Document:

Michael Stewart Offer Letter.

 

 
  
 EXHIBIT 10.1 
  
 August 8, 2003 
  
 Michael M. Stewart 
 46290 Sentinel Drive

 Fremont, California 94539 
  
 Dear Mike: 
  
 On behalf of SonicWALL, Inc., I am pleased to offer you the position of Vice President Worldwide Sales, Grade 64 reporting to me. You will begin your employment on Monday, August 11, 2003. 
  
 If you have not already done so, you will be asked to complete forms authorizing a background
check. These forms must be returned to HR along with an executed copy of this offer in order to proceed with the employment process. Contingent upon completion of a successful background check, your employment package will consist of the following
benefits: 
  
 Annual Base Salary –
$200,000.00, paid bi-weekly. 
  
 2003 Incentive
Compensation – There will be no incentive compensation for Q3 2003. For Q4 2003 you are eligible to earn $50,000.00. You will receive this incentive compensation if both of the following criteria are met: 1) SonicWALL achieves net revenue of
$26 million; 2) SonicWALL achieves a minimum of 70% gross margin. SonicWALL must achieve at a minimum 80% of the gross margin target to pay on the Q4 incentive. 
  
 2004 Incentive Compensation, Company Executive Bonus Plan – You are eligible to participate in the
company executive bonus plan. This bonus plan will provide an incentive up to 100% of your base salary, or $200,000.00. You will receive this bonus based on the criterion established in exhibit A. If all criteria are achieved at the maximum range,
you will receive your full incentive bonus, which will bring your annual total target compensation to $400,000.00. 
  
 Incentive stock options – 300,000 shares with a four-year vest period, of which 25% vest on your one-year anniversary and the
balance to vest in equal monthly amounts. The options are subject to approval and assigned a price by the Board of Directors at the next scheduled meeting. Your vesting period will commence on your first day of employment with SonicWALL. 

 
 Other Benefits – In addition, you will receive
company paid medical, dental and vision benefits commencing on your start date, as well as all other benefits offered to SonicWALL employees. 
  
 Employee Stock Purchase Plan – You will be able to participate commencing on the next open enrollment date. This program allows
employees to apply up to 15% of their salary to purchase stock at 85% of the fair market value on preset measurement dates. 
  
 Period of Employment – Your employment with the company will be “at will”, meaning that either you or the company will be
entitled to terminate your employment at any time for any reason, with or without cause. Any contrary representations, which may have been made to you, are superseded by this offer. Although your job duties, title, compensation and benefits, as well
as the company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express writing signed by you and the President of the company. 

	 Severance Pay – If your employment with SonicWALL terminates other than for “Cause,” (defined below), and you sign
and do not revoke SonicWALL’s standard release of claims, then you will be entitled to severance benefits as follows:

  
 If the termination
occurs within the first twelve (12) months of your employment, you will be entitled to receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to your base salary rate, as then in effect, for a period of six
(6) months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies. You will not be entitled to any other benefits following termination; or  
  
 If the termination occurs after the first twelve (12) months of your
employment, you will be entitled to receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to your base salary rate, as then in effect, for a period of three (3) months from the date of such termination, to
be paid periodically in accordance with the Company’s normal payroll policies. You will not be entitled to any other benefits following termination. 
  
 As used herein, the term “Cause” means (i) your refusal to follow written, lawful directions or failure to perform your duties (other than due
to disability), (ii) fraud, dishonesty, or willful or reckless misconduct (including, without limitation, engaging in conduct that is or may be unlawful or disreputable, to the possible detriment of SonicWALL) in the performance of your duties,
(iii) any material breach by you of any term of this offer letter after receipt of written notice from SonicWALL with respect to such failure and a reasonable opportunity to cure, if reasonably curable without material harm to the Company, or (iv)
conviction or plea of guilty or nolo contendre by you to any felony. 
  

	 Change of Control – If SonicWALL terminates your employment other than for Cause within ninety (90) days before a Change of
Control (as defined below) or within one (1) year after a Change of Control, subject to you signing and not revoking SonicWALL’s standard release of claims, you shall receive the following: (i) a lump sum equal to (12) months base salary, as
then in effect; (ii) a pro-rated bonus under the Annual Bonus Plan, payable at the same time and to the same extent as other senior Executives of the Company payments pursuant to the Annual Bonus Plan, and pro-rated according to the percentage of
the applicable fiscal year you are with the Company, calculated as the number of days from the commencement of the fiscal year to the termination date over 365 (the “Pro-Rated Annual Bonus”); and (iii) monthly vesting of the Stock Option
for each month of your employment.

  
 “Change of
Control” shall mean the occurrence of any of the following events: 
  
 (A) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or 
  
 (B) The consummation of the sale or disposition by the Company of all or
substantially all the Company’s assets or its business; or 
  
 (C) The consummation of a merger, reverse merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation. 
  
 You acknowledge and agree that the Severance Pay provisions and Change of Control provisions are mutually exclusive. You shall receive severance, if any, pursuant to either the Severance Pay provisions or the Change of
Control provisions. 

 The Immigration Reform and Control Act (IRCA) of 1986 requires that all new employees provide verification of US
citizenship or that they possess INS authorization to work in the United States. Attached is an I-9 form identifying the required documents to establish such rights. If this offer is accepted, you would be required to present such documentation your
first day of employment, and no later than your third day of employment. If we have not received your completed form and proper support documentation prior to your third day of employment, you would be dismissed without pay until such time you are
able to provide all necessary documentation, as required by law. 
  
 While we hope
your employment with SonicWALL is long term and mutually satisfying, we want to reiterate that it is not for a specific term and that you or SonicWALL can terminate the employment relationship at any time for any reason. 
  
 This letter, along with SonicWALL’s Non-Disclosure and Invention Assignment Agreement
that you agree to sign as a condition of your employment, sets forth the terms of your employment with the Company and supersede any prior representations or agreements including, but not limited to, any representations made during your interviews
or relocation negotiations, whether written or oral. 
  
 We are eager to see the
results of your contributions to SonicWALL based upon your considerable talents and abilities, and hope that we, in turn, enrich your career and contribute to the fulfillment of your professional goals. We look forward to having you join our team.
If you accept this offer, please return a signed copy of this letter to me at our Sunnyvale location no later than Monday, August 11, 2003. 
  
 If you have any questions please feel free to contact me. 
  
 Best Regards, 
  
 Matthew T. Medeiros 
 President and CEO 
  
 Accepted: 
  

	 /s/    MICHAEL M. STEWART

 Michael M. Stewart
	 	 August 11, 2003

 Date

  
 Please provide the completed forms
your first day of employment. 
  
 W-4 Tax Withholdings 
 I-9 INS Employment Verification Form (please do not date this form prior to your start date) 
 Employee Data Sheet 
 Non-Disclosure and Invention Assignment Agreement 
 Direct Deposit 
 Application 
 Background Check Authorization FormsCredit Agreement Duxford Financial Inc. and Bayport Mortgage, L.P.

 Exhibit 10.1 
  
 [EXECUTION] 
  

  
 CREDIT AGREEMENT 
  
 DUXFORD FINANCIAL, INC. 
  
 and 
  
 BAYPORT MORTGAGE, L.P. 
  
 as Borrowers 
  
 GUARANTY BANK 
  
 as Lender 
  

  
 August 29, 2003 
  

 TABLE OF CONTENTS 
  

	 	 	 	 	 	  	Page

	 ARTICLE I
	 	 GENERAL TERMS
	  	1
				
	 	 	 Section 1.1
	 	 Certain Definitions
	  	1
	 	 	 Section 1.2
	 	 Exhibits and Schedules
	  	14
	 	 	 Section 1.3
	 	 Calculations and Determinations
	  	14
			
	 ARTICLE II
	 	 AMOUNT AND TERMS OF LOANS
	  	14
				
	 	 	 Section 2.1
	 	 Commitment and Loans
	  	14
	 	 	 Section 2.2
	 	 Promissory Note; Interest on the Note
	  	14
	 	 	 Section 2.3
	 	 Notice and Manner of Obtaining Loans
	  	15
	 	 	 Section 2.4
	 	 Fees.
	  	15
	 	 	 Section 2.5
	 	 Mandatory Repayments
	  	15
	 	 	 Section 2.6
	 	 Payments to Lender
	  	15
	 	 	 Section 2.7
	 	 Increased Cost and Reduced Return.
	  	16
			
	 ARTICLE III
	 	 CONDITIONS PRECEDENT
	  	17
				
	 	 	 Section 3.1
	 	 Initial Loan
	  	17
	 	 	 Section 3.2
	 	 All Loans
	  	18
			
	 ARTICLE IV
	 	 BORROWER REPRESENTATIONS AND WARRANTIES
	  	19
				
	 	 	 Section 4.1
	 	 Organization and Good Standing
	  	19
	 	 	 Section 4.2
	 	 Authorization and Power
	  	19
	 	 	 Section 4.3
	 	 No Conflicts or Consents
	  	19
	 	 	 Section 4.4
	 	 Enforceable Obligations
	  	19
	 	 	 Section 4.5
	 	 Priority of Liens
	  	20
	 	 	 Section 4.6
	 	 No Liens
	  	20
	 	 	 Section 4.7
	 	 Financial Condition of Borrowers
	  	20
	 	 	 Section 4.8
	 	 Full Disclosure
	  	20
	 	 	 Section 4.9
	 	 No Default
	  	20
	 	 	 Section 4.10
	 	 No Litigation
	  	20
	 	 	 Section 4.11
	 	 Taxes
	  	20
	 	 	 Section 4.12
	 	 Principal Office, etc
	  	21
	 	 	 Section 4.13
	 	 Compliance with ERISA
	  	21
	 	 	 Section 4.14
	 	 Subsidiaries
	  	21
	 	 	 Section 4.15
	 	 Indebtedness
	  	21
	 	 	 Section 4.16
	 	 Permits, Patents, Trademarks, etc.
	  	21
	 	 	 Section 4.17
	 	 Status Under Certain Federal Statutes
	  	21
	 	 	 Section 4.18
	 	 Securities Act
	  	21
	 	 	 Section 4.19
	 	 No Approvals Required
	  	22
	 	 	 Section 4.20
	 	 Survival of Representations
	  	22
	 	 	 Section 4.21
	 	 Individual Mortgage Loans
	  	22
	 	 	 Section 4.22
	 	 Environmental Matters
	  	23

  

 i 

	 ARTICLE V
	 	 AFFIRMATIVE COVENANTS
	  	24
				
	 	 	 Section 5.1
	 	 Financial Statements and Reports.
	  	24
	 	 	 Section 5.2
	 	 Taxes and Other Liens
	  	26
	 	 	 Section 5.3
	 	 Maintenance
	  	26
	 	 	 Section 5.4
	 	 Further Assurances
	  	26
	 	 	 Section 5.5
	 	 Reimbursement of Expenses
	  	26
	 	 	 Section 5.6
	 	 Insurance
	  	27
	 	 	 Section 5.7
	 	 Accounts and Records; Servicing Records
	  	27
	 	 	 Section 5.8
	 	 Right of Inspection
	  	27
	 	 	 Section 5.9
	 	 Notice of Certain Events
	  	28
	 	 	 Section 5.10
	 	 Performance of Certain Obligations and Information Regarding Investors
	  	28
	 	 	 Section 5.11
	 	 Use of Proceeds; Margin Stock
	  	28
	 	 	 Section 5.12
	 	 Notice of Default
	  	28
	 	 	 Section 5.13
	 	 Compliance with Loan Documents
	  	29
	 	 	 Section 5.14
	 	 Operations and Properties
	  	29
	 	 	 Section 5.15
	 	 Environmental Matters.
	  	29
			
	 ARTICLE VI
	 	 NEGATIVE COVENANTS
	  	29
				
	 	 	 Section 6.1
	 	 No Merger; Limitation on Issuance of Securities
	  	29
	 	 	 Section 6.2
	 	 Limitation on Indebtedness
	  	29
	 	 	 Section 6.3
	 	 Fiscal Year, Method of Accounting
	  	30
	 	 	 Section 6.4
	 	 Business
	  	30
	 	 	 Section 6.5
	 	 Liquidations, Consolidations and Dispositions of Substantial Assets
	  	30
	 	 	 Section 6.6
	 	 Loans, Advances, and Investments
	  	30
	 	 	 Section 6.7
	 	 Use of Proceeds
	  	30
	 	 	 Section 6.8
	 	 Actions with Respect to Mortgage Collateral
	  	31
	 	 	 Section 6.9
	 	 Transactions with Affiliates
	  	31
	 	 	 Section 6.10
	 	 Liens
	  	31
	 	 	 Section 6.11
	 	 ERISA Plans
	  	31
	 	 	 Section 6.12
	 	 Change of Principal Office
	  	31
	 	 	 Section 6.13
	 	 Minimum Tangible Net Worth
	  	32
	 	 	 Section 6.14
	 	 Total Debt to Tangible Net Worth Ratio
	  	32
	 	 	 Section 6.15
	 	 Profitability
	  	32
	 	 	 Section 6.16
	 	 Management Fees
	  	32
	 	 	 Section 6.17
	 	 Minimum Liquidity
	  	32
			
	 ARTICLE VII
	 	 EVENTS OF DEFAULT
	  	32
				
	 	 	 Section 7.1
	 	 Nature of Event
	  	32
	 	 	 Section 7.2
	 	 Default Remedies
	  	34
			
	 ARTICLE VIII
	 	 INDEMNIFICATION
	  	35
				
	 	 	 Section 8.1
	 	 Indemnification
	  	35
	 	 	 Section 8.2
	 	 Limitation of Liability
	  	35

  

 ii 

	 ARTICLE IX
	 	 MISCELLANEOUS
	  	35
				
	 	 	 Section 9.1
	 	 Notices
	  	35
	 	 	 Section 9.2
	 	 Amendments, Etc
	  	36
	 	 	 Section 9.3
	 	 CHOICE OF LAW; VENUE
	  	37
	 	 	 Section 9.4
	 	 Invalidity
	  	37
	 	 	 Section 9.5
	 	 Survival of Agreements
	  	37
	 	 	 Section 9.6
	 	 Renewal, Extension or Rearrangement
	  	37
	 	 	 Section 9.7
	 	 Waivers
	  	37
	 	 	 Section 9.8
	 	 Cumulative Rights
	  	37
	 	 	 Section 9.9
	 	 Limitation on Interest
	  	37
	 	 	 Section 9.10
	 	 Bank Accounts; Offset
	  	38
	 	 	 Section 9.11
	 	 Assignments, Participations.
	  	39
	 	 	 Section 9.12
	 	 Confidentiality
	  	39
	 	 	 Section 9.13
	 	 Exhibits
	  	39
	 	 	 Section 9.14
	 	 Titles of Articles, Sections and Subsections
	  	39
	 	 	 Section 9.15
	 	 Counterparts; Fax
	  	39
	 	 	 Section 9.16
	 	 ENTIRE AGREEMENT
	  	40
	 	 	 Section 9.17
	 	 Termination; Limited Survival
	  	40
	 	 	 Section 9.18
	 	 Joint and Several Liability
	  	40
	 	 	 Section 9.19
	 	 No Release of Joint and Several Liability.
	  	40
	 	 	 Section 9.20
	 	 Disclosures
	  	42
	 	 	 Section 9.21
	 	 WAIVER OF JURY TRIAL
	  	43
	 	 	 Section 9.22
	 	 CONSEQUENTIAL DAMAGES
	  	43

  
 EXHIBITS 
  

	 Exhibit A
	 	—	 	 Form of Note

	 Exhibit B
	 	—	 	 Form of Borrowing Request

	 Exhibit C
	 	—	 	 Investors

	 Exhibit D
	 	—	 	 Subsidiaries

	 Exhibit E
	 	—	 	 Certificate Accompanying Financial Statement

	 Exhibit F
	 	—	 	 Form of Security Agreement

	 Exhibit G
	 	—	 	 [Intentionally Omitted]

	 Exhibit H
	 	—	 	 Borrowing Base Worksheet

  

 iii 

 CREDIT AGREEMENT 
  
 THIS CREDIT AGREEMENT is made and entered into as of August 29, 2003, between DUXFORD FINANCIAL, INC., a California
corporation (“Duxford”), and BAYPORT MORTGAGE, L.P., a California limited partnership (“Bayport”) GUARANTY BANK (“Lender”). 
  
 The Borrowers, jointly and severally, agree with Lender as follows:

  
 ARTICLE I 
  
 GENERAL TERMS 
  
 Section 1.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings: 
  
 “Affiliate” means, as to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with, such Person.

  
 “Aged Mortgage Loan” means an Eligible
Mortgage Loan which has been included in the Borrowing Base for more than forty-five (45) days and less than ninety (90) days. 
  
 “Aged Mortgage Loan Sublimit” means $2,000,000. 
  
 “Agency” means any of FHA, FNMA, FHLMC, GNMA and VA. 
  
 “Agreement” means this Credit Agreement, as the same
may from time to time be amended, supplemented or restated. 
  
 “Agreement to Pledge” means each agreement by Borrowers set forth in a Borrowing Request for Wet Mortgage Loans, to deliver Required Mortgage Documents to Agent. 
  
 “Applicable Collateral Value Percentage” means (i)
with respect to each GRL Loan included in the Borrowing Base, one hundred percent (100%), (ii) with respect to each other Eligible Mortgage Loan included in the Borrowing Base, ninety-eight percent (98%). 
  
 “Borrowers” means Duxford and Bayport and
“Borrower” means either of them. 
  
 “Borrowing” means a borrowing of a new Loan. 
  
 “Borrowing Base” means at any date all Eligible Mortgage Loans which have been delivered to and held by Lender or otherwise identified as Mortgage Collateral. 
  
 “Borrowing Base Worksheet” means a certificate
describing the Eligible Mortgage Loans to be included in the Borrowing Base in a form acceptable to Lender. 
  
 “Borrowing Request” means a request, in the form of Exhibit B, for a Loan pursuant to Article II. 

 “Business Day” means a day, other than a Saturday or Sunday, on which commercial
banks are open for business with the public in Dallas, Texas. Any Business Day in any way relating to the Eurodollar Rate must also be a day on which, in the judgment of Lender, significant transactions in dollars are carried out in the interbank
Eurocurrency market. 
  
 “Cash
Equivalents” means (i) securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof which mature within ninety (90) days from the date of acquisition, and (ii)
time deposits and certificates of deposit, which mature within ninety (90) days from the date of acquisition, of Lender or any other domestic commercial bank having capital and surplus in excess of $200,000,000, which has, or the holding company of
which has, a commercial paper rating of at least A-1 or the equivalent thereof by Standard & Poors Corporation or P-1 or the equivalent thereof by Moody’s Investors Service, Inc. 
  
 “Change of Control” means (a) Parent ceases to own one hundred percent (100%) of the voting power of
the voting stock of Duxford, (b) Duxford ceases to be the sole general partner of Bayport, (c) Richard E. Frankel ceases to serve as Chief Executive Officer of Duxford, or Mark A. Carver ceases to serve as President of Duxford and such officer is
not replaced within sixty days thereafter with a new officer acceptable to Lender, in its sole and absolute discretion. 
  
 “Code” means the Internal Revenue Code of 1986, as amended. 
  
 “Collateral” has the meaning given to it in the Security Agreement. 
  
 “Collateral Value of the Borrowing Base” means on any
day the sum of the Unit Collateral Values of all Eligible Mortgage Loans included in the Borrowing Base on such day as determined by Lender based on information then available to Lender; provided that the Collateral Value of the Borrowing Base shall
never exceed the Commitment. 
  
 “Commitment” means at any date, the obligation of the Lender to make Loans to Borrowers pursuant to Section 2.1 hereof in an aggregate outstanding amount not to exceed at any time $10,000,000. 
  
 “Consolidated” refers to the consolidation of any
Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person’s Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial
statements, financial position, financial condition, liabilities, etc. of such Person and its properly consolidated subsidiaries. 
  
 “Debtor Laws” means all applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization or similar Laws from time to time in effect affecting the rights of creditors generally and general principles of equity. 
  
 “Default” means any of the events specified in Section 7.1 hereof, whether or not any requirement for notice or lapse or time or
any other condition has been satisfied. 
  
 “Default
Rate” means, at the time in question, with respect to all Obligations, the sum of (i) four percent (4%) per annum, plus (ii) the per annum interest rate otherwise payable in respect of the Obligations; provided that in no event shall
the Default Rate ever exceed the Maximum Rate. 
  

 2 

 “Dividends,” in respect of any corporation, means: (a) cash distributions or any
other distributions on, or in respect of, any class of equity security of such corporation, except for distributions made solely in shares of securities of the same class; and (b) any and all funds, cash or other payments made in respect of the
redemption, repurchase or acquisition of such securities. 
  
 “Drawdown Termination Date” means the earlier of the date which is 364 days after the date hereof, or the day on which the Note first becomes due and payable in full. 
  
 “Dry Loans” means all Eligible Mortgage Loans
included in the Borrowing Base other than Wet Loans. 
  
