Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Viceroy Exploration Ltd. - Exhibit 4.5

Exhibit 4.5

VICEROY EXPLORATION LTD.

  Suite 520 – 700 West Pender Street 

  Vancouver, B.C. V6C 1G8 

INFORMATION CIRCULAR 

(As at March 21, 2005, and in Canadian dollars except as indicated)

SOLICITATION OF PROXIES

 This information circular is furnished in connection with
  the solicitation of proxies by the management of Viceroy Exploration Ltd. (the
  “Company”) for use at the annual general and special meeting to
  be held on April 22, 2005 and any adjournments thereof (the “Meeting”).
  Unless the context otherwise requires, when we refer in this information circular
  to the Company, its subsidiaries are also included. The solicitation will be
  conducted primarily by mail but may be supplemented by telephone or other personal
  contact to be made by officers and employees of the Company without special
  compensation or by agents retained and compensated for that purpose. The cost
  of solicitation will be borne by the Company. 

APPOINTMENT OF PROXYHOLDER

 A duly completed form of proxy will constitute the person(s)
  named in the enclosed form of proxy as the shareholder's proxyholder. The persons
  whose names are printed in the enclosed form of proxy for the Meeting are directors
  or officers of the Company (the “Management Proxyholders”). 

 A shareholder has the right to appoint a person other than
  the Management Proxyholders, to represent them at the Meeting by striking out
  the names of the Management Proxyholders and by inserting the desired person's
  name in the blank space provided or by executing a proxy in a form similar to
  the enclosed form. A proxyholder need not be a shareholder. 

VOTING BY PROXY

 Common shares of the Company represented by properly executed
  proxies in the accompanying form will be voted or withheld from voting on each
  respective matter in accordance with the instructions of the shareholder on
  any ballot that may be called for. 

 If no choice is specified and one of the Management Proxyholders
  is appointed by a shareholder as proxyholder, such person will vote in favour
  of the matters proposed at the Meeting and for all other matters proposed by
  management at the Meeting. 

 The enclosed form of proxy also confers discretionary authority
  upon the person named therein as proxyholder with respect to amendments or variations
  to matters identified in the Notice of the Meeting and with respect to other
  matters which may properly come before the Meeting. At the date of this information
  circular, management of the Company knows of no such amendments, variations
  or other matters to come before the Meeting. 

COMPLETION AND RETURN OF PROXY

 Each proxy must be dated and signed by the Intermediary (see
  “Non-Registered Holders” below) acting on behalf, of a shareholder,
  or by the shareholder or his/her attorney authorized in writing. In case of
  a corporation, the proxy must be dated and executed under its corporate seal
  or signed by a duly authorized officer or attorney for the corporation. 

 Completed forms of proxy must be deposited at the office of
  the Company’s registrar and transfer agent, Computershare Trust Company
  of Canada, 100 University Avenue, 9th Floor, Toronto, Ontario, M5J
  2Y1, not later than forty-eight (48) hours, excluding Saturdays, Sundays and
  holidays, prior to the time of the Meeting, unless the chairman of the Meeting
  elects to exercise his discretion to accept proxies received subsequently. 

NON-REGISTERED HOLDERS

 Only registered shareholders or duly appointed proxyholders
  are permitted to vote at the Meeting. Most shareholders of the Company are “non-registered”
  shareholders because the shares they own are not registered in their names but
  are instead registered in the name of the brokerage firm, bank or trust company
  through which they purchased the shares. More particularly, a person
  is not a registered shareholder in respect of shares which are held on behalf
  of that person (the “Non-Registered Holder”) but which are registered
  either (a) in the name of an intermediary (an “Intermediary”) that
  the Non-Registered Holder deals with in respect of the shares (Intermediaries
  include, among others, banks, trust companies, securities dealers or brokers
  and trustees or administrators or self-administered RRSP’s, RRIF’s,
  RESP’s and similar plans); or (b) in the name of a clearing agency (such
  as The Canadian Depository for Securities Limited (“CDS”)) of which
  the Intermediary is a participant. In accordance with the requirements of National
  Policy 54-101 of the Canadian Securities Administrators, the Company has distributed
  copies of the Notice of Meeting, the Information Circular and the Proxy (collectively,
  the “Meeting Materials”) to the clearing agencies and Intermediaries
  for onward distribution to Non-Registered Holders.

 Intermediaries are required to forward the Meeting Materials
  to Non-Registered Holders unless a Non-Registered Holder has waived the right
  to receive them. Very often, Intermediaries will use service companies to forward
  the Meeting Materials to Non-Registered Holders. Generally, Non-Registered Holders
  who have not waived the right to receive Meeting Materials will either: 

	 (a)      	 be given a form of proxy which has already been
        signed by the Intermediary (typically by a facsimile, stamped signature),
        which is restricted as to the number of shares beneficially owned by the
        Non-Registered Holder but which is otherwise not completed. Because the
        Intermediary has already signed the form of proxy, this form of proxy
        is not required to be signed by the Non-Registered Holder when submitting
        the proxy. In this case, the Non-Registered Holder who wished to submit
        a proxy should otherwise properly complete the form of proxy and deliver
        it to Computershare Trust Company of Canada as provided above;
        or 

	 
	 (b)      	 more typically, be given a voting instruction form
        which is not signed by the Intermediary, and which, when properly
        completed and signed by the Non-Registered Holder and returned to the
        Intermediary or its service company, will constitute voting instructions
        (often called a “proxy authorization form”) which the Intermediary
        must follow. Typically, the proxy authorization form will consist of a
        one page pre-printed form. Sometimes, instead of the one page pre-printed
        form, the proxy authorization form will consist of a regular printed proxy
        form accompanied by a page of instructions which contains a removable
        label containing a bar-code and other information. In order for the form
        of proxy to validly constitute a proxy authorization form, the Non-Registered
        Shareholder must remove the label from the instructions and affix it to
        the form of proxy, properly complete and sign the form of proxy and return
        it to the Intermediary or its service company in accordance with the instructions
        of the Intermediary or its service company. 

 In either case, the purpose of this procedure is to permit
  Non-Registered Holders to direct the voting of the shares which they beneficially
  own. Should a Non-Registered Holder who receives one of the above forms wish
  to vote at the Meeting in person, the Non-Registered Holder should strike out
  the names of the Management Proxyholders and insert the Non-Registered Holder’s
  name in the blank space provided. In either case, Non-Registered Holders
  should carefully follow the instructions of their Intermediary, including those
  regarding when and where the proxy or proxy authorization form is to be delivered.

REVOCABILITY OF PROXY

 Any registered shareholder who has returned a proxy may revoke
  it at any time before it has been exercised. In addition to revocation in any
  other manner permitted by law, a proxy may be revoked by instrument in writing,
  including a proxy bearing a later date, executed by the registered shareholder
  or by his attorney authorized in writing or, if the registered shareholder is
  a corporation, under its corporate seal or by an officer or attorney thereof
  duly authorized. The instrument revoking the proxy must be deposited at the
  registered office of the Company, at any time up to and including the last business
  day preceding the date of the Meeting, or any adjournment thereof, or with the
  chairman of the Meeting on the day of the Meeting. Only registered shareholders
  have the right to revoke a proxy. Non-Registered Holders who wish to change
  their vote must, at least 7 days before the Meeting, arrange for their respective
  Intermediaries to revoke the proxy on their behalf. 

 2

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF 

 The authorized capital of the Issuer consists of an unlimited
  number of first preferred shares without par value; an unlimited number of second
  preferred shares without par value; and an unlimited number of common shares
  without par value. As at March 21, 2005 , 35,620,308 common shares, no first
  preferred shares and no second preferred shares were issued and outstanding.
  The holders of common shares are entitled to one vote for each common share
  held. Holders of common shares of record at the close of business on March 22,
  2005 will be entitled to receive notice of and vote at the Meeting. 

 To the knowledge of the directors and senior officers of the
  Company, no person beneficially owns, directly or indirectly, or exercises control
  or direction over shares carrying more than 10% of the voting rights attached
  to all shares of the Company.

ELECTION OF DIRECTORS

 The directors of the Company are elected at each annual general
  meeting and hold office until the next annual general meeting or until their
  successors are appointed. In the absence of instructions to the contrary, the
  enclosed proxy will be voted for the nominees herein listed. 

 Shareholder approval will be sought to fix the number of directors
  of the Company at seven (7), which is the current number of directors. 

 The Company has a compensation committee, a corporate governance
  committee and an audit committee. Members of these committees are as set out
  below. 

 Management of the Company proposes to nominate each of the
  following persons for election as a director. Information concerning such persons,
  as furnished by the individual nominees as at March 21, 2005, is as follows:

	 Name and municipality of

      residence and position 	 Principal occupation or

      employment and, if not a
 previously elected director,

      occupation during the past 5 years 	 Previous service

      as a director 	 Number of common

      shares beneficially

      owned or, directly or

      indirectly controlled 
	 W. David Black (1) (2) (3)

      Vancouver, British Columbia

      Director  	 Associate Counsel, DuMoulin Black since January
      2004; Partner, DuMoulin Black, from 1968 to December 2003.	 Since March

      2003 	 210,720 common shares and options to

      acquire 250,000 common shares
	 Richard M. Colterjohn

      Toronto, Ontario

      Director 	 Managing Partner, Glencoban Capital Management Inc.,
      October 2003 to present; President and CEO, Centenario Copper Corporation,
      March 2004 to present; Senior officer in corporate finance department, UBS
      Bunting Warburg Inc., April 1992 to April 2002, and Director of UBS Bunting
      Warburg Inc., April 1997 to April 2002. Also a director of Cumberland Resources
      Ltd. and Canico Resource Corp.  	 Since October

      2004 	 150,000 common shares, options to

      acquire 250,000 common shares and warrants to acquire 75,000 common shares.
    
	 Eric Cunningham (3) 
      

      Toronto, Ontario

      Director  	 Mining Consultant  	 Since December

      2003 	 230,840 common shares and options to acquire 150,000
      common shares

 3 

 

	 Patrick G. Downey  

      North Vancouver, British  

      Columbia  

      President, CEO & Director  	 President and CEO of the Company; Professional Engineer
      and Principal of P. Downey & Associates; President and Director of Oliver
      Gold Corporation, November 1997 to February 2002; Director of Canico Resource
      Corporation, February 2002 to February 2003; President & C.E.O., Consolidated
      Trillion Resources Ltd., January 1999 to December 2003. 	 Since December

      2003	 679,326 common shares and options to acquire 450,000
      common shares
	 Michael H. Halvorson (1) (2) 
      

      Edmonton, Alberta  

      Director  	 President of Halcorp Capital Ltd., a private investment
      and consulting company, since 1980.	 Since March

      2003 	 521,906 common shares and options to acquire 250,000
      common shares 
 
	 Robert V. Matthews (1)(2) 
      

      North Vancouver, British

      Columbia  

      Director  	 President, Sheppards Building Materials Inc. 	 Since March

      2003 	 234,000 common shares and options to acquire 150,000
      common shares 
	 Ronald K. Netolitzky (3) 
      

      Victoria, British Columbia 

      Chairman & Director  	 Chairman since April 2003; past President March
      2003 to December 2003; Chairman of Consolidated Trillion Resources Ltd.
      from January 1999 to December 2003; Consulting Geologist, Keewatin Consultants,
      a division of Chintz & Co., 49.6% held by Mr. Netolitzky.	 Since March

      2003 	 1,413,987 common shares and options to acquire
      300,000 common shares

	 	 (1)	 Member of the audit committee. 
	 	 (2)	 Member of the compensation committee. 
	 	 (3)	 Member of the corporate governance committee. 

No proposed director:

	 (a)      	 is, as at the date of the Information
        Circular, or has been, within 10 years before the date of the Information
        Circular, a director or executive officer of any company (including the
        Company) that, while that person was acting in that capacity, 

	 
	 	 (i)      	 was the subject of a cease trade or similar order
        or an order that denied the relevant company access to any exemption under
        securities legislation, for a period of more than 30 consecutive days;
      

	 
	 	 (ii)      	 was subject to an event that resulted, after the
        director or executive officer ceased to be a director or executive officer,
        in the company being the subject of a cease trade or similar order or
        an order that denied the relevant company access to any exemption under
        securities legislation, for a period of more than 30 consecutive days;
        or 

	 
	 	 (iii)      	 or within a year of that person ceasing to act in
        that capacity, became bankrupt, made a proposal under any legislation
        relating to bankruptcy or insolvency or was subject to or instituted any
        proceedings, arrangement or compromise with creditors or had a receiver,
        receiver manager or trustee appointed to hold its assets; or 

 4

 

	 (b)	 has, within the 10 years before the date of the
        Information Circular, become bankrupt, made a proposal under any legislation
        relating to bankruptcy or insolvency, or become subject to or instituted
        any proceedings, arrangement or compromise with creditors, or had a receiver,
        receiver manager or trustee appointed to hold the assets of the proposed
        director. 

EXECUTIVE COMPENSATION

 The following table (presented in accordance with the rules
  (the "Rules”) made under the Securities Act (British Columbia)) sets forth
  all annual and long term compensation for services in all capacities to the
  Company and its subsidiaries for the two most recently completed financial years
  (to the extent required by the Rules) in respect of each of the individuals
  comprised of the Chief Executive Officer and the Chief Financial Officer as
  at December 31, 2004 and the other three most highly compensated executive officers
  of the Company as at December 31, 2004 whose individual total compensation for
  the most recently completed financial year exceeded $150,000 and any individual
  who would have satisfied these criteria but for the fact that individual was
  not serving as such an officer at the end of the most recently completed financial
  year (collectively the "Named Executive Officers” or “NEOs”).

Summary Compensation Table

	  	 Annual Compensation  	 Long-Term Compensation  	  
	  	 Awards  	 Payouts  
	Name and Principal 

      Position	 Fiscal

      Year

      ended

      Dec 31st(1) 	Salary(2)
  ($)
    	Bonus

      ($) 	 Other

      Annual

      Compen-

      sation

      ($) 	 Securities

      Under

      Options

      Granted

      (#) 	 Restricted

      Shares or

      Restricted

      Share Units

      (#) 	LTIP

      Payouts

      ($) 	 All Other

      Compen-

      sation

      ($)() 
	 Patrick G. Downey  

      President & CEO (3) 	 2004  	 150,000  	 25,000  	 Nil  	 400,000  	 Nil  	 Nil  	 Nil  
	 2003  	 12,500  	 Nil  	 Nil  	 400,000  	 Nil  	 Nil  	 Nil  
	Ronald K. Netolitzky 

      Chairman (Past President & CEO) (4)  	 2004  	 95,000  	 17,000  	 Nil  	 300,000  	 Nil  	 Nil  	 Nil  
	 2003  	 45,000  	 Nil  	 Nil  	 400,000  	 Nil  	 Nil  	 Nil  
	 John P. Fairchild

      CFO (5)  	 2004  	 102,027  	 10,000  	 Nil  	 150,000  	 Nil  	 Nil  	 Nil  
	 2003  	 -  	 -  	 -  	 -  	 -  	 -  	 -  

	 	 (1)      	 The Company was incorporated on March 31, 2003 and
        has only two completed financial years. 

	 
	 	 (2)      	 Includes consulting fees paid to the Named Executive Officers. 
	 
	 	 (3)      	 Mr. Downey was appointed December 2003. His remuneration,
        which commenced December 2003 at $12,500 per month and increased in
        January 2005 to $15,000 per month, is paid to Downey & Associates,
        a company controlled by Mr. Downey. 

	 
	 	 (4)      	 Previous President & C.E.O. of the Company from
        April to December 2003. Mr. Netolitzky’s remuneration, which commenced
        in July 2003 at $7,500 per month and increased in October 2004 to
        $9,167 per month, is paid to Keewatin Consultants, a division of Chintz
        & Co., 49.6% held by Mr. Netolitzky.

	 
	 	 (5)      	 Appointed April 2004 with remuneration of $568 per day. 

Long Term Incentive Plans (LTIP) Awards

 The Company does not have a LTIP, pursuant to which cash or
  non-cash compensation intended to serve as an incentive for performance (whereby
  performance is measured by reference to financial performance or the price of
  the Company’s securities) was paid or distributed to the Named Executive
  Officers during the most recently completed financial year. 

 5

Option/Stock Appreciation Rights (“SAR”) Grants During the Most Recently Completed Financial Year 

 The following table sets forth stock options granted under
  the Company’s Stock Option Plan or otherwise during the most recently
  completed financial year to each of the Named Executive Officers. 

	Name 	 Securities

      Under

      Options/

      SARs

      Granted

      (#) 	 % of Total

      Options/SARs

      Granted to

      Employees in

      Financial

      Year 	Exercise or

      Base Price

      ($/Security) 	 Market Value 
 of Securities

      Underlying

      Options/SARs

      on the Date of 
 Grant

      ($/Security) 	Expiration

      Date 
	 Patrick G. Downey 

      President & CEO  	 -  	 -  	 -  	 -  	 -  
	 Ronald K. 

      Netolitzky

      Chairman (Past

      President & CEO) 	 -  	 -  	 -  	 -  	 -  
	 John P. Fairchild

      Chief Financial

      Officer 	 150,000  	 11.6  	 1.27  	 1.27  	 Apr 2/09  

Aggregated Option Exercises in Last Financial Year and Financial Year-End Option
Values 
 The following table sets forth details of all exercise of
  stock options during the most recently completed financial year by each of the
  Named Executive Officers, the number of unexercised options held by the Named
  Executive Officers and the financial year-end value of unexercised options on
  an aggregated basis.

	Name 	 Common

      Shares

      Acquired

      on Exercise

      (#) 	Aggregate

      Value

      Realized

      ($) 	 Unexercised

      Options at

      Financial Year

      End

      (#) Exercisable/

      Unexercisable 	 Value(2) of 

      in-the-Money

      Options at Financial

      Year End

      ($) Exercisable/

      Unexercisable 
	 Patrick G. Downey 

      President & CEO  	 -  	 - 	 400,000/0  	 500,000/0 
	 Ronald K. Netolitzky

      Chairman (Past President & CEO)	 100,000  	 58,000(1) 	 300,000/0  	 413,000/0 
	 John P. Fairchild

      Chief Financial Officer  	 -  	 - 	 150,000/0  	 184,500/0 

	 	 (1)      	 Based on the difference between the market value
        of the securities underlying the options on the exercise date, July 30,
        2004, being $1.08 and the exercise price of the options being $0.50.
      

	 
	 	 (2)      	 Based on the difference between the option exercise
        price and the closing market price of the Company’s shares as at
        December 31, 2004 ($2.50). 

Option Re-Pricings

 There was no re-pricing of stock options under the Company’s
  stock option plan or otherwise during the most recently completed financial
  year. 

Defined Benefit or Actuarial Plan Disclosure

The Company does not have a defined benefit or actuarial plan.

 6

Termination of Employment, Change in Responsibilities and Employment Contracts 

 The Company and its subsidiaries have no compensatory plan,
  contract or arrangement where a Named Executive Officer is entitled to receive
  more than $100,000 to compensate such executive officers in the event of
  resignation, retirement or other termination, a change of control of the Company
  or its subsidiaries or a change in responsibilities following a change in control
  except pursuant to agreements dated December 20, 2004, whereby, in the event
  of a change of control, Messrs. Downey and Netolitzky have the right to receive
  a sum equal to 24 months of their then existing monthly rate and Mr. Fairchild,
  a sum equal to 100 days of his then existing daily rate.

Composition of the Compensation Committee

 During the most recently completed financial year, the Compensation
  Committee was composed of Patrick G. Downey, President and C.E.O., and W. David
  Black and Michael H. Halvorson, who are independent directors. On January 2,
  2005, Mr. Downey was replaced by Robert V. Matthews, an independent outside
  director. 

Report on Executive Compensation 

 The compensation of the Company’s executive officers
  is determined by the Compensation Committee. Interested executives do not participate
  in decisions of the Compensation Committee regarding their remuneration. 

 In establishing levels of remuneration and in granting stock
  options, the executive’s performance, level of expertise, responsibilities,
  length of service to the Company and comparable levels of remuneration paid
  to executives of other companies of comparable size and development within the
  industry are taken into consideration.

 The general compensation philosophy of the Company for executive
  officers is to provide a level of compensation that is competitive within the
  North American marketplace and that will attract and retain individuals with
  the experience and qualifications necessary for the Company to be successful,
  and to provide long-term incentive compensation which aligns the interest of
  executives with those of shareholders and provide long-term incentives to members
  of senior management whose actions have a direct and identifiable impact on
  the performance of the Company and who have had a material responsibility for
  long-range strategy development and implementation. 

 The Company’s stock option plan is administered by the
  Compensation Committee. The stock option plan is designed to give each option
  holder an interest in preserving and maximizing shareholder value in the longer
  term, to enable the Company to attract and retain individuals with experience
  and ability, and to reward individuals for current performance and expected
  future performance. Stock option grants are considered when reviewing executive
  officer compensation packages as a whole. 

See “Executive Compensation - Summary Compensation Table” for more information on remuneration of Named Executive Officers. 

The foregoing Report on Executive Compensation was prepared under the supervision of the current Compensation Committee of the Company, comprised of W. David Black, Michael H. Halvorson and Robert V. Matthews. 

