Exhibit 10.1
MASTER REPURCHASE AGREEMENT (2007 WHOLE LOAN)
Dated as of May 9, 2007
AMONG:
Wachovia Bank, National Association, as buyer ("Buyer", which term shall include
any "Principal" as defined and provided for in Annex I), or as agent pursuant
hereto ("Agent");
NFI Repurchase Corporation ("NFI Repurchase"), as a seller, NMI Repurchase
Corporation ("NMI Repurchase"), as a seller, HomeView Lending, Inc. ("HVL"), as
a seller, and NMI Property Financing, Inc. ("NovaStar Asset"), as a seller (NFI
Repurchase, NMI Repurchase, HVL and NovaStar Asset, each a "Seller" and
collectively, jointly and severally, the "Sellers") and NovaStar Financial, Inc.
("NFI"), as a guarantor, NFI Holding Corporation ("NFI Holding"), as a
guarantor, NovaStar Mortgage, Inc. ("NMI"), as a guarantor, and HVL, as a
guarantor (NFI, NFI Holding, NMI, and HVL, each a "Guarantor" and collectively,
jointly and severally, the "Guarantors")
1. APPLICABILITY
Buyer shall, from time to time, upon the terms and conditions set forth
herein, agree to enter into transactions in which the related Seller transfers
to Buyer Eligible Assets against the transfer of funds by Buyer, with a
simultaneous agreement by Buyer to transfer to such Seller such Purchased Assets
at a date certain, against the transfer of funds by such Seller. Each such
transaction shall be referred to herein as a "Transaction", and, unless
otherwise agreed in writing, shall be governed by this Agreement.
On the initial Purchase Date, Buyer will purchase the REO Stock from
the Sellers in connection with the initial Transaction.
After the initial Purchase Date, as part of separate Transactions any
Seller may request and Buyer will fund, subject to the terms and conditions of
this Agreement, an increase in the Purchase Price for the REO Stock based upon
the acquisition of additional REO Property by the REO Subsidiary. Transactions
relating to Purchase Price Increases will be terminated and the Repurchase Price
for the related REO Property paid to Buyer in accordance with Section 3(e)
hereof.
2. DEFINITIONS AND INTERPRETATION
a. Defined Terms.
"2006 Dividend" shall mean the dividend distribution to be made by NFI
to comply with U.S. federal income tax law requirements for REITs to distribute
at least 90% of their REIT taxable income.
"Additional Purchased Assets" shall have the meaning assigned thereto
in Section 6(a) hereof.
"Adjustable Rate Loan" shall mean a Loan which provides for the
adjustment of the Mortgage Interest Rate payable in respect thereto.
"Adjusted Tangible Net Worth" shall mean at any date:
(a) Book Net Worth plus the notional amount of any Trust
Preferred Securities, minus
(b) The sum of (1) all assets which would be classified as
intangible assets of NFI and its consolidated Subsidiaries under GAAP
(except purchased and capitalized value of servicing rights),
including, without limitation, goodwill (whether representing the
excess cost over book value of assets acquired or otherwise), patents,
trademarks, trade names, copyrights, franchises and deferred charges
(including, without limitation, unamortized debt discount and expense,
organization costs and research and product development costs) plus (2)
all receivables from directors, officers and shareholders of NFI and
its consolidated Subsidiaries, minus
(c) The amount of unrealized gains on debt securities (as
defined in FASB 115) of NFI and any Subsidiaries of NFI Holding, plus
(d) The amount of unrealized losses on debt securities (as
defined in FASB 115) of NFI and any Subsidiaries of NFI Holding.
Provided that in all cases such amounts shall be determined by
combining the relevant figures for NFI and its consolidated
Subsidiaries and its Affiliates, as accounted for under the equity
method.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting equity, by contract or otherwise.
"Aged Loan" shall mean a Loan (other than a Non-performing Hospital
Line Asset, a Sub-performing Hospital Line Asset or an REO Hospital Line Asset)
which has been subject to a Transaction under this Agreement for a period
between 180 and 270 days.
"Agent" means Wachovia Bank, National Association or any successor.
"Agreement" means this Master Repurchase Agreement (2007 Whole Loan),
as it may be amended, supplemented or otherwise modified from time to time.
"Asset Files" shall mean, collectively, the Loan Files and the REO
Property Files.
"BPO" means an opinion of the fair market value of a Mortgaged Property
given by a real estate agent or broker licensed in the jurisdiction where such
Mortgaged Property is located or a certified third party appraiser which
generally includes three comparable sales and three comparable listings;
provided, that such BPO shall be no more than 60 days old.
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"Book Net Worth" shall mean the excess of total assets of NFI and its
consolidated Subsidiaries over Total Liabilities of NFI and its consolidated
Subsidiaries determined in accordance with GAAP (or such non-GAAP principles as
may be disclosed to and approved by Buyer from time to time).
"Borrower" means the obligor or obligors on a Note, including any
Person that has acquired the related collateral and assumed the obligations of
the original obligor or obligors under the Note.
"Breakage Costs" shall have the meaning assigned thereto in Section
3(c) herein.
"Bulk Loan" means any Loan that a Seller has conducted a due diligence
review of and purchased in accordance with such Seller's "purchase guidelines"
on a bulk basis (i) which is not delinquent and, unless otherwise approved in
writing by the Buyer, has not been subject to any repurchase transaction under
any repurchase facility between the related Seller or any Affiliate of such
Seller and any other Person and (ii) in respect of which the related Seller has
notified the Buyer of the complete chain of transfers from the related
originator to such Seller.
"Business Day" means any day other than (i) a Saturday or Sunday or
(ii) a day upon which the New York Stock Exchange or the Federal Reserve Bank of
New York is obligated by law or executive order to be closed.
"Buyer Deed" shall mean the duly executed deed or similar instrument in
favor of the Buyer provided by the REO Subsidiary to the Custodian for any REO
Property to be transferred to the REO Subsidiary and to be subject to a
Transaction under this Agreement. The related Buyer Deed shall (A) name the
Buyer or its designee as the assignee or beneficiary thereof, and (B) be in
recordable form in accordance with applicable state law.
"Buyer's MV Margin Amount" means, with respect to any Transaction as of
any date of determination, the amount obtained by application of Buyer's MV
Margin Percentage to the Repurchase Price for such Transaction as of such date.
"Buyer's MV Margin Percentage" shall have the meaning assigned thereto
in the Side Letter.
"Buyer's Par Margin Amount" means, with respect to any Transaction as
of any date of determination, the amount obtained by application of the Buyer's
Par Margin Percentage to the Repurchase Price for such Transaction as of such
date.
"Buyer's Par Margin Percentage" shall have the meaning assigned thereto
in the Side Letter.
"Change in Control" shall mean (i) any person or group of persons
(other than (a) any subsidiary of NFI or (b) any employee or director benefit
plan or stock plan of NFI or any subsidiary of NFI or any trustee or fiduciary
with respect to any such plan when acting in that capacity or any trust related
to any such plan) shall have acquired beneficial ownership of shares
representing more than 50% of the combined voting power represented by the
outstanding common stock of NFI (within the meaning of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended,
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and the applicable rules and regulations thereunder) or (ii) the related Seller
ceases to own 100% of the equity interests in the REO Subsidiary.
"Change of Control Fee" shall have the meaning assigned thereto in the
Side Letter.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by Buyer (or any Affiliate of
Buyer) with any request, guideline or directive (whether or not having the force
of law) of any Governmental Authority made or issued after the date of this
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meaning assigned thereto in Section 8
hereof.
"Collateral Security, Setoff and Netting Agreement" means the
Collateral Security, Setoff and Netting Agreement dated as of April 18, 2007
among Buyer and certain Affiliates and NFI and certain Affiliates as it may be
further amended from time to time.
"Collection Account" means, the account designated "Wachovia Bank,
National Association P&I Account", having the account number identified on
Exhibit F attached hereto, established by Sellers with Buyer for the benefit of
Buyer pursuant to the Collection Account Control Agreement.
"Collection Account Control Agreement" means the Collection Account
Control Agreement, dated as of May 9, 2007, among Sellers, each as a seller,
Buyer, as buyer, and Wachovia Bank, National Association, as bank, which
establishes the account designated "Wachovia Bank, National Association P&I
Account".
"Collection Account Control Agreement (REO)" means the Collection
Account Control Agreement (REO), dated as of May 9, 2007, among Sellers, each as
a seller, Buyer, as buyer, and Wachovia Bank, National Association, as bank,
which establishes the account designated "Wachovia Bank, National Association
REO Account".
"Commitment Letter" means the commitment letter, dated as of April 28,
2007, among the Buyer, the Agent, Wachovia Bank, National Association, NFI and
NMI.
"Computer Tape" means a computer tape or other electronic medium
generated by or on behalf of the related Seller and delivered to Buyer and
Custodian which provides information relating to the Purchased Assets, including
the information set forth in the Loan Schedule, in a format acceptable to Buyer.
"Confirmation" shall have the meaning assigned thereto in Section 4(b)
hereof.
"Conforming Loan" means a Loan that is eligible for sale to Xxxxxx Xxx,
Xxxxxxx Mac or GNMA, and that is subject to a takeout commitment from an
investor approved by Buyer, which
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takeout commitment has been assigned to the Buyer in connection with Buyer's
purchase of such Conforming Loan pursuant to this Agreement.
"Correspondent Loan" means any Loan that a Seller purchases on a
"pre-approval" and "flow" basis which (i) the related Seller has underwritten to
its "origination guidelines" (ii) is not a Wet Loan, (iii) is not delinquent
and, unless otherwise approved in writing by Buyer, has not been subject to any
repurchase transaction under any repurchase facility between the related Seller
or any Affiliate of such Seller and any other Person, and (iv) in respect of
which such Seller has notified the Buyer of the complete chain of transfers from
the related originator to such Seller.
"Custody Agreement" means the Custodial Agreement, dated as of May 9,
2007 among Sellers, Buyer, NMI and Custodian.
"Custodian" means (i) U.S. Bank, National Association, or (ii) another
nationally recognized bank acceptable to Buyer, who will act as Custodian of the
Loans.
"Default" means any event, that, with the giving of notice or the
passage of time or both, would constitute an Event of Default.
"Deposit" shall have the meaning assigned thereto in the Side Letter.
"Default Fee" shall have the meaning assigned thereto in the Side
Letter.
"Default Rate" means, as of any date of determination, the lesser of
(i) the Prime Rate plus 4% and (ii) the maximum rate permitted by applicable
law.
"Delinquent Loan" means any Loan for which a Monthly Payment due
thereon is over 29 days contractually past due, but not more than 59 days
contractually past due.
"Dividend Securities" shall mean notes, bonds, debentures or common or
preferred stock of NFI or its subsidiaries that qualify as property and will be
treated as a deductible dividend to NFI shareholders under the Code, and are
reasonably acceptable to the Buyer.
"Due Date" means the day on which the Monthly Payment is due on a Loan,
exclusive of any days of grace.
"EPD Loan" shall mean a Loan for which the first, second or third
Monthly Payment has been delinquent during the first three months after
origination of such Loan.
"Early Repayment Fee" shall have the meaning assigned thereto in the
Side Letter.
"Effective Date" shall mean the date set forth on the top of the first
page of this Agreement.
"Electronic Tracking Agreement" means that certain electronic tracking
agreement, dated as of May 9, 2007, among Buyer, MERSCORP, Inc., Mortgage
Electronic Registration Systems, Inc., NFI Repurchase, NMI Repurchase
Corporation, HVL and NovaStar Asset.
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"Eligible Asset" shall have the meaning assigned thereto in the Side
Letter.
"Eligible Loan" shall have the meaning assigned thereto in the Side
Letter.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which 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 Seller is a
member.
"Existing Agreements" shall include the agreements and facilities set
forth on Schedule 1 attached hereto.
"Event of Default" shall have the meaning assigned thereto in Section
18 hereof.
"Facility" means the comprehensive financing facility which includes
this Agreement, the Existing Agreements, the Master Repurchase Agreement (2007
Investment Grade), the Master Repurchase Agreement (2007 Non-investment Grade),
the Master Repurchase Agreement (2007 Servicing Advances) and the Master
Repurchase Agreement (New York).
"Facility Fees" means, collectively, the Structuring Fee, the Repayment
Fee, the Early Repayment Fee, the Default Fee and the Change in Control Fee.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions over Sellers.
"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.
"Guarantors" means NFI, NFI Holding, NMI and HVL.
"Guaranty" means the Guaranty of the Guarantors, jointly and severally,
in favor of the Buyer, dated as of May 9, 2007.
"Hospital Line Asset" means, an asset identified by any Seller as a
"Hospital Line Asset" on the related Transaction Notice and Asset Schedule,
which is either (i) a Hospital Line Loan, (ii) all equity of the REO Subsidiary;
provided however, no such pledged equity shall be a Hospital Line
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Asset if such pledged equity is, or has been at any time, previously subject to
a Transaction hereunder, (iii) a Performing Hospital Line Asset, (iv) a
Sub-performing Hospital Line Asset, (v) a Non-performing Hospital Line Asset, or
(vi) an REO Hospital Line Asset; provided, that each such Hospital Line Asset
shall be secured by first Lien.
"Hospital Line Loan" means, an Eligible Loan, where such Loan was
acquired by a Seller or an Affiliate thereof as a result of a NovaStar Called
Bond Loan or an EPD Loan.
"HVL" means HomeView Lending, Inc. and its permitted successors and assigns.
"HVL Loan" shall mean a Loan sold to the Buyer under this Agreement by
HVL.
"Income" means, (a) with respect to any Purchased Asset (other than REO
Stock) at any time, any principal distributions thereon and all interest,
dividends and other collections and distributions thereon, but not including any
commitment nor origination fees and (b) with respect to any REO Stock during any
period, any rental payments, if any, and all proceeds of the related REO
Property received upon liquidation of the related REO Property during such
period.
"Indebtedness" shall mean, for any Person: (a) all obligations for
borrowed money; (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
and paid within ninety (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 for account of such Person; (e) capital lease obligations of such Person;
(f) obligations of such Person under repurchase agreements or like arrangements;
(g) indebtedness of others guaranteed on a recourse basis by such Person; (h)
all obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; (i) indebtedness of general
partnerships of which such Person is a general partner; and (j) any other
contingent liabilities of such Person.
"Interest Only Loan" means a Mortgage Loan which only requires payments
of interest for a period of time specified in the related Mortgage Note.
