Document:

Exhibit 10.55

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. A COMPLETE VERSION
OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

PC OPTICAL STORAGE TECHNOLOGY PATENT LICENSE
AGREEMENT

 

This PC Optical Storage Technology Patent License Agreement (“Agreement”),
executed as of January 25, 2006 (the “Execution Date”), is made and
entered into by and between, on the one hand, Zoran Corporation, a Delaware
corporation with its principal place of business at 1390 Kifer Road,
Sunnyvale, CA, 94086, USA and its wholly owned subsidiary, Oak Technology, Inc.
(collectively, “Zoran”), and, on the other hand, MediaTek, Inc., a
Taiwanese corporation with its with its principal place of business at No. 1-2,
Innovation Road 1, Science-Based Industrial Park, Hsin-Chu City, Taiwan 300,
R.O.C. (“MediaTek”). This Agreement shall be effective as of January 25,
2006 (the “Effective Date”).

 

RECITALS

 

A.            Zoran owns and
controls, and has the right to license, the Zoran Licensed Patents (as defined
below); and

 

B.            MediaTek desires to
obtain a license under the Zoran Licensed Patents during the term of this Agreement,
all as is more particularly described in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and of other good and valuable consideration, the parties
agree as follows:

 

1.             DEFINITIONS

 

a.             “Subsidiary” means, with respect to a given
entity, any corporation or other entity which directly or indirectly is
controlled by the given entity for so long as such control exists. Control
means the direct or indirect ownership by the given entity of more than fifty
percent (50%) of the Voting Power or the power to direct or cause the direction
of the day-to-day management, operations, business and policies of the
controlled entity, whether through the ownership of voting securities, by
contract or otherwise.

 

b.             “After-Acquired Subsidiary” means any entity that becomes a
Subsidiary of a party during the term of this Agreement.

 

c.             “Assert” means to bring an action of any nature before any
legal, judicial, arbitration, administrative, executive or other type of body
or tribunal that has or claims to have authority to adjudicate such action in
whole or in part. Examples of such body or tribunal include, without
limitation, United States State and Federal Courts, the United States
International Trade Commission and any foreign counterparts of any of the
foregoing.

 

1

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE CONFIDENTIALITY
REQUEST. OMISSIONS ARE DESIGNATED AS [****]. [****]. A COMPLETE VERSION OF THIS
EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

d.             “Change of Control” means a transaction or series of
related transactions in which either (i) a party consolidates or merges
with or into a third party, or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets directly or
indirectly to a third party, or any third party consolidates with, or merges
with or into, a party, in each case unless the direct and indirect holders of
the outstanding voting stock or of other voting rights (referred to for
convenience as the “voting power”) entitled to elect directors or other
managing authority for such entity immediately prior to the transaction or series of
related transactions will hold, directly or indirectly, more than fifty (50%)
of the voting power of the surviving or transferee third party immediately
after the transaction or series of related transactions; or (ii) a
third party or “group” (as such term is used in Rule 13d-5 under the
United States Securities Exchange Act of 1934) is or becomes, or has the right
to become, the beneficial owner, directly or indirectly, of more than 50% of
the total voting power of a party.

 

e.             “Economic Interest” means rights of a party to receive,
directly or indirectly, a share of the profits of a Subsidiary associated with
securities or other equity or ownership interest in such Subsidiary (including,
for example, rights to receive dividends and other profit distributions),
whether or not actually distributed.

 

f.              “Former Subsidiary” means any entity that ceases to be a
Subsidiary of a party during the term of this Agreement.

 

g.             [****].

 

h.             “Licensed Product” means any product that
is a PC Optical Storage Device, the
manufacturing, using, selling, offering to sell, leasing, or importing of which
in any country would, in the absence of the license granted by this Agreement, directly
or indirectly infringe one or more claims of the Zoran Licensed Patents.

 

i.              “Patents” mean (i) any patent (including any utility
patent, design patent, patent of importation, patent of addition, certificate
of addition, certificate or model of utility) granted by the United States or any
other country, (ii) any reissue, continuation, parent, division,
extension, renewal, or continuation-in-part of any of the foregoing, (iii) any
counterpart anywhere in the world of any of the foregoing, (iv) any
patent application in the United States or any other country, and (v) any
patent application that is a continuation, continuing application,
continuation-in-part or division of any such application.

 

j.              “PC  Optical Storage Business”
means [****].

 

k.             “PC  Optical Storage Device”
means any data storage device [****].

 

2

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. A COMPLETE VERSION
OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

l.              “Zoran Licensed Patents” mean (i) the patents and patent
applications listed in Exhibit B; (ii) any existing or future
U.S. or foreign patent or patent application from which any of the foregoing
claim priority; and (iii) any counterpart, continuation,
continuation-in-part, division, reissue or re-examination of any of the
foregoing, whether now existing or filed after the Execution Date.

 

m.            “Voting Power” means the right to exercise voting power with respect to the election of
directors or similar managing authority of an entity (whether through direct or
indirect beneficial ownership of shares or securities of such entity or
otherwise).

 

n.             “Sold” means any direct or indirect disposition, by sale, lease, use or
otherwise, of a Licensed Product, whether or not for consideration.

 

2.             LICENSES

 

a.             Zoran’s
License to MediaTek.

 

(i)            Subject
to the limitations on the scope of license grant described in Section 2(d) below,
Zoran, on behalf of itself and its Subsidiaries, hereby grants to MediaTek and
its Licensed Subsidiaries, for the term of this Agreement only, a
non-exclusive, non-transferable and non-assignable (except as set forth in Section 7)
license, without the right to sublicense, under the Zoran Licensed Patents
only, to make, have made (subject to Section 2(d) below), use,
import, lease, offer to sell, sell (directly or indirectly) and otherwise
transfer Licensed Products and to practice any method or process in the PC
Optical Storage Business.

 

(ii)           No
implied licenses are granted hereunder. Nothing contained in this Agreement
shall expressly or by implication or by estoppel or otherwise give MediaTek any
right to license Zoran Licensed Patents to any third party.

 

b.             [Intentionally
Omitted]

 

3

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. [****]. A COMPLETE
VERSION OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

c.             Customers.
The sale or lease of a Licensed Product by MediaTek or its Licensed Subsidiary
to a direct or indirect customer under the license granted in Section 2(a) conveys
the right for such customer to use, sell (directly or indirectly), offer to
sell and import such Licensed Products as sold by MediaTek or its Licensed
Subsidiary (including as part of a larger combination through the
incorporation of the Licensed Products into other products to the extent
necessary for the use of such Licensed Products as part of PC Optical
Storage Devices).

 

d.             Limitations
on Scope of License Grant.

 

(i)            [****].

 

(ii)           [****].

 

3.             PAYMENTS BY MEDIATEK

 

a.             License
Fee. As a license fee under this Agreement, MediaTek shall pay to Zoran the
sum of fifty five million United States dollars (US $55,000,000) (the “License
Fee”) on or before February 7, 2006, as further provided for in this Section 3.
The parties agree that the payment of the License Fee to Zoran is (i) not
refundable, and (ii) unrelated to the volume of sales by MediaTek, and (iii) not
subject to any deductions, offsets or withholdings, other than withholdings for
purposes of Taiwan tax law for purposes of Section 3(d) below.

 

b.             Royalties.
In consideration for the license granted hereunder, for the first thirty (30)
months after the Effective Date, MediaTek shall pay to Zoran a monthly royalty
of one million United States dollars (US $1,000,000) for each month during
which at least [****] units of Licensed Products are Sold, whether by MediaTek
or any of its Subsidiaries (“Royalty”). [****]. In no event shall the
total royalties payable under this Section 3(b) exceed a total of
thirty million United States dollars (US $30,000,000). No royalties shall
accrue after such thirty (30) month period. Such royalties will be due and
payable within thirty (30) days after the end of the calendar quarter in which
such royalties accrue. MediaTek shall not be required to provide any reports
regarding the volume of Licensed Products sold by MediaTek.

 

c.             Payment.
The payment of the License Fee and Royalties shall be made to Zoran Corporation
in United States currency by wire transfer to the following account:

 

Bank
Address:                                                                 [****].

 

ABA
Number:                                                                    [****]

Account
Name:                                                             [****]

 

4

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. A COMPLETE VERSION
OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

Account
Number:                [****]

Beneficiary:                           [****]

 

d.             Withholding
Taxes.

 

(i)            Because
of the possibility that Taiwan tax authorities may require withholding
with respect to the payments under this Agreement, MediaTek shall withhold
amounts from the payments made to Zoran pursuant to this Agreement at the
applicable withholding tax rate and pay such amounts to the appropriate Taiwan
tax authorities (the “Pre-Gross-Up Tax Withholding”). The parties shall
cooperate with each other and use all reasonable efforts to reduce or eliminate
such withholding tax liability as further described below.

 

(ii)           MediaTek
will prepare and promptly file an application on Zoran’s behalf with the Taiwan
tax authorities for exemption from Taiwan’s withholding taxes with respect to
such payments. The parties shall cooperate and work together with respect to
such application and use reasonable efforts to obtain such exemption. To the
extent that a complete exemption is not available, the parties shall cooperate
and work together to reduce such withholding taxes to the maximum extent
possible. MediaTek and Zoran each agree to provide all documents reasonably
requested by the other party in connection with such application.

 

(iii)          [****].

 

(iv)          [****].

 

(v)           [****].

 

e.             Late
Payment. Any payment under this Article 3 that is not made when due
shall bear interest at the lesser of the prime rate plus two percent (2%), as
reported by Morgan Guaranty Trust Co. of New York, New York, or the maximum
rate permitted by law, from the date that such amounts were payable under this Section 3
until the date upon which such payment is made. In any action to collect past
due amounts which have not been paid in accordance with this Section 3,
the prevailing party shall be entitled to receive its costs and reasonable
attorneys’ fees incurred in such action as set forth in Section 9 below.

 

f.              Other.
The above payments will remain due from MediaTek to Zoran even if the Licensed
Patents are held invalid or unenforceable in a suit or other proceeding with a
third party. The parties acknowledge that the payments under this Section 3
are not evidence of what a reasonable royalty would be as determined in a suit
for infringement of any of the patents covered by this Agreement and are
specifically

 

5

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. [****]. A COMPLETE
VERSION OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

based upon various other considerations taken
into account in the negotiation of this Agreement.

 

4.             TERM

 

The term of this Agreement shall commence on
the Effective Date and continue until the expiration of the last to expire of
the Zoran Licensed Patents. The licenses granted in this Agreement are
irrevocable and non-terminable (except to the extent such licenses are subject
to limitations upon a Change of Control as set forth in Section 7 below).

 

5.             CONFIDENTIALITY
OF TERMS

 

a.             Neither
the parties nor their Subsidiaries shall use or refer to this Agreement or any
of its provisions in any promotional activity, except that the parties shall be
each allowed to issue a press release announcing the existence of this
Agreement. Prior to a party’s issuance of such a press release, that party
shall obtain the consent of the other as to the form and content of the
press release, said consent not being unreasonably withheld.

 

b.             The
specific terms of this Agreement shall be confidential. No party shall disclose
the specific terms of this Agreement except:

 

(i)            to
its Subsidiaries in confidence;

 

(ii)           in
the case of MediaTek, as permitted by the prior written consent of Zoran,
granted in its sole discretion;

 

(iii)          in
the case of Zoran, as permitted by the prior written consent of MediaTek,
granted in its sole discretion;

 

(iv)          as
may be required by law or legal process (including legal requirements and
regulations of the U.S. Securities and Exchange Commission and the rules of
the Nasdaq Stock Market), as determined by such party based on advice and
counsel from such party’s outside securities counsel that such disclosure is
advisable under such law or legal process, provided however, that in the event
either party determines it is necessary to publicly file a copy of this
Agreement, the disclosing party agrees to notify the other party prior to such
filing and, upon the request of the other party, to use commercially reasonable
efforts to obtain confidential treatment for information deemed sensitive, to the
extent such confidential treatment is available under applicable laws and
regulations;

 

(v)           to
the International Trade Commission (“ITC”) (to the extent permissible by ITC
rules, all such information shall be submitted in confidence);

 

6

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. A COMPLETE VERSION
OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

(vi)          to
state information that has already been properly publicly disclosed pursuant to
Section 5(b)(iv) or in an approved press release under Section 5(a),
to the extent reasonably necessary in response to an inquiry from industry
analysts or other third parties, provided that neither party will issue any
further press release (beyond the approved press release under Section 5(a))
or other advertising or publicity regarding such information or this Agreement,
except as the other party shall agree;

 

(vii)         in
confidence, to a party’s or its Subsidiaries’ accountants, legal counsel and
other financial and legal advisors in their capacity of advising the party in
such matters;

 

(viii)        in
response to a valid subpoena or as otherwise may be required by law (in
confidence to the extent allowed); provided, however, that if a party or
Subsidiary is required to do so by a subpoena (or other legal process) or court
order seeking disclosure of the terms set forth in this Agreement, such party
or Subsidiary shall, before responding thereto, provide the other parties with
prior written notice of such subpoena, legal process, order or legal
requirement in sufficient time (if reasonably feasible) to permit the other
parties the opportunity to object (or, if the timing of such litigation makes
advance notice impracticable, such notice is provided within ten (10) days
after such disclosure), to seek a court-entered protective order or comparable
court-ordered restriction, and shall reasonably cooperate with the other
parties in their efforts to obtain such protective order and provided further
that, the disclosing party shall seek to have the disclosure of such terms and
conditions restricted, as authorized or permitted by the court, in the same
manner as is the confidential information of other litigating persons; and any
party and any of its Subsidiaries is permitted to file this Agreement under
seal with and disclose under seal this Agreement, in whole or in part, and
information relating to this Agreement to a court, tribunal or government
agency of competent jurisdiction in an action or proceeding brought by or
against a party or a Subsidiary when reasonably necessary for such action or
proceeding, subject to written notice to the other party and an opportunity to
obtain a protective order or other restriction as described in this
subparagraph;

 

(ix)           to
a third party in connection with a potential Change of Control or other
permitted assignment of this Agreement by, of or with the party, provided that
such disclosure shall be (A) on a strictly limited, need-to-know basis, (B) when
the party believes that such transaction is reasonably likely to take place,
and (C) on terms applicable to other highly confidential information
disclosed by such party in connection with such transaction provided such terms
prohibit disclosure, prohibit use for any purpose other than as

 

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**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. [****]. A COMPLETE
VERSION OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

required for due diligence in connection with
the potential transaction and provide for reasonable care; and

 

(x)            [****].

 

6.             CERTAIN
REPRESENTATIONS, WARRANTIES AND DISCLAIMERS

 

a.             Zoran
represents and warrants to MediaTek that it has the right to enter into this
Agreement and grant the rights and licenses granted herein, including, without
limitation, to license the Zoran Licensed Patents, and to bind its Subsidiaries
under this Agreement.

 

b.             MediaTek
represents and warrants to Zoran that it has the right to enter into this
Agreement.

 

c.             MediaTek
represents to Zoran that each entity listed on Exhibit A hereto
currently meets the definition of “Subsidiary” herein.

 

d.             Nothing
contained in this Agreement is or shall be construed as: (i) a warranty or
representation by Zoran as to the validity, enforceability or scope of any of
the Zoran Licensed Patents; or (ii) a warranty or representation by Zoran
that any manufacture, sale, lease, use or other disposition of Licensed
Products will be free from infringement of any patent rights or other
intellectual property rights of any third party; or (iii) an obligation by
either of the parties to furnish any technical or other information or
know-how.

 

e.             Except
as expressly provided herein, neither party makes any representations or
warranties, express or implied, regarding any matter, including without
limitations the implied warranties of merchantability, suitability, and/or
fitness for a particular use or purpose.

 

f.              Each
party represents and warrants, on behalf of itself and its Subsidiaries, that
within the twelve (12) months prior to the Effective Date neither it, nor any
of its Subsidiaries, has assigned, transferred or sold to a third party any
Patents that, had they not been so assigned, transferred or sold, would have
been included within the definition of Zoran Licensed Patents.

 

g.             Each
party represents and warrants, on behalf of itself and its Subsidiaries, that
neither it nor any of its Subsidiaries has the right or power to direct any
third party to Assert against the other party any cause of action based upon
the other party’s purported infringement of any Patent owned or enforceable by
such third party.

 

h.             No
party assumes any liability with respect to any infringement of any patent or
to any other rights of third parties due to any reason, including, without
limitation,

 

8

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. A COMPLETE VERSION
OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

another party’s conduct under the licenses
granted hereunder or for any responsibility for the enforcement of its patents
against third parties.

 

7.             ASSIGNMENT

 

a.             Except
as otherwise expressly provided in this Section 7, neither party may assign,
transfer or otherwise dispose of this Agreement or any of its rights and
obligations under this Agreement (referred to as an “assignment”) to any entity
without prior written notice to, and obtaining the prior written consent of,
the other party; provided, however, that a party may assign this Agreement
without such consent in the event of (x) a Change of Control involving that
party or (y) as part of the transfer of all or substantially all of the
business or assets of a party (whether by sale, merger, operation of law or
otherwise) in a transaction that is not a Change of Control, solely because the
direct and indirect holders of Voting Power of the party immediately prior to
the transaction or series of related transactions will hold, directly or
indirectly, more than fifty percent (50%) of the Voting Power of the
successor-in-interest immediately after the transaction or series of
related transactions. Any assignment or attempted assignment or other transfer
not in compliance with the terms and conditions of this Agreement will be null
and void. If a party consents to an assignment of this Agreement, (i) the
successor-in-interest must agree in writing to be bound by the terms and
conditions of this Agreement; and (ii) the assigning party (to the extent
it does not become part of the successor-in-interest as a result of the
respective transaction) shall not retain any rights or licenses under this
Agreement.

 

b.             Upon
a Change of Control of a party, the following terms shall apply:

 

(i)            If
MediaTek is subject to a Change of Control, the Licensed Products of MediaTek (“Acquired
Party”) will be limited to those Licensed Products that [****]. If MediaTek
is subject to a Change of Control, the licenses granted in Section 2(a) shall
continue with respect to such Existing Products and Follow On Products after
the effective date of the Change of Control. [****].

 

(ii)           Nothing
contained in this Section 7 shall limit the Licensed Products of MediaTek
if Zoran is the party subject to the Change of Control.

 

(iii)          From
and after the effective date on which an After-Acquired Subsidiary becomes a
Subsidiary of MediaTek and meets the requirements for being a Licensed
Subsidiary, such After-Acquired Subsidiary shall be granted the licenses set
forth in Section 2. The Patents of an After-Acquired Subsidiary will be
included in the license granted to MediaTek to the extent set forth in the
definition of Zoran Licensed Patents, as applicable, as of the date the
After-Acquired Subsidiary becomes a Subsidiary. The licenses described

 

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EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. [****]. A COMPLETE
VERSION OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

in Section 2 shall not have any
retroactive effect for those units of products that were sold by the Subsidiary
prior to the date on which it becomes a Licensed Subsidiary.

 

(iv)          On
the date that a Licensed Subsidiary of MediaTek ceases to be a Licensed
Subsidiary (“Former Licensed Subsidiary”) or a Subsidiary becomes a
Former Subsidiary of MediaTek:

 

(A)          The
licenses granted to the Former Licensed Subsidiary of MediaTek under this
Agreement shall terminate on the date the Former Licensed Subsidiary ceases to
be a Licensed Subsidiary. Notwithstanding the foregoing, such termination shall
not have any retroactive effect and the licenses granted to the Former Licensed
Subsidiary under this Agreement for those units of Licensed Products previously
sold or that have already been made and are in inventory which the Former
Licensed Subsidiary demonstrates were made by or for the Former Licensed
Subsidiary prior to the date on which it ceased to be a Licensed Subsidiary
shall not be affected.

 

(B)           The
licenses and covenants granted hereunder to MediaTek and its Licensed
Subsidiaries with respect to Patents of the Former Subsidiary shall continue as
set forth in this Agreement.

 

(C)           Notwithstanding
the foregoing provisions (A) and (B) of this Section 7(b)(vi),
if a Licensed Subsidiary of MediaTek is merged or subsumed into MediaTek or
another Licensed Subsidiary of MediaTek such that the resulting entity remains
MediaTek or a Licensed Subsidiary under this Agreement, the licenses granted to
the Former Subsidiary under this Agreement shall remain in effect and shall
continue to apply to MediaTek or Licensed Subsidiary, as applicable.

 

(D)          Zoran
reserves the right to and may enter into negotiations with the Former
Licensed Subsidiary regarding cross-license or covenants to not sue agreements,
and MediaTek agrees not to improperly interfere with such negotiations.

 

c.             Divestiture
of Material Business Unit.

 

(i)            [****].

 

(ii)           [****].

 

(iii)          [****].

 

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**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. A COMPLETE VERSION
OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

d.             Each
party shall promptly provide the other party with written notice upon the
occurrence of a permitted assignment, Change of Control or addition of a
Licensed Subsidiary after the Effective Date.