Performance Graph

 The following graph compares the cumulative shareholder return
  on a $100 investment in common shares of the Company to a similar investment
  in companies comprising the S&P/TSX Small Cap Total Return Index, including
  dividend reinvestment, for the period from November 14, 2003 (the Company’s
  listing date on the TSX-V) to December 31, 2004. 

 7

 

	  	 Symbol  	 November 14, 2003  	 December 31, 2003  	 December 31, 2004  
	 Viceroy Exploration Ltd.  	• 	 100.00  	 131.14  	 245.71  
	 S&P/TSX Small Cap Total Return Index	• 	 100.00  	 105.22  	 112.05  

Compensation of Directors
 Other than disclosed herein, the Company does not have any
  arrangements, standard or otherwise, pursuant to which directors are compensated
  by the Company or its subsidiaries for their services in their capacity as directors,
  or for committee participation, involvement in special assignments or for services
  as consultants or expert during the most recently completed financial year or
  subsequently, up to and including the date of this information circular. The
  directors are reimbursed for actual expenses reasonably incurred in connection
  with the performance of their duties as directors. 

 The Company has a formalized stock option plan for the granting
  of incentive stock options to the officers, employees and directors. The purpose
  of granting options pursuant to the stock option plan is to assist the Company
  in compensating, attracting, retaining and motivating the officers, directors
  and employees of the Company and to closely align the personal interests of
  such persons to that of the shareholders. 

 The following table sets forth information concerning individual
  grants of options to purchase securities of the Company made during the most
  recently completed financial year to the Directors of the Company (excluding
  the Named Executive Officers): 

 8

 

	 Name of

      Director and

      Position as at

      Financial

      Year-End 	 Securities
 Under

      Options

      Granted (1)
 (#)  	 % of Total 
 Options

      Granted to

      All

      Employees in

      the Financial

      Year (2) 	Exercise or

      Base Price(3)

      ($/Securities) 	 Market Value

      of Securities

      Underlying

      Options on

      the Date of 
 Grant

      ($/Security) 	Date of

      Grant 	Expiration

      Date 
	 W. David Black  

      Director 	 50,000  	 3.9 	 1.57  	 1.57  	 Sep 13/04  	 Sep 13/09  
	 Richard  

      Colterjohn

      Director 	 200,000  	 15.4 	 2.25  	 2.25  	 Oct 21/04  	 Oct 21/09  
	 Eric

      Cunningham 	 50,000  	 3.9 	 1.57  	 1.57  	 Sep 13/04  	 Sep 13/09  
	 Michael

      Halvorson

      Director 	 50,000  	 3.9 	 1.57  	 1.57  	 Sep 13/04  	 Sep 13/09  
	 Robert

      Matthews

      Director 	 50,000  	 3.9 	 1.57  	 1.57  	 Sep 13/04  	 Sep 13/09  

	 	 (1)      	 The options are subject to regulatory and shareholder approval. 
	 
	 	 (2)      	 Based on a total of 1,298,000 stock options granted during the period.
    
	 
	 	 (3)      	 The exercise price of stock options is determined
        by the Board of Directors in accordance with the Company’s Stock
        Option Plan. The exercise price shall be no less than the Market Price
        prevailing on the date the option is granted less applicable discount,
        if any, permitted by the policies of the TSX-V and approved by the Board.
        Market price means the last closing price per share on the trading day
        immediately preceding the day on which the Company announces the grant
        of the option or, if the grant is not announced, on the grant date. 

The following stock options were outstanding to all directors of the Company at the most recently completed financial year: 

	 Date Granted  	 Number of 
 Shares Under Option 
    	 Exercise Price

      Per Share  	 Expiry Date  
	 September 12, 2003  	 300,000  	 $0.50  	 September 12, 2008  
	 October 7, 2003  	 200,000  	 $1.06  	 October 7, 2008  
	 December 3, 2003  	 700,000  	 $1.25  	 December 3, 2008  
	 September 13, 2004  	 200,000  	 $1.57  	 September 13, 2009  
	 October 21, 2004  	 200,000  	 $2.25  	 October 21, 2009  

On January 31, 2005, the directors were granted an aggregate 450,000 stock options
at $2.46 expiring January 31, 2010.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS 

 The following table sets forth details of the Company’s
  compensation plans under which equity securities of the Company are authorized
  for issuance at the end of the Company’s most recently completed financial
  year. 

 9

 

	Plan Category 	 Number of securities to be

      issued upon exercise of

      outstanding options,

      warrants and rights 	Weighted-average exercise

      price of outstanding

      options, warrants and rights 	 Number of securities

      remaining available for

      future issuance under

      equity compensation plans 
	 Equity compensation plans

      approved by

      securityholders – Stock

      Option Plan (1)  	 2,593,000  	 $1.29  	 944,031(2) 
	 Equity compensation plans

      not approved by

      securityholders 	 Nil  	 Nil  	 Nil 
	 Total  	 2,593,000  	 $1.29  	 944,031 

	 	 (1)      	 In 2003, the Company adopted its current Stock Option
        Plan whereby directors may, from time to time, reserve for issuance and
        issue up to 10% of the then issued and outstanding common shares of the
        Company pursuant to options granted to directors, officers, employees
        and consultants of the Company and its subsidiaries; 

	 
	 	 (2)      	 Based on the Company’s issued and outstanding
        of 35,370,308 common shares at December 31, 2004. 

INDEBTEDNESS TO COMPANY OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS 

 There is no indebtedness, now nor at any time since the beginning
  of the most recently completed financial year of the Company, of any director,
  executive officer, senior officer, proposed nominee for election as a director
  or associate of any of them to or guaranteed or supported by the Company or
  any of its subsidiaries either pursuant to an employee stock purchase program
  of the Company or otherwise. 

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE 

 The Company has acquired an insurance policy for its directors
  and officers against liability incurred by them while performing their duties,
  subject to certain limitations. The amount of the premium is $18,500 per
  annum for annual aggregate coverage of $3,000,000 with a deductible of $25,000
  for each claim. The current policy, which the Company intends to renew, expires
  May 1, 2005. 

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS 

 No informed person or proposed director of the Company and
  no associate or affiliate of the foregoing persons has or has had any material
  interest, direct or indirect, in any transaction since the commencement of the
  Company's most recently completed financial year or in any proposed transaction
  which in either such case has materially affected or would materially affect
  the Company or any of its subsidiaries, except as follows: 

	 (1)      	 In the twelve months ended December 31, 2004, the
        Company had monthly consulting services arrangements with each of its
        four officers, two of which are also directors of the Company. Cash paid
        or payable pursuant to these arrangements was $175,000, $112,027,
        $112,000 and $102,650, an aggregate of $501,677. The arrangement
        with one of the officers began March 15, 2004. 

	 
	 (2)      	 During the twelve months ended December 31, 2004,
        stock options were granted to certain directors/officers/ employees for
        a total 778,000 common shares having a recorded fair value of $748,421.
      

	 
	 (3)      	 In connection with the 2004 private placement of
        the Company, the independent directors of the Company approved the participation
        by one director of the Company in the private placement for the purchase
        of 150,000 units on the same terms as arm’s length investors. 

 10

APPOINTMENT OF AUDITOR

 PricewaterhouseCoopers LLP, Chartered Accountants of Vancouver,
  British Columbia, is the auditor of the Company. 

 Unless otherwise instructed, the proxies given pursuant to
  this solicitation will be voted for the re-appointment of PricewaterhouseCoopers
  LLP as the auditor of the Company to hold office for the ensuing year with remuneration
  to be fixed by the directors. 

 PricewaterhouseCoopers LLP, Chartered Accountants, were first
  appointed as auditors by the shareholders on April 29, 2004, which was the date
  of the first Annual General Meeting of the Company. 

MANAGEMENT CONTRACTS

 No management functions of the Company are performed to any
  substantial degree by a person other than the directors or executive officers
  of the Company. 

INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON 

 Except as set out herein, no director or senior officer of
  the Company or any proposed nominee of management of the Company for election
  as a director of the Company, nor any associate or affiliate of the foregoing
  persons, has any substantial interest, direct or indirect, by way of beneficial
  ownership or otherwise, in matters to be acted upon at the meeting. 

STATEMENT OF CORPORATE GOVERNANCE PRACTICES 

 Corporate governance relates to the activities of the Board,
  the members of which are elected by and are accountable to the shareholders,
  and takes into account the role of the individual members of management who
  are appointed by the Board and who are charged with the day to day management
  of the Company. The Board is committed to sound corporate governance practices
  which are both in the interest of its shareholders and contribute to effective
  and efficient decision making. As a Tier 1 company listed on the TSX-V, the
  Company is required to comply with the guidelines for improved corporate governance
  in Canada adopted by the TSX (the “Exchange Guidelines”). The Company’s
  approach to corporate governance in the context of the 14 specific Exchange
  Guidelines is set out in the attached Schedule A.

AUDIT COMMITTEE CHARTER

 The Company’s audit committee is governed by a written
  charter that sets out its mandate and responsibilities. A copy of the Company’s
  Audit Committee Mandate & Charter is included with this Information Circular
  as Appendix I to the attached Schedule A. 

PARTICULARS OF OTHER MATTERS TO BE ACTED UPON 

 A.     Ratification of Current Stock Option
  Plan

 The Company’s current stock option plan (“Stock
  Option Plan”) was adopted in 2003 and first approved by shareholders
  at the meeting held on April 29, 2004. The purpose of the Stock Option Plan
  is to allow the Company to grant options to directors, officers, employees and
  consultants, as additional compensation, and as an opportunity to participate
  in the success of the Company. The granting of such options is intended to align
  the interests of such persons with that of the shareholders. Options will be
  exercisable over periods of up to five years as determined by the Board of Directors
  of the Company and are required to have an exercise price no less than the market
  price prevailing on the date the option is granted less applicable discount,
  if any, permitted by the policies of the Exchanges and approved by the Board.
  Market price means the last closing price per share on the trading day immediately
  preceding the day on which the Company announces the grant of the option or,
  if the grant is not announced, on the grant date. Pursuant to the Stock Option
  Plan, the Board of Directors may from time to time authorize the issue of options
  to directors, officers, employees and consultants of the Company and its subsidiaries
  or employees of companies providing management or consulting services to the
  Company or its subsidiaries. The number of common shares which may be reserved
  for issuance to directors, officers, employees and consultants of the Company
  may not exceed 10% of the common shares issued and outstanding at any one time.
  The number of common shares which may be issued to insiders of the Company,
  within a one year period, may not exceed 10% of the outstanding common shares
  of the Company; and the number of common shares which may be issued to any one
  insider of the Company or to such

 11

 insider’s associates, within a one year period, may
  not exceed 5% of the outstanding common shares of the Company. The Stock Option
  Plan does not contain any vesting requirements, but permits the Board of Directors
  to specify a vesting schedule in its discretion. As at March 21, 2005, the Company
  has 35,620,308 common shares issued and outstanding and 3,200,000 stock options
  granted and outstanding under the Stock Option Plan. As additional shares are
  issued by the Company, including upon exercise of options, the Board of Directors
  may grant and reserve for issuance additional options based upon the increased
  issued capital of the Company.

 The Stock Option Plan provides that if a change of control,
  as defined therein, occurs, all shares subject to option shall immediately become
  vested and may thereupon be exercised in whole or in part by the option holder.

 The full text of the Stock Option Plan is available for review
  at the registered office of the Company, (Suite 520, 700 West Pender Street,
  Vancouver, British Columbia) during regular business hours before the Meeting
  and at the Meeting. 

 The directors of the Company believe that passing of the
  following resolutions is in the best interest of the Company and recommend that
  shareholders of the Company vote in favour of the resolutions. 

 PROXIES RECEIVED IN FAVOUR OF MANAGEMENT WILL BE VOTED
  IN FAVOUR OF THE FOLLOWING RESOLUTIONS, UNLESS THE SHAREHOLDER
  HAS SPECIFIED IN THE PROXY THAT HIS OR HER SHARES ARE TO BE VOTED AGAINST SUCH
  RESOLUTIONS. 

At the Meeting, shareholders will be asked to pass an ordinary resolution in the following form: 

   “RESOLVED that the Company’s stock option plan
    pursuant to which directors may, from time to time, reserve for issuance and
    issue up to 10% of the then issued and outstanding common shares of the Company
    pursuant to options issued to directors, officers, employees and consultants
    of the Company and its subsidiaries, as more particularly described in the
    Company’s Information Circular dated March 21, 2005, be and is hereby
    approved, ratified and confirmed, subject to regulatory approval.” 

 In order to be effective, the foregoing ordinary resolutions
  must be approved by a simple majority of the votes cast by those shareholders
  of the Company who, being entitled to do so, vote in person or by proxy at the
  Meeting in respect of such resolutions. 

 B.     Amendment to Stock Option Plan

 On March 18, 2005, the Board of Directors of the Company approved
  amendments of the Stock Option Plan (the “Amended Plan”),
  subject to required acceptance by regulatory authorities and the shareholders
  of the Company, whereby a maximum of 50,000 bonus shares (“Bonus Shares”),
  in the aggregate, may be issued in any calendar year to eligible persons, excluding
  directors, in consideration of the fair value of the extraordinary contribution
  to the Company by the recipient as determined by the Board, in its discretion,
  and shall be issued at a deemed price determined by the Board at the time of
  issuance of such Bonus Shares, but such price shall not be less than the Market
  Price. The granting of Bonus Shares pursuant to the Amended Plan shall be subject
  to such further shareholder and regulatory approval as may be required by the
  Exchange. 

 The Stock Option Plan would be renamed the “Stock Option
  and Share Compensation Plan” and the following text would be added as
  a new Section 5 to the Stock Option Plan: 

   “5. Bonus Shares

   The Board shall have the authority and power in its sole
    discretion, to allot, issue and distribute in such amounts as the Board in
    its sole and absolute discretion deems fit, as fully paid and non-assessable
    shares in the capital of the Company, up to a total of 50,000 Shares (“Bonus
    Shares”) in the aggregate in each calendar year, to Eligible Persons,
    excluding directors, of the Company whom the Board, in its sole and absolute
    discretion, deems to have provided extraordinary contributions to the advancement
    of the Company. The granting of Bonus Shares pursuant to the Plan shall be
    subject to such further shareholder and regulatory approval as may be required
    by the Exchange. 

 12

                  The
    Bonus Shares will be issued in consideration of the fair value of the extraordinary
    contribution to the Company by the recipient as determined by the Board, in
    its discretion, and shall be issued at a deemed price determined by the Board
    at the time of issuance of such Bonus Shares, but such price shall not be
    less than the Market Price. No Bonus Shares shall be issued at a time when
    it is unlawful to fix the price for such Bonus Shares. 

                  Nothing
    in this Plan shall require the issue or distribution of any Bonus Shares in
    any given year or the distribution to any particular person of Bonus Shares
    at any time. The receipt by a recipient in any year of Bonus Shares shall
    not create any entitlement to a receipt of Bonus Shares by such recipient
    in any other year. No person shall have any right to receive a distribution
    of Bonus Shares in a year, whether or not other persons receive Bonus Shares
    in such other year. The pool of Bonus Shares available for any given year,
    if not distributed, shall cease to be available at the end of such year and
    shall not accumulate or be available for any succeeding year. The Bonus Shares
    available for distribution in any year may not exceed the percentages authorized
    for issuance pursuant to Section 3.2 of the Plan. In addition, Bonus Shares
    issued in any calendar year will not be added to the issued capital in that
    calendar year for the purposes of increasing the number of options available
    for issuance under the Plan.”

 The full text of the Amended Plan is available for review
  at the registered office of the Company during regular business hours before
  the Meeting and at the Meeting. The Amended Plan will take effect upon receipt
  of all required regulatory and shareholder approvals. 

 The directors of the Company believe that passing of the
  following resolution is in the best interest of the Company and recommend that
  shareholders of the Company vote in favour of the resolutions. 

 PROXIES RECEIVED IN FAVOUR OF MANAGEMENT WILL BE VOTED
  IN FAVOUR OF THE FOLLOWING RESOLUTION, UNLESS THE SHAREHOLDER
  HAS SPECIFIED IN THE PROXY THAT HIS OR HER SHARES ARE TO BE VOTED AGAINST SUCH
  RESOLUTIONS. 

 At the Meeting, shareholders will be asked to pass an ordinary resolution
  in the following form: 

   “RESOLVED that the Amended Plan, which provides for
    the granting of Bonus Shares as more particularly described in the Information
    Circular dated March 21, 2005, be and is hereby approved, subject to all necessary
    regulatory approvals.” 

 C.     Adoption of New Stock Option Plan

 The Board of Directors of the Company has approved, subject
  to required acceptance by regulatory authorities and the shareholders of the
  Company, a 10% rolling stock option plan (the “Proposed Plan”) which
  is consistent with the policies of and will take effect only upon and in the
  event of listing of the Company’s shares on the Toronto Stock Exchange
  (the “TSX”).

 The following table contains information regarding the authorized,
  issued and available options under the Stock Option Plan as at March 21, 2005:

	 Number of shares

      authorized for issuance 	 Number of options granted

      and outstanding / percentage

      of issued capital 	 Number of shares available for

      issuance / percentage of issued

      capital 
	 3,562,031  	 3,200,000/9% 	 362,031/1% 

 The number of options authorized, granted and available under
  the Proposed Plan will be the same as those described in the above table in
  respect of the Stock Option Plan. The Proposed Plan contains the same Bonus
  Share provisions as the Amended Plan. The Proposed Plan will be an amendment
  and restatement of the Stock Option Plan (or Amended Plan as the case may be)
  by the incorporation of the options and bonus shares issued and issuable under
  such plan into the Plan, such that the Proposed Plan will be the Company’s
  only stock option plan. Stock options which are outstanding under the Stock
  Option Plan and the provisions as to bonus shares will be rolled into the Proposed
  Plan and will be governed by the Proposed Plan except to the extent provisions
  as to granted stock options are inconsistent with the Proposed Plan in which
  case they will be governed by the stock option agreement evidencing their issuance.

 13

 If the Proposed Plan becomes effective, no new stock options
  or bonus shares will be granted under the Stock Option Plan(or Amended Plan
  as the case may be). 

 The purpose of the Proposed Plan is to attract and motivate
  directors, officers, employees of and service providers to the Company and its
  subsidiaries and thereby advance the Company's interests by affording such persons
  with an opportunity to acquire an equity interest in the Company through stock
  options and, in some cases, bonus shares. Service providers are persons or companies
  who are engaged by the Company to provide services for an initial, renewable
  or extended period of twelve months or more. The Proposed Plan provides as follows:

	 1.	 The number of shares subject to each stock
        option and grant of bonus shares is determined by the Board of Directors
        (or Compensation Committee) provided that the Proposed Plan, together
        with all other previously established or proposed share compensation arrangements,
        may not result in: 

	 
	 	 (a)	 the number of common shares of the Company reserved
        for issuance pursuant to stock options and bonus shares granted to insiders
        exceeding 10% of the outstanding issue; 

	 
	 	 (b)	 the issuance, to insiders of the Company of a number
        of common shares of the Company exceeding, within a one year period, 10%
        of the outstanding issue; or 

	 
	 	 (c)	 the issuance, to any one insider of the Company
        and such insider’s associates, of a number of common shares of the
        Company exceeding, within a one year period, 5% of the outstanding issue.
      

	 
	 	 The outstanding issue is determined
        on the basis of the number of common shares of the Company outstanding
        immediately prior to any share issuance, excluding shares issued pursuant
        to share compensation arrangements over the preceding one-year period.
      

	 
	 2.	 The maximum number of common shares of
        the Company which may be issued pursuant to stock options and bonus shares
        granted under the Proposed Plan, unless otherwise approved by shareholders,
        is 10% of the issued and outstanding common shares at the time of the
        grant. Any increase in the issued and outstanding common shares will result
        in an increase in the available number of common shares issuable under
        the Proposed Plan, and any exercises of stock options will make new grants
        available under the plan. However, bonus shares issued in any calendar
        year will not be added to the issued capital in that calendar year for
        the purposes of increasing the number of options available for issuance
        under the Proposed Plan 

	 
	 3.	 The Proposed Plan must be approved and ratified by shareholders
      every three years. 
	 
	 4.	 The exercise price of an option and the
        deemed issuance price of bonus shares may not be set at less than the
        market price as defined in the TSX Manual which currently means the volume
        weighted average trading price for the five trading days immediately preceding
        the grant date. 

	 
	 5.	 The options may be exercisable for a period
        of up to ten years, such period and any vesting schedule to be determined
        by the Board of Directors (or Compensation Committee) of the Company,
        and are non-assignable, except other than pursuant to a will or by the
        laws of descent and distribution. 

	 
	 6.	 If an Optionee shall cease to be a director,
        officer, employee or service provider for cause, no Option held by such
        Optionee shall be exercisable following the date on which such Optionee
        ceases to be so engaged. In other circumstances, the options can be exercised
        by the Optionee: 

	 	 (i)      	 as long as the Optionee is a director, officer,
        employee or service provider to the Company or its subsidiaries or within
        a period of not more than 365 days after ceasing to be a director, officer,
        employee or service provider unless the Optionee was engaged in investor
        relations activities at the cessation of his service, in which case the
        option expires in 30 days or, 

	 
	 	 (ii)      	 if the Optionee dies, within one year from the date
        of the Optionee's death. 

	 7.      	 On the receipt of a takeover bid, issuer bid, going
        private transaction or change of control, any unvested options shall be
        immediately exercisable. 