 “Eligible Mortgage Loan” means a Mortgage Loan with respect to which each of the following statements is accurate and complete (and the Borrowers by including such Mortgage Loan in any computation of the Collateral
Value of the Borrowing Base shall be deemed to so represent to Lender at and as of the date of such computation): 
  
 (a) Such Mortgage Loan is a binding and valid obligation of the Obligor thereon, in full force and effect and enforceable in accordance
with its terms, except as enforceability may be limited by Debtor Laws; 
  
 (b) The Mortgage Note evidencing such Mortgage Loan is genuine in all respects as appearing on its face and as represented in the books and records of Borrower, and all information set forth therein is true and
correct; 
  
 (c) Such Mortgage Loan is free of
any default (other than as permitted by subparagraph below) of any party thereto (including Borrowers), counterclaims, offsets and defenses, including the defense of usury, and from any rescission, cancellation or avoidance, and all right thereof,
whether by operation of law or otherwise; 
  
 (d)
No payment under such Mortgage Loan is more than thirty (30) days past due the payment due date set forth in the underlying Mortgage Note and Mortgage; 
  
 (e) The Mortgage Note evidencing such Mortgage Loan contains the entire agreement of the parties thereto with respect to the subject
matter thereof, has not been modified or amended in any respect not expressed in writing therein and is free of concessions or understandings with the Obligor thereon of any kind not expressed in writing therein; 
  
 (f) Such Mortgage Loan is in all respects in accordance with
all Requirements of Law applicable thereto, including, without limitation, the federal Consumer Credit Protection Act and the regulations promulgated thereunder and all applicable usury Laws and restrictions, and all notices, disclosures and other
statements or information required by Law or regulation to be given, and any other act required by Law or regulation to be performed, in connection with such Mortgage Loan have been given and performed as required; 
  

 3 

 (g) All advance payments and other deposits on such Mortgage Loan have been paid in cash,
and no part of said sums has been loaned, directly or indirectly, by Borrowers to the Obligor, and, other than as disclosed to Lender in writing, there have been no prepayments; 
  
 (h) At all times such Mortgage Loan will be free and clear of all Liens, except in favor of Lender;

  
 (i) The Property covered by such Mortgage
Loan is insured against loss or damage by fire and all other hazards normally included within standard extended coverage in accordance with the provisions of such Mortgage Loan with Borrower named as a loss payee thereon; 
  
 (j) Such Mortgage Loan is secured by a first Mortgage;

  
 (k) The date of origination of such Mortgage
Loan is not more than thirty (30) days prior to the date such Mortgage Loan was first included in the Borrowing Base; 
  
 (l) Such Mortgage Loan has not been included in the Borrowing Base for more than forty-five (45) days, provided that if such Mortgage Loan
is an Aged Mortgage Loan, it has not been included in the Borrowing Base for more than ninety (90) days and the Unit Collateral Value of such Mortgage Loan when added to the Unit Collateral Value of all other Aged Mortgage Loans does not exceed the
Aged Mortgage Loan Sublimit; 
  
 (m) If such
Mortgage Loan is included in the Borrowing Base and has been withdrawn from the possession of the Lender on terms and subject to conditions set forth in the Security Agreement then: 
  
 (i) If such Mortgage Loan was withdrawn by Borrowers for purposes of correcting clerical or other
non-substantive documentation problems, the promissory note and other documents relating to such Mortgage Loan are returned to the Lender within ten (10) Business Days from the date of withdrawal; and the Unit Collateral Value of such Mortgage Loan
when added to the Unit Collateral Value of other Mortgage Loans which have been similarly released to Borrowers and have not been returned does not exceed ten percent (10%) of the Commitment; 
  
 (ii) If such Mortgage Loan was shipped by the Lender
directly to a permanent investor for purchase or to a custodian for the formation of a pool, (x) such investor or custodian is in full compliance with the terms of the bailee letter under which such Mortgage Loan was shipped, and (y) the full
purchase price for such Mortgage Loan has been received by the Lender (or such Mortgage Loan has been returned to the Lender) within forty (40) calendar days from the date of shipment by the Lender; 
  

 4 

 (n) Such Mortgage Loan is subject to a Take-Out Commitment which is in full force and
effect; 
  
 (o) Such Mortgage Loan conforms to
Agency guidelines in regards to credit quality, or has a credit score of at least 650 from a repository acceptable to the Lender, and if such Mortgage Loan is a Jumbo Loan, the Unit Collateral Value of such Mortgage Loan when added to the Unit
Collateral Value of all other Jumbo Loans does not exceed the Jumbo Sublimit; and 
  
 (p) The Required Mortgage Documents have been delivered to Lender prior to the inclusion of such Mortgage Loan in any computation of the
Borrowing Base or, if such items have not been delivered to Lender on or prior to the date such Mortgage Loan is first included in any computation of the Borrowing Base, (a) Borrowers have pledged and agreed to deliver all Required Mortgage
Documents pursuant to a Borrowing Request delivered to Lender prior to such inclusion, and (b) the Collateral Value of such Mortgage Loan when added to the Collateral Value of all other Mortgage Loans for which Lender has not received the Required
Mortgage Documents does not exceed the Wet Warehousing Sublimit, provided that, all Required Mortgage Documents with respect to such Mortgage Loan shall be delivered to Lender within five (5) Business Days after the date of the Agreement to Pledge
with respect thereto; 
  
 “Environmental
Laws” means any and all Laws relating to (a) the protection of the environment, (b) emissions, discharges or releases of pollutants, contaminants, chemicals or hazardous or toxic substances or wastes into the environment including
ambient air, surface water, ground water or land, or (c) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or
wastes or the clean-up or other remediation thereof. 
  
 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with the regulations from time to time promulgated with respect thereto. 
  
 “ERISA Affiliate” means all members of the group of
corporations and trades or businesses (whether or not incorporated) which, together with any Borrower, are treated as a single employer under Section 414 of the Code. 
  
 “ERISA Plan” means any pension benefit plan subject to Title IV of ERISA or Section 412 of the Code
maintained or contributed to by a Borrower or any ERISA Affiliate with respect to which Borrowers have a fixed or contingent liability. 
  
 “Eurodollar Rate” means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
the Bloomberg Eurorate (or, if not available, any other nationally recognized trading screen reporting on-line trading with Eurorates) at 10:00 a.m. (Dallas, Texas time) as the Eurorates for deposits in dollars on that day for a period of one month.
In the event such rate ceases to be published, Eurodollar Rate shall mean a comparable rate of interest reasonably selected by Lender. 
  

 5 

 “Event of Default” means any of the events specified in Section 7.1 hereof,
provided that any requirement in connection with such event for the giving of notice or the lapse of time, or the happening of any further condition, event or act has been satisfied. 
  
 “FHA” means the Federal Housing Administration or any successor thereto. 
  
 “FHLMC” means the Federal Home Loan Mortgage
Corporation, or any successor thereto. 
  
 “Financing
Lease” means (i) any lease of Property if the then present value of the minimum rental commitment thereunder should, in accordance with GAAP, be capitalized on a balance sheet of the lessee, and (ii) any other lease obligations which
are capitalized on a balance sheet of the lessee. 
  
 “First Tier Loans” means GRL Dry Loans. 
  
 “First Tier Rate” means the per annum rate of interest equal to the Eurodollar Rate plus 2.25% per annum, but in no event shall the First Tier Rate exceed the Maximum Rate. 
  
 “First Tier Portion” means, on any day, the Unit
Collateral Value of the First Tier Loans. 
  
 “Fiscal
Quarter” means each period of three calendar months ending March 31, June 30, September 30 and December 31 of each year. 
  
 “Fiscal Year” means each period of twelve calendar months ending December 31 of each year. 
  
 “FNMA” means the Federal National Mortgage
Association, or any successor thereto. 
  
 “Funding
Account” means the non-interest bearing demand checking account established by Borrowers with Lender to be used for (a) the initial deposit of proceeds of Loans; and (b) the funding or purchase of a Mortgage Note by Borrowers; provided
that the Funding Account shall be pledged to Lender and that Borrowers shall not be entitled to withdraw funds from the Funding Account. 
  
 “GAAP” means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting
Standards Board (or any generally recognized successor) and which, in the case of any Borrower and its consolidated subsidiaries, are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and
practices were applied to the financial statements described in Section 4.7. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board (or any such successor) in order for such principle or
practice to continue as a generally accepted accounting principle or practice, all reports and financial statements required hereunder with respect to such Borrowers may be prepared in accordance with such change, but all calculations and
determinations to be made hereunder may be made in accordance with such change only after notice of such change is given to Lender and Lender agrees to such change insofar as it affects the accounting of such Borrowers. 
  

 6 

 “General Partner” means Duxford. 
  
 “GNMA” means the Government National Mortgage
Association, or any successor thereto. 
  
 “Governmental Authority” means any nation or government, any agency, department, state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government. 
  
 “Governmental Requirement” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other direction or requirement
(including, without limitation, any of the foregoing which relate to environmental standards or controls, energy regulations and occupational, safety and health standards or controls) of any arbitrator, court or other Governmental Authority, which
exercises jurisdiction over any Related Person or any of its Property. 
  
 “GRL” means Guaranty Residential Lending, a Nevada corporation. 
  
 “GRL Dry Loans” means Dry Loans for which GRL has issued a Take-out Commitment. 
  
 “Indebtedness” of any Person at a particular date
means the sum (without duplication) at such date of (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services or which is evidenced by a note, bond, debenture, or similar instrument, (b) all
obligations of such Person under any Financing Lease, (c) all obligations of such Person in respect of letters of credit, acceptances, or similar obligations issued or created for the account of such Person, (d) all Guaranty Obligations of such
Person, (e) all liabilities secured by any Lien on any property owned by such Person, whether or not such Person has assumed or otherwise become liable for the payment thereof, and (f) any liability of such Person in respect of unfunded vested
benefits under an ERISA Plan and (g) all liabilities of such Person in respect of indemnities or repurchase obligations made in connection with the sale of Mortgage Loans. 
  
 “Investor” means any Person listed on Exhibit C, as such exhibit may be updated or supplemented from
time to time; provided, however, that Lender shall deliver a list of all Persons approved as Investors by Lender upon each amendment of such exhibit by Lender, and a Investor shall be removed from such list upon the written direction
of Lender. 
  
 “Jumbo Loan” means a
Mortgage Loan which has been underwritten in accordance with the guidelines of an Investor and which would be an Eligible Mortgage Loan except that the original unpaid principal amount of the underlying Mortgage Note is greater than the maximum
amount accepted by the Agencies and equal to or less than $650,000; provided that Mortgage Loans with an unpaid principal amount in excess of $650,000 and less than $1,000,000 shall be included as a “Jumbo Loan” if approved for inclusion
in the Borrowing Base by Lender in writing. 
  
 “Jumbo
Sublimit” means $4,000,000. 
  

 7 

 “Keep-Well Agreement” means the Keep Well Agreement of even date herewith
between Parent and Lender. 
  
 “Law” means
any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license, agreement or other governmental restriction of the United States or any state or political subdivision thereof or of any foreign
country or any department, province or other political subdivision thereof. Any reference to a Law includes any amendment or modification to such Law, and all regulations, rulings, and other Laws promulgated under such Law. 
  
 “Lender” means Guaranty Bank and its successors and
assigns. 
  
 “Lien” means any mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (whether statutory or otherwise), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any Financing Lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction in respect of any of the foregoing). 
  
 “Liquidity” means, with respect to any Person as of any date, the amount of cash and Cash Equivalents of such Person as of such date.. 
  
 “Loan” has the meaning given it in Section 2.1. 
  
 “Loan Balance” means for any day, the principal
balance of the Loans outstanding on such day. 
  
 “Loan
Document” means any, and “Loan Documents” shall mean all, of this Agreement, the Note, the Security Instruments, the Keep-Well Agreement, and any and all other agreements or instruments now or hereafter executed and
delivered by Borrowers or any other Person in connection with, or as security for the payment or performance of any or all of the Obligations, as any of such may be renewed, amended or supplemented from time to time. 
  
 “Market Value” on any day shall be determined by
Lender, in its sole discretion, based upon (a) information then available to Lender regarding quotes to dealers for the purchase of mortgage notes similar to the Mortgage Note that have been delivered to Lender pursuant to this Agreement or (b)
sales prices actually received by Borrowers for mortgage notes sold by Borrowers during the immediately preceding thirty (30) day period similar to the Mortgage Note that have been delivered to Lender pursuant to this Agreement. 
  
 “Material Adverse Effect” means any material adverse
effect on (a) the validity or enforceability of this Agreement, the Note or any other Loan Document, (b) the business, operations, total Property or financial condition of any Related Person, (c) the collateral under any Security Instrument, or (d)
the ability of any Related Person to fulfill its obligations under this Agreement, the Note, or any other Loan Document to which it is a party. 
  

 8 

 “Maximum Rate” means, with respect to each Lender, the maximum nonusurious rate
of interest that such Lender is permitted under applicable Law to contract for, take, charge, or receive with respect to its Loans. 
  
 “MERS” means Mortgage Electronic Registration, Inc., a Delaware corporation, or any successor thereto. 
  
 “MERS Agreement” means those agreements by and among
Borrowers, Lender, MERS and MERSCORP, Inc., as amended, modified, supplemented, extended, restated or replaced from time to time. 
  
 “MERS(R) System” means the system of recording transfers of mortgages electronically maintained by MERS. 
  
 “Monthly Facility Usage” means for each calendar
month, the sum of (i) the average Loan Balance for such month, plus (ii) the average amount of purchased loans outstanding under the Purchase Facility for such month. 
  
 “Mortgage” means a mortgage or deed of trust, on standard forms in form and substance satisfactory
to Lender, securing a Mortgage Note and granting a perfected, first priority lien on residential real property consisting of land and a one-to-four-family dwelling thereon which is completed and ready for occupancy. 
  
 “Mortgage Collateral” means all Mortgage Notes (a)
which are made payable to the order of Borrower or have been endorsed (without restriction or limitation) payable to the order of Borrower, (b) in which Lender has been granted and continues to hold a perfected first priority security interest, (c)
which are in form and substance acceptable to Lender in its reasonable discretion, (d) which are secured by Mortgages, and (e) which conform in all respects with all the requirements for purchase of such Mortgage Note under the Take-Out Commitments
and are valid and enforceable in accordance with their respective terms. 
  
 “Mortgage Loan” means a one-to-four-family mortgage loan which is evidenced by a Mortgage Note and secured by a Mortgage, together with the rights and obligations of a holder thereof and
payments thereon and proceeds therefrom. 
  
 “Mortgage
Note” means the note or other evidence of indebtedness evidencing the indebtedness of an Obligor under a Mortgage Loan. 
  
 “Net Worth” of any Person means, as of any date, the remainder of all Consolidated assets of such Person minus such Person’s
Consolidated liabilities, each as determined by GAAP. 
  
 “Note” means any promissory note delivered by Borrowers to Lender pursuant to Section 2.2 in the form attached hereto as Exhibit A and all renewals, modifications and extensions thereof. 
  
 “Obligations” means all present and future
Indebtedness, obligations, and liabilities of Borrower to Lender, and all renewals and extensions thereof, or any part thereof, arising pursuant to this Agreement or any other Loan Document, and all interest accrued thereon, and 

  

 9 

 
reasonable attorneys’ fees and other costs incurred in the drafting, negotiation, enforcement or collection thereof, regardless of whether such
Indebtedness, obligations, and liabilities are direct, indirect, fixed, contingent, joint, several or joint and several. 
  
 “Obligor” means the Person or Persons obligated to pay the Indebtedness which is the subject of a Mortgage Loan. 
  
 “Operating Account” means the non-interest bearing
demand checking accounts (whether one or more) established by Borrowers with Lender to be used for Borrowers’ operations. 
  
 “Parent” means William Lyon Homes, a Delaware corporation, and owner of all of the outstanding capital stock of Duxford and a
fifty percent (50%) partnership interest in Bayport. 
  
 “PBGC” means the Pension Benefit Guaranty Corporation or any Governmental Authority succeeding to any of its functions. 
  
 “Permitted Warehouse Facilities” means (i) the mortgage warehouse credit facility provided by First Tennessee Bank, N.A. to
Borrowers in an aggregate principal amount not to exceed $20,000,000, and (ii) any other mortgage warehouse credit facility approved in writing by Lender. 
  
 “Person” means any individual, corporation, partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated organization, Governmental Authority, or any other form of entity. 
  
 “Property” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

  
 “Purchase Facility” means the Mortgage
Loan Purchase and Sale Agreement of even date herewith between Duxford and Lender and the Mortgage Loan Purchase and Sale Agreement of even date herewith between Bayport and Lender. 
  
 “Regulation D” means Regulation D issued by the Board of Governors of the Federal Reserve System as
in effect from time to time. 
  
 “Regulation
U” means Regulation U issued by the Board of Governors of the Federal Reserve System as in effect from time to time. 
  
 “Regulation X” means Regulation X issued by the Board of Governors of the Federal Reserve System as in effect from time to time.

  
 “Related Persons” means Borrowers and
each Subsidiary of a Borrower. 
  
 “Reportable
Event” means (1) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or the regulations promulgated thereunder, or (2) any other reportable event described in Section 4043(c) of ERISA or the regulations promulgated
thereunder other than a reportable event not subject to the provision for 30-day notice to the PBGC pursuant to a waiver by the PBGC under Section 4043(a) of ERISA. 
  

 10 

 “Required Mortgage Documents” means as to any Mortgage Loan, the items described
on Schedule A to the Security Agreement. 
  
 “Requirement of Law” as to any Person means the charter and by-laws or other organizational or governing documents of such Person, and any law, statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other determination, direction or requirement (including, without limitation, any of the foregoing which relate to environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any arbitrator, court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

  
 “Second Tier Loans” means all Dry
Loans other than (i) GRL Dry Loans, (ii) Aged Loans and (iii) Jumbo Loans. 
  
 “Second Tier Portion” means, on any day, the Unit Collateral Value of the Second Tier Loans. 
  
 “Second Tier Rate” means the per annum rate of interest equal to the Eurodollar Rate plus 2.35% per annum, but in no event shall
the Second Tier Rate exceed the Maximum Rate. 
  
 “Security Agreement” means the Security Agreement between Borrowers and Lender in the form attached hereto as Exhibit F, as the same may from time to time be further supplemented, amended or restated. 
  
 “Security Instrument” means (a) the Security
Agreement and (b) such other executed documents as are or may be necessary to grant to Lender a perfected first prior and continuing security interest in and to all Mortgage Collateral, and any and all other agreements or instruments now or
hereafter executed and delivered by Borrowers in connection with, or as security for the payment or performance of, all or any of the Obligations, including Borrower’s obligations under the Note and this Agreement, as such agreements may be
amended, modified or supplemented from time to time. 
  
 “Servicing Agreements” means all agreements between the Related Persons and Persons other than a Related Person pursuant to which Borrowers undertake to service Mortgage Loans. 
  
 “Servicing Records” means all contracts and other
documents, books, records and other information (including without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) maintained with respect to the Servicing Rights. 
  
 “Servicing Rights” means all of right, title and
interest of any Related Person in and under the Servicing Agreements, including, without limitation, the rights of Borrowers to income and reimbursement thereunder. 
  

 11 

 “Settlement Account” means (i) the non-interest bearing demand deposit account
established by Borrowers with Lender to be used for the deposit of proceeds from the sale of Mortgage Collateral; and (ii) the payment of the Obligations; provided that (a) the Settlement Account shall be pledged to Lender for the benefit of
Lender, (b) neither Borrower shall be entitled to withdraw funds from the Settlement Account, (c) as long as no Event of Default has occurred and is continuing, to the extent that the deposit of proceeds from the sale of Mortgage Loans exceeds the
Unit Collateral Value of such Mortgage Loans and any payments then due and owing under this Agreement or the Note, Lender shall transfer such excess amount to the Operating Account, and (d) if at any time the aggregate amount of funds in the
Settlement Account is insufficient to pay any and all payments due and owing under this Agreement or the Note (such amount being referred to as the “Deficiency”), Lender shall transfer an amount equal to the Deficiency from the Operating
Account to the Settlement Account. 
  
 “Submission
List” means a list in the form of Schedule B-I or B-II to the form of Borrowing Request. 
  
 “Subsidiary” means, with respect to any Person, any corporation, association, partnership, joint venture, or other business or
corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled by or owned fifty percent (50%) or more by such Person. 
  
 “Take-Out Commitment” means with respect to any Eligible Mortgage Loan, a written master commitment
of an Investor to purchase a Mortgage Loan or a pool of Mortgage Loans under which such Eligible Mortgage Loans will be delivered to such Investor on terms satisfactory to Lender, in its reasonable discretion. 
  
 “Tangible Net Worth” means, with respect to any
Person, as of any date, the Net Worth of such Person minus (a) all Consolidated assets of such Person which would be classified as intangible assets under GAAP, including but not limited to goodwill (whether representing the excess cost over
book value of assets acquired or otherwise), patents, trademarks, trade names, copyrights, franchises, deferred charges, and capitalized servicing rights and (b) all Indebtedness and receivables owing from Parent and other Affiliates of such Person
to such Person. 
  
 “Termination Event”
means (a) the occurrence with respect to any ERISA Plan of a Reportable Event, (2) the withdrawal of either Borrower or any ERISA Affiliate from an ERISA Plan during a plan year in which it was a “substantial employer,” as defined in
Section 4001(a)(2) of ERISA, (c) the distribution to affected parties of a notice of intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a termination under Section 4041 of ERISA, (d) the institution of proceedings to
terminate any ERISA Plan by the PBGC under Section 4042 of ERISA, or (5) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan.

  
 “Third Tier Loans” means all Wet
Loans, Aged Loans and Jumbo Loans. 
  
 “Third Tier
Portion” means, on any day, the Unit Collateral Value of the Third Tier Loans. 
  

 12 

 “Third Tier Rate” means the per annum rate of interest equal to the Eurodollar
Rate plus 2.50% per annum, but in no event shall the Third Tier Rate exceed the Maximum Rate. 
  
 “Total Debt” of any Person means, as of any date, all amounts which would be included as liabilities on a Consolidated balance sheet of such Person as of such date prepared in accordance with
GAAP. 
  
 “Unit Collateral Value” means on
any day with respect to each Eligible Mortgage Loan included in the Borrowing Base, the Applicable Collateral Value Percentage of the least of the following: 
  

(i) the outstanding principal balance of the Mortgage Note constituting such Mortgage Loan; 
  
 (ii) the actual out-of-pocket cost to the applicable
Borrower of such Mortgage Loan minus the amount of principal paid under such Mortgage Loan and delivered to Lender for application to the prepayment of the Loans; 
  
 (iii) the amount at which an Investor has committed to purchase the Mortgage Loan pursuant to a Take-Out
Commitment not to exceed 100% of the original principal balance of the Mortgage Note; or 
  
 (iv) the Market Value of the Mortgage Note constituting such Mortgage Loan. 
  
 “VA” means the Veterans Administration and any successor thereto. 
  
 “Wet Loans” means Eligible Mortgage Loans which are
included in the Borrowing Base, but for which the Required Mortgage Documents have not been delivered to Lender. 
  
 “Wet Warehousing Sublimit” means 40% of the Commitment. 
  
 Other Definitional Provisions. 
  
 (b) Unless otherwise specified therein, all terms defined in this Agreement shall have the above-defined
meanings when used in the Note or any other Loan Document, certificate, report or other document made or delivered pursuant hereto. 
  
 (c) Each term defined in the singular form in Section 1.1 shall mean the plural thereof when the plural form of such term is used in this
Agreement, the Note or any other Loan Document, certificate, report or other document made or delivered pursuant hereto, and each term defined in the plural form in Section 1.1 shall mean the singular thereof when the singular form of such term is
used herein or therein. 
  
 (d) The words
“hereof,” “herein,” “hereunder” and similar terms when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection, schedule and exhibit
references herein are references to sections, subsections, schedules and exhibits to this Agreement unless otherwise specified. The word “or” is not exclusive, and the word “including” (in its various forms) means “including
without limitation.” 
  

 13 

 (e) Unless the context otherwise requires or unless otherwise provided herein the terms
defined in this Agreement which refer to a particular agreement, instrument or document also refer to and include all renewals, extensions, modifications, amendments and restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal, extension, modification, amendment or restatement. 
  
 (f) As used herein, in the Note or in any other Loan Document, certificate, report or other document made or delivered pursuant hereto,
accounting terms relating to any Person and not specifically defined in this Agreement or therein shall have the respective meanings given to them under GAAP. 
  

Section 1.2 Exhibits and Schedules. All Exhibits and Schedules attached to this Agreement are a part hereof for all purposes. 
  
