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Exhibit 10.1    
    

 
 

EXECUTION COPY    
    

NOVELL, INC.

0.50% Convertible Senior Debentures Due 2024  

REGISTRATION RIGHTS AGREEMENT 

July 2,
2004 

Citigroup
Global Markets Inc. 

As Representative of the Initial Purchasers 

c/o Citigroup Global Markets Inc. 

388 Greenwich Street 

New York, New York 10013 

Ladies
and Gentlemen: 

        Novell, Inc.,
a corporation organized under the laws of Delaware (the "Company"), proposes to issue and sell to certain purchasers (the "Initial Purchasers"), for whom you (the
"Representative") are acting as representative, its 0.50% Convertible Senior Debentures Due 2024 (the "Securities"), upon the terms set forth in the Purchase Agreement between the Company and the
Representative dated June 28, 2004 (the "Purchase Agreement") relating to the initial placement (the "Initial Placement") of the Securities. The Securities will be convertible into fully paid,
nonassessable shares of common stock, par value $0.10 per share, of the Company (the "Common Stock") on the terms, and subject to the conditions, set forth in the Indenture (as defined herein). To
induce the Initial Purchasers to enter into the Purchase Agreement and to satisfy a condition to your obligations thereunder, the Company agrees with you for your benefit and the benefit of the
holders from time to time of the Securities and the Common Stock issued upon conversion of the Securities (including the Initial Purchasers) (each a "Holder" and, collectively, the "Holders"), as
follows: 

 
 

           1.    Definitions.     Capitalized terms used herein without definition shall have their respective meanings
set forth in the Purchase Agreement. As used in this Agreement, the
following capitalized defined terms shall have the following meanings: 

        "Act"
shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. 

        "Affiliate"
shall have the meaning specified in Rule 405 under the Act and the terms "controlling" and "controlled" shall have meanings correlative thereto. 

        "Broker-Dealer"
shall mean any broker or dealer registered as such under the Exchange Act. 

        "Business
Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close
in New York City. 

        "Closing
Date" shall mean the date of the first issuance of the Securities. 

        "Commission"
shall mean the Securities and Exchange Commission. 

        "Damages
Payment Date" shall mean each Interest Payment Date. For purposes of this Agreement, if no Securities are outstanding, "Damages Payment Date" shall mean each January 15
and July 15. 

        "Deferral
Period" shall have the meaning indicated in Section 3(h) hereof. 

 

        "Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. 

        "Final
Memorandum" shall mean the offering memorandum, dated June 28, 2004, relating to the Securities, including any and all exhibits thereto and any information incorporated by
reference therein as of such date. 

        "Holder"
shall have the meaning set forth in the preamble hereto. 

        "Indenture"
shall mean the Indenture relating to the Securities, dated as of July 2, 2004, between the Company and Wells Fargo Bank, National Association, as trustee, as the same
may be amended from time to time in accordance with the terms thereof. 

        "Initial
Placement" shall have the meaning set forth in the preamble hereto. 

        "Initial
Purchasers" shall have the meaning set forth in the preamble hereto. 

        "Interest
Payment Date" shall have the meaning set forth in the Indenture. 

        "Losses"
shall have the meaning set forth in Section 5(d) hereof. 

        "Majority
Holders" shall mean, on any date, Holders of a majority of the then outstanding shares of Common Stock constituting Registrable Securities (with Holders of Securities deemed to
be Holders,
for purposes of this definition, of the number of outstanding shares of Common Stock into which such Securities are would be convertible as of such date) registered under a Registration Statement. 

        "Managing
Underwriters" shall mean the investment banker or investment bankers and manager or managers that administer an underwritten offering, if any, conducted pursuant to
Section 6 hereof. 

        "NASD
Rules" shall mean the Conduct Rules and the By-Laws of the National Association of Securities Dealers, Inc. 

        "Notice
and Questionnaire" shall mean a written notice delivered to the Company substantially in the form attached as Annex A to the Final Memorandum. 

        "Notice
Holder" shall mean, on any date, any Holder of Registrable Securities that has delivered a completed and executed Notice and Questionnaire and any other information reasonably
requested by the Company pursuant to Section 3(l) hereof to the Company on or prior to such date. 

        "Prospectus"
shall mean a prospectus included in the Shelf Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of
the offering of any portion of the Registrable Securities covered by the Shelf Registration Statement, and all amendments and supplements thereto, including any and all exhibits thereto and any
information incorporated by reference therein. 

        "Purchase
Agreement" shall have the meaning set forth in the preamble hereto. 

        "Record
Holder" shall mean with respect to any Damages Payment Date, each person who is a Holder on the record date with respect to the Interest Payment Date on which such Damages
Payment Date shall occur. In the case of a Holder of shares of Common Stock issued upon conversion of the Securities, "Record Holder" shall mean each person who is a Holder of shares of Common Stock
which constitute Registrable Securities on the January 1 or July 1 immediately preceding the Damages Payment Date. 

        "Registrable
Securities" shall mean Securities and each share of Common Stock issued upon conversion of Securities other than those that have been (i) registered under the Shelf
Registration Statement and disposed of in accordance therewith or (ii) distributed to the public pursuant to 

2

 

Rule 144
under the Act or any successor rule or regulation thereto that may be adopted by the Commission. 

        "Registration
Default Damages" shall have the meaning set forth in Section 7 hereof. 

        "Securities"
shall have the meaning set forth in the preamble hereto. 

        "Shelf
Registration Period" shall have the meaning set forth in Section 2(c) hereof. 

        "Shelf
Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 2 hereof which covers some or all of the
Registrable Securities on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. 

        "Special
Counsel" means Davis Polk & Wardwell or one such other successor counsel as shall be specified by the Majority Holders. 

        "Trustee"
shall mean the trustee with respect to the Securities under the Indenture. 

        "Trust
Indenture Act" shall mean the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission promulgated thereunder. 

        "underwriter"
shall mean any underwriter of Registrable Securities in connection with an offering thereof under the Shelf Registration Statement. 

 
 

           2.    Shelf Registration.     (a) The Company shall as promptly as practicable (but in no event more
than 90 days after the Closing Date) file with the Commission a Shelf
Registration Statement providing for the registration of, and the sale on a continuous or delayed basis by the Holders of, all of the Registrable Securities, from time to time in accordance with the
methods of distribution elected by such Holders, pursuant to Rule 415 under the Act or any similar rule that may be adopted by the Commission. 