"Investment Company Act" means the Investment Company Act of 1940, as
amended, including all rules and regulations promulgated thereunder.
"LIBOR" shall mean, for each day of a Transaction, a rate based on the
offered rates of the Reference Banks for one-month U.S. dollar deposits, as
determined by the Buyer for the related Purchase Date.
"Lien" shall mean, any mortgage, lien, pledge, charge, security
interest, option or claim or similar encumbrance.
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"Liquidity" means cash, cash equivalents and the aggregate unused
borrowing capacity under the Existing Agreements and Other Facilities that could
be drawn against (taking into account required haircuts).
"Loan" shall mean (i) a first lien or second lien, fixed rate or
adjustable rate, wet or dry funded, closed-end home equity residential loan
(including Conforming Loans, Bulk Loans, Correspondent Loans, Delinquent Loans,
Aged Loans, Hospital Line Loans, Second Lien Loans, Manufactured Home Loans, HVL
Loans, Option ARM Loans and NovaStar Called Bond Loans), (ii) such other type of
loan, lease or other receivable as shall be agreed upon by the parties as
evidenced by Appendix A to the Custody Agreement, as amended or supplemented by
mutual agreement of the parties, or (iii) any interest in, or secured by, any
such loan, lease or other receivable.
"Loan Documents" shall have the meaning assigned thereto in the Custody
Agreement.
"Loan File" shall have the meaning assigned thereto in the Custody
Agreement.
"Loan Schedule" means the list of Loans delivered by a Guarantor or a
Seller to Buyer and Custodian together with each Transaction Notice and attached
by the Custodian to the related Trust Receipt and setting forth as to each Loan
the related Borrower name, the address of the related Mortgaged Property and the
outstanding principal balance of the Loan as of the initial Purchase Date,
together with any other information specified by Buyer from time to time in good
faith.
"Manufactured Home Loan" means a Loan (i) secured by a lien on a
prefabricated or manufactured home and (ii) considered and treated as "real
estate" under applicable law.
"Margin Call" shall have the meaning assigned thereto in Section 6(a)
hereof.
"Margin Deficit" shall have the meaning assigned thereto in Section
6(a) hereof.
"Market Value" means (i) with respect to any Purchased Asset (other
than an REO Property) that is an Eligible Asset, as of any date of
determination, the value ascribed to such asset by Buyer in its sole discretion,
(ii) with respect to an REO Property, the price at which the REO Property could
be sold as determined by Buyer in its sole discretion, and (iii) with respect to
a Purchased Asset that is not an Eligible Asset, zero. For purposes of
determining the Market Value of the REO Stock, the Buyer shall use the Market
Value of the REO Properties owned by the REO Subsidiary.
"Master Repurchase Agreement (2007 Investment Grade)" means that
certain master repurchase agreement, among Variable Funding Capital Corp.,
Wachovia Capital Markets LLC, NovaStar Mortgage, Inc., NovaStar Certificates
Financing LLC, and NovaStar Certificates Financing Corp., to be negotiated among
the parties.
"Master Repurchase Agreement (2007 Non-investment Grade)" means that
certain master repurchase agreement, among Wachovia Investment Holdings, LLC,
Wachovia Capital Markets LLC, NovaStar Mortgage, Inc., NovaStar Certificates
Financing LLC, and NovaStar Certificates Financing Corp. to be negotiated among
the parties.
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"Master Repurchase Agreement (2007 Residual Securities)" means that
certain master repurchase agreement, dated as of April 18, 2007, among Wachovia
Bank, National Association, Wachovia Capital Markets LLC, NovaStar Mortgage,
Inc., NovaStar Certificates Financing LLC, and NovaStar Certificates Financing
Corp., as amended from time to time.
"Master Repurchase Agreement (2007 Servicing Advances)" means that
certain master repurchase agreement, between Wachovia Bank, National Association
and NovaStar Mortgage, Inc., to be negotiated among the parties.
"Master Repurchase Agreement (2007 Servicing Rights)" means that
certain master repurchase agreement (MSR), dated as of April 25, 2007, among
Wachovia Bank, National Association and NovaStar Mortgage, Inc., as amended from
time to time.
"Master Repurchase Agreement (New York)" means that certain master
repurchase agreement, dated as of May 14, 2004, between Wachovia Bank, National
Association and NovaStar Mortgage, Inc., as amended from time to time.
"Material Adverse Change" means any material adverse change in the
business, financial performance, assets, operations or condition (financial or
otherwise) of NFI and its consolidated subsidiaries, taken as a whole.
"Material Adverse Effect" means (a) a Material Adverse Change with
respect to a Guarantor or a Guarantor and its Affiliates that are party to any
Program Document taken as a whole; (b) a material impairment of the ability of a
Guarantor or any Affiliate that is a party to any Program Document to perform
under any Program Document and to avoid any Event of Default; or (c) a material
adverse effect upon the legality, validity, binding effect or enforceability of
any Program Document against a Guarantor or any Affiliate that is a party to any
Program Document.
"Maximum Aggregate Purchase Price" shall have the meaning assigned
thereto in the Side Letter.
"Maximum Combined Aggregate Purchase Price" shall have the meaning
assigned thereto in the Side Letter.
"Monthly Payment" means with respect to any Loan, the scheduled
combined payment of principal and interest payable by a Borrower under the
related Note on each Due Date.
"Mortgage" means a mortgage, deed of trust, or other instrument that
creates a lien on the related Mortgaged Property and secures a Note.
"Mortgage Interest Rate" means, with respect to each Loan, the annual
rate at which interest accrues on such Loan from time to time in accordance with
the provisions of the related Note.
"Mortgaged Property" means, with respect to a Loan, the related
Borrower's fee interest in real property and all other collateral securing
repayment of the debt evidenced by the related Note.
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"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 Seller or any ERISA Affiliate and that is covered by Title IV of ERISA.
"NFI" means NovaStar Financial, Inc. and its permitted successors and assigns.
"NFI Holding" means NFI Holding Corporation and its permitted
successors and assigns.
"NFI Repurchase" means NFI Repurchase Corporation and its permitted
successors and assigns.
"NMI" means NovaStar Mortgage, Inc. and its permitted successors and assigns.
"NMI Repurchase" means NMI Repurchase Corporation and its permitted
successors and assigns.
"Non-Seller Affiliate" means an Affiliate of any Seller or any
Guarantor that is not, itself, a Seller or Guarantor.
"Note" means, with respect to any Loan, the related promissory note
together with all riders thereto and amendments thereof or other evidence of
indebtedness of the related Borrower.
"Notice Date" shall have the meaning assigned thereto in Section 4
hereof.
"Non-performing Hospital Line Asset" means any Hospital Line Asset for
which the related Monthly Payment is more than eighty-nine (89) days
contractually past due or is in the process of foreclosure. If a Hospital Line
Asset has previously been eighty-nine (89) days contractually past due while
being subject to a Transaction, such Hospital Line Asset must have a BPO that is
no more than sixty (60) days old prior to being subject to a Transaction.
Updated BPO's are required every sixty (60) days thereafter for each such
Non-performing Hospital Line Asset.
"NovaStar Asset" means NMI Property Financing, Inc. and its permitted
successors and assigns.
"NovaStar Asset Value" means the value assigned to any Loan by any
Seller based upon the Seller's system of valuing assets.
"NovaStar Called Bond Loan" means a Loan purchased by a Seller in a
"bond collateral call" or "clean-up call" directly from a securitization trust
formed in connection with a securitization by a Seller (or any of Sellers'
Affiliates).
"Obligations" means (a) all of Sellers' and Guarantors' obligation to
pay the Repurchase Price on the Repurchase Date, and other obligations and
liabilities of Sellers and Guarantors, to Buyer or its Affiliates arising under,
or in connection with, the Program Documents or otherwise, whether now existing
or hereafter arising; (b) any and all sums paid by Buyer or on behalf of Buyer
pursuant to the Program Documents in order to preserve any Purchased Asset or
its interest therein;
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(c) in the event of any proceeding for the collection or enforcement of any of
Seller's or any of Guarantors' 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 Asset, or of any exercise by Buyer or such Affiliate of its rights
under the related agreements, including without limitation, reasonable
attorneys' fees and disbursements and court costs; and (d) all of Sellers' and
Guarantors' obligations to Buyer or any other Person pursuant to the Program
Documents.
"Option ARM Loan" means an Adjustable Rate Loan which (i) provides the
Borrower with multiple Monthly Payment options and (ii) may result in negative
amortization, as set forth in the Underwriting Guidelines.
"Other Facilities" means the repurchase or financing facilities
identified on Schedule 4 attached hereto as such Schedule may be amended upon
the mutual agreement of the Buyer and Sellers.
"Performing Hospital Line Asset" means any Hospital Line Asset for
which the related Monthly Payment is no more than thirty (30) days contractually
past due and which is not in the process of foreclosure.
"Person" shall mean any legal person, including any individual,
corporation, partnership, association, joint-stock company, trust, limited
liability company, unincorporated organization, governmental entity or other
entity of similar nature.
"Plan" shall mean an employee benefit or other plan established or
maintained by Seller or any ERISA Affiliate and covered by Title IV of ERISA,
other than a Multiemployer Plan.
"Price Differential" means, with respect to each Transaction as of any
date, the aggregate amount obtained by daily application of the Pricing Rate for
such Transaction to the Purchase Price on a 360-day-per-year basis for the
actual number of days during the period commencing on (and including) the
Purchase Date and ending on (but excluding) the date of determination (reduced
by any amount of such Price Differential in respect of such period previously
paid by the related Seller to Buyer) with respect to such Transaction.
"Pricing Rate" shall have the meaning assigned thereto in the Side
Letter.
"Prime Rate" means the daily prime loan rate as reported in The Wall
Street Journal or if more than one rate is published, the highest of such rates.
"Principal" shall have the meaning given to it in Annex I.
"Program Documents" means this Agreement, the Collateral Security,
Setoff and Netting Agreement, the Guaranty, the Side Letter, the Commitment
Letter, the Custody Agreement, REO Subsidiary Agreement, the Collection Account
Control Agreement, the Collection Account Control Agreement (REO), the
Securitization Side Letter, the Electronic Tracking Agreement, and any other
agreement entered into on or prior to the Effective Date by any of the Sellers,
any of the Guarantors
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and/or the REO Subsidiary, on the one hand, and Buyer or one of its Affiliates
(or Custodian on its behalf) on the other, in connection herewith or therewith.
"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 Date" means the date on which Purchased Assets are to be
transferred by the related Seller to Buyer.
"Purchase Price" shall have the meaning assigned thereto in the Side
Letter.
"Purchase Price Decrease" means a decrease in the Purchase Price for an
REO Property related to the removal of an REO Property from the REO Subsidiary
and the decrease in value of the REO Stock related thereto, as specified by the
related Seller in any Purchase Price Decrease Notice delivered in accordance
with Section 3 hereof.
"Purchase Price Decrease Date" means the date on which the related
Seller requests Purchase Price Decrease for the REO Property related to the
removal of REO Property from the REO Subsidiary, and the decrease in value of
the REO Stock related thereto.
"Purchase Price Decrease Notice" means the notice for decrease in
Purchase Price requested by the related Seller in accordance with Section 3
hereof.
"Purchase Price Increase" means an increase in the Purchase Price for
the REO Stock based upon REO Subsidiary acquiring additional REO Property, as
requested by Sellers pursuant to Section 1 hereof.
"Purchased Assets" means, with respect to a Transaction, the related
Loans, REO Stock, and REO Hospital Line Assets, together with the related
Records, Servicing Rights and other Collateral, instruments, chattel paper, and
general intangibles comprising or relating to all of the foregoing; provided,
that in the case of the REO Stock, Purchased Assets shall be deemed to include
any and all REO Properties owned by the REO Subsidiary. The term "Purchased
Assets" with respect to any Transaction at any time also shall include
Additional Purchased Assets delivered pursuant to Section 6(a) hereof.
"Records" means all instruments, agreements and other books, records,
and reports and data generated by other media for the storage of information
maintained by a Seller or any other person or entity with respect to a Purchased
Asset. Records shall include the Notes, any Mortgages, the Asset Files and any
other instruments necessary to document or service a Loan that is a Purchased
Asset, including, without limitation, the complete payment and modification
history of each Loan that is a Purchased Asset.
"Reference Banks" means any leading banks selected by the Agent which
are engaged in transactions in Eurodollar deposits in the international
Eurocurrency market with an established place of business in London.
12
"REIT" shall mean a real estate investment trust, as defined in Section
856 of the Code.
"REMIC" means a "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REO Account" means, the account designated "Wachovia Bank, National
Association REO Account", having the account number identified on Exhibit F
attached hereto, established by Sellers with Buyer for the benefit of Buyer
pursuant to the Collection Account Control Agreement (REO).
"REO Hospital Line Asset" means a Hospital Line Asset that is over
eighty nine (89) days contractually past due and is classified as REO Property
by Buyer or Seller. Buyer must have a first priority lien on the liquidation
proceeds from the REO Hospital Line Asset prior to being subject to a
Transaction. REO Hospital Line Assets must have a BPO that is no more than sixty
(60) days old prior to being subject to a Transaction. Updated BPO's are
required every sixty (60) days thereafter for each such REO Hospital Line Asset.
"REO Property" means the real property assets (a) purchased by the REO
Subsidiary from a lender who obtained title to such real property assets as a
result of foreclosure or deed in lieu of foreclosure of a mortgage or deed of
trust, or (b) acquired by the REO Subsidiary as a result of foreclosure or deed
in lieu of foreclosure of a mortgage or deed of trust.
"REO Property File" means for each REO Property, the related Buyer Deed
and an attorney bailee letter, if applicable.
"REO Stock" means any and all of any Seller's equity interests,
including without limitation, options, warrants or any other equity interest, in
the REO Subsidiary including, without limitation, all its rights to participate
in the operation or management of the REO Subsidiary and all its rights to
properties, assets, interests and distributions in respect of such stock. "REO
Stock" also includes (i) all accounts receivable; (ii) all general intangibles;
and (iii) to the extent not otherwise included, all proceeds of any and all the
foregoing (including within proceeds, whether or not otherwise included therein,
and any and all contractual rights of the related Seller under any revenue
sharing or similar agreement to receive all or any portion of the revenues or
profits of the REO Subsidiary).
"REO Subsidiary" shall mean NMI Property Financing, Inc., a
wholly-owned subsidiary of NovaStar Mortgage, Inc., that is a Special Purpose
Entity formed for the sole purpose of holding REO Property.