 Section 1.3 Calculations and Determinations. All calculations under
the Loan Documents of interest and of fees shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of three hundred sixty (360) days. Each determination by Lender of amounts to be paid under
Section 2.7 shall, in the absence of manifest error, be conclusive and binding. Unless otherwise expressly provided herein or unless Lender otherwise consents all financial statements and reports furnished to Lender hereunder shall be prepared and
all financial computations and determinations pursuant hereto shall be made in accordance with GAAP. Lender shall deliver to Borrowers an interest billing statement for each month on or before the fifteenth day of the next succeeding month, which
interest billing statement shall set forth the interest accrued on the Loans for such month; provided that any failure or delay in delivering such interest billing or any inaccuracy therein shall not affect the Obligations. 
  
 ARTICLE II 
  
 AMOUNT AND TERMS OF LOANS 
  
 Section 2.1 Commitment and Loans. Subject to the terms and conditions
contained in this Agreement, Lender agrees to make loans (“Loans”) to Borrowers on a revolving credit basis from time to time on any Business Day from the date of this Agreement through the Drawdown Termination Date. The
aggregate amount of all Loans requested in any Borrowing Request must be greater than or equal to $50,000] or the unadvanced portion of the Borrowing Base. After giving effect to the transactions contemplated by the Borrowing Request pursuant to
which a Loan is requested, and at all other times, the aggregate amount of all Loans outstanding shall not exceed the Collateral Value of the Borrowing Base. 
  
 Section 2.2 Promissory Note; Interest on the Note. The obligation of Borrowers to repay the Loans made by Lender, together with interest accruing
in connection therewith, shall be evidenced by a Note payable to the order of Lender. Interest on the Note shall be due and payable as provided herein and therein. The entire Loan Balance and all accrued and unpaid interest thereon shall be finally
due and payable on the Drawdown Termination Date. 
  

 14 

 Section 2.3 Notice and Manner of Obtaining Loans. Borrowers must give written notice, or
telephonic notice promptly confirmed in writing, of each request for Loans. Each such written request or confirmation must be made in writing in the form and substance of the “Borrowing Request” attached hereto as Exhibit B, duly
completed. Each such Borrowing Request must: 
  
 (a) specify the aggregate amount of any new Loans and the date on which such Loan is to be advanced; and 
  
 (b) be received by Lender not later than 2:00 p.m., Dallas, Texas, time, on the day on which such Loan is to be made. 
  
 Each such telephonic request shall be deemed a representation, warranty, acknowledgment and
agreement by Borrowers as to the matters which are required to be set out in such written confirmation. If all conditions precedent to such Loan have been met Lender will on the date requested promptly remit to Borrowers the amount of such Loan in
immediately available dollars, by crediting the Funding Account with immediately available funds as the amount of such Loan. 
  
 Section 2.4 Fees. 
  
 (a) Borrowers shall pay to Lender, a collateral handling fee in the amount of $30 for each Mortgage Loan file. 
  
 (b) For each GRL Loan included in the Borrowing Base that is
not submitted to GRL for purchase, Borrower shall pay to Lender an administrative fee in the amount of Two Hundred Fifty Dollars ($250). In addition, the rate of interest on the part of the First Tier Portion attributable to such GRL Loan (in the
section collectively called the “Recalculated Portion”), shall be recalculated using the Second Tier Margin or the Third Tier Margin, as appropriate (in this section called the “Recalculated Interest Amount”), and Borrower shall
pay to Lender the amount by which the Recalculated Interest Amount exceeds the amount of interest accrued on the Recalculated Portion prior to the date of such recalculation. 
  
 Section 2.5 Mandatory Repayments. If at any time the Loan Balance exceeds the Collateral Value of the Borrowing Base,
Borrowers shall repay the amount of such excess within one (1) Business Day after written notice thereof is given by Lender to either Borrower. 
  
 Section 2.6 Payments to Lender. All payments of interest on the Note, all payments of principal, including any principal payment made with proceeds
of Mortgage Collateral, and fees hereunder shall be made directly to Lender in federal or other immediately available funds before 1:00 pm (Dallas, Texas time) on the respective dates when due via wire transfer to the Settlement Account. Borrowers
shall send notice to Lender before 1:00 p.m. (Dallas, Texas time) on the day any payment of principal or interest is received by Lender which sets forth the Loans against which such payment is to be applied. Any payment (or any payment 

  

 15 

 
received without a notice regarding application of such payment) received by Lender after such time will be deemed to have been made on the next following
Business Day. Should any such payment become due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day, and, in the case of a payment of principal or past due interest,
interest shall accrue and be payable thereon for the period of such extension as provided in the Loan Document under which such payment is due. Each payment under a Loan Document shall be payable at the place provided therein and, if no specific
place of payment is provided, shall be payable at the place of payment of the Note. When Lender collects or receives money on account of the Obligations, Lender shall apply all such money so distributed, as follows: 
  
 (a) first, for the payment of all Obligations which are then
due, and if such money is insufficient to pay all such Obligations, (i) first to any reimbursements due Lender under Section 5.5, (ii) second, to the payment of the Loans then due, and (iii) then to the partial payment of all other Obligations then
due in proportion to the amounts thereof, or as Lender shall otherwise agree; 
  
 (b) then for the prepayment of amounts owing under the Loan Documents if so specified by Borrowers; 
  
 (c) then for the prepayment of principal on the Note, together with accrued and unpaid interest on the principal so prepaid; and

  
 (d) last, for the payment or prepayment of
any other Obligations. 
  
 All payments applied to principal or interest on any
Note shall be applied first to any interest then due and payable, then to principal then due and payable, and last to any prepayment of principal and interest. 
  

Section 2.7 Increased Cost and Reduced Return. 
  
 (a) If, after the date hereof, Lender shall have determined that the adoption of any applicable Law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank, or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding
capital adequacy (whether or not having the force of Law) of any such Governmental Authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on the capital of Lender or any corporation controlling
Lender, due to the obligations of Lender hereunder, to a level below that which Lender or such corporation could have achieved but for such adoption, change, request, or directive (taking into consideration its policies with respect to capital
adequacy), then, within fifteen (15) days after demand by Lender, Borrowers shall pay to Lender such additional amount or amounts as will compensate Lender for such reduction, but only to the extent that Lender has not been compensated therefor by
any increase in the Eurodollar Rate. 
  
 (b)
Lender shall promptly notify Borrowers of any event of which it has knowledge, occurring after the date hereof, which will entitle Lender to compensation 

  

 16 

 
pursuant to this Section. In the event that Lender claims compensation under this Section, Lender shall furnish to Borrowers a statement setting forth the
additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, Lender shall act in good faith and may use any reasonable averaging and attribution methods. 

 
 ARTICLE III 
  
 CONDITIONS PRECEDENT 
  
 The obligation of Lender to make Loans hereunder is subject to fulfillment of
the conditions precedent stated in this Article III. 
  
 Section
3.1 Initial Loan. The obligation of Lender to fund any Loan hereunder shall be subject to, in addition to the conditions precedent specified in Section 3.2, the following terms and conditions: 
  
 (a) Borrowers shall have delivered to Lender the following
(each of the following documents being duly executed and delivered and in form and substance satisfactory to Lender, and, with the exception of the Note, each in a sufficient number of originals that Lender and its counsel may have an executed
original of each document): 
  
 (i) an executed
counterpart of this Agreement and of all instruments and certificates referred to in this Article III not theretofore delivered (except the Borrowing Request which is to be delivered at the time provided in Subsection 3.2(a) hereof); 
  
 (ii) the Note; 
  
 (iii) the Security Agreement dated of even date herewith;

  
 (iv) a certificate of the Secretary or
Assistant Secretary of Duxford Borrower setting forth (i) resolutions of its board of directors authorizing the execution, delivery, and performance of the Loan Documents to which it is a party and identifying the officers authorized to sign such
instruments, (ii) specimen signatures of the officers so authorized, and (iii) articles of incorporation of Duxford certified by the appropriate Secretary of State as of a recent date, and (iv) bylaws of Duxford, certified as being accurate and
complete; 
  
 (v) a certificate of the existence
and good standing for Duxford in its state of incorporation dated no earlier than fifteen days prior to the date hereof; 
  
 (vi) documents similar to those described in items (iv) and (v) above with respect to Bayport; 
  
 (vii) [Intentionally Omitted]; 
  
 (viii) a Borrowing Request and a Borrowing Base Worksheet
dated as of the date of the first Loan, certified by authorized officers of Borrowers; 
  

 17 

 (ix) the Keep Well Agreement executed by Parent; 
  
 (x) documents similar to those described as items (iv) and
(v) above with respect to Parent; 
  
 (xi) a duly
executed original of the MERS Agreement; and 
  
 (xii) such other documents as Lender may reasonably request at any time at or prior to the date of the initial Loan hereunder. 
  
 (b) No Person, other than Lender, holds any mortgage, pledge, lien, security interest or other charge or encumbrance in, against or to any
of the Mortgage Loans. 
  
 (c) Borrowers shall
have paid all fees and reimbursements to be paid to Lender pursuant to any Loan Document, or otherwise due Lender and including reasonable fees and disbursements of Lender’s attorneys. 
  
 Section 3.2 All Loans. The obligation of Lender to fund any Loan
pursuant to this Agreement is subject to the following further conditions precedent: 
  
 (a) Borrowing Request accompanied by a Borrowing Base Worksheet dated as of the date of such Loan, certified by the chief financial
officer of Borrowers, and the Required Mortgage Documents for all Eligible Mortgage Loans other than Wet Loans; 
  
 (b) all other Property in which Borrowers have granted a Lien to Lender shall have been physically delivered to the possession of Lender;

  
 (c) the representations and warranties of
each Related Person contained in this Agreement or any Security Instrument (other than those representations and warranties which are by their terms limited to the date of the agreement in which they are initially made) shall be true and correct in
all material respects on and as of the date of such Loan; 
  
 (d) no Default or Event of Default shall have occurred and be continuing and no change or event which constitutes a Material Adverse Effect shall have occurred as of the date of such Loan; 
  
 (e) the Funding Account, the Settlement Account and the
Operating Account shall be established and in existence; 
  
 (f) the making of such Loan shall not be prohibited by any Governmental Requirement; 
  
 (g) the delivery to Lender of such other documents and opinions of counsel, including such documents as may be necessary or desirable to
perfect or maintain the priority of any Lien granted or intended to be granted hereunder or otherwise and including favorable written opinions of counsel with respect thereto, as Lender may reasonably request; and 
  

 18 

 (h) No Person, other than Lender, shall be listed in the field designated “interim
funder” on the MERS(R) System. 
  
 Delivery to Lender of a Borrowing Request
shall be deemed to constitute a representation and warranty by Borrowers on the date thereof and on the date on which the Loan is made, if any, set forth therein as to the facts specified in Subsections (c) and (d) of this Section. 
  
 ARTICLE IV 
  
 BORROWER REPRESENTATIONS AND WARRANTIES 
  
 Borrowers represent and warrant as follows: 
  
 Section 4.1 Organization and Good Standing. Each Related Person (a)
is a corporation or limited partnership duly incorporated or formed, and existing in good standing under the Laws of the jurisdiction of its incorporation or formation, (b) is duly qualified as a foreign corporation or limited partnership and in
good standing in all jurisdictions in which its failure to be so qualified could have a Material Adverse Effect, (c) has the corporate or partnership power and authority to own its properties and assets and to transact the business in which it is
engaged and is or will be qualified in those states wherein it proposes to transact business in the future and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate,
have a Material Adverse Effect. 
  
 Section 4.2 Authorization
and Power. Each Related Person has the corporate or partnership power and requisite authority to execute, deliver and perform the Loan Documents to which it is a party; each Related Person is duly authorized to and has taken all corporate or
partnership action necessary to authorize it to, execute, deliver and perform the Loan Documents to which it is a party and is and will continue to be duly authorized to perform such Loan Documents. 
  
 Section 4.3 No Conflicts or Consents. Neither the execution and
delivery by any Related Person of the Loan Documents to which it is a party, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or with the terms and provisions
thereof, will (a) materially contravene or conflict with any Requirement of Law to which any Related Person is subject, or any indenture, mortgage, deed of trust, or other agreement or instrument to which any Related Person is a party or by which
any Related Person may be bound, or to which the Property of any Related Person may be subject, or (b) result in the creation or imposition of any Lien, other than the Lien of the Security Agreement, on the Property of any Related Person. All
actions, approvals, consents, waivers, exemptions, variances, franchises, orders, permits, authorizations, rights and licenses required to be taken, given or obtained, as the case may be, from any Governmental Authority that are necessary in
connection with the transactions contemplated by the Loan Documents have been obtained. 
  
 Section 4.4 Enforceable Obligations. This Agreement, the Note, and the other Loan Documents to which any Related Person is a party are the legal, valid and binding obligations of such Related Person,
enforceable in accordance with their respective terms, except as limited by Debtor Laws. 
  

 19 

 Section 4.5 Priority of Liens. Upon delivery to Lender of each Borrowing Request, Lender shall
have valid, enforceable, perfected, first priority Liens and security interests in each Mortgage Note identified therein. 
  
 Section 4.6 No Liens. Borrowers have good and indefeasible title to the Mortgage Collateral free and clear of all Liens and other adverse claims of
any nature, except for ad valorem taxes and assessments not yet due and payable and Liens in the Mortgage Collateral in favor of Lender. 
  
 Section 4.7 Financial Condition of Borrowers. Each Borrower has delivered to Lender copies of its annual audited balance sheet as of December 31,
2002, and the related statements of income, stockholders’ equity and cash flows for the period ended such date; such financial statements fairly present the financial condition of such Borrower as of such date and the results of operations of
Borrowers for the period ended on such date and have been prepared in accordance with GAAP, subject to normal year-end adjustments; as of the date thereof, there were no obligations, liabilities or Indebtedness (including material contingent and
indirect liabilities and obligations or unusual forward or long-term commitments) of such Borrower which are not reflected in such financial statements and no change which constitutes a Material Adverse Effect has occurred in the financial condition
or business of Borrowers since December 31, 2002. Each Borrower has also delivered to Lender its unaudited quarterly balance sheet for the period ending March 31, 2003 and management reports for the period ending on March 31, 2003; such reports
fairly and accurately present Borrowers’ commitment position, pipeline position, servicing and production as of the end of such months and for the fiscal year to date for the periods ending on such dates. 
  
 Section 4.8 Full Disclosure. There is no material fact that Borrowers
have not disclosed to Lender which could adversely affect the properties, business, prospects or condition (financial or otherwise) of the Related Persons, or could adversely affect the Mortgage Collateral or the Servicing Rights. To the knowledge
of Borrowers, none of (i) the financial statements referred to in Section 4.7 hereof, (ii) any Borrowing Request or officer’s certificate, or (iii) any statement delivered by any Related Person to Lender in connection with this Agreement,
contains any untrue statement of material fact. 
  
 Section 4.9
No Default. No Related Person is in default under any loan agreement, mortgage, security agreement or other material agreement or obligation to which it is a party or by which any of its Property is bound. 
  
 Section 4.10 No Litigation. There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings pending, or to the knowledge of any Borrower threatened, against any Related Person the adverse determination of which could constitute a Material Adverse Effect. 
  
 Section 4.11 Taxes. All tax returns required to be filed by each
Related Person in any jurisdiction have been filed and all taxes, assessments, fees and other governmental 

  

 20 

 
charges upon each Related Person or upon any of its properties, income or franchises have been paid prior to the time that such taxes could give rise to a
Lien thereon, unless protested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been established on the books of such Related Person. No Related Person has any knowledge of any proposed tax
assessment against any Related Person. 
  
 Section 4.12
Principal Office, etc. The principal office, chief executive office and principal place of business of each Related Person is at the address set forth in Section 9.1. 
  
 Section 4.13 Compliance with ERISA. No Related Person currently maintains, contributes to, is required to contribute
to or has any liability, whether absolute or contingent, with respect to an ERISA Plan. With respect to all other employee benefit plans maintained or contributed to by each Related Person, each Related Person is in material compliance with ERISA.

  
 Section 4.14 Subsidiaries. No Related Person presently
has any Subsidiary or owns any stock in any other corporation or association except those listed in Exhibit D. As of the date hereof, each Related Person owns, directly or indirectly, the equity interest in each of its Subsidiaries which is
indicated in such exhibit. 
  
 Section 4.15 Indebtedness.
No Related Person has any indebtedness outstanding other than the Indebtedness permitted by Section 6.2. 
  
 Section 4.16 Permits, Patents, Trademarks, etc. 
  
 (a) Each Related Person has all permits and licenses necessary for the operation of its business. 
  
 (b) Each Related Person owns or possesses (or is licensed or
otherwise has the necessary right to use) all patents, trademarks, service marks, trade names and copyrights, technology, know-how and processes, and all rights with respect to the foregoing, which are necessary for the operation of its business,
without any known material conflict with the rights of others. The consummation of the transactions contemplated hereby will not alter or impair in any material respect any of such rights of each Related Person. 
  
 Section 4.17 Status Under Certain Federal Statutes. No Related Person
is (a) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company,” as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended, (b) a “public utility,” as such term is defined in the Federal Power Act, as amended, (c) an “investment company,” or a company
“controlled” by an “investment company,” within the meaning of the Investment Company Act of 1949, as amended or (d) a “rail carrier,” or a “person controlled by or affiliated with a rail carrier,” within the
meaning of Title 49, U.S.C., and no Related Person is a “carrier” to which 49 U.S.C. §11301(b)(1) is applicable. 
  
 Section 4.18 Securities Act. No Related Person has issued any unregistered securities in violation of the registration requirements of the
Securities Act of 1933, as amended, or of any other Requirement of Law, and is not violating any rule, regulation, or requirement 

  

 21 

 
under the Securities Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended. No Related Person is required to qualify an indenture
under the Trust Indenture Act of 1939, as amended, in connection with its execution and delivery of the Note. 
  
 Section 4.19 No Approvals Required. Other than consents and approvals previously obtained and actions previously taken, neither the execution and
delivery of this Agreement, the Note and the other Loan Documents to which any Related Person is a party, nor the consummation of any of the transactions contemplated hereby or thereby requires the consent or approval of, the giving of notice to, or
the registration, recording or filing by any Related Person of any document with, or the taking of any other action in respect of, any Governmental Authority which has jurisdiction over each Related Person or any of its Property, except for (a) the
filing of the Uniform Commercial Code financing statements and other similar filings to perfect the interest of Lender in the Collateral, and (b) such other consents, approvals, notices, registrations, filings or action as may be required in the
ordinary course of business of the Related Persons in connection with the performance of the obligations of the Related Persons hereunder. 
  
 Section 4.20 Survival of Representations. All representations and warranties by Borrowers herein shall survive delivery of the Note and the funding
of the Loans, and any investigation at any time made by or on behalf of Lender shall not diminish the right of Lender to rely thereon. 
  
 Section 4.21 Individual Mortgage Loans. Borrowers hereby represent with respect to each Mortgage Note and Mortgage Loan that is part of the
Collateral: 
  
 (a) Borrowers have good and
marketable title to each Mortgage Note and Mortgage, was the sole owner thereof and had full right to pledge the Mortgage Loan to Lender free and clear of any other Lien; 
  
 (b) To the knowledge of Borrowers, there is no default, breach, violation or event of acceleration existing
under any Mortgage or the related Mortgage Note and there is no event which, with the passage of time or with notice and/or the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration and no
such default, breach, violation or event of acceleration has been waived; 
  
 (c) To the knowledge of Borrowers, the physical condition of the Property subject to the Mortgage has not deteriorated since the date of origination of the related secured Mortgage Loan (normal wear and tear excepted)
and there is no proceeding pending for the total or partial condemnation of any Mortgaged Property; 
  
 (d) Each Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate
for the realization against the related Property subject to the Mortgage 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; 
  
 (e) Each Mortgage Loan
is a first lien one-to-four-family loan, and has been underwritten by the originator thereof in accordance with such originator’s then current underwriting guidelines; 
  

 22 

 (f) Each Mortgage Note is payable in monthly installments of principal and interest, with
interest payable in arrears, and requires a monthly payment which is sufficient to amortize the original principal balance over the original term and to pay interest at the related interest rate; and no Mortgage Note provides for any extension of
the original term; 
  
 (g) No Mortgage Loan is a
loan in respect of either the purchase of a manufactured home or mobile home or the purchase of the land on which a manufactured home or mobile home will be placed; 
  
 (h) The origination practices used by the originator of the Mortgage Loans and the collection practices used
by the Borrowers with respect to each Mortgage Loan have been in all material respects legal, proper, prudent and customary in the loan origination and servicing business; 
  
 (i) Each Mortgage Loan was originated in compliance with all applicable Laws and no fraud or
misrepresentation was committed by any Person in connection therewith; 
  
 (j) Each Mortgage Loan matures within thirty (30) years after the date of origination thereof. 
  
 (k) For each Mortgage Loan, Borrowers have obtained closing protection letters from the underwriter for the respective title insurance
policy. 
  
 Section 4.22 Environmental Matters. In the
ordinary course of each Related Person’s business, the officers and managers of each Related Person consider the effect of Environmental Laws on the business of such Related Person, in the course of which they identify and evaluate potential
risks and liabilities accruing to such Related Person due to Environmental Laws. On the basis of this consideration, each Related Person has reasonably concluded that neither violation of nor compliance with Environmental Laws can reasonably be
expected to have a Material Adverse Effect on the business or financial condition of such Related Person or on the ability of Borrowers to perform the Obligations. No Related Person has received any notice to the effect that its operations are not
in material compliance with any of the requirements of applicable Environmental Laws or are the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or
substance into the environment, which non-compliance or remedial action could reasonably be expected to have a Material Adverse Effect on the business or financial condition of the Related Persons, taken as a whole, or on the ability of Borrowers to
perform the Obligations. 
  

 23 

 ARTICLE V 
  

AFFIRMATIVE COVENANTS 
  
 Each Related Person shall at all times comply with the covenants contained in this Article V, from the date hereof and for so long as any part of the
Obligations or the Commitment is outstanding unless Lender has agreed otherwise. 
  
 Section 5.1 Financial Statements and Reports. 
  
 (a) Duxford shall furnish to Lender the following, all in form and detail reasonably satisfactory to Lender. 
  