        (b)   The
Company shall use its reasonable best efforts to cause the Shelf Registration Statement to become or be declared effective under the Act as promptly as practicable
(but in no event more than 180 days after the Closing Date). 

        (c)   The
Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the Act, in
order to permit the Prospectus forming part thereof to be usable by Holders for a period (the "Shelf Registration Period") from the date the Shelf Registration Statement is declared effective by the
Commission until the earlier of (i) the date upon which there are no Registrable Securities outstanding, (ii) the date as of which all the Registrable Securities have been sold either
under Rule 144 under the Act (or any similar provision then in force) or pursuant to the Shelf Registration Statement, or (iii) the date on which all Registrable Securities held by
non-Affiliates are eligible to be sold to the public pursuant to Rule 144(k) under the Act. 

        (d)   The
Company shall cause the Shelf Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf
Registration Statement or such amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Act; and (ii) not to contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein (in the case of the Prospectus, in the light of the circumstances
under which they were made) not misleading. 

        (e)   At
the time the Shelf Registration Statement is declared to be effective, each Holder that became a Notice Holder on or prior to the date 15 Business Days prior to such
time of effectiveness 

3

 

shall
be named as a selling securityholder in the Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of
Registrable Securities in accordance with applicable law, subject to the terms and conditions hereof. Following the date that the Shelf Registration Statement is declared effective, each Holder that
is not a Notice Holder wishing to sell Registrable Securities pursuant to a Shelf Registration Statement and related Prospectus agrees to deliver a Notice and Questionnaire (and such other information
as is required by Section 3(l)) to the Company prior to any intended distribution by it of Registrable Securities under the Shelf Registration Statement. From and after the date the Shelf
Registration Statement is declared effective and during the Shelf Registration Period (but excluding any Deferral Period), the Company shall as promptly as is practicable after the date a Notice and
Questionnaire (and such other information as is required by Section 3(l)) is delivered, and in any event within the later of (x) 15 Business Days after such date or (y) 15
Business Days after the expiration of any Deferred Period in effect when the Notice and Questionnaire (and such other information as is required by Section 3(l)) is delivered, file a
supplement to the Shelf Registration Statement and related Prospectus as is necessary and permitted to name such Holder as a selling securityholder or if not permitted to name such Holder as a selling
securityholder by supplement, file any necessary post-effective amendments to the Shelf Registration Statement or prepare and, if required by applicable law, file an amendment or
supplement to any document incorporated by reference or file any other required document so that such Holder is named as selling securityholder, and use its best efforts to cause such
post-effective amendment to be declared effective under the Act as promptly as practicable, but in no event later than the date (the "Amendment Effectiveness Deadline Date") that is
45 days after the date such post-effective amendment is required to be filed; provided that the Company shall not be obligated to
file more than one post-effective amendment in any 60-day period. In connection with such filing, the Company agrees to: 

        (i)    provide
such Holder copies of any documents filed pursuant to Section 2(e) hereof; and 

        (ii)   notify
such Holder as promptly as practicable after the effectiveness under the Act of any post-effective amendment filed pursuant to Section 2(e)
hereof; 

Notwithstanding
anything contained herein to the contrary, the Company shall be under no obligation to name any Holder that is not a Notice Holder as a selling holder in the Shelf Registration
Statement or related Prospectus; provided, however, that any Holder that becomes a Notice Holder
pursuant to the provisions of this Section 2(e) (whether or not such Holder was a Notice Holder at the time the Shelf Registration Statement was declared effective) shall be named as a selling
holder in the Shelf Registration Statement or related Prospectus in accordance with the requirements of this Section 2(e). 

 
 

           3.    Registration Procedures.     The following provisions shall apply in connection with the Shelf
Registration Statement. 

        (a)   The
Company shall: 

          (i)  furnish
to the Representative and to Special Counsel for the Notice Holders, not less than five Business Days prior to the filing with the Commission a copy of the
Shelf Registration Statement and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein (including all documents incorporated by reference therein after
the initial filing) and shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as the Representative reasonably proposes; and 

         (ii)  include
information regarding the Notice Holders and the methods of distribution they have elected for their Registrable Securities provided to the Company in Notices
and Questionnaires as necessary to permit such distribution by the methods specified therein. 

4

  

        (b)   The
Company shall give notice to the Representatives, the Notice Holders and, subject to Section 6 hereof, any underwriter that has provided in writing to the
Company a telephone or facsimile number and address for notices, and confirm such advice by notice in writing (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an
instruction to suspend the use of the Prospectus until the Company shall have remedied the basis for such suspension): 

          (i)  when
the Shelf Registration Statement and any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any
post-effective amendment thereto has become effective; 

         (ii)  of
any request by the Commission for any amendment or supplement to the Shelf Registration Statement or the Prospectus or for additional information; 

        (iii)  of
the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the institution of any proceeding for that
purpose; 

        (iv)  of
the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities included therein for sale in any
jurisdiction or the institution of any proceeding for such purpose; and 

         (v)  of
the happening of any event that requires any change in the Shelf Registration Statement or the Prospectus so that, as of such date, they (A) do not contain any
untrue statement of a material fact and (B) do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading. 

        (c)   The
Company shall use its best efforts to prevent the issuance of any order suspending the effectiveness of the Shelf Registration Statement or the qualification of the
securities therein for sale in any jurisdiction, and if issued, to obtain as soon as possible the withdrawal thereof. 

        (d)   The
Company shall furnish to each Notice Holder who so requests in writing, without charge, at least one copy of the Shelf Registration Statement and any
post-effective amendment thereto, and, if a Notice Holder so requests in writing, all material incorporated therein by reference and all exhibits thereto (including exhibits incorporated
by reference therein). 

        (e)   During
the Shelf Registration Period, the Company shall promptly deliver to each Initial Purchaser, each Notice Holder, and any sales or placement agents or underwriters
acting on their behalf, without charge, as many copies of the Prospectus (including the preliminary Prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as
any such person may reasonably request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the foregoing in connection with the offering and sale of
the Registrable Securities (except during any Deferral Period, as defined below). 