"REO Subsidiary Agreement" shall mean that certain REO Subsidiary
Agreement, dated as of May 9, 2007, executed and delivered by a duly authorized
officer of the REO Subsidiary in favor of the Buyer.
"Repayment Fee" shall have the meaning assigned thereto in the Side
Letter.
"Repurchase Date" shall have the meaning assigned thereto in Section
3(b) and shall also include the date determined by application of Section 19.
13
"Repurchase Price" means the price at which Purchased Assets are to be
transferred from Buyer to the related Seller upon the Repurchase Date for a
Transaction, which will be determined in each case (including Transactions
terminable upon demand) as the sum of the Purchase Price or Purchase Price
Increase, as applicable, and the Price Differential as of the date of such
determination.
"Required Equity" shall mean, with respect to NFI (and its consolidated
Subsidiaries) (together, the "Companies"), the sum of the dollar amounts
calculated after multiplying the amount determined by combining the relevant
figures for NFI and its consolidated Subsidiaries for each asset class set forth
in the table below (or if such asset class is owned by NFI or a consolidated
Subsidiary but cannot be determined by combining the relevant figures for the
Companies, the fair market value thereof as calculated by the Companies subject,
however, to the approval of Buyer which will not be unreasonably withheld) by
the Percentage Multipliers set forth opposite such asset class in the table
below:
------------------------------------------------------------------------------------------------------------------------
Percentage
Asset Class Multiplier
------------------------------------------------------------------------------------------------------------------------
Cash 0%
------------------------------------------------------------------------------------------------------------------------
Mortgage Loans held-for-sale including accrued interest 5%
------------------------------------------------------------------------------------------------------------------------
Mortgage loans held-in-portfolio including accrued interest (securitized in an owners trust) 5%
------------------------------------------------------------------------------------------------------------------------
Mortgage loans held-in-portfolio including accrued interest (securitized in a REMIC trust) 1.75%
------------------------------------------------------------------------------------------------------------------------
AAA-Rated I/O and Prepay (P) Certificates booked on-B/S 25%
------------------------------------------------------------------------------------------------------------------------
BBB NIM Certificates 25%
------------------------------------------------------------------------------------------------------------------------
Residuals from whole loan securitizations 35%
------------------------------------------------------------------------------------------------------------------------
Residuals from NIM/CAPS 100%
------------------------------------------------------------------------------------------------------------------------
Non-rated subordinate bonds (excluding residuals) 100%
------------------------------------------------------------------------------------------------------------------------
A-Rated Mortgage-Backed Securities not in CDO 20%
------------------------------------------------------------------------------------------------------------------------
BBB-Rated Mortgage-Backed Securities not in CDO 25%
------------------------------------------------------------------------------------------------------------------------
BB-Rate Mortgage-Backed Securities not in CDO 50%
------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed Securities in CDO 5%
------------------------------------------------------------------------------------------------------------------------
CDO Equity Sub Notes 100%
------------------------------------------------------------------------------------------------------------------------
CDO BBB Bonds 5%
------------------------------------------------------------------------------------------------------------------------
Agency Securities 3%
------------------------------------------------------------------------------------------------------------------------
Servicing Agreements (Mortgage Servicing Rights) 35%
------------------------------------------------------------------------------------------------------------------------
14
------------------------------------------------------------------------------------------------------------------------
Percentage
Asset Class Multiplier
------------------------------------------------------------------------------------------------------------------------
Servicing Advances 15%
------------------------------------------------------------------------------------------------------------------------
REO + Non-performing (90+ & foreclosures from bond collateral calls) 35%
------------------------------------------------------------------------------------------------------------------------
Other assets
- Hedging Agreements (Value of reserves that are not reflected in Marks to Market that impact equity) 100%
- All Other Assets (all else remaining - including Other Receivables & PP&E)
35%
------------------------------------------------------------------------------------------------------------------------
Intangible Assets 100%
------------------------------------------------------------------------------------------------------------------------
provided that the Required Equity shall be reduced by any Dividend
Securities with a maturity date of more than one year issued in connection with
the 2006 Dividend.
"Second Lien Loan" means a Loan secured by the lien on the Mortgaged
Property, subject to one prior lien on such Mortgaged Property securing
financing obtained by the related Borrower.
"Securitization Side Letter" means that certain securitization side
letter, dated May 9, 2007, among Wachovia Capital Markets, LLC and NFI.
"Servicer" means (i) NMI, or (ii) any other servicer approved by Buyer
in its sole discretion.
"Servicing Agreement" means any agreement (other than the Custody
Agreement) giving rise or relating to Servicing Rights with respect to a
Purchased Asset, including any assignment or other agreement relating to such
agreement.
"Servicing Rights" means the contractual, possessory or other rights of
Sellers or any other Person arising under a Servicing Agreement, the Custody
Agreement or otherwise, to administer or service a Purchased Asset or to possess
related Records.
"Side Letter" means the Pricing Side Letter, dated as of May 9, 2007,
among Sellers, Guarantors and Buyer.
"Special Purpose Entity" shall mean a Person, other than an individual,
which is formed or organized solely for the purpose of holding, directly or
indirectly, an ownership interest in one or more REO Properties, does not engage
in any business unrelated to the REO Properties, does not have any assets or
liabilities other than as otherwise expressly permitted by this Agreement, has
its own separate books and records and will not commingle its funds in each case
which are separate and apart from the books and records of any other Person, and
is subject to all of the limitations on the powers set forth in the
organizational documentation of the related Seller or the REO Subsidiary, as the
case may be, as in effect on each Purchase Date, and holds itself out as a
Person separate and
15
apart from any other Person and otherwise complies with all of the covenants set
forth in Section 13(y).
"Structuring Fee" shall have the meaning assigned thereto in the Side
Letter.
"Sub-performing Hospital Line Asset" means any Hospital Line Asset for
which the related Monthly Payment is between thirty (30) and eighty-nine (89)
days contractually past due and which is not in the process of foreclosure.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person; provided, however, that for purposes of Section 18 hereof,
"Subsidiary" shall not include any of the entities listed on Exhibit B hereto,
which may be revised by Sellers from time to time upon consent of Buyer.
"Substitute Assets" has the meaning assigned thereto in Section 16(a).
"Termination Date" has the meaning assigned thereto in Section 27.
"Total Liabilities" shall mean total liabilities of NFI and its
consolidated Subsidiaries determined in accordance with GAAP (or with such
non-GAAP principles as may be disclosed to and approved by Buyer from time to
time); provided; for purposes of this Agreement, such term shall not include any
Trust Preferred Securities.
"Transaction" has the meaning assigned thereto in Section 1.
"Transaction Notice" means a written request of a Seller to enter into
a Transaction, in the form attached to the Custody Agreement which is delivered
to Buyer and Custodian.
"Trust Preferred Securities" shall mean (i) the $50,000,000 of
unsecured floating rate securities issued by NovaStar Capital Trust I, a
statutory trust 100 percent owned by NMI, pursuant to the indenture dated March
15, 2005, between NMI and XX Xxxxxx Xxxxx Bank, NA, as trustee and (ii) the
$35,000,000 of unsecured floating rate securities issued by NovaStar Capital
Trust II, a statutory trust 100 percent owned by NMI, pursuant to the indenture
dated April 18, 2006, between NMI and XX Xxxxxx Chase Bank, NA, as trustee.
"Trust Receipt" means a Trust Receipt and Certification as defined in
the Custody Agreement.
16
"Underwriting Guidelines" means NMI's underwriting guidelines in effect
as of the date of this Agreement and attached hereto as Exhibit D, as the same
may be amended from time to time.
"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.
"Wet Loan" means a Loan for which the related Loan File has not been
delivered to the Custodian as of the related Purchase Date and which has not
been subject to any other repurchase agreement or any similar transaction.
b. Capitalized terms used but not defined in this Agreement shall have
the meanings assigned thereto in the Custody Agreement.
c. Interpretation.
Headings are for convenience only and do not affect interpretation. The
following rules of this subsection (b) apply unless the context requires
otherwise. The singular includes the plural and conversely. A gender includes
all genders. Where a word or phrase is defined, its other grammatical forms have
a corresponding meaning. A reference to a subsection, Section, Annex or Exhibit
is, unless otherwise specified, a reference to a Section of, or annex or exhibit
to, this Agreement. A reference to a party to this Agreement or another
agreement or document includes the party's successors and permitted substitutes
or assigns. A reference to an agreement or document is to the agreement or
document as amended, modified, novated, supplemented or replaced, except to the
extent prohibited by any Program Document. A reference to legislation or to a
provision of legislation includes a modification or re-enactment of it, a
legislative provision substituted for it and a regulation or statutory
instrument issued under it. A reference to writing includes a facsimile
transmission and any means of reproducing words in a tangible and permanently
visible form. A reference to conduct includes, without limitation, an omission,
statement or undertaking, whether or not in writing. An Event of Default
subsists until it has been waived in writing by the Buyer or has been timely
cured. The words "hereof", "herein", "hereunder" and similar words refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
term "including" is not limiting and means "including without limitation." In
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including", the words "to" and "until"
each mean "to but excluding", and the word "through" means "to and including."
This Agreement may use several different limitations, tests or measurements to
regulate the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in accordance with their
terms. Unless the context otherwise clearly requires, all accounting terms not
expressly defined herein shall be construed, and all financial computations
required under this Agreement shall be made, in accordance with GAAP,
consistently applied. References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of NFI. Except where otherwise provided in this
Agreement any determination, statement or certificate by the Buyer or an
authorized officer of the Buyer provided for in this Agreement is conclusive and
binds the parties in the absence of manifest error. A reference to an agreement
includes a security interest, guarantee, agreement or legally enforceable
arrangement whether or not in writing. A reference to a document includes an
agreement (as so defined) in writing or a certificate, notice, instrument or
17
document, or any information recorded in computer disk form. Where the NFI or a
Guarantor is required to provide any document to the Buyer under the terms of
this Agreement, the relevant document shall be provided in writing or printed
form unless the Buyer requests otherwise. At the request of the Buyer, the
document shall be provided in computer disk form or both printed and computer
disk form. This Agreement is the result of negotiations among and has been
reviewed by counsel to the Buyer, Guarantors and the Sellers, and is the product
of all parties. In the interpretation of this Agreement, no rule of construction
shall apply to disadvantage one party on the ground that such party proposed or
was involved in the preparation of any particular provision of this Agreement or
this Agreement itself. Except where otherwise expressly stated, the Buyer may
give or withhold, or give conditionally, approvals and consents, and may form
opinions and make determinations at its absolute discretion. Any requirement of
good faith, discretion or judgment by the Buyer shall not be construed to
require Buyer to request or await receipt of information or documentation not
immediately available from or with respect to the related Seller, a Guarantor, a
servicer of the Purchased Assets, any other Person or the Purchased Assets
themselves. With respect to any information set forth on Schedules 2 and 3
attached hereto, Buyer has reviewed and consented to such information on such
schedules as of the Effective Date; provided, however, that to the extent any
facts or circumstances relating to the matters disclosed on such schedules
change after the Effective Date, Buyer shall not be deemed to have consented to
any such change and such change may result in an Event of Default.
3. THE TRANSACTIONS
a. The related Seller shall repurchase Purchased Assets from Buyer on each
related Repurchase Date. In addition, the related Seller may request a Purchase
Price Decrease on any Business Day when REO Property is to be sold by the REO
Subsidiary by providing a Purchase Price Decrease Notice, and shall pay the
portion of the related Repurchase Price attributable to the Purchase Price
Decrease. Each obligation to repurchase subsists without regard to any prior or
intervening liquidation or foreclosure with respect to each Purchased Asset. The
related Seller is obligated to obtain the Purchased Assets from Buyer or its
designee (including the Custodian) at the related Seller's expense on (or after)
the related Repurchase Date.
b. Provided that the applicable conditions in Sections 9(a) and (b) have
been satisfied, each Purchased Asset that is repurchased by the related Seller
on the 1st day of each month (or, if such 1st day is not a Business Day, the
immediately following Business Day) following the related initial Purchase Date
(the day of the month so determined for each month, or any other date designated
by the related Seller to Buyer for such a repurchase on at least one Business
Day's prior notice to Buyer, a "Repurchase Date", which term shall also include
the date determined by application of Section 19) shall automatically become
subject to a new Transaction unless Buyer is notified by the related Seller at
least one (1) Business Day prior to any Repurchase Date; provided that if the
Repurchase Date so determined is later than the Termination Date, the Repurchase
Date for such Transaction shall automatically reset to the Termination Date, and
the provisions of this sentence as it might relate to a new Transaction shall
expire on such date for each new Transaction, unless otherwise agreed, (y) the
accrued and unpaid Price Differential shall be settled in cash on each related
Repurchase Date, and (z) the Pricing Rate shall be as set forth in the Side
Letter. Notwithstanding anything to the contrary herein, a partial payment of
Repurchase Price with respect to REO Stock shall not result in a transfer to any
Seller of the REO Stock but instead shall result in
18
the REO Subsidiary being entitled to convey each REO Property to which the
Purchase Price Decrease relates.
c. Any Seller may repurchase Purchased Assets on any day which is not a
Repurchase Date for such Purchased Assets provided Buyer receives the requisite
loan level information and repurchase request in electronic form prior to 3:00
p.m. New York City time; provided, however, that requests received by Buyer
after such time above will be fulfilled on a best-efforts basis. For the
avoidance of doubt, any repurchase request received after such time above and
which does not settle on such Business Day will be deemed received at the
opening of business on the next Business Day and will incur the respective Price
Differential. If any such Seller repurchases Purchased Assets on any day which
is not a Repurchase Date for such Purchased Assets, such Seller shall indemnify
Buyer and hold Buyer harmless from any losses, costs and/or expenses which Buyer
may sustain or incur arising from the reemployment of funds obtained by Buyer
hereunder or from fees payable to terminate the deposits from which such funds
were obtained ("Breakage Costs"), in each case for the remainder of the
applicable 30 day period. Buyer shall deliver to the related Seller a statement
setting forth the amount and basis of determination of any Breakage Costs in
such detail as determined in good faith by Buyer to be adequate, it being agreed
that such statement and the method of its calculation shall be adequate and
shall be conclusive and binding upon such Seller, absent manifest error. This
Section shall survive termination of this Agreement and the repurchase of all
Purchased Assets subject to Transactions hereunder.
d. REO Properties. Upon transfer of REO Stock to Buyer as set forth herein
and until termination of any related Transactions as set forth herein, ownership
of the related REO Stock is vested in the Buyer, and prior to the recordation of
the Buyer Deed by the Custodian as provided for in the Custody Agreement, record
title to each REO Property shall be retained by the REO Subsidiary or Servicer
for liquidation purposes, for the benefit of Buyer.
e. Repurchase; Purchase Price Decrease. Each Seller may repurchase
Purchased Assets or request a Purchase Price Decrease without penalty or
premium, subject to the last sentence of this Section 3(e), on any date. The
Repurchase Price payable for the repurchase of any such Purchased Asset shall be
reduced as provided herein. If the related Seller intends to make such a
repurchase or Purchase Price Decrease, such Seller shall give one (1) Business
Day's prior written notice thereof to the Buyer, designating the REO Property to
be repurchased. If such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein, and, on receipt, such
amount shall be applied to the Repurchase Price for the REO Stock in respect of
the designated REO Property.