 (i) Promptly after becoming available, and in any event
within ninety (90) days after the close of each Fiscal Year of Duxford, Duxford’s Consolidated balance sheet as of the end of such Fiscal Year, and the related Consolidated statements of income, stockholders’ equity and cash flows of
Duxford for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the preceding Fiscal Year, such financial statements shall be unqualified and shall be accompanied by the related report of independent
certified public accountants acceptable to Lender which report shall be to the effect that such statements have been prepared in accordance with GAAP applied on a basis consistent with prior periods except for such changes in such principles with
which the independent public accountants shall have concurred; 
  
 (ii) Promptly after becoming available, and in any event within forty-five (45) days after the end of each calendar month, including the twelfth calendar month in each Fiscal Year, a Consolidated balance sheet of
Duxford as of the end of such month and the related Consolidated statements of income, stockholders’ equity and cash flows of Duxford for such month and the period from the first day of the then current Fiscal Year through the end of such
month, certified by the chief financial officer or other executive officer of Duxford to have been prepared in accordance with GAAP applied on a basis consistent with prior periods; 
  
 (iii) Promptly and in any event within forty-five (45) days after the end of each calendar month in each
Fiscal Year of Duxford (except the last), and within fifteen (15) days after the completion of each year-end audit by Duxford independent public accountants, a completed Officer’s Certificate in the form of Exhibit E hereto, executed by the
president or chief financial officer of Duxford; 
  
 (iv) Promptly and in any event within forty-five (45) days after the end of each calendar month, a management report in form acceptable to Lender including, without limitation detail on Borrower’s pipeline position, commitment
position, repurchase requests by investors and production statistics; 
  
 (v) With each Borrowing Request, a Borrowing Base Worksheet; 
  
 (vi) Promptly upon receipt thereof, a copy of each other report 

  

 24 

 
submitted to Borrower by independent accountants in connection with any annual, interim or special audit of the books of Borrower; and 
  
 (vii) such other information concerning the business,
properties or financial condition of any Related Person as Lender may reasonably request. 
  
 (b) Bayport shall furnish to Lender the following, all in form and detail reasonably satisfactory to Lender: 
  
 (i) Promptly after becoming available, and in any event
within ninety (90) days after the close of each Fiscal Year of Bayport, Bayport’s Consolidated balance sheet as of the end of such Fiscal Year, and the related Consolidated statements of income, partnership equity and cash flows of Bayport for
such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the preceding Fiscal Year, such financial statements shall be unqualified and shall be accompanied by the related report of independent certified public
accountants acceptable to Lender which report shall be to the effect that such statements have been prepared in accordance with GAAP applied on a basis consistent with prior periods except for such changes in such principles with which the
independent public accountants shall have concurred; 
  
 (ii) Promptly after becoming available, and in any event within forty-five (45) days after the end of each calendar month, including the twelfth calendar month in each Fiscal Year, a Consolidated balance sheet of Bayport as of the end of
such month and the related Consolidated statements of income, partnership equity and cash flows of Bayport for such month and the period from the first day of the then current Fiscal Year through the end of such month, certified by the chief
financial officer or other executive officer of the general partner of Bayport to have been prepared in accordance with GAAP applied on a basis consistent with prior periods; 
  
 (iii) Promptly and in any event within forty-five (45) days after the end of each calendar month in each
Fiscal Year of Bayport (except the last), and within fifteen (15) days after the completion of each year-end audit by Bayport’s independent public accountants, a completed Officer’s Certificate in the form of Exhibit E hereto, executed by
the president or chief financial officer of the general partners of Bayport; 
  
 (iv) Promptly and in any event within forty-five (45) days after the end of each calendar month, a management report in form acceptable to Lender including, without limitation detail on Bayport’s pipeline
position, commitment position, repurchase requests by investors and production statistics; 
  
 (v) With each Borrowing Request, a Borrowing Base Worksheet; 
  
 (vi) Promptly upon receipt thereof, a copy of each other report submitted to Bayport by independent
accountants in connection with any annual, interim or special audit of the books of Bayport; and 
  

 25 

 (vii) such other information concerning the business, properties or financial condition
of any Related Person as Lender may reasonably request. 
  
 Section 5.2 Taxes and Other Liens. Each Related Person shall pay and discharge promptly all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon any of its Property as well as all claims of
any kind (including claims for labor, materials, supplies and rent) which, if unpaid, might become a Lien upon any or all of its Property; provided, however, each Related Person shall not be required to pay any such tax, assessment, charge, levy or
claim if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings diligently conducted by or on behalf of such Related Person and if such Related Person shall have set up reserves therefor
adequate under GAAP. 
  
 Section 5.3 Maintenance. Each
Related Person shall (a) maintain its corporate existence, rights and franchises; (b) observe and comply in all material respects with all Governmental Requirements, and (c) maintain its Properties (and any Properties leased by or consigned to it or
held under title retention or conditional sales contracts) in good and workable condition at all times and make all repairs, replacements, additions, betterments and improvements to its Properties as are needed and proper so that the business
carried on in connection therewith may be conducted properly and efficiently at all times. Borrowers shall maintain good standing as an approved seller and servicer for FNMA and FHLMC and as an approved lender with FHA, VA and HUD. 
  
 Section 5.4 Further Assurances. Borrowers shall, within three (3)
Business Days after the request of Lender, cure any defects in the execution and delivery of the Note, this Agreement or any other Loan Document and each Related Person shall, at its expense, promptly execute and deliver to Lender upon request all
such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of each Related Person in this Agreement and in the other Loan Documents or to further evidence and more fully describe
the collateral intended as security for the Note, or to correct any omissions in this Agreement or the other Loan Documents, or more fully to state the security for the obligations set out herein or in any of the other Loan Documents, or to make any
recordings, to file any notices, or obtain any consents. 
  
 Section 5.5 Reimbursement of Expenses. Borrowers shall pay (a) all reasonable legal fees (including, without limitation, allocated costs for in-house legal service) incurred by Lender in connection with the preparation, negotiation,
syndication, execution and delivery of this Agreement, the Note and the other Loan Documents and any amendments, consents or waivers executed in connection therewith, (b) all fees, charges or taxes for the recording or filing of the Security
Instruments, (c) all reasonable out-of-pocket expenses of Lender in connection with the administration of this Agreement, the Note and the other Loan Documents, including courier expenses incurred in connection with the Mortgage Collateral, (d) all
amounts expended, advanced or incurred by Lender to satisfy any obligation of Borrowers under this Agreement or any of the other Loan Documents or to collect the Note, or to protect, preserve, exercise or enforce the rights of Lender under this
Agreement or any of the other Loan Documents or to collect the Note, or to protect, preserve, exercise or enforce the rights of Lender or any Lender under this Agreement or any of the other Loan Documents, (e) all reasonable out- 

  

 26 

 
of-pocket costs and expenses (including fees and disbursements of attorneys and other experts employed or retained by such Person) incurred in connection
with, arising out of, or in any way related to (i) consulting during a Default with respect to (A) the protection, preservation, exercise or enforcement of any of its rights in, under or related to the Collateral or the Loan Documents or (B) the
performance of any of its obligations under or related to the Loan Documents, or (ii) protecting, preserving, exercising or enforcing during a Default any of its rights in, under or related to the Collateral or the Loan Documents, each of (a)
through (e) shall include all underwriting expenses, collateral liquidation costs, court costs, attorneys’ fees (including, without limitation, for trial, appeal or other proceedings), fees of auditors and accountants, and investigation
expenses reasonably incurred by Lender in connection with any such matters, together with interest at the post-maturity rate specified in the Note on each item specified in clause (a) through (e) from thirty (30) days after the date of written
demand or request for reimbursement until the date of reimbursement. 
  
 Section 5.6 Insurance. Borrowers shall maintain with financially sound and reputable insurers, insurance with respect to their Properties and business against such liabilities, casualties, risks and contingencies and in such types
and amounts as is customary in the case of Persons engaged in the same or similar businesses and similarly situated, including, without limitation, a fidelity bond or bonds with financially sound and reputable insurers with such coverage and in such
amounts as is customary in the case of Persons engaged in the same or similar businesses and similarly situated. The improvements on the land covered by each Mortgage shall be kept continuously insured at all times by responsible insurance companies
against fire and extended coverage hazards under policies, binders, letters, or certificates of insurance, with a standard mortgagee clause in favor of the applicable Borrowers and its assigns. Each such policy must be in an amount equal to the
lesser of the maximum insurable value of the improvements or the original principal amount of the Mortgage Note, without reduction by reason of any co-insurance, reduced rate contribution, or similar clause of the policies or binders. Upon request
of Lender, each Borrower shall furnish or cause to be furnished to Lender from time to time a summary of the insurance coverage of such Borrower in form and substance satisfactory to Lender and if requested shall furnish Lender copies of the
applicable policies. 
  
 Section 5.7 Accounts and Records;
Servicing Records. Each Related Person shall keep books of record and account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and activities, in accordance with GAAP. Each Related
Person shall maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate all records pertaining to the performance of such Related Person’s obligations under the Servicing Agreements in
the event of the destruction of the originals of such records) and keep and maintain all documents, books, records, computer tapes and other information reasonably necessary or advisable for the performance by each Related Person of its obligations
under the Servicing Agreements. 
  
 Section 5.8 Right of
Inspection. Each Related Person shall permit authorized representatives of Lender to discuss the business, operations, assets and financial condition of such Related Person with their officers and employees, to examine their Servicing Records
and books of records and account and make copies or extracts thereof and to visit and inspect any of the Properties of each Related Person, all at such reasonable times and as often as Lender may request. Each Related Person will provide its
accountants with a copy of this Agreement 

  

 27 

 
promptly after the execution hereof and will instruct its accountants to answer candidly any and all questions that the officers of Lender or any authorized
representatives of Lender may address to them in reference to the financial condition or affairs of any Related Person as those conditions or affairs relate to this Agreement. Each Related Person may have its representatives in attendance at any
meetings between the officers or other representatives of Lender and such Related Person’s accountants held in accordance with this authorization. 
  
 Section 5.9 Notice of Certain Events. Borrowers shall promptly notify Lender upon (a) the receipt of any notice from, or the taking of any other
action by, the holder of any promissory note, debenture or other evidence of Indebtedness of any Related Person with respect to a claimed default, together with a detailed statement by a responsible officer of the respective Borrower specifying the
notice given or other action taken by such holder and the nature of the claimed default and what action such Borrower is taking or proposes to take with respect thereto; (b) the commencement of, or any determination in, any legal, judicial or
regulatory proceedings between any Related Person and any Governmental Authority or any other Person which, if adversely determined, could have a Material Adverse Effect; (c) any change in senior management of either Borrower; (d) any material
adverse change in the business, operations, prospects or financial condition of any Related Person, including, without limitation, the insolvency of any Related Person, (e) any event or condition which, if adversely determined, could have a Material
Adverse Effect or (f) the occurrence of any Termination Event. 
  
 Section 5.10 Performance of Certain Obligations and Information Regarding Investors. Borrowers shall perform and observe in all material respects each of the provisions of each Take-Out Commitment and each of the Servicing Agreements
on its part to be performed or observed and will cause all things to be done which are necessary to have each item of Mortgage Collateral covered by a Take-Out Commitment comply with the requirements of such Take-Out Commitment. Upon request by
Lender, Borrowers will deliver to Lender financial information concerning any Person Lender is reviewing to determine whether to approve such Person as an Investor; all such financial information must be delivered to Lender prior to any request by
Borrowers for Mortgage Collateral to be delivered to such Person. 
  
 Section 5.11 Use of Proceeds; Margin Stock. The proceeds of all Loans shall be used by Borrowers solely for the origination and purchase of Eligible Mortgage Loans pending sale to an Investor. None of such proceeds shall be used for
the purpose of purchasing or carrying any “margin stock” as defined in Regulation U, or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which
might constitute this transaction a “purpose credit” within the meaning of such Regulation U. Neither Borrowers nor any Person acting on behalf of Borrower shall take any action in violation of Regulation U or Regulation X or shall violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereafter be in effect. 
  

Section 5.12 Notice of Default. Borrowers shall furnish to Lender immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of existence thereof and the action which Borrowers are taking or proposes to take with respect thereto. 
  

 28 

 Section 5.13 Compliance with Loan Documents. Each Related Person shall promptly comply with any
and all covenants and provisions of this Agreement the Note and the other Loan Documents to be complied with by such Related Person. 
  
 Section 5.14 Operations and Properties. Each Related Person shall comply with all rules, regulations and guidelines applicable to it. Each Related
Party shall act prudently and in accordance with customary industry standards in managing and operating its Property. 
  
 Section 5.15 Environmental Matters. 
  
 (a) Each Related Person will comply in all material respects with all Environmental Laws now or hereafter applicable to such Related
Person and shall obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and will maintain such authorizations in full
force and effect. 
  
 (b) Each Borrower will
promptly furnish to Lender all written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or other proceedings received by Borrowers, or of which it has notice, pending or threatened against the respective
Borrower, by any Governmental Authority with respect to any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations in connection with its ownership or use of its properties or the operation of
its business. 
  
 ARTICLE VI 
  
 NEGATIVE COVENANTS 
  
 Each Related Person shall at all times comply with the covenants contained in
this Article VI, from the date hereof and for so long as any part of the Obligations or the Commitment is outstanding unless Lender has agreed otherwise: 
  
 Section 6.1 No Merger; Limitation on Issuance of Securities. Neither Parent nor any Related Person shall merge or consolidate with or into any
Person; provided that Borrower may merge or consolidated with any wholly owned subsidiary of such Borrower if such Borrower is the surviving entity, if prior to and after giving effect thereto, no Default exists or would exist hereunder. No Related
Person shall acquire by purchase, or otherwise, all or substantially all of the assets or capital stock of any Person. Borrowers will not issue any securities other than shares of its common stock and any options or warrants giving the holders
thereof only the right to acquire such shares. No Subsidiary of either Borrower will issue any additional shares of its capital stock or other securities or any options, warrants or other rights to acquire such additional shares or other securities
except to the respective Borrower and only to the extent not otherwise forbidden under the terms hereof. No Subsidiary of either Borrower which is a partnership will allow any diminution of the respective Borrower’s interest (direct or
indirect) therein. 
  
 Section 6.2 Limitation on
Indebtedness. No Related Person shall incur, create, contract, assume, have outstanding, guarantee or otherwise be or become, directly or indirectly, liable in respect of any Indebtedness or Guaranty Obligations except: 
  

 29 

 (a) the Obligations; 
  
 (b) trade debt, equipment leases, equipment loans and liens for taxes and assessments not yet due and
payable owed in the ordinary course of business; and 
  
 (c) Indebtedness arising under Permitted Warehouse Facilities. 
  
 Section 6.3 Fiscal Year, Method of Accounting. Neither Parent nor any Related Person shall change its Fiscal Year or make any material change in its method of accounting. 
  
 Section 6.4 Business. No Related Person shall, directly or indirectly, engage in any business which differs
materially from that currently engaged in by Borrowers. 
  
 Section 6.5 Liquidations, Consolidations and Dispositions of Substantial Assets. No Related Person shall dissolve or liquidate or sell, transfer, lease or otherwise dispose of any material portion of their property or assets or
business; provided, however, nothing in this Section 6.5 shall be construed to prohibit any Related Person from selling rights to service mortgage loans and pools of mortgage loans or Mortgage Note in the ordinary course of their business.

  
 Section 6.6 Loans, Advances, and Investments. No
Related Person shall make any loan (other than Mortgage Loans), advance, or capital contribution to, or investment in (including any investment in any Subsidiary, joint venture or partnership), or purchase or otherwise acquire any of the capital
stock, securities, or evidences of indebtedness of, any Person (collectively, “Investment”), or otherwise acquire any interest in, or control of, another Person, except for the following: 
  
 (a) Cash Equivalents; 
  
 (b) Any acquisition of securities or evidences of
indebtedness of others when acquired by a Related Person in settlement of accounts receivable or other debts arising in the ordinary course of its business, so long as the aggregate amount of any such securities or evidences of indebtedness is not
material to the business or condition (financial or otherwise) of such Related Person; 
  
 (c) Mortgage Notes acquired by Borrowers in the ordinary course of their business; and 
  
 (d) Other Investments in an aggregate amount not to exceed
$100,000. 
  
 Section 6.7 Use of Proceeds. Borrowers shall
not permit the proceeds of the Loans to be used for any purpose other than those permitted by Section 5.11 hereof. Borrowers shall not, directly or indirectly, use any of the proceeds of the Loans for the purpose, whether immediate, incidental or
ultimate, of buying any “margin stock” or of maintaining, reducing or retiring any Indebtedness originally incurred to purchase a stock that is currently any “margin 

  

 30 

 
stock,” or for any other purpose which might constitute this transaction a “purpose credit,” in each case within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System (12 C.F.R. 207, as amended), or Regulation U, or otherwise take or permit to be taken any action which would involve a violation of such Regulation G or Regulation U or of Regulation T (12
C.F.R. 220, as amended) or Regulation X (12 C.F.R. 224, as amended) or any other regulation of such board. 
  
 Section 6.8 Actions with Respect to Mortgage Collateral. Borrowers shall not: 
  
 (a) Compromise, extend, release, or adjust payments on any Mortgage Collateral, accept a conveyance of
mortgaged property in full or partial satisfaction of any Mortgage Collateral, or release any Mortgage securing or underlying any Mortgage Collateral; 
  
 (b) Agree to the amendment or termination of any Take-Out Commitment in which Lender has a security interest or to substitution of a
Take-Out Commitment for a Take-Out Commitment in which Lender has a security interest hereunder, if such amendment, termination or substitution may reasonably be expected (as determined by Lender in its sole discretion) to have a Material Adverse
Effect; 
  
 (c) Transfer, sell, assign, or
deliver any Mortgage Collateral pledged to Lender to any Person other than Lender, except pursuant to a Take-Out Commitment; or 
  
 (d) Grant, create, incur, permit or suffer to exist any Lien upon any Mortgage Collateral except for Liens granted to Lender to secure the
Note and Obligations and such non-consensual Liens as may be deemed to arise as a matter of law pursuant to any Take-Out Commitment. 
  
 Section 6.9 Transactions with Affiliates. Borrowers shall not enter into any transactions including, without limitation, any purchase, sale, lease
or exchange of property or the rendering of any service, with any Affiliate unless such transactions are otherwise permitted under this Agreement, are in the ordinary course of each Borrower’s respective business and are upon fair and
reasonable terms no less favorable to such Borrower than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate. 
  
 Section 6.10 Liens. No Related Person shall grant, create, incur, assume, permit or suffer to exist any Lien, upon any of its Property, including
without limitation any and all of Borrowers’ Mortgage Note, and Servicing Rights and the proceeds from any thereof, other than (a) Liens which secure payment of the Obligations, (b) Liens on any Borrower’s Mortgage Notes and Servicing
Rights which secure Permitted Warehouse Facilities and are not part of the Collateral, (c) to the extent not otherwise prohibited hereunder, Liens which secure payment of the Indebtedness described in Section 6.2(b) or Section 6.2(c) on Property
other than Collateral. 
  
 Section 6.11 ERISA Plans. No
Related Person shall adopt or agree to maintain or contribute to any ERISA Plan. Borrowers shall promptly notify Lender in writing in the event an ERISA Affiliate adopts an ERISA Plan. 
  
 Section 6.12 Change of Principal Office. No Related Person shall move its principal office, executive office or
principal place of business from the address set forth in Section 9.1 without prior written notice to Lender. 
  

 31 

 Section 6.13 Minimum Tangible Net Worth. As of the end of each calender month, the aggregate
Tangible Net Worth of Borrowers shall not be less than $2,000,000. 
  
 Section 6.14 Total Debt to Tangible Net Worth Ratio. The ratio of the aggregate Total Debt of Borrowers to the aggregate Tangible Net Worth of Borrowers shall never exceed 12.0 to 1.0. 
  
 Section 6.15 Profitability. As of the end of each Fiscal Quarter, each
Borrower’s Consolidated net income for the two consecutive Fiscal Quarters then ended shall be a positive number equal to or greater than $1. 
  
 Section 6.16 Management Fees. No Related Person shall pay management fees to any of its Affiliates. 
  
 Section 6.17 Minimum Liquidity. The aggregate Liquidity of Borrowers
shall never be less than $1,500,000. 
  
 ARTICLE VII

  
 EVENTS OF DEFAULT 
  
 Section 7.1 Nature of Event. An Event of Default shall exist if any
one or more of the following occurs: 
  
 (a)
Borrowers fail to make any payment of principal of or interest on the Note, or payment of any fee, expense or other amount due hereunder, under the Note, or under any other Loan Document, on or before the date such payment is due; 
  
 (b) Default is made in the due observance or performance by
any Related Person of any covenant set forth in Article V of this Agreement (other than Section 5.9) and such Default continues for a period of fifteen (15) days after Lender gives Borrowers notice thereof; 
  
 (c) Default is made in the due observance or performance by
any Related Person of any of the covenants or agreements contained in this Agreement other than those described in subsections (a) or (b) immediately above; 
  
 (d) Any Related Person or Parent defaults in the due observance or performance or any of the covenants or agreements contained in any
other Loan Document to which it is a party, and (unless such default otherwise constitutes a Default pursuant to other provisions of this Section 7.1) such default continues unremedied beyond the expiration of any applicable grace period which may
be expressly allowed under such other Loan Document; 
  
 (e) Any material statement, warranty or representation by or on behalf of any 

  

 32 

 
Related Person or Parent contained in this Agreement, the Note or any other Loan Document to which it is a party, or in any Borrowing Request, officer’s
certificate or other writing furnished in connection with this Agreement, proves to have been incorrect or misleading in any material respect as of the date made or deemed made; 
  
 (f) Any Related Person or Parent: 
  
 (i) suffers the entry against it of a judgment, decree or order for relief by a court of competent
jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvency or other similar law of any jurisdiction now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended, or has any such
proceeding commenced against it which remains undismissed for a period of sixty (60) days; or 
  
 (ii) commences a voluntary case under any applicable bankruptcy, insolvency or similar law now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended; or applies for or consents to the entry of an order for relief in an involuntary case under any such law; or makes a general assignment for the benefit of creditors; or fails generally to pay
(or admits in writing its inability to pay) its debts as such debts become due; or takes corporate or other action to authorize any of the foregoing; or 
  
 (iii) suffers the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of all or a substantial part of its assets or of any part of the Mortgage Collateral in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within sixty (60)
days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or 
  
 (iv) suffers the entry against it of a final judgment for the payment of money in excess of $500,000 (not covered by insurance
satisfactory to Lender in its discretion), unless the same is discharged within thirty (30) days after the date of entry thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending
such appeal is obtained; or 
  
 (v) suffers a
writ or warrant of attachment or any similar process to be issued by any court against all or any substantial part of its assets or any part of the Mortgage Collateral; 
  
 (g) Any Related Person fails to make when due or within any applicable grace period any payment on any
Indebtedness under any Permitted Warehouse Facility or any other Indebtedness (except the Obligations) with an unpaid principal balance of over $250,000; or any event or condition occurs under any provision contained in any agreement under which
such obligation is governed, evidenced or secured (or any other material breach or default under such obligation or agreement occurs) if the effect thereof is to cause or permit the holder or trustee of such obligation to cause such obligation to

  

 33 

 
become due prior to its stated maturity; or any such obligation becomes due (other than by regularly scheduled payments) prior to its stated maturity; or any
of the foregoing occurs with respect to any one or more items of Indebtedness of any Related Person with unpaid principal balances exceeding, in the aggregate, $250,000; 
  
 (h) Any event or condition occurs under any provision contained in any document or agreement governing any
Permitted Warehouse Facility (or any other material breach or default under any such document or agreement occurs) if the effect thereof is to cause or permit the holder or trustee of such obligation to cause such obligation to become due prior to
its stated maturity; 
  
 (i) This Agreement, the
Note or any other Loan Document shall for any reason cease to be in full force and effect, or be declared null and void or unenforceable in whole or in part as the result of any action initiated by any Person other than Lender; or the validity or
enforceability of any such document shall be challenged or denied by any Person other than Lender other than by reason of illegality; 
  
 (j) Either (i) any “accumulated funding deficiency” (as defined in Section 412(a) of the Code in excess of $500,000 exists with
respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, or (ii) any Termination Event occurs with respect to any ERISA Plan and the then current value of such ERISA Plan’s benefits guaranteed under
Title IV of ERISA exceeds the then current value of such ERISA Plan’s assets available for the payment of such benefits by more than $10,000 (or in the case of a Termination Event involving the withdrawal of a substantial employer, the
withdrawing employer’s proportionate share of such excess exceeds such amount) or (iii) any Related Person or any ERISA Affiliate withdraws from a multiemployer plan resulting in liability under Title IV of ERISA of an amount in excess of
$10,000; 
  
 (k) A Change of Control occurs;

  
 (l) General Partner ceases to be the general
partner of Bayport; 
  
 (m) Bayport is not
treated as a partnership for federal income tax purposes; 
  
 (n) The Partnership Agreement is modified without the prior written consent of Lender; or 
  
 (o) Bayport is dissolved. 
  