 

8.             MISCELLANEOUS
PROVISIONS

 

a.             Nothing
contained in this Agreement shall be construed as imposing any obligation to
institute any suit or action for infringement of any patents, or to defend any
suit or action brought by a third party which challenges or concerns the
validity or enforceability of any patents licensed under this Agreement.

 

b.             This
Agreement will not be binding until it has been signed below by both parties.

 

c.             Nothing
contained in this Agreement shall be construed as an obligation to file any
patent application or to secure any patent or to maintain any patent in force.

 

d.             No
express or implied waiver of any breach of any term, condition or obligation of
this Agreement shall be construed as a waiver of any subsequent breach of that
term, condition or obligation or of any other term, condition or obligation of
this Agreement of the same or of a different nature.

 

e.             Any
failure to perform any obligation hereunder, except for the obligation to
make payments hereunder, shall be excused to the extent such failure is caused
by any controlling law, order, or regulation, or by any acts of war, acts of
public enemies, fires, floods, acts of God, acts of terrorism, or any other
contingency beyond the control of the parties, but only so long as said law,
order, regulation or contingency continues.

 

f.              Nothing
contained in this Agreement shall be construed as conferring to either party
hereof any right to use in advertising, publicity, or other promotional
activities any name, trade name, trademark or other designation of the other
party and its Subsidiaries (including any contraction, abbreviation or
simulation of any of the foregoing).

 

g.             This
Agreement shall be construed in accordance with and governed by the laws of the
State of California, United States, as applied to agreements entered into and
fully performed therein by residents thereof, excluding conflict of laws
principles thereof. In the event of a breach of this Agreement, the exclusive
venue for any and all litigation brought to enforce the Agreement shall be the
United States District Court, Northern District of California.

 

h.             If
any term, clause, or provision of this Agreement shall be held to be invalid,
the validity of any other term, clause or provision shall not be affected; and
such invalid term, clause or provision shall be replaced by a valid term that
reflects the

 

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**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE CONFIDENTIALITY
REQUEST. OMISSIONS ARE DESIGNATED AS [****]. [****]. A COMPLETE VERSION OF THIS
EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

economic effect of the invalid term, clause
or provision, or if such is not possible, shall be deemed deleted from this
Agreement.

 

i.              This
Agreement is the result of negotiations between Zoran and MediaTek, both of
which have been represented by counsel during such negotiations; accordingly,
this Agreement shall not be construed for or against either party.

 

j.              This
Agreement (including all Exhibits hereto, which are all incorporated by this
reference) sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and supersedes all prior or
contemporaneous agreements, understandings, discussions and other
communications, if any, between the parties with respect to the subject matter
hereof.

 

k.             No
modification or amendment to this Agreement will be effective unless it is in
writing and executed by authorized representatives of the parties, nor will any
waiver of any rights be effective unless assented to in writing by the party to
be charged.

 

l.              Each
party to this Agreement agrees to perform any further acts and execute and
deliver any further documents that may be reasonably necessary to carry
out the provisions of this Agreement.

 

m.            This
Agreement and any counterpart original thereof may be executed and
transmitted by facsimile or by emailed portable document format (“.pdf”)
document. The facsimile and/or .pdf signature shall be valid and acceptable for
all purposes as if it were an original. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. In making proof of
this Agreement, it shall not be necessary to produce or account for more than
one such counterpart.

 

9.             ATTORNEYS’
FEES

 

Each party
shall bear its own attorney’s fees and related expenses incurred by or on
behalf of said party in connection with the negotiation of this Agreement. In
the event of any litigation in connection with this Agreement, the prevailing
party will be entitled to receive its costs, expert witness fees and reasonable
attorneys’ fees, including costs and fees on appeal.

 

[signature page follows]

 

12

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. A COMPLETE VERSION
OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by its duly authorized officer as of the Execution Date.

 

	
  Zoran Corporation

  	
  MediaTek, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Levy Gerzberg

  	
   

  	
  By:

  	
  /s/ C.J. Hsieh

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Levy Gerzberg

  	
   

  	
  Name:

  	
  C.J. Hsieh

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  1/25/06

  	
   

  	
  Date:

  	
  1/25/06

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Oak Technology, Inc.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Levy Gerzberg

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Levy Gerzberg

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  1/25/06

  	
   

  	
   

  
										

 

13

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. [****]. A COMPLETE
VERSION OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

EXHIBIT A

 

MEDIATEK LICENSED SUBSIDIARIES

 

[****]

 

14

 

**** CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS
EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED AS [****]. A COMPLETE VERSION
OF THIS EXHIBIT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

 

EXHIBIT B

 

LICENSED PATENTS

 

[****]

 

15Exhibit 10.10(a)

 

 

 

MASTER REPURCHASE AGREEMENT

Dated as of April 10, 2006

Among:

AAMES INVESTMENT CORPORATION, as a Seller, 

 

AAMES CAPITAL CORPORATION, as a Seller, 

 

AAMES FUNDING CORPORATION, as a Seller

and

GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., as Buyer

 

 

 

TABLE
OF CONTENTS

 

	
  1.

  	
  APPLICABILITY

  	
  1

  
	
   

  	
   

  	
   

  
	
  2.

  	
  DEFINITIONS AND ACCOUNTING MATTERS

  	
  1

  
	
   

  	
   

  	
   

  
	
  3.

  	
  THE TRANSACTIONS

  	
  18

  
	
   

  	
   

  	
   

  
	
  4.

  	
  PAYMENT AND TRANSFER

  	
  23

  
	
   

  	
   

  	
   

  
	
  5.

  	
  TAXES; TAX TREATMENT

  	
  23

  
	
   

  	
   

  	
   

  
	
  6.

  	
  MARGIN MAINTENANCE

  	
  24

  
	
   

  	
   

  	
   

  
	
  7.

  	
  INCOME PAYMENTS

  	
  25

  
	
   

  	
   

  	
   

  
	
  8.

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

  	
  25

  
	
   

  	
   

  	
   

  
	
  9.

  	
  CONDITIONS PRECEDENT

  	
  28

  
	
   

  	
   

  	
   

  
	
  10.

  	
  RELEASE OF PURCHASED LOANS

  	
  32

  
	
   

  	
   

  	
   

  
	
  11.

  	
  RELIANCE

  	
  33

  
	
   

  	
   

  	
   

  
	
  12.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  33

  
	
   

  	
   

  	
   

  
	
  13.

  	
  COVENANTS OF SELLER

  	
  38

  
	
   

  	
   

  	
   

  
	
  14.

  	
  REPURCHASE DATE PAYMENTS

  	
  46

  
	
   

  	
   

  	
   

  
	
  15.

  	
  REPURCHASE OF PURCHASED LOANS

  	
  46

  
	
   

  	
   

  	
   

  
	
  16.

  	
  SUBSTITUTION

  	
  47

  
	
   

  	
   

  	
   

  
	
  17.

  	
  RESERVED

  	
  47

  
	
   

  	
   

  	
   

  
	
  18.

  	
  EVENTS OF DEFAULT

  	
  47

  
	
   

  	
   

  	
   

  
	
  19.

  	
  REMEDIES

  	
  50

  
	
   

  	
   

  	
   

  
	
  20.

  	
  DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE

  	
  53

  
	
   

  	
   

  	
   

  
	
  21.

  	
  NOTICES AND OTHER COMMUNICATIONS

  	
  53

  
	
   

  	
   

  	
   

  
	
  22.

  	
  USE OF EMPLOYEE PLAN ASSETS

  	
  53

  
	
   

  	
   

  	
   

  
	
  23.

  	
  INDEMNIFICATION AND EXPENSES.

  	
  53

  
	
   

  	
   

  	
   

  
	
  24.

  	
  WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS

  	
  55

  
	
   

  	
   

  	
   

  
	
  25.

  	
  REIMBURSEMENT

  	
  55

  
	
   

  	
   

  	
   

  
	
  26.

  	
  FURTHER ASSURANCES

  	
  55

  
	
   

  	
   

  	
   

  
	
  27.

  	
  TERMINATION

  	
  55

  
	
   

  	
   

  	
   

  
	
  28.

  	
  SEVERABILITY

  	
  56

  
	
   

  	
   

  	
   

  
	
  29.

  	
  BINDING EFFECT; GOVERNING LAW

  	
  56

  
	
   

  	
   

  	
   

  
	
  30.

  	
  AMENDMENTS

  	
  56

  
	
   

  	
   

  	
   

  
	
  31.

  	
  SUCCESSORS AND ASSIGNS

  	
  56

  
	
   

  	
   

  	
   

  
	
  32.

  	
  SURVIVAL

  	
  56

  
	
   

  	
   

  	
   

  
	
  33.

  	
  CAPTIONS

  	
  56

  
	
   

  	
   

  	
   

  
	
  34.

  	
  COUNTERPARTS

  	
  57

  
	
   

  	
   

  	
   

  
	
  35.

  	
  SUBMISSION TO JURISDICTION; WAIVERS

  	
  57

  

 

i

 

	
  36.

  	
  WAIVER OF JURY TRIAL

  	
  57

  
	
   

  	
   

  	
   

  
	
  37.

  	
  ACKNOWLEDGEMENTS

  	
  57

  
	
   

  	
   

  	
   

  
	
  38.

  	
  HYPOTHECATION OR PLEDGE OF PURCHASED ITEMS.

  	
  58

  
	
   

  	
   

  	
   

  
	
  39.

  	
  ASSIGNMENTS; PARTICIPATIONS.

  	
  58

  
	
   

  	
   

  	
   

  
	
  40.

  	
  SINGLE AGREEMENT

  	
  59

  
	
   

  	
   

  	
   

  
	
  41.

  	
  INTENT

  	
  59

  
	
   

  	
   

  	
   

  
	
  42.

  	
  CONFIDENTIALITY

  	
  59

  
	
   

  	
   

  	
   

  
	
  43.

  	
  SERVICING

  	
  60

  
	
   

  	
   

  	
   

  
	
  44.

  	
  PERIODIC DUE DILIGENCE REVIEW

  	
  61

  
	
   

  	
   

  	
   

  
	
  45.

  	
  SET-OFF

  	
  62

  
	
   

  	
   

  	
   

  
	
  46.

  	
  ENTIRE AGREEMENT

  	
  62

  

 

	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1

  	
  Representations and Warranties re: Loans

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2

  	
  Filing Jurisdictions and Offices

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 3

  	
  Relevant States

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 4

  	
  Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 5

  	
  List of Financing Facilities

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  Forms of Monthly and Quarterly Certifications

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  Form of Custodial Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  Form of Opinion of Counsel to the Seller

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT D

  	
  Form of Notice of Transaction Notice

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT E

  	
  Underwriting Guidelines

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT F

  	
  Required Fields for Servicing Transmission

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT G

  	
  Required Fields for Loan Schedule

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT H

  	
  Form of Confidentiality Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT I

  	
  Form of Instruction Letter

  	
   

  
					

 

ii

 

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

 

1.             APPLICABILITY

 

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

 

2.             DEFINITIONS AND
ACCOUNTING MATTERS  

 

(a)           Defined
Terms.  As used herein, the following
terms have the following meanings (all terms defined in this Section 2 or in other
provisions of this Agreement in the singular to have the same meanings when
used in the plural and vice versa):

 

“Aames Capital” shall mean Aames Capital Corporation and any
permitted successors and assigns.

 

“Aames Financial” shall mean Aames Financial Corporation and any
permitted successors and assigns. 

 

“Aames Funding” shall mean Aames Funding Corporation and any
permitted successors and assigns.

 

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

 

“Accepted
Servicing Practices” shall mean with respect to any Loan, those accepted
and prudent mortgage servicing practices (including collection procedures) of
prudent mortgage lending institutions which service mortgage loans of the same
type as the Loans in the jurisdiction where the related Mortgaged Property is
located, and which are in accordance with Fannie Mae servicing practices and
procedures for MBS pool mortgages, as defined in the Fannie Mae servicing
guides including future updates, and in a manner at least equal in quality to
the servicing the Sellers or Sellers’ designee provides to mortgage loans which
they own in their own portfolio.

 

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

 

“Adjusted
Indebtedness” shall mean, with respect to any Person, the Total
Indebtedness of such Person and its Subsidiaries, less outstanding REIT
portfolio debt.

 

 

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

 

“Adjustment
Date” shall mean with respect to each Adjustable Rate Loan, the date set
forth in the related Note on which the Mortgage Interest Rate on the Loan is
adjusted in accordance with the terms of the Note.

 

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

 

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

 

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

 

“ALTA”
shall mean the American Land Title Association.

 

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

 

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

 

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

 

“Attorney
Bailee Letter” shall have the meaning assigned to such term in the
Custodial Agreement.

 

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

 

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

 

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

 

2

 

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

 

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

 

“Cash
Equivalents” shall mean (a) securities with maturities of 90 days or less
from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit and
eurodollar time deposits with maturities of 90 days or less from the date of
acquisition and overnight bank deposits of any commercial bank having capital
and surplus in excess of $500,000,000, (c) repurchase obligations of any
commercial bank satisfying the requirements of clause (b) of this definition,
having a term of not more than seven days with respect to securities issued or
fully guaranteed or insured by the United States Government, (d) commercial
paper of a domestic issuer rated at least A-1 or the equivalent thereof by
Standard and Poor’s Ratings Group (“S&P”) or P-1 or the equivalent thereof
by Moody’s Investors Service, Inc. (“Moody’s”) and in either case maturing
within 90 days after the day of acquisition, (e) securities with maturities of
90 days or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory or
by any foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign government (as
the case may be) are rated at least A by S&P or A by Moody’s, (f)
securities with maturities of 90 days or less from the date of acquisition
backed by standby letters of credit issued by any commercial bank satisfying
the requirements of clause (b) of this definition or, (g) shares of money
market mutual or similar funds which invest exclusively in assets satisfying
the requirements of clauses (a) through (f) of this definition.

 

“Change of
Control” shall mean, Aames Investment, through its Subsidiaries, does not
own (100%) of the outstanding capital stock of Aames Capital or Aames Funding.

 

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

 

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

 

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

 

3

 

is under
common control with the Sellers within the meaning of Section 4001 of ERISA or
is part of a group which includes any Seller and which is treated as a single
employer under Section 414 of the Code.

 

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

 

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

 

“Contractual
Obligation” shall mean as to any Person, any material provision of any
agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its property is bound or any material provision of any
security issued by such Person.

 

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

 

“Cooperative
Loan” shall mean a Loan that is secured by a First Lien on and perfected
security interest in Cooperative Shares and the related Proprietary Lease
granting exclusive rights to occupy the related Cooperative Unit in the building
owned by the related Cooperative Corporation.

 

“Cooperative
Project” shall mean, with respect to any Cooperative Loan, all real
property and improvements thereto and rights therein and thereto owned by a
Cooperative Corporation including without limitation the land, separate
dwelling units and all common elements.

 

“Cooperative
Shares” shall mean, with respect to any Cooperative Loan, the shares of
stock issued by a Cooperative Corporation and allocated to a Cooperative Unit
and represented by a stock certificate.

 

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

 

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

 

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

 

“Custodian
Loan Transmission” shall have the meaning assigned thereto in the Custodial
Agreement.

 

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

 

4

 

“Disbursement
Account” shall mean the account established by Buyer pursuant to which
funds shall be disbursed to fund any Wet Loan.

 

“Document
Deficiency Repurchased Mortgage Loan” shall mean any Loan that has been
repurchased by the Sellers pursuant to the terms of any whole loan transfer or
pass-through transfer due to document deficiencies, which document deficiencies
have been fully and accurately disclosed to the Buyer and are acceptable to the
Buyer in its sole discretion, and which, except for such document deficiencies
would otherwise qualify as an Eligible Loan pursuant to the terms of the
Program Documents.

 

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

 

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

 

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

 

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

 

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

 

“Effective
Date” shall mean the date upon which the conditions precedent set forth in
Section 9(a) have been satisfied.

 

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

 

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

 

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

 

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

 

5

 

“Escrow
Letter” shall mean, with respect to any Wet Loan that becomes subject to a
Transaction before the end of the applicable rescission period, an escrow
agreement or letter, which is fully assignable to the Buyer, stating that in
the event of a Rescission or if for any other reason the Loan fails to fund on
a given day, the party conducting the closing is holding all funds which would
have been disbursed on behalf of the Mortgagor as agent for and for the benefit
of the Buyer and such funds shall be returned to the related Seller not later
than one Business Day after the date of Rescission or other failure of the Loan
to fund on a given day.

 

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

 

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

 

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

 

“Exception
Report” shall mean the exception report prepared by the Custodian pursuant
to the Custodial Agreement.

 

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

 

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

 

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

 

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

 

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

 

“Full
Documentation Loan” means a mortgage loan which was underwritten in
accordance with Underwriting Guidelines which require the related Mortgagor to
complete a detailed application designed to provide pertinent credit
information and pursuant to which the Mortgagor is required to provide full
documentation of the Mortgagor’s income and assets and such information is fully
verified by the related Seller.

 

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

 

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

 

6

 

Subsidiaries
or any of its properties.

 

“Gross
Margin” shall mean with respect to each Adjustable Rate Loan, the fixed
percentage amount set forth in the related Note and the Loan Schedule that is
added to the Index on each Adjustment Date in accordance with the terms of the
related Note to determine the new Mortgage Interest Rate for such Loan.

 

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

 

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

 

“Indebtedness”
shall mean, for any Person: (a) obligations created, issued or incurred by such
Person for borrowed money (whether by loan, the issuance and sale of debt
securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such
Property from such Person); (b) obligations of such Person to pay the deferred
purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations
(contingent or otherwise) of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of such
Person; (f) obligations of such Person under repurchase agreements or like
arrangements; (g) indebtedness of others Guaranteed by such Person; (h) all
obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; (i) indebtedness of general
partnerships of which such Person is a general partner; and (j) any other
indebtedness of such Person by a note, bond, debenture or similar instrument.

 

7

 

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

 

“Instruction
Letter” shall mean a letter agreement between the related Seller and each
Subservicer substantially in the form of Exhibit I attached hereto.

 

“Insurance
Proceeds” shall mean with respect to each Loan, proceeds of insurance
policies insuring the Loan or the related Mortgaged Property.

 

“Insured
Closing Letter” shall mean, with respect to any Wet Loan that becomes
subject to a Transaction before the end of the applicable rescission period, a
letter of indemnification from an Approved Title Insurance Company, in any
jurisdiction where insured closing letters are permitted under applicable law
and regulation, addressed to the related Seller, which is fully assignable to
the Buyer, with coverage that is customarily acceptable to Persons engaged in
the origination of mortgage loans, identifying the Settlement Agent covered
thereby, which may be in the form of a blanket letter.

 

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

 

“Interest
Rate Protection Agreement” shall mean with respect to any or all of the
Purchased Loans, any interest rate swap, cap or collar agreement or any other
applicable hedging arrangements providing for protection against fluctuations
in interest rates or the exchange of nominal interest obligations, either
generally or under specific contingencies entered into by Sellers and
reasonably acceptable to Buyer.

 

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

 

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

 

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

 

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

 

8

 

	
   

  	
    LIBO Base Rate

  	
   

  
	
   

  	
    1.00 – LIBO Reserve
  Requirements

  

 

The LIBO Rate
shall be calculated on each Purchase Date and Repurchase Date commencing with
the first Purchase Date.

 

“LIBO
Reserve Requirements” shall mean for any Interest Period for any
Transaction, the aggregate (without duplication) of the rates (expressed as a
decimal fraction) of reserve requirements applicable to the Buyer in effect on
such day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction with
respect thereto), dealing with reserve requirements prescribed for eurocurrency
funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of
such Board) maintained by a member bank of such Governmental Authority. As of
the Effective Date, the LIBO Reserve Requirements shall be deemed to be zero.

 

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

 

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

 

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

 

“Loan
Schedule” shall mean a hard copy or electronic format incorporating the
fields identified on Exhibit G, any other information required by Buyer
and any other additional information to be provided pursuant to the Custodial
Agreement.

 

“Loan-to-Value
Ratio” or “LTV” shall mean with respect to any Loan, the ratio of
the outstanding principal amount of such Loan at the time of origination to the
lesser of (a) the Appraised Value of the related Mortgaged Property at
origination of such Loan and (b) if the related Mortgaged Property was
purchased within twelve (12) months of the origination of such Loan, the
purchase price of the related Mortgaged Property.

 

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

 

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

 

“Market
Value” shall mean the value, determined by the Buyer in its sole reasonable
discretion, of the Loans if sold in their entirety to a single third-party
purchaser.  In determining Market Value,
the Buyer may take into account (a) customary factors, including, but not
limited to current market conditions and the fact that the Purchased Loans may
be sold under circumstances in which the Sellers, as originators of the
Purchased Loans, are in default under this Agreement, and (b) firm takeout
commitments from investment grade purchasers in favor of the Sellers covering
the Purchased Loans or mortgage loans substantially similar to the

 

9

 

Purchased
Loans to the extent recently obtained and during similar market
conditions.  The Buyer’s determination of
Market Value shall be conclusive upon the parties, absent manifest error on the
part of the Buyer.  The Buyer shall have
the right to mark to market the Loans on a daily basis which Market Value with
respect to one or more of the Loans may be determined to be zero. The Sellers
acknowledge that the Buyer’s determination of Market Value is for the limited
purpose of determining the value of Purchased Loans which are subject to
Transactions hereunder without the ability to perform customary purchaser’s due
diligence and is not necessarily equivalent to a determination of the fair
market value of the Loans achieved by obtaining competing bids in an orderly
market in which the originator/servicer is not in default under a revolving
debt facility and the bidders have adequate opportunity to perform customary
loan and servicing due diligence.  The
Market Value shall be deemed to be zero with respect to each Loan which is not
an Eligible Loan.