	 
	 8.      	 The Proposed Plan does not provide for financial assistance by the Company
      to any Optionee. 

 14

 

	 9.      	 The provisions of the Amended Plan respecting
        Bonus Shares issuable to Eligible Persons, excluding directors, are included
        in the Proposed Plan. 

	 
	 10.      	 The Directors may from time to time in
        the absolute discretion of the Directors amend, modify and change the
        provisions of an option or the Proposed Plan without obtaining approval
        of shareholders to: 

	 
	 	 (i)      	 make amendments of a “housekeeping” nature; 
	 
	 	 (ii)      	 change vesting provisions; 
	 
	 	 (iii)      	 change termination provisions for an insider provided
        that the expiry date does not extend beyond the original expiry date;
      

	 
	 	 (iv)      	 change termination provisions which does extend
        beyond the original expiry date for an optionee who is not an insider;
      

	 
	 	 (v)      	 reduce the exercise price of an option for an optionee who is not an
      insider; and 
	 
	 	 (vi)      	 make any other amendments of a non-material nature which are approved
      by the TSX. 
	 
	 	 All other amendments will require approval of shareholders
      and the TSX. 

 The full text of the Proposed Plan is available for review
  at the registered office of the Company during regular business hours before
  the Meeting and at the Meeting. 

 The directors of the Company believe that passing of the
  following resolution is in the best interest of the Company and recommend that
  shareholders of the Company vote in favour of the resolutions. 

 PROXIES RECEIVED IN FAVOUR OF MANAGEMENT WILL BE VOTED
  IN FAVOUR OF THE FOLLOWING RESOLUTION, UNLESS THE SHAREHOLDER
  HAS SPECIFIED IN THE PROXY THAT HIS OR HER SHARES ARE TO BE VOTED AGAINST SUCH
  RESOLUTIONS. 

 Shareholders will be asked at the Meeting to consider, and
  if thought fit, approve with or without variation, the ordinary resolution in
  the form set forth below: 

   "RESOLVED that the Company be and is hereby authorized to
    adopt, subject to regulatory approval and upon and in the event of a listing
    on the TSX, the Proposed Plan as more particularly described in the Information
    Circular dated March 21, 2005." 

 If approved by shareholders of the Company and regulatory
  authorities, the Proposed Plan will take effect upon and in the event of listing
  on the TSX or such other date as may be determined by the directors, and the
  Company will issue a press release announcing the implementation of the Proposed
  Plan. 

 Management of the Company is not aware of any other matter
  to come before the Meeting other than as set forth in the notice of meeting.
  If any other matter properly comes before the Meeting, it is the intention of
  the persons named in the enclosed form of proxy to vote the shares represented
  thereby in accordance with their best judgement on such matter. 

ADDITIONAL INFORMATION

 Additional information relating to the Company is on SEDAR
  at www.sedar.com and on the Company’s
  website at www.viceroyexploration.com.

 Financial information on the Company, including its audited
  financial statements for the fiscal year ended December 31, 2004 and the management
  discussion and analysis relating thereto, may be obtained by contacting the
  Company at: 

Viceroy Exploration Ltd. 

  520-700 West Pender Street 

  Vancouver, BC V6C 1G8 

  Tel: 604-669-4777 

  Fax: 604-696-0212 

  Email: info@viceroyexploration.com

 15

CERTIFICATE

 The Board of Directors of the Company has approved the contents
  and sending of this Information Circular. 

 The foregoing contains no untrue statement of a material fact
  and does not omit to state a material fact that is required to be stated or
  that is necessary to make a statement contained herein misleading in the light
  of the circumstance in which it was made. 

DATED this 21st day of March, 2005.

ON BEHALF OF THE BOARD 

 “Patrick G. Downey” 

  PATRICK G. DOWNEY 

  President and Chief Executive Officer

 16

 SCHEDULE A

 TO INFORMATION CIRCULAR DATED MARCH 21, 2005

 Viceroy Exploration Ltd. 

 Statement of Corporate Governance Practices

  Viceroy Exploration Ltd. 

 Statement of Corporate Governance Practices

 The corporate governance practices of Viceroy Exploration
  Ltd. (the “Company”) are designed with a view to ensuring that the
  business and affairs of the Company are effectively managed so as to best serve
  the interests of the shareholders. 

 The TSX has adopted certain guidelines regarding the disclosure
  by listed companies of their practices relating to corporate governance. These
  guidelines apply to the Company as it is listed on Tier 1 of the TSX-V. The
  corporate governance practices of the Company are described below under the
  headings which relate to the guidelines set out by the TSX. 

	 1.      	 Stewardship of the Company 
	 
	 	 The role of the directors is to oversee
        the conduct of the Company's activities and direct and supervise management
        in the day-to-day conduct of the business in accordance with governing
        rules and regulations and the Company’s Charter and Code of Ethics.
        A copy of the Company’s Code of Ethics is available upon request
        to the Corporate Secretary. 

	 
	 	 The directors discharge the following five specific responsibilities
      as part of their overall "stewardship responsibility": 
	 
	 	 (i)      	 Adopting a strategic planning process: the Board’s
        strategic planning decisions are primarily based on information and recommendations
        provided by management. Prior approval of the directors of the Company
        is required for all material transactions in which the Company is involved
        including, without limitation, the acquisition and disposition by the
        Company of significant assets and properties, the issue of securities
        of the Company and the appointment of officers of the Company. At least
        quarterly, the Board reviews with management the Company’s projects,
        budgets, new opportunities, environmental issues and any other matters
        which may affect the Company’s strategic plans. 

	 
	 	 (ii)      	 Identifying the principal risks of the Company’s
        business and employing appropriate systems to manage these risks: through
        the Audit Committee, the Board is responsible for identifying risks of
        the Company and ensuring that risk management systems are implemented
        in accordance with the Audit Committee Mandate (see Guideline #13). At
        each meeting held to consider quarterly and annual reports, the Audit
        Committee reviews and discusses areas of concern with the external auditors
        and reports back to the Board as deemed fit. 

	 
	 	 (iii)      	 Succession planning, including appointing, training
        and monitoring senior management: the entire Board assumes responsibility
        for this function which includes choosing the President and C.E.O., appointing
        senior management and monitoring their performance. In order to train,
        develop and retain senior management, the Board encourages professional
        and personal development activities and courses. Due to the size of the
        Company (four officers, two employees), there is no formal job description
        or succession planning program in place. When senior management positions
        become available, replacements are sourced via executive search companies
        or recommendations from other management personnel or directors. 

	 
	 	 (iv)      	 Communications policy: in order to ensure that communications
        with the investing public are timely, factual and broadly disseminated
        in accordance with all applicable legal and regulatory requirements, the
        Company maintains a Corporate Disclosure Policy, a copy of which is available
        upon request to the Corporate Secretary. The Board believes that its communications
        with shareholders and others interested in the Company are responsive
        and effective. The Company formally maintains communication with its shareholders
        and other interested parties through various channels, including annual
        and quarterly reports, news releases and statutory filings. Management
        is available to shareholders to respond to questions and concerns on a
        prompt basis. Information is also widely available at the Company’s
        website located at www.viceroyexploration.com. Shareholders may contact
        the Company via the website, by e-mail or by telephone. 

	 
	 	 (v)      	 Integrity of the Company’s internal information,
        audit and control systems: on behalf of the Board, the Audit Committee
        assesses the control systems in place and ensures their effectiveness.
        Please see Guideline #13 for additional information. 

 17

 

	 2.      	 Board Independence 
	 
	 	 The Company's Board is comprised of seven
        directors, of whom five can be defined as "unrelated directors" or "directors
        who are independent of management and are free from any interests and
        any business or other relationship which could, or could reasonably be
        perceived to, materially interfere with the directors' ability to act
        with a view to the best interests of the Company, other than interests
        and relationships arising from shareholdings" and do not have interests
        in or relationships with the Company. To the best of the Company’s
        knowledge, the Company does not have a significant shareholder. 

	 
	 3.      	 Individual Unrelated Directors 
	 
	 	 In determining whether a director is an
        unrelated director, the directors of the Company consider, among other
        things, whether the director has a relationship which could, or could
        be perceived to, interfere with the director’s ability to objectively
        assess the performance of management of the Company. The determination
        of the number of “unrelated directors” of the Company is made
        on the basis of the foregoing considerations and factors relating to the
        degree to which directors perform management functions of the Company.
        Messrs. Netolitzky and Downey are related directors due to their positions
        of Chairman and President and C.E.O., respectively. The other directors
        are unrelated as they do not work in the day-to-day operations of the
        Company or have any other direct relationship with the Company. 

	 
	 4.      	 Nominating Committee 
	 
	 	 The Company does not have a Nominating
        Committee. The Corporate Governance Committee is responsible for proposing
        new nominees to the Board and for assessing directors on an ongoing basis.
        All its members are unrelated directors. New nominees should have a proven
        track record in business (preferably in the mining industry) and the ability
        to devote the time required to serve. 

	 
	 5.      	 Assessing the Board’s Effectiveness 
	 
	 	 The Corporate Governance Committee evaluates
        the effectiveness of the Board, its committees and individual directors.
        Based on feedback from the directors, the Corporate Governance Committee
        members assess the operation of the Board and the adequacy of information
        provided to the Board and recommends changes where necessary. 

	 
	 6.      	 Orientation and Education of Directors 
	 
	 	 The Company has not adopted a formal orientation
        and education program for new directors, and all relevant information
        is communicated to new directors informally. The directors consider that
        the adoption of formal orientation and education program for new directors
        is not presently warranted given the size of the Company and the current
        composition of the Board. Senior management provides regular reports to
        the directors on the Company’s activities. Directors may visit the
        Company’s properties whenever they wish and are encouraged to take
        professional development courses at the Company’s expense. Once
        appointed, directors are provided with a copy of the Company’s Code
        of Ethics to which they are expected to adhere. 

	 
	 7.      	 Effective Board Size 
	 
	 	 The Corporate Governance Committee reviews
        the composition and size of the Board once a year. The Committee considers
        the current number of seven directors to be appropriate given the size
        of the Company and do not contemplate changing the number of directors
        of the Company in the foreseeable future. 

	 
	 8.      	 Compensation of Directors 
	 
	 	 There are no arrangements under which
        directors are compensated by the Company and its subsidiaries, other than
        the Stock Option Plan. The Compensation Committee reviews the Company’s
        Stock Option Plan annually and determines the number, if any, to be granted
        to directors, officers and employees. 

	 
	 9.      	 Committees and Outside Directors 
	 
	 	 There are three committees which are re-elected
        each year subsequent to the Annual General Meeting and all of which have
        a majority of members who are outside directors. The committees are as
        follows: 

	 
	 	 a)      	 The Compensation Committee is comprised of three
        directors, all of which are outside directors. The members are W. David
        Black, Michael H. Halvorson and Robert V. Matthews. This committee is
        responsible 

 18

 

	 	  	for reviewing and making recommendations to the Board
        regarding human resources matters, including management compensation policies
        and programs, succession plans and recruitment. A copy of the Compensation
        Committee Mandate is available on request from the Company. 

	 
	 	 b)      	 The Corporate Governance Committee is comprised
        of three directors, two of which are outside directors. The members are
        W. David Black, Eric Cunningham and Ronald K. Netolitzky. This committee
        is responsible for monitoring the quality and effectiveness of the governance
        system and ensuring effective communication and reporting to shareholders.
        A copy of the Corporate Governance Committee Mandate is available on request
        from the Company. 

	 
	 	 c)      	 The Audit Committee is comprised of three directors,
        all of which are outside directors. The members are W. David Black, Michael
        H. Halvorson and Robert V. Matthews. Please see Guideline #13 for the
        Audit Committee Mandate. 

	 
	 10.      	 Approach to Corporate Governance 
	 
	 	 The Corporate Governance Committee has
        the responsibility for developing the Company’s approach to corporate
        governance matters, including the review and implementation of the corporate
        governance practices of the Company, and recommending any changes to the
        Board of Directors. They do so primarily by monitoring best practices
        among peer companies to ensure the Company continues to maintain high
        standards of corporate governance. 

	 
	 11.      	 Position Descriptions 
	 
	 	 There are no formal job descriptions for
        directors or for management. The directors of the Company require management
        of the Company to provide complete and accurate information with respect
        to management’s activities and to provide relevant information concerning
        the industry in which the Company operates. The Board monitors and assesses
        management through its regular contact with the management team, most
        of whom provide reports to the Board or its committees at meetings. 

	 
	 12.      	 Independence of Management 
	 
	 	 There are no special structures or processes
        in place to facilitate the functioning of the directors of the Company
        independently of management. However, the outside directors are given
        full access to management so that they can develop an independent perspective
        and express their views and communicate their expectations of management.
      

	 
	 13.      	 Audit Committee 
	 
	 	 The Audit Committee is appointed by the
        Board and comprised of three members, none of whom are officers or employees.
        The current members are W. David Black, Michael H. Halvorson and Robert
        V. Matthews, who is also the Committee’s financial expert. 

	 
	 	 The purpose of the Audit Committee is
        to assist the Board in fulfilling its oversight responsibilities by reviewing
        the financial information which will be provided to the shareholders and
        others, the systems of corporate controls which management and the Board
        have established and the audit process. The mandate of the Audit Committee
        is attached hereto as Appendix I. 

	 
	 14.      	 Outside Advisors 
	 
	 	 The directors of the Company have not
        implemented any formal system enabling an individual director to engage
        an outside advisor at the expense of the Company in appropriate circumstances.
        Upon notice to the Chairman or President and C.E.O., all directors have
        the right to seek legal advice at the Company’s expense. Other outside
        advisors may be engaged at the Company’s expense upon request to
        the Board. 

Updated and Approved by the Board of Directors on March 18, 2005

 19

Appendix I to Schedule A of Information Circular dated March 21, 2005

VICEROY EXPLORATION LTD. 

Audit Committee Mandate & Charter 

 The responsibilities of the Audit Committee are as follows: 

	 1.      	 Assisting the Board of Directors in fulfilling
        its fiduciary responsibilities relating to the Company's accounting and
        reporting practices and the integrity of the Company's internal accounting
        controls and management information systems; 

	 
	 2.      	 Managing the relationship with the auditor with respect to:
    
	 
	 	 (a)      	 recommending nomination and compensation of the auditor; 
	 
	 	 (b)      	 having the auditor report directly to the Audit Committee; 
	 
	 	 (c)      	 overseeing the work of the auditor; 
	 
	 	 (d)      	 pre-approving non-audit services. 
	 
	 3.      	 Reviewing with the auditors and management of the Company:
    
	 
	 	 (a)      	 any audited financial statement of the Company,
        including any such statement that is to be presented to an annual general
        meeting or provided to shareholders or filed with regulatory authorities
        and including any audited financial statement contained in a prospectus,
        registration statement or other similar document; 

	 
	 	 (b)      	 the financial disclosure in each Annual Report and
        Management Discussion and Analysis of the Company which accompanies such
        audited financial statement and in each such filing, prospectus, registration
        statement or other similar document; 

	 
	 4.      	 Reviewing with management of the Company: 
	 
	 	 (a)      	 any unaudited financial statement of the Company,
        including any such statement that is to be presented to an annual general
        meeting or provided to shareholders or filed with regulatory authorities
        and including any unaudited financial statement contained in a prospectus,
        registration statement, Quarterly Report or other similar document; 

	 
	 	 (b)      	 the financial disclosure in each Quarterly Report
        and when applicable, Management Discussion and Analysis of the Company
        accompanying such unaudited financial statement and in each such filing,
        prospectus, registration statement or other similar document which accompanies
        such unaudited financial statement; and 

	 
	 	 (c)      	 the Company’s compliance with legal and regulatory requirements
      with respect to financial reporting. 
	 
	 5.      	 Otherwise reviewing as required and reporting
        to the Board of Directors with respect to the adequacy of internal accounting
        and audit procedures and the adequacy of the Company’s management
        information systems; 

	 
	 6.      	 Otherwise ensuring that no restrictions are placed by management
      on the scope of the auditor's review and examination of the Company's accounts;
    
	 
	 7.      	 Ensuring the independence of and recommending
        to the Board of Directors the firm of independent auditors to be nominated
        for appointment by the shareholders at the next annual general meeting;
      

	 
	 8.      	 Ensuring that methods are in place to
        allow any director, officer or employee to bring concerns to the attention
        of the Audit Committee and that those who do so are provided protection
        from any retaliatory action whatsoever. Mr. Robert Matthews, Chairman
        of the Audit Committee, has been designated as the person to whom such
        concerns should be addressed and is responsible for ensuring that such
        concerns are handled promptly and appropriately; 

	 
	 9.      	 Reviewing on an annual basis the adequacy
        of this Mandate and Charter and revising as necessary with the approval
        of the Board of Directors; and 

	 
	 10.      	 Meeting regularly at such times and places,
        engaging such advisors at the expense of the Company and undertaking such
        interviews and inquiries as the Committee sees fit for the purpose of
        carrying out this Mandate and Charter. 

Updated and Approved by the Board of Directors on March 18, 2005

 20Exhibit 10.1

 

EXECUTION VERSION

 

 

 

SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

 

CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as buyer

(“Buyer”) or as agent
pursuant hereto (“Agent”),

 

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

 

FIELDSTONE INVESTMENT CORPORATION, as seller (“Seller”)

 

Dated March 31, 2005

 

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  Applicability

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Program; Initiation
  of Transactions

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Repurchase

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Price Differential

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Margin Maintenance

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Income
  Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Security Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Payment and Transfer

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Conditions Precedent

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Program

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Servicing

  	
   

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Representations; Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Remedies Upon Default

  	
   

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Reports

  	
   

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Repurchase Transactions

  	
   

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Single Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Notices and Other
  Communications

  	
   

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Entire Agreement; Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Non assignability

  	
   

  
	
   

  	
   

  	
   

  
	
  23.

  	
  Set-off

  	
   

  

 

i

 

	
  24.

  	
  Binding
  Effect; Governing Law; Jurisdiction

  	
   

  
	
   

  	
   

  	
   

  
	
  25.

  	
  No Waivers, Etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  26.

  	
  Intent

  	
   

  
	
   

  	
   

  	
   

  
	
  27.

  	
  Disclosure
  Relating to Certain Federal Protections

  	
   

  
	
   

  	
   

  	
   

  
	
  28.

  	
  Power of Attorney

  	
   

  
	
   

  	
   

  	
   

  
	
  29.

  	
  Buyer May Act Through
  Affiliates

  	
   

  
	
   

  	
   

  	
   

  
	
  30.

  	
  Indemnification; Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  31.

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  32.

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  
	
  33.

  	
  Recording of Communications

  	
   

  
	
   

  	
   

  	
   

  
	
  34.

  	
  Periodic Fee

  	
   

  
	
   

  	
   

  	
   

  
	
  35.

  	
  Non-Utilization Fee

  	
   

  
	
   

  	
   

  	
   

  
	
  36.

  	
  Periodic Due Diligence
  Review

  	
   

  
	
   

  	
   

  	
   

  
	
  37.

  	
  Authorized Representatives

  	
   

  
	
   

  	
   

  	
   

  
	
  38.

  	
  Acknowledgement
  Of Anti-Predatory Lending Policies

  	
   

  
	
   

  	
   

  	
   

  
	
  39.

  	
  Documents Mutually Drafted

  	
   

  
	
   

  	
   

  	
   

  
	
  40.

  	
  Joint and Several

  	
   

  

 

ii

 

	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Schedule 2 –
  Authorized Representatives

  
	
   

  	
   

  	
   

  
	
  Schedule 3 –
  Take-out Investors

  
	
   

  	
   

  	
   

  
	
  ANNEXES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Annex I – Non-Utilization
  Fee Formula

  
	
   

  	
   

  	
   

  
	
  Annex II –
  Periodic Fee Schedule

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  A.

  	
   

  	
  Form of
  Transaction Request

  
	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Form of Purchase
  Confirmation

  
	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Form of Mortgage
  Loan Schedule

  
	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Officer’s
  Compliance Certificate

  
	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  Form of
  Subordination Agreement

  
	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Form of Opinion
  of Seller’s Internal Counsel

  
	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  Underwriting
  Guidelines

  
	
   

  	
   

  	
   

  
	
  H.

  	
   

  	
  Reserved

  
	
   

  	
   

  	
   

  
	
  I.

  	
   

  	
  Corporate
  Resolutions of Seller

  
	
   

  	
   

  	
   

  
	
  J.

  	
   

  	
  Sellers’ Tax
  Identification Number

  
	
   

  	
   

  	
   

  
	
  K.

  	
   

  	
  Existing Credit
  Facilities

  
	
   

  	
   

  	
   

  
	
  L.

  	
   

  	
  Wet Ink
  Procedures

  
	
   

  	
   

  	
   

  
	
  M.

  	
   

  	
  Escrow Instruction
  Letter

  
	
   

  	
   

  	
   

  
	
  N.

  	
   

  	
  Custodial and
  Bank Fee Schedule

  
					

 

iii

 

This is a SECOND AMENDED AND RESTATED MASTER REPURCHASE
AGREEMENT, dated as of March 31, 2005, between CREDIT SUISSE FIRST BOSTON MORTGAGE
CAPITAL LLC (the “Buyer”),
FIELDSTONE MORTGAGE COMPANY (a “Seller”)
and FIELDSTONE INVESTMENT CORPORATION (a “Seller” and, together with Fieldstone Mortgage Company,
the “Sellers”).

