, (B) qualified
to do business in such state, (C) a federal savings and loan association,
a savings bank or a national bank having a principal office in such state, or (D) not
doing business in such state; provided, if a warehouse lender that was the
assignee of the Mortgage Loans was not authorized to do business in the
jurisdiction where the Mortgaged Property is located, the applicable Seller
represents and warrants that the financing of the Mortgage Loan and the holding
of an interest in the Mortgage Loan by the warehouse lender did not constitute
doing business in that jurisdiction.

 

(n)           Title Insurance.  The Mortgage Loan is covered by either (i) an
attorney’s opinion of title and abstract of title, the form and substance of
which is acceptable to prudent mortgage lending institutions making mortgage
loans in the area wherein the Mortgaged Property is located or (ii) an
ALTA lender’s title insurance policy or other generally acceptable form of
policy or insurance acceptable to Fannie Mae or Freddie Mac and each such title
insurance policy is issued by a title insurer acceptable to Fannie Mae or
Freddie Mac and qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring the related Seller, its successors and
assigns, as to the first or second priority lien of the Mortgage, as
applicable, in the original principal amount of the Mortgage Loan (or to the
extent a Mortgage Note provides for negative amortization, the maximum amount
of negative amortization in accordance with the Mortgage), subject only to the
exceptions contained in clauses (1), (2) and (3) and, with respect to
Second Lien Mortgage Loans, clause (4) of paragraph (i) of this Schedule 1,
and in the case of adjustable rate Mortgage Loans, against any loss by reason
of the invalidity or unenforceability of the lien resulting from the provisions
of the Mortgage providing for adjustment to the Mortgage Interest Rate and
Monthly Payment. Where required by state law or regulation, the Mortgagor has
been given the opportunity to choose the carrier of the required mortgage title
insurance. Additionally, such lender’s title insurance policy affirmatively
insures ingress and egress and against encroachments by or upon the Mortgaged
Property or any interest therein. The title policy does not contain any special
exceptions (other than the standard exclusions) for zoning and uses and has
been marked to delete the standard survey exception or to replace the standard
survey exception with a specific survey reading. The related Seller, its
successors and assigns, are the sole insureds of such lender’s title insurance
policy, and such lender’s title insurance policy is valid and remains in full
force and effect and will be in force and effect upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under
such lender’s title insurance policy, and no prior holder or servicer of the
related Mortgage, including the related Seller, has done, by act or omission,
anything which would impair the coverage of such lender’s title insurance
policy, including without limitation, no unlawful fee, commission, kickback or
other unlawful compensation or value of any kind has been or will be received,
retained or realized by any attorney, firm or other Person, and no such
unlawful items have been received, retained or realized by the related Seller.

 

(o)           No Event of Defaults.  There is no material default, breach,
violation or event of acceleration existing under the Mortgage or the Mortgage
Note which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a material default, breach, violation or
event of acceleration, and neither any Seller nor its predecessors have waived
any default, breach, violation or event of acceleration.

 

1-5

 

(p)           No Mechanics’ Liens.  To the best of any Seller’s knowledge, there
are no mechanics’ or similar liens or claims which have been filed for work,
labor or material (and no rights are outstanding that under the law could give
rise to such liens) affecting the Mortgaged Property which are or may be liens
prior to, or equal or coordinate with, the lien of the Mortgage.

 

(q)           Location of Improvements; No
Encroachments.  Except as may be
expressly noted and considered in the appraisal of the Mortgaged Property, all
improvements which were considered in determining the Appraised Value of the
Mortgaged Property lie wholly within the boundaries and building restriction
lines of the Mortgaged Property, and no improvements on adjoining properties
encroach upon the Mortgaged Property unless there exists in the Mortgage File a
title policy with endorsements which insure against losses sustained by the
insured as a result of such encroachments. 
No improvement located on or being part of the Mortgaged Property is in
violation of any applicable zoning and building law, ordinance or regulation.