        (f)    Prior
to any offering of Registrable Securities pursuant to the Shelf Registration Statement, the Company shall arrange for the qualification of the Registrable
Securities for sale under the laws of such jurisdictions as any Notice Holder shall reasonably request and shall maintain such qualification in effect so long as required; provided that in no event
shall the Company be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action in connection therewith that would subject it to taxation or
service of process in suits, other than those arising out of the Initial Placement or any offering pursuant to the Shelf Registration Statement, in any jurisdiction where it is not then so subject. 

        (g)   Upon
the occurrence of any event contemplated by subsections (b)(ii) through (v) above, the Company shall promptly (or within the time period provided for
by Section 3(h) hereof, if applicable) prepare a post-effective amendment to the Shelf Registration Statement or an amendment or supplement to the related Prospectus or file any
other required document so that, as thereafter 

5

 

delivered
to purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 

        (h)   The
Company may suspend each Holder's use of the Shelf Registration and any Prospectus for a maximum of 45 days in any 90-day period, and not to
exceed an aggregate of 90 days in any 12 month period, if (i) the Company, in its reasonable judgment, believes it may possess material non-public information the
disclosure of which would be seriously detrimental to the Company and its subsidiaries taken as a whole or (ii) the Shelf Registration Statement and any Prospectus would, in the Company's
judgment, contain a material misstatement or omission as a result of an event that has occurred or is continuing. However, if the disclosure relates to a proposed or pending material business
transaction, the disclosure of which the Company determines in good faith would be reasonably likely to impede its ability to consummate such transaction, or would otherwise be seriously detrimental
to the Company and its subsidiaries taken as a whole, the Company may extend the suspension period from 45 days to 60 days. Any suspension period described in this Section 3(h)
shall be referred to herein as the "Deferral Period." The Company shall give notice to the Notice Holders that the availability of the Shelf Registration is suspended and upon notice duly given
pursuant to Section 10 hereof, each Notice Holder agrees not to sell any Registrable Securities pursuant to the Shelf Registration until such Notice Holder's receipt of copies of the
supplemented or amended Prospectus provided for in Section 3(h) hereof, or until it is advised in writing by the Company that the Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The Company need not specify the nature of the event giving rise to a suspension in any
notice to holders of the Securities of the existence of such a suspension. 

        (i)    Not
later than the effective date of the Shelf Registration Statement, the Company shall provide a CUSIP number for the Registrable Securities registered under the Shelf
Registration Statement and, if required, provide the Trustee with printed certificates for such Securities, free of any restrictive legends, in a form eligible for deposit with The Depository Trust
Company. 

        (j)    The
Company shall comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders an earnings statement
satisfying the provisions of Section 11(a) of the Act as soon as practicable after the effective date of the Shelf Registration Statement and in any event no later than 45 days after the
end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of
the Shelf Registration Statement. 

        (k)   The
Company shall cause the Indenture to be qualified under the Trust Indenture Act in a timely manner. 

        (l)    The
Company may require each Holder of Registrable Securities to be sold pursuant to the Shelf Registration Statement to deliver to the Company a completed and executed
Notice and Questionnaire and to furnish to the Company such other information regarding the Holder and the distribution of such Registrable Securities as the Company may from time to time reasonably
require for inclusion in the Shelf Registration Statement. The Company may exclude (i) from the initial Shelf Registration Statement the Registrable Securities of any Holder that fails to
return a completed and executed Notice and Questionnaire and fails to furnish such other information no later than 15 Business Days before the initial effectiveness of the Shelf Registration Statement
and (ii) from any post-effective amendment or supplement the Registrable Securities of any Holder that fails to return a completed and executed Notice and Questionnaire and fails to
furnish such other information no later than 15 Business Days before the date of filing any post-effective amendment or supplement to the Shelf Registration Statement contemplated by
Section 2(e)(i), as applicable. 

6

 

        (m)  The
Company shall enter into customary agreements (including, if requested, an underwriting agreement in customary form) and take all other appropriate actions as
reasonably requested by the Notice Holders in order to expedite or facilitate the registration or the disposition of the Registrable Securities, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 5 hereof. 

        (n)   The
Company shall: 

          (i)  make
reasonably available for inspection during normal business hours by the Notice Holders of Registrable Securities to be registered thereunder, any underwriter
participating in any disposition pursuant to the Shelf Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and
other records and pertinent corporate documents of the Company and its subsidiaries; 

         (ii)  cause
the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Notice Holders or any such
underwriter, attorney, accountant or agent in connection with any the Shelf Registration Statement as is customary for similar due diligence examinations; provided that the inspection and information
gathering pursuant to clause (i) and (ii) shall be coordinated by a single party (or a single counsel (which shall be the Special Counsel) on behalf of the parties so inspecting and
gathering); 

        (iii)  make
such representations and warranties to the Holders of Registrable Securities registered thereunder and the underwriters in form, substance and scope as are
customarily made by issuers to
underwriters in primary underwritten offerings and covering matters, including, but not limited to, those set forth in the Purchase Agreement; 

        (iv)  obtain
opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the
Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Holders and underwriters; 

         (v)  obtain
"comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Shelf Registration
Statement), addressed to each selling Holder of Registrable Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in
"comfort" letters in connection with primary underwritten offerings; and 

        (vi)  deliver
such documents and certificates as may be reasonably requested by the Majority Holders or the Managing Underwriters, if any, including those to evidence
compliance with Section 3(i) hereof and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. 

Notwithstanding
the foregoing, the actions set forth in clauses (iii), (iv), (v) and (vi) of this paragraph (n) shall only be performed in connection with an underwritten offering
pursuant to Section 6 hereof and only if requested by the underwriters thereof. 

        (o)   In
the event that any Broker-Dealer shall underwrite any Registrable Securities or participate as a member of an underwriting syndicate or selling group or "assist in
the distribution" (within the meaning of the NASD Rules) thereof, whether as a Holder of such Registrable Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such Broker-Dealer in complying with the NASD Rules. 

7

 

        (p)   The
Company shall upon (i) the filing of the initial Shelf Registration Statement and (ii) the effectiveness of the initial Shelf Registration Statement,
announce the same, in each case by release to Reuters Economic Services and Bloomberg Business News. 

        (q)   The
Company shall use its best efforts to take all other steps necessary to effect the registration of the Registrable Securities covered by the Shelf Registration
Statement. 