 Section 7.2 Default Remedies. Upon the occurrence and during the continuance of an Event of Default, Lender may declare the Commitment to be
terminated and/or declare the entire principal and all interest accrued on the Note to be, and the Note, together with all Obligations, shall thereupon become, forthwith due and payable, without any presentment, demand, protest, notice of protest
and nonpayment, notice of acceleration or of intent to accelerate or other notice of any kind, all of which hereby are expressly waived. Notwithstanding the foregoing, if an Event of Default specified in Subsections 7.1 (f)(i), (ii) or (iii) above
occurs with respect to either Borrower, the Commitment shall automatically and 

  

 34 

 
immediately terminate and the Note and all other Obligations shall become automatically and immediately due and payable, both as to principal and interest,
without any action by Lender and without presentment, demand, protest, notice of protest and nonpayment, notice of acceleration or of intent to accelerate, or any other notice of any kind, all of which are hereby expressly waived, anything contained
herein, in the Note to the contrary notwithstanding. 
  
 ARTICLE
VIII 
  
 INDEMNIFICATION 
  
 Section 8.1 Indemnification. Borrowers agree to indemnify Lender and
each director, officer, agent, attorney, employee, representative and Affiliate of Lender (each an “Indemnified Party”), upon demand, from and against any and all liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including reasonable fees of attorneys, accountants, experts and advisors) of any kind or nature whatsoever (in this Section 8.1 collectively called “liabilities and costs”) which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against any Indemnified Party growing out of, resulting from or in any other way associated with any of the Mortgage Collateral, the Loan Documents, and the transactions and
events (including the enforcement or defense thereof) at any time associated therewith or contemplated therein (including any violation or noncompliance with any Environmental Laws by any Related Person). 
  

	THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT
LIABILITY, OR ARE CAUSED IN WHOLE OR PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY SUCH INDEMNIFIED PARTY,

  
 provided only that such indemnified
party shall be not entitled under this section to receive indemnification for that portion, if any, of any liabilities and costs which is proximately caused by its own individual gross negligence or willful misconduct. All amounts payable by
Borrowers shall be immediately due upon Lender’s request for the payment thereof. 
  
 Section 8.2 Limitation of Liability. None of Lender, its directors, officers, agents, attorneys, employees, representatives or affiliates shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement. THE FOREGOING EXCULPATION SHALL APPLY TO ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY SUCH PERSON, PROVIDED THAT SUCH PERSON SHALL BE LIABLE FOR ITS OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. 
  
  

 35 

 ARTICLE IX 
  
 MISCELLANEOUS 
  
 Section 9.1 Notices. Any notice or request required or permitted to be given under or in connection with this Agreement, the Note or the other Loan
Documents (except as may otherwise be expressly required therein) shall be in writing and shall be mailed by first class or express mail, postage prepaid, or sent by telex, telegram, telecopy or other similar form of rapid transmission, confirmed by
mailing (by first class or express mail, postage prepaid) written confirmation at substantially the same time as such rapid transmission, or personally delivered to an officer of the receiving party. All such communications shall be mailed, sent or
delivered to the parties hereto at their respective addresses as follows: 
  

	 Borrowers:
	 	 	  	 Duxford Financial, Inc.

	 	 	 	  	 1300 Dove Street, Suite 200

	 	 	 	  	 Newport Beach, California 92660

	 	 	 	  	 FAX:   949.471.2110

	 	 	 	  	 TEL:    949.471.2000

			
	 	 	 	  	 Bayport Mortgage, L.P.

	 	 	 	  	 1300 Dove Street, Suite 200

	 	 	 	  	 Newport Beach, California 92660

	 	 	 	  	 FAX:   949.471.2110

	 	 	 	  	 TEL:    949.471.2000

			
	 Lender:
	 	 	  	 Guaranty Bank

	 	 	 	  	 8333 Douglas Avenue

	 	 	 	  	 Dallas, Texas 75225

	 	 	 	  	 Attention: Judi Flusche

	 	 	 	  	 FAX:   214.360.1660

	 	 	 	  	 TEL:    214.360.2782

			
	 	 	cc:	  	 Guaranty Bank

	 	 	 	  	 4330 La Jolla Village Drive, Suite 310

	 	 	 	  	 San Diego, California 92122

	 	 	 	  	 Attention: Jon M. Larson

	 	 	 	  	 FAX:   858.597.8830

	 	 	 	  	 TEL:    858.597.8842

  
 or at such other addresses or to such
individual’s or department’s attention as any party may have furnished the other party in writing. Any communication so addressed and mailed shall be deemed to be given when so mailed, except that Borrowing Requests, and communications
related thereto shall not be effective until actually received by Lender or Borrowers, as the case may be; and any notice so sent by rapid transmission shall be deemed to be given when receipt of such transmission is acknowledged, and any
communication so delivered in person shall be deemed to be given when receipted for by, or actually received by, an authorized officer of Borrowers or Lender, as the case may be. 
  
 Section 9.2 Amendments, Etc. No amendment or waiver of any provision of this Agreement, the Security Instruments, the
Note, or any other Loan Document, nor consent to any departure by any Related Person from the terms thereof, shall in any event be effective unless the same shall be in writing and signed by (i) if such party is Borrower, by Borrower and (ii) if
such party is Lender, by Lender. 
  

 36 

 Section 9.3 CHOICE OF LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF TEXAS. ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT AND MAINTAINED IN THE APPLICABLE STATE OR FEDERAL COURT IN DALLAS COUNTY, TEXAS. THIS AGREEMENT IS PERFORMABLE IN DALLAS COUNTY,
TEXAS AND THE PARTIES HERETO WAIVE ANY RIGHT THEY MAY HAVE TO BE SUED ELSEWHERE. THE PARTIES HERETO CONSENT TO PERSONAL JURISDICTION IN DALLAS COUNTY, TEXAS. Section 346 of the Texas Finance Code (which regulates certain revolving loan accounts and
revolving triparty accounts) shall not apply to this Agreement or the other Loan Documents. 
  
 Section 9.4 Invalidity. In the event that any one or more of the provisions contained in the Note, this Agreement or any other Loan Document shall,
for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of such document. 
  
 Section 9.5 Survival of Agreements. All covenants and agreements herein and in any other Loan Document not fully
performed before the date hereof or the date thereof, and all representations and warranties herein or therein, shall survive until payment in full of the Obligations and termination of the Commitment. 
  
 Section 9.6 Renewal, Extension or Rearrangement. All provisions of
this Agreement and of the other Loan Documents shall apply with equal force and effect to each promissory note hereafter executed which in whole or in part represent a renewal, extension for any period, increase or rearrangement of any part of the
Obligations originally represented by the Note or of any part of such other Obligations. 
  
 Section 9.7 Waivers. No course of dealing on the part of Lender, or any of its officers, employees, consultants or agents, nor any failure or delay by Lender with respect to exercising any right, power or
privilege of Lender under the Note, this Agreement or any other Loan Document shall operate as a waiver thereof, except as otherwise provided in Section 9.2 hereof. 
  
 Section 9.8 Cumulative Rights. The rights and remedies of Lender under the Note, this Agreement, and any other Loan
Document shall be cumulative, and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any other right or remedy. 
  
 Section 9.9 Limitation on Interest. Lender, each Related Person and any other parties to the Loan Documents intend to contract in strict compliance
with applicable usury Law from time to time in effect. In furtherance thereof such Persons stipulate and agree that none of the terms and provisions contained in the Loan Documents shall ever be construed to create a contract to pay, for the use,
forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be charged by applicable Law from time to time in 

  

 37 

 
effect. Neither each Related Person nor any present or future guarantors, endorsers, or other Persons hereafter becoming liable for payment of any Obligation
shall ever be liable for unearned interest thereon or shall ever be required to pay interest thereon in excess of the maximum amount that may be lawfully charged under applicable Law from time to time in effect, and the provisions of this section
shall control over all other provisions of the Loan Documents which may be in conflict or apparent conflict herewith. Lender expressly disavows any intention to charge or collect excessive unearned interest or finance charges in the event the
maturity of any Obligation is accelerated. If (a) the maturity of any Obligation is accelerated for any reason, (b) any Obligation is prepaid and as a result any amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) Lender or any other holder of any or all of the Obligations shall otherwise collect moneys which are determined to constitute interest which would otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be charged by applicable Law then in effect, then all such sums determined to constitute interest in excess of such legal limit shall, without penalty, be promptly applied to reduce the then outstanding principal of the
related Obligations or, at Lender’s or such holder’s option, promptly returned to each Related Person or the other payor thereof upon such determination. In determining whether or not the interest paid or payable, under any specific
circumstance, exceeds the maximum amount permitted under applicable Law, Lender and each Related Persons (and any other payors thereof) shall to the greatest extent permitted under applicable Law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and spread the total amount of interest throughout the entire contemplated term of the instruments
evidencing the Obligations in accordance with the amounts outstanding from time to time thereunder and the maximum legal rate of interest from time to time in effect under applicable Law in order to lawfully charge the maximum amount of interest
permitted under applicable Law. In the event applicable Law provides for an interest ceiling under Section 303 of the Texas Finance Code, that ceiling shall be the weekly ceiling. 
  
 Section 9.10 Bank Accounts; Offset. To secure the repayment of the Obligations each Related Person hereby grants to
Lender and to each financial institution which hereafter acquires a participation or other interest in the Loans or Note (in this section called a “Participant”) a security interest, a lien, and a right of offset, each of which shall be in
addition to all other interests, liens, and rights of Lender or any Participant at common law, under the Loan Documents, or otherwise, and each of which shall be upon and against (a) any and all moneys, securities or other property (and the proceeds
therefrom) of any Related Person now or hereafter held or received by or in transit to Lender, any Lender or Participant from or for the account any Related Person, whether for safekeeping, custody pledge, transmission, collection or otherwise, (b)
any and all deposits (general or special, time or demand, provisional or final) of any Related Person with Lender or any Participant, and (c) any other credits and claims of any Related Person at any time existing against Lender, any Lender or
Participant, including claims under certificates of deposit. Upon the occurrence of any Default, each of Lender and Participants is hereby authorized to foreclose upon, offset, appropriate, and apply, at any time and from time to time, without
notice to Borrowers, any and all items hereinabove referred to against the Obligations then due and payable. 
  

 38 

 Section 9.11 Assignments, Participations. 
  
 (a) Assignments. Lender shall have the right to sell,
assign or transfer all or any part of Note, Loans and rights and the associated rights and obligations under all Loan Documents to one or more financial institutions, with minimum assets of $500,000,000, and the assignee, transferee or recipient
shall have, to the extent of such sale, assignment, or transfer, the same rights, benefits and obligations of Lender. Within five (5) Business Days after any such assignment, the assignee shall notify Borrowers of the outstanding principal balance
of the Note payable to assignee and Borrowers shall execute and deliver to assignee a new Note evidencing such assignee’s assigned Loans and, if the assignor Lender has retained a portion of its Loans, replacement Note in the principal amount
of the Loans retained by the assignor Lender (such Note to be in exchange for, but not in payment of, the Note held by such Lender). 
  
 (b) Participations. Lender shall have the right to grant participations in all or any part of the Note, Loans and the associated
rights and obligations under all Loan Documents to one or more financial institutions with minimum assets of $500,000,000. 
  
 (c) Distribution of Information. It is understood and agreed that Lender may provide to assignees and participants and prospective
assignees and participants financial information and reports and data concerning Borrowers’ properties and operations which was provided to Lender pursuant to this Agreement. 
  
 Section 9.12 Confidentiality. Lender agrees to keep confidential any information furnished or made available to it by
any Related Person pursuant to this Agreement that is marked confidential; provided that nothing herein shall prevent Lender from disclosing such information (a) to any officer, director, employee, agent, or advisor of Lender or Affiliate of Lender,
(b) to any other Person if reasonably incidental to the administration of the credit facility provided herein, (c) as required by any law, (d) upon the order of any court or administrative agency, (e) upon the request or demand of any tribunal, (f)
that is or becomes available to the public or that is or becomes available to Lender other than as a result of a disclosure by Lender prohibited by this Agreement, (g) in connection with any litigation to which such Lender or any of its Affiliates
may be a party, (h) to the extent necessary in connection with the exercise of any right or remedy under this Agreement or any other Loan Document, and (i) subject to provisions substantially similar to those contained in this section, to any actual
or proposed participant or assignee. 
  
 Section 9.13
Exhibits. The exhibits attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits
and the provisions of this Agreement, the provisions of this Agreement shall prevail. 
  
 Section 9.14 Titles of Articles, Sections and Subsections. All titles or headings to articles, sections, subsections or other divisions of this Agreement or the exhibits hereto are only for the convenience of
the parties and shall not be construed to have any effect or meaning with respect to the other content of such articles, sections, subsections or other divisions, such other content being controlling as to the agreement between the parties hereto.

  
 Section 9.15 Counterparts; Fax. This Agreement may be
executed in 

  

 39 

 
counterparts, and it shall not be necessary that the signatures of both of the parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all counterparts together shall constitute one and the same instrument. This Agreement may be duly executed by facsimile or other electronic transmission. 
  
 Section 9.16 ENTIRE AGREEMENT. THE NOTE, THIS AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES. 
  
 Section 9.17 Termination; Limited Survival. In its sole and absolute
discretion Borrowers may at any time that no Obligations are owing elect in a notice delivered to Lender to terminate this Agreement. Upon receipt by Lender of such a notice, if no Obligations are then owing, this Agreement and all other Loan
Documents shall thereupon be terminated and the parties thereto released from all prospective obligations thereunder. Notwithstanding the foregoing or anything herein to the contrary, any waivers or admissions made by any Person in any Loan
Documents, any Obligations, and any obligations which any Person may have to indemnify or compensate Lender shall survive any termination of this Agreement or any other Loan Document. At the request and expense of Borrowers, Lender shall prepare and
execute all necessary instruments to reflect and effect such termination of the Loan Documents. 
  
 Section 9.18 Joint and Several Liability. Each Borrower shall be jointly and severally liable for Indebtedness and Obligations under the Loan
Documents, including but not limited to the payment of all Obligations. 
  
 Section 9.19 No Release of Joint and Several Liability. 
  
 (i) No action which Lender may take or omit to take in connection with any Loan Document or any of the Obligations, and no course of dealing of the Lender with a Borrower (the “Affected Borrower”) or any
other Person, shall release or diminish the joint and several liability of the other Borrower hereunder for Loans made to the Affected Borrower. Without limiting the foregoing, each Borrower hereby expressly agrees that Lender may, from time to
time, without notice to or the consent of the other Borrower, do any or all of the following: 
  
 (1) Give or refuse to give any waivers or other indulgences with respect to the Loan Documents. 
  
 (2) Neglect, delay, fail, or refuse to take or prosecute
any action for the collection or enforcement of any of the Obligations, to foreclose or take or prosecute any action in connection with the Collateral, to bring suit against any Borrower or any other Person, or to take any other action concerning
the Obligations or the Loan Documents. 
  
 (3)
Compromise or settle any unpaid or unperformed Obligations. 
  

 40 

 (4) Take, exchange, amend, eliminate, surrender, release, or subordinate any Collateral,
accept additional or substituted collateral therefor, and perfect or fail to perfect Lender’s rights in any or all of such collateral. 
  
 (5) Except as otherwise provided in the Loan Documents, apply all monies received from any Borrower or others, or from any Collateral, as
Lender may determine to be in its best interest, without in any way being required to marshal Collateral or assets or to apply all or any part of such monies upon any particular part of the Obligations. 
  
 (ii) No action or inaction of Duxford or any other Person,
and no change of law or circumstances, shall release or diminish the joint and several liability of Bayport hereunder for Loans made to Duxford. Without limiting the foregoing, the joint and several liability of Bayport hereunder for Loans made to
Duxford shall not be released, diminished, impaired, reduced, or affected by the occurrence of any or all of the following from time to time, even if occurring without notice to or without the consent of Bayport: 
  
 (1) Any voluntary or involuntary liquidation, dissolution,
sale of all or substantially all assets, marshaling of assets or liabilities, receivership, conservatorship, assignment for the benefit of creditors, insolvency, bankruptcy, reorganization, arrangement, or composition of Duxford or any other
proceedings involving Duxford or any of the assets of Duxford under laws for the protection of debtors, or any discharge, impairment, modification, release, or limitation of the liability of, or stay of actions or lien enforcement proceedings
against, Duxford, any properties of Duxford, or the estate in bankruptcy of Duxford in the course of or resulting from any such proceedings. 
  
 (2) The failure by Agent or any Lender to file or enforce a claim in any proceeding described in the immediately preceding subsection or
to take any other action in any proceeding to which Duxford is a party. 
  
 (3) The release by operation of law of Duxford from any of the Obligations. 
  
 (4) The invalidity, deficiency, illegality, or unenforceability of any of the Obligations or the Loan Documents against Duxford, in whole
or in part, any bar by any statute of limitations or other law of recovery on any of the Obligations, or any defense or excuse for failure to perform on account of force majeure, act of God, casualty, impossibility, impracticability, or other
defense or excuse whatsoever. 
  
 (5) Without
limiting any of the foregoing, any fact or event (whether or not similar to any of the foregoing) which in the absence of 

  

 41 

 
this provision would or might constitute or afford a legal or equitable discharge or release of or defense to a debtor or surety other than the actual
performance by Duxford under this Agreement. 
  
 (iii) No action or inaction of Bayport or any other Person, and no change of law or circumstances, shall release or diminish the joint and several liability of Duxford hereunder for Loans made to Bayport. Without limiting the foregoing, the
joint and several liability of Duxford hereunder for Loans made to Bayport shall not be released, diminished, impaired, reduced, or affected by the occurrence of any or all of the following from time to time, even if occurring without notice to or
without the consent of Duxford: 
  
 (1) Any
voluntary or involuntary liquidation, dissolution, sale of all or substantially all assets, marshaling of assets or liabilities, receivership, conservatorship, assignment for the benefit of creditors, insolvency, bankruptcy, reorganization,
arrangement, or composition of Bayport or any other proceedings involving Bayport or any of the assets of Bayport under laws for the protection of debtors, or any discharge, impairment, modification, release, or limitation of the liability of, or
stay of actions or lien enforcement proceedings against, Bayport, any properties of Bayport, or the estate in bankruptcy of Bayport in the course of or resulting from any such proceedings. 
  
 (2) The failure Lender to file or enforce a claim in any
proceeding described in the immediately preceding subsection or to take any other action in any proceeding to which Bayport is a party. 
  
 (3) The release by operation of law of Bayport from any of the Obligations. 
  
 (4) The invalidity, deficiency, illegality, or
unenforceability of any of the Obligations or the Loan Documents against Bayport, in whole or in part, any bar by any statute of limitations or other law of recovery on any of the Obligations, or any defense or excuse for failure to perform on
account of force majeure, act of God, casualty, impossibility, impracticability, or other defense or excuse whatsoever. 
  
 (5) Without limiting any of the foregoing, any fact or event (whether or not similar to any of the foregoing) which in the absence of
this provision would or might constitute or afford a legal or equitable discharge or release of or defense to a debtor or surety other than the actual performance by Bayport under this Agreement. 
  
 Section 9.20 Disclosures. Lender may disclose to, and exchange and
discuss with, any other Person any information concerning the Collateral or Borrowers or any Subsidiary (whether received by Lender or any other Person) for the purpose of (a) complying with Governmental Requirements or any legal proceedings, (b)
protecting or preserving the 

  

 42 

 
Collateral, (c) protecting, preserving, exercising or enforcing any of their rights in, under or related to the Collateral or the Loan Documents, (d)
performing any of their obligations under or related to the Loan Documents, or (e) consulting with respect to any of the foregoing matters. 
  
 Section 9.21 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ITS RESPECTIVE RIGHTS
TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE
VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND ANY OTHER LOAN
DOCUMENTS. 
  
 Section 9.22 CONSEQUENTIAL DAMAGES.
NEITHER BORROWERS, NOR LENDER SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND EACH SUCH PERSON HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE EACH OTHER SUCH PERSON FOR, ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES SUFFERED BY SUCH OTHER PERSON IN
CONNECTION WITH ANY CLAIM RELATED TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREIN. 
  
 [The remainder of this page is intentionally left blank] 
  

 43 

 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the date
first above written. 
  

	 BORROWERS:
	  	 DUXFORD FINANCIAL, INC., a California
 Corporation

			
	 	  	By:	  	     /s/ Richard Frankel

	 	  	 	  	 Name:  Richard Frankel

	 	  	 	  	 Title:    Chairman

			
	 	  	By:	  	     /s/ Mark A. Carver

	 	  	 	  	 Name:  Mark A. Carver

	 	  	 	  	 Title:    President

		
	 	  	 BAYPORT MORTGAGE, L.P., a California Limited
 Partnership

			
	 	  	By:	  	 Duxford Financial, Inc., a California
 Corporation, its general partner

				
	 	  	 	  	 By:
	  	   /s/ Richard Frankel

	 	  	 	  	 	  	 Name:  Richard Frankel

	 	  	 	  	 	  	 Title:    Chairman

				
	 	  	 	  	 By:
	  	   /s/ Mark A. Carver

	 	  	 	  	 	  	 Name:  Mark A. Carver

	 	  	 	  	 	  	 Title:    President

			
	 LENDER:
	  	 	  	 GUARANTY BANK

				
	 	  	 	  	 By:
	  	   /s/ Jon Larson

	 	  	 	  	 	  	 Name:  Jon Larson

	 	  	 	  	 	  	 Title:    Senior Vice President

 EXHIBIT A 
  

PROMISSORY NOTE 
  

	 $10,000,000
	 	Dallas, Texas	 	August 29, 2003

  
 FOR VALUE RECEIVED,
the undersigned, DUXFORD FINANCIAL, INC., a California corporation (“Duxford”) and BAYPORT MORTGAGE, L.P., a California limited partnership (“Bayport,” and together with Duxford, “Borrowers”), jointly and severally
promise to pay to the order of GUARANTY BANK (herein called “Lender”), the principal sum of Ten Million and No/100 ($10,000,000) or, if less, the aggregate unpaid principal amount of the Loans made under this Note by Lender to Borrowers
pursuant to the terms of the Credit Agreement (as hereinafter defined), together with interest on the unpaid principal balance thereof as hereinafter set forth, both principal and interest payable as herein provided in lawful money of the United
States of America at the offices of the Lender, 8333 Douglas Avenue, Dallas, Texas or at such other place within Dallas County, Texas, as from time to time may be designated by the holder of this Note. 
  