 

(r)            Origination; Payment Terms.  The Mortgage Loan was originated by or in conjunction with a mortgagee
approved by the Secretary of Housing and Urban Development pursuant to Sections
203 and 211 of the National Housing Act, a savings and loan association, a
savings bank, a commercial bank, credit union, insurance company or similar banking
institution which is supervised and examined by a federal or state
authority.  Principal and/or interest
payments on the Mortgage Loan commenced no more than 60 days after funds were
disbursed in connection with the Mortgage Loan. 
With respect to adjustable rate Mortgage Loans, the Mortgage Interest
Rate is adjusted on each Interest Rate Adjustment Date to equal the Index plus
the Gross Margin (rounded up or down to the nearest .125%), subject to the
Mortgage Interest Rate Cap.  The Mortgage
Note is payable on the first day of each month in equal monthly installments of
principal and/or interest (subject to an “interest only” period in the case of
Interest Only Loans), which installments of interest (a) with respect to
adjustable rate Mortgage Loans are subject to change on the Interest Rate
Adjustment Date due to adjustments to the Mortgage Interest Rate on each
Interest Rate Adjustment Date and (b) with respect to Interest Only Loans
are subject to change on the Interest Only Adjustment Date due to adjustments
to the Mortgage Interest Rate on each Interest Only Adjustment Date, in both
cases with interest calculated and payable in arrears, sufficient to amortize
the Mortgage Loan fully by the stated maturity date, over an original term of
not more than 30 years from commencement of amortization.  The Due Date of the first payment under the
Mortgage Note is no more than 60 days from the date of the Mortgage Note.

 

(s)           Customary Provisions.  The Mortgage Note has a stated maturity.  The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise
by judicial foreclosure.  Upon default by
a Mortgagor on a Mortgage Loan and foreclosure on, or trustee’s sale of, the
Mortgaged Property pursuant to the proper procedures, the holder of the
Mortgage Loan will be able to deliver good and merchantable title to the
Mortgaged Property.  There is no
homestead or other exemption available to a Mortgagor which would interfere
with the right to sell the Mortgaged Property at a trustee’s sale or the right
to foreclose the Mortgage.  The Mortgage
Note and Mortgage are on forms acceptable to Freddie Mac or Fannie Mae.

 

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(t)            Occupancy of the Mortgaged
Property.  To the best of any Seller’s
knowledge, as of the Purchase Date (i) the Mortgaged Property is lawfully
occupied under applicable law and (ii) all inspections, licenses and
certificates required to be made or issued with respect to all occupied
portions of the Mortgaged Property and, with respect to the use and occupancy
of the same, including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities.  Neither Seller has received
notification from any Governmental Authority that the Mortgaged Property is in
material non-compliance with such laws or regulations, is being used, operated
or occupied unlawfully or has failed to have or obtain such inspection,
licenses or certificates, as the case may be. 
With respect to any Mortgage Loan originated with an “owner-occupied”
Mortgaged property, the Mortgagor represented at the time of origination of the
Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the
Mortgagor’s primary residence.

 

(u)           No Additional Collateral.  The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to in clause (i) above.

 

(v)           Deeds of Trust.  In the event the Mortgage constitutes a deed
of trust, a trustee, authorized and duly qualified under applicable law to
serve as such, has been properly designated and currently so serves and is
named in the Mortgage, and no fees or expenses are or will become payable by
the Custodian or Buyers to the trustee under the deed of trust, except in
connection with a trustee’s sale after default by the Mortgagor.

 

(w)          Transfer of Mortgage Loans.  Except with respect to Mortgage Loans
intended for purchase by Ginnie Mae and for Mortgage Loans registered with
MERS, the Assignment of Mortgage is in recordable form and is acceptable for
recording under the laws of the jurisdiction in which the Mortgaged Property is
located.

 

(x)            Due-On-Sale.  Except with respect to Mortgage Loans
intended for purchase by Ginnie Mae, the Mortgage contains an enforceable
provision for the acceleration of the payment of the unpaid principal balance
of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred
without the prior written consent of the mortgagee thereunder.