 
 

           4.    Registration Expenses.     The Company shall bear all expenses incurred in connection with the
performance of its obligations under Sections 2 and 3 hereof and shall reimburse the Holders
for the reasonable fees and disbursements of one firm or counsel (which shall be the Special Counsel) to act as counsel for the Holders in connection therewith. The Holders will bear their individual
selling expenses, including commissions and discounts and transfer taxes. 

 
 

           5.    Indemnification and Contribution.     (a)    The Company agrees to indemnify and
hold harmless each Holder of Registrable Securities covered by the Shelf Registration Statement, each Initial
Purchaser, the directors, officers, employees, Affiliates and agents of each such Holder or Initial Purchaser and each person who controls any such Holder or Initial Purchaser within the meaning of
either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or
other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement or in any amendment thereof, in each case at the time such became effective under the
Act, or in any preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein (in the case of any preliminary Prospectus or the Prospectus, in the light of the circumstances under which they
were made) not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by it in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the party claiming indemnification specifically for inclusion therein. This indemnity
agreement shall be in addition to any liability that the Company may otherwise have. 

        The
Company also agrees to indemnify as provided in this Section 5(a) or contribute as provided in Section 5(d) hereof to Losses of each underwriter, if any, of Registrable
Securities registered under the Shelf Registration Statement, its directors, officers, employees, Affiliates or agents and each person who controls such underwriter on substantially the same basis as
that of the indemnification of the Initial Purchasers and the selling Holders provided in this paragraph (a) and shall, if requested by any Holder, enter into an underwriting agreement
reflecting such agreement, as provided in Section 3(n) hereof. 

        (b)   Each
Holder of securities covered by the Shelf Registration Statement (including each Initial Purchaser that is a Holder, in such capacity) severally and not jointly
agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Shelf Registration Statement and each person who controls the Company within the meaning of
either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished
to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement shall be acknowledged by each Notice Holder
that is not an 

8

 

Initial
Purchaser in such Notice Holder's Notice and Questionnaire and shall be in addition to any liability that any such Notice Holder may otherwise have. 

        (c)   Promptly
after receipt by an indemnified party under this Section 5 or notice of the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses or otherwise materially prejudices the indemnifying party; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party
other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel (including local counsel) of the
indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel, other than local counsel if not appointed by the indemnifying party, retained by the indemnified party or parties except as
set forth below); provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint counsel (including local counsel) to represent the indemnified party in an action, the indemnified party shall have the
right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified
party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent
to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding. 

        (d)   In
the event that the indemnity provided in paragraph (a) or (b) of this Section 5 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending loss, claim, liability, damage or action) (collectively "Losses") to which such indemnified party may be subject in such
proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the
Shelf Registration Statement which resulted in such Losses; provided, however, that in no case shall any
Initial Purchaser be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security received by such Initial Purchaser in connection with
the Initial Placement, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the
Shelf Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified
party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such 

9

 

indemnifying
party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the Initial Placement (before deducting expenses) as set forth in the Final Memorandum.
Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions received in connection with the Initial Placement, and benefits received by any
other Holders shall be deemed to be equal to the value of receiving Securities registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting
discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Shelf Registration Statement which resulted in such Losses. Relative fault shall be determined by
reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information provided by the
indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation (even if the Holders were treated as one entity for
such purpose) or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 5, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of
such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company
who shall have signed the Shelf Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d). 

        (e)   The
provisions of this Section 5 shall remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any
of the indemnified persons referred to in this Section 5, and shall survive the sale by a Holder of Registrable Securities covered by the Shelf Registration Statement. 

 
 

           6.    Underwritten Registrations.     (a)    The Registrable Securities may be sold in
an underwritten offering only with the consent of the Company, and, in such event, the Managing
Underwriters shall be selected by the Majority Holders and shall be reasonably acceptable to the Company. 

        (b)   No
person may participate in any underwritten offering pursuant to the Shelf Registration Statement unless such person (i) agrees to sell such person's
Registrable Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements; and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 

 
 

          7.    Registration Defaults.     (a)    If: 

          (i)  the
Shelf Registration Statement is not filed with the Commission on or prior to the 90th day following the Closing Date; or 

         (ii)  the
Shelf Registration Statement is not declared effective by the Commission on or prior to the 180th day following the Closing Date; or 

        (iii)  the
Company has failed to perform its obligations set forth in Section 2(e)within the time required therein; or 

10

 

        (iv)  any
post-effective amendment to a Shelf Registration Statement filed pursuant to Section 2(e) has not become effective under the Securities Act on or
prior to the Amendment Effectiveness Deadline Date; or 

         (v)  the
aggregate duration of Deferral Periods in any period exceeds the number of days permitted in respect of such period pursuant to Section 3(i) hereof (in
each case except as the result of filing a post-effective amendment solely to add additional selling securityholders); 

(each
such event referred to in the foregoing clauses (i) through (v), a "Registration Default"), the Company hereby agrees to pay liquidated damages ("Liquidated Damages") with respect to the
Registrable Securities from and including the day following the Registration Default to but excluding the earlier of (1) the day after the end of the Shelf Registration Period and
(2) the day on which the Registration Default has been cured: 

        (A)  in
respect of the Registrable Securities that are Securities, to each holder thereof, (x) with respect to the first 90-day period during which a
Registration Default shall have occurred and be continuing, in an amount per year equal to an additional 0.25% of the principal amount of the Securities and (y) with respect to the period
commencing on the 91st day following the day the Registration Default shall have occurred and be continuing, in an amount per year equal to an additional 0.50% of the principal amount of the
Securities; provided that in no event shall Liquidated Damages accrue at a rate per year exceeding 0.50% of the principal amount of the Securities; and 

        (B)  in
respect of Registrable Securities that are shares of Common Stock issued upon conversion of the Securities, to each holder thereof, (x) with respect to the
first 90-day period in which a Registration Default shall have occurred and be continuing, in an amount per year equal to 0.25% of the principal amount of the converted Securities and
(y) with respect to the period commencing the 91st day following the day the Registration Default shall have occurred and be continuing, in an amount per year equal to 0.50% of the principal
amount of the converted Securities; provided, however, that in no event shall Liquidated Damages accrue at a rate per year exceeding 0.50% of the principal amount of the converted Securities. 