 This Note (a) is issued and delivered under that certain Credit Agreement of
even date herewith between Borrowers and Lender (herein, as from time to time supplemented, amended or restated, called the “Credit Agreement”), and is a Note as defined therein, (b) is subject to the terms and provisions of the Credit
Agreement, which contains provisions for payments and prepayments hereunder and acceleration of the maturity hereof upon the happening of certain stated events, and (c) is secured by and entitled to the benefits of certain Security Instruments (as
identified and defined in the Credit Agreement). Payments on this Note shall be made and applied as provided herein and in the Credit Agreement. Reference is hereby made to the Credit Agreement for a description of certain rights, limitations of
rights, obligations and duties of the parties hereto and for the meanings assigned to terms used and not defined herein and to the Security Instruments for a description of the nature and extent of the security thereby provided and the rights of the
parties thereto. 
  
 The principal amount of this Note, together
with all interest accrued hereon, shall be due and payable in full on the Drawdown Termination Date. 
  
 So long as no Event of Default has occurred and is continuing, (i) the First Tier Portion of the Loan Balance (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day outstanding at the First Tier Rate in effect on such day; (ii) the Second Tier Portion of the Loan Balance (exclusive of any past due principal or interest) from time to time
outstanding shall bear interest on each day outstanding at the Second Tier Rate in effect on such day; and (iii) the Third Tier Portion of the Loan Balance (exclusive of any past due principal or interest) from time to time outstanding shall bear
interest on each day outstanding at the Third Tier Rate in effect on such day. If an Event of Default has occurred and is continuing, the entire Loan Balance (exclusive of any past due principal or interest) from time to time outstanding shall bear
interest on each day outstanding at the applicable Default Rate in effect on such day. 

 On the fifteenth (15th) day of each calendar month, beginning on the fifteenth (15th) day of the calendar month immediately following the calendar month in which this Note is executed, Borrowers shall pay to the holder hereof all unpaid interest which has accrued on the Loan Balance
through and including the last day of the immediately preceding calendar month. All past due principal of and past due interest on the Loan Balance shall bear interest on each day outstanding at the applicable Default Rate in effect on such day, and
such interest shall be due and payable daily as it accrues. Notwithstanding the foregoing provisions of this paragraph: (i) this Note shall never bear interest in excess of the Maximum Rate and, (ii) if at any time the rate at which interest is
payable on this Note is limited by the Maximum Rate (by the foregoing subsection (i) or by reference to the Maximum Rate in the definition of Default Rate), this Note shall bear interest at the Maximum Rate and shall continue to bear interest at the
Maximum Rate until such time as the total amount of interest accrued hereon equals (but does not exceed) the total amount of interest which would have accrued hereon had there been no Maximum Rate applicable hereto. 
  
 Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after maturity, exceed the maximum amount of interest which, under applicable law, may be charged on this Note, and this Note is expressly made subject to the provisions of the
Credit Agreement which more fully set out the limitations on how interest accrues hereon. In the event applicable law provides for a ceiling under Section 303 of the Texas Finance Code, that ceiling shall be the weekly rate ceiling and shall be used
in this Note for calculating the Maximum Rate and for all other purposes. The term “applicable law” as used in this Note shall mean the laws of the State of Texas or the laws of the United States, whichever laws allow the greater interest,
as such laws now exist or may be changed or amended or come into effect in the future. 
  
 If this Note is placed in the hands of an attorney for collection after default, or if all or any part of the indebtedness represented hereby is proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrowers and all endorsers, sureties and guarantors of this Note jointly and severally agree to pay reasonable attorneys’ fees and collection costs to the holder hereof in
addition to the principal and interest payable hereunder. 
  
 Except as otherwise provided in the Credit Agreement, Borrowers and all endorsers, sureties and guarantors of this Note hereby severally waive demand, presentment, notice of demand and of dishonor and nonpayment of this Note, protest,
notice of protest, notice of intention to accelerate the maturity of this Note, declaration or notice of acceleration of the maturity of this Note, diligence in collecting, the bringing of any suit against any party and any notice of or defense on
account of any extensions, renewals, partial payments or changes in any manner of or in this Note or in any of its terms, provisions and covenants, or any releases or substitutions of any security, or any delay, indulgence or other act of any
trustee or any holder hereof, whether before or after maturity. 
  

 2 

 No waiver by Lender of any of its rights or remedies hereunder or under any other document evidencing or
securing this Note or otherwise shall be considered a waiver of any other subsequent right or remedy of Lender; no delay or omission in the exercise or enforcement by Lender of any rights or remedies shall ever by construed as a waiver of any right
or remedy of Lender; and no exercise or enforcement of any such rights or remedies shall ever be held to exhaust any right or remedy of Lender. 
  
 Borrowers reserve the right to prepay the outstanding principal balance of this Note, in whole or in part at any time and from time to time without
premium or penalty, in accordance with the terms of the Credit Agreement. 
  

 3 

 THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF TEXAS, EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW. 
  

	 DUXFORD FINANCIAL, INC., a California
 Corporation

		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

	
	 BAYPORT MORTGAGE, L.P., a California
 Limited Partnership

		
	 By:
	 	 Duxford Financial, Inc., its general partner

			
	 	 	 By:
	 	  

	 	 	 	 	 Name:

	 	 	 	 	 Title:

			
	 	 	 By:
	 	  

	 	 	 	 	 Name:

	 	 	 	 	 Title:

  

 4 

 EXHIBIT B 
  
 BORROWING REQUEST 
  

	FROM:	 	Duxford Financial, Inc. 

	    	 	Bayport Mortgage, L.P. 

	    	 	(collectively, “Borrowers”) 

  

	TO:	 	Guaranty Bank (“Lender”) 

  

	I.	Borrowers hereby request Loans in the amount and on the date specified below, pursuant to the Credit Agreement among Borrowers and Lender dated as of August 29, 2003 (as amended,
modified or restated from time to time, the “Agreement”). Capitalized terms used herein and defined in the Agreement shall be used herein as so defined. 

  

	II.	Loans requested: 

  

	 	(a)	Borrowers hereby request Loans in the aggregate principal amount of
$                                        .

  

	 	(b)	Requested advance date:                     ,
200    . 

  

	III.	The undersigned officers of Borrower represent and warrant to Lender and each Lender: 

  

	 	(a)	Borrowers are entitled to receive the requested Loan under the terms and conditions of the Agreement; 

  

	 	(b)	all items which Borrowers are required to furnish to Lender pursuant to the Agreement accompany this Borrowing Request (or, if Wet Loans, shall be delivered to Lender in accordance
with the Agreement); 

  

	 	(c)	all Mortgage Loans offered hereby conform in all respects with the applicable requirements set forth in the Agreement; 

  

	 	(d)	no Event of Default has occurred and is continuing under the Agreement; 

  

	 	(e)	no change or event which with notice and/or the passage of time would constitute an Event of Default; 

  

	 	(f)	after giving effect to the Loan requested hereby the aggregate amount of the outstanding principal balance of the Loan will not exceed the lesser of (1) the Collateral Value of the
Borrowing Base and (2) the Commitment. 

 Borrowers have attached and submit herewith Submission Lists describing all Eligible Mortgage Loans
included in the Collateral Value of the Borrowing Base, other than Wet Loans (the “Dry Submission Lists”) and Submission Lists describing all Wet Loans included in the Collateral Value of the Borrowing Base (the “Wet Submission
Lists”). Borrowers have submitted—or are submitting to Lender concurrently herewith—the Required Mortgage Documents with respect to each Mortgage Note described or referred to in the Dry Submission Lists. Borrowers hereby grant to
Lender a security interest in all such new Mortgage Collateral described in the Dry Submission Lists and the Wet Submission Lists and all related Required Mortgage Documents, and all of the foregoing are hereby made subject to the security interest
of Lender created by the Security Agreement. Borrowers hereby agree to deliver the Required Mortgage Documents with respect to each Mortgage Note described or referred to in the Wet Submission Lists within five (5) Business Days following the date
hereof. 
  
 Borrowers represent and warrant that, except as
permitted under the Agreement, Borrowers hold with respect to each of the Mortgage Notes hereby offered the following: 
  

	 	(a)	unless delivered herewith, the original filed copy of the Mortgage relating to such Mortgage Note; 

  

	 	(b)	mortgagee policies of title insurance conforming to the requirements of the Lender or binding commitments for the issuance of same; 

  

	 	(c)	insurance policies insuring the mortgaged premises as required by the Lender; and 

  

	 	(d)	unless delivered herewith, an original of any executed Take-Out Commitment relating to such Mortgage Note. 

  
 Borrowers agree that they hold the above referenced items in trust for
Lender, and will at any time deliver the same to Lender upon request or, upon written instructions from Lender, to any Person designated by Lender. Borrowers further agrees that they will not deliver any of the above items, nor give, transfer, or
assign any interest in same, to any Person other than Lender (or the Person or Persons designated by Lender) without the prior written consent of Lender. 
  
 The representations and warranties of Borrowers contained in the Agreement and those contained in each other Loan Document to which Borrowers are a party
are true and correct in all respects on and as of the date hereof. 
  

 2 

	 	  	 DUXFORD FINANCIAL, INC., a California
 Corporation

			
	 Date:                    , 2003
	  	 By:
	 	  

	 	  	 	 	 Name:
	 	 
	 	  	 	 	 Title:
	 	 
			
	 	  	 By:
	 	  

	 	  	 	 	 Name:
	 	 
	 	  	 	 	 Title:
	 	 
		
	 	  	 BAYPORT MORTGAGE, L.P., a California
 Limited Partnership

			
	 	  	 By:
	 	 Duxford Financial, Inc., a California
 Corporation, its general partner

				
	 	  	 	 	 By:
	 	  

	 	  	 	 	 	 	 Name:

	 	  	 	 	 	 	 Title:

				
	 	  	 	 	 By:
	 	  

	 	  	 	 	 	 	 Name:

	 	  	 	 	 	 	 Title:

  

 3 

 INSTRUCTIONS FOR ELECTRONIC TRANSFER 
 OF BORROWING REQUEST 
  

	I.	Narrative to be included on face of email from Borrower to Lender: 

  
 The Borrowing Request attached to this email is hereby (i) electronically signed by
                                        
            , the [insert title] of [Duxford Financial, Inc. or Bayport Mortgage, L.P., a California [corporation or limited partnership] (the “Borrower”), on the date
this email is sent to you, (ii) adopted by the Borrower in all respects, and (iii) delivered pursuant to the Credit Agreement dated as of August 29, 2003 between Guaranty Bank (“Lender”) and the Borrower (the “Credit Agreement”).
The Submission Lists incorporated into such Borrowing Request are also attached to this email. 
  
 Documents to be attached: 
  

	 Borrowing Request
	 	Dry Submission List	 	Wet Submission List

 SCHEDULE B-I 
  
 DRY SUBMISSION LISTS 

 SCHEDULE B-II 
  
 WET SUBMISSION LISTS 

 EXHIBIT C 
  

APPROVED INVESTORS 
  
 ABN AMRO ( Interfirst) 
 Chase 
 Countrywide 
 Etrade 
 First Horizon 
 Wells Fargo Funding

 EXHIBIT D 
  

SUBSIDIARIES OF BORROWERS 
  

	 Name

	 	 State of Incorporation

	 	 Percentage Ownership

	 None
	 	 	 	 

 EXHIBIT E 
 [Duxford] 
  
 CERTIFICATE
ACCOMPANYING 
 FINANCIAL STATEMENTS 
  
 Reference is made to that certain Credit Agreement dated as of August 29, 2003 (as from time to time amended, the
“Agreement”), by and among DUXFORD FINANCIAL, INC. (“Duxford”) and BAYPORT MORTGAGE, L.P. (“Bayport,” and together with Duxford, “Borrowers”) and GUARANTY BANK, as Lender (“Lender”),
which Agreement is in full force and effect on the date hereof. Terms which are defined in the Agreement are used herein with the meanings given them in the Agreement. 
  
 This Certificate is furnished pursuant to Section 5.1(a)(iii) of the Agreement. Together herewith Duxford is furnishing to
Lender Duxford’s audited annual financial statements or monthly financial statements (the “Financial Statements”) dated
                    , 20     (the “Reporting Date”). Duxford hereby represents, warrants, and
acknowledges to Lender that: 
  

	 	(a)	the officer of Duxford signing this instrument is the duly elected, qualified and acting
                                        
of Duxford; 

  

	 	(b)	the Financial Statements are prepared in accordance with GAAP; 

  

	 	(c)	attached hereto is Schedule E-1 showing Duxford’s compliance as of the Reporting Date with the requirements of Sections 6.13 through 6.17 of the Agreement *[and Duxford’s
non-compliance as of such date with the requirements of Section(s)              of the Agreement]; 

  

	 	(d)	on the Reporting Date Borrowers were, and on the date hereof Borrowers are, in full compliance with the disclosure requirements of Article V of the Agreement, and no Default
otherwise existed on the Reporting Date or otherwise exists on the date of this instrument *[except for Default(s) under Section (s)
                                        
of the Agreement, which (is/are] more fully described on a schedule attached hereto). 

  
 The officer of Duxford signing this instrument hereby certifies that he has reviewed the Loan Documents and the Financial Statements and has otherwise
undertaken such inquiry as is in his opinion necessary to enable him to express an informed opinion with respect to the above representations, warranties and acknowledgments of Duxford and, to the best of his knowledge, such representations,
warranties, and acknowledgments are true, correct and complete. 
  
 IN WITNESS WHEREOF, this instrument is executed as of                     , 20    . 

	 DUXFORD FINANCIAL, INC., a California
 Corporation

		
	 By:
	 	  

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

		
	 By:
	 	  

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

  

 2 

 SCHEDULE E-1 
 [Duxford] 
  

	 Financial Covenants

	 	 Required

	 	 Actual [or in compliance]

	 1.
	 	 Minimum Tangible
 Net Worth*
	 	 Not less than $2,000,000
	 	___________________________
				
	 2.
	 	 Total Debt to
 Tangible Net Worth*
	 	 Not more than 12.0 to 1.00
	 	___________________________
				
	 3.
	 	 Profitability*
	 	 Not less than $1
	 	___________________________
				
	 4.
	 	 Minimum Liquidity*
	 	 Not less than $1,500,000
	 	___________________________

  

	
	 DUXFORD FINANCIAL, INC., a California
 Corporation

		
	 By:
	 	  

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

		
	 By:
	 	  

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

 _____________ 
 (Date) 
  

	*	Aggregate values with those of Bayport Mortgage, L.P. 

 EXHIBIT E 
 [Bayport] 
  
 CERTIFICATE
ACCOMPANYING 
 FINANCIAL STATEMENTS 
  
 Reference is made to that certain Credit Agreement dated as of August 29, 2003 (as from time to time amended, the
“Agreement”), by and among DUXFORD FINANCIAL, INC. (“Duxford”) and BAYPORT MORTGAGE, L.P. (“Bayport,” and together with Duxford, “Borrowers”) and GUARANTY BANK, as Lender (“Lender”),
which Agreement is in full force and effect on the date hereof. Terms which are defined in the Agreement are used herein with the meanings given them in the Agreement. 
  
 This Certificate is furnished pursuant to Section 5.1(a)(iii) of the Agreement. Together herewith Bayport is furnishing to
Lender Bayport’s audited annual financial statements or monthly financial statements (the “Financial Statements”) dated
                    , 20     (the “Reporting Date”). Bayport hereby represents, warrants, and
acknowledges to Lender that: 
  

	 	(a)	the officer signing this instrument on behalf of Duxford in its capacity as general partner of Bayport is the duly elected, qualified and acting
                                        
of Duxford; 

  

	 	(b)	the Financial Statements are prepared in accordance with GAAP; 

  

	 	(c)	attached hereto is Schedule E-1 showing Bayport’s compliance as of the Reporting Date with the requirements of Sections 6.13 through 6.17 of the Agreement *[and Bayport’s
non-compliance as of such date with the requirements of Section(s)              of the Agreement]; 

  

	 	(d)	on the Reporting Date Borrowers were, and on the date hereof Borrowers are, in full compliance with the disclosure requirements of Article V of the Agreement, and no Default
otherwise existed on the Reporting Date or otherwise exists on the date of this instrument *[except for Default(s) under Section (s)
                                        
of the Agreement, which (is/are] more fully described on a schedule attached hereto). 

  
 The officer of Duxford signing this instrument on behalf of Duxford in its capacity as general partner of Bayport hereby certifies that he has reviewed
the Loan Documents and the Financial Statements and has otherwise undertaken such inquiry as is in his opinion necessary to enable him to express an informed opinion with respect to the above representations, warranties and acknowledgments of
Bayport and, to the best of his knowledge, such representations, warranties, and acknowledgments are true, correct and complete. 
  
 IN WITNESS WHEREOF, this instrument is executed as of
                    , 20    . 

	 BAYPORT MORTGAGE, L.P. a California
 Limited Partnership

		
	 By:
	 	 Duxford Financial, Inc., a California
 Corporation, its general partner

			
	 	 	 By:
	 	  

	 	 	 	 	 Name:
	 	  

	 	 	 	 	 Title:
	 	  

			
	 	 	 By:
	 	  

	 	 	 	 	 Name:
	 	  

	 	 	 	 	 Title:
	 	  

  

 2 

 SCHEDULE E-1 
 [Bayport] 
  

	 Financial Covenants

	 	 Required

	 	 Actual [or in compliance]

	 1.
	 	 Minimum Tangible Net Worth
	 	 Not less than $2,000,000
	 	___________________________
				
	 2.
	 	 Total Debt to
 Tangible Net Worth**
	 	 Not more than 12.0 to 1.00
	 	___________________________
				
	 3.
	 	 Profitability**
	 	 Not less than $1
	 	___________________________
				
	 4.
	 	 Minimum Liquidity**
	 	 Not less than $1,500,000
	 	___________________________

  

	
	 BAYPORT MORTGAGE, L.P., a California
 Limited Partnership

		
	 By:
	 	 Duxford Financial, Inc., a California
 Corporation, its general partner

		
	 By:
	 	  

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

		
	 By:
	 	  

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

  
 _____________ 
 (Date) 
  

	**	Aggregate values with those of Duxford Financial, Inc. 

 EXHIBIT F 
  

FORM OF SECURITY AGREEMENT 
  
 [EXECUTION] 
  
 SECURITY AGREEMENT 
  
 THIS SECURITY AGREEMENT (this “Security Agreement”) is made and dated as of August 29, 2003, by DUXFORD FINANCIAL, INC., a California
corporation, and BAYPORT MORTGAGE, L.P., a California limited partnership (collectively, “Debtors”), and GUARANTY BANK (“Secured Party”). 
  
 RECITALS 
  
 A.     Pursuant to that certain Credit Agreement of even date herewith between Debtors and Secured Party (as from time to time
amended, supplemented or restated, the “Credit Agreement”), Secured Party agreed to extend credit to Debtors on the terms and subject to the conditions set forth therein. Capitalized terms not otherwise defined herein are used with the
same meanings as in the Credit Agreement. 
  
 B.     As a condition precedent to the effectiveness of the Credit Agreement, Secured Party has required the execution and delivery of this Security Agreement in order to, among other things, create a first priority
perfected security interest in the Collateral in favor of Secured Party to secure payment of the Obligations. 
  
 NOW, THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtors agree with Secured Party as follows: 
  
 AGREEMENTS 
  
 1.     Delivery of
Collateral.   Debtors shall deliver Submission Lists to Secured Party from time to time identifying Mortgage Loans that Debtors intend to include in Collateral by delivering to Secured Party the mortgage documents described on Schedule
A attached hereto for each such Mortgage Loan (the “Required Mortgage Documents”). Debtors shall obtain and hold for the benefit of Secured Party the documents described on Schedule B attached hereto for each such Mortgage Loan (the
“Additional Required Mortgage Documents”). 
  
 2.     Grant of Security Interest.   Debtors hereby pledge, assign and grant to Secured Party a first priority security interest in the property described in Paragraph 3 below (collectively and
severally, the “Collateral”), to secure payment of (i) the Obligations, (ii) all costs reasonably incurred by Secured Party (a) to obtain, preserve, perfect and enforce the security interest granted hereby and all other liens and
security interests securing payment of the Obligations, (b) to collect the Obligations, and (c) to maintain, preserve and collect the Collateral, including, but not limited to, taxes, assessments, insurance premiums, repairs, reasonable
attorneys’ fees and legal expenses (including, without limitation, allocated costs for in-house legal services), rent, storage 

 charges, advertising costs, brokerage fees and expenses of sale; and (iii) all renewals, extensions and modifications of
the indebtedness referred to in the foregoing clauses, or any part thereof. The loans, advances, indebtedness, obligations, liabilities and costs described in this section are collectively referred to herein as the “Secured
Indebtedness.” All proceeds hereof shall be applied by Secured Party to the Secured Indebtedness in accordance with the Credit Agreement. 
  
 3.    Collateral.  The Collateral shall consist of all right, title and interest of Debtors, of every kind and
nature, in and to all of the following property, assets and rights of Debtors, wherever located, whether now existing or hereafter arising, and whether now or hereafter owned or acquired by or accruing or owing to Debtors, and all proceeds and
products thereof (including all proceeds in the Settlement Account from time to time): 
  
 (a)    Any and all Instruments, Certificated Securities, Uncertificated Securities, and Investment Property of Debtors in the actual or constructive possession of Secured Party, any Person
designated as a bailee (“Bailee”) of Mortgage Notes by Secured Party until payment is made for such Notes or they are returned to Secured Party, or of Debtors in trust for Secured Party, or in transit to or from Secured Party or Bailee as
collateral for the Secured Indebtedness or designated by Debtors as collateral for the Secured Indebtedness (whether or not delivered to Secured Party or Bailee), and any and all agreements and documents related to any thereof including, without
limitation, all Mortgage Notes and Mortgages delivered, or to be delivered, to Secured Party or Bailee or to be held by Debtors in trust for Secured Party or Bailee (the “Mortgage Collateral”, including without limitation: 
  
 (i)    any and all rights, titles and
interests Debtors may now or hereafter have in and to any and all promissory notes, Mortgages, guaranties, bonds, insurance policies, commitments, and other Instruments, documents, or agreements ever executed and delivered to Debtors in connection
with its mortgage lending business and related to the Mortgage Collateral; 
  
 (ii)    any and all present and future Accounts, Chattel Paper, documents, Instruments, General Intangibles, Payment Intangibles and other personal property now owned or hereafter acquired by
Debtors arising from or by virtue of any transactions related to its mortgage lending business and related to the Mortgage Collateral; 
  
 (iii)    any and all proceeds from the sale, financing or other disposition of the items described in (i) and (ii)
above; and 
  
 (iv)    all
Software, files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records, and other records, information, and data of Debtors related to the Mortgage Collateral (including without limitation all
information, data, programs, tapes, discs and cards necessary to administer and service such Mortgage Loans). 
  