4. ENTERING INTO TRANSACTIONS, TRANSACTION NOTICE CONFIRMATIONS
a. Under the terms and conditions of the Program Documents, Buyer hereby
agrees to enter into Transactions with a Purchase Price up to the Maximum
Aggregate Purchase Price. The Buyer shall not be obligated to enter into more
than four Transactions per Business Day; provided, that the related Seller shall
give Buyer proper advance notification (to include the receipt of the requisite
loan level information) of a Transaction, and the Buyer will use its best
efforts to enter into such Transactions at 10:00 a.m., 12:00 p.m., 2:00 p.m. and
4:00 p.m. New York City time on any Business Day. Unless otherwise agreed, the
related Seller shall give Buyer and Custodian notice of
19
any proposed Purchase Date prior to 2:00 p.m. New York City time on the second
(2nd) preceding Business Day (the date on which such notice is so given, the
"Notice Date"), provided that the initial Transaction shall only require one (1)
Business Day prior notice. On the Notice Date, the related Seller or a Guarantor
shall (i) request that Buyer enter into a Transaction by furnishing to Buyer and
Custodian a Transaction Notice and Asset Schedule, (ii) deliver to Buyer a
Computer Tape and (iii) deliver to Custodian the Asset File for each Loan
subject to such Transaction.
b. In the event that the parties hereto desire to enter into a Transaction
on terms other than as set forth herein, the parties shall execute a
"Confirmation" specifying such terms prior to entering into such Transaction.
Any such Confirmation and the related Transaction Notice, together with this
Agreement, shall constitute conclusive evidence of the terms agreed between
Buyer and Sellers with respect to the Transaction to which the Confirmation
relates. In the event of any conflict between this Agreement and a Confirmation,
the terms of the Confirmation shall control with respect to the related
Transaction.
5. PAYMENT AND TRANSFER
Unless otherwise agreed, all transfers of funds hereunder shall be in
immediately available funds and all Purchased Assets transferred shall be
transferred to the Custodian pursuant to the Custody Agreement. Any Repurchase
Price or Price Differential received by Buyer after 12:00 noon New York City
time shall be applied on the next succeeding Business Day.
6. MARGIN MAINTENANCE
a. If at any time either (i) the aggregate Market Value of all Purchased
Assets subject to all Transactions is less than the aggregate Buyer's MV Margin
Amount for all such Transactions or (ii) the aggregate Market Value for all
Purchased Assets subject to all Transactions is less than Buyer's Par Margin
Amount for all such Transactions (each a "Margin Deficit"), then Buyer may by
notice to the Sellers require the Sellers in such Transactions to transfer to
Buyer, either cash or additional Eligible Loans acceptable to Buyer in its sole
discretion ("Additional Purchased Assets"), so that either (a) with respect to
any Margin Deficit pursuant to clause (i) above, the cash and aggregate Market
Value of the Purchased Assets, including any such Additional Purchased Assets,
will thereupon equal or exceed such aggregate Buyer's MV Margin Amount, or (b)
with respect to any Margin Deficit pursuant to clause (ii) above, the cash and
aggregate unpaid principal balance of the Purchased Assets, including any such
Additional Purchased Assets, will thereupon equal or exceed such Buyer's Par
Margin Amount (either such requirement, a "Margin Call").
b. Notice required pursuant to Section 6(a) may be given by any means
provided in Section 35 hereof. Any notice received before 11:00 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 received after
11:00 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 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.
Sellers, each Guarantor 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
20
otherwise existing by law or in any way create additional rights for Sellers or
any Guarantor.
c. If the Sellers fail to satisfy a Margin Deficit in accordance with
Section 6(a) and Section 6(b) hereof, then Buyer may, in its sole discretion,
satisfy a Margin Deficit, by netting the purchase price under any Existing
Agreement by the amount of such Margin Deficit. Upon such netting, the purchase
price under such Existing Agreement shall be increased on a dollar for dollar
basis by the amount of such Margin Deficit regardless of whether the maximum
aggregate purchase price had already been reached under any such Existing
Agreement.
7. INCOME PAYMENTS
Where a particular term of a Transaction extends over the date on which
Income is paid in respect of any Purchased Assets subject to that Transaction,
such Income shall be deposited in the Collection Account by the related Seller
(or the Servicer on its behalf) within two (2) Business Days after collection;
provided, that Income with respect to dispositions of REO Properties shall be
deposited in the REO Account by the related Seller immediately upon receipt.
Buyer agrees that prior to the Buyer providing notice to the Bank under the
Collection Account Control Agreement, the related Seller shall be entitled to
receive an amount equal to all Income received, whether by a Guarantor, Buyer,
Custodian, Servicer or any servicer or any other Person, which is not otherwise
received by such Seller, in respect of the Purchased Assets; provided, however,
that any income received by or on behalf of a Seller while the related
Transaction is outstanding shall be deemed held by such Seller solely in trust
for Buyer pending the repurchase on the related Repurchase Date.
8. SECURITY INTEREST; BUYER DEED
a. The related Seller and Buyer intend that the Transactions hereunder be
sales to Buyer of the Purchased Assets and not loans from Buyer to the related
Seller secured by the Purchased Assets. However, in order to preserve Buyer's
rights under this Agreement in the event that a court or other forum
recharacterizes the Transactions hereunder as other than sales, and as security
for the related Seller's performance of all of its Obligations, the related
Seller hereby grants Buyer a fully perfected first priority security interest in
the following property, whether now existing or hereafter acquired: the
Purchased Assets, the related Records, the related Servicing Rights, the
contractual right to receive payments, including the right to payments of
principal and interest and the right to enforce such payments arising from or
under any of the Purchased Assets, all mortgage guaranties and insurance
relating to such Purchased Assets (issued by governmental agencies or otherwise)
or the related Mortgaged Property and any mortgage insurance certificate or
other document evidencing such mortgage guaranties or insurance and all claims
and payments thereunder, any purchase agreements or other agreements or
contracts relating to or constituting any or all of the foregoing, all
"accounts" as defined in the Uniform Commercial Code relating to or constituting
any or all of the foregoing, including the Collection Account and the REO
Account, and all instruments, chattel paper, securities, investment property and
general intangibles and other assets comprising or relating to the foregoing,
any security account and all rights to Income and the rights to enforce such
payments arising from any of the foregoing, all guarantees or other support for
the foregoing, and any and all replacements, substitutions, distributions on, or
proceeds with respect to, any of the foregoing (collectively the "Collateral").
Each Seller acknowledges and agrees that its rights with respect to the
Collateral (including without limitation, its security interest in the Purchased
Assets and any
21
other collateral granted to such Seller pursuant to any other agreement) are and
shall continue to be at all times junior and subordinate to the rights of the
Buyer hereunder.
b. Provision of Buyer Deed.
i. If any Seller shall acquire, or contemplate the acquisition
of, any REO Property or desire to extinguish any Mortgage Note in connection
with the foreclosure of the related Mortgage Loan, a transfer of the real
property underlying the Mortgage Note in lieu of foreclosure or other transfer
of such real property, such Seller shall cause such real property to be taken by
deed, or by means of such instruments as is provided by the Governmental
Authority governing such acquisition or transfer in the jurisdiction in which
the REO Property is located, in the name of the REO Subsidiary. Upon the
acquisition of title to an REO Property by the REO Subsidiary, the applicable
Seller will be deemed to make the representations and warranties hereto with
respect to such REO Property as set forth in Appendices B and C to the Custody
Agreement. Sellers shall, at their sole cost and expense, take all such other
steps as may be necessary in connection with the pledge of all REO Stock.
ii. The related Seller shall, with respect to any REO Property
to be transferred to the REO Subsidiary and to be subject to a Transaction under
this Agreement, concurrently with the delivering of title to such REO Property
to the REO Subsidiary, cause the REO Subsidiary to provide the Custodian a duly
executed deed or similar instrument (a "Buyer Deed") in favor of the Buyer, on
such REO Property, which Buyer Deed shall (A) name the Buyer or its designee as
the assignee or beneficiary thereof, and (B) be in recordable form in accordance
with applicable state law. The Buyer has the right to record such Buyer Deed
should the Buyer have a good faith belief that an Event of Default may occur or
if an Event of Default has occurred and is continuing. Such Buyer Deed shall
constitute Collateral for all purposes hereof. All costs and expenses in
connection with the preparation, execution, delivery and filing or recording of
any Buyer Deed, and any filing or recording tax or other charges with respect
thereto shall be for the account of the related Seller.
iii. REO Stock as Intangible. The parties acknowledge and
agree that REO Stock constitutes "general intangibles" (as defined in Section
9-102(a)(42) of the Uniform Commercial Code); and each Seller therefore
covenants and agrees that (A) REO Stock is not and will not be dealt in or
traded on securities exchanges or securities markets, (B) the terms of REO Stock
does not and will not provide that they are securities governed by the Uniform
Commercial Code and (C) REO Stock is not and will not be investment company
securities within the meaning of Section 8-103 of the Uniform Commercial Code.
iv. Additional Interests. If a Seller shall, as a result of
its interest in REO Stock, become entitled to receive or shall receive any
certificate evidencing any option rights or any other equity interest in the REO
Subsidiary, whether in addition to, in substitution for, as a conversion of, or
in exchange for such REO Stock, or otherwise in respect thereof, such Seller
shall accept the same as the Buyer's agent, hold the same in trust for the Buyer
and deliver the same forthwith to the Buyer in the exact form received, duly
indorsed by such Seller to the Buyer, if required, together with an undated
transfer power, if required, covering such certificate duly executed in blank,
to be held by the Buyer subject to the terms hereof and applied to the payment
of the Obligations. Any sums paid upon or in respect of REO Stock upon the
liquidation or dissolution of the REO Subsidiary shall be paid over to the Buyer
and applied to the payment of the Obligations. If following the occurrence
22
and during the continuation of an Event of Default any sums of money or property
so paid or distributed in respect of REO Stock shall be received by the related
Seller, such Seller shall, until such money or property is paid or delivered to
the Buyer, hold such money or property in trust for the Buyer segregated from
other funds of such Seller, as additional security for the Obligations.
v. Cash Dividends; Voting Rights. Unless an Event of Default
shall have occurred and be continuing, each Seller shall be permitted to receive
all cash dividends or other cash distributions paid in respect of REO Stock and
to exercise all voting and member rights with respect to such REO Stock;
provided, however, that no vote shall be cast or member right exercised or other
action taken which would impair such REO Stock or which would be inconsistent
with or result in a violation of any provision of this Agreement. Without the
prior consent of the Buyer, no Seller will (i) vote to enable, or take any other
action to permit the REO Subsidiary to issue any equity interests of any nature
or to issue any other equity interests convertible into or granting the right to
purchase or exchange for any equity interests of the REO Subsidiary, or (ii)
sell, assign, transfer, exchange or otherwise dispose of, or grant any option
with respect to, REO Stock or (iii) create, incur or permit to exist any Lien or
option in favor of, or any claim of any Person with respect to, REO Stock, or
any interest therein, except for the Lien provided for by this Agreement, or
(iv) enter into any agreement (other than this Agreement) or undertaking
restricting the right or ability of any Seller to sell, assign or transfer any
of related REO Stock.
9. CONDITIONS PRECEDENT
a. 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 each party thereto:
i. Agent shall have received the Program Documents, including
collateral documents, required legal opinions and certificates, each
duly executed and in form and substance reasonably satisfactory to the
Agent;
ii. Agent shall be satisfied that all material Liens granted to
Buyer hereunder with respect to the Collateral are valid and perfected
liens and have the priorities indicated herein;
iii. Except as disclosed on Schedule 2 attached hereto, there are
no actions, suits, arbitrations, investigations (including, without
limitation, any of the foregoing which are pending or threatened) or
other legal or arbitrable proceedings affecting Sellers or any of
their Subsidiaries or affecting any of the Property of any of them
before any Governmental Authority which (i) questions or challenges
the validity or enforceability of the Program Documents or otherwise
materially impairs the transactions contemplated hereby or (ii)
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect;
23
iv. The Program Documents shall be duly executed and delivered by
the parties thereto and being in full force and effect, free of any
modification, breach or waiver;
v. Except as disclosed on Schedule 3 attached hereto, there shall
have been no Material Adverse Change in the business, financial
performance, assets, operations or condition (financial or otherwise)
of Sellers and their subsidiaries, taken as a whole since March 31,
2007;
vi. The Sellers shall have delivered to the Agent and the Buyer
(i) an unaudited consolidated balance sheet of NFI dated not earlier
than March 31, 2007 prior to the date hereof showing Adjusted Tangible
Net Worth of not less than $517,000,000 (which may or may not have
been prepared in accordance with GAAP), (ii) an unaudited summary
schedule of estimated consolidated financial results of NFI and its
subsidiaries for the three months ended March 31, 2007 (which may or
may not have been prepared in accordance with GAAP) and (iii) a
certificate of the Chief Financial Officer of NFI certifying to the
best of his knowledge as to such balance sheet after reasonable
inquiry and further stating that he is not aware of any information or
other matter that would make the financial information set forth
therein materially inaccurate or incomplete;
vii. There shall not exist any violation of applicable laws and
regulations (including, without limitation, ERISA, margin regulations
and environmental laws) which could reasonably be expected to result
in a Material Adverse Change, except as disclosed on Schedule 3
attached hereto;
viii. The representations and warranties contained herein shall
be true and correct in all material respects as of the date hereof;
ix. No event shall have occurred and be continuing or would
result from any Existing Agreement that would constitute an Event of
Default or a Default;
x. Agent shall have received a certified copy of each Seller's
and each Guarantor's consents or corporate resolutions, as applicable,
approving the Program Documents 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 Documents;
xi. Agent shall have received an incumbency certificate of the
secretaries of each Seller, each Guarantor and the REO Subsidiary
certifying the names, true signatures and titles of each Seller's and
each Guarantor's representatives duly authorized to request
Transactions hereunder and to execute the Program Documents and the
other documents to be delivered thereunder;
xii. Agent shall have received an opinion of each Seller's, each
Guarantor's and the REO Subsidiary's counsel as to such matters
(including, without
24
limitation, a corporate opinion, a New York law enforceability
opinion, a security interest opinion, an investment company act
opinion, a "repurchase agreement" under federal bankruptcy law opinion
with respect to all Purchased Assets other than REO Stock and a
"securities contract" under federal bankruptcy law opinion with
respect to all Purchased Assets) as Buyer may reasonably request and
in form and substance acceptable to Buyer;
xiii. A copy of the Underwriting Guidelines certified by an
officer of NMI;
xiv. All of the conditions precedent in the Guaranty shall have
been satisfied; and
xv. Any other documents reasonably requested by Buyer.
b. The obligation of Buyer to enter into each Transaction (including the
initial Transaction) pursuant to this Agreement is subject to the following
conditions precedent:
i. Buyer or its designee shall have received on or before the day
of a Transaction with respect to such Purchased Assets (unless
otherwise specified in this Agreement) the following, in form and
substance satisfactory to Buyer and (if applicable) duly executed:
(A) Transaction Notice, Loan Schedule and Computer Tape
delivered pursuant to Section 4(a);
(B) The related Trust Receipt; and
(C) such certificates, customary opinions of counsel or
other documents as Buyer may reasonably request, provided that
such opinions of counsel shall not be required in connection with
each Transaction but shall only be required from time to time as
deemed necessary by Buyer in its good faith.
ii. No Default or Event of Default shall have occurred and be
continuing.
iii. Buyer shall not have reasonably determined that 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,
unless Seller shall have elected pursuant to Section 15(a) hereof that
the Pricing Rate for all Transactions be based upon the Prime Rate.
iv. All representations and warranties in the Program Documents
shall be true and correct in all material respects on the date of such
Transaction and Sellers and Guarantors are in compliance with the
terms and conditions of the Program Documents.