        (b)   All
accrued Liquidated Damages shall be paid in arrears to Record Holders by the Company on each Damages Payment Date by wire transfer of immediately available funds or
by federal funds check. Following the cure of all Registration Defaults relating to any particular Securities or share of Common Stock, the accrual of Liquidated Damages with respect to such
Securities or share of Common Stock will cease. 

        All
obligations of the Company set forth in this Section 7 that are outstanding with respect to any Registrable Securities at the time such security ceases to be a Registrable
Security shall survive until such time as all such obligations with respect to such Registrable Security shall have been satisfied in full. 

        The
parties hereto agree that the Liquidated Damages provided for in this Section 7 constitute a reasonable estimate of the damages that may be incurred by Holders by reason of a
Registration Default and that such Liquidated Damages are the only monetary damages available to Holders with respect to a Registration Default. 

 
 

           8.    No Inconsistent Agreements.     The Company has not entered into, and agrees not to enter into, any
agreement with respect to its securities that is inconsistent with the rights granted to the
Holders herein or that otherwise conflicts with the provisions hereof. 

 
 

           9.    Amendments and Waivers.     The provisions of this Agreement may not be amended, qualified, modified
or supplemented, and waivers or consents to departures from the provisions hereof may not
be given, unless the Company has obtained the written consent of the Holders of a majority of the then 

11

 

outstanding
shares of Common Stock constituting Registrable Securities (with Holders of Securities deemed to be Holders, for purposes of this Section, of the number of outstanding shares of Common
Stock into which such Securities would be convertible as of the date on which such consent is requested); provided that, with respect to any matter that
adversely affects the rights of any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement,
waiver or consent is to be effective; provided, further, that no amendment, qualification, supplement,
waiver or consent with respect to Section 7 hereof (other than the reduction or elimination of the amount of Liquidated Damages payable to Holders of Common Stock constituting Registrable
Securities, which may be effected with the written consent of the Holders of a majority of the then outstanding shares of Common Stock constituting Registrable Securities (with Holders of Securities
deemed to be Holders, for purposes of this Section, of the number of outstanding shares of Common Stock into which such Securities would be convertible as of the date on which such consent is
requested)) shall be effective as against any Holder of Registered Securities unless consented to in writing by such Holder; and provided,  further, that
the provisions of this Article 9 may not be amended, qualified, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the Company has obtained the written consent of the Initial Purchasers and each Holder. 

 
 

           10.    Notices.     All notices, requests and other communications provided for or permitted hereunder shall
be made in writing by hand-delivery, first-class mail, telex,
facsimile or air courier guaranteeing overnight delivery: 

        (a)   if
to a Holder, at the most current address given by such holder to the Company in accordance with the provisions of the Notice and Questionnaire, which address
initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture; 

        (b)   if
to the Initial Purchasers or the Representatives, initially at the address or addresses set forth in the Purchase Agreement; and 

        (c)   if
to the Company, initially at its address set forth in the Purchase Agreement. 

        All
such notices and communications shall be deemed to have been duly given on the earliest of (i) at the time delivered, if delivered by hand-delivery;
(ii) three business days after being deposited in the mail, postage prepaid, if mailed by first-class mail; (iii) when receipt is acknowledged and confirmed as sent by sender's telex or
facsimile machine, if sent by telex or facsimile transmission; and (iv) on the day delivered, if sent by overnight air courier guaranteeing next day delivery. 

        The
Initial Purchasers or the Company by notice to the other parties may designate additional or different addresses for subsequent notices or communications. 

 
 

          11.    Remedies.     Each party, in addition to being entitled to exercise all rights provided to it herein,
in the Indenture or in the Purchase Agreement or granted by law, including
recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. Each party agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive in any action for specific performance the defense that a remedy at law would be adequate. 

 
 

          12.    Successors.     This Agreement shall inure to the benefit of and be binding upon the parties hereto,
their respective successors and assigns, including, without the need for an
express assignment or any consent by the Company thereto, subsequent Holders of Registrable Securities, and the indemnified persons referred to in Section 5 hereof. The Company hereby agrees to
extend the benefits of this Agreement to any Holder of Registrable Securities, and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. 

12

 

 
 

           13.    Counterparts.     This Agreement may be signed in one or more counterparts, each of which shall
constitute an original and all of which together shall constitute one and the same
agreement. 

 
 

          14.    Headings.     The section headings used herein are for convenience only and shall not affect the
construction hereof. 

 
 

           15.    Applicable Law.     This Agreement shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed in the
State of New York. The parties hereto each hereby waive any right to trial by jury in any action, proceeding or counterclaim arising out of or relating to this Agreement. 

 
 

          16.    Severability.     In the event that any one of more of the provisions contained herein, or the
application thereof in any circumstances, is held invalid, illegal or unenforceable
in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or
affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. 

 
 

          17.    Securities Held by the Company, etc.     Whenever the consent or approval of Holders of Registrable
Securities is required hereunder, Registrable Securities held by the Company or its Affiliates (other
than subsequent Holders of Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required percentage. 

13

 

        If
the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall
represent a binding agreement between the Company and the several Initial Purchasers. 

	 	 	Very truly yours,
	 	 	 	 
	 	 	Novell, Inc.
	 	 	 	 
	 	 	 	 
	 	 	By:	 
	 	 	 	

	 	 	 	Name:
	 	 	 	Title:

The
foregoing Agreement is hereby confirmed and

accepted as of the date first above written. 

	Citigroup Global Markets Inc.	 
	 	 	 
	 	 	 
	By	 	 
	 	
	 
	 	Name:	 
	 	Title:	 
	 	 	 
	 	 	 
	For itself and the other several Initial Purchasers named in Schedule I to the Purchase Agreement.	 