 

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

 

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

 

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

 

“Monthly
Payment” shall mean the scheduled monthly payment of principal and interest
on a Loan as adjusted in accordance with changes in the Mortgage Interest Rate
pursuant to the provisions of the Note for an Adjustable Rate Loan.

 

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

 

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

 

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

 

“Mortgaged
Property” shall mean the real property (including all improvements,
buildings, fixtures, building equipment and personal property thereon and all
additions, alterations and replacements made at any time with respect to the
foregoing) and all other collateral securing repayment of the debt evidenced by
a Note.

 

10

 

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

 

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

 

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

 

“MV Margin
Amount” means, with respect to any Transaction, as of any date of
determination, the amount obtained by application of the MV Margin Percentage
to the Repurchase Price (reduced by the amount of any accrued and unpaid Price
Differential) for such Transaction as of such date.

 

“MV Margin
Percentage” shall have the meaning assigned thereto in the Pricing Side
Letter.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

“Par Margin
Percentage” shall have the meaning assigned thereto in the Pricing Side
Letter.

 

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

 

“Payment
Adjustment Date”  With respect to
each Negative Amortization Loan, the date on which Monthly Payments shall be
adjusted.  A Payment Adjustment Date with
respect to a Negative Amortization Loan shall occur on the dates specified on
the Loan Schedule.

 

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

 

“Permitted
Exceptions” shall mean the following exceptions to lien priority: (i) the
lien of current real property taxes and assessments not yet due and payable;
(ii) covenants, conditions and restrictions, rights of way, easements and other
matters of the public record as of the date of recording acceptable to mortgage
lending institutions generally and specifically referred to in the lender’s
title insurance policy delivered to the originator of the Loan and (A) referred
to or otherwise considered in the appraisal (if any) made for the originator of
the Loan or (B) which do not adversely affect the appraised value of the
Mortgaged Property set forth in such appraisal; (iii) other matters to which
like properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged Property; and (iv)
in the case of a Second Lien Loan, a First Lien on the Mortgaged Property.

 

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

 

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

 

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

 

“Post-Default
Rate” shall mean, in respect of the Repurchase Price for any Transaction or
any other amount under this Agreement, or any other Program Document that is
not paid when due to the Buyer (whether at stated maturity, by acceleration or
mandatory prepayment or otherwise), a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid
in full equal to 2% per annum, plus (a)(i) the Pricing Rate otherwise
applicable to such Loan or other amount, or (ii) if no Pricing Rate is
otherwise applicable, the LIBO Rate plus (b) the Applicable Margin.

 

“Price
Differential” shall mean, with respect to each Transaction as of any date
of

 

12

 

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

 

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

 

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

 

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

 

“Program
Documents” shall mean this Agreement, the Custodial Agreement, any
Servicing Agreement, the Pricing Side Letter, any Instruction Letter, the
Securitization Side Letter, any assignment of an Interest Rate Protection
Agreement, and any other agreement entered into by Sellers, on the one hand,
and the Buyer and/or any of its Affiliates or Subsidiaries (or Custodian on its
behalf) on the other, in connection herewith or therewith.

 

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

 

“Proprietary
Lease” shall mean the lease on a Cooperative Unit evidencing the possessory
interest of the owner of the Cooperative Shares in such Cooperative Unit.

 

“Purchase
Date” shall mean, with respect to each Transaction, the date on which
Purchased Loans are sold by Sellers to the Buyer hereunder.

 

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

 

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

 

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

 

“Qualified
Insurer” shall mean an insurance company duly qualified as such under the
laws of each state in which any Mortgaged Property is located, duly authorized
and licensed in each such state to transact the applicable insurance business
and to write the insurance provided,

 

13

 

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

 

“Qualified
Originator” shall mean (a) Sellers and (b) any other mutually agreed upon
originator of Loans.

 

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

 

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

 

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

 

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

 

“Repurchase
Date”  shall mean the date occurring
on (i) the second Business Day following the 15th day of each month following
the related Purchase Date (or if such date is not a Business Day, the following
Business Day), (ii) any other Business Day set forth in the related Transaction
Notice and/or the related Confirmation, or (iii) the date determined by
application of Section 19, as applicable.

 

“Repurchase
Price” shall mean the price at which Purchased Loans are to be transferred
from Buyer to Sellers upon termination of a Transaction, which will be
determined in each case (including Transactions terminable upon demand) as the
sum of the outstanding Purchase Price for such Purchased Loans and the Price
Differential as of the date of such determination.

 

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

 

“Requirement
of Law” shall mean as to any Person, the certificate of incorporation and
by-laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation or determination of an arbitrator or a 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.

 

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

 

“Responsible
Officer” shall mean, as to any Person, the chief executive officer or, with
respect to financial matters, the chief financial officer or treasurer of such
Person; provided, that in the event any such officer is unavailable at any time
he or she is required to take any action

 

14

 

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

 

“Restricted
Payments” shall mean with respect to any Person, collectively, all
dividends or other distributions of any nature (cash, securities, assets or
otherwise), and all payments, by virtue of redemption or otherwise, on any
class of equity securities (including, without limitation, warrants, options or
rights therefor) issued by such Person, whether such securities are now or may
hereafter be authorized or outstanding and any distribution in respect of any
of the foregoing, whether directly or indirectly.

 

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

 

“Second
Lien Loan” shall mean an Eligible Loan secured by the lien on the Mortgaged
Property, subject only to one prior lien on such Mortgaged Property securing
financing obtained by the related Mortgagor and to Permitted Exceptions.

 

“Securitization
Letter” shall mean that certain letter agreement by and among Sellers and
Buyer dated the date hereof, outlining rights and obligations with respect to
securitizations and whole loan sales of Loans subject to this Agreement from
time to time.

 

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

 

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

 

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

 

“Servicing
File” shall mean with respect to each Loan, the file retained by the
related Seller (in its capacity as Servicer) consisting of all documents that a
prudent originator and servicer would have, including copies of the Loan
Documents, all documents necessary to document and service the Loans and any
and all documents required to be delivered pursuant to any of the Program
Documents.

 

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

 

“Servicing
Rights” shall mean contractual, possessory or other rights of any Seller or
any other Person, whether arising under the Servicing Agreement, the Custodial
Agreement or otherwise, to administer or service a Purchased Loan or to possess
related Servicing Records.

 

“Servicing
Transmission” shall mean a computer-readable magnetic or other electronic
format acceptable to the parties containing the information identified on
Exhibit F.

 

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

 

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

 

15

 

which is not a
Multiemployer Plan.

 

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

 

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

 

“Substitute
Loans” has the meaning assigned thereto in Section 16.

 

“Tangible
Net Worth” shall mean, with respect to Aames Investment, as of any date of
determination, the stockholders equity of Aames Investment, less the
consolidated net book value of all assets of Aames Investment and its
Subsidiaries (to the extent reflected as an asset in the balance sheet of Aames
Investment or any Subsidiary at such date) which will be treated as intangibles
under GAAP, provided, that residual securities issued by such Aames Investment
or its Subsidiaries shall not be treated as intangibles for purposes of this
definition.

 

“Termination
Date” shall mean February 3, 2007, or such earlier date on which this
Agreement shall terminate in accordance with the provisions hereof or by
operation of law.

 

“Total
Indebtedness” shall mean with respect to any Person, for any period, the
aggregate consolidated funded Indebtedness of such Person and its Subsidiaries
during such period (including any outstanding warehouse debt and [REIT
portfolio debt]).

 

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

 

“Transaction
Notice” shall mean a written request by a Seller in the form of Exhibit
D hereto, to enter into a Transaction, in a format to be mutually agreed
upon among the related Seller and Buyer, which is delivered to Buyer.

 

“Trust
Receipt” shall have the meaning provided in the Custodial Agreement.

 

“Underwriting
Guidelines” shall mean the underwriting guidelines of the Sellers attached
as Exhibit E hereto in effect as of the date of this Agreement, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with terms of this Agreement, and which have been approved in writing
by Buyer (including any amendments, supplements or modifications thereto).

 

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

 

16

 

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

 

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

 

“Wet Loan”
shall mean a wet-funded First Lien Loan or Second Lien Loan which is
underwritten in accordance with the Underwriting Guidelines and does not
contain all the required Loan Documents in the Mortgage File, which in order to
be deemed an Eligible Loan shall have the following additional characteristics:

 

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

 

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

 

(c)           the
proceeds thereof have not been returned to the Buyer from the Settlement Agent
for such Wet Loan;

 

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

 

(e)           upon
recordation such Loan will constitute a First Lien Loan or Second Lien on the
premises described therein; and

 

(f)            the
related Seller shall have obtained an Insured Closing Letter and an Escrow
Letter with respect to such Wet Loan (or, with respect to any Mortgaged
Property located in the State of New York, a comparable letter as customarily
provided for closings occurring in such state).

 

(b)           Accounting
Terms and Determinations.  Except as
otherwise expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Buyer hereunder shall be
prepared, in accordance with GAAP.

 

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

 

17

 

it, a legislative provision substituted for
it and a regulation or statutory instrument issued under it.  A reference to writing includes a facsimile
transmission and any means of reproducing words in a tangible and permanently
visible form.  A reference to conduct
includes, without limitation, an omission, statement or undertaking, whether or
not in writing.  The words “hereof”, “herein”,
“hereunder” and similar words refer to this Agreement as a whole and not to any
particular provision of this Agreement. 
The term “including” is not limiting and means “including without
limitation”.  In the computation of periods
of time from a specified date to a later specified date, the word “from” means “from
and including”, the words “to” and “until” each mean “to but excluding”, and
the word “through” means “to and including”.

 

Except where
otherwise provided in this Agreement, any determination, consent, approval,
statement or certificate made or confirmed in writing with notice to Seller by
Buyer or an authorized officer of Buyer provided for in this Agreement is
conclusive and binds the parties in the absence of manifest error. A reference
to an agreement includes a security interest, guarantee, agreement or legally
enforceable arrangement whether or not in writing related to such agreement.

 

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

 

This Agreement
is the result of negotiations among, and has been reviewed by counsel to, Buyer
and Seller, and is the product of all parties. 
In the interpretation of this Agreement, no rule of construction shall
apply to disadvantage one party on the ground that such party proposed or was
involved in the preparation of any particular provision of this Agreement or
this Agreement itself.  Except where
otherwise expressly stated, Buyer may give or withhold, or give conditionally,
approvals and consents and may form opinions and make determinations at its
absolute discretion.  Any requirement of
good faith, discretion or judgment by Buyer shall not be construed to require
Buyer to request or await receipt of information or documentation not
immediately available from or with respect to Seller, a servicer of the
Purchased Loans, any other Person or the Purchased Loans themselves.

 

3.             THE TRANSACTIONS

 

(a)           Buyer
shall, from time to time enter into Transactions with an aggregate Purchase
Price for all Purchased Loans acquired by Buyer not to exceed the Maximum
Aggregate Purchase Price, subject to the terms and conditions of the Program
Documents, and further subject to the following limitations:  

 

(i)            The
Buyer shall enter into Transactions with Aames Investment and Aames Capital
with respect to Eligible Loans that are Dry Loans on any Business Day, with an
aggregate outstanding Purchase Price at any time up to, but not exceeding the
lesser of (A) the Maximum Aggregate Purchase Price, less the sum of (1) the
aggregate outstanding Purchase Price of any Purchased Loans that are then
subject to Transactions

 

18

 

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

 

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

 

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

 

(b)           Unless
otherwise agreed, Sellers shall request that Buyer enter into a Transaction by
delivering (i) a Transaction Notice substantially in the form of Exhibit D
hereto (a “Transaction Notice”), appropriately completed, and a Loan Schedule
to Buyer and Custodian, and (ii) the Mortgage File to Custodian for each
Loan proposed to be included in such Transaction, which Transaction Notice and
Loan Schedule must be received no later than 2:00 p.m. (New York City time) one
Business Day prior to the requested Purchase Date with respect to Dry Loans and
no later than 3:00 p.m. (New York City Time) with respect to Wet Loans. Such
Transaction Notice shall clearly indicate those Loans that are intended to be
Wet Loans and Dry Loans and include a Loan Schedule in respect of the Eligible
Loans that the related Seller proposes to include in the related Transaction.
Each Transaction Notice shall specify the proposed Purchase Date, Purchase
Price, Pricing Rate and Repurchase Date. Sellers agree to immediately report to
Custodian and the Buyer by facsimile transmission within one Business Day of
discovery that any Wet Loans that were previously subject to a Transaction do
not close for any reason including, but not limited to, a Rescission.  In the event that the parties hereto desire
to enter into a Transaction, the Buyer shall deliver to the related Seller, in
electronic or other format, a “Confirmation” specifying such terms, including,
without limitation, the Purchase Date, the Purchase Price, the Pricing Rate
therefor and the Repurchase Date.  Any
such Confirmation and the related Transaction Notice, together with this
Agreement, shall constitute conclusive evidence of the terms agreed to between
Buyer and related Seller with respect to the Transaction to which the
Confirmation relates.  By entering in to
a Transaction with the Buyer, the related Seller consents to the terms set
forth in the related Confirmation.  In
the event of any conflict between this Agreement and a Confirmation, the terms
of the Confirmation shall control with respect to the related Transaction.  

 

(c)           Pursuant
to the Custodial Agreement, the Custodian shall review any Required Documents
delivered prior to 12:00 p.m. (New York City time) on any Business Day on the
same day.  Not later than 5:30 p.m. (New
York City time) on each Business Day, the Custodian shall deliver to the Buyer,
via Electronic Transmission acceptable to the Buyer, the Custodian Loan
Transmission and an Exception Report showing the status of all Loans then held
by the

 

19

 

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

 

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

 

(ii)           Upon a Seller’s request
to enter into a Transaction with respect to Wet Loans pursuant to Section 3(b),
Buyer may, in its sole discretion, assuming all conditions precedent set forth
in this Section 3 and in Sections 9(a) and (b) have been met, and provided no
Default shall have occurred and be continuing, not later than 3:30 p.m. (New
York City time) on the requested Purchase Date purchase the Eligible Loans
included in the related Transaction Notice by transferring, via wire transfer
(pursuant to wire transfer instructions provided by the Seller on or prior to
such Purchase Date), the Purchase Price. 
With respect to any Transaction with respect to Wet Loans, the Purchase
Price shall be disbursed to the Settlement Agent from the Disbursement
Account.  Accordingly, in connection with
any Wet Loan, the Sellers shall be required to deposit in the Disbursement
Account prior to the closing of such Loan an amount equal to the excess of (i)
the amount required to be remitted in connection with the closing of such Loan
over (ii) the related Purchase Price to be paid to such Seller by Buyer for
such Loan.  No later than one Business
Day following the related Purchase Date for each Wet Loan, the Sellers shall
provide to the Buyer a complete Loan Data Transmission with respect to each Wet
Loan subject to a Transaction, which Loan Data Transmission shall contain all
fields required for Dry Loans.  The Buyer
and the Sellers agree that the procedures for requesting and entering into a
Transaction with respect to Wet Loans may be modified from time to time by a
written agreement executed by the Buyer and the Sellers.

 

(e)           Anything
herein to the contrary notwithstanding, if, on or prior to the determination of
any LIBO Base Rate:

 

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

 

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

 

20

 

Applicable Margin plus the relevant rate of
interest referred to in the definition of “LIBO Base Rate” in Section 2 upon
the basis of which the rate of interest for Transactions is to be determined is
not likely adequately to cover the cost to the Buyer of purchasing and holding
Loans hereunder; or

 

(iii)     it
becomes unlawful for Buyer to enter into Transactions with a Pricing Rate based
on the LIBO Base Rate;

 

then the Buyer
shall give the related Seller prompt notice thereof and, so long as such
condition remains in effect, the Buyer shall be under no obligation to purchase
Loans hereunder, and the related Seller shall, at its option, either repurchase
such Loans or pay a Pricing Rate at a rate per annum as determined by the Buyer
taking into account the increased cost to the Buyer of purchasing and holding
the Loans.

 

(f)            Sellers
shall repurchase Purchased Loans from Buyer on each related Repurchase Date.  Each obligation to repurchase exists without
regard to any prior or intervening liquidation or foreclosure with respect to
any Purchased Loan.  Sellers are
obligated to obtain the Purchased Loans from Buyer or its designee (including
the Custodian) at Sellers’ expense on (or after) the related Repurchase Date.

 

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

 

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

 

(i)            If
Sellers repurchase Purchased Loans other than as provided in Section 3(h)
above, Sellers shall indemnify Buyer and hold Buyer harmless from any actual
loss or expense which Buyer may sustain or incur arising from (a) the
re-employment of funds obtained by Buyer to perform hereunder or from (b) fees
payable to terminate the deposits from which such funds were obtained (“Breakage
Costs”), in either case, which actual loss or expense shall be equal to the
excess, as reasonably determined by the Lender of (i) its cost of obtaining
funds to perform under such Transactions for the period from the date of such
payment through the following Repurchase Date over (ii) the amount of interest
likely to be realized by Lender in redeploying the funds no utilized by reason
of such payment for such period.  Buyer
shall deliver to Sellers a statement setting forth the amount and basis of
determination of any Breakage Costs in such detail as determined in good faith
by Buyer to be adequate, it being agreed that such

 

21

 

statement and the method of its calculation
shall be adequate and shall be conclusive and binding upon Sellers, absent
manifest error.  The provisions of this
Section 3(i) shall survive termination of this Agreement and the repurchase of
all Purchased Loans subject to Transactions hereunder.

 

(j)            If
any Requirement of Law (other than with respect to any amendment made to the
Buyer’s certificate of incorporation and by-laws or other organizational or
governing documents) or any change in the interpretation or application thereof
or compliance by the Buyer with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:

 

(i)       shall
subject the Buyer to any tax of any kind whatsoever with respect to this
Agreement or any Loans purchased pursuant to it (excluding net income taxes) or
change the basis of taxation of payments to the Buyer in respect thereof;

 

(ii)      shall
impose, modify or hold applicable any reserve, special deposit, compulsory
advance or similar requirement against assets held by deposits or other
liabilities in or for the account of Transactions or extensions of credit by,
or any other acquisition of funds by any office of the Buyer which is not
otherwise included in the determination of the LIBO Base Rate hereunder;

 

(iii)     shall
impose on the Buyer any other condition;

 

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

 

If the Buyer
shall have determined that the adoption of or any change in any Requirement of
Law (other than with respect to any amendment made to the Buyer’s certificate
of incorporation and by-laws or other organizational or governing documents)
regarding capital adequacy or in the interpretation or application thereof or
compliance by the Buyer or any corporation controlling the Buyer with any
request or directive regarding capital adequacy (whether or not having the
force of law) from any Governmental Authority made subsequent to the date
hereof shall have the effect of reducing the rate of return on the Buyer’s or
such corporation’s capital as a consequence of its obligations hereunder to a
level below that which the Buyer or such corporation (taking into consideration
the Buyer’s or such corporation’s policies with respect to capital adequacy) by
an amount deemed by the Buyer to be material, then from time to time, the
Seller shall promptly pay to the Buyer such additional amount or amounts as
will thereafter compensate the Buyer for such reduction or shall repurchase all
of the Purchased Loans then subject to outstanding Transactions. Any payment or
repurchase made by the Sellers as a result of this paragraph shall not be
subject to the provisions of Section 3(i).

 

If the Buyer
becomes entitled to claim any additional amounts pursuant to this subsection,
it shall promptly notify the Sellers of the event by reason of which it has
become so

 

22

 

entitled.  A certificate as to any additional amounts
payable pursuant to this subsection submitted by the Buyer to the Sellers shall
be conclusive in the absence of manifest error.

 

4.             PAYMENT AND
TRANSFER

 

(a)           Payments.  Except to the extent otherwise provided
herein, all payments to be made by the Seller under this Agreement shall be
made in Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Buyer at the following account maintained by the Buyer at
JPMorgan Chase Bank Account Number 140095961, For the A/C of Greenwich Capital
Financial Products, Inc., ABA# 021000021, Attn: Brett Kibbe, not later than
2:00 p.m., New York City time, on the date on which such payment shall become
due (each such payment made after such time on such due date to be deemed to
have been made on the next succeeding Business Day). Each Seller acknowledges
that it has no rights of withdrawal from the foregoing account.