25
v. The then aggregate outstanding Purchase Price for all
Purchased Assets, when added to the Purchase Price for the requested
Transaction, shall not exceed the Maximum Aggregate Purchase Price.
vi. No event or events shall have been reasonably determined by
Buyer to have occurred and be continuing resulting in the effective
absence of a whole loan or asset-backed securities market.
vii. If requested, Buyer shall have received satisfactory
information regarding the hedging strategy, arrangements and general
policy of the Guarantors with respect to hedge instruments.
viii. Satisfaction of any conditions precedent to the initial
Transaction as set forth in clause (a) of this Section 9 that were not
satisfied prior to such initial Purchase Date.
ix. In no event shall the Buyer be obligated to enter into more
than four Transactions per Business Day (excluding any automatic
Transaction pursuant to Section 3(b)) ; provided, that the related
Seller shall give Buyer proper advance notification (to include the
receipt of the requisite loan level information) of a Transaction, and
Buyer will use its best efforts to enter into such Transactions at
10:00 a.m., 12:00 p.m., 2:00 p.m. and 4:00 p.m. New York City time on
any Business Day.
x. The Purchase Price for the requested Transaction shall not be
less than $100,000.
xi. Buyer shall have determined that all actions necessary or, in
the opinion of Buyer, desirable to maintain Buyer's perfected interest
in the Purchased Assets and other Collateral have been taken,
including, without limitation, duly executed and filed Uniform
Commercial Code financing statements on Form UCC-1.
xii. Buyer shall have received from the Sellers payment of the
applicable Facility Fees as set forth in this Agreement and the Side
Letter.
xiii. The Buyer shall not enter into any Transaction with respect
to REO Properties until NMI and NovaStar Asset enter into a
contribution agreement in form and substance acceptable to the Buyer,
and the Buyer receives the requisite opinions of counsel related to
such contribution agreement as determined by the Buyer in its sole
discretion.
xiv. Any other documents reasonably requested by Buyer.
10. RELEASE OF PURCHASED ASSETS
26
Upon timely payment in full of the Repurchase Price or Purchase Price
Decrease amount and all other Obligations owing with respect to a Purchased
Asset, if no Default or Event of Default has occurred and is continuing, Buyer
shall, and shall direct Custodian to, release such Purchased Asset unless such
release would give rise to or perpetuate a Margin Deficit. Except as set forth
in Sections 6(a) and 16, the related Seller shall give at least three (3)
Business Days' prior written notice to Buyer if such repurchase shall occur on
other than a Repurchase Date.
If such a Margin Deficit is applicable, Buyer shall notify Sellers of the
amount thereof and Sellers may thereupon satisfy the Margin Call in the manner
specified in Section 6.
11. RELIANCE
With respect to any Transaction, Buyer may conclusively rely upon, and
shall incur no liability to any Seller or any Guarantor in acting upon, any
request or other communication that Buyer reasonably believes to have been given
or made by a person authorized to enter into a Transaction on the related
Seller's or the related Guarantor's behalf.
12. REPRESENTATIONS AND WARRANTIES
Each Seller, each Guarantor and the REO Subsidiary hereby represents and
warrants, and shall on and as of the Purchase Date for any Transaction and on
and as of each date thereafter through and including the related Repurchase Date
be deemed to represent and warrant, that:
a. Due Organization and Qualification. Each Seller, each Guarantor and
the REO Subsidiary is duly organized, validly existing and in good standing
under the laws of the jurisdiction under whose laws it is organized. Each
Seller, each Guarantor and the REO Subsidiary is duly qualified to do
business, is in good standing and has obtained all necessary licenses,
permits, charters, registrations and approvals necessary for the conduct of
its business as currently conducted and the performance of its obligations
under the Program Documents, except to the extent any failure to be so
qualified and in good standing or to obtain such a license, permit,
charter, registration or approval will not cause a Material Adverse Effect
or impair the enforceability of any Purchased Asset.
b. Power and Authority. Each Seller, each Guarantor and the REO
Subsidiary has all necessary power and authority to conduct its business as
currently conducted, to execute, deliver and perform its obligations under
the Program Documents and to consummate the Transactions.
c. Due Authorization. The execution, delivery and performance of the
Program Documents by each Seller, each Guarantor and the REO Subsidiary
have been duly authorized by all necessary action and do not require any
additional approvals or consents or other action by or any notice to or
filing with any Person other than any that have heretofore been obtained,
given or made.
d. Noncontravention. Neither the execution and delivery of the Program
Documents by such Person of the execution and delivery of the Program
Documents by any
27
Seller, any Guarantor and the REO Subsidiary or the consummation of the
Transactions and transactions thereunder:
i) conflicts with, breaches or violates any provision
of any Seller's, any Guarantor's or the REO Subsidiary's
charter documents, bylaws, operating agreement or any similar
agreement or of any material agreement of any Seller, any
Guarantor or the REO Subsidiary or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or
award currently in effect having applicability to any Seller,
any Guarantor or the REO Subsidiary or their properties,
except as would not have a Material Adverse Effect;
ii) constitutes a material default by any Seller, any
Guarantor or the REO Subsidiary under any loan or repurchase
agreement, mortgage, indenture or other material agreement or
instrument to which any Seller, any Guarantor or the REO
Subsidiary is a party or by which it or any of its properties
is or may be bound or affected; or
iii) results in or requires the creation of any lien
upon or in respect of any of the assets of any Seller, any
Guarantor or the REO Subsidiary except the lien relating to
the Program Documents.
e. Legal Proceeding. Except as disclosed on Schedule 2 attached
hereto, there is no action, proceeding or investigation by or before any
court, governmental or administrative agency or arbitrator affecting any of
the Purchased Assets, any Seller, any Guarantor, the REO Subsidiary,
Servicer or any of their Affiliates, pending or threatened, which is
reasonably likely to be adversely determined and which, if decided
adversely, would have a Material Adverse Effect.
f. Valid and Binding Obligations. Each of the Program Documents to
which any Seller, any Guarantor, the REO Subsidiary or Servicer is a party,
when executed and delivered by such Seller, such Guarantor, the REO
Subsidiary or Servicer, as applicable, will constitute the legal, valid and
binding obligations of such Seller, such Guarantor or Servicer, as
applicable, enforceable against such Seller, such Guarantor, the REO
Subsidiary or Servicer, as applicable, in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and general equitable principles.
g. Financial Statements. The financial statements and pro forma
balance sheet of NFI, copies of which have been furnished to Buyer, (i)
are, as of the dates and for the periods referred to therein, complete and
correct in all material respects, (ii) present fairly the financial
condition and results of operations of NFI as of the dates and for the
periods indicated and (iii) have been prepared in accordance with GAAP
consistently applied, except as noted therein (subject as to interim
statements to normal year-end adjustments). Since the date of the most
recent financial statements, there has been no Material Adverse Change with
respect to NFI except as disclosed on Schedule 3 attached hereto. Except as
disclosed in such financial statements, no Guarantor is subject to any
contingent liabilities or commitments
28
that, individually or in the aggregate, have a material possibility of
causing a Material Adverse Change with respect to such Guarantor. Buyer
hereby acknowledges that only the annual and quarterly financial statements
are prepared in accordance with GAAP.
h. Accuracy of Information. None of the documents or information
prepared by or on behalf of any Seller, any Guarantor, the REO Subsidiary
or Servicer and provided by any Seller, any Guarantor, the REO Subsidiary
or Servicer to Buyer relating to any Seller's, any Guarantor's, the REO
Subsidiary's or Servicer's financial condition contain any statement of a
material fact with respect to any Seller, any Guarantor, the REO Subsidiary
or Servicer or the Transactions that was untrue or misleading in any
material respect when made. Since the most recent furnishing of such
documents or information, there has been no change, nor any development or
event involving a prospective change known to any Seller, any Guarantor,
the REO Subsidiary or Servicer, that would render any of such documents or
information untrue or misleading in any material respect.
i. No Consents. No consent, license, approval or authorization from,
or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental, instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
non-governmental person, is required in connection with the execution,
delivery and performance by any Seller, the REO Subsidiary or any Guarantor
of this Agreement or the consummation by any Seller, the REO Subsidiary or
any Guarantor of any other Program Document, other than any that have
heretofore been obtained, given or made.
j. Compliance With Law Etc. No practice, procedure or policy employed
or proposed to be employed by any Seller, the REO Subsidiary or any
Guarantor in the conduct of its businesses violates any law, regulation,
judgment, agreement, order or decree applicable to it which, if enforced,
would result in either a Material Adverse Change with respect to any
Seller, the REO Subsidiary or any Guarantor or a Material Adverse Effect.
k. Solvency: Fraudulent Conveyance. Each Seller, each Guarantor and
the REO Subsidiary is solvent and will not be rendered insolvent by the
Transaction and, after giving effect to such Transaction, no Seller, no
Guarantor nor the REO Subsidiary will be left with an unreasonably small
amount of capital with which to engage in its business. No Seller, no
Guarantor nor the REO Subsidary intends to incur, nor believes that it has
incurred, debts beyond its ability to pay such debts as they mature. No
Seller, no Guarantor nor the REO Subsidary is 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 any Seller, any Guarantor or the
REO Subsidiary or any of their assets. The amount of consideration being
received by the related Seller upon the sale of the Purchased Assets to
Buyer constitutes reasonably equivalent value and fair consideration for
such Purchased Assets. No Seller is transferring any Purchased Assets with
any intent to hinder, delay or defraud any of its creditors.
l. Investment Company Act Compliance. No Seller is required to be
registered as an "investment company" as defined under the Investment
Company Act nor as an entity
29
under the control of an "investment company" as defined under the
Investment Company Act.
m. Taxes. Each Seller, each Guarantor and the REO Subsidiary filed all
federal and state tax returns which are required to be filed and paid all
taxes, including any assessments received by it, to the extent that such
taxes have become due (other than for taxes that are being contested in
good faith or for which it has established adequate reserves). Any taxes,
fees and other governmental charges payable by any Seller, any Guarantor
and the REO Subsidiary in connection with a Transaction and the execution
and delivery of the Program Documents have been paid.
n. Additional Representations. With respect to each Purchased Asset,
each Seller and each Guarantor, jointly and severally, hereby make all of
the applicable representations and warranties set forth in Appendices A, B
and C to the Custody Agreement as of the date the Asset File is delivered
to the Custodian. Further, as of each Purchase Date, each Seller and each
Guarantor shall be deemed to have represented and warranted in like manner
that none of any Seller nor any Guarantor has any knowledge that any such
representation or warranty may have ceased to be true in a material respect
as of such date, except as otherwise stated in a Transaction Notice, and
the related Seller, Gurantor or REO Subsidiary shall identify any exception
to the applicable representation or warranty and specify in reasonable
detail the related knowledge of the applicable Sellers or Guarantors. In
addition, each Guarantor agrees to make the representations and warranties
set forth in Appendices A, B and C to the Custody Agreement as of the
"cut-off date" of the securitization or whole loan sale of the related
Loans by any Seller or Buyer, following an Event of Default; provided,
however, that to the extent that any Guarantor has at the time of such
securitization or whole loan sale actual knowledge of any facts or
circumstances that would render any of such representations and warranties
materially false, such Guarantor shall have no obligation to make such
materially false representation and warranty.
o. No Broker. No Seller, no Guarantor nor the REO Subsidiary has dealt
with any broker, investment banker, agent, or other person, except for
Buyer, who may be entitled to any commission or compensation in connection
with the sale of Purchased Assets pursuant to this Agreement; provided,
that if any Seller, any Guarantor or the REO Subsidiary has dealt with any
broker, investment banker, agent, or other person, except for Buyer, who
may be entitled to any commission or compensation in connection with the
sale of Purchased Assets pursuant to this Agreement, such commission or
compensation shall have been paid in full by such Seller, such Guarantor or
such REO Subsidary, as applicable.
p. Corporate Separateness.
i) The capital of each Seller, each Guarantor and the
REO Subsidiary is adequate for the respective business and
undertakings of each Seller, each Guarantor and the REO
Subsidiary.
ii) Other than as provided in this Agreement and the
other Program Documents, no Seller is engaged in any business
transactions with any Guarantor or
30
any of its Affiliates other than transactions in the
ordinary course of its business on an "arms-length" basis.
iii) The funds and assets of each Seller are not and
will not be, commingled with the funds of any other Person.
q. Hedging. Each Seller has entered into the hedge instruments
pursuant to its customary hedging procedures.
r. Adequate Capital. The capital of each Seller and each Guarantor is
adequate for the respective business and undertakings of such Seller and
such Guarantor.
s. ERISA. Each Plan to which Sellers or any of their Subsidiaries make
direct contributions, and, to the knowledge of the related Seller, each
other 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 applicable Federal or State
law. As of the date hereof and on any date prior to the Termination Date,
no Plan is a "multiemployer plan" (within the meaning of Section 4001(a)(3)
of ERISA) or a "defined benefit plan" (within the meaning of Section 3(35)
of ERISA).
t. Compliance with Anti-Money Laundering Laws. Within thirty (30) days
following the issuance of regulations pursuant to the USA Patriot Act of
2001, or any similar federal, state or local anti-money laundering laws and
regulations (collectively, the "Anti-Money Laundering Laws"), each Seller
shall have implemented and shall thereafter maintain to the extent required
by law a compliance program that meets the requirements of such Anti-Money
Laundering Laws.