14

QuickLinks

Exhibit 10.1

EXECUTION COPY

1. Definitions.

2. Shelf Registration.

3. Registration Procedures.

4. Registration Expenses.

5. Indemnification and Contribution.

6. Underwritten Registrations.

7. Registration Defaults.

8. No Inconsistent Agreements.

9. Amendments and Waivers.

10. Notices.

11. Remedies.

12. Successors.

13. Counterparts.

14. Headings.

15. Applicable Law.

16. Severability.

17. Securities Held by the Company, etc.QuickLinks
 -- Click here to rapidly navigate through this document

Exhibit 10.17(2)  

Execution  

 
 

FIRST AMENDMENT TO
  AMENDED AND RESTATED
  MASTER REPURCHASE AGREEMENT
  GOVERNING PURCHASES AND SALES OF MORTGAGE LOANS    
    

        This First Amendment, dated as of August 20, 2004 (the "Amendment"), to the Amended and Restated Master
Repurchase Agreement Governing Purchases and Sales of Mortgage Loans, dated as of December 31, 2003 (the "Repurchase Agreement"), is made by and
between LEHMAN BROTHERS BANK, FSB ("Buyer"), FIELDSTONE INVESTMENT CORPORATION ("FIC") and FIELDSTONE
MORTGAGE COMPANY ("FMC") (FIC and FMC shall be individually and collectively referred to as "Seller").
Buyer, FMC and FIC may be collectively referred to herein as the "Parties". 

RECITALS  

        Seller and Buyer are parties to the Repurchase Agreement, pursuant to which Buyer has agreed, subject to the terms and conditions set forth in the Repurchase
Agreement, to purchase certain Mortgage Loans owned by Seller, including, without limitation, all rights of Seller to service and administer such Mortgage Loans. 

        The
Parties desire to amend the Repurchase Agreement to modify certain of the terms and conditions governing the purchase and sale of the Mortgage Loans thereunder. 

        NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows: 

        Section 1.    Definitions.    Capitalized terms used but not otherwise defined herein have the meanings given
them in the Repurchase Agreement. 

        Section 2.    Amendments to Repurchase Agreement.    Subject to Section 4 hereof, the Repurchase
Agreement shall be amended as follows: 

        (a)   References
in the Repurchase Agreement to "this Agreement" or words of similar import (including indirect references to the Repurchase Agreement) shall, without
limitation, be deemed to be references to the Repurchase Agreement as amended by this Amendment. 

        (b)   Section 2
of the Repurchase Agreement is hereby amended by: 

          (i)  inserting
the following defined terms in proper alphabetical order: 

"Backup Collection Account" and "Backup Collection Account Bank" have the meanings specified in
Section 5(c). 

"Backup Collection Account Agreements" has the meaning specified in Section 5(c). 

"Backup Escrow Account" has the meaning specified in Section 5(c). 

"Transferable Interest" shall mean Buyer's rights and obligations under this Agreement and the other Facility Documents (including all or a portion of
any Transactions) not to exceed, in the aggregate, 80% of the Total Facility Amount. 

         (ii)  deleting
the definition of "Collection Account Bank" in its entirety; 

 

        (iii)  deleting
the definition of "Collection Account" in its entirety and replacing it with the following: 

"Collection Account" means one or more accounts established by the Seller and/or Servicer into which all collections and proceeds on or in respect of
the Mortgage Loans shall be deposited by Seller and/or Servicer. 

        (iv)  deleting
the definition of "Collection Account Agreements" in its entirety; 

         (v)  deleting
the definition of "Escrow Account" in its entirety and replacing it with the following: 

"Escrow Account" means one or more accounts established by the Seller and/or Servicer into which escrow payments in respect of the Mortgage Loans shall
be deposited by Seller and/or Servicer. 

        (vi)  deleting
the definition of "Income" in its entirety and replacing it with the following: 

"Income" means, with respect to any Purchased Mortgage Loan at any time, any principal thereof then payable, any principal prepayments and curtailments
and all interest, dividends or other distributions payable thereon. 

       (vii)  deleting
the definition of "Interest Reset Date" in its entirety and replacing it with the following: 

"Interest Reset Date" means each Business Day on which any Transaction is outstanding under this Agreement (it being the understanding of Buyer and
Seller that the Pricing Rate applicable to each Transaction shall change on each Business Day based on any change in LIBOR) or, at the election of Buyer specified in the related Confirmation, Interest
Reset Date shall have the meaning specified in the definition of Interest Period. 

      (viii)  deleting
clause (iv) of the definition of "Market Value" in its entirety and replacing it with the following: 

"(iv)    any
Workout Mortgage Loan which, when added with all other Workout Mortgage Loans subject to then outstanding Transactions, would cause the aggregate Repurchase Price for all
Workout Mortgage Loans that are subject to then outstanding Transactions to exceed the LESSER of (A) 10% of the aggregate Repurchase Price for
all Purchased Mortgage Loans which are subject to then outstanding Transactions and (B) 5% of the Total Facility Amount," 

        (ix)  deleting
the definition of "Periodic Payment" in its entirety and replacing it with the following: 

"Periodic Payment" has the meaning specified in Section 5(d). 

         (x)  deleting
the definition of "Pricing Rate" in its entirety and replacing it with the following: 

"Pricing Rate" means, with respect to a Transaction, the per annum percentage rate specified in the related Confirmation for determination of the Price
Differential that shall not exceed LIBOR plus the applicable Pricing Spread. Unless the Confirmation expressly indicates otherwise, the Pricing Rate shall be adjusted on each Business Day that the
Transaction remains outstanding. 

2

 

        (c)   A
new subsection (iv) is hereby added to Section 3(f) of the Repurchase Agreement to read in its entirety as follows: 

"(iv)    If
Seller repurchases the Purchased Mortgage Loans subject to a Transaction on any day or otherwise transfers funds to Buyer pursuant to its obligations hereunder on any day that is
not a Repurchase Date, Seller shall indemnify Buyer and hold Buyer harmless from any loss or expense that Buyer sustains or incurs arising from the reemployment of funds obtained by Buyer hereunder or
from fees actually paid by Buyer to terminate the deposits from which such funds were obtained, but not including loss of profit ("Breakage Costs").
Buyer shall deliver to Seller a statement setting forth the amount and basis of determination of any Breakage Costs in such detail as reasonably determined in good faith by Buyer, it being agreed that
such statement and the method of its calculation shall be conclusive and binding upon Seller, absent manifest error. This Section shall survive termination of this Agreement and repurchase of all
Purchased Mortgage Loans subject to Transactions hereunder." 