 

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

 

5.             TAXES; TAX
TREATMENT

 

(a)           All
payments made by the Sellers under this Agreement shall be made free and clear
of, and without deduction or withholding for or on account of, any present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities (including penalties, interest and additions to tax) with respect
thereto imposed by any Governmental Authority, excluding income taxes, branch
profits taxes, franchise taxes or any other tax imposed on the net income by
the United States, a state or a foreign jurisdiction under the laws of which the
Buyer is organized or of its applicable lending office, or any political
subdivision thereof (collectively, “Taxes”), all of which shall be paid
by the related Seller for its own account not later than the date when
due.  If any Seller is required by law or
regulation to deduct or withhold any Taxes from or in respect of any amount
payable hereunder, it shall: (a) make such deduction or withholding; (b) pay
the amount so deducted or withheld to the appropriate Governmental Authority
not later than the date when due; (c) deliver to Buyer, promptly, original tax
receipts and other evidence satisfactory to Buyer of the payment when due of
the full amount of such Taxes; and (d) pay to the Buyer such additional amounts
as may be necessary so that such Buyer receives, free and clear of all Taxes, a
net amount equal to the amount it would have received under this Agreement, as
if no such deduction or withholding had been made.

 

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

 

(c)           Each
Seller agrees to indemnify the Buyer for the full amount of Taxes (including
additional amounts with respect thereto) and Other Taxes, and the full amount
of Taxes of any

 

23

 

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

 

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

 

(e)           Without
prejudice to the survival or any other agreement of any Seller hereunder, the
agreements and obligations of Sellers contained in this Section 5 shall survive
the termination of this Agreement. 
Nothing contained in this Section 5 shall require Buyer to make
available any of its tax returns or other information that it deems to be
confidential or proprietary.

 

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

 

6.             MARGIN MAINTENANCE

 

(a)           If
at any time either (i) the aggregate Market Value of all Purchased Loans
subject to all Transactions is less than the aggregate MV Margin Amount for all
such Transactions, or (ii) the aggregate unpaid principal balance of the
Purchased Loans for all Transactions is less than the aggregate Par Margin
Amount for all such Transactions (either such event, a “Margin Deficit”),
then the Buyer may, by notice to Sellers, require Sellers in such Transactions
to transfer to the Buyer cash or, at the Buyer’s option (and provided Sellers
have additional Eligible Loans), additional Eligible Loans (“Additional
Purchased Loans”) within one (1) Business Day of such notice by Buyer, so
that both (x) the cash and aggregate Market Value of the Purchased Loans, including
any such Additional Purchased Loans, will thereupon equal or exceed such

 

24

 

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

 

(b)           Notice
required pursuant to Section 6(a) may be given by any means provided in
Section 21 hereof.  Any notice given
on a Business Day preceding 1:00 p.m. (New York City time) shall be met, and
the related Margin Call satisfied, no later than 5:00 p.m. (New York City time)
on the same Business Day.  Any notice
given on a Business Day following 1:00 p.m. (New York City time) shall be met,
and the related Margin Call satisfied, no later than 1:00 p.m. (New York City
time) on the following Business Day.  The
failure of Buyer, on any one or more occasions, to exercise its rights under
this Section 6, shall not change or alter the terms and conditions to which
this Agreement is subject or limit the right of Buyer to do so at a later
date.  Sellers and Buyer each agree that
a failure or delay by Buyer to exercise its rights hereunder shall not limit or
waive Buyer’s rights under this Agreement or otherwise existing by law or in
any way create additional rights for Sellers.

 

7.             INCOME PAYMENTS

 

Where a
particular term of a Transaction extends over the date on which Income is paid
in respect of any Purchased Loan subject to that Transaction, such Income shall
be the property of Buyer. Notwithstanding the foregoing, and provided no
Default has occurred and is continuing, Buyer agrees that Sellers shall be
entitled to receive an amount equal to all Income received in respect of the
Purchased Loans, whether by Buyer, Custodian or any servicer or any other
Person, which is not otherwise received by Sellers, to the full extent it would
be so entitled if the Purchased Loans had not been sold to Buyer; provided
that any Income received by Sellers while the related Transaction is
outstanding shall be deemed to be held by Sellers solely in trust for Buyer
pending the repurchase on the related Repurchase Date.  Provided no Default has occurred, Buyer
shall, as the parties may agree with respect to any Transaction (or, in the
absence of any such agreement, as Buyer shall reasonably determine in its sole
discretion), on the Repurchase Date following the date any Income is received
by Buyer (or a servicer on its behalf) either (i) transfer (or permit the
servicer to transfer) to Sellers such Income with respect to any Purchased
Loans subject to such Transaction, or (ii) if a Margin Deficit then exists,
apply the Income payment to reduce the amount, if any, to be transferred to
Buyer by Sellers upon termination of such Transaction.  Buyer shall not be obligated to take any
action pursuant to the preceding sentences (A) to the extent that such action
would result in the creation of a Margin Deficit, unless prior thereto or
simultaneously therewith Sellers transfer to Buyer cash or Additional Purchased
Loans sufficient to eliminate such Margin Deficit, or (B) if an Event of
Default with respect to any Seller has occurred and is then continuing at the
time such Income is paid.

 

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

 

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

 

25

 

other forum recharacterizes the Transactions
hereunder as other than sales, and as security for each Seller’s performance of
all of its Obligations, each Seller hereby grants Buyer a fully perfected first
priority security interest in the following property, whether now existing or
hereafter acquired: (i) all Purchased Loans identified on a Transaction Notice
delivered by any Seller to the Buyer and the Custodian from time to time, (ii)
all Loan Documents, including without limitation all promissory notes, and all
Records, and any other collateral pledged or otherwise relating to such
Purchased Loans, together with all files, material documents, instruments,
surveys (if available), certificates, correspondence, appraisals, computer
records, computer storage media, Loan accounting records and other books and
records relating thereto, (iii) all mortgage guaranties and insurance (issued
by governmental agencies or otherwise) and any mortgage insurance certificate
or other document evidencing such mortgage guaranties or insurance relating to
any Purchased Loans and all claims and payments thereunder, (iv) all other
insurance policies and insurance proceeds relating to any Purchased Loans or
the related Mortgaged Property, (v) all Interest Rate Protection Agreements
relating to any or all of the foregoing, (vi) any purchase agreements or other
agreements or contracts relating to or constituting any or all of the
foregoing, (vii) all purchase or take-out commitments relating to or
constituting any or all of the foregoing, (viii) all “accounts”, “chattel paper”,
“commercial tort claims”, “deposit accounts”, “documents,” “equivalent”, “general
intangibles”, “goods”, “instruments”, “inventory”, “investment property”, “letter
of credit rights”, and “securities’ accounts” as each of those terms is defined
in the Uniform Commercial Code and all cash and Cash Equivalents and all
products and proceeds relating to or constituting any or all of the foregoing,
(ix) Sellers’ interests under any Escrow Letters and Insured Closing Letters
with respect to any Purchased Loans, (x) all interests in real property owned
by the Sellers or collateralizing any Loans, and (xi) any and all replacements,
substitutions, distributions on or proceeds of any or all of the foregoing
(collectively the “Purchased Items”). Each Seller acknowledges and
agrees that its rights with respect to the Purchased Items (including without
limitation, any security interest Sellers may have in the Purchased Loans and
any other collateral granted by Sellers to Buyer pursuant to any other
agreement) are and shall continue to be at all times junior and subordinate to
the rights of Buyer hereunder.

 

(b)           At
any time and from time to time, upon the written request of the Buyer, and at
the sole expense of the Sellers, the Sellers will promptly and duly execute and
deliver, or will promptly cause to be executed and delivered, such further
instruments and documents and take such further action as the Buyer may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements
under the Uniform Commercial Code in effect in any jurisdiction with respect to
the Purchased Items and the liens created hereby.  The Sellers also hereby authorizes the Buyer
to file any such financing or continuation statement without the signature of
the Sellers to the extent permitted by applicable law. A carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction. 
This Agreement shall constitute a security agreement under applicable
law.

 

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

 

26

 

another jurisdiction unless it shall have
given the Buyer at least 30 days prior written notice thereof and shall have
delivered to the Buyer all Uniform Commercial Code financing statements and
amendments thereto as the Buyer shall request and taken all other actions
deemed reasonably necessary by the Buyer to continue its perfected status in
the Purchased Items with the same or better priority.

 

(d)           Each
Seller hereby irrevocably constitutes and appoints Buyer and any officer or
agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such Seller and in the name of such Seller or in its own name, from
time to time in Buyer’s discretion, for the purpose of carrying out the terms
of this Agreement, including without limitation, protecting, preserving and
realizing upon the Purchased Items, to take any and all appropriate action and
to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, including without
limitation, to protect, preserve and realize upon the Purchased Items, to file
such financing statement or statements relating to the Purchased Loans and the
Purchased Items without such Seller’s signature thereon as Buyer at its option
may deem appropriate, and, without limiting the generality of the foregoing,
Seller hereby gives Buyer the power and right, on behalf of such Seller,
without assent by, but with notice to, such Seller, if an Event of Default
shall have occurred and be continuing, to do the following:

 

(i)       in
the name of such Seller, or in its own name, or otherwise, to take possession
of and endorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due with respect to any Purchased Loans
and to file any claim or to take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by Buyer for the purpose of
collecting any and all such moneys due with respect to any Purchased Loans
whenever payable;

 

(ii)      to
pay or discharge taxes and Liens levied or placed on or threatened against the
Purchased Loans;

 

(iii)     (A)
to direct any party liable for any payment under any Purchased Loans to make
payment of any and all moneys due or to become due thereunder directly to Buyer
or as Buyer shall direct; (B) to ask or demand for, collect, receive payment of
and receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Purchased Loans; (C) to
sign and endorse any invoices, assignments, verifications, notices and other
documents in connection with any Purchased Loans; (D) to commence and prosecute
any suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Purchased Loans or any proceeds thereof and to
enforce any other right in respect of any Purchased Loans; (E) to defend any
suit, action or proceeding brought against Seller with respect to any Purchased
Loans; (F) to settle, compromise or adjust any suit, action or proceeding
described in clause (E) above and, in connection therewith, to give such
discharges or releases as Buyer may deem appropriate; and (G) generally, to
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any Purchased Loans as fully and completely as though Buyer were the
absolute owner thereof for all purposes, and to do, at Buyer’s option and
Seller’s expense, at any time, and from time to time, all acts and things which
Buyer deems necessary to protect,

 

27

 

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

 

Each Seller
hereby ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof.  This power of attorney
is a power coupled with an interest and shall be irrevocable.

 

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

 

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

 

(f)            If
the Seller fails to perform or comply with any of its agreements contained in
the Program Documents and the Buyer may itself perform or comply, or otherwise
cause performance or compliance, with such agreement, the reasonable
out-of-pocket expenses of the Buyer incurred in connection with such
performance or compliance, together with interest thereon at a rate per annum
equal to the Post-Default Rate, shall be payable by the Seller to the Buyer on
demand and shall constitute Obligations.

 

(g)           The
Buyer’s duty with respect to the custody, safekeeping and physical preservation
of the Purchased Items in its possession, under Section 9-207 of the Uniform
Commercial Code or otherwise, shall be to deal with it in the same manner as
the Buyer deals with similar property for its own account. Neither the Buyer
nor any of its directors, officers or employees shall be liable for failure to
demand, collect or realize upon all or any part of the Purchased Items or for
any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Purchased Items upon the request of the Seller or otherwise.

 

(h)           All
authorizations and agencies herein contained with respect to the Purchased
Items are irrevocable and powers coupled with an interest.

 

9.             CONDITIONS
PRECEDENT

 

(a)           As
conditions precedent to the initial Transaction, Buyer shall have received on
or before the date on which such initial Transaction is consummated the
following, in form and substance satisfactory to Buyer and duly executed by
each party thereto (as applicable):

 

(i)       Program
Documents. The Program Documents duly executed and delivered by the Seller
thereto and being in full force and effect, free of any modification, breach or
waiver.

 

28

 

(ii)      Organizational
Documents.  A good standing
certificate and certified copies of the charter and by-laws (or equivalent
documents) of each Seller, in each case dated as of a recent date, but in no
event more than ten (10) days prior to the date of such initial Transaction and
of all corporate or other authority for the related Seller with respect to the
execution, delivery and performance of the Program Documents and each other
document to be delivered by the related Seller from time to time in connection
herewith (and the Buyer may conclusively rely on such certificate until it
receives notice in writing from the Seller to the contrary).

 

(iii)     Incumbency
Certificate.  An incumbency
certificate of the secretary of each Seller certifying the names, true
signatures and titles of Seller’s representatives duly authorized to request
Transactions hereunder and to execute the Program Documents and the other
documents to be delivered thereunder;

 

(iv)     Legal
Opinion.  A legal opinion of counsel
to the Sellers, substantially in the form attached hereto as Exhibit C.

 

(v)      Filings,
Registrations, Recordings. (i)  Any
documents (including, without limitation, financing statements) required to be
filed, registered or recorded in order to create, in favor of the Buyer, a
perfected, first-priority security interest in the Purchased Items, subject to
no Liens other than those created hereunder, shall have been properly prepared
and executed for filing (including the applicable county(ies) if the Buyer
determines such filings are necessary in its reasonable discretion),
registration or recording in each office in each jurisdiction in which such
filings, registrations and recordations are required to perfect such
first-priority security interest; and (ii) UCC lien searches, dated as of a
recent date, in no event more than 14 days prior to the date of such initial
Transaction, in such jurisdictions as shall be applicable to the Seller and the
Purchased Items, the results of which shall be satisfactory to the Buyer.

 

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

 

(vii)    Financial
Statements. The Buyer shall have received the financial statements
referenced in Section 12(b).

 

(viii)   Underwriting
Guidelines. The Buyer and the Sellers shall have agreed upon the current
Underwriting Guidelines for Loans and the Buyer shall have received a copy
thereof certified by a Responsible Officer of each Seller.

 

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

 

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

 

29

 

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

 

(xi)     Reserved.

 

(xii)    Other
Documents. The Buyer shall have received such other documents as the Buyer
or its counsel may reasonably request.

 

(b)           The
obligation of Buyer to enter into each Transaction pursuant to this Agreement
(including the initial Transaction) is subject to the following further
conditions precedent, both immediately prior to any Transaction and also after
giving effect thereto and to the intended use thereof:

 

(i)       No
Default or Event of Default shall have occurred and be continuing.

 

(ii)      Both
immediately prior to entering into such Transaction and also after giving
effect thereto and to the intended use of the proceeds thereof, the
representations and warranties made by the Seller in Section 12 and Schedule 1
hereof, and in each of the other Program Documents, shall be true and complete
on and as of the Purchase Date in all material respects (in the case of the
representations and warranties in Section 12(v), 12(w) and Schedule 1, solely
with respect to Loans which have not been repurchased by Seller) with the same
force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date). At the request of the Buyer, the
Buyer shall have received an officer’s certificate signed by a Responsible
Officer of the related Seller certifying as to the truth and accuracy of the
above, which certificate shall specifically include a statement that the
related Seller is in compliance with all governmental licenses and
authorizations and is qualified to do business and in good standing in all
required jurisdictions.

 

(iii)     The
then aggregate outstanding Purchase Price for all Purchased Loans, when added
to the Purchase Price for the requested Transaction, shall not exceed the
Maximum Aggregate Purchase Price.

 

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

 

(v)      Buyer
or its designee shall have received on or before the day of a Transaction with
respect to any Purchased Loans (unless otherwise specified in this Agreement) the
following, in form and substance satisfactory to Buyer and (if applicable) duly
executed:

 

(a) The
Transaction Notice and Loan Schedule with respect to such

 

30

 

Purchased
Loans, delivered pursuant to Section 3(a);

 

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

 

(c) Such
certificates, customary opinions of counsel or other documents as Buyer may
reasonably request, provided that such opinions of counsel shall not be
required routinely in connection with each Transaction but shall only be
required from time to time as deemed necessary by Buyer in its commercially
reasonable judgment.

 

(vi)     Reserved.

 

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

 

(viii)   None
of the following shall have occurred and/or be continuing:

 

(i)            an
event or events resulting in the inability of the Buyer to finance its
purchases of assets with traditional counterparties at rates which would have
been reasonable prior to the occurrence of such event or events or a material
adverse change in the financial condition of the Buyer which affects (or can
reasonably be expected to affect) materially and adversely the ability of the
Buyer to fund its obligations under or otherwise comply with the terms of this
Agreement; or

 

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

 

(ix)     If
any Loans to be purchased hereunder were acquired by the Sellers, such Loans
shall conform to the Underwriting Guidelines or the Buyer shall have received
Underwriting Guidelines for such Loans acceptable to the Buyer in its
discretion.

 

(x)      The
Buyer shall have received all information requested from the Sellers relating
to Interest Rate Protection Agreements pursuant to Section 13(aa), and the
Buyer shall have determined that such Interest Rate Protection Agreements
adequately protect the Sellers from interest rate fluctuations.

 

31

 

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

 

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

 

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

 

(xiv)   Sellers
shall have paid to Buyer all fees and expenses owed to Buyer in accordance with
this Agreement and any other Program Document.

 

(xv)    Buyer
or its designee shall have received any other documents reasonably requested by
Buyer.

 

(xvi)   There
is no Margin Deficit at the time immediately prior to entering into a new
Transaction.

 

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

 

(xviii) If
any Loan sold to Buyer in connection with such Transaction is subject to a Lien
immediately prior to the Purchase Date, the related secured party (including
any party that has a precautionary security interest in a Loan) shall have
released all of its right, title and interest in, to and under such Loan
(including, without limitation, any security interest that such secured party
or secured party’s agent may have by virtue of its possession, custody or
control thereof), and Seller shall evidence such release by delivering to Buyer
and to Custodian (as part of the Mortgage File) a duly executed Security
Release Certification and filed Uniform Commercial Code termination statements
in respect of any Uniform Commercial Code filings made in respect of such
Loan.  

 

10.          RELEASE OF PURCHASED
LOANS

 

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

 

32

 

to release
such Purchased Loan and any Purchased Items solely related to such Purchased
Loan to Sellers unless such release and termination would give rise to or
perpetuate a Margin Deficit.  Except as
set forth in Section 16, Sellers shall give at least one (1) Business Day’s
prior written notice to Buyer if such repurchase shall occur on any date other
than the Repurchase Date in Section 3(i).

 

If such
release and termination gives rise to or perpetuates a Margin Deficit, Buyer
shall notify Sellers of the amount thereof and Sellers shall thereupon satisfy
the Margin Call in the manner specified in Section 6.

 

11.          RELIANCE

 

With respect
to any Transaction, Buyer may conclusively rely upon, and shall incur no
liability to Sellers in acting upon, any request or other communication that
Buyer reasonably believes to have been given or made by a person authorized to
enter into a Transaction on Sellers’ behalf.

 

12.          REPRESENTATIONS AND
WARRANTIES

 

Each Seller
represents and warrants to the Buyer that throughout the term of this
Agreement:

 

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

 

(b)           Financial
Condition.  The Sellers have
heretofore furnished to the Lender a copy of the Annual Report of Aames
Investment on Form 10-K which includes audited consolidated financial
statements at and for the fiscal year ended December 31, 2005 with the opinion
thereon of Ernst & Young LLP.  All
such financial statements are materially complete and correct and fairly present
the consolidated financial condition of Aames Investment and its Subsidiaries
and the consolidated results of their operations for the fiscal year ended on
said date, all in accordance with GAAP applied on a consistent basis.  Aames Investment has heretofore furnished to
the Lender a copy of the Quarterly Report of Aames Investment on Form 10-Q
which includes unaudited consolidated financial statements at and for the
fiscal quarter ended September 30, 2005. 
All such financial statements are materially complete and correct and
fairly present the consolidated financial condition of Aames Investment and its
Subsidiaries and the consolidated results of their operations for the fiscal
quarter ended on said date, all in accordance with GAAP applied on a consistent
basis. Since December 31, 2005 there has been no development or event nor any
prospective development or event which has had or should

 

33

 

reasonably be expected to have a Material Adverse Effect.

 

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

 

(d)           No
Breach.  Neither (a) the execution
and delivery of the Program Documents, or (b) the consummation of the
transactions therein contemplated in compliance with the terms and provisions
thereof will conflict with or result in a breach of the charter or by-laws of
the Seller, or any applicable law, rule or regulation, or any order, writ,
injunction or decree of any Governmental Authority, or other material agreement
or instrument to which the Seller, or any of its Subsidiaries, is a party or by
which any of them or any of their property is bound or to which any of them or
their property is subject, or constitute a default under any such material
agreement or instrument, or (except for the Liens created pursuant to this
Agreement) result in the creation or imposition of any Lien upon any property
of the Seller or any of its Subsidiaries, pursuant to the terms of any such
agreement or instrument.

 

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

 

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

 

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

 

(h)           Investment
Company Act.  Neither the Seller nor
any of its Subsidiaries is an

 

34

 

“investment company”, or a company “controlled”
by an “investment company”, within the meaning of the Investment Company Act of
1940, as amended. The Seller is not subject to any Federal or state statute or
regulation which limits its ability to incur indebtedness.