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 (b)    All Take-Out Commitments related to the Mortgage Collateral and all rights of
Debtors in, to and under any agreements or other arrangements (including without limitation, an interest rate swap agreement, an interest cap agreement, and a forward sale agreement) entered into by Debtor to protect itself against changes in
interest rates or the market value of any of the Mortgage Collateral, including without limitation, all rights to payment arising under such agreements or arrangements. 
  
 (c)    All right, title and interest of Debtors under all agreements between Debtors and Persons other
than Debtors pursuant to which Debtors undertake to service the Mortgage Collateral, including without limitation, the rights of Debtors to income and reimbursement thereunder. 
  
 (d)    All purchase agreements, credit agreements or other agreements pursuant to which Debtors acquired
the Mortgage Collateral and all promissory notes, security agreements and other instruments and documents executed by Debtors pursuant thereto or in connection therewith, insofar as such agreements, instruments and documents relate to the Mortgage
Collateral. 
  
 (e)    All other money or
property of Debtors in the possession of Secured Party including, without limitation, (i) the Funding Account, the Settlement Account, the Operating Account, all Deposit Accounts established with Secured Party and any other accounts established by
Debtors with Secured Party, (ii) all amounts on deposit in the Funding Account, the Settlement Account, the Operating Account, such Deposit Accounts or any other accounts established by Debtors with Secured Party and (iii) the obligations of Secured
Party to Debtors arising out of such deposits. 
  
 (f)    All right, title and interest of Debtors in and to any other asset of Debtors which has been or hereafter at any time is delivered to Secured Party or Bailee hereunder. 
  
 (g)    All proceeds of whatever kind or nature from any
of such collateral described in paragraphs (a), (b), (c), (d), (e) and (f) above, including but not limited to Mortgage-Backed Securities constituting proceeds of the Mortgage Collateral. 
  
 As used in this Security Agreement, the terms “Accounts,” “Certificated Securities,” “Chattel
Paper,” “Deposit Accounts,” “General Intangibles, “Instruments,” “Investment Property,” “Payment Intangibles,” “Software,” and “Uncertificated Securities” and shall have the
respective meanings assigned to them in the Texas Uniform Commercial Code, as the same may hereafter be amended; and the term “Mortgage-Backed Security” shall mean (i) a security (including a participation certificate) guaranteed by GNMA
that represents interests in a pool of Mortgage Loans, or (ii) a security (including a participation certificate) issued by FNMA or FHLMC that represents interests is such a pool. 
  

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 4.    Handling of Collateral; Settlement Account; Redemption of Collateral.

  
 (a)    So long as no Default or Event of
Default exists, Secured Party may from time to time release documentation relating to Mortgage Loans to Debtors against a trust receipt executed by Debtors in the form of Exhibit 1 hereto. Debtors hereby represent and warrant that any request
by Debtors for release of Collateral under this subparagraph (a) shall be solely for the purposes of correcting clerical or other non-substantial documentation problems in preparation of returning such Collateral to Secured Party for ultimate sale
or exchange and that Debtors have requested such release in compliance with all terms and conditions of such release set forth herein and in the Credit Agreement. 
  
 (b)    So long as no Default or Event of Default exists, upon delivery by Debtors to Secured Party of a
shipping request substantially in the form of that attached hereto as Exhibit 2, together with an air bill or other form of shipping label properly completed with the name and address of the respective Investor, Secured Party will transmit,
or cause to be transmitted, Mortgage Loans held by it as directed by Debtors under cover of a transmittal letter substantially in the form of that attached hereto as Exhibit 3 (or such other form as may be approved by Secured Party).

  
 (c)    All amounts payable on account of
the sale of Collateral will be instructed to be paid directly by the purchaser to the Settlement Account. Debtors will not be credited for any amounts due from any purchaser until Secured Party has actually received immediately available funds.
Pursuant to Paragraph 3 above Debtors have granted to Secured Party a security interest in and lien upon the Settlement Account and in any and all amounts at any time held therein. This Paragraph 4(c) shall further constitute
irrevocable notice to Secured Party that the accounts referred to in Paragraph 3(e) above are “no access” accounts to Debtors. 
  
 (d)    So long as no Default or Event of Default exists, Secured Party shall take such steps as they may be reasonably directed from
time to time by Debtors in writing which are not inconsistent with the provisions of this Security Agreement and the other Loan Documents and which Debtors deem necessary to enable Debtors to perform and comply with Take-Out Commitments and with
other agreements for the sale or other disposition in whole or in part of Mortgage Loans. Mortgage Collateral may be sold pursuant to a Take-Out Commitment so long as no Default or Event of Default exists. 
  
 (e)    So long as no Default or Event of Default exists,
upon receipt of a Collateral Release Request in the form attached hereto as Exhibit 4, Secured Party is hereby authorized, and does hereby agree, to release free and clear of the security interest granted to Secured Party by this Security
Agreement any Mortgage Loan, together with all other documentation relating thereto, to Debtors or as directed by Debtors; provided that after giving effect to such release, the Collateral Value of the Borrowing Base is equal or greater than the
Loan Balance. In the event any Collateral Release Request is received by Secured Party prior to 2:15 p.m. (Dallas time) on any Business Day, said Collateral shall be released on the following Business Day. Secured Party agrees to transmit all
Collateral released pursuant to this section as directed by Debtors at the expense of Debtors, and, upon request by Debtors, to complete the endorsements of the 
  

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 related instruments and the assignments of the related instruments, to execute the appropriate form of UCC financing
statement release, if necessary, and to execute such other appropriate instruments of transfer or release as Debtors shall reasonably request. Secured Party shall be fully protected in relying on any delivery instructions from Debtors in which
Debtors purport to be entitled to direct delivery of the items identified therein, and Debtors shall reimburse Secured Party for all expenses incurred in connection with the delivery of any item held by it under this section. 
  
 (f)    So long as no Default or Event of Default exists,
Debtors may obtain the release of the security interest in favor of Secured Party in all or any part of the Mortgage Collateral at any time, and from time to time, by paying to Secured Party, as a prepayment under the Credit Agreement, the Unit
Collateral Value of the Mortgage Collateral to be so released (such Unit Collateral Value being determined as of the date of such release). In the event that the Unit Collateral Value of the Mortgage Collateral designated by Secured Party, as
determined on the date in question, is less than the Unit Collateral Value of such Mortgage Collateral as determined on the date that such Mortgage Collateral was first delivered to Secured Party reasonably shall deem impaired its ability to satisfy
the Secured Indebtedness by recourse to such Mortgage Collateral, Debtors shall, within two (2) Business Days after the reasonable written request of Secured Party at any time during the term hereof either: 
  
 (i)    pay to Secured Party in
immediately available funds an amount equal to the aggregate Unit Collateral Value of any Mortgage Collateral designated by Secured Party (such Unit Collateral Value being determined as of the date of such redemption), or 
  
 (ii)    deliver to Secured Party other
Mortgage Collateral in substitution for such designated Mortgage Collateral, the aggregate Unit Collateral Value of which substituted Mortgage Collateral (determined at the time of substitution) is equal to or greater than the aggregate Unit
Collateral Value of the Mortgage Collateral being replaced (determined as of the date such Mortgage Collateral was first delivered to Secured Party hereunder). 
  

(g)    A Mortgage Loan which has been delivered to Secured Party under this Security Agreement shall be and remain Collateral until
released pursuant to Section 4(f) or until this Security Agreement is terminated, notwithstanding (i) any defect in any document delivered to Secured Party pursuant to the Credit Agreement or this Security Agreement, (ii) the failure of such
Mortgage Loan to have or retain Unit Collateral Value, (iii) the failure of Debtors to make timely delivery of any document required to be delivered to Secured Party under this Security Agreement or the Credit Agreement, or (iv) any other fact,
circumstance, condition or event whatsoever. For purposes of the preceding sentence, the funding of the origination or purchase of a Mortgage Loan from the proceeds of a Loan and/or the assignment of Unit Collateral Value to such Mortgage Loan by
Secured Party shall be deemed to be conclusive evidence of the delivery of such Mortgage Loan under the Credit Agreement, notwithstanding any subsequent determination by Secured Party that the documentation delivered for such Mortgage Loan was
incomplete or defective in any respect or that such Mortgage Loan should not have been assigned Unit Collateral Value. 
  

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 5.    Costs and Expenses.  Debtors shall pay all costs and expenses
of Secured Party directly relating to Secured Party’s performance of this Security Agreement and the enforcement of the rights and remedies of Secured Party hereunder and such costs and expenses, including, without limitation, reasonable fees
and expenses of legal counsel to Secured Party as provided in the Credit Agreement. 
  
 6.    Representations and Warranties.  Debtors warrant that: (a) Debtors is the sole owner of the Collateral (or, in the case of after-acquired Collateral, at the time Debtors
acquire rights in the Collateral, will be the sole owner thereof), subject only to the rights of Investors under the Take-Out Commitments; (b) except for security interests in favor of Secured Party any other security interests permitted under the
Credit Agreement, no Person has (or, in the case of after-acquired Collateral, at the time Debtors acquire rights therein, will have) any right, title, claim or interest in, against or to the Collateral and, in any event, so long as Secured Party
complies with the procedures relating to possession of Collateral set forth in this Security Agreement, Secured Party shall have a perfected, first priority security interest therein; (c) no consent of any Person is required that has not been
obtained for the granting of the security interests provided for herein, nor will any consent be required for Secured Party to exercise its rights under this Security Agreement in accordance with the terms of this Security Agreement; (d) to the best
of Debtor’s knowledge, all information heretofore, herein or hereafter supplied to Secured Party by or on behalf of Debtors with respect to the Collateral is or will be accurate and complete in all material respects; (e) the Take-Out
Commitments covering such Collateral may be collaterally assigned to Secured Party as described herein; (f) each Mortgage Loan is, at all dates included in the computation of the Collateral Value of the Borrowing Base an Eligible Mortgage Loan; (g)
to the best of Debtor’s knowledge, no material dispute, right of setoff, counterclaim or defense exists with respect to all or any part of the Collateral; (h) this Security Agreement constitutes the legal, valid and binding obligation of
Debtors enforceable against Debtors and the Collateral in accordance with its terms (subject to limitations as to enforceability which might result from bankruptcy, reorganization, insolvency or other similar laws affecting creditors’ rights
generally and general principles of equity); (i) in making and closing each Mortgage Loan originated by a third party, Debtors have or will have fully complied with, and all collateral documents delivered with respect to such Mortgage Loan comply or
will comply with, all applicable federal, state and local laws, regulations and rules, including, but not limited to, (1) usury laws, (2) the Real Estate Settlement Procedures Act of 1974, (3) the Equal Credit Opportunity Act, (4) the Federal Truth
in Lending Act, (5) Regulation Z of the Board of Governors of the Federal Reserve System and (6) all other consumer protection and truth-in-lending laws which may apply, and in each case with the regulations promulgated in connection therewith, as
the same may be amended from time to time; and Debtors shall maintain sufficient documentary evidence in its files with respect to such Mortgage Loans to substantiate such compliance; (j) upon the delivery of the Mortgage Note evidencing a Mortgage
Loan to Secured Party, Secured Party shall have a valid and perfected first priority security interest in such Mortgage Loan; and (k) immediately upon (1) the execution and delivery of the Credit Agreement, the Note and the other Loan Documents, (2)
the acquisition by Debtors of rights in such Collateral and (3) the filing with the Secretary of State of Texas of a financing statement showing Debtors, as debtors, and Secured Party, as secured party, and describing the Collateral, Secured Party
shall have a valid and perfected first priority security interest in the Collateral which is other than as described in clause (j) above, to the extent that a security interest in such other Collateral can be perfected by filing a financing
statement. 
  

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 7.    Covenants of Debtors.  Debtors hereby agree: (a) to procure,
execute and deliver from time to time any endorsements, assignments, financing statements and other writings deemed necessary or appropriate by Secured Party to perfect, maintain and protect Secured Party’s security interest hereunder and the
priority thereof and to deliver promptly to Secured Party all originals of any Collateral or proceeds thereof consisting of chattel paper or instruments; (b) not to surrender or lose possession of (other than to Secured Party), sell, encumber, or
otherwise dispose of or transfer, any Collateral or right or interest therein other than shipment of Mortgage Loans under Take-Out Commitments and as otherwise permitted under Paragraph 6 above or the Credit Agreement; (c) not to grant to any
Investor any other security interest in any Collateral, or otherwise acknowledge the creation of any ownership rights of any Investor with respect to any Collateral unless and until Secured Party has received the proceeds of such Collateral as
described herein; (d) at all times to account fully for and promptly to deliver to Secured Party, in the form received, all Collateral or proceeds thereof received, endorsed to Secured Party or in blank as appropriate and accompanied by such
assignments and powers, duly executed, as Secured Party shall request, and until so delivered all Collateral and proceeds thereof shall be held in trust for Secured Party, separate from all other property of Debtors and identified as the property of
Secured Party; (e) to keep accurate and complete records of the Collateral and at any reasonable time and at Secured Party’s expense (provided that during the continuation of any Event of Default, the following shall be at Debtors’
expense), upon demand by Secured Party, to exhibit to and allow inspection of the Collateral and the records, reports and information concerning the Collateral by Secured Party (or Persons designated by Secured Party); (f) to keep the records
concerning the Collateral at the location(s) set forth in Paragraph 15 below and not to remove the records from such location(s) without the prior written consent of Secured Party; (g) not to materially modify, compromise, extend, rescind or
cancel any deed of trust, mortgage, note or other document, instrument or agreement connected with any Mortgage Loan pledged under this Security Agreement or any document relating thereto or connected therewith or consent to a postponement of strict
compliance on the part of any party thereto with any term or provision thereof in any material respect; (h) to keep the Collateral insured against loss, damage, theft, and other risks customarily covered by insurance, and such other risks as Secured
Party may reasonably request; (i) to do all acts that a prudent investor would deem necessary or desirable to maintain, preserve and protect the Collateral; (j) not knowingly to use or permit any Collateral to be used unlawfully or in violation of
any provision of this Security Agreement, the Credit Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral; (k) to pay (or require to be paid) prior to their becoming delinquent all taxes,
assessments, insurance premiums, charges, encumbrances and liens now or hereafter imposed upon or affecting any Collateral except as otherwise permitted in the Credit Agreement; (l) to notify Secured Party before any such change shall occur of any
change in Debtors’ names, identities, structures or jurisdictions through merger, consolidation or otherwise; (m) to appear in and defend, at Debtors’ cost and expense, any action or proceeding which may affect its title to or Secured
Party’s interest in the Collateral; and (n) to comply in all material respects with all laws, regulations and ordinances relating to the possession, operation, maintenance and control of the Collateral. 
  

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 8.    Collection of Collateral Payments. 
  
 (a)    Until Secured Party gives notice to Debtors
pursuant to Paragraph 8(b) below or exercises the Secured Party’s rights under Paragraph 10 hereof, Debtors shall be entitled to receive all collections on any and all of the Mortgage Notes, Mortgages and any documents related to
the foregoing (hereinafter collectively called “Collections”) and use the same in the normal course of business. Upon notice from Secured Party to Debtors given after the occurrence and during the continuation of an Event of
Default, Debtors shall furnish to Secured Party not later than the tenth Business Day after the end of each month a report on all Collections received during the preceding month and provide the same accounting therefor as Debtors customarily furnish
the Investors therein, including with respect to Collections on each Mortgage Loan: (1) the name of the Obligor, (2) Debtors’ loan number for the Mortgage Loan, (3) current principal balance of the Mortgage Loan, (4) current escrow balance with
respect to the Mortgage Loan, (5) number and amount of past due payments on the Mortgage Loan and (6) the amount of the Collections received during such month with respect to the Mortgage Loan, itemized to show (A) principal portion, (B) interest
portion and (C) portion thereof representing amounts paid in escrow for real estate taxes and insurance. 
  
 (b)    Upon notice from Secured Party to Debtors given after the occurrence and during the continuation of an Event of Default,
Debtors shall hold all Collections representing principal payments and prepayments and escrows for real estate taxes and insurance in trust for Secured Party and shall promptly remit the same to Secured Party. All amounts representing the principal
payments and prepayments on Mortgage Loans which are delivered to Secured Party pursuant to the preceding sentence shall be deposited in the Settlement Account and all amounts representing real estate tax and insurance escrows for Mortgage Loans
which are delivered to Secured Party pursuant to the preceding sentence shall be deposited in an escrow account with any bank satisfactory to Debtors and Secured Party, to be held for the payment of the applicable real estate taxes and insurance
premiums. 
  
 (c)    Debtors hereby agree to
indemnify, defend and save harmless Secured Party and its officers, employees and representatives (collectively, the “Indemnified Persons”) from and against all liabilities and expenses on account of any adverse claim asserted against
Secured Party relating to any moneys received by Secured Party on account of any Collections WHETHER OR NOT SUCH LIABILITIES AND EXPENSES ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR
ARE CAUSED IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY INDEMNIFIED PERSON (except for any such liabilities or expenses arising as a direct result of the gross negligence or willful misconduct of such Indemnified Person)
and such obligation of Debtors shall continue in effect after and notwithstanding the discharge of the Secured Indebtedness and/or the release of the security interest granted in Paragraph 3 above. 
  
 9.    Authorized Action by Secured
Party.  Debtors hereby irrevocably appoint Secured Party its attorney in fact, with full power of substitution, for and on behalf and in the name of Debtors, which power of attorney shall become effective upon the occurrence and remain

  

 8 

 effective during the continuance of an Event of Default, to (i) endorse and deliver to any Person any check, instrument
or other paper coming into Secured Party’s possession and representing payment made in respect of any Mortgage Note delivered to and held by Secured Party hereunder as Mortgage Collateral or in respect of any other Collateral or Take-Out
Commitment; (ii) prepare, complete, execute, deliver and record any assignment to Secured Party or to any other Person of any Mortgage relating to any Mortgage Note delivered to and held by Secured Party hereunder as Mortgage Collateral; (iii)
endorse and deliver any Mortgage Note delivered to and held by Secured Party hereunder as Mortgage Collateral and do every other thing necessary or desirable to effect transfer of all or any part of the Mortgage Collateral to Secured Party or to any
other Person; (iv) take all necessary and appropriate action with respect to all Secured Indebtedness and the Mortgage Collateral to be delivered to Secured Party or held by Debtors in trust for Secured Party; (v) commence, prosecute, settle,
discontinue, defend, or otherwise dispose of any claim relating to any Take-Out Commitment or any part of the Mortgage Collateral; and (vi) sign Debtors’ name wherever appropriate to effect the enforcement of Secured Party’s rights and
remedies set forth in this Agreement relating to the Secured Indebtedness and/or the Mortgage Collateral. This Paragraph 9 shall be liberally, not restrictively, construed so as to give the greatest latitude to Secured Party’s power, as
Debtors’ attorney-in-fact, to collect, sell, and deliver any of the Mortgage Collateral and all other documents relating thereto. The powers and authorities herein conferred on Secured Party may be exercised by Secured Party through any Person
who, at the time of the execution of a particular instrument, is an authorized officer of Secured Party. The power of attorney conferred by this Paragraph 9 is granted for a valuable consideration and is coupled with an interest and
irrevocable so long as the Secured Indebtedness, or any part thereof, shall remain unpaid or the Commitment is outstanding. All Persons dealing with Secured Party, or any officer thereof acting pursuant hereto shall be fully protected in treating
the powers and authorities conferred by this Paragraph 9 as existing and continuing in full force and effect until advised by Secured Party that the Secured Indebtedness have been fully and finally paid and satisfied and the Commitment has
been terminated. Debtors hereby authorize Secured Party to file, without the signature of Debtors where permitted by law, one or more financing statements, continuation statements or initial financing statements and amendments thereto indicating the
Collateral. Debtors further agree that a carbon, photographic or other reproduction of this Agreement or any financing statement describing any Collateral is sufficient as a financing statement and may be filed in any jurisdiction by Secured Party.

  
 10.    Default and Remedies.

  
 (a)    While an Event of Default exists
under any Loan Document, Secured Party may, without notice to or demand upon Debtors: (a) foreclose or otherwise enforce Secured Party’s security interest in the Collateral in any manner permitted by law or provided for hereunder; (b) sell or
otherwise dispose of in a commercially reasonable manner the Collateral or any part thereof at one or more public or private sales or at any broker’s board or on any securities exchange, whether or not such Collateral is present at the place of
sale, for cash or credit or future delivery and without assumption of any credit risk, on such terms and in such manner as Secured Party may determine; (c) require Debtors to assemble the Collateral and/or books and records relating thereto and make
such available to Secured Party at a place to be designated by 
  

 9 

 Secured Party; (d) enter into property where any Collateral or books and records relating thereto are located and take
possession thereof with or without judicial process; and (e) prior to the disposition of the Collateral, prepare it for disposition in any manner and to the extent Secured Party deems appropriate. Whether or not Secured Party exercises any right
given pursuant to this section upon the occurrence of any Event of Default, Secured Party shall have as to any Collateral all other rights and remedies provided for herein and all rights and remedies of a secured party under the Texas Uniform
Commercial Code and, in addition thereto and not in lieu thereof, all other rights or remedies at law or in equity existing or conferred upon Secured Party by other jurisdictions or other applicable law or given to Secured Party pursuant to any
security agreement, other instrument or agreement heretofore, now, or hereafter given as security for Debtors’ obligations hereunder. 
  