        (d)   A
new Section 3(h) is hereby added to the Repurchase Agreement to read in its entirety as follows: 

"(h)    Seller Payment Obligations Absolute.    Subject to the provisions of Section 5(f), clause (ii) of
Section 15 and of Section 27 (if applicable) of this Agreement, the obligation of Seller to make payment of the Repurchase Price and to make any and all other payments required to be
made by Seller to Buyer under this Agreement, any Confirmation or any other Facility Document shall be unconditional and irrevocable and shall be paid under all circumstances strictly in accordance
with the terms of this Agreement, notwithstanding the existence of any claim, set-off right, defense or other right that Seller, any of its Subsidiaries or Affiliates or any other Person
may at any time have against Buyer or any other Person, whether in connection with this Agreement or any other related or unrelated agreements or transactions, and Seller hereby waives its right to
exercise any such claim, set-off right, defense or other right to the extent such exercise would have the purpose or effect of offsetting any or all of Seller's payment obligations under
this Agreement, any Confirmation or any other Facility Document." 

        (e)   Subsection
(b) of Section 5 of the Repurchase Agreement is hereby amended by deleting such Subsection (b) in its entirety and replacing such
subsection as follows: 

        "(b) As
soon as received from each Mortgagor, Seller or Servicer shall deposit all Income relating to any Purchased Mortgage Loan in the Collection Account, and shall
deposit all tax and insurance escrow payments (and other similar payments) relating to any Purchased Mortgage Loan in the Escrow Account." 

        (f)    A
new Subsection (c) is added to Section 5 immediately after Subsection (b), existing Subsection (c) is renumbered as Subsection (d) and all
remaining Subsections are similarly renumbered. The reference in Section 3(f) of the Agreement to "Section 5(d)" is deemed to be a reference to "Section 5(e)". New Subsection
(c) of Section 5 shall read as follows: 

        "(c) Seller
has established, and shall maintain for Buyer's benefit, with a financial institution acceptable to Buyer (the "Backup Collection Account Bank") one or more
collection accounts (together, the "Backup Collection Account") and escrow accounts (together, the "Backup Escrow Account") pledged to Buyer. At any time that a Default or an Event of Default has
occurred and is continuing, at the direction of the Buyer, as soon as received from each Mortgagor, Seller or Servicer shall deposit each Mortgagor's 

3

 

Income,
all tax and insurance escrow payments and other such payments relating to any Purchased Mortgage Loans in Seller's deposit account that it generally employs for deposits of such collections
and within one Business Day of receipt, remit the same to the Backup Collection Account Bank. The Backup Collection Account Bank shall upon receipt thereof promptly remit all Income (including all
cash, checks and other near cash items) to the Backup Collection Account and all tax and insurance escrow payments to the Backup Escrow Accounts. The Backup Collection Accounts may be interest-
bearing and such accounts shall be entitled "FIELDSTONE MORTGAGE COMPANY, IN TRUST FOR LEHMAN BROTHERS BANK, FSB" and "FIELDSTONE INVESTMENT CORPORATION, IN TRUST FOR LEHMAN BROTHERS BANK". The Backup
Escrow Accounts may be interest-bearing and such accounts shall be entitled "FIELDSTONE MORTGAGE COMPANY, IN TRUST FOR LEHMAN BROTHERS BANK, FSB, AND VARIOUS MORTGAGORS" and "FIELDSTONE INVESTMENT
CORPORATION, IN TRUST FOR LEHMAN BROTHERS BANK, AND VARIOUS MORTGAGORS". Prior to the date of the first Transaction, Seller has caused the Backup Collection Account Bank to deliver to Buyer agreements
between each of FIC and FMC and Buyer and the Backup Collection Account Bank, substantially in the form of Exhibit VII hereto, with such modifications thereto as Buyer may require or permit in
its discretion (the "Backup Collection Account Agreements") in which the Backup Collection Account Bank acknowledges Buyer's security interest in the Backup Collection Account and the Backup Escrow
Account and agrees that upon receipt of notice that an Event of Default has occurred and is continuing, the Backup Collection Account Bank shall only withdraw funds from the Backup Collection Account
or the Backup Escrow Account, respectively, on instructions of Buyer (other than for payment of servicing fees and ancillary income due and owing to Servicer and reimbursement of servicing advances
under any servicing agreement). Prior to the delivery by Buyer to the Backup Collection Account Bank of the notice referred to in the immediately preceding sentence, all Income and all tax and
insurance escrow payments held in the Backup Collection Account or the Backup Escrow Account, respectively, may be withdrawn by Seller or Servicer for servicing of the Purchased Mortgage Loans and
administration of escrow-related matters pertaining to the Purchased Mortgage Loans and any other purposes approved by Buyer." 

        (g)   Subsection
(f) of Section 5 of the Repurchase Agreement is hereby amended by deleting the following clause in its entirety: 

"provided, that if an Event of Default shall have occurred and be continuing, all funds in the Collection Account shall be distributed by Buyer, on each
Business Day in the following order or priority:" 

and
replacing such clause as follows: 

"provided, that if an Event of Default shall have occurred and be continuing, all Income in the Collection Account or the Backup Collection Account, as
the case may be, shall be distributed by Buyer, on each Business Day in the following order or priority:" 

        (h)   Section 6
of the Repurchase Agreement is amended by deleting the following clause: "any and all collection accounts and escrow accounts relating to the Purchased
Mortgage Loans (including any Collection Account and, to the extent permitted by law, any Escrow Account) and all cash or other property or amounts on deposit therein" and replacing such clause as
follows: "any Backup Collection Account and, to the extent permitted by law, any Backup Escrow Account." 

4

 

        (i)    Section 8
of the Repurchase Agreement is hereby amended by adding the following paragraph thereto: 

"Without
limiting the foregoing or any other provision of this Agreement, Buyer may sell participations to one or more entities in or to all or a portion of its Transferable Interests; provided, that
(i) Buyer's obligations under this Agreement shall remain unchanged; (ii) Buyer shall remain solely responsible to Seller for the performance of such obligations, and Seller shall
continue to deal solely and directly with Buyer in connection with Buyer's rights and obligations under this Agreement and the other Facility Documents; and (iii) no participant under any such
participation shall have any right to approve any modification, amendment or waiver of any of the terms of any of the Facility Documents, provided that Buyer may be required to obtain the consent of
any participant prior to agreeing to any such modification, amendment or waiver which would, with respect to any Transaction, (x) extend the Final Repurchase Date; (y) waive the payment
of the Repurchase Price or (z) decrease the Pricing Rate. Seller agrees that each participant shall be entitled to the benefits of Sections 3(e), 3(f) and 20 of this Agreement with respect to
its participation in any portion of the Transactions and this facility as if it were Buyer hereunder; provided, however, that such benefits shall not exceed in the aggregate that amount the Buyer
would have been entitled to receive had Buyer sold no such participations. Buyer may furnish information concerning Seller in accordance with Section 30(g) of this Agreement from time to time
to participants (including prospective participants); provided that such participant or prospective participant agrees to hold such information subject to the confidentiality provisions of this
Agreement." 