 

(y)           No Buydown Provisions; No
Graduated Payments or Contingent Interests. 
Except with respect to Agency Mortgage Loans, the Mortgage Loan does not
contain provisions pursuant to which Monthly Payments are paid or partially
paid with funds deposited in any separate account established by the applicable
Seller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by any
source other than the Mortgagor nor does it contain any other similar
provisions which may constitute a “buydown” provision.  The Mortgage Loan is not a graduated payment
mortgage loan and the Mortgage Loan does not have a shared appreciation or
other contingent interest feature.

 

(z)            Consolidation of Future Advances.  Any future advances made to the Mortgagor
prior to the Purchase Date have been consolidated with the outstanding
principal amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term.  The lien of the Mortgage securing the

 

1-7

 

consolidated
principal amount is expressly insured as having first or second lien priority
by a title insurance policy, an endorsement to the policy insuring the
mortgagee’s consolidated interest or by other title evidence acceptable to
Fannie Mae and Freddie Mac.  The
consolidated principal amount does not exceed the original principal amount of
the Mortgage Loan.

 

(aa)         No Condemnation Proceeding.  To the best of any Seller’s knowledge, there
is no proceeding pending for the total or partial condemnation and no eminent
domain proceedings pending affecting any Mortgaged Property.

 

(bb)         Collection Practices; Escrow
Deposits; Interest Rate Adjustments. 
The origination and collection practices used by the originator, each
servicer of the Mortgage Loan and the applicable Seller with respect to the
Mortgage Loan have been in all respects in compliance with Accepted Servicing
Practices, applicable laws and regulations, and have been in all respects legal
and proper.  With respect to escrow
deposits and Escrow Payments, (other than with respect to each Second Lien
Mortgage Loan and for which the mortgagee under the first lien is collecting
Escrow Payments) all such payments are in the possession of, or under the
control of, the applicable Seller and there exist no deficiencies in connection
therewith for which customary arrangements for repayment thereof have not been
made.  All Escrow Payments have been
collected in full compliance with state and federal law.  If an escrow of funds has been established,
it is not prohibited by applicable law and has been established in an amount
sufficient to pay for every item that remains unpaid and has been assessed but
is not yet due and payable.  No escrow
deposits or Escrow Payments or other charges or payments due the applicable
Seller have been capitalized under the Mortgage or the Mortgage Note.  All Mortgage Interest Rate adjustments have
been made in strict compliance with state and federal law and the terms of the
related Mortgage Note.  Any interest
required to be paid pursuant to state, federal and local law has been properly
paid and credited.

 

(cc)         Conversion to Fixed Interest Rate.  Except (i) as allowed by Fannie Mae or
Freddie Mac, (ii) as would be allowed by Fannie Mae or Freddie Mac but for
limits by such Agencies on loan amounts, or (iii) or otherwise as
expressly approved in writing by Administrative Agent, with respect to
adjustable rate Mortgage Loans, the Mortgage Loan is not convertible to a fixed
interest rate Mortgage Loan.

 

(dd)         Other Insurance Policies.  No action, inaction or event has occurred and
no state of facts exists or has existed that has resulted or will result in the
exclusion from, denial of, or defense to coverage under any applicable special
hazard insurance policy, PMI Policy or bankruptcy bond, irrespective of the
cause of such failure of coverage.  In
connection with the placement of any such insurance, no commission, fee, or
other compensation has been or will be received by the applicable Seller or by
any officer, director, or employee of Seller or any designee of Seller or any
corporation in which Seller or any officer, director, or employee had a
financial interest at the time of placement of such insurance.

 

(ee)         Servicemembers Civil Relief
Act.  The Mortgagor has not notified
the applicable Seller, and such Seller has no knowledge, of any relief
requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act
of 2003.