 

(i)            No
Legal Bar.  The execution, delivery
and performance of this Agreement, the other Program Documents, the sales
hereunder and the use of the proceeds thereof will not violate any Requirement
of Law or Contractual Obligation of the Seller or of any of its Subsidiaries
and will not result in, or require, the creation or imposition of any Lien
(other than the Liens created hereunder) on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation.

 

(j)            Compliance
with Law.  No practice, procedure or
policy employed or proposed to be employed by Seller in the conduct of its
business violates any law, regulation, judgment, agreement, regulatory consent,
order or decree applicable to it which, if enforced, would result in either a
Material Adverse Effect with respect to Seller.

 

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

 

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

 

(m)          Location
of Books and Records.  The location
where the Seller keeps its books and records including all computer tapes and
records relating to the Purchased Items is its chief executive office or chief
operating office or the offices of the Custodian.

 

(n)           True
and Complete Disclosure.  The
information, reports, financial statements, exhibits and schedules furnished in
writing by or on behalf of the Seller or any of its Subsidiaries to the Buyer
in connection with the negotiation, preparation or delivery of this Agreement
and the other Program Documents or included herein or therein or delivered
pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement
of material fact or omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading. All written information furnished after the date
hereof by or on behalf of the Seller or any of its Subsidiaries to the Buyer in
connection with this Agreement and the other Program Documents and the
transactions contemplated hereby and thereby will be true, complete and
accurate in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified. There is no fact known to a Responsible Officer that, after due
inquiry, could reasonably be expected to have a Material Adverse Effect that has
not been disclosed herein, in the other Program Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Buyer for use in connection with the transactions contemplated
hereby or thereby.

 

35

 

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

 

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

 

(q)           Licenses.  The Buyer will not be required as a result of
purchasing the Loans to be licensed, registered or approved or to obtain
permits or otherwise qualify (i) to do business in any state in which it
currently so required or (ii) under any state or other jurisdiction’s consumer
lending, fair debt collection or other applicable state or other jurisdiction’s
statute or regulation.

 

(r)            Filing
Jurisdictions; Relevant States. 
Schedule 2 sets forth all of the jurisdictions and filing offices in
which a financing statement should be filed in order for Buyer to perfect its
security interest in the Purchased Items. Schedule 3 sets forth all of the
states or other jurisdictions in which the Seller originates Loans in its own
name or through brokers on the date of this Agreement.

 

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

 

(t)            No
Burdensome Restrictions.  No
Requirement of Law or Contractual Obligation of the Seller or any of its
Subsidiaries has a Material Adverse Effect.

 

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

 

(v)           Origination
and Acquisition of Loans.  The Loans
were originated or acquired by

 

36

 

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

 

(w)          No
Adverse Selection.  The Seller used
no selection procedures that identified the Loans as being less desirable or
valuable than other comparable Loans owned by the Seller.

 

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

 

(y)           No
Broker.  Seller has not dealt with
any broker, investment banker, agent, or other person, except for Buyer, who
may be entitled to any commission or compensation in connection with the sale
of Purchased Loans pursuant to this Agreement; provided, that if Seller
has dealt with any broker, investment banker, agent, or other person, except
for Buyer, who may be entitled to any commission or compensation in connection
with the sale of Purchased Loans pursuant to this Agreement, such commission or
compensation shall have been paid in full by Seller.

 

(z)            Current
Financing Facilities.  All credit
facilities, repurchase facilities or substantially similar facilities of
Sellers which are presently in effect are listed on Schedule 5 attached hereto
(the “Existing Financing Facilities”) and no defaults or events of
default exist thereunder.  Sellers shall
give Buyer prior notification of any amendment to any financial covenant in any
such Existing Financing Facility or any modification to any Seller’s borrowing
capacity under any such Existing Financing Facility.

 

(aa)         Insured
Closing Letter. As of the date hereof and as of the date of each delivery
of a Wet Loan, the Settlement Agent has obtained an Insured Closing Letter,
closing protection letter or similar authorization letter from a nationally
recognized title insurance company approved by the Buyer (or, with respect to
any Mortgaged Property located in the State of New York, a comparable letter as
customarily provided for closings occurring in such state), copies of which
shall be delivered by the Seller to the Custodian prior to the Purchase
Date.  Among other things, the Insured
Closing Letter covers any losses occurring due to the fraud, dishonesty or
mistakes of the closing agent.  The
Insured Closing Letter inures to the benefit of, and the rights thereunder may
be enforced by, the loan originator and its successors and assigns, including
the

 

37

 

Buyer.

 

(bb)         Escrow
Agreement.  As of the date hereof and
as of the date of each delivery of a Wet Loan, the Settlement Agent has
executed an escrow agreement or letter stating that in the event of a Rescission
of or if for any reason the Loan fails to fund on a given day, the party
conducting the closing is holding all funds which would have been disbursed on
behalf of the Mortgagor as agent for the benefit of the Buyer and such funds
shall be redeposited in the Disbursement Account for benefit of the Buyer not
later than one Business Day after the date of Rescission or other failure of
the Loan to fund on a given day.  Such
Escrow Agreement inures to the benefit of, and the rights thereunder may be
enforced by, the loan originator and its successors and assigns, including the
Buyer.

 

13.          COVENANTS OF SELLER

 

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

 

(a)           Financial
Statements and Other Information; Financial Covenants.

 

Sellers shall
deliver to the Buyer:

 

(i)       As
soon as available and in any event within 30 days after the end of the first
two months of any quarterly fiscal period, the consolidated balance sheets of
the Seller and each of the consolidated Subsidiaries of the Seller as at the
end of such month and the related unaudited consolidated statements of income
and retained earnings and of cash flows for the Seller and the consolidated
Subsidiaries of Seller for such month and the portion of the fiscal year through
the end of such month. Such consolidated financial statements shall fairly
present the consolidated financial condition and results of operations of the
Seller and its Subsidiaries in accordance with GAAP, consistently applied, as
at the end of, and for, such month (subject to normal year-end audit
adjustments);

 

(ii)      As
soon as available and in any event within 45 days after the end of each of the
first three quarterly fiscal periods of each fiscal year of the Seller, a
certification in the form of Exhibit A together with the consolidated
balance sheets of the Seller and its consolidated Subsidiaries as at the end of
such period and the related unaudited consolidated statements of income and
retained earnings and of cash flows for the Seller and the consolidated
Subsidiaries of Seller for such period and the portion of the fiscal year
through the end of such period, accompanied by a certificate of a Responsible
Officer of the Seller, which certificate shall state that said consolidated
financial statements fairly present the consolidated financial condition and
results of operations of the Seller and the Subsidiaries of the Seller in
accordance with GAAP, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments);

 

(iii)     As
soon as available and in any event within 90 days after the end of each fiscal
year of the Seller, the consolidated balance sheets of the Seller and its
consolidated Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and of cash flows for
the Seller and its

 

38

 

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

 

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

 

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

 

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

 

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

 

c.             the
institution by PBGC of proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Seller or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by PBGC with respect to such Multiemployer
Plan;

 

d.             the
complete or partial withdrawal from a Multiemployer Plan by

 

39

 

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

 

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

 

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

 

The Seller
will furnish to the Buyer, at the time it furnishes each set of financial
statements pursuant to paragraphs (a)(ii-v) above, a certificate of a
Responsible Officer of the Seller to the effect that, to the best of such
Responsible Officer’s knowledge, the Seller during such fiscal period or year
has observed or performed all of its covenants and other agreements, and
satisfied every material condition, contained in this Agreement and the other
Program Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate (and, if any Default or Event
of Default has occurred and is continuing, describing the same in reasonable
detail and describing the action the Seller has taken or proposes to take with
respect thereto).

 

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

 

(c)           Existence,
Etc.  Each of the Seller and its
Subsidiaries will:

 

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

 

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

 

(iii)     keep
adequate records and books of account, in which complete entries will be made
in accordance with GAAP consistently applied;

 

40

 

(iv)     not
move its chief executive office or chief operating office from the addresses
referred to in Section 12(l) unless it shall have provided the Buyer 30 days
prior written notice of such change (other than Subsidiaries which are not
material to the business of the Sellers);

 

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

 

(vi)     permit
representatives of the Buyer, during normal business hours upon three (3)
Business Days’ prior written notice at a mutually desirable time or at any time
during the continuance of an Event of Default, to examine, copy and make
extracts from its books and records, to inspect any of its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by the Buyer.

 

(d)           Prohibition
of Fundamental Changes.  Seller shall
not at any time, directly or indirectly, (i) enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation, winding up or dissolution) or sell all or
substantially all of its assets without Buyer’s prior consent; or (ii) form or
enter into any partnership, joint venture, syndicate or other combination which
would have a Material Adverse Effect with respect to Seller.

 

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

 

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

 

(i)       Upon
the Seller becoming aware of, and in any event within one (1) Business Day
after the occurrence of any Default, Event of Default or any event of default
or default under any Program Document or other material agreement of the
Seller;

 

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

 

(iii)     upon
the Seller becoming aware of any default related to any Purchased Items, any
Material Adverse Effect and any event or change in circumstances which should
reasonably be expected to have a Material Adverse Effect;

 

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

 

41

 

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

 

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

 

(vi)     any
material change in the insurance coverage required of Seller or any other
Person pursuant to any Program Document, with copy of evidence of same
attached;

 

(vii)    any
material dispute, licensing issue, litigation, investigation, proceeding or
suspension between Seller or its Subsidiaries, on the one hand, and any
Governmental Authority or any other Person; and

 

(viii)   any
material change in accounting policies or financial reporting practices of
Seller or its Subsidiaries.

 

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

 

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

 

(h)           Underwriting
Guidelines.  Seller shall not permit
any material modifications to be made to the Underwriting Guidelines that will
impact either the Buyer or the Purchased Loans without the prior consent of
Buyer (such consent not to be unreasonably withheld).  Seller agrees to deliver to Buyer copies of
the Underwriting Guidelines in the event that any changes are made to the
Underwriting Guidelines following the Closing Date.

 

(i)            Lines
of Business.  Seller shall not engage
to any substantial extent in any line or lines of business activity other than
the businesses generally carried on by it as of the Effective Date.

 

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

 

(k)           Defense
of Title.  Seller warrants and will
defend the right, title and interest of Buyer in and to all Purchased Items
against all adverse claims and demands of all Persons whomsoever.

 

42

 

(l)            Preservation
of Purchased Items. Seller shall do all things necessary to preserve the
Purchased Items so that such Purchased Items remain subject to a first priority
perfected security interest hereunder. Without limiting the foregoing, Seller
will comply with all applicable laws, rules and regulations of any Governmental
Authority applicable to Seller or relating to the Purchased Items and cause the
Purchased Items to comply with all applicable laws, rules, regulations of any
such Governmental Authority.  Seller will
not allow any default to occur for which Seller is responsible under any
Purchased Items or any Program Documents and Seller shall fully perform or
cause to be performed when due all of its obligations under any Purchased Items
or the Program Documents.

 

(m)          No
Assignment.  Seller shall not sell,
assign, transfer or otherwise dispose of, or grant any option with respect to,
or pledge, hypothecate or grant a security interest in or lien on or otherwise
encumber (except pursuant to the Program Documents), any of the Purchased Loans
or any interest therein, provided that this Section 13(m) shall not
prevent any contribution, assignment, transfer or conveyance of Purchased Loans
in accordance with the Program Documents.

 

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

 

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

 

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

 

(q)           Maintenance
of Tangible Net Worth.  The Sellers
shall not permit the Tangible Net Worth of Aames Investment at any time to be
less than the sum of (1) $250,000,000, plus (2) 50% of any additional
subsequent additional capital raised in a public or private offering by Aames
Investment.

 

43

 

(r)            Maintenance
of Profitability.  The Sellers shall
not permit Aames Investment’s Net Income before tax, generated over any two
consecutive fiscal quarters, measured on the last day of each fiscal quarter,
to be less than $1.00.

 

(s)           Maintenance
of Ratio of Total Indebtedness to Tangible Net Worth.  The Sellers shall not permit Aames Investment’s
ratio of Total Indebtedness to Tangible Net Worth at any time to be greater
than 20.00 to 1.00.

 

(t)            Maintenance
of Ratio of Adjusted Indebtedness to Tangible Net Worth.  The Sellers shall not permit Aames Investment’s
ratio of Adjusted Indebtedness to Tangible Net Worth at any time to be greater
than 7 to 1.00.

 

(u)           Restricted
Payments.  The Seller shall not make
any Restricted Payments following an Event of Default.

 

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

 

(w)          No
Amendment or Compromise.  Without
Buyer’s prior written consent, none of Seller or those acting on Seller’s
behalf shall amend or modify, or waive any term or condition of, or settle or
compromise any claim in respect of, any item of the Purchased Loans, any
related rights or any of the Program Documents, provided that Seller may amend
or modify a Loan if such amendment or modification does not affect the amount
or timing of any payment of principal or interest, extend its scheduled
maturity date, modify its interest rate, or constitute a cancellation or
discharge of its outstanding principal balance and does not materially and adversely
affect the security afforded by the real property, furnishings, fixtures, or
equipment securing the Loan.

 

(x)            Maintenance
of Property; Insurance.  The Seller
shall keep all property useful and necessary in its business in good working
order and condition.  The Seller shall
maintain errors and omissions insurance and/or mortgage impairment insurance
and blanket bond coverage in such amounts as are in effect on the Effective
Date (as disclosed to Buyer in writing) and shall not reduce such coverage
without the written consent of the Buyer, and shall also maintain such other
insurance with financially sound and reputable insurance companies, and with
respect to property and risks of a character usually maintained by entities
engaged in the same or similar business similarly situated, against loss,
damage and liability of the kinds and in the amounts customarily maintained by
such entities.

 

(y)           Further
Identification of Purchased Items. 
The Seller will furnish to the Buyer from time to time statements and schedules
further identifying and describing the Purchased Items and such other reports
in connection with the Purchased Items as the Buyer may

 

44

 

reasonably request, all in reasonable detail.

 

(z)            Loan
Determined to be Defective.  Upon
discovery by Seller or the Buyer of any breach of any representation or
warranty listed on Schedule 1 hereto applicable to any Loan, the party
discovering such breach shall promptly give notice of such discovery to the
other.

 

(aa)         Interest
Rate Protection Agreements.  Upon the
Buyer’s request, the Seller shall deliver to the Buyer any and all information
relating to Interest Rate Protection Agreements.

 

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

 

(cc)         Reserved.

 

(dd)         Maintenance
of Papers, Records and Files.  Seller
shall acquire, and Seller shall build, maintain and have available, a complete
file in accordance with lending industry custom and practice for each Purchased
Loan.  Seller will maintain all such
Records not in the possession of Custodian in good and complete condition in
accordance with industry practices and preserve them against loss or
destruction.

 

(i)       Seller
shall collect and maintain or cause to be collected and maintained all Records
relating to the Purchased Loans in accordance with industry custom and
practice, including those maintained pursuant to the preceding subsection, and
all such Records shall be in Custodian’s possession unless Buyer otherwise
approves.  Seller will not cause or
authorize any such papers, records or files that are an original or an only
copy to leave Custodian’s possession, except for individual items removed in
connection with servicing a specific Loan, in which event Seller will obtain or
cause to be obtained a receipt from the Custodian for any such paper, record or
file.

 

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

 

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

 

(ee)         Maintenance
of Licenses. Seller shall (i) maintain all licenses, permits or other
approvals necessary for Seller to conduct its business and to perform its
obligations under the Program Documents, (ii) remain in good standing under the
laws of each state in which it

 

45

 

conducts business or any Mortgage Property is
located, and (iii) shall conduct its business strictly in accordance with
applicable law.

 

(ff)           Taxes,
Etc.  The Seller shall pay and
discharge or cause to be paid and discharged, when due, all taxes, assessments
and governmental charges or levies imposed upon the Seller or upon its income
and profits or upon any of its property, real, personal or mixed (including
without limitation, the Purchased Loans) or upon any part thereof, as well as
any other lawful claims which, if unpaid, might become a Lien upon such
properties or any part thereof, except for any such taxes, assessments and
governmental charges, levies or claims as are appropriately contested in good
faith by appropriate proceedings diligently conducted and with respect to which
adequate reserves are provided.  The
Seller shall file on a timely basis all federal, and material state and local
tax and information returns, reports and any other information statements or
schedules required to be filed by or in respect of it.

 

(gg)         Use
of Custodian.  Without the prior
written consent of Buyer, Seller shall use no third party custodian as document
custodian other than the Custodian with respect to third party purchasers,
prospective third party purchasers, lenders and prospective third party lenders
with respect to loans of the same type as the Purchased Loans.

 

(hh)         Change
of Fiscal Year.  Seller will not at
any time, directly or indirectly, except upon ninety (90) days’ prior written
notice to Buyer, change the date on which Seller’s fiscal year begins from
Seller’s current fiscal year beginning date.

 

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

 

14.          REPURCHASE DATE
PAYMENTS

 

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

 

15.          REPURCHASE OF
PURCHASED LOANS

 

Upon discovery
by any Seller of a breach of any of the representations and warranties set
forth on Schedule 1 to this Agreement, Sellers shall give prompt written
notice thereof to Buyer.  Upon any such
discovery by Buyer, Buyer will notify Sellers. 
It is understood and agreed that the representations and warranties set
forth in Schedule 1 with respect to the Purchased Loans shall survive
delivery of the respective Mortgage Files to the Custodian and shall inure to
the benefit of Buyer.  The fact that
Buyer has conducted or has failed to conduct any partial or

 

46

 

complete due
diligence investigation in connection with its purchase of any Purchased Loan
shall not affect Buyer’s right to demand repurchase as provided under this
Agreement.  Sellers shall, within two (2)
Business Days of the earlier of Sellers’ discovery or any Seller receiving
notice with respect to any Purchased Loan of (i) any breach of a representation
or warranty contained in Schedule 1, or (ii) any failure to deliver any
of the items required to be delivered as part of the Mortgage File within the
time period required for delivery pursuant to the Custodial Agreement, promptly
cure such breach or delivery failure in all material respects.  If within two (2) Business Days after the
earlier of Sellers’ discovery of such breach or delivery failure or any Seller
receiving notice thereof that such breach or delivery failure has not been
remedied by Sellers, Sellers shall promptly upon receipt of written
instructions from Buyer, at Buyer’s option, either (i) repurchase such
Purchased Loan at a purchase price equal to the Repurchase Price with respect
to such Purchased Loan by wire transfer to the account designated by Buyer, or
(ii) transfer comparable Substitute Loans to Buyer, as provided in Section 16
hereof.

 

16.          SUBSTITUTION

 

Sellers may,
subject to agreement with and acceptance by Buyer upon one (1) Business Day’s
notice, substitute other assets which are substantially the same as the
Purchased Loans (the “Substitute Loans”) for any Purchased Loans.  Such substitution shall be made by transfer
to Buyer of such Substitute Loans and transfer to Sellers of such Purchased
Loans (the “Reacquired Loans”) along with the other information to be
provided with respect to the applicable Substitute Loan as described in the
form of Transaction Notice.  Upon
substitution, the Substitute Loans shall be deemed to be Purchased Loans, the
Reacquired Loans shall no longer be deemed Purchased Loans, Buyer shall be
deemed to have terminated any security interest that Buyer may have had in the
Reacquired Loans and any Purchased Items solely related to such Reacquired
Loans to Seller unless such termination and release would give rise to or
perpetuate a Margin Deficit. 
Concurrently with any termination and release described in this Section
16, Buyer shall execute and deliver to Sellers upon request and Buyer hereby authorizes
Seller to file and record such documents as Seller may reasonably deem
necessary or advisable in order to evidence such termination and release.