The representations and warranties set forth in this Agreement shall
survive transfer of the Purchased Assets to Buyer and shall continue for so long
as the Purchased Assets are subject to this Agreement.
13. COVENANTS OF SELLERS, GUARANTORS AND REO SUBSIDIARY
Each Seller, each Guarantor and the REO Subsidiary, as applicable, hereby
covenants with Buyer as follows:
a. Defense of Title. Each Seller, each Guarantor and the REO Subsidiary
warrants and will defend the right, title and interest of Buyer in and to all
Collateral against all adverse claims and demands.
b. No Amendment or Compromise. Without Buyer's prior written consent, none
of Sellers, Guarantors, the REO Subsidary, nor those acting on any Seller's, any
Guarantor's or the REO Subsidiary's behalf shall amend or modify, or waive any
term or condition of, or settle or compromise any claim in respect of, any item
of the Purchased Assets, any related rights or any of the Programs, documents,
provided that Servicer may amend or modify a Loan or REO Property if such
amendment or modification does not affect the amount or timing of any payment of
principal or
31
interest, extend its scheduled maturity date, modify its interest rate, or
constitute a cancellation or discharge of its outstanding principal balance and
does not materially and adversely affect the security afforded by the real
property, finishings, fixtures, or equipment securing the Loan or REO Property;
provided that the Servicer shall be permitted to take on any actions with
respect to REO Properties in accordance with its liquidation guidelines.
c. No Assignment. Except as permitted herein, no Seller, nor any Guarantor
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 Documents),
any of the Purchased Assets or any interest therein, provided that this Section
shall not prevent any transfer of Purchased Assets in accordance with the
Program Documents.
d. Servicing of Loans. Each Seller and each Guarantor shall cause Servicer
to service, or cause to be serviced, all Loans and REO Properties that are part
of the Purchased Assets in accordance with prudent servicing practices, pending
any delivery of such servicing to Buyer pursuant to the Servicing Agreement,
employing at least the same procedures and exercising the same care that
Servicer customarily employs in servicing Loans for its own account. The related
Seller shall notify servicers of Buyer's interest hereunder and such Seller
shall notify Buyer of the name and address of all servicers of Loans and REO
Properties. Buyer shall have the right to approve each servicer and the form of
all Servicing Agreements or servicing side letter agreements. The related Seller
shall cause the servicer to hold or cause to be held all escrow funds collected
with respect to such Loans in trust accounts and shall apply the same for the
purposes for which such funds were collected. Upon Buyer's request, the related
Seller shall provide reasonably promptly to Buyer a letter addressed to and
agreed to by each servicer of Loans and REO Properties, in form and substance
reasonably satisfactory to Buyer, advising such servicer of such matters as
Buyer may reasonably request. If any Seller should discover that, for any reason
whatsoever, such Seller or any entity responsible to such Seller by contract for
managing or servicing any such Loan or REO Property has failed to perform fully
such Seller's obligations under the Program Documents or any of the obligations
of such entities with respect to the Purchased Assets, such Seller shall
promptly notify Buyer.
e. Preservation of Collateral: Collateral Value. Each Seller, each
Guarantor and the REO Subsidiary shall do all things necessary to preserve the
Collateral so that it remains subject to a first priority perfected security
interest hereunder. Without limiting the foregoing, each Seller, each Guarantor
and the REO Subsidiary will comply with all rules, regulations and other laws of
any Governmental Authority necessary to preserve the Collateral so that it
remains subject to a first priority perfected security interest hereunder. No
Seller nor any Guarantor will allow any default for which any Seller or any
Guarantor is responsible to occur under any Collateral or any Program Documents
and each Seller and each Guarantor shall fully perform or cause to be performed
when due all of its obligations under any Collateral or the Program Documents.
f. Maintenance of Papers, Records and Files. Each Seller, each Guarantor
and the REO Subsidiary shall require, and Sellers, the Guarantors or the
Servicer of the Purchased Assets shall build, maintain and have available, a
complete file in accordance with lending industry custom and practice for each
Purchased Asset. Sellers, the Guarantors or the Servicer of the Purchased assets
will
32
maintain all such Records not in the possession of Custodian in good and
complete condition in accordance with industry practices and preserve them
against loss.
i) Each Seller and each Guarantor shall collect and maintain
or cause to be collected and maintained all Records relating to the
Purchased Assets in accordance with industry custom and practice,
including those maintained pursuant to the preceding subsection, and
all such Records shall be in Custodian's possession unless Buyer
otherwise approves. No Seller nor any Guarantor will 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 Loan, in which event such Seller
or such Guarantor will obtain or cause to be obtained a receipt from a
financially responsible person for any such paper, record or file.
ii) For so long as Buyer has an interest in or lien on any
Purchased Asset, each Seller and each Guarantor will hold or cause to
be held all related Records in trust for Buyer. Each Seller or each
Guarantor shall notify, or cause to be notified, every other party
holding any such Records of the interests and liens granted hereby.
iii) Upon reasonable advance notice from Custodian or Buyer,
each Seller and each Guarantor shall (x) make any and all such Records
available to Custodian or Buyer to examine any such Records, either by
its own officers or employees, or by agents or contractors, or both,
and make copies of all or any portion thereof, (y) permit Buyer or its
authorized agents to discuss the affairs, finances and accounts of such
Seller or such Guarantor with its respective chief operating officer
and chief financial officer and to discuss the affairs, finances and
accounts of such Seller or such Guarantor with its independent
certified public accountants.
g. Financial Statements: Accountants' Reports: Other Information. Each
Seller, each Guarantor and the REO Subsidiary 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 Assets to Buyer. Each
Seller and NFI shall furnish or cause to be furnished to Buyer the following:
i. Financial Statements. (w) As soon as available and in any
event within 90 days after the end of each fiscal year, the
consolidated and consolidating, audited balance sheets of NFI as of
the end of each fiscal year of NFI, and the audited financial
statements of income and changes in equity of NFI, and the audited
statement of cash flows of NFI, for such fiscal year, (x) as soon as
available and in any event within 45 days after the end of each
quarter, the consolidated and consolidating, unaudited balance sheets
of NFI as of the end of each quarter, and the unaudited financial
statements of income and changes in equity of NFI and the unaudited
statement of cash flows of NFI for the portion of the fiscal year then
ended, (y) within 30 days after the end of each month, monthly
consolidated and consolidating and unaudited statements (excluding
cash flow statements) and balance sheets as provided in clause (x),
and (z) within 10 days after the end of each month, NFI's monthly cash
activity report, the items in clauses (w) and (x) having been
33
prepared in accordance with GAAP (subject, in the case of interim
statements, to normal year-end adjustments) and certified by NFI's
treasurer.
ii. Asset Data. Monthly reports in form and scope satisfactory to
Buyer, setting forth data regarding the performance of the Purchased
Assets for the immediately preceding month, and such other information
as Buyer may reasonably request, including, without limitation, any
other information regarding the Purchased Assets requested by Buyer,
the performance of any loans serviced by or on behalf of NMI and any
other financial information regarding the Guarantors reasonably
requested by Buyer.
iii. Monthly Servicing Diskettes. On or before the second
Business Day prior to each Repurchase Date, or any other time at
Buyer's request, a Computer Tape or a diskette (or any other
electronic transmission acceptable to Buyer) in a format acceptable to
Buyer containing such information with respect to the Purchased Assets
as Buyer may reasonably request upon reasonable prior notice.
iv. Monthly Certification. Each Seller shall execute and deliver
a monthly certification substantially in the form of Exhibit A-1
attached hereto and NFI shall execute and deliver a monthly
certification substantially in the form of Exhibit A-2 attached hereto
within thirty (30) days following the end of each month.
h. Notice of Material Events. Each Seller, each Guarantor and the REO
Subsidiary shall promptly inform Buyer in writing of any of the following:
i. any Default, Event of Default or default or breach by any
Seller, any Guarantor and the REO Subsidiary of any other material
obligation under any Program Document, or the occurrence or existence
of any event or circumstance that such Seller or such Guarantor
reasonably expects will with the passage of time become a Default,
Event of Default or such a default or breach by any Seller or any
Guarantor;
ii. any material change in the insurance coverage required of any
Seller, any Guarantor and the REO Subsidiary or any other Person
pursuant to any Program Document, with copy of evidence of same
attached;
iii. any material dispute, litigation, investigation, proceeding
or suspension between any Seller, any Guarantor and the REO Subsidiary
on the one hand, and any Governmental Authority or any other Person;
iv. any material change in accounting policies or financial
reporting practices of any Seller, any Guarantor, or the REO
Subsidiary;
v. the occurrence of any material employment dispute and a
description of the strategy for resolving it; and
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vi. any event, circumstance or condition that has resulted, or
has a reasonable possibility of resulting, in either a Material
Adverse Change with respect to any Seller, any Guarantor or the REO
Subsidiary or a Material Adverse Effect.
i. Maintenance of Licenses. Except as would not be reasonably likely to
have a Material Adverse Effect, (i) each Seller, each Guarantor and the REO
Subsidiary shall maintain, all material licenses, permits or other approvals
necessary for each Seller and each Guarantor to conduct its business and to
perform its obligations under the Program Documents, and (ii) each Seller and
each Guarantor shall conduct its business in accordance with applicable law.
j. No Withholdings for Taxes. Any payments made by any Seller to Buyer
shall be free and clear of, and without deduction or withholding for, any taxes;
provided, however, that if such Seller shall be required by law to deduct or
withhold any taxes from any sums payable to Buyer, then such Seller 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 the 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. This provision does not apply to income taxes
payable by Buyer on its taxable income.
k. Change in Nature of Business. Neither any Seller nor any Guarantor shall
enter into any new material lines of business except those currently engaged in
as of the date hereof.
l. Limitation on Distributions. If an Event of Default has occurred and is
occurring, no Seller nor any Guarantor shall pay any dividends or distributions
with respect to any capital stock or other equity interests in any Seller or any
Guarantor (except any dividends or distributions required by law in order for
such party to maintain its status as a real estate investment trust), whether
now or hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
any Seller or any Guarantor, except with respect to transfers in the form of
inter-company loans made in the ordinary course of business.
m. Merger of Guarantor. No Guarantor shall at any time, directly or
indirectly, without Buyer's prior consent (i) liquidate or dissolve or (ii) form
or enter into any partnership, joint venture, syndicate or other combination
which would have a Material Adverse Effect.
n. Insurance. Each Seller will obtain and maintain insurance with
responsible companies in such amounts and against such risks as are customarily
carried by business entities engaged in similar businesses similarly situated,
and will furnish Buyer on request full information as to all such insurance, and
provide within (15) days after receipt of such request the certificates or other
documents evidencing renewal of each such policy.
o. Affiliate Transactions. Neither any Seller nor any Guarantor will at any
time, directly or indirectly, sell, lease or otherwise transfer any material
property or assets to, or otherwise acquire any material property or assets
from, or otherwise engage in any material transactions with, any of their
Non-Seller Affiliates unless the terms thereof are no less favorable to the
related Seller or such
35
Guarantor, as applicable, than those that could be obtained at the time of such
transaction in an arm's length transaction with a Person who is not an
Affiliate.
p. Change of Fiscal Year. Neither any Seller nor any Guarantor will at any
time, directly or indirectly, except upon thirty (30) days' prior written notice
to Buyer, change the date on which the related Seller's or such Guarantor's
fiscal year begins from the related Seller's or such Guarantor's current fiscal
year beginning date.
q. Delivery of Servicing Rights. With respect to the Servicing Rights of
each Loan, Sellers and Guarantors shall deliver such Servicing Rights to the
designee of Buyer, within 75 days of a Purchase Date, unless otherwise stated in
writing by Buyer; provided that on each Repurchase Date that is subject to a new
Transaction, such delivery requirement is deemed restated for such new
Transaction (and the immediately preceding delivery requirement is deemed to be
rescinded) in the absence of directions to the contrary from Buyer, and a new
75-day period is deemed to commence as of such Repurchase Date. The Sellers' and
Guarantors' transfer of the Servicing Rights under this Section shall be in
accordance with customary standards in the industry. Buyer shall have the right
to immediately transfer the Servicing Rights, if as of any date of
determination, the Adjusted Tangible Net Worth of NFI is less than $542,000,000;
provided however, that the Adjusted Tangible Net Worth shall be reduced by the
amount of the 2006 Dividend.
r. Underwriting Guidelines. NMI shall not permit any material modifications
to be made to the Underwriting Guidelines without prior notice to the Buyer.
s. Facility Fees. Buyer shall be paid the following fees by wire transfer
of immediately available funds without deduction, set-off or counterclaim
pursuant to the terms and conditions set forth herein and in the Side Letter:
i. Structuring Fee. Prior to the Effective Date, the Sellers
shall have paid the Structuring Fee to the Buyer.
ii. Repayment Fee. Upon termination of the Facility on or
prior to the Termination Date in accordance with Section 27 herein, Sellers
shall pay to Buyer an amount equal to (i) the Repurchase Price, plus (ii) the
Repayment Fee, minus (iii) the sum of all Early Repayment Fees, if any.
iii. Early Repayment Fee. For any asset repurchased by any
Seller prior to such asset's related Repurchase Date, such Seller shall pay the
applicable Early Repayment Fee to Buyer; provided, that the sum of all Early
Repayment Fees shall not exceed the Repayment Fee and payments of any Early
Repayment Fees shall reduce the Repayment Fee owed.