 

The Buyer and the Sellers previously entered into an Amended
and Restated Master Repurchase Agreement, dated as of April 5, 2004 (the “Existing Master Repurchase Agreement”).

 

The parties have requested that the Existing Master Repurchase
Agreement be amended and restated on the terms and conditions set forth herein.

 

1.  Applicability

 

From time to time the parties hereto may enter into transactions
in which a Seller agrees to transfer to Buyer Mortgage Loans (as hereinafter defined)
against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to
transfer to such Seller such Mortgage Loans at a date certain or on demand, against
the transfer of funds by such Seller.  This
Agreement is a commitment by Buyer to engage in the Transactions as set forth herein
up to the Maximum Aggregate Purchase Price; provided, that the Buyer shall have
no commitment to enter into any Transaction requested which would result in the
aggregate Purchase Price of then outstanding Transactions to exceed the Maximum
Aggregate Purchase Price.  Each such transaction
shall be referred to herein as a “Transaction”
and, unless otherwise agreed in writing, shall be governed by this Agreement, including
any supplemental terms or conditions contained in any annexes identified herein,
as applicable hereunder.

 

2.  Definitions

 

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

 

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

 

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

 

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

 

“Act of Insolvency”
means, with respect to any Person or its Affiliates, (i) the filing of a petition,
commencing, or authorizing the commencement of any case or proceeding, or the voluntary
joining of any case or proceeding under any bankruptcy, insolvency,

 

 

reorganization, liquidation,
dissolution or similar law relating to the protection of creditors, or suffering
any such petition or proceeding to be commenced by another which is consented to,
not timely contested or results in entry of an order for relief; (ii) the seeking
of the appointment of a receiver, trustee, custodian or similar official for such
party or an Affiliate or any substantial part of the property of either; (iii) the
appointment of a receiver, conservator, or manager for such party or an Affiliate
by any governmental agency or authority having the jurisdiction to do so; (iv) the
making or offering by such party or an Affiliate of a composition with its creditors
or a general assignment for the benefit of creditors; (v) the admission by such
party or an Affiliate of such party of its inability to pay its debts or discharge
its obligations as they become due or mature; or (vi) that any governmental authority
or agency or any person, agency or entity acting or purporting to act under governmental
authority shall have taken any action to condemn, seize or appropriate, or to assume
custody or control of, all or any substantial part of the property of such party
or of any of its Affiliates, or shall have taken any action to displace the management
of such party or of any of its Affiliates or to curtail its authority in the conduct
of the business of such party or of any of its Affiliates.

 

“Additional
Costs” has the meaning set forth in Section 11(b) hereof.

 

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

 

“Aged Loan”
means a Mortgage Loan which has been subject to a Transaction hereunder for a period
of greater than 90 but not greater than 180 days.

 

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

 

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

 

“Agent”
means Credit Suisse First Boston Mortgage Capital LLC or any affiliate or successor
thereto.

 

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

 

“AICPA”
means the American Institute of Certified Public Accountants or any successor thereto.

 

“Alt-A Mortgage
Loan” means a Mortgage Loan originated in accordance with the
criteria established by Buyer for Alt-A Mortgage Loans, as determined by Buyer in
its sole discretion and which has a FICO score of at least 600.

 

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

 

“Asset Tape”
means a remittance report on a monthly basis or requested by Buyer pursuant to Section
17(e) hereof containing servicing information, including, without limitation, those
fields reasonably requested by Buyer from time to time, on a loan-by-loan basis
and in the

 

2

 

aggregate, with respect to the Purchased Mortgage Loans
serviced hereunder by any Seller or any Servicer for the month (or any portion thereof)
prior to the Reporting Date.

 

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

 

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

 

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

 

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

 

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

 

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

 

“Buyer”
means Credit Suisse First Boston Mortgage Capital LLC, and any successor hereunder.

 

“Buyer’s Margin
Amount” means with respect to any Transaction as of any date of
determination, an amount equal to the product of (A) Buyer’s Margin Percentage and
(B) the Purchase Price for such Transaction; provided, that, with respect to any
Mortgage Loan which was not an Aged Loan or an Exception Mortgage Loan on the related
Purchase Date which, as of the date of determination, is an Aged Loan or an Exception
Mortgage Loan, Buyer’s Margin Percentage as of such date of determination shall
be equal to the percentage obtained by dividing the Market Value of such Mortgage
Loan on the related Purchase Date by an amount equal to the amount the Purchase
Price would have been on the Purchase Date if the Mortgage Loan had been categorized
as the type of Mortgage Loan (e.g., Aged Loan or an Exception Mortgage Loan, etc.)
that it is categorized on the date of determination.

 

“Buyer’s Margin
Percentage” means, with respect to any Transaction as of any date,
a percentage equal to the percentage obtained by dividing the Market Value of the
Purchased Mortgage Loans on the Purchase Date by the Purchase Price on the Purchase
Date for such Transaction.

 

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

 

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

 

3

 

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

 

“Change in Control” means:

 

(A)                              the sale,
transfer, or other disposition of all or substantially all of either Seller’s assets
(excluding any such action taken in connection with any securitization transaction),
except the sale, transfer or other disposition of substantially all of FMC’s assets
to FIC; or

 

(B)                                the
consummation of a merger or consolidation of any Seller with or into another entity
or any other corporate reorganization of any Seller, if more than 50% of the combined
voting power of the continuing or surviving entity immediately after such merger,
consolidation or such other reorganization is owned by persons who were not stockholders
of such Seller immediately prior to such merger, consolidation or other reorganization.

 

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

 

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

 

“Committed
Mortgage Loan” means a Mortgage Loan which is the subject of a
Take-out Commitment with a Take-out Investor.

 

“Conforming
Mortgage Loan” means a Mortgage Loan originated in accordance
with the criteria of an Agency for purchase of Mortgage Loans, including, without
limitation, conventional Mortgage Loans, FHA Loans and VA Loans, as determined by
Buyer in its sole discretion.

 

4

 

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

 

“Credit Limit” means, with respect to each HELOC,
the maximum amount permitted under the terms of the related Credit Line Agreement.

 

“Credit Line Agreement” means, with respect to each
HELOC, the related home equity line of credit agreement, account agreement and promissory
note (if any) executed by the related Mortgagor and any amendment or modification
thereof.

 

“Custodial
Agreement” means the custodial agreement dated March 31, 2005
among Sellers, Buyer and Custodian, as may be amended from time to time.

 

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

 

“Default”
means an Event of Default or an event that with notice or lapse of time or both
would become an Event of Default.

 

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

 

“Draw” means, with respect to each HELOC, an additional
borrowing by the Mortgagor in accordance with the related Credit Line Agreement.

 

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

 

“Due Diligence Cap” has the meaning specified in
Section 11(a) hereof.

 

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

 

“Electronic
Tracking Agreement” means an Electronic Tracking Agreement among
Buyer, the Sellers, MERS and MERSCORP, Inc., as amended by Amendment No. 1 and

 

5

 

Joinder, dated as of November
10, 2003, and as may be further amended from time to time, to the extent applicable.

 

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

 

“ERISA Affiliate”
means any corporation or trade or business that is a member of any group of organizations
(i) described in Section 414(b) or (c) of the Code of which 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.

 

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

 

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

 

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

 

“Exception
Mortgage Loan” means any Mortgage Loan which is otherwise ineligible
for purchase hereunder, or which otherwise becomes ineligible for purchase hereunder,
which is approved by Buyer in its sole discretion; provided, however, that the Sellers
shall pay to Buyer a fee of $25 with respect to any such approval of an Exception
Mortgage Loan other than a Wet-Ink Mortgage Loan and $10 with respect to any such
approval of an Exception Mortgage Loan which is a Wet-Ink Mortgage Loan provided,
that upon 30 days notice to the Sellers, Buyer may change such Exception
Mortgage Loan approval fee.  Buyer’s approval
of a Mortgage Loan as an Exception Mortgage Loan shall expire on the earlier of
(a) the date set forth by the Buyer in the written notice that such Mortgage Loan
is approved as an Exception Mortgage Loan (an “Exception Notice”) or (b) the occurrence of any additional
event, other than that set forth in the Exception Notice, which would cause the
Mortgage Loan to become ineligible for purchase hereunder.  The Pricing Rate, Market Value, Purchase Price
and Buyer’s Margin Percentage with respect to Exception Mortgage Loans shall be
set in the sole discretion of Buyer.  A Mortgage
Loan’s status as an Exception Mortgage Loan may be changed at any time by Buyer
in its sole discretion.

 

“Existing
Credit Facilities” has the meaning specified in Section 13(a)(23)
hereof.

 

“Fannie Mae”
means Fannie Mae, or any successor thereto.

 

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

 

6

 

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

 

“FHA Approved
Mortgagee” means a corporation or institution approved as a mortgagee
by the FHA under the National Housing Act, as amended from time to time, and applicable
FHA Regulations, and eligible to own and service mortgage loans such as the FHA
Loans.

 

“FHA Loan”
means a Mortgage Loan which is the subject of an FHA Mortgage Insurance Contract

 

“FHA Mortgage
Insurance” means, mortgage insurance authorized under the National
Housing Act, as amended from time to time, and provided by the FHA.

 

“FHA Mortgage
Insurance Contract” means the contractual obligation of the FHA
respecting the insurance of a Mortgage Loan.

 

“FHA Regulations”
means the regulations promulgated by the Department of Housing and Urban Development
under the National Housing Act, as amended from time to time and codified in 24
Code of Federal Regulations, and other Department of Housing and Urban Development
issuances relating to FHA Loans, including the related handbooks, circulars, notices
and mortgagee letters.

 

“FIC”
means Fieldstone Investment Corporation or its permitted successors and assigns.

 

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

 

“Fidelity
Insurance” means insurance coverage with respect to employee dishonesty,
forgery or alteration, theft, disappearance and destruction, robbery and safe burglary,
property (other than money and securities) and computer fraud in an aggregate amount
acceptable to Fannie Mae and Freddie Mac.

 

“First Payment
Default” means, with respect to a Mortgage Loan, the failure of
the Mortgagor to make the first Monthly Payment due under the Mortgage Loan on or
before its scheduled Due Date.

 

“FMC”
means Fieldstone Mortgage Company or its permitted successors and assigns.

 

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

 

“Freddie Mac”
means Freddie Mac, or any successor thereto.

 

7

 

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

 

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

 

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

 

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

 

“Gross Margin”
means, with respect to each adjustable rate Mortgage Loan, the fixed percentage
amount set forth in the related Mortgage Note that is added to the Index for the
purpose of calculating the applicable Mortgage Interest Rate.

 

“Guarantee”
means, as to any Person, any obligation of such Person directly or indirectly guaranteeing
any Indebtedness of any other Person or in any manner providing for the payment
of any Indebtedness of any other Person or otherwise protecting the holder of such
Indebtedness against loss (whether by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, or to take-or-pay
or otherwise); provided that the term “Guarantee” shall not include (i) endorsements for
collection or deposit in the ordinary course of business, or (ii) obligations to
make servicing advances for delinquent taxes and insurance or other obligations
in respect of a Mortgaged Property, to the extent required by 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.

 

“HELOC” means a Mortgage Loan that is a home equity
revolving line of credit secured by a mortgage, deed of trust or other instrument
creating a second lien on the related Mortgaged Property, which lien secures the
related line of credit.

 

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

 

“High Purchase Price Mortgage Loan” means a Purchased
Mortgage Loan designated as a High Purchase Price Mortgage Loan by Seller in accordance
with Section 3.

 

8

 

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

 

“Indebtedness”
means, 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 the account of such Person; (e) Capital Lease Obligations of such Person (other
than that portion not currently due and owing not to exceed, in the aggregate with
amounts excepted from clause (h) below, $500,000); (f) obligations of such Person
under repurchase agreements, sale/buy-back 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 (other than that portion currently due and owing not to exceed, in the aggregate
with amounts excepted from clause (e) above, $500,000); and (i) Indebtedness of
general partnerships of which such Person is a general partner.

 

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

 

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

 

“Interest
Rate Protection Agreement” means, with respect to any or all of
the Purchased Mortgage Loans, any short sale of a US Treasury Security, or futures
contract, or mortgage related security, or Eurodollar futures contract, or options
related contract, or interest rate swap, cap or collar agreement or Take-out Commitment,
or similar arrangement providing for protection against fluctuations in interest
rates or the exchange of nominal interest obligations, either generally or under
specific contingencies, entered into by a Seller and an Affiliate of Buyer or such
other party acceptable to Buyer in its sole discretion, which agreement is acceptable
to Buyer in its sole discretion.

 

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

 

“LIBOR”
means for each day, the rate of interest (calculated on a per annum basis) equal
to the overnight British Bankers Association Rate as reported on the display designated
as “BBAM” “Page DG8 4a” on Bloomberg (or such other display as may replace 

 

9

 

“BBAM” “Page DG8 4a” on Bloomberg)
on such date of determination, and if such rate shall not be so quoted, the rate
per annum at which Buyer is offered Dollar deposits at or about 11:00 a.m., New
York City time, on such day, by prime banks in the interbank eurodollar market where
the eurodollar and foreign currency exchange operations in respect of its loans
are then being conducted for delivery on such day for an overnight period, and in
an amount comparable to the amount of the Purchase Price of Transactions to be outstanding
on such day.

 

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

 

“Loan to Value Ratio” or “LTV” means the
ratio of (i) (a) with respect to any Mortgage Loan other than a HELOC, the original
outstanding principal amount of the Mortgage Loan, (b) with respect to a HELOC,
the original Credit Limit, and (c) with respect to any Second Lien Mortgage Loan,
the outstanding principal amount of any related first lien as of the date of origination
of such mortgage loan, to (ii) the lesser of (a) the Appraised Value of the related
Mortgaged Property at origination or (b) if the Mortgaged Property was purchased
within 12 months of the origination of such Mortgage Loan, the purchase price of
the related Mortgaged Property.

 

“Low Purchase Price Mortgage Loan” means a Purchased
Mortgage Loan designated as a Low Purchase Price Mortgage Loan by Seller in accordance
with Section 3.

 

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

 

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

 

“Market Value” means, with respect to any Purchased
Mortgage Loan as of any date, the whole-loan servicing released fair market value
of such Purchased Mortgage Loan on such date as determined by Buyer (or an Affiliate
thereof) in its good faith discretion.  Without
limiting the generality of the foregoing, each Seller acknowledges that the Market
Value of a Purchased Mortgage Loan may be reduced to zero by Buyer if:

 

(i)                                     a
material breach of a representation, warranty or covenant made by any Seller in
this Agreement with respect to such Purchased Mortgage Loan has occurred and is
continuing;

 

(ii)                                  such
Purchased Mortgage Loan is a Non-Performing Mortgage Loan;

 

(iii)                               a First
Payment Default occurs with respect to such Purchased Mortgage Loan;

 

(iv)                              such
Purchased Mortgage Loan has been released from the possession of the Custodian under
the Custodial Agreement (other than to a Take-out Investor pursuant to a Bailee
Letter) for a period in excess of ten (10) calendar days;

 

10

 

(v)                                 such
Purchased Mortgage Loan has been released from the possession of the Custodian under
the Custodial Agreement to a Take-out Investor pursuant to a Bailee Letter for a
period in excess of 45 calendar days;

 

(vi)                              such
Purchased Mortgage Loan has been subject to a Transaction for a period of greater
than (a) 90 days (unless the Mortgage Loan is an Aged Loan) or (b) 180 days with
respect to each Aged Loan;

 

(vii)                           such Purchased
Mortgage Loan is a Wet-Ink Mortgage Loan for which the Wet-Ink Mortgage File has
not been delivered to the Custodian on or prior to the eighth Business Day after
the related Purchase Date;

 

(viii)                        when the Purchase
Price for such Purchased Mortgage Loan is added to other Purchased Mortgage Loans,
the aggregate Purchase Price of all Wet-Ink Mortgage Loans that are Purchased Mortgage
Loans exceeds (i) 40% of the Maximum Aggregate Purchase Price for the first five
Business Days and the last five Business Days of each month or (ii) 30% of the Maximum
Aggregate Purchase Price for the remainder of the month;

 

(ix)                                when
added to other Purchased Mortgage Loans, the aggregate Purchase Price of all Sub-Prime
Mortgage Loans that are Purchased Mortgage Loans exceeds $350 million dollars;

 

(x)                                   when
added to other Purchased Mortgage Loans, the aggregate Purchase Price of all Second
Lien Mortgage Loans and HELOCs that are Purchased Mortgage Loans exceeds $75 million
dollars;

 

(xi)                                when
added to other Purchased Mortgage Loans, the aggregate Purchase Price of all Aged
Loans that are Purchased Mortgage Loans exceeds $250 million dollars;

 

(xii)                             when added
to other Purchased Mortgage Loans, the aggregate Purchase Price of all Reperforming
Mortgage Loans exceeds $10 million dollars;

 

(xiii)                          when added
to other Purchased Mortgage Loans, the aggregate Purchase Price of all Negative
Amortizations Loans exceeds $5 million; or

 

(xiv)                         such Purchased
Mortgage Loan is no longer acceptable for purchase by Buyer (or an Affiliate thereof)
under any of the flow purchase or conduit programs for which Sellers then have been
approved due to a Requirement of Law relating to consumer credit laws or otherwise.

 

“Material
Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, condition (financial
or otherwise) or prospects of any Seller or any Affiliate that is a party to any
Program Agreement taken as a whole; (b) a material impairment of the ability of
any Seller or any Affiliate that is a party to any Program Agreement to perform
under any Program Agreement; or (c) a material adverse effect

 

11

 

upon the legality, validity,
binding effect or enforceability of any Program Agreement against any Seller or
any Affiliate that is a party to any Program Agreement.

 

“Maximum Aggregate
Purchase Price” means FIVE HUNDRED MILLION DOLLARS ($500,000,000).

 

“Medium Purchase Price Mortgage Loan” means a Purchased
Mortgage Loan designated as a Medium Purchase Price Mortgage Loan by Seller in accordance
with Section 3.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Mortgage
Loan” means any Sub-Prime Mortgage Loan, Exception Mortgage Loan,
Jumbo Mortgage Loan, Alt A Mortgage Loan, HELOC or Conforming Mortgage Loan which
is a closed-end, fixed or floating-rate, first lien or Second Lien Mortgage Loan,
on a one-to-four-family residential mortgage evidenced by a promissory note and
secured by a mortgage, which satisfies the requirements set forth in the Underwriting
Guidelines and Section 13(b) hereof which Mortgage Loan the Custodian has been instructed
to hold pursuant to the Custodial Agreement; provided, however, that, except as
expressly approved in writing by Buyer, Mortgage Loans shall not include any “high-LTV”
loans (i.e., a mortgage loan having a loan-to-value ratio in excess of 100%
or in excess of such lower percentage set forth in the Underwriting Guidelines or
with respect to Second Lien Mortgage Loans, a combined loan-to-value ratio, in excess
of the lower of (i) the percentage specified in the Underwriting Guidelines or (ii)
100%)

 

12

 

or any High Cost Mortgage
Loans and; provided, further, that the origination date with respect to such Mortgage
Loan is no earlier than thirty (30) days prior to the related Purchase Date.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Negative Amortization Loan” means a Mortgage Loan
whose principal balance will increase over time due to the addition of unpaid interest
amounts to the outstanding principal balance of the mortgage loan.

 

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

 

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

 

“1934 Act”
means the Securities Exchange Act of 1934.

 

“Non-Performing
Mortgage Loan” means (i) any Mortgage Loan for which any payment
of principal or interest is thirty (30) days or more past due, (ii) any Mortgage
Loan with respect to which the related mortgagor is in bankruptcy or (iii) any Mortgage
Loan with respect to which the related mortgaged property is in foreclosure; provided
that such Mortgage Loan is not a Foreclosed Loan.

 

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

 

13

 

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

 

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

 

“Par Percentage” in the case of Mortgage Loans
that are:

 

(a)           High
Purchase Price Mortgage Loans, 100%;

 

(b)           Medium
Purchase Price Mortgage Loans, 98%;

 

(c)           Low
Purchase Price Mortgage Loans, 96%; and

 

(d)           Exception
Mortgage Loans, a percentage to be determined by Buyer in its sole discretion;
and

 

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

 

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

 

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

 

“Post Default
Rate” means an annual rate of interest equal to the Pricing Rate
plus 3%.

 

“Price Differential”
means with respect to any Transaction as of any date of determination, an amount
equal to the product of (A) the Pricing Rate for such Transaction and (B) the Purchase
Price for such Transaction, calculated daily on the basis of a 360-day year for

 

14

 

the actual number of days
during the period commencing on (and including) the Purchase Date for such Transaction
and ending on (but excluding) the date of determination.