 (b)    Secured Party is authorized, at any such sale, if it deems it advisable so to do, to restrict the prospective bidders or
purchasers to Persons who will represent and agree that they are purchasing for their own account, for investment, and not with a view to the distribution or sale of any of the Collateral. Upon any sale or other disposition pursuant to this Security
Agreement, Secured Party shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral or portion thereof so sold or disposed of and all proceeds thereof shall be promptly distributed in accordance with the terms of
the Credit Agreement. Each purchaser at any such sale or other disposition shall hold the Collateral free from any claim or right of whatever kind, including any equity or right of redemption of Debtors, and Debtors specifically waive (to the extent
permitted by law) all rights of redemption, stay or appraisal which they have or may have under any rule of law or statute now existing or hereafter adopted. Secured Party shall give Debtors only such notice and shall publish such notice as may be
required by the Texas Uniform Commercial Code or by other applicable law of the intention to make any such public or private sale or sale at broker’s board or on a securities exchange. Debtors acknowledge and agrees that a private sale of any
Collateral pursuant to any Take-Out Commitment shall be deemed to be a sale of such Collateral in a commercially reasonable manner, provided that such sale is substantially on the terms and conditions of such Take-Out Commitment. Any such public
sale shall be held at such time or times within the ordinary business hours and at such place or places permitted by the Texas Uniform Commercial Code. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as
Secured Party may determine. Secured Party may adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which
the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, (i) the Collateral so sold may be retained by Secured Party until the selling price is paid by the purchaser thereof, (ii)
Secured Party shall not incur any liability in case of the failure of such purchaser to take up and pay for the Collateral so sold, and (iii) in case of any such failure, such Collateral may again be sold as provided herein. Nothing contained in
this Security Agreement shall prohibit the Lender from purchasing the Collateral at such sale. 
  
 11.    Waiver.  Secured Party shall not incur any liability as a result of the sale of the Collateral in a commercially reasonable manner, or any part thereof, at any public or
private sale. Debtors each hereby waive any claims it may have against Secured Party arising by reason of the 
  

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 fact that the price at which the Collateral may have been sold at such private sale was less than the price which might
have been obtained at a public sale or was less than the aggregate amount of the Secured Indebtedness then outstanding. 
  
 12.    Binding Upon Successors.  All rights of Secured Party under this Security Agreement shall inure to the benefit
of Secured Party and its successors and assigns, and all obligations of Debtors shall bind their successors and assigns; provided that Debtors shall not have the right to assign their rights or obligations under this Security Agreement without the
consent of Secured Party. 
  
 13.    Entire
Agreement; Severability.  This Security Agreement and the Credit Agreement contains the entire security agreement and collateral agency agreement with respect to the Collateral between Secured Party and Debtors and supersedes all prior
written or oral agreements and understandings relating thereto. All waivers by Debtors provided for in this Security Agreement have been specifically negotiated by the parties with full cognizance and understanding of their rights. If any of the
provisions of this Security Agreement shall be held invalid or unenforceable, this Security Agreement shall be construed as if not containing such provisions, and the rights and obligations of the parties hereto shall be construed and enforced
accordingly. 
  
 14.    Choice of
Law.  This Security Agreement shall be construed in accordance with and governed by the laws of the State of Texas, except to the extent that the perfection and the effect of perfection or non-perfection of the security interest
created hereunder, in respect of any of the Collateral, are governed by the laws of a jurisdiction other than the State of Texas. Where applicable and except as otherwise defined herein or in the Credit Agreement, terms used herein have the meanings
given them in the Texas Uniform Commercial Code. 
  
 15.    Place of Business; Records.  Debtors represent and warrant that their principal place of business and chief executive office is at the address set forth beneath their signature below, and that
their books and records concerning the Collateral are kept at their principal place of business and chief executive office. Debtors shall not change their principal place of business and chief executive office without thirty (30) days’ prior
written notice to Secured Party. 
  
 16.    Notice.  Except where instructions or notices are expressly authorized elsewhere in this Security Agreement to be given by telephone or by other means of transmission, all instructions, notices
and other communications to be given to any party hereto shall be given as provided in the Credit Agreement. 
  
 17.    Modification of Agreement.  No provisions of this Agreement may be amended or waived (except for waivers
expressly provided for hereunder) unless such amendment or waiver is in writing and is signed by Debtors and Secured Party. 
  

 11 

 18.    Counterparts; Fax.  This Agreement may be executed in
counterparts, and it shall not be necessary that the signatures of both of the parties hereto be contained on any one counterpart hereof; each counterpart shall be deemed an original, but all counterparts together shall constitute one and the same
instrument. This Agreement may be duly executed by facsimile or other electronic transmission. 
  
 [The remainder of this page is intentionally left blank.] 
  
  

 12 

 EXECUTED as of the day and year first above written. 
  

	 DUXFORD FINANCIAL, INC., a California
 Corporation

		
	 By:
	 	 
	 	

	 	 	 Name:
 Title:

		
	 	 	 Address for Notices:
  
 1300 Dove Street, Suite 200
 Newport Beach, California 92660
 Fax:   949.471.2110
 Tel:    949.471.2000

	
	 BAYPORT MORTGAGE, L.P. a California
 Limited Partnership

		
	 By:
	 	 Duxford Financial, Inc., a California
 Corporation, its general partner

		
	 By:
	 	 
	 	

	 	 	 Name:
 Title:

	 	 	 
		
	 By:
	 	 
	 	

	 	 	 Name:
 Title:

	 	 	 
		
	 By:
	 	 
	 	

	 	 	 Name:
 Title:

		
	 	 	 Address for Notices:
  
 1300 Dove Street, Suite 200
 Newport Beach, California 92660
 Fax:   949.471.2110
 Tel:    949.471.2000

 GUARANTY BANK 
  

	 By:
	 	 
	 	

	 	 	 Name:
 Title:
  
 Address for Notices:
  
 8333 Douglas Avenue
 Dallas, Texas 75225
 Attention: Judi Flusche
 Fax:   (214) 360-1660
 Tel:    (214) 360-2782
  

	 cc:
	 	 4330 La Jolla Village Drive, Suite 310
 San Diego, California 92122
 Attention: Jon M. Larson
 Fax:   (858) 597-8830
 Tel:    (858) 597-8842

  

 EXHIBITS AND SCHEDULES 
 TO 
 SECURITY AGREEMENT 
  

	 SCHEDULE

	  	DOCUMENT

		
	A	  	Required Mortgage Documents
		
	B	  	Additional Required Mortgage Documents
		
	 EXHIBIT

	  	DOCUMENT

		
	1	  	Form of Debtor Trust Receipt
		
	2	  	Form of Shipping Request
		
	3	  	Form of Bailee Letter to Investors
		
	4	  	Form of Collateral Release Request

  

 SCHEDULE A 
  
 REQUIRED MORTGAGE DOCUMENTS 
  

A.    Original Mortgage Note executed in favor of a Debtor or the originator who sold such Mortgage Note to a Debtor (with a
complete series of endorsements without recourse from the original payee thereof, through any subsequent holders to such Debtor if purchased by such Debtor and endorsed by an authorized signatory of such Debtor in blank). 
  
 B.    Unless the Mortgage is registered on the MERS(R)
System, an assignment of the Mortgage executed by the Debtors in favor of Secured Party in recordable form, such assignment may be in the form of one or more blanket assignments covering Mortgage Loans located in the same county, if Secured Party so
agrees. 
  
 C.    If the Mortgage is
registered on the MERS(R) System and noting the presence of a MIN, an assignment of the Mortgage executed by the Debtors in favor of MERS in recordable form. 
  
 D.    Originals or copies of assignments from each holder of the Mortgage Loan to each subsequent assignee, if any, to complete the
chain of record ownership of such Mortgage Loan to the applicable Debtor. 
  
 E.    The original or a copy of the Mortgage, including all available Mortgage riders relating to the Mortgage Loan, noting the presence of the MIN of the Mortgage Loan and language indicating that
the Mortgage Loan is a MOM Loan if the Mortgage Loan is a MOM Loan, with the recording information indicated thereon. 
  
 F.    A copy of the executed master Take-Out Commitment relating to such Mortgage Note, a certificate of Debtors confirming that such
Mortgage Loan will be delivered under such Take-Out Commitment. 
  
 G.    A copy, certified by the title insurance company or the closing Secured Party, of all applicable and necessary powers-of-attorney and assumed name certificates. 
  

 SCHEDULE B 
  
 ADDITIONAL REQUIRED MORTGAGE DOCUMENTS 
  
 1.    The original recorded Mortgage securing the Mortgage Note if not delivered to Secured Party.

  
 2.    Evidence of fire and extended
coverage insurance in an amount not less than the highest of the following: (a) the amount of the Mortgage Loan, (b) 90% of the insurable value of the improvements, and (c) an amount sufficient to prevent co-insurance. Secured Party reserves the
right to obtain a loss payable endorsement in its favor if it so desires. 
  
 3.    Evidence of Notice to Customer required by the federal Truth-in-Lending Law and Federal Reserve Regulation Z. 
  
 4.    In the case of an FHA Mortgage Note, an FHA insurance certificate or a commitment to deliver such;
in the case of a VA mortgage note; a VA guaranty certificate or a commitment to deliver such and in the case of a conventional mortgage note, an appraisal. 
  
 5.    A certified copy of the preliminary policy of or commitment for title insurance insuring the Mortgage as a first lien on the
property subject thereto written by a title company and in amount and containing exceptions satisfactory to Secured Party. 
  
 6.    Evidence of certificate of completion, as appropriate under the circumstances. 
  
 7.    Other documentation as Secured Party may reasonably
deem appropriate, as well as documentation necessary to fulfill requirements of the Take-Out Commitments. 
  
 8.    Such additional documents as may be necessary in the opinion of Secured Party to transfer to Secured Party the title to any
Collateral pledged and/or hypothecated pursuant to the Security Agreement. 
  

 EXHIBIT 1 
  

TRUST RECEIPT 
  
 DATE:                         , 2003

  
 GUARANTY BANK 
 8333 Douglas Avenue 
 11th Floor 
 Dallas, Texas 75225 
  
 Attn:
                                        
         
  
 Pursuant to Paragraph 4 of
the Security Agreement by and among Guaranty Bank and Duxford Financial, Inc. and Bayport Mortgage, L.P., as “Debtors” (as amended, supplemented or restated from time to time, the “Security Agreement”), Debtors request the
temporary transfer of the original Mortgage Note(s) as listed below to allow Debtors to make corrections to such Mortgage Notes. We acknowledge that these Mortgage Notes are being used as Mortgage Collateral for the warehouse line of credit
established by the Credit Agreement dated as of August 29, 2003 by and among Secured Party and Debtors (as amended, supplemented or restated from time to time, the “Credit Agreement”). 
  

	 Obligor
  

	 	 Loan Amount
  

	 	 Collateral Value
  

  
 Debtors agree to hold
the Mortgage Notes in trust for Secured Party, as a custodian, bailee and agent for the benefit of Secured Party. Debtors agree to do the following within [ten (10)] days of this date: 
  
 (a)    Return the Mortgage Notes to Secured Party, or 
  
 (b)    Pay to Secured Party the aggregate Unit Collateral
Value of the Mortgage Notes. 
  
 In the event Debtors are unable
for any reason to comply with the terms of this Trust Receipt, Debtors shall immediately return the Mortgage Notes to Secured Party. 
  
 By accepting the Mortgage Notes, Debtors shall be bound by the terms of this Trust Receipt. Secured Party requests that Debtors acknowledge the receipt of
the Mortgage Notes and this Trust Receipt by signing below. Capitalized terms not defined herein are used as defined in the Credit Agreement. 

 REQUESTED BY: 
  
 DUXFORD FINANCIAL, INC., a California Corporation 
  
  

		
	By:	 	 
	 	

	 	 	Name:
	 	 	Title:

  

		
	By:	 	 
	 	

	 	 	Name:
	 	 	Title:

  

	 BAYPORT MORTGAGE, L.P.,
 a
California Limited Partnership

		
	By:	 	Duxford Financial, Inc., its general partner
	 	 	 
		
	By:	 	 
	 	

	 	 	Name:
	 	 	Title:
		
	By:	 	 
	 	

	 	 	Name:
	 	 	Title:

  

	STATE OF	  	§
	 	  	§
	COUNTY OF	  	§

  
 This instrument was
ACKNOWLEDGED before me the              day of
                        , 2003, by              of
Duxford Financial, Inc., a California corporation, on behalf of said corporation in its individual capacity and its capacity as general partner of Bayport Mortgage, L.P., a California limited partnership. 
  

			
	  	 	 	 	  
	 	 	 	

	 	 	 	 	Notary Public—State of
                                        
                                       
 
			
	My Commission expires: 	 	 	 	  
	 	 	 	

	 	 	 	 	Printed Name of Notary
	
	 	 	 	 

 EXHIBIT 2 
  
 FORM OF SHIPPING REQUEST 
  
 Date:                     ,
2003 
  
 GUARANTY BANK 
 8333 Douglas Avenue 
 Dallas, Texas 75225 
 Attention:
                                     
 FAX: (214) 360-1660 
 Telephone: (214) 360-             
  
 This letter is to serve as authorization for you to endorse and ship the following loans: 
  

	Loan Number	 	Obligor Name	 	Note Amount

  
 to the following address under
Take-Out Commitment #                             (the “Commitment”) from an Investor
as follows: 
  
 NAME: 
 ADDRESS: 
  
 ATTENTION: 
  
 Please endorse the notes as follows: 
  
 Please ship the loan documents either by
                             or by such other courier service as we have designated to you as
“approved.” The courier shall act as an independent contractor bailee acting solely on your behalf, but we acknowledge and agree that you are not responsible for any delays in shipment caused by courier or any other actions or inactions of
the courier, including, without limitation, any loss of any loan documents; however, because the Commitment expires on                     ,
200    , we ask that you deliver the loan documents to the courier no later than                     ,
200    . 
  

 Please have the courier bill us by using our acct.
#                    . If you should have any questions, or should feel the need for additional documentation, please do not hesitate to call
                            . 
  

	 DUXFORD FINANCIAL, INC., a California
 Corporation

		
	 By:
	 	 
	 	

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

	 	 	 	 	 
	 By:
	 	 	 	 
	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

	
	 BAYPORT MORTGAGE, L.P., a California
 Limited Partnership

		
	 By:
	 	 Duxford Financial, Inc., its general partner

		
	 By:
	 	 
	 	

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

  

 INSTRUCTIONS FOR ELECTRONIC TRANSFER 
 OF SHIPPING REQUEST 
  
 I.    Narrative to be included on face of email from Debtor to Secured Party: 
  
 The Shipping Request attached to this email is hereby (i) electronically signed by
                            , the [insert title] of [Duxford Financial, Inc. or Bayport
Mortgage, L.P.], a California [corporation or limited partnership] (the “Debtor”), on the date this email is sent to you, (ii) adopted by the Debtor in all respects, and (iii) delivered pursuant to the Security Agreement dated as of August
29, 2003 between Guaranty Bank (“Secured Party”) and Debtor (the “Security Agreement”). The Schedule of Mortgage Loans incorporated into such Shipping Request is also attached to this email. 
  
 Documents to be attached: 
  

	 Shipping Request 
	 Schedule of Mortgage Loans to be Shipped 

  

 EXHIBIT 3 
  

BAILEE LETTER FOR INVESTORS 
  

	
	  	GUARANTY BANK
	
	  	8333 Douglas Avenue
	
	  	Dallas, Texas 75225
	 	  	 Attention:
                                
 Mortgage Finance Department
 FAX: (214)
360-1660
 Telephone: (214) 360-        

  
 The enclosed mortgage notes and other
documents (the “Mortgage Documents”) as more particularly described on the attached schedule, have been (i) sold to GUARANTY BANK (“Guaranty”) under each Mortgage Loan Purchase and Sale Agreement
(collectively, as renewed, extended, amended, or restated, the “Purchase Agreement”) dated as of August 29, 2003 between each of DUXFORD FINANCIAL, INC. and BAYPORT MORTGAGE, L.P. (collectively, the
“Companies”) and Guaranty or (ii) assigned and pledged to Guaranty as collateral under the Credit Agreement (as renewed, extended, amended, or restated, the “Credit Agreement”) dated as of August 29, 2003
between the Companies and Guaranty. 
  
 The Mortgage Documents themselves are
being delivered to you for purchase under an existing commitment (the “Takeout Commitment”). Either payment in full for the Mortgage Documents or the Mortgage Documents themselves must be received by Guaranty within forty (40) days after
the date of this letter. Until that time, you are deemed to be holding the Mortgage Documents in trust as bailee for Guaranty, subject to the security interest granted Guaranty in accordance with the applicable provisions of the Uniform Commercial
Code. No property interest in the Mortgage Documents is transferred to you until Guaranty receives the greater of (i) the agreed purchase price of the Mortgage Documents or (ii)
$                    . If you receive conflicting instructions regarding the Mortgage Documents from the Company and Guaranty, you agree to
act in accordance with Guaranty’s instructions. GUARANTY RESERVES THE RIGHT, AT ANY TIME BEFORE IT RECEIVES FULL PAYMENT, TO NOTIFY YOU AND REQUIRE THAT YOU RETURN THE MORTGAGE DOCUMENTS TO GUARANTY. 
  
 Payment for the Mortgage Documents must be made by wire transfer of immediately available
funds to: 
  

	GUARANTY BANK	  	 Account Number                             

	 ABA Number:
	  	 Attn:

	 Further Credit:
                                       
 
	  	 TEL:

	 	  	 FAX:

  

 BY ACCEPTING THE MORTGAGE DOCUMENTS DELIVERED TO YOU WITH THIS LETTER, YOU CONSENT TO HOLD THE MORTGAGE DOCUMENTS FOR
THE BENEFIT OF GUARANTY AND TO BE GUARANTY’S BAILEE ON THE TERMS DESCRIBED IN THIS LETTER. GUARANTY REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE DOCUMENTS AND THIS LETTER BY SIGNING AND RETURNING TO GUARANTY THE ENCLOSED COPY
OF THIS LETTER, BUT YOUR FAILURE TO DO SO DOES NOT NULLIFY YOUR CONSENT OR OTHERWISE AFFECT OR IMPAIR ANY TERM OR CONDITION OF THIS LETTER OR THEIR BINDING EFFECTS ON YOU. If you fail to make full payment to Guaranty for it within forty (40)
days after the date of this letter, you are instructed to return all of the Mortgage Documents to Guaranty. The preceding provision in no way affects or impairs any claim or cause of action against you in respect of the Takeout Commitment.

  
 This letter binds you and your successors, assigns, trustees,
conservators, and receivers and inures to Guaranty and its respective successors and assigns. 
  

	 Very truly yours,
  

	 GUARANTY BANK
  
  

		
	By:	 	 
	 	

	 	 	 Name:

	 	 	 Title:

  
  

	 Acknowledged and Agreed as of             ,
200            

	 
	 [NAME OF BAILEE]
  

		
	By:	 	 
	 	

	 	 	 Name:

	 	 	 Title:

  

 EXHIBIT 4 
  

COLLATERAL RELEASE REQUEST 
  

	 TO: GUARANTY BANK as Secured Party
	  	Date:                        

  

	1.	DUXFORD FINANCIAL, INC. and BAYPORT MORTGAGE, L.P. (collectively, the “Debtors”) hereby request the release of the Mortgage Collateral herein specified, pursuant to
Paragraph 4(f) of the Security Agreement (as amended, supplemented or restated from time to time, the “Agreement”) between Debtors and Guaranty Bank (“Secured Party”), and hereby direct Secured Party, in accordance with the
provisions of the Agreement and that certain Credit Agreement dated as of August 29, 2003, between Debtors and Secured Party and the Lenders named therein (as from time to time amended, supplemented or restated, the “Credit Agreement”) to
hold or deliver the Mortgage Collateral described on the attached schedule as directed herein. Capitalized terms used herein and defined in the Credit Agreement shall be used herein as so defined. 

  

	2.	Release Requested: 

  
 Debtors hereby request that Secured Party release any security interest it may have in each Mortgage Note (the “Identified Notes”) described on
Schedule I attached hereto. 
  

	3.	Delivery Instructions: 

  
 Debtors hereby direct Secured Party to (check applicable blank): 
  

	 	        	To hold the Identified Notes pending written delivery instructions from Debtors. 

  

	 	        	To deliver the Identified Notes to the Person described in the attached instructions in accordance with the attached instructions. 

  

	4.	The undersigned officers of Debtors represent and warrant to Secured Party: 

  

	 	(a)	Debtors are entitled to receive the requested release under the terms and conditions of the Agreement and the Credit Agreement; 

  

	 	(b)	no Default or Event of Default has occurred and is continuing under the Credit Agreement; 

  

	 	(c)	no change or event which constitutes a Material Adverse Effect has occurred; and 

	 (d)
	  	(i)	  	the Collateral Value of the Borrowing Base (after giving effect to the release requested pursuant to Paragraph 2 of this Collateral Release Request) is
$                    
			
	 	  	(ii)	  	the Loan Balance is $                    
			
	 	  	(iii)	  	Debtors are entitled to such release. (Requirement of Agreement: item (i) not less than item (ii).

  
 5.    The
representations and warranties of Debtors contained in the Credit Agreement and those contained in each other Loan Document to which Debtors are a party (other than those representations and warranties which are by their terms limited to the date of
the agreement in which they were initially made) are true and correct in all material respects on and as of the date hereof. 
  

	 DUXFORD FINANCIAL, INC., a California
 Corporation

		
	By:	 	 
	 	

	 	 	 Name:
	 	 	 	  

	 	 	 Title:
	 	 	 	  

				
	By:	 	 	 	 	 	 
	 	

	 	 	 Name:
	 	 	 	  

	 	 	 Title:
	 	 	 	  

	
	 BAYPORT MORTGAGE, L.P. a California
 Limited Partnership

		
	By:	 	 Duxford Financial, Inc., its general partner

	 	

				
	 	 	By:	 	 	 	 
	 	 	 	

	 	 	 	 	 Name:
	 	  

	 	 	 	 	 Title:
	 	  

				
	 	 	By:	 	 	 	 
	 	 	 	

	 	 	 	 	 Name:
	 	  

	 	 	 	 	 Title:
	 	  

 SCHEDULE I 
  
 MORTGAGE NOTES TO BE RELEASED 
  

	 Loan Number

	  	Date

	  	Original
Principal
Amount

	  	Collateral
Value

	  	Maker

	  	Payee

	  	Interest Rate

	  	Maturity
Date

  
  
  
  
 COLLATERAL DELIVERY INSTRUCTIONS 

 INSTRUCTIONS FOR COLLATERAL RELEASE REQUEST 
  
 I.    Narrative to be included on face of email from Debtor to Secured
Party: 
  
 The Shipping Request attached to this email is hereby (i)
electronically signed by                             , the [insert title] of [Duxford
Financial, Inc. or Bayport Mortgage L.P.], a California [corporation or limited partnership] (the “Debtor”), on the date this email is sent to you, (ii) adopted by the Debtor in all respects, and (iii) delivered pursuant to the Security
Agreement dated as of August 29, 2003 between Guaranty Bank (“Secured Party”) and Debtor (the “Security Agreement”). The Schedule of Mortgage Loans incorporated into such Shipping Request is also attached to this email.

  
 Documents to be attached: 
  

	 Shipping Request 
	 Schedule of Mortgage Loans to be Shipped 

 EXHIBIT G 
  

[INTENTIONALLY OMITTED] 

 EXHIBIT H 
  

BORROWING BASE WORKSHEET

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