iv. Default Fee. Upon the occurrence of either an Event of
Default or a Default has occurred or is continuing the Sellers shall pay the
Default Fee to Buyer.
v. Change in Control Fee. Upon the occurrence of a Change in
Control, Buyer shall have the right, at its option within ninety (90) days of
such Change in Control, to terminate the
36
Facility and require the Sellers to pay Buyer an amount equal to (i) the
Repurchase Price, plus (ii) the Change in Control Fee.
t. Excluded Subsidiaries. No material change in the nature of the business
including without limitation, capitalization or change in significant investors
shall occur for any Subsidiaries listed on Exhibit B, without thirty (30) days
prior written notice to the Buyer.
u. Maintenance of Liquidity. At all times NFI, on a consolidated basis,
shall maintain Liquidity in an amount of not less than $30,000,000. In the event
that NFI's Liquidity falls below $45,000,000 at any time or NFI's management
believes such event is reasonably likely, Sellers shall provide notice of such
event or likelihood of event to the Agent.
v. Maintenance of Adjusted Tangible Net Worth. The Adjusted Tangible Net
Worth of NFI at any time shall be greater than $517,000,000, provided however
that such amount shall be reduced by the amount of the 2006 Dividend.
w. Margin Calls. If at any time after the date hereof Sellers or any of
their Affiliates receive margin calls under any repurchase or financing
facilities in excess of $5,000,000 in the aggregate, Seller shall provide notice
to Buyer and Buyer shall cause the related Seller to repurchase the assets
subject to such margin calls and include such assets under this Agreement or the
Existing Agreements (provided there is additional capacity) on mutually
acceptable terms to Buyer and Sellers.
x. Payment of Dividends. No Guarantor, Seller or Subsidiary of any of the
foregoing shall pay dividends (other than dividends paid in stock) without the
prior consent of Buyer, exclusive of (i) dividends paid, directly or indirectly
through one or more other Subsidiaries, to a Seller or to a Guarantor and (ii)
subject to the further provisions of this clause (x), NFI's 2006 Dividend to its
shareholders and (iii) dividends paid on NFI's 8.90% Series C Cumulative
Redeemable Preferred Stock and dividends paid on the Trust Preferred Securities;
provided that after giving effect to the payment of the dividends described in
this clause (iii), NFI will have at least $30,000,000 of Liquidity; provided
that, notwithstanding the generality of the foregoing, after payment of the
above, NFI shall be in compliance with all representations, warranties and
covenants set forth in the Existing Agreements. No dividend other than the 2006
Dividend, to the extent permitted by this clause (x), shall be paid in cash
without the prior consent of Buyer.
As of the date hereof, NFI's best estimate of the maximum amount of the
2006 Dividend is $175,000,000.
Buyer acknowledges that the 2006 Dividend must be paid in order for NFI to
continue to maintain its status as a REIT, and that such dividend may be paid in
cash or Dividend Securities. Buyer further acknowledges that U.S. income tax
laws require that any Dividend Securities be valued at their fair market value
at the time of issuance (which, in the case of debt-like securities, may be less
than the face amount thereof) for purposes of determining compliance with the
REIT distribution test.
37
Unless Buyer otherwise consents, the 2006 Dividend shall be paid in the
form of Dividend Securities, provided that if, in the joint determination of NFI
and Buyer, either excess cash is available or it is financially impractical for
NFI to satisfy the requirement to pay the 2006 Dividend entirely by means of
Dividend Securities, then all or a portion of the 2006 Dividend may be paid in
cash, provided further that (i) Buyer will permit all or a portion of the 2006
Dividend to be paid in cash if, following payment in cash of such 2006 Dividend,
NFI's Liquidity shall be greater than $125,000,000 and (ii) NFI will neither pay
nor declare the 2006 Dividend earlier than fifteen (15) days before payment or
declaration of such dividend is required by applicable law.
NFI may issue Dividend Securities, provided that, after giving effect to
such issuance, NFI shall be in compliance with all representations, warranties
and covenants set forth in the Existing Agreements.
y. Special Purpose Entity. The applicable Seller shall cause the REO
Subsidiary to be a Special Purpose Entity that shall (a) own no assets, and will
not engage in any business, other than the assets and transactions specifically
contemplated by the Program Documents; (b) not incur any Indebtedness or
obligation, secured or unsecured, direct or indirect, absolute or contingent
(including Guaranteeing any obligation), other than pursuant to the Program
Documents; (c) not make any loans or advances to any third party, and shall not
acquire obligations or securities of any Seller's Affiliates; (d) pay its debts
and liabilities (including, as applicable, shared personnel and overhead
expenses) only from its own assets; (e) comply with the provisions of its
organizational documents; (f) do all things necessary to observe organizational
formalities and to preserve its existence, and will not amend, modify or
otherwise change its organizational documents, or suffer same to be amended,
modified or otherwise changed, without the Buyer's prior written consent which
shall not be unreasonably withheld; (g) maintain all of its books, records,
financial statements and bank accounts separate from those of its Affiliates;
(h) be, and at all times hold itself out to the public as, a legal entity
separate and distinct from any other entity (including any Affiliate), shall
correct any known misunderstanding regarding its status as a separate entity,
shall conduct business in its own name, shall not identify itself or any of its
Affiliates as a division or part of the other and shall maintain and utilize a
separate telephone number and separate stationery; (i) maintain adequate capital
for the normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations; (j) not engage
in or suffer any Change in Control, dissolution, winding up, liquidation,
consolidation or merger in whole or in part; (k) not commingle its funds or
other assets with those of any Affiliate or any other Person; (l) maintain its
assets in such a manner that it will not be costly or difficult to segregate,
ascertain or identify its individual assets from those of any Affiliate or any
other Person; (m) not institute against, or join any other Person in instituting
against the REO Subsidiary, any insolvency or similar proceeding hereunder or
seek to substantially consolidate the REO Subsidiary in connection with any
insolvency proceeding with respect to the related Seller; (n) comply with the
provisions of its organizational documents; and (o) and will not hold itself out
to be responsible for the debts or obligations of any other Person.
z. Delivery of REO Stock. Simultaneously with the delivery of this
Agreement, NMI will deliver to the Buyer all instruments and certificates
representing the REO Stock. Such instruments and certificates represents 100% of
the equity interest in the REO Subsidiary, including without limitation, any
options, warrants or any other equity interest.
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14. REPURCHASE DATE PAYMENTS/COLLECTIONS
On each Repurchase Date, the related Seller shall remit or shall cause to
be remitted to Buyer the Repurchase Price.
15. CHANGE OF LAW
a. Upon discovery by any Seller, any Guarantor or the REO Subsidiary of a
breach of any of the representations and warranties set forth in Appendices A, B
or C to the Custody Agreement, as applicable, such Seller, such Guarantor or the
REO Subsidiary shall give prompt written notice thereof to Buyer. Upon any such
discovery by Buyer, Buyer will notify the related Seller, the related Guarantor
or the REO Subsidiary. It is understood and agreed that the representations and
warranties set forth in Appendices A, B and C to the Custody Agreement shall
survive delivery of the respective Asset Files to the Custodian and shall inure
to the benefit of Buyer. The fact that Buyer has conducted or has failed to
conduct any partial or complete due diligence investigation in connection with
its purchase of any Purchased Asset shall not affect Buyer's right to demand
repurchase as provided under this Agreement. The Guarantors shall within two (2)
Business Days of the earlier of the Guarantors' discovery or Guarantors'
receiving notice, with respect to any Purchased Asset, of (i) any breach of a
representation or warranty contained in Appendices A, B or C to the Custody
Agreement or (ii) any failure to deliver any of the items required to be
delivered as part of the Asset File within the time period required for delivery
pursuant to the Custody Agreement, promptly cure such breach or delivery failure
in all material respects. If within two (2) Business Days after the earlier of
Guarantors' discovery of such breach or delivery failure or Guarantors'
receiving notice thereof such breach or delivery failure has not been remedied
by a Guarantor, the Guarantors shall promptly upon receipt of written
instructions from Buyer, at Buyer's option, either (i) purchase such Purchased
Asset at a purchase price equal to the Repurchase Price with respect to such
Purchased Asset by wire transfer to the account designated by Buyer, or (ii)
transfer comparable Substitute Assets to Buyer, as provided in Section 16
hereof.
b. If Buyer determines that the introduction of, any change in, or the
interpretation or administration of any requirement of law has made it unlawful
or commercially impracticable to engage in any Transactions with a Pricing Rate
based on LIBOR, then the related Seller (i) shall, upon its receipt of notice of
such fact and demand from Buyer, repurchase the Purchased Assets subject to the
Transaction on the next succeeding Business Day and, at the related Seller's
election, concurrently enter into a new Transaction with Buyer with a Pricing
Rate based on the Prime Rate plus the margin set forth in the Side Letter as
part of the Pricing Rate and (ii) may elect, by giving notice to Buyer, that all
new Transactions shall have Pricing Rates based on the Prime Rate plus such
margin.
c. If Buyer determines in its sole discretion that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on Buyer's capital or on the capital of any Affiliate of Buyer as a
consequence of such Change in Law on this Agreement, then from time to time the
related Seller will compensate Buyer or Buyer's Affiliate, as applicable, for
such reduced rate of return suffered as a consequence of such Change in Law on
terms similar to those imposed by Buyer on its other similarly affected
customers. Buyer shall provide the related
39
Seller with prompt notice as to any Change in Law. Notwithstanding any other
provisions in this Agreement, in the event of any such Change in Law, the
related Seller will have the right to terminate all Transactions then
outstanding without any prepayment penalty as of a date selected by the related
Seller, which date shall be prior to the then applicable Repurchase Date and
which date shall thereafter for all purposes hereof be deemed to be the
Repurchase Date. Nothing in this Section 15 shall be deemed to limit Buyer's
ability to invoke a Margin Call pursuant to Section 6.
16. SUBSTITUTION
a. The related Seller may, subject to agreement with and acceptance by
Buyer, substitute other assets which are substantially the same as the Purchased
Assets (the "Substitute Assets") for any Purchased Assets. Such substitution
shall be made by transfer to Buyer of such other Substitute Assets and transfer
to the related Seller of such Purchased Assets. After substitution, the
Substitute Assets shall be deemed to be Purchased Assets.
b. In the case of any Transaction for which the Repurchase Date is other
than the Business Day immediately following the Purchase Date and with respect
to which the related Seller does not have any existing right to Substitute
Assets for the Purchased Assets, the related Seller shall have the right,
subject to the proviso to this sentence, upon notice to Buyer, which notice
shall be given at or prior to 10 a.m. (New York City time) on the second
preceding Business Day, to Substitute Assets for any Purchased Assets; provided,
however, that Buyer may elect, by the close of business on the Business Day
following which such notice is received, or by the close of the next Business
Day if notice is given after 10 a.m. (New York City time) on such day, not to
accept such substitution. In the event such substitution is accepted by Buyer,
such substitution shall be made by the related Seller's transfer to Buyer of
such Substitute Assets and Buyer's transfer to the related Seller of such
Purchased Assets, and after such substitution, the Substitute Assets shall be
deemed to be Purchased Assets. In the event Buyer elects not to accept such
substitution, Buyer shall offer the related Seller the right to terminate the
Transaction.
c. In the event the related Seller exercises its right to substitute or
terminate under subsection (b), the related Seller shall be obligated to pay to
Buyer, by the close of the Business Day of such substitution, as the case may
be, an amount equal to (A) Buyer's actual cost in bona fide third party
transactions (including all fees, expenses and commissions) of (i) entering into
replacement transactions; (ii) entering into or terminating hedge transactions;
and/or (iii) terminating transactions or substituting securities in like
transactions with third parties in connection with or as a result of such
substitution or termination, and (B) to the extent Buyer determines not to enter
into replacement transactions, the Breakage Costs incurred by Buyer directly
arising or resulting from such substitution or termination. Nothing in this
Section 16 shall be deemed to limit Buyer's ability to invoke a Margin Call
pursuant to Section 6.
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17. REPURCHASE TRANSACTIONS
Buyer may, in its sole election, engage in repurchase transactions with the
Purchased Assets or otherwise pledge, hypothecate, assign, transfer or otherwise
convey the Purchased Assets with a counterparty of Buyer's choice, in all cases
subject to Buyer's obligation to reconvey the Purchased Assets (and not
substitutes therefor) on the Repurchase Date. In the event Buyer engages in a
repurchase transaction with any of the Purchased Assets or otherwise pledges or
hypothecates any of the Purchased Assets, Buyer shall have the right to assign
to Buyer's counterparty any of the applicable representations or warranties in
Appendices A, B and C to the Custody Agreement and the remedies for breach
thereof, as they relate to the Purchased Assets that are subject to such
repurchase transaction.