 

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

 

“Pricing Rate” means LIBOR plus:

 

(a) in the case of Purchased
Mortgage Loans that are High Purchase Price Mortgage Loans:

 

(i)           0.70% with respect to Transactions the
subject of which are Conforming Mortgage Loans, Sub-Prime Mortgage Loans, Second
Lien Mortgage Loans, HELOCs, Jumbo Mortgage Loans or Alt-A Mortgage Loans (other
than Aged Loans subject to a Transaction greater than 120 days and Wet-Ink Mortgage
Loans);

 

(ii)                             0.75%
with respect to Transactions the subject of which are Aged Loans subject to a Transaction
greater than 120 days;

 

(iii)                          0.80% with
respect to Transactions the subject of which are Wet-Ink Mortgage Loans; and

 

(iv)                         0.90% with
respect to Transactions the subject of which are Reperforming Mortgage Loans;

 

(b) in the case of Purchased
Mortgage Loans that are Medium Purchase Price Mortgage Loans:

 

(i)                                0.60%
with respect to Transactions the subject of which are Conforming Mortgage Loans,
Sub-Prime Mortgage Loans, Second Lien Mortgage Loans, HELOCs, Jumbo Mortgage Loans
or Alt-A Mortgage Loans (other than Aged Loans subject to a Transaction greater
than 120 days and Wet-Ink Mortgage Loans);

 

(ii)                             0.65%
with respect to Transactions the subject of which are Aged Loans subject to a Transaction
greater than 120 days;

 

(iii)                          0.80% with
respect to Transactions the subject of which are Wet-Ink Mortgage Loans; and

 

(iv)                         0.80% with
respect to Transactions the subject of which are Reperforming Mortgage Loans; and

 

15

 

(c) in the case of Purchased
Mortgage Loans that are Low Purchase Price Mortgage Loans:

 

(i)                                0.50%
with respect to Transactions the subject of which are Conforming Mortgage Loans,
Sub-Prime Mortgage Loans, Second Lien Mortgage Loans, HELOCs, Jumbo Mortgage Loans
or Alt-A Mortgage Loans (other than Aged Loans subject to a Transaction greater
than 120 days and Wet-Ink Mortgage Loans);

 

(ii)                             0.55%
with respect to Transactions the subject of which are Aged Loans subject to a Transaction
greater than 120 days;

 

(iii)                          0.80% with
respect to Transactions the subject of which are Wet-Ink Mortgage Loans; and

 

(iv)                         0.70% with
respect to Transactions the subject of which are Reperforming Mortgage Loans.

 

“Program Agreements”
means, collectively, the Custodial Agreement, this Agreement, and the Electronic
Tracking Agreement, if entered into.

 

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

 

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

 

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

 

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

 

“Purchase Price” means (i) on the Purchase Date, the
price at which each Purchased Mortgage Loan is transferred by a Seller to Buyer,
which shall not exceed:

 

(a)        in the case of Purchased Mortgage Loans which
are Conforming Mortgage Loans, Alt-A Mortgage Loans, Second Lien Mortgage Loans,
HELOCs or Jumbo Mortgage Loans, the lesser of (1) the applicable Purchase Price
Percentage for such Purchased Mortgage Loan multiplied by the Market Value of such
Purchased Mortgage Loan and (2) the applicable Par Percentage for such Purchased
Mortgage Loan multiplied by the outstanding principal balance thereof as set forth
on the related Mortgage Loan Schedule; or

 

(b)        in the case of Purchased Mortgage Loans which
are Sub-Prime Mortgage Loans, the applicable Purchase Price Percentage for such
Sub-Prime Mortgage Loan multiplied by the lesser of (1) the outstanding principal
balance thereof as set forth on the related Mortgage Loan Schedule and (2) the Market
Value of such Sub-Prime Mortgage Loan; or

 

16

 

(ii)           after the applicable Purchase Date, except
where Buyer and the Sellers agree otherwise, such price decreased by the amount
of any cash transferred by the Sellers to Buyer pursuant to Section 6(c) hereof
or applied to reduce the Sellers’ obligations under clause (ii) of Section 4(b)
hereof.

 

“Purchase Price Percentage” means:

 

(a) in the case of Mortgage
Loans, that are High Purchase Price Mortgage Loans, the following percentage, as
applicable:

 

(i)                                     99%
with respect to Purchased Mortgage Loans that are first lien Conforming Mortgage
Loans, Jumbo Mortgage Loans or Alt A Mortgage Loans;

 

(ii)                                  98%
with respect to Purchased Mortgage Loans that are Sub-Prime Mortgage Loans;

 

(iii)                               95%
with respect to Purchased Mortgage Loans that are Second Lien Mortgage Loans or
HELOCs; and

 

(iv)                              with
respect to Transactions the subject of which are Exception Mortgage Loans, a percentage
to be determined by Buyer in its sole discretion; and

 

(b) in the case of
Mortgage Loans that are Medium Purchase Price Mortgage Loans, the following
percentage, as applicable:

 

(i)                                     97%
with respect to Purchased Mortgage Loans that are first lien Conforming Mortgage
Loans, Jumbo Mortgage Loans or Alt A Mortgage Loans;

 

(ii)                                  96%
with respect to Purchased Mortgage Loans that are Sub-Prime Mortgage Loans;

 

(iii)                               93%
with respect to Purchased Mortgage Loans that are Second Lien Mortgage Loans or
HELOCs; and

 

(iv)                              with
respect to Transactions the subject of which are Exception Mortgage Loans, a percentage
to be determined by Buyer in its sole discretion; and

 

(c) in the case of
Mortgage Loans that are Low Purchase Price Mortgage Loans, the following
percentage, as applicable:

 

(i)                                     95%
with respect to Purchased Mortgage Loans that are first lien Conforming Mortgage
Loans, Jumbo Mortgage Loans or Alt A Mortgage Loans;

 

(ii)                                  94%
with respect to Purchased Mortgage Loans that are Sub-Prime Mortgage Loans;

 

17

 

(iii)                               91%
with respect to Purchased Mortgage Loans that are Second Lien Mortgage Loans or
HELOCs; and

 

(iv)                              with
respect to Transactions the subject of which are Exception Mortgage Loans, a percentage
to be determined by Buyer in its sole discretion.

 

“Purchased
Mortgage Loans” means the Mortgage Loans (and the related Repurchase
Assets) transferred by the Sellers to Buyer in a Transaction hereunder and listed
on the related Mortgage Loan Schedule attached to the related Transaction Request.

 

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

 

“Qualified
Originator” means an originator of Mortgage Loans which Mortgage
Loans conform to the Underwriting Guidelines.

 

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

 

“Records”
means all instruments, agreements and other books, records, and reports and data
generated by other media for the storage of information maintained by the Sellers
or any other person or entity with respect to a Purchased Mortgage Loan.  Records shall include the mortgage notes, any
Mortgages, the Mortgage Files, the credit files related to the Purchased Mortgage
Loan and any other instruments necessary to document or service a Mortgage Loan.

 

“REIT”
means Real Estate Investment Trust, as the term is defined in Section 856 of the
Internal Revenue Code.

 

“Reperforming
Mortgage Loan” means a Purchased Mortgage Loan that previously
met the criteria for a Non-Performing Mortgage Loan, but with respect to which the
Mortgagor subsequently made at least three (3) consecutive scheduled payments in
the three (3) calendar months preceding the date of determination.

 

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

 

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

 

“Repurchase
Date” means the earlier of (i) the Termination Date, (ii) the
date set forth in the applicable Purchase Confirmation which shall be no later than
180 days following the date on which the Purchased Assets are transferred by a Seller
to the Buyer, (iii) the date determined by application of Section 16 hereof or (iv)
the date identified to Buyer by a Seller as the date that the related Mortgage Loan
is to be sold pursuant to a Take-out Commitment.

 

“Repurchase
Price” means the price at which Purchased Mortgage Loans are to
be transferred from Buyer to a Seller upon termination of a Transaction, which will
be determined

 

18

 

in each case (including Transactions
terminable upon demand) as the sum of the Purchase Price and the accrued but unpaid
Price Differential as of the date of such determination.

 

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

 

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

 

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

 

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

 

“Second Lien
Mortgage Loan” means a Mortgage Loan which has a second lien on
the Mortgaged Property.

 

“Seller”
means Fieldstone Mortgage Company or Fieldstone Investment Corporation, or their
respective permitted successors and assigns.

 

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

 

“Servicing
Agreement” means any servicing agreement entered into among Seller,
Buyer and any servicer as the same may be amended from time to time.

 

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

 

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

 

“Subsidiary”
means, with respect to any Person, any corporation, partnership or other entity
of which at least a majority of the securities or other ownership interests having
by the terms thereof ordinary voting power to elect a majority of the board of directors
or other persons performing similar functions of such corporation, partnership or
other entity (irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or other
entity shall have or might have voting power by reason

 

19

 

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.

 

“Sub-Prime
Mortgage Loan” means a Mortgage Loan originated in accordance
with the criteria established by Buyer for sub-prime mortgage loans, as determined
by Buyer in its sole discretion.

 

“Take-out
Commitment” means a commitment of a Seller to either (a) sell
one or more Purchased Mortgage Loans to a Take-out Investor or (b) (i) swap one
or more Purchased Mortgage Loans with a Take-out Investor that is an Agency for
an Agency Security, and (ii) sell the related Agency Security to a Take-out Investor,
and in each case, the corresponding Take-out Investor’s commitment back to such
Seller to effectuate any of the foregoing, as applicable.  With respect to any Take-out Commitment with an
Agency, the applicable agency documents list Buyer as sole subscriber.

 

“Take-out
Investor” means (i) an Agency or (ii) other institution which
has made a Take-out Commitment and has been approved by Buyer.  The initial list of Take-out Investors is attached
hereto as Schedule 3, which schedule may be amended from time to time with
the Buyer’s consent.

 

“Termination
Date” means the earlier of (a) February 23, 2006 or (b) the date
of the occurrence of an Event of Default.

 

“Test Period”
means any fiscal quarter.

 

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

 

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

 

“Underwriting
Guidelines” means the standards, procedures and guidelines of
Sellers for underwriting and acquiring Mortgage Loans, which are set forth in the
written policies and procedures of Sellers, a copy of which is attached hereto as
Exhibit G and such other guidelines as are identified to and approved in
writing by Buyer (provided, that the Buyer shall be deemed to have approved revised
or additional Underwriting Guidelines if the Buyer has failed to object to such
revised or additional Underwriting Guidelines within ten (10) Business Days of Buyer’s
receipt of notice of such revised or additional Underwriting Guidelines) in accordance
with Section 14(q) hereof.

 

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

 

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

 

20

 

“VA Approved
Lender” means a lender which is approved by the VA to act as a
lender in connection with the origination of VA Loans.

 

“VA Loan”
means a Mortgage Loan which is subject of a VA Loan Guaranty Agreement as evidenced
by a VA Loan Guaranty Agreement, or a Mortgage Loan which is a vender loan sold
by the VA.

 

“VA Loan Guaranty
Agreement” means the obligation of the United States to pay a
specific percentage of a Mortgage Loan (subject to a maximum amount) upon default
of the Mortgagor pursuant to the Servicemen’s Readjustment Act, as amended.

 

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

 

“Wet-Ink Mortgage
Loan” means a Mortgage Loan which a Seller is selling to Buyer
simultaneously with the origination thereof prior to the delivery to the Custodian
of the Mortgage File related thereto.

 

“Wet-Ink Mortgage
File” means, with respect to any Wet-Ink Mortgage Loan, the documents
set forth in Exhibit L hereto.

 

3.  Program; Initiation of Transactions

 

a.  From time to time Buyer will purchase from each
Seller certain Mortgage Loans that have been either originated by such Seller or
purchased by such Seller from other originators.  All Purchased Mortgage Loans shall exceed or meet
the Underwriting Guidelines, and shall be serviced by Servicer.  The aggregate Purchase Price of Purchased Mortgage
Loans subject to outstanding Transactions shall not exceed the Maximum Aggregate
Purchase Price.  With respect to Transactions
involving Mortgage Loans that are not Wet-Ink Mortgage Loans, Buyer shall only be
required to enter into Transactions in which the Purchase Price with respect thereto
is at least $1,000,000.  With respect to each
Transaction involving Mortgage Loans that are not Wet-Ink Mortgage Loans, Buyer
shall not be required to enter into Transactions more than 3 times per calendar
week.

 

b.  With respect to each Transaction involving Mortgage
Loans which are not Wet-Ink Mortgage Loans, the related Seller shall give Buyer
and Custodian at least 1 Business Day’s prior notice of any proposed Purchase Date
(the date on which such notice is given, the “Notice Date”); provided, that if the Sellers are delivering
25 or fewer Mortgage Loans, which are not Wet-Ink Mortgage Loans, on a Purchase
Date, the notice shall be delivered on or before 12:00 noon on the Purchase Date.  With respect to Wet-Ink Mortgage Loans, the related
Seller shall deliver notice of any proposed purchase on or before 4:30 p.m. Eastern
Time on the Purchase Date.  On the Notice
Date, the related Seller shall (i) request that Buyer enter into a Transaction by
furnishing to Buyer a Transaction Request, (ii) deliver to Buyer and Custodian a
Mortgage Loan Schedule and (iii) deliver to Custodian a Request for Certification
and each Mortgage File or Wet-Ink File for each Wet-Ink Mortgage Loan in accordance
with Section 10(b)(3) and otherwise

 

21

 

comply with the procedures set forth
in Exhibit L hereto.  In the event
the Mortgage Loan Schedule provided by a Seller contains erroneous computer data,
is not formatted properly or the computer fields are otherwise improperly aligned,
Buyer shall provide written or electronic notice to such Seller describing such
error and such Seller may either (i) give Buyer written or electronic authority
to correct the computer data, reformat such Mortgage Loan Schedule or properly align
the computer fields or (ii) correct the computer data, reformat the Mortgage Loan
Schedule or properly align the computer fields itself and resubmit the Mortgage
Loan Schedule as required herein.  In the
event that such Seller gives Buyer authority to correct the computer data, reformat
the Mortgage Loan Schedule or properly align the computer fields, such Seller shall
pay $10 per change and any other direct expenses incurred by Buyer; provided, that
upon 30 days’ notice to the Sellers, Buyer may change such computer correction fee.  The Sellers shall hold Buyer harmless for such
correction, reformatting or realigning, as applicable, except as otherwise expressly
provided herein.  In the event that such changes
to a Mortgage Loan Schedule have been made prior to the date of this Repurchase
Agreement, the terms hereof shall also govern such changes.

 

c.  Once per month during any calendar month, with
respect to all requested Transactions and all related Purchased Mortgage Loans,
Seller shall designate all such Purchased Mortgage Loans as either Low Purchase
Price Mortgage Loans, Medium Purchase Price Mortgage Loans or High Purchase Price
Mortgage Loans.  In the event that Seller
fails to make such designation, the Purchase Price election set forth above will
not be available and all Purchased Mortgage Loans in such calendar month shall be
treated as High Purchase Price Mortgage Loans.

 

d.  With respect to each Exception Mortgage Loan,
upon receipt of the Transaction Request, Buyer shall, consistent with this Agreement,
specify the specific terms for such proposed Transaction, including the Purchase
Price, the Pricing Rate, the Market Value and the Repurchase Date in respect of
such Transaction.  The terms thereof shall
be set forth in the Purchase Confirmation to be delivered to the related Seller
on or prior to the Purchase Date.

 

e.  With respect to each Exception Mortgage Loan,
the Purchase Confirmation, together with this Agreement, shall constitute conclusive
evidence of the terms agreed between Buyer and the applicable Seller with respect
to the Transaction to which the Purchase Confirmation relates, and such Seller’s
acceptance of the related proceeds shall constitute such Seller’s agreement to the
terms of such Purchase Confirmation.  It is
the intention of the parties that, with respect to each Exception Mortgage Loan,
each Purchase Confirmation shall not be separate from this Agreement but shall be
made a part of this Agreement.  In the event
of any conflict between this Agreement and, with respect to each Exception Mortgage
Loan, a Purchase Confirmation, the terms of the Purchase Confirmation shall control
with respect to the related Transaction.

 

22

 

f.  Upon the satisfaction of the applicable conditions
precedent set forth in Section 10 hereof, all of the related Seller’s interest in
the Repurchase Assets shall pass to Buyer on the Purchase Date, against the transfer
of the Purchase Price to the related Seller. 
Upon transfer of the Mortgage Loans to Buyer as set forth in this Section
and until termination of any related Transactions as set forth in Sections 4 or
15 of this Agreement, ownership of each Mortgage Loan, including each document in
the related Mortgage File and Records, is vested in Buyer; provided that, prior
to the recordation of the assignments of mortgage by the Custodian as provided for
in the Custodial Agreement, record title in the name of the related Seller to each
Mortgage shall be retained by the related Seller in trust, for the benefit of Buyer,
for the sole purpose of facilitating the servicing and the supervision of the servicing
of the Mortgage Loans.

 

g.  With respect to each Wet-Ink Mortgage Loan, by
no later than 12:00 p.m. New York City time on the eighth Business Day following
the applicable Purchase Date, the related Seller shall cause the related Settlement
Agent to deliver to the Custodian the remaining documents in the Mortgage File.

 

h.  Once per month during any calendar month and with
respect to all High Purchase Price Mortgage Loans or Medium Purchase Price Mortgage
Loans, Seller may, by prior written notice to Buyer, elect to transfer cash to the
account of Buyer specified in Section 9; provided that such cash is sufficient
to cause the Purchase Price of such High Purchase Price Mortgage Loans or Medium
Purchase Price Mortgage Loans, recalculated to include such cash, low enough to
classify such High Purchase Price Mortgage Loans as Medium Purchase Price Mortgage
Loans or Low Purchase Price Mortgage Loans or such Medium Purchase Price Mortgage
Loans as Low Purchase Price Mortgage Loans. 
Any amounts so transferred shall be allocated to all High Purchase Price
Mortgage Loans to effect such recalculation.

 

4.  Repurchase

 

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

 

b.  Provided that no Default shall have occurred and
is continuing, and Buyer has received the related Repurchase Price, Buyer agrees
to release its ownership interest hereunder in the Mortgage Loans (including, the
Mortgage Files) at the request of the related Seller upon repurchase of Purchased
Mortgage Loans by

 

23

 

such Seller.  With respect to payments in full by the related
Mortgagor of a Purchased Mortgage Loan, the Sellers agree to (i) provide Buyer with
a copy of a report from the related Servicer indicating that such Purchased Mortgage
Loan has been paid in full, (ii) remit to Buyer, within two Business Days, the Repurchase
Price with respect to such Purchased Mortgage Loans and (iii) provide Buyer a notice
specifying each Purchased Mortgage Loan that has been prepaid in full.  Buyer agrees to release its ownership interest
in Purchased Mortgage Loans which have been prepaid in full after receipt of evidence
of compliance with clauses (i) through (iii) of the immediately preceding sentence.

 

c.  In the event that at any time any Purchased Mortgage
Loan violates the applicable sublimit set forth in the definition of Market Value,
Buyer may, in its sole discretion, redesignate such Mortgage Loan as an Exception
Mortgage Loan.  If Buyer does not redesignate
such Mortgage Loan as an Exception Mortgage Loan, and if the related Seller does
not notify Buyer within five (5) Business Days of such violation that it does not
want to receive a bid for such Mortgage Loan as described below, Buyer or an Affiliate
of Buyer may offer to terminate the related Seller’s right and obligation to repurchase
such Mortgage Loan by paying such Seller a price to be set by Buyer in its sole
discretion (a “Bid”).  The related Seller, within five (5) Business Days
of receipt of Buyer’s bid (the “Violation
Deadline”) may, in its sole discretion, either (i) accept Buyer’s
bid, terminating the related Seller’s right and obligations to repurchase such Mortgage
Loan under this Agreement or (ii) immediately repurchase the Mortgage Loan at the
Repurchase Price in accordance with this Section 4.  The Sellers shall pay Buyer a bid fee equal to
$250 (the “Bid Fee”)
with respect to each Mortgage Loan on which Buyer or its Affiliate makes a Bid,
regardless of whether the Bid is accepted and such Bid Fee shall be due and payable
to Buyer by the Violation Deadline.  Any amount
paid by Buyer or its Affiliate to terminate the Sellers’ right to repurchase a Purchased
Mortgage Loan if a Bid is accepted pursuant to this Section shall be applied by
Buyer toward the outstanding Repurchase Price for the applicable Transaction.

 

5.  Price Differential

 

a.  On each Business Day that a Transaction is outstanding,
the Pricing Rate shall be reset and, unless otherwise agreed, the accrued and unpaid
Price Differential shall be settled in cash on each related Price Differential Payment
Date.  Two Business Days prior to the Price
Differential Payment Date, Buyer shall give the Sellers written or electronic notice
of the amount of the Price Differential due on such Price Differential Payment Date.  On the Price Differential Payment Date, the Sellers
shall pay to Buyer the Price Differential for such Price Differential Payment Date
(along with any other amounts to be paid pursuant to Sections 7, 34 and 35 hereof),
by wire transfer in immediately available funds.

 

b.  If the Sellers fail to pay all or part of the
Price Differential by 3:00 p.m. (New York City time) on the related Price Differential
Payment Date, with respect to any Purchased Mortgage Loan, the Sellers shall be
obligated to pay to Buyer (in

 

24

 

addition to, and together with,
the amount of such Price Differential) interest on the unpaid Repurchase Price at
a rate per annum equal to the Post Default Rate until the Price Differential is
received in full by Buyer.