        (j)    Subsection
(x) of Section 13 of the Repurchase Agreement is amended by replacing "the Collection Account and Escrow Account or" with "the Backup Collection
Account and Backup Escrow Account or". 

        (k)   Section 14(b)(v) is
hereby deleted and replaced in its entirety with the following: 

"(v)    Seller
shall have all the rights and remedies provided herein, provided by applicable federal, state, foreign, and local laws, in equity, and under any other agreement between Buyer
and Seller, other than as set forth in Section 3(h)." 

        (l)    Subsection
(g) of Section 25 of the Repurchase Agreement is amended by deleting the fourth sentence from Subsection (g) in its entirety and
replacing such sentence as follows: 

        "Seller
shall deliver immediately to Backup Servicer the funds in the Backup Collection Account and Backup Escrow Account not held pursuant to Backup Collection Account Agreements and
all other Income and escrow payments and all Mortgage Loan documents and related documents and statements held by it hereunder and Seller shall account for all funds and shall execute and deliver such
instruments and do such other things as may reasonably be required to more fully and definitively vest in Backup Servicer all such rights, powers, duties, responsibilities, obligations and liabilities
of Seller as servicer of the Purchased Mortgage Loans." 

        (m)  Subsection
(g) of Section 30 of the Repurchase Agreement is amended by deleting Subsection (g) in its entirety and replacing such Subsection as
follows: 

        "(g) Buyer
and Seller agree that this Agreement and any information delivered hereunder will be held by the parties hereto in confidence and will not be disclosed to anyone
other than to (i) participants or prospective participants who agree to hold this Agreement and any such information in confidence in accordance with the provisions hereof,
(ii) principals of the parties hereto or of such participants or proposed participants, (iii) proposed transferees of all 

5

 

or
any portion of the Mortgage Loans and (iv) financial and legal advisors for any of the parties described in (i), (ii) and (iii) above, and other agents and representatives of
the parties described in (i), (ii) and (iii) above who need to know such information in connection with the transactions contemplated hereby and except that the Buyer, or any successor
thereto, may disclose any facilities in place and/or may describe the provisions of this Agreement in the ordinary course of business. In addition, the parties hereto shall be permitted to disclose
information regarding this Agreement to the extent required for the enforcement of its terms or as required by law, regulatory requirements (including the requirements of the Securities and Exchange
Commission) or court order." 

        (n)   All
references to "Collection Account" in Exhibit VII to the Repurchase Agreement are replaced with references to the "Backup Collection Account". 

        Section 3.    Additional Agreement Regarding Custodial Agreement.    Buyer agrees that for purposes of Sections
9(b) and 9(c) of the Custodial Agreement, any document released to a third party purchaser pursuant to a Request for Release and not actually purchased by such third party purchaser shall be returned
to Custodian no later than forty five (45) days from the date on such Transmittal Letter, rather than the thirty (30) days currently set forth in Sections 9(b) and 9(c) of the Custodial
Agreement. Buyer shall notify the Custodian in writing of its agreement to this change in time period. 

        Section 4.    Representations and Warranties.    Seller hereby represents and warrants to Buyer that
(a) both immediately before and after giving effect to the amendments set forth in Section 2 of this Amendment, no Event of Default shall have occurred and be continuing and
(b) the representations and warranties of Seller set forth in Section 10 of the Repurchase Agreement are, on and as of the Effective Date (as defined in Section 4), true and
complete as if made on and as of such date and as if each reference in said Section 10 to "this Agreement" included reference to the Repurchase Agreement as amended hereby, other than any such
representation or warranty that, by their terms, refer to a specific date other than the Effective Date (as defined in Section 4), in which case as of such specific date. 

        Section 5.    Condition Precedent.    The amendments to the Repurchase Agreement set forth in Section 2
are subject to, and will become effective upon the delivery of this Amendment by each of Buyer and Seller to the other Party, duly executed by each Party and satisfactory in form and substance to
Buyer and Seller (the date of such delivery, the "Effective Date"). 

        Section 6.    Miscellaneous.    

        (a)   Except
as expressly amended by Section 2 hereof, the Repurchase Agreement remains unaltered and in full force and effect. Each of the Parties hereby reaffirms all
terms and covenants made in the Repurchase Agreement as amended hereby. 

        (b)   Each
of the Parties hereby represents and warrants to the other that (i) this Amendment constitutes the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms, and (ii) the execution and delivery by such Party of this Amendment has been duly authorized by all requisite corporate or
partnership action on the part of such Party and will not violate any provision of the organizational documents of such Party. 

        (c)   The
execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Party under the Repurchase Agreement, or
any other document, instrument or agreement executed and/or delivered in connection therewith. 

        (d)   THIS
AMENDMENT SHALL BE CONSTRUED, INTERPRETED AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. 

6

 

        (e)   This
Amendment may be executed in any number of counterparts, and all such counterparts shall together constitute the same agreement. Any signature delivered by a party
via facsimile shall be deemed to be an original signature hereto. 

[SIGNATURE
PAGE TO FOLLOW] 

7

   
        IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed as of the day and year first above written. 

	 	 	SELLER:
	

 	
 	

FIELDSTONE MORTGAGE COMPANY
	 	 	By:	 	/s/ Mark C. Krebs
 Name: Mark C. Krebs

Title: Sr. Vice President & Treasurer
	

 	
 	

FIELDSTONE INVESTMENT CORPORATION
	

 	
 	

By:	
 	

/s/ Robert G. Partlow
 Name: Robert G. Partlow

Title: Senior Vice President
	

 	
 	
BUYER:
	

 	
 	

LEHMAN BROTHERS BANK, FSB
	

 	
 	

By:	
 	

/s/ Frederick C. Madonna
 Name: Frederick C. Madonna

Title: Authorized Signatory

S-1

QuickLinks

FIRST AMENDMENT TO AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT GOVERNING PURCHASES AND SALES OF MORTGAGE LOANS

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