 

17.          RESERVED

 

18.          EVENTS OF DEFAULT

 

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

 

(a)           a
Seller fails to transfer the Purchased Loans to Buyer on the applicable
Purchase Date (provided Buyer has tendered the related Purchase Price);

 

(b)           a
Seller either fails to repurchase the Purchased Loans on the applicable
Repurchase Date or fails to perform its obligations under Section 6;

 

(c)           a
Seller shall default in the payment of any other amount payable by it hereunder
or under any other Program Document after notification by the Buyer of such
default, and such default shall have continued unremedied for three Business
Days; or

 

47

 

(d)           any
representation, warranty or certification made or deemed made herein or in any
other Program Document by a Seller or any certificate furnished to the Buyer
pursuant to the provisions thereof, shall prove to have been false or
misleading in any material respect as of the time made or furnished (other than
the representations and warranties set forth in Schedule 1 which shall be
considered solely for the purpose of determining the Market Value of the Loans;
unless (i) a Seller shall have made any such representations and warranties
with knowledge that they were materially false or misleading at the time made
or (ii) any such representations and warranties have been determined by the
Buyer in its sole discretion to be materially false or misleading on a regular
basis); or

 

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

 

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

 

(g)           a
Seller shall admit in writing its inability to, or intention not to, perform
any of such Seller’s Obligations, or Buyer shall have determined in good faith
that any Seller is unable to meet its commitments;

 

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

 

(i)            A
custodian, receiver, conservator, liquidator, trustee, sequestrator or similar
official for a Seller, or any of Sellers’ Affiliates/Subsidiaries, or of any of
Sellers’, or their respective Property (as a debtor or creditor protection
procedure), is appointed or takes possession of such Property; or Seller or any
of Seller’s Affiliates/Subsidiaries generally fails to

 

48

 

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

 

(j)            Any
Governmental Authority or any person, agency or entity acting or purporting to
act under governmental authority shall have taken any action to condemn, seize
or appropriate, or to assume custody or control of, all or any substantial part
of the Property of any Seller or any of Sellers’ Affiliates/Subsidiaries, or
shall have taken any action to displace the management of any Seller or any of
Sellers’ Affiliates/Subsidiaries or to curtail its authority in the conduct of
the business of any Seller or any of Sellers’ Affiliates/Subsidiaries, or takes
any action in the nature of enforcement to remove, limit or restrict the
approval of any Seller or any of Sellers’ Affiliates/Subsidiaries as an issuer,
buyer or a seller/servicer of Loans or securities backed thereby, and such
action provided for in this subsection (j) shall not have been discontinued or
stayed within thirty (30) days;

 

(k)           Any
Program Document shall for whatever reason (including an event of default
thereunder) be terminated, this Agreement shall for any reason cease to create
a valid, first priority security interest or ownership interest upon transfer
in any of the Purchased Loans or Purchased Items purported to be covered hereby
or any of Sellers’ material obligations (including Sellers’ Obligations
hereunder shall cease to be in full force and effect, or the enforceability
thereof shall be contested by the Sellers;

 

(l)            Any
Material Adverse Effect shall have occurred, as determined by Buyer in its sole
discretion;

 

(m)          (i)
any Person shall engage in any “prohibited transaction” (as defined in Section
406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any material
“accumulated funding deficiency” (as defined in Section 302 of ERISA), whether
or not waived, shall exist with respect to any Plan or any Lien in favor of the
PBGC or a Plan shall arise on the assets of the Buyer or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Buyer, likely to result in the termination of
such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan
shall terminate for purposes of Title IV of ERISA, (v) the Seller or any
Commonly Controlled Entity shall, or in the reasonable opinion of the Buyer is
likely to, incur any liability in connection with a withdrawal from, or the
insolvency or reorganization of, a Multiemployer Plan or (vi) any other event
or condition shall occur or exist with respect to a Plan; and in each case in
clauses (i) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could reasonably be expected to have a
Material Adverse Effect;

 

49

 

(n)                                 A
Change of Control shall have occurred without the prior consent of the Buyer or
a material change in the management of the Sellers shall have occurred which
has not been approved by Buyer;

 

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

 

(p)                                 Buyer
shall reasonably request, specifying the reasons for such request, reasonable
information, and/or written responses to such requests, regarding the financial
well-being of Seller and such reasonable information and/or responses shall not
have been provided within three (3) Business Days of such request;

 

(q)                                 Sellers
or any Subsidiary or Affiliate of Sellers shall default under, or fail to
perform as required under, or shall otherwise breach the terms of any
instrument, agreement or contract between the Seller or such other entity, on
the one hand, and the Buyer or any of the Buyer’s Affiliates on the other; or
the Seller or any Subsidiary or Affiliate of the Seller shall default under, or
fail to perform as requested under, the terms of any repurchase agreement, loan
and security agreement or similar credit facility or agreement for borrowed
funds entered into by the Seller or such other entity and any third party,
which default or failure entitles any party to require acceleration or
prepayment of any indebtedness thereunder; and

 

(r)                                    Aames
Investment shall fail to maintain its status as a REIT.

 

19.                               REMEDIES

 

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

 

(a)                                  (i)  The
Repurchase Date for each Transaction hereunder shall, if it has not already
occurred, be deemed immediately to occur (provided that, in the event that the
Purchase Date for any Transaction has not yet occurred as of the date of such
exercise or deemed exercise, such Transaction shall be deemed immediately
canceled). Sellers’ obligations hereunder to repurchase all Purchased Loans at
the Repurchase Price therefor on the Repurchase Date in such Transactions shall
thereupon become immediately due and payable; all Income then held by the
Seller for the benefit of Buyer and all Income paid after such exercise or
deemed exercise shall be remitted to and retained by Buyer and applied to the
aggregate Repurchase Price and any other amounts owing by Sellers hereunder;
Sellers shall immediately deliver to Buyer or its designee any and all original
papers, Servicing Records and files relating to the Purchased Loans subject to
such Transaction then in Sellers’ possession and/or control; and all right,
title and interest in and entitlement to such Purchased Loans and Servicing
Rights thereon shall be deemed transferred to Buyer or its designee.

 

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

 

50

 

Section 19(a)(i) without notice or demand of
any kind, at a public or private sale and at such price or prices as Buyer may
reasonably deem satisfactory any or all Purchased Loans and/or (B) in its sole
discretion elect, in lieu of selling all or a portion of such Purchased Loans,
to give Seller credit for such Purchased Loans in an amount equal to the Market
Value of the Purchased Loans against the aggregate unpaid Repurchase Price and
any other amounts owing by Seller hereunder. Sellers shall remain liable to
Buyer for any amounts that remain owing to Buyer following a sale and/or credit
under the preceding sentence. The proceeds of any disposition of Purchased
Loans shall be applied first to the reasonable costs and expenses
incurred by Buyer in connection with or as a result of an Event of Default; second
to Breakage Costs, if any, costs of cover and/or related hedging transactions; third
to the aggregate Repurchase Prices; and fourth to all other Obligations.

 

(iii)  Buyer
shall have the right to terminate this Agreement and declare all obligations of
Seller to be immediately due and payable, by a notice in accordance with
Section 21 hereof.

 

(iv)  The
parties recognize that it may not be possible to purchase or sell all of the
Purchased Loans on a particular Business Day, or in a transaction with the same
purchaser, or in the same manner because the market for such Purchased Loans
may not be liquid. In view of the nature of the Purchased Loans, the parties
agree that liquidation of a Transaction or the underlying Purchased Loans does
not require a public purchase or sale and that a good faith private purchase or
sale shall be deemed to have been made in a commercially reasonable manner. Accordingly,
Buyer may elect the time and manner of liquidating any Purchased Loan and
nothing contained herein shall obligate Buyer to liquidate any Purchased Loan
on the occurrence of an Event of Default or to liquidate all Purchased Loans in
the same manner or on the same Business Day or constitute a waiver of any right
or remedy of Buyer. Notwithstanding the foregoing, the parties to this
Agreement agree that the Transactions have been entered into in consideration
of and in reliance upon the fact that all Transactions hereunder constitute a
single business and contractual obligation and that each Transaction has been
entered into in consideration of the other Transactions.

 

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

 

(b)                                 Each
Seller hereby acknowledges, admits and agrees that Sellers’ obligations under
this Agreement are joint and several recourse obligations of the Sellers to
which each Seller pledges its full faith and credit. In addition to its rights
hereunder, Buyer shall have the right to proceed against any of any Seller’s
assets which may be in the possession of Buyer, any of Buyer’s Affiliates or
their respective designees (including the Custodian), including the right to
liquidate such assets and to set-off the proceeds against monies owed by
Sellers to Buyer

 

51

 

pursuant to this Agreement. Buyer
may set off cash, the proceeds of the liquidation of the Purchased Loans and
Additional Purchased Loans, any other Purchased Items and their proceeds and
all other sums or obligations owed by Buyer to Sellers against all of Sellers’
obligations to Buyer, whether under this Agreement, under a Transaction, or
under any other agreement between the parties, or otherwise, whether or not
such obligations are then due, without prejudice to Buyer’s right to recover
any deficiency.

 

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

 

(d)                                 Buyer
shall have the right to direct all Persons servicing the Purchased Loans to
take such action with respect to the Purchased Loans as Buyer determines
appropriate.

 

(e)                                  Buyer
shall, without regard to the adequacy of the security for the Obligations, be
entitled to the appointment of a receiver by any court having jurisdiction,
without notice, to take possession of and protect, collect, manage, liquidate,
and sell the Purchased Loans and any other Purchased Items or any portion
thereof, collect the payments due with respect to the Purchased Loans and any
other Purchased Items or any portion thereof, and do anything that Buyer is
authorized hereunder or by law to do. Seller shall pay all costs and expenses
incurred by Buyer in connection with the appointment and activities of such
receiver.

 

(f)                                    Buyer
may, at its option, enter into one or more Interest Rate Protection Agreements
covering all or a portion of the Purchased Loans, and the Seller shall be
responsible for all damages, judgments, costs and expenses of any kind which
may be imposed on, incurred by or asserted against the Buyer relating to or
arising out of such Interest Rate Protection Agreements; including without
limitation any losses resulting from such Interest Rate Protection Agreements.

 

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

 

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

 

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

 

52

 

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

 

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

 

20.                               DELAY
NOT WAIVER; REMEDIES ARE CUMULATIVE

 

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

 

21.                               NOTICES
AND OTHER COMMUNICATIONS

 

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

 

22.                               USE
OF EMPLOYEE PLAN ASSETS

 

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

 

23.                               INDEMNIFICATION
AND EXPENSES.

 

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

 

53

 

Indemnified Party against all
liabilities, losses, damages, judgments, costs and expenses of any kind which
may be imposed on, incurred by or asserted against such Indemnified Party
(collectively, the “Costs”) relating to or arising out of this Agreement, any
other Program Document or any transaction contemplated hereby or thereby, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, any other Program Document or any transaction
contemplated hereby or thereby, that, in each case, results from anything other
than any Indemnified Party’s gross negligence or willful misconduct. Without
limiting the generality of the foregoing, the Sellers agree to hold any
Indemnified Party harmless from and indemnify such Indemnified Party against
all Costs with respect to all Loans relating to or arising out of any violation
or alleged violation of any environmental law, rule or regulation or any
consumer credit laws, including without limitation laws with respect to unfair
or deceptive lending practices and predatory lending practices, the Truth in
Lending Act and/or the Real Estate Settlement Procedures Act, that, in each
case, results from anything other than such Indemnified Party’s gross
negligence or willful misconduct. In any suit, proceeding or action brought by
an Indemnified Party in connection with any Loan for any sum owing thereunder,
or to enforce any provisions of any Loan, the Seller will save, indemnify and
hold such Indemnified Party harmless from and against all expense, loss or
damage suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction of liability whatsoever of the account debtor or obligor thereunder,
arising out of a breach by the Sellers of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or
in favor of such account debtor or obligor or its successors from the Sellers. The
Sellers also agree to reimburse an Indemnified Party as and when billed by such
Indemnified Party for all such Indemnified Party’s costs and expenses incurred
in connection with the enforcement or the preservation of such Indemnified
Party’s rights under this Agreement, any other Program Document or any
transaction contemplated hereby or thereby, including without limitation the
reasonable fees and disbursements of its counsel. The Sellers hereby
acknowledge that, the obligations of the Sellers under this Agreement are
recourse obligations of the Sellers.

 

(b)                                 The
Sellers agree to pay as and when billed by the Buyer all of the out-of pocket
costs and expenses incurred by the Buyer in connection with the development,
preparation and execution of, and any amendment, supplement or modification to,
this Agreement, any other Program Document or any other documents prepared in
connection herewith or therewith. The Sellers agree to pay as and when billed
by the Buyer all of the out-of-pocket costs and expenses incurred in connection
with the consummation and administration of the transactions contemplated
hereby and thereby including, without limitation, (i) all the reasonable fees,
disbursements and expenses of counsel to the Buyer and (ii) all the due
diligence, inspection, testing and review costs and expenses incurred by the
Buyer with respect to Purchased Items under this Agreement, including, but not
limited to, those costs and expenses incurred by the Buyer pursuant to Sections
23, 39 and 44 hereof other than any costs and expenses incurred in connection
with the Buyer’s rehypothecation of the Purchased Loans prior to an Event of
Default. Sellers also agree not to assert any claim against Buyer or any of its
Affiliates, or any of their respective officers, directors, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Program Documents, the actual or proposed use of the proceeds of the
Transactions, this Agreement or any of the transactions contemplated hereby or
thereby. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY
APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR

 

54

 

WILLFUL MISCONDUCT) OF THE
INDEMNIFIED PARTIES.

 

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

 

(d)                                 Without
prejudice to the survival of any other agreement of Sellers hereunder, the covenants
and obligations of Sellers contained in this Section 23 shall survive the
payment in full of the Repurchase Price and all other amounts payable hereunder
and delivery of the Purchased Loans by Buyer against full payment therefor.

 

24.                               WAIVER
OF REDEMPTION AND DEFICIENCY RIGHTS

 

Each Seller
hereby expressly waives, to the fullest extent permitted by law, every statute
of limitation on a deficiency judgment, any reduction in the proceeds of any
Purchased Items as a result of restrictions upon Buyer or Custodian contained
in the Program Documents or any other instrument delivered in connection
therewith, and any right that it may have to direct the order in which any of
the Purchased Items shall be disposed of in the event of any disposition
pursuant hereto.

 

25.                               REIMBURSEMENT

 

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

 

26.                               FURTHER
ASSURANCES

 

Sellers agree
to do such further acts and things and to execute and deliver to Buyer such
additional assignments, acknowledgments, agreements, powers and instruments as
are reasonably required by Buyer to carry into effect the intent and purposes
of this Agreement and the other Program Documents, to perfect the interests of
Buyer in the Purchased Items or to better assure and confirm unto Buyer its
rights, powers and remedies hereunder and thereunder.

 

27.                               TERMINATION

 

This Agreement
shall remain in effect until the Termination Date. However, no such termination
shall affect Sellers’ outstanding obligations to Buyer at the time of such
termination.

 

55

 

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

 

28.                               SEVERABILITY

 

If any
provision of any Program Document is declared invalid by any court of competent
jurisdiction, such invalidity shall not affect any other provision of the
Program Documents, and each Program Document shall be enforced to the fullest
extent permitted by law.

 

29.                               BINDING
EFFECT; GOVERNING LAW

 

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

 

30.                               AMENDMENTS

 

Except as
otherwise expressly provided in this Agreement, any provision of this Agreement
may be modified or supplemented only by an instrument in writing signed by the
Seller and the Buyer and any provision of this Agreement may be waived by the
Buyer.

 

31.                               SUCCESSORS
AND ASSIGNS

 

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

 

32.                               SURVIVAL

 

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

 

33.                               CAPTIONS

 

The table of
contents and captions and section headings appearing herein are included

 

56

 

solely for
convenience of reference and are not intended to affect the interpretation of
any provision of this Agreement.

 

34.                               COUNTERPARTS

 

This Agreement
may be executed in any number of counterparts, all of which taken together
shall constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart.

 

35.                               SUBMISSION
TO JURISDICTION; WAIVERS

 

EACH PARTY
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:

 

(A)                               SUBMITS
FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT AND/OR ANY OTHER PROGRAM DOCUMENT, OR FOR RECOGNITION AND ENFORCEMENT
OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY
THEREOF;

 

(B)                               CONSENTS
THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE
EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH
ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO
PLEAD OR CLAIM THE SAME;

 

(C)                               AGREES
THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY
MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY
SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS
SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE BUYER SHALL HAVE BEEN
NOTIFIED; AND

 

(D)                               AGREES
THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION.

 

36.                               WAIVER
OF JURY TRIAL

 

EACH OF
THE SELLERS AND THE BUYER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

57

 

37.                               ACKNOWLEDGEMENTS

 

Each Seller
hereby acknowledges that:

 

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

 

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

 

(c)                                  no
joint venture exists among or between the Buyer and the Seller.

 

38.                               HYPOTHECATION
OR PLEDGE OF PURCHASED ITEMS.

 

The Buyer
shall have free and unrestricted use of all Loans and Purchased Items and
nothing in this Agreement shall preclude the Buyer from engaging in repurchase
transactions with the Loans and Purchased Items or otherwise pledging,
repledging, transferring, hypothecating, or rehypothecating the Loans and
Purchased Items. Nothing contained in this Agreement shall obligate the Buyer
to segregate any Loans or Purchased Items delivered to the Buyer by the
Sellers.

 

39.                               ASSIGNMENTS;
PARTICIPATIONS.

 

(a)                                  The
Sellers may assign any of their rights or obligations hereunder only with the
prior written consent of the Buyer. The Buyer may assign or transfer to any
bank or other financial institution that makes or invests in repurchase
agreements or loans or any Affiliate of the Buyer all or any of its rights
under this Agreement and the other Program Documents.

 

(b)                                 The
Buyer may, in accordance with applicable law, at any time sell to one or more
entities (“Participants”) participating interests in this Agreement, its
agreement to purchase Loans, or any other interest of the Buyer hereunder and
under the other Program Documents. In the event of any such sale by the Buyer
of participating interests to a Participant, the Buyer’s obligations under this
Agreement to the Sellers shall remain unchanged, the Buyer shall remain solely
responsible for the performance thereof and the Sellers shall continue to deal
solely and directly with the Buyer in connection with the Buyer’s rights and
obligations under this Agreement and the other Program Documents. The Sellers
agree that if amounts outstanding under this Agreement are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Buyer under this Agreement; provided,
that such Participant shall only be entitled to such right of set-off if it
shall have agreed in the agreement pursuant to which it shall have acquired its
participating interest to share with the Buyer the proceeds thereof. The Buyer
also agrees that each Participant shall be entitled to the benefits of Sections
3(h), 3(i) and 23 with respect to its participation in the Loans and Purchased
Items outstanding from time to time; provided, that the Buyer and all
Participants shall be entitled to receive no greater amount in the aggregate
pursuant to such Sections than the Buyer would have been entitled to receive
had no such transfer occurred.

 

(c)                                  The
Buyer may furnish any information concerning the Sellers or any of their
Subsidiaries in the possession of Buyer from time to time to assignees and
Participants

 

58

 

(including prospective
assignees and Participants) only after notifying the Sellers in writing and
securing signed confidentiality statements (a form of which is attached hereto
as Exhibit H) and only for the sole purpose of evaluating assignments or
participations and for no other purpose.

 

(d)                                 The
Sellers agree to cooperate with the Buyer in connection with any such
assignment and/or participation, to execute and deliver replacement notes, and
to enter into such restatements of, and amendments, supplements and other
modifications to, this Agreement and the other Program Documents in order to
give effect to such assignment and/or participation. The Sellers further agree
to furnish to any Participant identified by the Buyer to the Sellers copies of
all reports and certificates to be delivered by the Sellers to the Buyer
hereunder, as and when delivered to the Buyer.

 

40.                               SINGLE
AGREEMENT

 

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

 

41.                               INTENT

 

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

 

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

 

42.                               CONFIDENTIALITY

 

The Program
Documents and their respective terms, provisions, supplements and amendments,
and transactions and notices thereunder, are proprietary to Buyer and shall be
held by Sellers in strict confidence and shall not be disclosed to any third
party without the consent of Buyer except for (i) disclosure to Sellers’ direct
and indirect parent companies, directors, attorneys, agents or accountants,
provided that such attorneys or accountants likewise agree to be bound by this
covenant of confidentiality, or are otherwise subject to confidentiality
restrictions or (ii) upon prior written notice to Buyer, disclosure required by
law, rule, regulation or order of a court or other regulatory body or (iii)
upon prior written notice to Buyer, disclosure to any approved hedge
counterparty to the extent necessary to obtain any Interest Rate Protection

 

59

 

Agreement
hereunder or (iv) any disclosures or filing required under Securities and
Exchange Commission (“SEC”) or state securities’ laws; provided that
in the case of (ii), (iii) and (iv), Sellers shall take reasonable actions to
provide Buyer with prior written notice; provided  further that in
the case of (iv), the Sellers shall not file any of the Program Documents other
than the Agreement with the SEC or state securities office unless Sellers shall
have provided at least thirty (30) days (or such lesser time as may be demanded
by the SEC or state securities office) prior written notice of such filing to
Buyer. Notwithstanding anything herein to the contrary, each party (and each
employee, representative, or other agent of each party) may disclose to any and
all persons, without limitation of any kind, the tax treatment and tax
structure of the transaction and all materials of any kind (including opinions
or other tax analyses) that are provided to it relating to such tax treatment
and tax structure. For this purpose, tax treatment and tax structure shall not
include (i) the identity of any existing or future party (or any Affiliate of
such party) to this Agreement or (ii) any specific pricing information or other
commercial terms, including the amount of any fees, expenses, rates or payments
arising in connection with the transactions contemplated by this Agreement. Buyer
acknowledges that this Agreement may be filed with the Securities and Exchange
Commission; provided that, the Sellers shall redact any pricing and other
confidential provisions, including, without limitation, the amount of any
commitment fee, non-usage fee, Price Differential and Purchase Price from such
filed Agreement.

 

43.                               SERVICING

 

(a)                                  The
Seller covenants to maintain or cause the servicing of the Purchased Loans to
be maintained in conformity with Accepted Servicing Practices. In the event
that the preceding language is interpreted as constituting one or more
servicing contracts, each such servicing contract shall terminate automatically
upon the earliest of (i) an Event of Default, or (ii) the date on which all the
Obligations have been paid in full, or (iii) the transfer of servicing to any
entity approved by the Buyer and the assumption thereof by such entity.