 

c.  Seller may remit to Buyer funds in $100,000 increments
up to the outstanding Purchase Price, to be held as unsegregated cash margin and
collateral for all Obligations under the Repurchase Agreement (such amount, to the
extent not applied to Obligations under the Repurchase Agreement, the “Buydown
Amount”).  The Buydown Amount shall be
used by Buyer in order to calculate the Price Differential, which will accrue on
the Purchase Price then outstanding minus the Buydown Amount, applied to Transactions
involving Conforming Mortgage Loans.  The
Seller shall be entitled to request a drawdown of the Buydown Amount or remit additional
funds to be added to the Buydown Amount in increments of $100,000 no more than one
time per week.  Without limiting the generality
of the foregoing, in the event that a Margin Call or other Default exists, the Buyer
shall be entitled to use any or all of the Buydown Amount to cure such circumstance
or otherwise exercise remedies available to the Buyer without prior notice to, or
consent from, the Seller.

 

6.  Margin Maintenance

 

a.  If at any time the Market Value of any Purchased
Mortgage Loan subject to a Transaction is less than Buyer’s Margin Amount for such
Transaction (a “Margin Deficit”),
then Buyer may by notice to any Seller given pursuant to Section 20 require Sellers
to transfer to Buyer cash in an amount at least equal to the Margin Deficit (such
requirement, a “Margin Call”).

 

b.  Any notice given pursuant to Section 6(a) before
10:00 a.m. New York time on a Business Day shall be met, and the related Margin
Call satisfied, no later than 5:00 p.m. New York time on such Business Day; notice
given after 10:00 a.m. New York time on a Business Day shall be met, and the related
Margin Call satisfied, no later than 5:00 p.m. New York time on the following Business
Day (the foregoing time requirements for satisfaction of a Margin Call are referred
to as the “Margin Deadlines”).  The failure of Buyer, on any one or more occasions,
to exercise its rights hereunder, shall not change or alter the terms and conditions
to which this Agreement is subject or limit the right of Buyer to do so at a later
date.  The 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 the Sellers.

 

c.  In the event that a Margin Deficit exists with
respect to any Purchased Mortgage Loan, Buyer may retain any funds received by it
to which the Sellers would otherwise be entitled hereunder up to an amount not to
exceed the Margin Deficit and upon providing notice to the Sellers, which funds
(i) shall be held by Buyer against the related Margin Deficit and (ii) may be applied
by Buyer against any Purchased Mortgage Loan for which the related Margin Deficit
remains

 

25

 

otherwise unsatisfied.  Notwithstanding the foregoing, the Buyer retains
the right, in its sole discretion, to make a Margin Call in accordance with the
provisions of this Section 6 to the extent that Buyer has not exercised its rights
under this Subsection (c).

 

d.  Notwithstanding anything to the contrary herein,
if a Margin Deficit occurs with respect to a Medium Purchase Price Mortgage Loan
or a Low Purchase Price Mortgage Loan, which, if considered to be a High Purchase
Price Mortgage Loan, would not cause a Margin Deficit to occur, then Seller may
transfer to Buyer cash in an amount at least equal to the Margin Deficit, provided
that such cash is sufficient to ensure such Purchased Mortgage Loan is fully compliant
as a Medium Purchase Price Mortgage Loans or a Low Purchase Price Mortgage Loan,
as applicable.

 

7.  Income Payments

 

a.  If Income is paid in respect of any Purchased
Mortgage Loan during the term of a Transaction, such Income shall be the property
of Buyer.  Notwithstanding the foregoing,
and provided no Event of Default has occurred and is continuing, Buyer agrees that
if a third-party Servicer is in place for any Purchased Mortgage Loans, such Servicer
shall deposit such Income to the Collection Account.  Each Seller shall deposit all Income received
in its capacity as Servicer of any Purchased Mortgage Loans or pursuant to the preceding
sentence to the Collection Account in accordance with Section 12(c) hereof.

 

b.  Provided no Event of Default has occurred and
is continuing, on each Price Differential Payment Date, the Sellers shall remit
to Buyer an amount equal to the Price Differential out of the interest portion of
the Income paid in respect to the Purchased Mortgage Loans for the preceding month
in accordance with Section 5 of this Agreement. 
Provided no Event of Default has occurred and is continuing, upon termination
of any Transaction and on each Price Differential Payment Date, to the extent that
there is any excess Income after repayment of all amounts to be transferred to Buyer
by the Sellers, Buyer shall pay the excess to the Sellers.

 

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

 

d.  Notwithstanding any provision to the contrary
in this Section 7, within two (2) Business Days of receipt by any Seller of any
prepayment of principal in full, with respect to a Purchased Mortgage Loan, the
Sellers shall remit such amount to Buyer and Buyer shall immediately apply any such
amount received by Buyer to reduce the amount of the Repurchase Price due upon termination
of the related Transaction.

 

26

 

e.  Notwithstanding anything to the contrary set forth
herein, upon the occurrence of an Event of Default and further upon written notice
by Buyer to the Sellers, the Sellers shall remit to Buyer all collections received
by Servicer or any Seller on the Purchased Mortgage Loans in accordance with Buyer’s
directions no later than the day on which aggregate collections of principal and
interest (excluding principal prepayments) on the Purchased Mortgaged Loans reaches
an amount to be indicated by Buyer in its sole discretion.

 

8.  Security Interest

 

Although the parties intend that all Transactions hereunder
be sales and purchases and not financings, in the event any such Transactions are
deemed to be financings, each Seller hereby pledges to Buyer as security for the
performance by the Sellers of their Obligations and hereby grants, assigns and pledges
to Buyer a fully perfected first priority security interest in the Purchased Mortgage
Loans, the Records, and all related servicing rights, the Program Agreements (to
the extent such Program Agreements and such Seller’s right thereunder relate to
the Purchased Mortgage Loans), any related Take-out Commitments, Property, all insurance
policies and insurance proceeds, in each case, relating to any Purchased Mortgage
Loan or the related Mortgaged Property, including but not limited to any payments
or proceeds under any related primary insurance, hazard insurance, FHA Mortgage
Insurance Contracts or VA Loan Guaranty Agreements (if any), Income, the Buydown Amount and any account to which such
amount is deposited, Interest Rate Protection Agreements, accounts (including
any interest of such Seller in escrow accounts) and any other contract rights, accounts,
payments, rights to payment (including payments of interest or finance charges)
general intangibles and other assets, in each case, relating to the Purchased Mortgage
Loans (including, without limitation, any other accounts) or any interest in the
Purchased Mortgage Loans, the servicing of the Purchased Mortgage Loans, and any
proceeds (including the related securitization proceeds) and distributions with
respect to any of the foregoing and any other property, rights, title or interests
as are specified on a Request for Certification and/or Trust Receipt and Certification,
in all instances, whether now owned or hereafter acquired, now existing or hereafter
created (collectively, the “Repurchase
Assets”); provided, however, as to any Purchased Mortgage Loan
the security interest shall automatically terminate upon payment in full to Buyer
of the Repurchase Price with respect thereto. 
Sellers agree to execute, deliver and/or file such documents and perform
such acts as may be reasonably necessary to fully perfect Buyer’s security interest
created hereby.  Furthermore, the Sellers
hereby authorize the Buyer to file financing statements relating to the Repurchase
Assets, as the Buyer, at its option, may deem appropriate.  The Sellers shall pay the filing costs for any
financing statement or statements prepared pursuant to this Section.

 

9.  Payment and Transfer

 

Unless otherwise mutually agreed in writing, all transfers
of funds to be made by the Sellers hereunder shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to Buyer at the following
account maintained by Buyer:  (a) Account
No. 3048-8764, for the account of CSFB Buyer/Fieldstone Mortgage Company Seller—Inbound
Account, Citibank, ABA No. 021 000 089, and (b) Account No. 3055-7598, for

 

27

 

the account of CSFB Buyer/Fieldstone
Investment Corporation Seller—Inbound Account, Citibank, ABA No. 021 000 089, or
such other account as Buyer shall specify to the Sellers in writing.  Each Seller acknowledges that it has no rights
of withdrawal from the foregoing account. 
All Purchased Mortgage Loans transferred by one party hereto to the other
party shall be in the case of a purchase by Buyer in suitable form for transfer
or shall be accompanied by duly executed instruments of transfer or assignment in
blank and such other documentation as Buyer may reasonably request.  All Purchased Mortgage Loans shall be evidenced
by a Trust Receipt and Certification.  Any
Repurchase Price received by Buyer after 2:00 p.m. New York City time shall be deemed
received on the next succeeding Business Day; provided, that Buyer shall credit
to the Sellers interest, if any, earned on such funds overnight.

 

10.  Conditions Precedent

 

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

 

(1) Program Agreements.  The Program Agreements (including a Custodial
Agreement in a form acceptable to Buyer) duly executed and delivered by the parties
thereto and being in full force and effect, free of any modification, breach or
waiver.

 

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

 

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

 

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

 

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

 

(6) Opinion of Counsel.  An opinion of each Seller’s internal counsel,
in form and substance substantially as set forth in Exhibit F attached hereto.

 

28

 

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

 

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

 

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

 

(1) Due Diligence Review.  Without limiting the generality of Section 36
hereof, Buyer shall have completed, to its satisfaction, its due diligence review
of the Sellers and those Mortgage Loans identified to the Sellers by Buyer.

 

(2) Required Documents.

 

(a)  With respect
to each Purchased Mortgage Loan which is not a Wet-Ink Mortgage Loan the Mortgage
File has been delivered to the Custodian (i) with respect to any purchase of 25
or fewer Mortgage Loans on a single Purchase Date, on or prior to 3:00 p.m. (New
York City Time) on the Purchase Date, and (ii) with respect to any purchase of 26
or more Mortgage Loans on a single Purchase Date, at least 24 hours prior to the
Purchase Date;

 

(b)  With respect
to each Wet-Ink Mortgage Loan, the Wet-Ink Mortgage File has been delivered to Buyer
or Custodian, as the case may be, by 4:30 p.m. (Eastern time) on the Purchase Date.

 

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

 

(a)  A Transaction
Request delivered pursuant to Section 3(b) hereof.

 

(b)  The Request
for Certification and the related Mortgage Loan Schedule and Exception Report,
and the Trust Receipt, each as defined in the Custodial Agreement.

 

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

 

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

 

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

 

29

 

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

 

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

 

(8) Material Adverse Change.  None of the following shall have occurred and/or
be continuing:

 

(a)  Credit Suisse
First Boston, New York Branch’s corporate bond rating as calculated by S&P or
Moody’s has been lowered or downgraded to a rating below investment grade by S&P
or Moody’s;

 

(b)  an event or
events shall have occurred in the good faith determination of Buyer resulting in
the effective absence of a “repo market” or comparable “lending market” for financing
debt obligations secured by mortgage loans or securities or an event or events shall
have occurred resulting in Buyer not being able to finance Purchased Assets through
the “repo market” or “lending market” with traditional counterparties at rates which
would have been reasonable prior to the occurrence of such event or events; or

 

(c)  an event or
events shall have occurred resulting in the effective absence of a “securities market”
for securities backed by mortgage loans or an event or events shall have occurred
resulting in Buyer not being able to sell securities backed by mortgage loans at
prices which would have been reasonable prior to such event or events; or

 

(d)  there shall
have occurred a material adverse change in the financial condition of Buyer which
affects (or can reasonably be expected to affect) materially and adversely the ability
of Buyer to fund its obligations under this Agreement.

 

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

 

(10) New Businesses.  Buyer has not determined, in Buyer’s sole discretion,
that the Sellers have acquired or have begun operating in any business unrelated
to that of a REIT or a mortgage banker.

 

30

 

(11) REIT Asset and Income Tests.  In accordance with all applicable laws and requirements
for income and asset tests for a REIT, FIC has satisfied all of the following asset
or income tests:

 

(a)  At the close
of each taxable year, at least 75 percent of FIC’s gross income consists of (i)
“rents from real property” within the meaning of Section 856(c)(3)(A) of the
Code, (ii) interest on obligations secured by mortgages on real property or on interests
in real property, within the meaning of Section 856(c)(3)(B) of the Code, (iii)
gain from the sale or other disposition of real property (including interests in
real property and interests in mortgages on real property) which is not property
described in Section 1221(a)(1) of the Code, within the meaning of Section 856(c)(3)(C)
of the Code, (iv) dividends or other distributions on, and gain (other than gain
from “prohibited transactions” within the meaning of Section 857(b)(6)(B)(iii)
of the Code) from the sale or other disposition of, transferable shares (or transferable
certificates of beneficial interest) in other qualifying REITs within the meaning
of Section 856(d)(3)(D) of the Code, and (v) amounts described in Sections
856(c)(3)(E) through 856(c)(3)(I) of the Code.

 

(b)  At the close
of each taxable year, at least 95 percent of FIC’s gross income consists of (i)
the items of income described in paragraph 1 hereof (other than those described
in Section 856(c)(3)(I) of the Code), (ii) gain realized from the sale or other
disposition of stock or securities which are not property described in Section 1221(a)(1)
of the Code, (iii) interest and (iv) dividends, in each case within the meaning
of Section 856(c)(2) of the Code.

 

(c)  At the close
of each quarter of FIC’s taxable years, at least 75 percent of the value of FIC’s
total assets (as determined in accordance with Treasury Regulations Section 1.856-2(d))
has consisted of and will consist of real estate assets within the meaning of Sections
856(c)(4) and 856(c)(5)(B) of the Code, cash and cash items (including receivables
which arise in the ordinary course of FIC’s operations, but not including receivables
purchased from another person), and Government Securities.

 

(d)  At the close
of each quarter of each of FIC’s taxable years, (a) not more than 25 percent of
FIC’s total asset value will be represented by securities (other than those described
in paragraph 3), (b) not more than 20 percent of FIC’s total asset value will be
represented by securities of one or more taxable REIT subsidiaries, and (c) (i)
not more than 5 percent of the value of FIC’s total assets will be represented by
securities of any one issuer (other than Government Securities and securities of
taxable REIT subsidiaries), and (ii) FIC will not hold securities possessing more
than 10 percent of the total voting power or value of the outstanding securities
of any one issuer (other than Government Securities, securities of taxable REIT
subsidiaries, and securities of a qualified REIT subsidiary within the meaning of
Section 856(i) of the Code).

 

31

 

11.  Program

 

a.  The Sellers shall reimburse Buyer for any of Buyer’s
reasonable out-of-pocket costs, including due diligence review costs and reasonable
attorney’s fees, incurred by Buyer in determining the acceptability to Buyer of
any Mortgage Loans as set forth in this Section 11.  The Sellers shall also pay, or reimburse Buyer
if Buyer shall pay, any termination fee, which may be due any servicer.  The Sellers shall pay the fees and expenses of
Buyer’s counsel (up to $20,000), due diligence (up to $10,000, the “Due Diligence Cap”), provided
that such Due Diligence Cap shall not apply upon the occurrence of an Event of Default
and other out-of-pocket expenses of Buyer in connection with the initial establishment
of this facility and renewals thereof.  Legal
fees for any subsequent amendments to this Agreement or related documents shall
be borne by the Sellers.  The Sellers shall
pay ongoing custodial and bank fees and expenses as set forth on Exhibit N
hereto, and any other ongoing fees and expenses under any other Program Document.

 

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

 

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

 

d.  Notwithstanding the assignment of the Program
Agreements with respect to each Purchased Mortgage Loan to Buyer, each Seller agrees
and covenants with

 

32

 

Buyer (x) to enforce diligently
the Sellers’ rights and remedies set forth in the Program Agreements and (y) to
provide Buyer with prompt written notice of any Material Adverse Effect or event
which, with the passage of time, is reasonably likely to become a Material Adverse
Effect, by any party to any Program Agreement and of which such Seller is aware.

 

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

 

12.  Servicing

 

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

 

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

 

c.  The Sellers shall cause the Servicer to deposit
all collections received by Servicer on the Purchased Mortgage Loans in the Collection
Account no later than the 5th Business Day following receipt; provided,
however, that any amounts required to be remitted to Buyer shall be deposited in
the Collection Account on or prior to the day on which such remittance is to occur.

 

d.  Upon Buyer’s request, the Sellers shall provide
promptly to Buyer (i) a letter addressed to and agreed to by the Servicer of the
related Purchased Mortgage Loans, in form and substance reasonably satisfactory
to Buyer, advising such Servicer of such matters as Buyer may reasonably request,
and/or (ii) a recognition agreement executed by the Servicer of the related Purchased
Mortgage Loans, in form and substance reasonably satisfactory to Buyer, in which
the Servicer recognizes the interest of Buyer and agrees to follow the

 

33

 

instructions of Buyer with respect
to the Purchased Mortgage Loans and any related Income with respect thereto.

 

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

 

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

 

13.  Representations; Warranties

 

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

 

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

 

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

 

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

 

34

 

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

 

(5) Financial Statements.  Each Seller has heretofore furnished to Buyer
a copy of (a) its consolidated and consolidating balance sheet and the consolidated
and consolidating balance sheets of its consolidated Subsidiaries for the fiscal
year of such Seller ended December 31, 2003 and the related consolidated statements
of income and retained earnings and of cash flows for such Seller and its consolidated
Subsidiaries for such fiscal year, setting forth in each case in comparative form
the figures for the previous year, with the opinion thereon of a member of AICPA
and (b) its consolidated and consolidating balance sheet and the consolidated and
consolidating balance sheets of its consolidated Subsidiaries for the fiscal quarters
of such Seller ended March 31, 2004, June 30, 2004 and September 31,
2004, and the related consolidated statements of income and retained earnings and
of cash flows for such Seller and its consolidated Subsidiaries for such quarterly
fiscal periods, setting forth in each case in comparative form the figures for the
previous year.  All such financial statements
are complete and correct and fairly present, in all material respects, the consolidated
financial condition of such Seller and its Subsidiaries and the consolidated results
of their operations as at such dates and for such fiscal periods, all in accordance
with GAAP applied on a consistent basis. 
Since December 31, 2003, there has been no material adverse change in
the consolidated business, operations or financial condition of such Seller and
its consolidated Subsidiaries taken as a whole from that set forth in said financial
statements nor is any Seller aware of any state of facts which (without notice or
the lapse of time) would or could result in any such material adverse change.  Each Seller has, on the date of the statements
delivered pursuant to this Section (the “Statement Date”) no knowledge of any liabilities,
direct or indirect, fixed or contingent, matured or unmatured, or liabilities for
taxes, long-term leases or unusual forward or long-term commitments not disclosed
by, or reserved against in, said balance sheet and related statements, and at the
present time there are no material unrealized or anticipated losses from any loans,
advances or other commitments of such Seller except as heretofore disclosed to Buyer
in writing.

 

(6) Event of Default.  There exists no Event of Default as described
in Section 15(b) hereof, which default gives rise to a right to accelerate
Indebtedness in excess of $5,000,000 as referenced in Section 15(b) hereof,
under any mortgage, borrowing agreement or other instrument or agreement pertaining

 

35

 

to indebtedness for borrowed money or to the repurchase of mortgage loans
or securities.

 

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

 

(8) No Conflicts.  The execution, delivery and performance by each
Seller of this Agreement, any Transaction Request or Purchase Confirmation hereunder
and the Program Agreements do not conflict with any term or provision of the certificate
of incorporation or by-laws of such Seller or any law, rule, regulation, order,
judgment, writ, injunction or decree applicable to such Seller of any court, regulatory
body, administrative agency or governmental body having jurisdiction over such Seller,
which conflict would have a Material Adverse Effect and will not result in any violation
of any such mortgage, instrument, agreement or repurchase agreement.

 

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

 

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

 

(11) Litigation.  Except as is disclosed in writing by Sellers and
approved by Buyer in writing, there is no action, proceeding or investigation pending
with respect to which either Seller has received service of process or, to the best
of such Seller’s knowledge threatened against it before any court, administrative
agency or other tribunal which (A) asserts the invalidity of this Agreement, any
Transaction Request, Purchase Confirmation or any Program Agreement, (B) seeks to
prevent the consummation of any of the transactions

 

36

 

contemplated by this Agreement, any Transaction Request, Purchase Confirmation
or any Program Agreement, (C) makes a claim individually in an amount greater than
$5,000,000 or in an aggregate amount greater than $10,000,000, (D) requires filing
with the Securities and Exchange Commission in accordance with the 1934 Act or any
rules thereunder or (E) might materially and adversely affect the validity of the
Purchased Mortgage Loans or the performance by it of its obligations under, or the
validity or enforceability of, this Agreement, any Transaction Request, Purchase
Confirmation or any Program Agreement.

 

(12) Material Adverse Change.  There has been no material adverse change in the
business, operations, financial conditions, properties or prospects of the Sellers
or its Affiliates on a consolidated basis since the date set forth in the most recent
financial statements supplied to Buyer that is reasonably likely to result in a
Material Adverse Effect.

 

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

 

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

 

(15) Taxes. 
Each Seller, and its Subsidiaries have filed all Federal income tax returns
and all other material tax returns that are required to be filed by them and have
paid all taxes due pursuant to such returns or pursuant to any assessment received
by any of them, except for any such taxes as are being appropriately contested in
good faith by appropriate proceedings diligently conducted and with respect to which
adequate reserves have been provided.  The
charges, accruals and reserves on the books of each Seller, and its Subsidiaries
in respect of taxes and other governmental charges are, in the opinion of such Seller,
adequate.

 

(16) Investment Company.  Neither the Sellers nor any of their Subsidiaries
is an “investment company”, or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as amended.