 

1-8

 

(ff)           Appraisal.  The Mortgage File contains an appraisal of
the related Mortgaged Property signed prior to the funding of the Mortgage
Loan, duly appointed by the related Seller, who had no interest, direct or
indirect in the Mortgaged Property or in any loan made on the security thereof,
and whose compensation is not affected by the approval or disapproval of the
Mortgage Loan, and the appraisal and appraiser both satisfy the requirements of
Fannie Mae or Freddie Mac and Title XI of the Federal Institutions Reform,
Recovery, and Enforcement Act of 1989 as amended and the regulations
promulgated thereunder, all as in effect on the date the Mortgage Loan was
originated.

 

(gg)         Disclosure Materials.  The Mortgagor has executed a statement to the
effect that the Mortgagor has received all disclosure materials required by
applicable law with respect to the making of adjustable rate mortgage loans,
and the applicable Seller maintains such statement in the Mortgage File.

 

(hh)         Construction or Rehabilitation of
Mortgaged Property.  No Mortgage Loan
was made in connection with the construction or rehabilitation of a Mortgaged
Property or facilitating the trade-in or exchange of a Mortgaged Property.

 

(ii)           Capitalization of Interest.  The Mortgage Note does not by its terms
provide for the capitalization or forbearance of interest.

 

(jj)           No Equity Participation.  No document relating to the Mortgage Loan
provides for any contingent or additional interest in the form of participation
in the cash flow of the Mortgaged Property or a sharing in the appreciation of
the value of the Mortgaged Property.  The
indebtedness evidenced by the Mortgage Note is not convertible to an ownership
interest in the Mortgaged Property or the Mortgagor and the applicable Seller
has not financed nor does it own directly or indirectly, any equity of any form
in the Mortgaged Property or the Mortgagor.

 

(kk)         No Defense to Insurance
Coverage.  No action has been taken
or failed to be taken, no event has occurred and no state of facts exists or
has existed on or prior to the Purchase Date (whether or not known to the
applicable Seller on or prior to such date) which has resulted or will result
in an exclusion from, denial of, or defense to coverage under any private
mortgage insurance (including, without limitation, any exclusions, denials or
defenses which would limit or reduce the availability of the timely payment of
the full amount of the loss otherwise due thereunder to the insured) whether
arising out of actions, representations, errors, omissions, negligence, or
fraud of the applicable Seller, the related Mortgagor or any party involved in
the application for such coverage, including the appraisal, plans and
specifications and other exhibits or documents submitted therewith to the
insurer under such insurance policy, or for any other reason under such
coverage, but not including the failure of such insurer to pay by reason of
such insurer’s breach of such insurance policy or such insurer’s financial
inability to pay.

 

(ll)           Proceeds of Mortgage Loan.  The proceeds of the Mortgage Loan have not
been and shall not be used to satisfy, in whole or in part, any debt owed or
owing by the Mortgagor to the applicable Seller or any Affiliate or
correspondent of Seller, except in connection with a refinanced Mortgage Loan;
provided, however, that no such refinanced

 

1-9

 

Mortgage Loan
shall have been originated pursuant to a streamlined mortgage loan refinancing program.

 

(mm)       Origination Date.  Unless otherwise approved by the
Administrative Agent in writing, the origination date is no earlier than thirty
(30) days prior to the related Purchase Date.

 

(nn)         Mortgage Submitted for
Recordation.  The Mortgage either has
been or will promptly be submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged Property
is located.

 

(oo)         Documents Genuine.  To the best of any Seller’s knowledge, such
Purchased Mortgage Loan and all accompanying collateral documents are complete
and authentic and all signatures thereon are genuine.  Such Purchased Mortgage Loan is a “closed”
loan fully funded by the applicable Seller and held in the applicable Seller’s
name.

 

(pp)         Bona Fide Loan.  Such Purchased Mortgage Loan arose from a
bona fide loan, complying with all applicable State and Federal laws and
regulations, to persons having legal capacity to contract and is not subject to
any defense, set-off or counterclaim.