 

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

 

(c)                                  If
the Loans are serviced by any other third party servicer (such third party
servicer, the “Subservicer”) the Sellers shall provide a copy of the related
servicing agreement with a properly executed Instruction Letter to the Buyer at
least three (3) Business Days prior to the applicable Purchase Date or the date
on which the Subservicer shall begin subservicing the Loans, which shall be in
the form and substance acceptable to Buyer (the “Servicing

 

60

 

Agreement”) and shall have
obtained the written consent of the Buyer for such Subservicer to subservice
the Loans. Initially, the Subservicer shall be Aames Funding.

 

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

 

(e)                                  After
the Purchase Date, until the Repurchase Date, the Sellers will have no right to
modify or alter the terms of the Loan or consent to the modification or
alteration of the terms of any Loan, and the Sellers will have no obligation or
right to repossess any Loan or substitute another Loan, except as provided in
any Custodial Agreement.

 

(f)                                    The
Sellers shall permit the Buyer to inspect upon reasonable prior written notice
at a mutually convenient time, the Seller’s or its Affiliate’s servicing
facilities, as the case may be, for the purpose of satisfying the Buyer that
the Sellers or its Affiliate, as the case may be, has the ability to service
the Loans as provided in this Agreement. In addition, with respect to any Subservicer
which is not an Affiliate of the Sellers, the Sellers shall use their best
efforts to enable the Buyer to inspect the servicing facilities of such
Subservicer.

 

44.                               PERIODIC
DUE DILIGENCE REVIEW

 

The Sellers
acknowledges that the Buyer has the right to perform continuing due diligence
reviews with respect to the Loans, for purposes of verifying compliance with
the representations, warranties, covenants and specifications made hereunder or
under any other Program Document, or otherwise, and the Seller agrees that upon
reasonable (but no less than one (1) Business Day’s) prior notice to the
Sellers (provided that upon the occurrence of a Default or an Event of Default,
no such prior notice shall be required), the Buyer or its authorized
representatives will be permitted during normal business hours to examine,
inspect, make copies of, and make extracts of, the Mortgage Files, the
Servicing Records and any and all documents, records, agreements, instruments
or information relating to such Loans in the possession, or under the control,
of the Sellers and/or the Custodian. The Sellers also shall make available to
the Buyer a knowledgeable financial or accounting officer for the purpose of
answering questions respecting the Mortgage Files and the Loans. Without
limiting the generality of the foregoing, the Sellers acknowledge that the
Buyer shall purchase Loans from the Sellers based solely upon the information
provided by the Sellers to the Buyer in the Loan Schedule and the
representations, warranties and covenants contained herein, and that the Buyer,
at its option, has the right, at any time to conduct a partial or complete due
diligence review on some or all of the Purchased Loans, including, without
limitation, ordering new credit reports, new appraisals on the related
Mortgaged Properties and otherwise re-generating the information used to
originate such Loan. The Buyer may underwrite such Loans itself or engage a
third party underwriter to perform such underwriting. The Sellers agree to
cooperate with the Buyer and any third party underwriter in connection with
such underwriting, including, but not limited to,

 

61

 

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

 

45.                               SET-OFF

 

In addition to
any rights and remedies of the Buyer provided by this Agreement and by law, the
Buyer shall have the right, without prior notice to the Sellers, any such
notice being expressly waived by the Sellers to the extent permitted by
applicable law, upon any amount becoming due and payable by the Sellers
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all Property and
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by the Buyer or any Affiliate thereof to
or for the credit or the account of the Sellers. The Buyer may set-off cash,
the proceeds of the liquidation of any Purchased Items and all other sums or
obligations owed by the Buyer or its Affiliates to Seller against all of
Sellers’ obligations to the Buyer or its Affiliates, whether under this
Agreement or under any other agreement between the parties or between Seller
and any Affiliate of the Buyer, or otherwise, whether or not such obligations
are then due, without prejudice to the Buyer’s or its Affiliate’s right to
recover any deficiency. The Buyer agrees promptly to notify the Sellers after
any such set-off and application made by the Buyer; provided that the failure
to give such notice shall not affect the validity of such set-off and
application.

 

46.                               JOINT
AND SEVERAL LIABILITY; CROSS-DEFAULT.

 

Each Seller
hereby acknowledges and agrees that the Sellers are jointly and severally
liable to the Buyer for all representations, warranties, covenants, obligations
and liabilities of either Seller hereunder. Each Seller hereby further
acknowledges and agrees that any Default, Event of Default or breach of a
representation, warranty or covenant by either Seller under this Agreement is
hereby considered a Default, Event of Default or breach by each Seller, as
applicable. Each Seller hereby waives any defense to their obligations under
this Agreement based upon or arising out of the disability or other defense or
cessation of liability of one Seller versus another. A Seller’s subrogation
claim arising out of payments to Buyer shall constitute a capital investment in
another Seller subordinated to any claims of Buyer and equal to a ratable share
of the equity interests in such Seller.

 

47.                               ENTIRE
AGREEMENT

 

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

 

62

 

unless the
same is set forth in writing by a duly authorized representative of each party
hereto.

 

[SIGNATURE PAGE
FOLLOWS]

 

63

 

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

 

 

	
  AAMES INVESTMENT CORPORATION, a

  Maryland corporation, as Seller

  	
   

  	
  AAMES CAPITAL CORPORATION, a

  California corporation, as Seller

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices:

  
	
  350 South Grand Avenue

  Los Angeles, California 90071

  Attention: Chief Financial Officer

  Telecopier No.: (323) 210-5036

  Telephone No.: (323) 210-4855

  	
   

  	
  350 South Grand Avenue

  Los Angeles, California 90071

  Attention: Chief Financial Officer

  Telecopier No.: (323) 210-5036

  Telephone No.: (323) 210-4855

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  With a copy to:

  
	
  Attention: Vice President/Treasury

  Telecopier No.: (323) 210-5044

  Telephone No.: (323) 210-5385

  	
   

  	
  Attention: Vice President/Treasury

  Telecopier No.: (323) 210-5044

  Telephone No.: (323) 210-5385

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  With a copy to:

  
	
  Attention: General Counsel

  Telecopier No.: (323) 210-5026

  Telephone No.: (323) 210-4871

  	
   

  	
  Attention: General Counsel

  Telecopier No.: (323) 210-5026

  Telephone No.: (323) 210-4871

  
											

 

 

	
  AAMES FUNDING CORPORATION, a

  California corporation, as Seller

  	
   

  	
  GREENWICH CAPITAL FINANCIAL

  PRODUCTS, INC., a Delaware corporation, as

  Buyer and Agent, as applicable

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address for Notices:

  	
   

  	
  Address for Notices to the Buyer:

  
	
  350 South Grand Avenue

  Los Angeles, California 90071

  Attention: Chief Financial Officer

  Telecopier No.: (323) 210-5036

  Telephone No.: (323) 210-4855

  	
   

  	
  600 Steamboat Road

  Greenwich, Connecticut 06830

  Attention: Tony Palmisano

  Telephone: (203) 618-2341

  Fax: (203) 422-4718

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  With a copy to:

  
	
  Attention: Vice President/Treasury

  Telecopier No.: (323) 210-5044

  Telephone No.: (323) 210-5385

  	
   

  	
  Attention: James Esposito

  Telephone: (203) 625-6072

  Fax: (203) 422-4072

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
   

  
	
  Attention: General Counsel

  Telecopier No.: (323) 210-5026

  Telephone No.: (323) 210-4871

  	
   

  	
   

  
											

 

 

ANNEX
I

 

BUYER
ACTING AS AGENT

 

This Annex I
forms a part of the Master Repurchase Agreement dated as of April 10, 2006 (the
“Agreement”) among Aames Investment Corporation, Aames Capital
Corporation, Aames Funding Corporation and Greenwich Capital Financial
Products, Inc. This Annex I sets forth the terms and conditions governing all
transactions in which the Buyer selling assets or buying assets, as the case
may be (“Agent”), in a Transaction is acting as agent for one or more
third parties (each, a “Principal”). Capitalized terms used but not
defined in this Annex I shall have the meanings ascribed to them in the
Agreement.

 

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

 

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

 

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

 

I-1

 

representations
of Agent under the Agreement, including this Annex I, are true and correct in
all material respects during the term of any Transaction and Agent otherwise
complies with the provisions of this Annex I, then (a) Agent’s obligations
under the Agreement shall not include a guarantee of performance by its
Principal or Principals; provided that Agent shall remain liable for
performance pursuant to Section 10 of the Agreement, and (b) the other party’s
remedies shall not include a right of setoff in respect of rights or
obligations, if any, of Agent arising in other transactions in which Agent is
acting as principal.

 

4.                                       Multiple
Principals.

 

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

 

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

 

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

 

(d)                                 Notwithstanding
any other provision of the Agreement (including, without limitation, this Annex
I), the parties agree that any Transactions by Agent on behalf of an employee
benefit plan under ERISA shall be treated as Transactions

 

I-2

 

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

 

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

 

I-3

 

Schedule 1

 

REPRESENTATIONS
AND WARRANTIES RE: LOANS

 

Eligible Loans

 

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

 

(a)                                  Loans
as Described. The information set forth in the Loan Schedule with respect
to the Loan is complete, true and correct in all material respects.

 

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

 

(c)                                  No
Outstanding Charges. There are no defaults in complying with the terms of
the Mortgage securing the Loan, and all taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges, leasehold payments or
ground rents which previously became due and owing have been paid, or an escrow
of funds has been established in an amount sufficient to pay for every such
item which remains unpaid and which has been assessed but is not yet due and
payable. Neither the Seller nor the Qualified Originator from which the Seller
acquired the Loan has advanced funds, or induced, solicited or knowingly
received any advance of funds by a party other than the Mortgagor, directly or
indirectly, for the payment of any amount required under the Loan, except for
interest accruing from the date of the Note or date of disbursement of the
proceeds of the Loan, whichever is more recent, to the day which precedes by
one month the Due Date of the first installment of principal and interest
thereunder.

 

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

 

(e)                                  No
Defenses. The Loan is not subject to any right of rescission, setoff,
counterclaim or defense, including without limitation the defense of usury, nor
will the operation of any of the terms of the Note or the Mortgage, or the
exercise of any right thereunder, render either the Note or the Mortgage
unenforceable, in whole or in part and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto, and no
Mortgagor in respect of the Loan was a debtor in any state or Federal
bankruptcy or insolvency proceeding at the time the Loan was originated.

 

I-4

 

(f)                                    Hazard
Insurance. The Mortgaged Property is insured by a fire and extended perils
insurance policy, issued by a Qualified Insurer, and such other hazards as are
customary in the area where the Mortgaged Property is located, and to the
extent required by the Seller as of the date of origination consistent with the
Underwriting Guidelines, against earthquake and other risks insured against by
Persons operating like properties in the locality of the Mortgaged Property, in
an amount not less than the greatest of (i) 100% of the replacement cost of all
improvements to the Mortgaged Property, (ii) either (A) the outstanding
principal balance of the Loan with respect to each First Lien Loan or (B) with
respect to each Second Lien Loan, the sum of the outstanding principal balance
of the First Lien Loan and the outstanding principal balance of the Second Lien
Loan, (iii) the amount necessary to avoid the operation of any co-insurance
provisions with respect to the Mortgaged Property, and consistent with the
amount that would have been required as of the date of origination in
accordance with the Underwriting Guidelines or (iv) the amount necessary to
fully compensate for any damage or loss to the improvements that are a part of
such property on a replacement cost basis. If any portion of the Mortgaged
Property is in an area identified by any federal Governmental Authority as
having special flood hazards, and flood insurance is available, a flood
insurance policy meeting the current guidelines of the Federal Insurance
Administration is in effect with a generally acceptable insurance carrier, in
an amount representing coverage not less than the least of (1) the outstanding
principal balance of the Loan, (2) the full insurable value of the Mortgaged
Property, and (3) the maximum amount of insurance available under the Flood
Disaster Protection Act of 1973, as amended. All such insurance policies
(collectively, the “hazard insurance policy”) contain a standard mortgagee
clause naming the Seller, its successors and assigns (including without
limitation, subsequent owners of the Loan), as mortgagee, and may not be
reduced, terminated or canceled without 30 days’ prior written notice to the
mortgagee. No such notice has been received by the Seller. All premiums due and
owing on such insurance policy have been paid. The related Mortgage obligates
the Mortgagor to maintain all such insurance and, at such Mortgagor’s failure
to do so, authorizes the mortgagee to maintain such insurance at the Mortgagor’s
cost and expense and to seek reimbursement therefor from such Mortgagor. Where
required by state law or regulation, the Mortgagor has been given an
opportunity to choose the carrier of the required hazard insurance, provided
the policy is not a “master” or “blanket” hazard insurance policy covering a
condominium, or any hazard insurance policy covering the common facilities of a
planned unit development. The hazard insurance policy is the valid and binding
obligation of the insurer and is in full force and effect. The Seller has not
engaged in, and has no knowledge of the Mortgagor’s having engaged in, any act
or omission which would impair the coverage of any such policy, the benefits of
the endorsement provided for herein, or the validity and binding effect of
either including, without limitation, no unlawful fee, commission, kickback or
other unlawful compensation or value of any kind has been or will be received,
retained or realized by any attorney, firm or other Person, and no such
unlawful items have been received, retained or realized by the Seller.

 

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

 

I-5

 

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

 

(h)                                 No
Satisfaction of Mortgage. The Mortgage has not been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the Mortgaged Property has
not been released from the lien of the Mortgage, in whole-or in part, nor has any
instrument been executed that would effect any such release, cancellation,
subordination or rescission other than in the case of a release of a portion of
the land comprising a Mortgaged Property or a release of a blanket Mortgage
which release will not cause the Loan to fail to satisfy the Underwriting
Guidelines. The Seller has not waived the performance by the Mortgagor of any
action, if the Mortgagor’s failure to perform such action would cause the Loan
to be in default, nor has the Seller waived any default resulting from any
action or inaction by the Mortgagor.

 

(i)                                     Location
and Type of Mortgaged Property. The Mortgaged Property is located in the
state identified in the Loan Schedule and consists of a single parcel of real
property with a detached single family residence erected thereon, or a two- to
four-family dwelling, or an individual condominium unit in a condominium
project, or an individual unit in a planned unit development or a de minimis
planned unit development, provided, however, that any condominium unit or
planned unit development shall conform with the applicable Fannie Mae and
Freddie Mac requirements regarding such dwellings, that a de minimus percentage
of the Loans may be Cooperative Loans and that no residence or dwelling is a mobile
home or a manufactured dwelling. No portion of the Mortgaged Property is used
for commercial purposes.

 

(j)                                     Valid
Lien. The Mortgage (including any Negative Amortization which may arise
thereunder) is a valid, subsisting, enforceable and perfected (A) first lien
and first priority security interest with respect to each Loan which is
indicated by the Seller to be a First Lien (as reflected on the Loan Schedule),
or (B) second lien and second priority security interest with respect to each
Loan which is indicated by the Seller to be a Second Lien (as reflected on the
Loan Schedule), in either case, on the real property included in the Mortgaged
Property, including all buildings on the Mortgaged Property and all
installations and mechanical, electrical, plumbing, heating and air
conditioning systems located in or annexed to such buildings, and all
additions, alterations and replacements made at any time with respect to the
foregoing and with respect to Cooperative Loans, including the Proprietary
Lease and the Cooperative Shares. The lien of the Mortgage is subject only to:

 

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

 

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

 

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

 

I-6

 

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

 

Any security
agreement, chattel mortgage or equivalent document related to and delivered in
connection with the Loan establishes and creates a valid, subsisting and
enforceable (A) first lien and first priority security interest with respect to
each Loan which is indicated by the Seller to be a First Lien (as reflected on
the Loan Schedule), or (B) second lien and second priority security interest
with respect to each Loan which is indicated by the Seller to be a Second Lien
Loan (as reflected on the Loan Schedule), in either case, on the property
described therein and the Seller has full right to pledge and assign the same
to the Buyer. Except with respect to any First Lien Loan which was originated
in connection with a Concurrent Second Lien Loan, the Mortgaged Property was
not, as of the date of origination of the Loan, subject to a mortgage, deed of
trust, deed to secure debt or other security instrument creating a lien
subordinate to the lien of the Mortgage.

 

(k)                                  Validity
of Mortgage Documents. The Note and the Mortgage and any other agreement
executed and delivered by a Mortgagor or guarantor, if applicable, in
connection with a Loan are genuine, and each is the legal, valid and binding
obligation of the maker thereof enforceable in accordance with its terms. All
parties to the Note, the Mortgage and any other such related agreement had
legal capacity to enter into the Loan and to execute and deliver the Note, the
Mortgage and any such agreement, and the Note, the Mortgage and any other such
related agreement have been duly and properly executed by such related parties.
No fraud, error, omission, misrepresentation, negligence or similar occurrence
with respect to a Loan has taken place on the part of any Person, including,
without limitation, the Mortgagor, any appraiser, any builder or developer, or
any other party involved in the origination of the Loan. The Seller has reviewed
all of the documents constituting the Servicing File and has made such
inquiries as it deems necessary to make and confirm the accuracy of the
representations set forth herein.

 

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

 

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

 

I-7

 

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

 

(n)                                 Doing
Business. All parties which have had any interest in the Loan, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (i) in compliance with any and
all applicable licensing requirements of the laws of the state wherein the
Mortgaged Property is located, and (ii) either (A) organized under the laws of
such state, (B) qualified to do business in such state, (C) a federal savings
and loan association, a savings bank or a national bank having a principal
office in such state or (D) not doing business in such state.

 

(o)                                 LTV.
As of the date of origination of the Loan, the LTV and CLTV (if applicable) are
as identified on the Loan Schedule. No First Lien Loan has an LTV greater than
100% and no First Lien Loan which is not a Full Documentation Loan has an LTV
greater than 90%.

 

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

 

I-8

 

realized by the Seller.

 

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

 

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

 

(s)                                  Location
of Improvements; No Encroachments. All improvements which were considered
in determining the Appraised Value of the Mortgaged Property lie wholly within
the boundaries and building restriction lines of the Mortgaged Property, and no
improvements on adjoining properties encroach upon the Mortgaged Property. No
improvement located on or being part of the Mortgaged Property is in violation
of any applicable zoning and building law, ordinance or regulation.

 

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

 

I-9

 

Adjustment Date, to fully amortize the outstanding principal balance as
of the first day of such period (including any Negative Amortization) over the
then remaining term of such Note and to pay interest at the related Mortgage
Interest Rate; provided, that the Monthly Payment shall not increase to an
amount that exceeds 107.5% of the amount of the Monthly Payment that was due
immediately prior to the Payment Adjustment Date; provided, further, that the
payment adjustment cap shall not be applicable with respect to the adjustment
made to the Monthly Payment that occurs in a year in which the Loan has been
outstanding for a multiple of five (5) years and in any such year the Monthly
Payment shall be adjusted to fully amortize the Loan over the remaining term. The
Due Date of the first payment under the Note is no more than 60 days from the
date of the Note.

 

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

 

(v)                                 Conformance
with Underwriting Guidelines and Agency Standards. The Loan was
underwritten in accordance with the applicable Underwriting Guidelines. The
Note and Mortgage are on forms similar to those used by Freddie Mac or Fannie
Mae and the Seller has not made any representations to a Mortgagor that are
inconsistent with the mortgage instruments used. Any Concurrent Second Lien
Loan was underwritten in accordance with the Seller’s Underwriting Guidelines
for the Seller’s “80-20” program, a copy of which guidelines has been provided
to the Buyer.

 

(w)                               Occupancy
of the Mortgaged Property. As of the Purchase Date the Mortgaged Property
is either vacant or lawfully occupied under applicable law. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of the Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy
and fire underwriting certificates, have been made or obtained from the
appropriate authorities. The Seller has not received written notification from
any governmental authority that the Mortgaged Property is in material
non-compliance with such laws or regulations, is being used, operated or
occupied unlawfully or has failed to have or obtain such inspection, licenses
or certificates, as the case may be. The Seller has not received notice of any
violation or failure to conform with any such law, ordinance, regulation,
standard, license or certificate. Except as otherwise set forth in the Loan
Schedule, the Mortgagor represented at the time of origination of the Loan that
the Mortgagor would occupy the Mortgaged Property as the Mortgagor’s primary
residence.

 

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

 

I-10

 

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

 

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

 

(aa)                            Transfer
of Loans. The Assignment of Mortgage is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the Mortgaged
Property is located.

 

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

 

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

 

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

 

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

 

I-11

 

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

 

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

 

(gg)                          Conversion
to Fixed Interest Rate. With respect to Adjustable Rate Loans, the Loan is
not convertible to a fixed interest rate Loan.

 

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

 

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

 

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

 

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

 

I-12

 

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

 

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

 

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

 

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

 

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

 

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

 

(qq)                          No
Exception. Other than as noted by the Custodian on the Exception Report; no
Exception exists (as defined in the Custodial Agreement) with respect to the
Loan which would materially adversely affect the Loan or the Buyer’s security
interest, granted by the Seller, in the Loan as determined by the Buyer in its
sole discretion.