 

(17) Chief Executive Office; Jurisdiction of Organization.  During the four months immediately preceding July 1,
2001, FMC’s chief executive office is, and has been, located at 11000 Broken Land
Parkway, Suite 600, Columbia, MD 21044.  On
the Effective Date, FMC’s jurisdiction of organization is Maryland.  FIC’s chief executive office is, and has been,
located at 11000 Broken Land Parkway, Suite 600, Columbia, MD 21044.  On the Effective Date, FIC’s jurisdiction of organization
is Maryland.  The Sellers shall provide Buyer
with thirty days advance notice of any change in any Seller’s chief executive office
or jurisdiction.  During the preceding five
years, neither Seller

 

37

 

(a) has been known by or done business under any other name, corporate or
fictitious, except with respect to FMC, since January 1, 2000 under the name
Broad Street Mortgage Company and (b) has filed or had filed against it any bankruptcy
receivership or similar petitions nor has it made any assignments for the benefit
of creditors.

 

(18) Location of Books and Records.  The location where the Sellers keep their books
and records, including all computer tapes and records relating to the Repurchase
Assets are their respective chief executive office.

 

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

 

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

 

(21) Adverse Selection.  Neither Seller has selected the Purchased Mortgage
Loans in a manner so as to adversely affect Buyer’s interests.

 

(22) Agreements.  Neither the Sellers nor any Subsidiary of the
Sellers is a party to any agreement, instrument, or indenture or subject to any
restriction materially and adversely affecting its business, operations, assets
or financial condition, except as disclosed in the financial statements described
in Section 13(a)(5) hereof.  Neither
the Sellers nor any Subsidiary of the Sellers is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions contained
in any agreement, instrument, or indenture which default could have a Material Adverse
Effect.  No holder of any Indebtedness in
excess of $5,000,000 of the Sellers or of any of their Subsidiaries has given notice
of any asserted default thereunder.

 

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

 

(24) Agency Approvals.  With respect to each Agency Security and to the
extent necessary, FMC is an FHA Approved Mortgagee and a VA Approved Lender.  FMC is also approved by Fannie Mae as an approved
lender and Freddie Mac as an approved seller/servicer, and, to the extent necessary,
approved by the Secretary of Housing and Urban Development pursuant to Sections
203 and 211 of the National Housing Act. 
In each such case, FMC is in good standing, with no event having occurred
or FMC having any reason whatsoever to believe or suspect will occur prior to the
issuance of the Agency

 

38

 

Security or the consummation of the Take-out Commitment, as the case may
be, including, without limitation, a change in insurance coverage which would either
make FMC unable to comply with the eligibility requirements for maintaining all
such applicable approvals or require notification to the relevant Agency or to the
Department of Housing and Urban Development, FHA or VA.  Should FMC for any reason cease to possess all
such applicable approvals, or should notification to the relevant Agency or to the
Department of Housing and Urban Development, FHA or VA be required, FMC shall so
notify Buyer immediately in writing.  FMC
has adequate financial standing, servicing facilities, procedures and experienced
personnel necessary for the sound servicing of mortgage loans of the same types
as may from time to time constitute Mortgage Loans and in accordance with Accepted
Servicing Practices.

 

(25) No Reliance.  Each Seller has made its own independent decisions
to enter into the Program Agreements and each Transaction and as to whether such
Transaction is appropriate and proper for it based upon its own judgment and upon
advice from such advisors (including without limitation, legal counsel and accountants)
as it has deemed necessary.  The Sellers are
not relying upon any advice from Buyer as to any aspect of the Transactions, including
without limitation, the legal, accounting or tax treatment of such Transactions.

 

(26) Plan Assets.  No Seller
is an employee benefit plan as defined in Section 3 of Title I of ERISA, or
a plan described in Section 4975(e)(1) of the Code, and the Purchased Mortgage
Loans are not “plan assets” within the meaning of 29 CFR §2510.3-101 in the Sellers’
hands.

 

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

 

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

 

39

 

supports “terrorism”, as that term is defined in EO13224; or (iv) who is
otherwise affiliated with any entity or person listed above (any and all parties
or persons described in clauses (i) through (iv) above are herein referred to as
a “Prohibited Person”).

 

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

 

c.  The representations and warranties set forth in
this Agreement shall survive transfer of the Purchased Mortgage Loans to Buyer and
shall continue for so long as the Purchased Mortgage Loans are subject to this Agreement.  Upon discovery by the Sellers, Servicer or Buyer
of any material breach of any of the representations or warranties set forth in
this Agreement, the party discovering such breach shall promptly give notice of
such discovery to the others.  Subject to
the Buyer’s right to determine the Market Value of the Purchased Mortgage Loans,
the Sellers shall have up to five (5) Business Days to verify any alleged breach
of a representation or warranty for any Purchased Mortgage Loan.  Buyer has the right to require, in its unreviewable
discretion, the Sellers to repurchase within 1 Business Day after completion of
the Sellers’ verification review any Purchased Mortgage Loan for which a breach
of one or more of the representations and warranties referenced in Section 13(a)
exists and which breach has a material adverse effect on the value of such Mortgage
Loan or the interests of the Buyer.

 

14.  Covenants

 

Each Seller jointly and severally covenants with Buyer
that, during the term of this facility:

 

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

 

b.  Indebtedness to Consolidated Adjusted Tangible
Net Worth Ratio.  The Sellers’ ratio of
consolidated Indebtedness to Consolidated Adjusted Tangible Net Worth shall not
exceed 16:1.

 

c.  Reports.  The Sellers shall provide the reports and notices
required under Section 17 hereof.

 

d.  Litigation.  The Sellers will promptly, and in any event within
ten (10) days after service of process on any of the following, give to Buyer notice
of all litigation, actions, suits, arbitrations, investigations (including, without
limitation, any of the foregoing which are threatened or pending) or other legal
or arbitrable proceedings affecting the Sellers or any of their Subsidiaries or
affecting any of the Property of any of them before any Governmental Authority that
(i) questions

 

40

 

or challenges the validity or enforceability
of any of the Program Agreements or any action to be taken in connection with the
transactions contemplated hereby, (ii) makes a claim individually in an amount greater
than $5,000,000 or claims in an aggregate amount greater than $10,000,000 or (iii)
which, individually or in the aggregate, if adversely determined, could be reasonably
likely to have a Material Adverse Effect.

 

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

 

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

 

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

 

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

 

i.  Trust Receipt.  The Sellers shall cause the Custodian to deliver
to Buyer a Mortgage Loan Schedule and Exception Report, and a Trust Receipt,
no later than the date set forth in the Custodial Agreement.  If upon examination of the documents included
in any Mortgage File, the Custodian determines that such documents do not satisfy
the requirements set forth in the Custodial Agreement, the Custodian shall mark
such Mortgage Loan as an exception on its Mortgage Loan Schedule and Exception
Report.

 

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

 

41

 

k.  Assignment.  Except as permitted herein, neither Seller nor
any Servicer shall sell, assign, transfer or otherwise dispose of, or grant any
option with respect to, or pledge, hypothecate or grant a security interest in or
lien on or otherwise encumber (except pursuant to the Program Agreements), any of
the Purchased Mortgage Loans or any interest therein, provided that this Section shall
not prevent any transfer of Purchased Mortgage Loans in accordance with the Program
Agreements.

 

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

 

m.  Records.

 

(1) Seller shall collect and maintain or cause to be collected
and maintained all Records relating to the Purchased Mortgage Loans in accordance
with industry custom and practice for assets similar to the Purchased Mortgage Loans,
including those maintained pursuant to the preceding subparagraph, and all such
Records shall be in Custodian’s possession unless Buyer otherwise approves.  The Sellers will not allow any such papers, records
or files that are an original or an only copy to leave Custodian’s possession, except
for individual items removed in connection with servicing a specific Mortgage Loan,
in which event the Sellers will obtain or cause to be obtained a receipt from a
financially responsible person for any such paper, record or file.  The Sellers or the Servicer of the Purchased Mortgage
Loans will maintain all such Records not in the possession of Custodian in good
and complete condition in accordance with industry practices for assets similar
to the Purchased Mortgage Loans and preserve them against loss.

 

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

 

(3) Upon reasonable advance notice from Custodian or Buyer,
the Sellers shall (x) make any and all such Records available to Custodian or Buyer
during normal business hours to examine any such Records, either by its own officers
or employees, or by agents or contractors, or both, and make copies of all or any
portion thereof, and (y) permit Buyer or its authorized agents to discuss the

 

42

 

affairs, finances and accounts of the Sellers with its chief operating officer
and chief financial officer and to discuss the affairs, finances and accounts of
the Sellers with its independent certified public accountants.

 

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

 

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

 

p.  Material Change in Business.  The Sellers shall not make any material change
in the nature of its business as carried on at the date hereof.

 

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

 

r.  Distributions.  If an Event of Default has occurred and is continuing,
the Sellers shall not pay any dividends with respect to any capital stock or other
equity interests in such entity, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of Seller.

 

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

 

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

 

u.  Chief Executive Office; Jurisdiction of Organization.  No Seller shall move its chief executive office
from the address referred to in Section 13(a)(17) or change its jurisdiction
of organization from the jurisdiction referred to in Section 13(a)(17) unless
it shall have provided Buyer 30 days’ prior written notice of such change.

 

v.  Taxes. 
The Sellers shall 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

 

43

 

such tax, assessment, charge or
levy (i) the payment of which is being contested in good faith and by proper proceedings
and against which adequate reserves are being maintained or (ii) of which the Sellers
has no knowledge.

 

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

 

x.  Indebtedness.  Neither Seller shall enter into any credit agreement
or otherwise incur any additional Indebtedness (1) except as expressly set forth
in clause (2) below, without 30 days’ prior written notice to Buyer (other than
(a) pursuant to Existing Credit Facilities specified on Exhibit K hereto
or any incremental increases thereto, (b) Structured Securities Debt, (c) Permitted
Guarantee Obligations and (d) usual and customary accounts payable for a mortgage
company) or (2) without the prior written consent of Buyer in its sole good faith
discretion with respect to any Seller’s acquisition or operation of any New line
of business unrelated to that of a REIT or a mortgage banker.  The relevant Seller shall provide prompt written
notice of any increase in its Existing Credit Facilities specified on Exhibit
K.

 

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

 

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

 

44

 

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

 

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

 

cc.  Take-out Payments.  With respect to each Committed Mortgage Loan,
the Sellers shall arrange that all payments under the related Take-out Commitment
shall be paid directly to Buyer at the account set forth in Section 9 hereof,
or to an account approved by Buyer in writing prior to such payment.  With respect to any Agency Take-out Commitment,
if applicable, (1) with respect to the wire transfer instructions as set forth in
Freddie Mac Form 987 (Wire Transfer Authorization for a Cash Warehouse Delivery)
such wire transfer instructions are identical to Buyer’s wire instructions to the
Sellers or Buyer has approved such wire transfer instructions in writing in its
sole discretion, or (2) the Payee Number set forth on Fannie Mae Form 1068 (Fixed-Rate,
Graduated-Payment, or Growing-Equity Mortgage Loan Schedule) or Fannie Mae Form
1069 (Adjustable-Rate Mortgage Loan Schedule), as applicable, is identical to the
Payee Number that has been identified by Buyer in writing as Buyer’s Payee Number
or Buyer has previously approved the related Payee Number in writing in its sole
discretion; with respect to any Take-out Commitment with an Agency, the applicable
agency documents list Buyer as sole subscriber, unless otherwise agreed to in writing
by Buyer, in Buyer’s sole discretion.

 

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

 

45

 

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

 

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

 

gg.  HELOC Provisions.  With respect to each HELOC, if a Mortgagor requests
an increase in the related Credit Limit, the related Seller, shall, in its sole
discretion, either accept or reject the Mortgagor’s request in accordance with such
Seller’s Underwriting Guidelines and notify the Buyer in writing of such Seller’s
decision. If the request for a Credit Limit increase is accepted by a Seller, the
increase will be effected by such Seller through modification of the Mortgage Loan
with the Mortgagor.  Sellers shall deliver
to the Buyer an updated Mortgage Loan Schedule reflecting the modification
to the Mortgage Loan and shall deliver any modified Mortgage Loan Documents to the
Custodian.  Notwithstanding anything to the
contrary herein, in no event shall Buyer have any obligation to fund any Draws with
respect to any HELOC, which obligations shall be retained by the Sellers.

 

15.  Events of Default

 

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

 

a.  Payment Failure.  Failure of any Seller to (i) make any payment
of Price Differential or Repurchase Price or any other sum which has become due,
on a Price Differential Payment Date or a Repurchase Date or otherwise, whether
by acceleration or otherwise, under the terms of this Agreement, any other warehouse
and security agreement or any other document evidencing or securing Indebtedness
of any Seller to Buyer or to any affiliate of Buyer (excluding from this clause
(i) any Indebtedness in which a non-Affiliate of the Buyer is also a creditor),
or (ii) cure any Margin Deficit pursuant to Section 6 hereof.

 

b.  Cross Default.  Any Seller or any of Seller’s Affiliates shall
be in default (after the expiration of any applicable grace period under any such
agreement) under (i) any Indebtedness of any Seller or of such Affiliate which default
(1) involves the failure to pay a matured obligation in any one case or in the aggregate
in an amount of at least $5,000,000, or (2) permits the acceleration of the maturity
of obligations in any one case or in the aggregate in an amount of at least $5,000,000
by any other party to or beneficiary with respect to such Indebtedness, or (ii)
any other contract to which any Seller or such Affiliate is a party which default
(1) involves the failure to pay a matured obligation in any one case or in the aggregate
in an amount of at least $5,000,000, or (2) permits the acceleration of the maturity
of obligations in any one case or in the aggregate in an amount of at least $5,000,000
by any other party to or beneficiary of such contract.

 

46

 

c.  Assignment.  Assignment or attempted assignment by any Seller
of this Agreement or any rights hereunder without first obtaining the specific written
consent of Buyer, or the granting by Seller of any security interest, lien or other
encumbrances on any Purchased Mortgage Loans to any person other than Buyer.

 

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

 

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

 

f.  Breach of Financial Representation or Covenant
or Obligation.  A breach by any Seller
of any of the representations, warranties or covenants or obligations set forth
in Sections 13(a)(1), 13(a)(6), 13(a)(7), 13(a)(12), 13(a)(19), 14(a), 14(b), 14(e),
14(f), 14(r), 14(w), 14(x), 14(ee) or 14(ff) of this Agreement.

 

g.  Breach of Non-Financial Representation or Covenant.  A breach by any Seller of any other material representation,
warranty or covenant set forth in this Agreement (and not otherwise listed in Section 15(f)
above) which breach is not cured within five (5) Business Days (other than the representations
and warranties set forth in Schedule 1, which shall be considered solely for
the purpose of determining the Market Value and the obligation to repurchase such
Mortgage Loan unless (i) such 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 Buyer
in its sole discretion to be materially false or misleading on a regular basis.

 

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

 

i.  Failure to Transfer.  Any Seller fails to transfer the Purchased Mortgage
Loans to Buyer on the applicable Purchase Date (provided Buyer has tendered the
related Purchase Price).

 

j.  Judgment.  A final judgment or judgments for the payment
of money in excess of $5,000,000 in an individual amount or $25,000,000 in the aggregate
shall be rendered against any Seller or any of its Affiliates by one or more courts,
administrative tribunals or other bodies having jurisdiction and the same shall
not be satisfied, discharged (or provision shall not be made for such discharge)
or bonded, or a stay of execution thereof shall not be procured, within 30 days
from the date of entry thereof.

 

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

 

47

 

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

 

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

 

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

 

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

 

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

 

p.  REIT Status.  The failure of FIC to at any time continue to
be (i) qualified as a real estate investment trust as defined in Section 856
of the Code and (ii) entitled to a dividend paid deduction under Section 857
of the Code with respect to dividends paid by it with respect to each taxable year
for which it claims a deduction on its Form 1120 – REIT filed with the United States
Internal Revenue Service for such year, or FIC has engaged in any “prohibited transactions”
as defined in Section 857(b)(6)(B)(iii) and (C) of the Code, which, either
in any one instance or in the aggregate, is reasonably likely to result in a Material
Adverse Effect or in any material impairment of the right or ability of Seller to
carry on its business substantially as now conducted, or in any material liability
on the part of Seller.

 

q.  REIT Asset and Income Tests.  The Seller and the Buyer each agree that should
the Seller enter into a repurchase agreement or credit facility with any Person
other than the Buyer, an Affiliate of the Buyer, Merrill Lynch Bank USA or an Affiliate
of Merrill Lynch Bank USA which by its terms provides more favorable terms with
respect to any REIT compliance or asset and income tests, including without limitation
provisions covering the same or similar subject matter set forth in Sections 10(c)(11)
and 13(a)(27) (a “More Favorable Agreement”), the terms of this Agreement
shall be deemed automatically amended to include such more favorable terms contained
in such More Favorable Agreement; provided, that in the event that such More Favorable
Agreement is terminated, upon notice by the Seller to the Buyer of such termination,
the original terms of this Agreement shall be deemed to be automatically reinstated.  The Seller and the Buyer further agree to execute
and deliver an amendment to this Agreement evidencing such provisions, provided
that the execution of such

 

48

 

amendment shall not be a precondition
to the effectiveness of such amendment, but shall merely be for the convenience
of the parties hereto.  Promptly upon the
Seller entering into a More Favorable Agreement with any Person other than the Buyer,
the Seller shall notify the Buyer of such More Favorable Agreement.

 

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

 

16.  Remedies Upon Default

 

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

 

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

 

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

 

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

 

d.  Buyer shall have the right to direct all Servicers
then servicing any Purchased Mortgage Loans to remit all collections thereon to
Buyer, and if any such payments are received by any Seller, the Sellers shall not
commingle the amounts

 

49

 

received with other funds of the
Sellers and shall promptly pay them over to Buyer.  Buyer shall also have the right to terminate any
one or all of the Servicers then servicing any Purchased Mortgage Loans with or
without cause.  In addition, Buyer shall have
the right to immediately sell the Purchased Mortgage Loans and liquidate all Repurchase
Assets.  Such disposition of Purchased Mortgage
Loans may be, at Buyer’s option, on either a servicing-released or a servicing-retained
basis.  Buyer shall be entitled to place the
Purchased Mortgage Loans in a pool for issuance of mortgage-backed securities at
the then-prevailing price for such securities and to sell such securities for such
prevailing price in the open market.  Buyer
shall also be entitled to sell any or all of such Mortgage Loans individually for
the prevailing price.  Buyer shall also be
entitled, in its sole discretion to elect, in lieu of selling all or a portion of
such Purchased Mortgage Loans, to give the Sellers credit for such Purchased Mortgage
Loans and the Repurchase Assets in an amount equal to the Market Value of the Purchased
Mortgage Loans against the aggregate unpaid Repurchase Price and any other amounts
owing by the Sellers hereunder.

 

e.  Upon the happening of one or more Events of Default,
Buyer may apply any proceeds from the liquidation of the Purchased Mortgage Loans
and Repurchase Assets to the Repurchase Prices hereunder and all other Obligations
in the manner Buyer deems appropriate in its sole discretion.

 

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

 

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

 

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

 

50

 

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

 

j.  Buyer may enforce its rights and remedies hereunder
without prior judicial process or hearing, and each Seller hereby expressly waives
any defenses such Seller might otherwise have to require Buyer to enforce its rights
by judicial process.  Each Seller also waives
any defense (other than a defense of payment or performance) such Seller might otherwise
have arising from the use of nonjudicial process, enforcement and sale of all or
any portion of the Repurchase Assets, or from any other election of remedies.  Each Seller recognizes that nonjudicial remedies
are consistent with the usages of the trade, are responsive to commercial necessity
and are the result of a bargain at arm’s length.

 

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

 

17.  Reports

 

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

 

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

 

(2) as soon as available and in any event within ninety
(90) days after the end of each fiscal year of FIC, the consolidated and consolidating
balance sheets of FIC and its consolidated Subsidiaries as at the end of such fiscal
year and the related consolidated statements of income and retained earnings and

 

51

 

of cash flows for FIC and its consolidated Subsidiaries for such year, setting
forth in each case in comparative form the figures for the previous year, accompanied
by an opinion thereon of independent certified public accountants, a member of AICPA,
which opinion shall not be qualified as to scope of audit or going concern and shall
state that said consolidated and consolidating financial statements fairly present
the consolidated financial condition and results of operations of FIC and its respective
consolidated Subsidiaries as at the end of, and for, such fiscal year in accordance
with GAAP;

 

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

 

(4) if applicable, copies of any 10-Ks, 10-Qs, registration
statements and other “corporate finance”
SEC filings (other than 8-Ks) by any Seller within 5 Business Days of their filing
with the SEC; provided, that, FIC or any Affiliate will provide Buyer and Credit
Suisse First Boston Corporation with a copy of the annual 10-K filed with the SEC
by any Seller or its affiliates, no later than 90 days after the end of the year;

 

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

 

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

 

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

 

52

 

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

 

(9) 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 any Seller or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

53

 

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

 

(f)  with respect
to any Purchased Mortgage Loan, immediately upon receipt of notice or knowledge
thereof, that the underlying Secured Property has been damaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged
so as to affect adversely the value of such Mortgaged Loan;

 

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

 

(h)  immediately
following notice or knowledge of any claim for any Purchased Mortgage Loan against
any Environmental Policy;

 

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

 

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

 

b.  Officer’s Certificates.  In conjunction with the delivery of each of the
financial statements to be delivered by FIC pursuant to Section 17(a)(1) and
(2) above, FIC shall deliver to Buyer a certificate of a Responsible Officer of
such Seller, in the form of Exhibit D hereto certifying that, as of the date
of such financial statements and as of the date of such certificates, the Sellers
are in compliance with all the terms of this Agreement and setting forth the basis
for such compliance, including the calculation of each financial ratio and covenant
required to be satisfied herein.