 

(qq)         Other Encumbrances.  To the best of any Seller’s knowledge, any
property subject to any security interest given in connection with such
Purchased Mortgage Loan is not subject to any other encumbrances other than a
stated first mortgage, if applicable, and encumbrances which may be allowed
under the Underwriting Guidelines.

 

(rr)           Description.  Each Purchased Mortgage Loan conforms to the
description thereof as set forth on the related Mortgage Loan Schedule delivered
to the Custodian and Administrative Agent.

 

(ss)         Located in U.S.  No collateral (including, without limitation,
the related real property and the dwellings thereon and otherwise) relating to
a Purchased Mortgage Loan is located in any jurisdiction other than in one of
the fifty (50) states of the United States of America or the District of
Columbia.

 

(tt)           Underwriting Guidelines.  Each Purchased Mortgage Loan has been
originated in accordance with the Underwriting Guidelines (including all
supplements or amendments thereto) previously provided to Administrative Agent.

 

(uu)         Aging.  Such Purchased Mortgage Loan has not been
subject to a Transaction hereunder for more than 180 days.

 

(vv)         Primary Mortgage Guaranty
Insurance.  Each Mortgage Loan is
insured as to payment defaults by a policy of primary mortgage guaranty
insurance in the amount required where applicable, and by an insurer approved,
by the applicable Take-out Investor, if applicable, and all provisions of such
primary mortgage guaranty insurance have been and are being complied with, such
policy is in full force and effect, and all premiums due thereunder have been
paid.  Each Mortgage Loan which is
represented to Administrative Agent to have, or to be eligible for, FHA
insurance is insured, or eligible to be insured, pursuant to the National Housing

 

1-10

 

Act.  Each Mortgage Loan which is represented by
Sellers to be guaranteed, or to be eligible for guaranty, by the VA is
guaranteed, or eligible to be guaranteed, under the provisions of Chapter 37 of
Title 38 of the United States Code.  As
to each FHA insurance certificate or each VA guaranty certificate, Sellers have
complied with applicable provisions of the insurance for guaranty contract and
federal statutes and regulations, all premiums or other charges due in
connection with such insurance or guarantee have been paid, there has been no
act or omission which would or may invalidate any such insurance or guaranty,
and the insurance or guaranty is, or when issued, will be, in full force and
effect with respect to each Mortgage Loan. 
There are no defenses, counterclaims, or rights of setoff affecting the
Mortgage Loans or affecting the validity or enforceability of any private
mortgage insurance or FHA insurance applicable to the Mortgage Loans or any VA
guaranty with respect to the Mortgage Loans.

 

(ww)       Predatory Lending Regulations;
High Cost Loans.  None of the
Mortgage Loans are classified as a High Cost Mortgage Loan.

 

(xx)          Wet-Ink Mortgage Loans.  With respect to each Mortgage Loan that is a
Wet-Ink Mortgage Loan, the Settlement Agent has been instructed in writing by
Sellers to hold the related Mortgage Loan Documents as agent and bailee for
Buyers or Buyers’ agent and to promptly forward such Mortgage Loan Documents in
accordance with the provisions of the Custodial Agreement and the Escrow
Instruction Letter.

 

(yy)         FHA Mortgage Insurance; VA
Loan Guaranty.  With respect to the
FHA Loans, the FHA Mortgage Insurance Contract is in full force and effect and
there exists no impairment to full recovery without indemnity to the Department
of Housing and Urban Development or the FHA under FHA Mortgage Insurance.  With respect to the VA Loans, the VA Loan
Guaranty Agreement is in full force and effect to the maximum extent stated
therein.  All necessary steps have been
taken to keep such guaranty or insurance valid, binding and enforceable and
each of such is the binding, valid and enforceable obligation of the FHA and
the VA, respectively, to the full extent thereof, without surcharge, set-off or
defense.  Each FHA Loan and VA Loan was
originated in accordance with the criteria of an Agency for purchase of such
Mortgage Loans.

 

 

1-11

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