 

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

 

(ss)                            Mortgage
Submitted for Recordation. The Mortgage has been submitted for recordation
in the appropriate governmental recording office of the jurisdiction where the
Mortgaged Property is located.

 

I-13

 

(tt)                                First
Lien Consent. With respect to each Loan which is a Second Lien Loan, (i) if
the related first lien provides for negative amortization, the LTV was
calculated at the maximum principal balance of such first lien that could
result upon application of such negative amortization feature, and (ii) either
no consent for the Loan is required by the holder of the first lien or such
consent has been obtained and is contained in the Mortgage File.

 

(uu)                          Acceptable
Investment. No specific circumstances or conditions exist with respect to
the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor’s credit
standing that should reasonably be expected to (i) cause private institutional
investors which invest in Loans similar to the Loan to regard the Loan as an
unacceptable investment, (ii) cause the Loan to be more likely to become past
due in comparison to similar Loans, or (iii) adversely affect the value or
marketability of the Loan in comparison to similar Loans;

 

(vv)                          Environmental
Matters. The Mortgaged Property is free from any and all toxic or hazardous
substances and there exists no violation of any local, state or federal
environmental law, rule or regulation;

 

(ww)                      Ground
Leases. With respect to each ground lease to which the Mortgaged Property
is subject (a “Ground Lease”): (i) the Mortgagor is the owner of a valid and
subsisting interest as tenant under the Ground Lease; (ii) the Ground Lease is
in full force and effect, unmodified and not supplemented by any writing or
otherwise; (iii) all rent, additional rent and other charges reserved therein
have been paid to the extent they are payable to the date hereof; (iv) the
Mortgagor enjoys the quiet and peaceful possession of the estate demised
thereby, subject to any sublease; (v) the Mortgagor is not in default under any
of the terms thereof and there are no circumstances which, with the passage of
time or the giving of notice or both, would constitute an event of default
thereunder; (vi)  the lessor under the
Ground Lease is not in default under any of the terms or provisions thereof on
the part of the lessor to be observed or performed; (vii) the lessor under the
Ground Lease has satisfied all of its repair or construction obligations, if
any, to date pursuant to the terms of the Ground Lease; (viii) the remaining
term of the Ground Lease extends not less than ten (10) years following the
maturity date of such Loan; and (ix) the execution, delivery and performance of
the Mortgage do not require the consent (other than those consents which have been
obtained and are in full force and effect) under, and will not contravene any
provision of or cause a default under, the Ground Lease;

 

(xx)                              Value
of Mortgaged Property. The Seller has no knowledge of any circumstances
existing that should reasonably be expected to adversely affect the value or
the marketability of the Mortgaged Property or the Loan or to cause the Loan to
prepay during any period materially faster or slower than the Loans originated
by the Seller generally;

 

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

 

I-14

 

(zz)                              No
Predatory Lending. No predatory, abusive or deceptive lending practices,
including but not limited to, the extension of credit to a mortgagor without
regard for the mortgagor’s ability to repay the Loan and the extension of
credit to a mortgagor which has no tangible net benefit to the mortgagor, were
employed in connection with the origination of the Loan;

 

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

 

(bbb)                   Cooperative
Loans. With respect to each Cooperative Loan, each original UCC financing
statement, continuation statement or other governmental filing or recordation
necessary to create or preserve the perfection and priority of the first
priority lien and security interest in the Cooperative Shares and Proprietary
Lease has been timely and properly made. Any security agreement, chattel
mortgage or equivalent document related to the Cooperative Loan and delivered
to the Seller or its designee establishes in the Seller a valid and subsisting
perfected first lien on and security interest in the Mortgaged Property
described therein, and the Seller has full right to sell and assign the same.

 

I-15

 

Schedule 2

 

Filing Jurisdictions and Offices

 

Aames Investment Corporation: State of Maryland

 

Aames Capital Corporation: State of California

 

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

 

I-16

 

Schedule 3

 

Relevant States

 

Arizona

California

Colorado

Connecticut

District of Columbia

Delaware

Florida

Georgia

Hawaii

Iowa

Idaho

Illinois

Indiana

Kansas

Kentucky

Louisiana

Massachusetts

Maryland

Maine

Michigan

Minnesota

Missouri

Mississippi

North Carolina

Nebraska

New Hampshire

New Jersey

New Mexico

Nevada

New York

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Virginia

Washington

Wisconsin

 

I-17

 

West Virginia

Wyoming

 

I-18

 

Schedule 4

 

Subsidiaries

 

SUBSIDIARIES
OF AAMES INVESTMENT CORPORATION

 

	
  Name of Subsidiary

  	
   

  	
  Jurisdiction of Organization

  
	
  Aames
  Capital Acceptance Corp.

  	
   

  	
  Delaware

  
	
  Aames
  Capital Corporation

  	
   

  	
  California

  
	
  Aames
  Financial Corporation

  	
   

  	
  California

  
	
  Aames
  Funding Corporation

  	
   

  	
  California

  
	
  Aames
  Investment Acceptance Corporation

  	
   

  	
  Delaware

  
	
  Aames
  Holding Corporation

  	
   

  	
  California

  
	
  AaRCs, LLC

  	
   

  	
  Pennsylvania

  
	
  One Stop
  Mortgage, Inc.

  	
   

  	
  Wyoming

  
	
  Oxford
  Aviation Corporation, Inc.

  	
   

  	
  California

  
	
  Rossmore
  Financial Insurance Services, Inc.

  	
   

  	
  California

  
	
  Serrano
  Insurance Services

  	
   

  	
  Nevada

  
	
  Windsor
  Management Co.

  	
   

  	
  California

  
	
  Windsor
  Management of Washington Inc.

  	
   

  	
  Washington

  

 

I-19

 

Schedule 5

 

Litigation

 

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

 

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

 

3.                                       Federal Trade Commission. On April 27, 2004, Aames Financial
Corporation received a civil investigative demand from the Federal Trade
Commission that, although not alleging any wrongdoing, sought documents and data
relating to Aames Financial’s business and lending practices. The demand was
issued pursuant to an April 8, 2004 resolution of the FTC authorizing
non-public investigations of various unnamed subprime lenders and loan brokers
to determine whether there have been violations of certain consumer protection
laws. Aames Financial believes it is in material compliance under applicable
consumer protection laws. Aames Financial has cooperated and intends to
continue to cooperate fully with the FTC in this investigation.

 

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

 

I-20

 

Schedule 6

 

List of Financing Facilities

 

	
  Lender

  	
   

  	
  Size of Facility

  	
   

  	
  Expiration Date

  
	
  Lehman

  	
   

  	
  $

  	
  500,000,000

  	
   

  	
  1/17/07

  
	
  Morgan Stanley

  	
   

  	
  $

  	
  500,000,000

  	
   

  	
  12/1/06

  
	
  Countrywide

  	
   

  	
  $

  	
  300,000,000

  	
   

  	
  4/30/06

  
	
  Citigroup

  	
   

  	
  $

  	
  200,000,000

  	
   

  	
  9/29/06

  
	
  Bear Stearns

  	
   

  	
  $

  	
  500,000,000

  	
   

  	
  8/4/06

  

 

I-21

 

EXHIBIT
A

 

QUARTERLY
CERTIFICATION

 

I,                                                    ,                                     of
Aames Investment Corporation, do hereby certify that

 

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

 

(ii)                                  no
Default has occurred thereunder;

 

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

 

(iv)                              all
additional modifications to the Underwriting Guidelines since the date of the
most recent disclosure to Buyer of any modification to the Underwriting
Guidelines are set forth herewith; and

 

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

 

(vi)                              Aames
Investment Corporation has maintained its REIT Status continuously from the
Effective Date through the date hereof.

 

IN WITNESS
WHEREOF, I have signed this certificate.

 

A-2-1

 

Date:                                ,
200    

 

	
   

  	
  AAMES INVESTMENT CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  , as Administrator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
					

 

A-2-2

 

EXHIBIT
B

 

FORM
OF CUSTODIAL AGREEMENT

 

B-1

 

EXHIBIT
C

 

FORM
OF OPINION OF COUNSEL TO THE SELLER

 

	
   

  	
   

  	
  (date)

  

 

Greenwich Capital Financial Products, Inc.

600 Steamboat Road

Greenwich, Connecticut 06830

 

Dear Sirs and
Mesdames:

 

You have
requested [our] [my] opinion, as counsel to Aames Investment Corporation, a
Maryland corporation, Aames Capital Corporation, a California corporation and
Aames Funding Corporation, a California Corporation (each, a “Seller” and
jointly and severally, the “Seller” or the “Sellers”), with respect to certain
matters in connection with respect to certain matters in connection with (i)
the Master Repurchase Agreement, dated as of April 10, 2006 (the “Repurchase
Agreement”), by and among the Sellers and Greenwich Capital Financial Products,
Inc. (the “Buyer”), (ii) the Custodial Agreement, dated as of April 10, 2006,
by and among the Sellers, Deutsche Bank Trust Company Americas (the “Custodian”),
and the Buyer, (iii) the Pricing Side Letter, dated as of April 10, 2006, by
and among the Buyer and the Sellers, and (iv) the Securitization Side Letter,
dated as of April 10, 2006 (the “Securitization Side Letter”), by and among the
Buyer, the Sellers and Greenwich Capital Markets, Inc. Items (i)-(iv) above are
collectively referred to herein as the “Program Documents”. Capitalized terms
not otherwise defined herein have the meanings set forth in the Repurchase
Agreement.

 

[We] [I] have
examined the following documents:

 

1.                                       the
Repurchase Agreement;

 

2.                                       Custodial
Agreement;

 

3.                                       the
Pricing Side Letter;

 

4.                                       the
Securitization Side Letter;

 

5.                                       such
other documents, records and papers as we have deemed necessary and relevant as
a basis for this opinion.

 

The documents
referred to in items in 1 through 6 shall be referred to herein as the “Program
Documents.” To the extent [we] [I] have deemed necessary and proper, [we] [I]
have relied upon the representations and warranties of the Seller contained in
the Agreement. [We] [I] have assumed the authenticity of all documents
submitted to me as originals, the genuineness of all signatures, the legal
capacity of natural persons and the conformity to the originals of all
documents.

 

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

 

C-1

 

1.                                       Each
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the state of [state] and is qualified to transact business
in, duly licensed and is in good standing under, the laws of each state in
which any Mortgaged Property is located to the extent necessary to ensure the
enforceability of each Loan and the servicing of each Loan pursuant to the
Agreement.

 

2.                                       Each
Seller has the corporate power to engage in the transactions contemplated by
the Program Documents and all requisite corporate power, authority and legal
right to execute and deliver the Program Documents and observe the terms and
conditions of such instruments. Each Seller has all requisite corporate power
to enter into Transactions under the Repurchase Agreement and to grant a
security interest in the Purchased Items pursuant to the Repurchase Agreement.

 

3.                                       The
execution, delivery and performance by each Seller of the Program Documents, and
the sale by each related Seller of the Purchased Items under the Repurchase
Agreement have been duly authorized by all necessary corporate action on the
part of the Sellers. Each of the Program Documents have been executed and
delivered by each Seller and are legal, valid and binding agreements
enforceable in accordance with their respective terms against such Seller,
subject to bankruptcy laws and other similar laws of general application
affecting rights of creditors and subject to the application of the rules of
equity, including those respecting the availability of specific performance,
none of which will materially interfere with the realization of the benefits
provided thereunder or with the Buyer’s security interest in the Loans.

 

4.                                       No
consent, approval, authorization or order of, and no filing or registration
with, any court or governmental agency or regulatory body is required on the
part of any Seller for the execution, delivery or performance by the Sellers of
Program Documents or for the borrowings by the Sellers under the Repurchase
Agreement or the granting of a security interest to the Buyer in the Purchased
Items, pursuant to the Repurchase Agreement.

 

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

 

C-2

 

6.                                       There
is no action, suit, proceeding or investigation pending or, to the best of
[our] [my] knowledge, threatened against the Seller which, in [our] [my]
judgment, either in any one instance or in the aggregate, would be reasonably
likely to result in any material adverse change in the properties, business or
financial condition, or prospects of the Seller or in any material impairment
of the right or ability of the Seller to carry on its business substantially as
now conducted or in any material liability on the part of the Seller or which would
draw into question the validity of the Program Documents or the Loans or of any
action taken or to be taken in connection with the transactions contemplated
thereby, or which would be reasonably likely to impair materially the ability
of the Seller to perform under the terms of the Repurchase Agreement, the
Custodial Agreement or the Loans.

 

7.                                       The
Repurchase Agreement is effective to create, in favor of the Buyer, a valid
security interest under the Uniform Commercial Code in all of the right, title
and interest of the Seller in, to and under the Purchased Items as collateral
security for the payment of the Secured Obligations (as defined in the
Repurchase Agreement), except that (a) such security interests will continue in
the Purchased Items after their sale, exchange or other disposition only to the
extent provided in Section 9-306 of the Uniform Commercial Code, (b) the
security interests in Purchased Items in which the Seller acquires rights after
the commencement of a case under the Bankruptcy Code in respect of any Seller
may be limited by Section 552 of the Bankruptcy Code.

 

8.                                       When
the Notes are delivered to the Custodian, endorsed in blank by a duly
authorized officer of any Seller, the security interest referred to in
paragraph 7 above in the Notes will constitute a fully perfected first priority
security interest in all right, title and interest of the Sellers therein, in
the Loan evidenced thereby and in the Seller’s interest in the related
Mortgaged Property.

 

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

 

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

 

9.                                       Neither
the Sellers nor any of their Subsidiaries is an “investment

 

C-3

 

company”, or a
company “controlled” by an “investment company”, within the meaning of the
Investment Company Act of 1940, as amended. The Sellers are not subject to any
Federal or state statute or regulation which limits their ability to incur
indebtedness.

 

10.                                 The
Assignments of Mortgage are in recordable form, except for the insertion of the
name of the assignee, and upon the name of the assignee being inserted, are
acceptable for recording under the laws of the state where each related
Mortgaged Property is located.

 

11.                                 Each
Seller is duly registered as a [                              ]
in each state in which Loans were originated to the extent such registration is
required by applicable law, and has obtained all other licenses and
governmental approvals in each jurisdiction to the extent that the failure to
obtain such licenses and approvals would render any Loan unenforceable or would
materially and adversely affect the ability of the Seller to perform any of its
obligations under, or the enforceability of, the Program Documents.

 

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

 

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

 

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

 

C-4

 

Very truly yours,

 

C-5

 

EXHIBIT
D

 

FORM
OF TRANSACTION NOTICE

 

	
   

  	
   

  	
  [insert
  date]

  

 

Greenwich Capital Financial Products, Inc.

600 Steamboat Road

Greenwich, Connecticut 06830

Attention:                                                   

 

Transaction
Notice No.:                                          

 

Ladies/Gentlemen:

 

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

 

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

 

The Seller
hereby certifies, as of such Purchase Date, that:

 

1.                                       no
Default or Event of Default has occurred and is continuing on the date hereof
nor will occur after giving effect to such Transaction as a result of such
Transaction;

 

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

 

3.                                       the
Seller is in compliance with all governmental licenses and

 

D-1

 

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

 

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

 

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

 

Seller hereby
represents and warrants that (x) the Receipted Loans have an unpaid principal
balance as of the date hereof of $                        and
(y) the number of Receipted Loans is                     .

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

D-2

 

EXHIBIT
E

 

UNDERWRITING
GUIDELINES

 

[Underwriting guidelines to be attached]

 

E-1

 

EXHIBIT
F

 

REQUIRED
FIELDS FOR SERVICING TRANSMISSION

 

[Required fields to be provided by Buyer]

 

F-1

 

EXHIBIT
G

 

REQUIRED
FIELDS FOR LOAN SCHEDULE

 

[Required fields to be provided by Buyer]

 

G-1

 

EXHIBIT
H

 

FORM
OF CONFIDENTIALITY AGREEMENT

 

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

 

1.                                       The
Evaluation Material will be used solely for the purpose of evaluating a
possible Transaction with Buyer involving you or your affiliates, and unless
and until you have completed such Transaction pursuant to a definitive
agreement between you or any such affiliate and Buyer, such Evaluation Material
will be kept strictly confidential by you and your affiliates, directors,
officers, employees, advisors, agents or controlling persons (such affiliates
and other persons being herein referred to collectively as “your
Representatives”), except that the Evaluation Material or portions thereof may
be disclosed to those of your Representatives who need to know such information
for the purpose of evaluating a possible Transaction with Buyer (it being
understood that prior to such disclosure your Representatives will be informed
of the confidential nature of the Evaluation Material and shall agree to be bound
by this Agreement). You agree to be responsible for any breach of this
Agreement by your Representatives.

 

2.                                       The
term “Evaluation Material” does not include any information which (i) at the
time of disclosure or thereafter is generally known by the public (other than
as a result of its disclosure by you or your Representatives) or (ii) was or
becomes available to you on a nonconfidential basis from a person not otherwise
bound by a confidential agreement with Buyer or its Representatives or is not
otherwise prohibited from transmitting the information to you. As used in this
Agreement, the term “person” shall be broadly interpreted to include, without
limitation, any corporation, company, joint venture, partnership or individual.

 

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

 

H-1

 

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

 

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

 

5.                                       You
agree not to initiate or maintain contact (except for those contacts made in
the ordinary course of business) with any officer, director or employee of the
Seller regarding the business, operations, prospects or finances of the Seller
or the employment of such officer, director or employee, except with the
express written permission of the Seller.

 

6.                                       You
understand and acknowledge that the Seller is not making any representation or
warranty, express or implied, as to the accuracy or completeness of the
Evaluation Material or any other information provided to you by Buyer. The
Seller, its respective affiliates or Representatives, nor any of its respective
officers, directors, employees, agents or controlling persons (within the
meaning of the 1934 Act) shall have any liability to you or any other person
(including, without limitation, any of your Representatives) resulting from
your use of the Evaluation Material.

 

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

 

8.                                       If
you determine that you do not wish to proceed with the Transaction, you will
promptly deliver to Buyer all of the Evaluation Material, including all copies
and reproductions thereof in your possession or in the possession of any of
your Representatives.

 

9.                                       Without
prejudice to the rights and remedies otherwise available to the Seller, the
Seller shall be entitled to equitable relief by way of injunction if you or any
of your Representatives breach or threaten to breach any of the provisions of
this Agreement. You agree to waive, and to cause your Representatives to waive,
any requirement for the securing or posting of any bond in connection with such
remedy.

 

10.                                 The
validity and interpretation of this Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
applicable to agreements made and to be fully performed therein (excluding the
conflicts of law rules). You submit to the jurisdiction of any court of the
State of New York or the United States District Court for the Southern District
of the State of New York for the purpose of any suit, action, or other
proceeding arising out of this Agreement.

 

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

 

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

 

H-2

 

subject to further appeal) that
any term or provision hereof is invalid or unenforceable, (i) the remaining
terms and provisions hereof shall be unimpaired and shall remain in full force
and effect and (ii) the invalid or unenforceable provision or term shall be
replaced by a term or provision that is valid and enforceable and that comes
closest to expressing the intention of such invalid or unenforceable term or
provision.

 

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

 

14.                                 For
the convenience of the parties, any number of counterparts of this Agreement
may be executed by the parties hereto. Each such counterpart shall be, and
shall be deemed to be, an original instrument, but all such counterparts taken
together shall constitute one and the same Agreement.

 

H-3

 

Kindly execute
and return one copy of this letter which will constitute our Agreement with
respect to the subject matter of this letter.

 

	
   

  	
  GREENWICH
  CAPITAL FINANCIAL PRODUCTS,

  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  

 

 

Confirmed and agreed to

 

this            day
of                            ,
200   .

 

	
  By:

  	
   

  	
   

  
	
  Name

  
	
  Title:

  

 

H-4

 

EXHIBIT
I

 

FORM
OF INSTRUCTION LETTER

 

[Required fields to be provided by Buyer]

 

                  
    , 200   

 

                                          ,
as Subservicer

                                          

                                          

Attention:                                    

 

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

 

Ladies and Gentlemen:

 

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

 

	
  Bank:

  	
   

  	
  JPMorgan Chase Bank

  
	
  Account No.:

  	
   

  	
  140095961

  
	
  ABA No.:

  	
   

  	
  021000021

  
	
  Attn:

  	
   

  	
  Brett Kibbe

  
	
  Reference:

  	
   

  	
  For the A/C of Greenwich Capital Financial
  Products, Inc. – Aames

  

 

Upon
notification by the Buyer of an occurrence of an Event of Default, the
Subservicer shall remit all collections with respect to the Eligible Asset in
accordance with the Buyer’s instructions. The Subservicer also acknowledges its
consent to terminate such Servicing Agreement upon notification by the Buyer of
an occurrence of an Event of Default.

 

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

 

J-5

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  AAMES INVESTMENT
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  AAMES CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  AAMES FUNDING CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

ACKNOWLEDGED:

 

                                                                                       ,
as Subservicer]

 

 

	
  By:

  
	
  Name:

  
	
  Title:

  
	
  Telephone:

  
	
  Facsimile:

  

 

J-6

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