 

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

 

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

 

54

 

e.  Asset Tape.  If required pursuant to Section 14(g), the
Sellers shall provide to Buyer, electronically, in a format mutually acceptable
to Buyer and the Sellers, an Asset Tape by no later than the Reporting Date.

 

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

 

18.  Repurchase Transactions

 

Buyer may, in its sole election, engage in repurchase transactions
with the Purchased Mortgage Loans or otherwise pledge, hypothecate, assign, transfer
or otherwise convey the Purchased Mortgage Loans with a counterparty of Buyer’s
choice.  Unless an Event of Default shall
have occurred, no such transaction shall relieve Buyer of its obligations to transfer
Purchased Mortgage Loans to the related Seller pursuant to Section 4 or 6 hereof,
or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations
of, the Sellers pursuant to Section 7 hereof.  In the event Buyer engages in a repurchase transaction
with any of the Purchased Mortgage Loans or otherwise pledges or hypothecates any
of the Purchased Mortgage Loans, Buyer shall have the right to assign to Buyer’s
counterparty any of the applicable representations or warranties herein and the
remedies for breach thereof, as they relate to the Purchased Mortgage Loans that
are subject to such repurchase transaction.

 

19.  Single Agreement

 

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

 

20.  Notices and Other Communications

 

Any and all notices (with the exception of Transaction
Requests or Purchase Confirmations, Margin Calls or Repurchase Requests, which shall
be delivered via facsimile and/or electronically only), statements, demands or other
communications hereunder may be given by a party to the other by mail, facsimile,
telegraph, messenger or otherwise to the address specified below, or so sent to
such party at any other place specified in a notice of change of address hereafter
received by the other.  All notices, demands
and requests hereunder may be

 

55

 

made orally, to be confirmed
promptly in writing, or by other communication as specified in the preceding sentence.

 

If to a Seller:

 

	
   

  	
  Fieldstone Mortgage Company

  
	
   

  	
  11000 Broken Land Parkway

  
	
   

  	
  Suite 600

  
	
   

  	
  Columbia, MD 21044

  
	
   

  	
  Attention: Treasurer

  
	
   

  	
  Phone Number: 410-772-7275

  
	
   

  	
  Fax Number: 443-367-2172

  
	
   

  	
   

  
	
   

  	
  rpartlow@fmcmortgage.com

  
	
   

  	
  mkrebs@fmcmortgage.com

  
	
   

  	
   

  
	
   

  	
  Fieldstone Investment Corporation

  
	
   

  	
  11000 Broken Land Parkway

  
	
   

  	
  Suite 600

  
	
   

  	
  Columbia, MD 21044

  
	
   

  	
  Attention: Treasurer

  
	
   

  	
  Phone Number: 410-772-7275

  
	
   

  	
  Fax Number: 443-367-2172

  
	
   

  	
   

  
	
   

  	
  rpartlow@fmcmortgage.com

  
	
   

  	
  mkrebs@fmcmortgage.com

  

 

with a copy to:

 

	
   

  	
  Kevin Gralley

  
	
   

  	
  Hogan & Hartson, LLP

  
	
   

  	
  111 S. Calvert St., Suite 1600

  
	
   

  	
  Baltimore, MD 21202

  
	
   

  	
  Phone Number: 410-659-2738

  
	
   

  	
  Fax Number: 410-539-6981

  
	
   

  	
   

  
	
   

  	
  kggralley@hhlaw.com

  

 

56

 

 

If to Buyer:

 

For Transaction Requests
and Purchase Confirmations:

 

	
  Credit Suisse First Boston Mortgage Capital LLC

  	
   

  	
   

  
	
  302 Carnegie Center, 2nd Floor

  	
   

  	
   

  
	
  Princeton, NJ 08540

  	
   

  	
   

  
	
  Attention: Tim Callahan

  	
   

  	
   

  
	
  Phone Number: 609-627-5053

  	
   

  	
   

  
	
  Fax Number: 609-627-5080

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  tim.callahan@csfbconnect.com

  	
   

  	
   

  

 

For all other Notices:

 

	
  Credit Suisse First Boston Mortgage Capital LLC

  	
   

  	
   

  
	
  302 Carnegie Center, 2nd Floor

  	
   

  	
   

  
	
  Princeton, NJ 08540

  	
   

  	
   

  
	
  Attention: Gary Timmerman

  	
   

  	
   

  
	
  Phone Number: 609-627-5026

  	
   

  	
   

  
	
  Fax Number: 609-627-5080

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  gary.timmerman@csfbconnect.com

  	
   

  	
   

  

 

with
a copy to:

 

	
  Credit Suisse First Boston Mortgage Capital LLC

  	
   

  	
   

  
	
  Eleven Madison Avenue

  	
   

  	
   

  
	
  New York, NY 10010

  	
   

  	
   

  
	
  Attention:

  	
  Legal Department

  	
   

  	
   

  
	
   

  	
  Bruce Kaiserman

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  kaiserman@csfbconnect.com

  	
   

  	
   

  

 

21.  Entire Agreement; Severability

 

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

 

22.  Non assignability

 

The Program Agreements are not assignable by the Sellers.  Buyer may from time to time assign all or a portion
of its rights and obligations under this Agreement and the Program Agreements; provided,
however that Buyer shall maintain, for review by the Sellers upon written

 

57

 

request,
a register of assignees and a copy of an executed assignment and acceptance by Buyer
and assignee (“Assignment and Acceptance”),
specifying the percentage or portion of such rights and obligations assigned.  Upon such assignment, (a) such assignee shall
be a party hereto and to each Program Agreement to the extent of the percentage
or portion set forth in the Assignment and Acceptance, and shall succeed to the
applicable rights and obligations of Buyer hereunder, and (b) Buyer shall, to the
extent that such rights and obligations have been so assigned by it to either (i)
an Affiliate of Buyer approved by the Sellers (such approval not to be unreasonably
withheld) which assumes the obligations of Buyer or (ii) to another Person approved
by the Sellers (such approval not to be unreasonably withheld) which assumes the
obligations of Buyer, be released from its obligations hereunder and under the Program
Agreements.  The Sellers shall continue to
take directions solely from Buyer unless Buyer has assigned all its rights and obligations
hereunder in accordance with the preceding statement.  Buyer may distribute to any prospective assignee
any document or other information delivered to Buyer by the Sellers.

 

23.  Set-off

 

In addition to any rights and remedies of Buyer provided
by law, Buyer shall have the right, without prior notice to the Sellers, any such
notice being expressly waived by each Seller to the extent permitted by applicable
law, upon any amount becoming due and payable by any Seller hereunder (whether at
the stated maturity, by acceleration or otherwise) to set-off and appropriate and
apply against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or claims,
in any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by Buyer or any branch or agency
thereof to or for the credit or the account of the Sellers.  Buyer agrees promptly to notify the Sellers after
any such set-off and application made by Buyer; provided, that the failure to give
such notice shall not affect the validity of such set-off and application.

 

24.  Binding Effect; Governing Law; Jurisdiction

 

a.  This Agreement shall be binding and inure to the
benefit of the parties hereto and their respective successors and assigns, except
that no Seller may assign or transfer any of its rights or obligations under this
Agreement, any Transaction Request, Purchase Confirmation or any other Program Agreement
without the prior written consent of Buyer. 
The Sellers acknowledges that the obligations of Buyer hereunder or otherwise
are not the subject of any guaranty by, or recourse to, any direct or indirect parent
or other Affiliate of Buyer.  THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

 

b.  EACH SELLER HEREBY
WAIVES TRIAL BY JURY.  EACH SELLER HEREBY
IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF ANY COURT OF NEW YORK COUNTY, OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM

 

58

 

AGREEMENTS IN ANY
ACTION OR PROCEEDING.  EACH SELLER HEREBY SUBMITS TO, AND WAIVES ANY
OBJECTION THEY MAY HAVE TO, NONEXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE
COURTS OF NEW YORK COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO
THE PROGRAM AGREEMENTS.

 

25.  No Waivers, Etc.

 

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

 

26.  Intent

 

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

 

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

 

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

 

d.  It is understood that this Agreement constitutes
a “netting contract”
as defined in and subject to Title IV of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (“FDICIA”)
and each payment entitlement and payment obligation under any Transaction hereunder
shall constitute a “covered contractual
payment entitlement” or “covered contractual payment obligation”,

 

59

 

respectively,
as defined in and subject to FDICIA (except insofar as one or both of the parties
is not a “financial institution”
as that term is defined in FDICIA).

 

27.  Disclosure Relating to Certain Federal Protections

 

The parties acknowledge that they have been advised that:

 

a.  in the case of Transactions
in which one of the parties is a broker or dealer registered with the Securities
and Exchange Commission (“SEC”)
under Section 15 of the Securities Exchange Act of 1934 (“1934 Act”), the Securities
Investor Protection Corporation has taken the position that the provisions of the
Securities Investor Protection Act of 1970 (“SIPA”) do not protect the other party with respect
to any Transaction hereunder;

 

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

 

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

 

28.  Power of Attorney

 

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

 

29.  Buyer May Act Through Affiliates

 

Buyer may, from time to time, designate one or more affiliates
for the purpose of performing any action hereunder.

 

60

 

30.  Indemnification; Obligations

 

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

 

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

 

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

 

61

 

31.  Counterparts

 

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

 

32.  Confidentiality

 

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

 

33.  Recording of Communications

 

Buyer and the Sellers shall have the right (but not the
obligation) from time to time to make or cause to be made tape recordings of communications
between its employees and those of the other party with respect to Transactions.  Buyer and the Sellers consent to the

 

62

 

admissibility
of such tape recordings in any court, arbitration, or other proceedings.  The parties agree that a duly authenticated transcript
of such a tape recording shall be deemed to be a writing conclusively evidencing
the communications of the persons so recorded.

 

34.  Periodic
Fee

 

The Sellers shall pay to Buyer in immediately available
funds a non refundable fee due and owing upon closing and payable in arrears no
later than the Price Differential Payment Date following the end of each calendar
quarter, in the amount set forth in the fee schedule attached hereto as Annex
II.  Such payment shall be made in Dollars,
in immediately available funds, without deduction, set-off or counterclaim, to Buyer
at such account designated by Buyer.

 

The Periodic Fee will be waived for any quarter in which
any Affiliate of Buyer acts as sole lead underwriter for the securitization of the
related Repurchase Asset.

 

Upon any failure to enter into Transactions solely as a
result of any of the events listed in Section 10(b)(8), no fee payable by the
Sellers in accordance with this Section shall be due which is attributable
to the period commencing on the date on which Buyer has ceased entering into Transactions
hereunder up to but not including the earliest to occur of the Buyer (i) giving
notice that the events in Section 10(b)(8) no longer exist and (ii) agreement
or other evidence of agreement to enter into Transactions hereunder (including without
limitation actually entering into Transactions hereunder) and (iii) the Termination
Date.

 

35.  Non-Utilization Fee

 

No later than the Price Differential Payment Date, the
Sellers shall pay to Buyer a non-refundable fee for the preceding calendar month
calculated in accordance with the formula set forth in the schedule attached
hereto as Annex I.  Such payment shall be
made in Dollars, in immediately available funds, without deduction, set-off or counterclaim,
to Buyer at such account designated by Buyer.

 

Upon any failure to enter into Transactions solely as a
result of any of the events listed in Section 10(b)(8), no fee payable by the
Sellers in accordance with this Section shall be due which is attributable
to the period commencing on the date on which Buyer has ceased entering into Transactions
hereunder up to but not including the earliest to occur of the Buyer (i) giving
notice that the events in Section 10(b)(8) no longer exist and (ii) agreement
or other evidence of agreement to enter into Transactions hereunder (including without
limitation actually entering into Transactions hereunder) and (iii) the Termination
Date.

 

36.  Periodic Due Diligence Review

 

Each Seller acknowledges that Buyer has the right to perform
continuing due diligence reviews with respect to the Mortgage Loans, for purposes
of verifying compliance with the representations, warranties and specifications
made hereunder, or otherwise, and each Seller agrees that upon reasonable (but no
less than one (1) Business Day’s) prior notice unless an

 

63

 

Event of Default shall have
occurred, in which case no notice is required, to the Sellers, Buyer or its authorized
representatives will be permitted during normal business hours to examine, inspect,
and make copies and extracts of, the Mortgage Files and any and all documents, records,
agreements, instruments or information relating to such Mortgage Loans in the possession
or under the control of the Sellers and/or the Custodian.  The Sellers also shall make available to Buyer
a knowledgeable financial or accounting officer for the purpose of answering questions
respecting the Mortgage Files and the Mortgage Loans.  Without limiting the generality of the foregoing,
each Seller acknowledges that Buyer may purchase Mortgage Loans from the Sellers
based solely upon the information provided by the Sellers to Buyer in the Purchased
Assets Schedule and the representations, warranties and covenants contained
herein, and that 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 Mortgage Loans purchased
in a Transaction, including, without limitation, ordering Broker’s price opinions,
New credit reports and New appraisals on the related Mortgaged Properties and otherwise
re-generating the information used to originate such Mortgage Loan.  Buyer may underwrite such Mortgage Loans itself
or engage a mutually agreed upon third party underwriter to perform such underwriting.  Each Seller agrees to cooperate with Buyer and
any third party underwriter in connection with such underwriting, including, but
not limited to, providing Buyer and any third party underwriter with access to any
and all documents, records, agreements, instruments or information relating to such
Mortgage Loans in the possession, or under the control, of the Sellers.  Each Seller further agrees that Seller shall pay
all reasonable out-of-pocket costs and expenses incurred by Buyer in connection
with Buyer’s activities pursuant to this Section 36 (“Due Diligence Costs”).

 

37.  Authorized Representatives

 

Any of the persons whose signatures and titles appear on
Schedule 2 are authorized, acting singly for the Sellers or the Buyer, as
the case may be, under this Agreement

 

38.  Acknowledgement Of Anti-Predatory Lending
Policies

 

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

 

39.  Documents Mutually Drafted

 

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

 

40.  Joint and Several

 

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

 

[Signature Page Follows]

 

64

 

IN WITNESS WHEREOF, each Seller and the Buyer have caused
their names to be signed hereto by their respective officers thereunto duly authorized
as of the date first above written.

 

Credit Suisse First Boston Mortgage Capital LLC

 

 

	
  By:

  	
  /s/ Bruce S. Kaiserman

  	
   

  
	
   

  
	
  Title:

  	
  Vice President

  	
   

  
	
   

  
	
  Date:

  	
  March 31, 2005

  	
   

  
	
   

  
	
   

  
	
  Fieldstone Mortgage
  Company

  	
   

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Mark C. Krebs

  	
   

  
	
   

  
	
  Title:

  	
  Sr. Vice President
  & Treasurer

  	
   

  
	
   

  
	
  Date:

  	
  March 31, 2005

  	
   

  
	
   

  
	
   

  
	
  Fieldstone Investment
  Corporation

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Robert G. Partlow

  	
   

  
	
   

  
	
  Title:

  	
  Sr. Vice President
  & CFO

  	
   

  
	
   

  
	
  Date:

  	
  March 31, 2005

  	
   

  
												

 

 

SCHEDULE 1

 

REPRESENTATIONS AND WARRANTIES WITH
RESPECT TO PURCHASED MORTGAGE LOANS

 

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

 

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

 

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

 

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

 

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

 

Schedule 1-1

 

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

 

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

 

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

 

Schedule 1-2

 

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

 

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

 

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

 

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

 

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

 

(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;

 

Schedule 1-3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Schedule 1-4

 

office in such state, or (D)
not doing business in such state; provided, if a warehouse lender that was the assignee
of the Mortgage Loans was not authorized to do business in the jurisdiction where
the Mortgaged Property is located, the Seller represents and warrants that the financing
of the Mortgage Loan and the holding of an interest in the Mortgage Loan by the
warehouse lender did not constitute doing business in that jurisdiction.

 

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

 

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

 

Schedule 1-5

 

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

 

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

 

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

 

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

 

Schedule 1-6

 

available
to a Mortgagor which would interfere with the right to sell the Mortgaged Property
at a trustee’s sale or the right to foreclose the Mortgage.  The Mortgage Note and Mortgage are on forms acceptable
to Freddie Mac or Fannie Mae.

 

(t)                                    Occupancy
of the Mortgaged Property.  To the best
of Seller’s knowledge, as of the Purchase Date (i) the Mortgaged Property is lawfully
occupied under applicable law and (ii) all inspections, licenses and certificates
required to be made or issued with respect to all occupied portions of the Mortgaged
Property and, with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting certificates, have been
made or obtained from the appropriate authorities.  Seller has not received notification from any
Governmental Authority that the Mortgaged Property is in material non-compliance
with such laws or regulations, is being used, operated or occupied unlawfully or
has failed to have or obtain such inspection, licenses or certificates, as the case
may be.  With respect to any Mortgage Loan
originated with an “owner-occupied” Mortgaged property, the Mortgagor represented
at the time of origination of the Mortgage Loan that the Mortgagor would occupy
the Mortgaged Property as the Mortgagor’s primary residence.

 

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

 

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

 

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

 

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

 

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

 

Schedule 1-7

 

(z)                                   Consolidation
of Future Advances.  Any future advances
made to the Mortgagor prior to the Purchase Date have been consolidated with the
outstanding principal amount secured by the Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term.  The lien of the Mortgage securing the consolidated
principal amount is expressly insured as having first or second lien priority by
a title insurance policy, an endorsement to the policy insuring the mortgagee’s
consolidated interest or by other title evidence acceptable to Fannie Mae and Freddie
Mac.  The consolidated principal amount does
not exceed the original principal amount of the Mortgage Loan.

 

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

 

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

 

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

 

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

 

Schedule 1-8

 

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

 

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

 

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

 

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

 

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

 

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

 

(kk)                            No Defense
to Insurance Coverage.  No action has
been taken or failed to be taken, no event has occurred and no state of facts exists
or has existed on or prior to the Purchase Date (whether or not known to 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 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.

 

Schedule 1-9

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(vv)                          Committed
Mortgage Loans.  Each Committed Mortgage
Loan is covered by a Take-out Commitment, does not exceed the availability under
such Take-out Commitment (taking into consideration mortgage loans which have been
purchased by the respective Take-out Investor under the Take-out Commitment and
mortgage loan which Seller has identified to Buyer as covered by such Take-out Commitment)
and conforms to the requirements and the specifications set forth in such Take-out
Commitment and the related regulations, rules,

 

Schedule 1-10

 

requirements
and/or handbooks of the applicable Take-out Investor and is eligible for sale to
and insurance or guaranty by, respectively the applicable Take-out Investor and
applicable insurer.  Each Take-out Commitment
is a legal, valid and binding obligation of Seller enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a proceeding in equity
or at law).

 

(ww)                      Primary Mortgage Guaranty Insurance.  Each Mortgage Loan is insured as to payment defaults
by a policy of primary mortgage guaranty insurance in the amount required where
applicable, and by an insurer approved, by the applicable Take-out Investor, if
applicable, and all provisions of such primary mortgage guaranty insurance have
been and are being complied with, such policy is in full force and effect, and all
premiums due thereunder have been paid.  Each
Mortgage Loan which is represented to Buyer to have, or to be eligible for, FHA
insurance is insured, or eligible to be insured, pursuant to the National Housing
Act.  Each Mortgage Loan which is represented
by Seller to be guaranteed, or to be eligible for guaranty,
by the VA is guaranteed, or eligible to be guaranteed, under the provisions of Chapter
37 of Title 38 of the United States Code. 
As to each FHA insurance certificate or each VA guaranty certificate, Seller
has complied with applicable provisions of the insurance for guaranty contract and
federal statutes and regulations, all premiums or other charges due in connection
with such insurance or guarantee have been paid, there has been no act or omission
which would or may invalidate any such insurance or guaranty, and the insurance
or guaranty is, or when issued, will be, in full force and effect with respect to
each Mortgage Loan.  There are no defenses,
counterclaims, or rights of setoff affecting the Mortgage Loans or affecting the
validity or enforceability of any private mortgage insurance or FHA insurance applicable
to the Mortgage Loans or any VA guaranty with respect to the Mortgage Loans.

 

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

 

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

 

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

 

Schedule 1-11

 

(aaa)                      Revolving Period. 
Each HELOC provides for an initial period (the “Revolving Period”)
during which the Mortgagor is required to make monthly payments of interest payable
in arrears and requires repayment of the unpaid principal balance thereof over a
period following the Revolving Period (the “Repayment Period”) which is not
in excess of 120 months. As of the Purchase Date no HELOC was in its Repayment Period.
The Mortgage Interest Rate on each Mortgage Loan adjusts periodically in accordance
with the Credit Line Agreement to equal the sum of the Index and the related Gross
Margin. On each Adjustment Date the related Seller has made interest rate adjustments
on the Mortgage Loan which are in compliance with the related Mortgage and Mortgage
Note and applicable law.

 

Schedule 1-12

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