18. EVENTS OF DEFAULT
With respect to any Transactions covered by or related to this Agreement,
the occurrence of any of the following events shall constitute an "Event of
Default":
a. any Seller fails to transfer the Purchased Assets to Buyer on the
applicable Purchase Date (provided Buyer has tendered the related Purchase
Price);
b. any Seller either fails to repurchase the Purchased Assets on the
applicable Repurchase Date or fails to perform its obligations under Section 6;
c. any Seller, any Guarantor or Servicer shall fail to perform, observe or
comply with any other material term, covenant or agreement contained in the
Program Documents (other than Appendices A, B and C to the Custody Agreement)
and such failure is not cured within the time period expressly provided or, if
no such cure period is provided, within two (2) Business Days of the earlier of
(i) such party's receipt of written notice from Buyer or Custodian of such
breach or (ii) the date on which such party obtains notice or knowledge of the
facts giving rise to such breach;
d. any representation or warranty made by a Seller or a Guarantor (or any
of such Seller's or such Guarantor's officers) in the Program Documents or in
any other document delivered in connection therewith (other than the
representations or warranties in Appendices A, B and C to the Custody Agreement)
shall have been incorrect or untrue in any material respect when made or
repeated or to have been made or repeated if such inaccuracy would constitute a
Material Adverse Change with respect to any Seller or Guarantor, except for the
representations and warranties set forth in Section 12(n) and Appendices A, B
and C to the Custody Agreement with respect to the Purchased Assets, which shall
be considered solely for determining whether such assets constitute Eligible
Assets and the Market Value thereof;
e. any Seller, any Guarantor, or any of any Seller's or any Guarantor's
Subsidiaries shall fail to pay any of any Seller's, such Guarantor's or any
Seller's or such Guarantor's Subsidiaries' Indebtedness, or any interest or
premium thereon when due (whether by scheduled maturity, requirement prepayment,
acceleration, demand or otherwise), or shall fail to make any payment when due
under any Seller's, such Guarantor's or any Seller's or such Guarantor's
Subsidiaries' Guarantee of another person's Indebtedness for borrowed money, and
such failure shall entitle any related counterparty to declare any such
Indebtedness or Guarantee to be due and payable, or required to be
41
prepaid (other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof provided that such Indebtedness is in excess of (i)
$5,000,000 with respect to NFI and (ii) $1,000,000 with respect to all other
parties referenced in this subsection (e) and such failure is not cured within
two (2) Business Days;
f. a custodian, receiver, conservator, liquidator, trustee, sequestrator or
similar official for any Seller, a Guarantor or any of any Seller's or a
Guarantor's Subsidiaries, or of any of any Seller's, a Guarantor's or their
respective Property (as a debtor or creditor protection procedure), is appointed
or takes possession of such property; or any Seller, a Guarantor or any of any
Seller's or a Guarantor's Subsidiaries generally fails to pay any Seller's, such
Guarantor's or any Seller's or such Guarantor's Subsidiaries' debts as they
become due; or any Seller, a Guarantor or any of any Seller's or a Guarantor's
Subsidiaries is adjudicated bankrupt or insolvent; or an order for relief is
entered under the Federal Bankruptcy Code, or any successor or similar
applicable statute, or any administrative insolvency scheme, against any Seller,
a Guarantor or any of any Seller's or a Guarantor's Subsidiaries; or any of any
Seller's, Guarantor's or any Seller's or a Guarantor's Subsidiaries' Property is
sequestered by court or administrative order; or a petition is filed against any
Seller, a Guarantor or any of any Seller's or a Guarantor's Subsidiaries under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution, moratorium, delinquency or liquidation law of any jurisdiction,
whether now or subsequently in effect;
g. any Seller, a Guarantor or any of any Seller's or a Guarantor's
Subsidiaries files a voluntary petition in bankruptcy seeks relief under any
provision of any bankruptcy, reorganization, moratorium, delinquency,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction whether now or subsequently in effect; or consents to the
filing of any petition against it under any such law; or consents to the
appointment of or taking possession by a custodian, receiver, conservator,
trustee, liquidator, sequestrator or similar official for any Seller, any
Guarantor or any of any Seller's or any Guarantor's Subsidiaries, or of all or
any part of any Seller's, any Guarantor's or any Seller's or any Guarantor's
Subsidiaries' Property; or makes an assignment for the benefit of any Seller,
any Guarantor or any Seller's or any Guarantor's Subsidiaries' creditors;
h. any final, nonappealable judgment or order for the payment of money in
excess of (i) $5,000,000 with respect to NFI and (ii) $1,000,000 with respect to
all other parties referenced in this subsection (h), in the aggregate (to the
extent that it is, in the reasonable determination of Buyer, uninsured and
provided that any insurance or other credit posted in connection with an appeal
shall not be deemed insurance for these purposes) shall be rendered against any
Seller, any Guarantor or any of Sellers' or any Guarantor's Affiliates and
Subsidiaries by one or more courts, administrative tribunals or other bodies
having jurisdiction over them and the same shall not be discharged (or
provisions shall not be made for such discharge), satisfied, or bonded, or a
stay of execution thereof shall not be procured, within sixty (60) days from the
date of entry thereof and any Seller, any Guarantor or any of Sellers' or any
Guarantor's Affiliates and Subsidiaries, as applicable, shall not, within said
period of sixty (60) days, appeal therefrom and cause the execution thereof to
be stayed during such appeal;
i. 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, any Guarantor or any of any
Seller's or any Guarantor's Subsidiaries, or shall have taken any action to
displace the
42
management of any Seller, any Guarantor or any of any Seller's or any
Guarantor's Subsidiaries or to materially curtail its authority in the conduct
of the business of any Seller, any Guarantor or any of any Seller's or any
Guarantor's Subsidiaries, or takes any action in the nature of enforcement to
remove or materially limit or restrict the approval of any Seller, any Guarantor
or any of any Seller's or any Guarantor's Subsidiaries as an issuer, buyer or a
seller/servicer of the Purchased Assets or similar securities backed thereby;
j. any Seller, any Guarantor or any of any Seller's or any Guarantor's
Subsidiaries shall default under, or fail to perform as requested under, or
shall otherwise breach the material terms of any instrument, agreement or
contract relating to Indebtedness, and such default, failure or breach shall
entitle any counterparty to declare an amount of such Indebtedness in excess of
(i) $5,000,000 with respect to any NFI and (ii) $1,000,000 with respect to all
other parties referenced in this subsection (j), to be due and payable prior to
the maturity thereof;
k. in the reasonable good faith judgment of Buyer any Material Adverse
Change shall have occurred with respect to the financial condition of NFI and
its Subsidiaries taken as a whole;
l. any Seller or any Guarantor shall admit in writing its inability to, or
intention not to, perform any of any Seller's or such Guarantor's respective
material Obligations;
m. any Seller or any Guarantor dissolves or sells, transfers, or otherwise
disposes of a material portion of any Seller's or such Guarantor's (as
applicable) business or assets (other than pursuant to a securitization or
similar transaction in the ordinary course of business) unless Buyer's written
consent is given;
n. this Agreement shall for any reason cease to create a valid, first
priority security interest or ownership interest upon transfer in any material
portion of the Purchased Assets or Collateral purported to be covered hereby;
o. either any Seller's or any Guarantor'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 or such
Guarantor as a "going concern" or a reference of similar import;
p. the ratio of NFI's Adjusted Tangible Net Worth to Required Equity on a
consolidated basis at any date is less than 1.0:1.0;
q. the Adjusted Tangible Net Worth of NFI, on a consolidated basis, is less
than or equal to $517,000,000 at any time, provided that such amount shall be
reduced by the amount of the 2006 Dividend;
r. any failure of NFI, on a consolidated basis, to maintain Liquidity of at
least $30,000,000 at any time or failure of NFI to notify the Agent if NFI's
Liquidity falls below $45,000,000 at any time;
s. any failure by Sellers or Guarantors to pay any Price Differential,
Margin Deficit or other amount payable under this Agreement or any similar
amounts payable under the Existing Agreements after any applicable grace
periods;
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t. any event of default under the Existing Agreements;
u. any Person shall engage in any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan, which
could reasonably be expected to have a Material Adverse Effect;
v. failure of the Sellers to provide same day notification as soon as
practicable to Buyer of any margin call under any repurchase or financing
facility; or
w. failure to allow Buyer to exercise its options as set forth in Section
13(w) hereof with respect to any margin calls under any repurchase or financing
facility which exceeds $5,000,000 in the aggregate.
19. REMEDIES
Upon the occurrence of an Event of Default, Buyer, at its option, shall
have any or all of the following rights and remedies, which may be exercised by
Buyer in good faith:
a. The Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
b. The Sellers' obligations hereunder to repurchase all Purchased
Assets at the Repurchase Price therefor on the Repurchase Date in such
Transactions shall thereupon become immediately due and payable; all Income
paid after such exercise or deemed exercise shall be retained by Buyer and
applied to the aggregate Repurchase Prices and any other amounts owing by
the Sellers hereunder; the Sellers, the REO Subsidiary and the Guarantors
shall immediately deliver to Buyer or its designee any and all original
papers, Records and Asset Files relating to the Purchased Assets subject to
such Transaction then in the Sellers', the REO Subsidiary's and Guarantors'
possession and/or control; and all right, title and interest in and
entitlement to such Purchased Assets thereon shall be deemed transferred to
Buyer.
c. Buyer may (A) sell, on or following the Business Day following the
date on which the Repurchase Price became due and payable pursuant to
Section 19(b) without notice or demand of any kind, at a public or private
sale and at such price or prices as Buyer may reasonably deem satisfactory
any or all Purchased Assets or (B) in its sole discretion elect, in lieu of
selling all or a portion of such Purchased Assets, to give the Sellers
credit for such Purchased Assets in an amount equal to the Market Value of
the Purchased Assets against the aggregate unpaid Repurchase Price and any
other amounts owing by the Sellers hereunder. The Sellers shall remain
liable to the Buyer for any amounts that remain owing to Buyer following a
sale or credit under the preceding sentence. The proceeds of any
disposition of Purchased Assets shall be applied first to the reasonable
costs and expenses incurred by Buyer in connection with or as a result of
an Event of Default; second to Breakage Costs, costs of cover and/or
related hedging transactions; third to the aggregate Repurchase Prices; and
fourth to all other Obligations.
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d. The parties recognize that it may not be possible to purchase or
sell all of the Purchased Assets on a particular Business Day, or in a
transaction with the same purchaser, or in the same manner because the
market for such Purchased Assets may not be liquid. In view of the nature
of the Purchased Assets, the parties agree that liquidation of a
Transaction or the underlying Purchased Assets does not require a public
purchase or sale and that a good faith private purchase or sale shall be
deemed to have been made in a commercially reasonable manner. Accordingly,
Buyer may elect the time and manner of liquidating any Purchased Asset and
nothing contained herein shall obligate Buyer to liquidate any Purchased
Asset on the occurrence of an Event of Default or to liquidate all
Purchased Assets in the same manner or on the same Business Day or
constitute a waiver of any right or remedy of Buyer. Notwithstanding the
foregoing, the parties' to this Agreement agree that the Transactions have
been entered into in consideration of and in reliance upon the fact that
all Transactions hereunder constitute a single business and contractual
obligation and that each Transaction has been entered into in consideration
of the other Transactions.
e. In addition to its rights hereunder, Buyer shall have the right to
proceed against any Seller's or the REO Subsidiary's assets which may be in
the possession of Buyer, any of Buyer's Affiliates or its designee
(including the Custodian), including the right to liquidate such assets and
to set-off the proceeds against monies owed by the related Seller to Buyer
pursuant to this Agreement. Buyer may set off cash, the proceeds of the
liquidation of the Purchased Assets, any other Collateral or its proceeds
and all other sums or obligations owed by Buyer to the related Seller
hereunder against all of the related Seller's Obligations to Buyer, whether
under this Agreement, under a Transaction, or under any other agreement
between the parties (including, without limitation, the Existing
Agreements), or otherwise, whether or not such Obligations are then due,
without prejudice to Buyer's right to recover any deficiency.
f. Buyer may direct all Persons servicing the Purchased Assets to take
such action with respect to the Purchased Assets as Buyer determines
appropriate.
x. Xxxxxxx shall be liable to Buyer for the amount of all expenses
(plus interest thereon at a rate equal to the Default Rate), and Breakage
Costs and all costs and expenses incurred within 30 days of the Event of
Default in connection with hedging or covering transactions related to the
Purchased Assets.
h. Each Seller and each Guarantor shall cause all sums received by it
with respect to the Purchased Assets to be deposited with Custodian (or
such other Person as Buyer may direct) after receipt thereof.
i. Buyer shall without regard to the adequacy of the security for the
Obligations, be entitled to the appointment of a receiver by any court
having jurisdiction, without notice, to take possession of and protect,
collect, manage, liquidate, and sell the Purchased Assets and any other
Collateral or any portion thereof, collect the payments due with respect to
the Purchased Assets and any other Collateral or any portion thereof, and
do anything that Buyer is authorized hereunder to do. Sellers shall pay all
costs and expenses incurred by Buyer in connection with the appointment and
activities of such receiver.
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j. Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and each Seller hereby expressly waives, to
the extent permitted by law, any right such Seller might otherwise have to
require Buyer to enforce its rights by judicial process. Each Seller also
waives, to the extent permitted by law, any defense such Seller might
otherwise have to the Obligations, arising from use of nonjudicial process,
enforcement and sale of all or any portion of the Purchased Assets and any
other Collateral 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. In addition to all the rights and remedies specifically provided
herein, Buyer shall have all other rights and remedies provided by
applicable federal, state, foreign, and local laws, whether existing at
law, in equity or by statute.
l. Upon the occurrence of an Event of Default, Buyer shall have,
except as otherwise expressly provided in this Agreement, the right to
exercise any of its rights and/or remedies without presentment, demand,
protest or further notice of any kind other than as expressly set forth
herein, all of which are hereby expressly waived by each Seller.
m. Each Seller hereby authorizes Buyer, at such Seller's expense, to
file such financing statement or statements relating to the Purchased
Assets and the Collateral without such Seller's signature thereon as Buyer
at its option may deem appropriate, and appoints Buyer as such Seller's
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 the lien and security interest granted
hereby and to protect, preserve and realize upon the Purchased Assets and
the Collateral, including, but not limited to, the right to endorse notes,
complete blanks in documents, transfer servicing (including, but not
limited, to sending "good-bye letters" to any Borrower in the form of
Exhibit E) and execute assignments on behalf of such Seller as its
attorney-in-fact. This power of attorney is coupled with an interest and is
irrevocable without Buyer's consent.
n. Each Seller recognizes that the Buyer may be unable to effect a
public sale of any or all of the REO Stock, by reason of certain
prohibitions contained in the 1934 Act and applicable state securities laws
or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not a view to the distribution or resale thereof. Each
Seller acknowledges and agrees that any such private sale may result in
prices and other terms less favorable to the Buyer than if such sale were a
public sale, and notwithstanding such circumstances, agrees that any such
private sale shall be deemed to have been made in a commercially reasonable
manner. The Buyer shall be under no obligation to delay a sale of any of
the REO Stock for the period of time necessary to permit the a Seller to
register the related REO Stock for public sale under the 1934 Act, or under
applicable state securities laws, even if such Seller would agree to do so.
o. Each Seller further agrees to use its best efforts to do or cause
to be done all such other acts as may be reasonably necessary to make any
sale or sales of any portion of the REO Stock pursuant to this Agreement
valid and binding and in compliance with any and all
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other applicable laws other than registration under applicable securities
laws, provided that no Seller shall have the obligation to register REO
Stock for public sale under the 1934 Act. Each Seller further agrees that a
breach of any of the covenants contained in this Section 19 will cause
irreparable injury to the Buyer, that the Buyer has no adequate remedy at
law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 19 shall be specifically enforceable
against each Seller, and each Seller hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants
except for defense that no Event of Default has occurred hereunder.
20. DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE
No failure on the part of Buyer to exercise, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by Buyer of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. All rights and remedies of Buyer provided for
herein are cumulative and in addition to any and all other rights and remedies
provided by law, the Program Documents and the other instruments and agreements
contemplated hereby and thereby, and are not conditional or contingent on any
attempt by Buyer to exercise any of its rights under any other related document.
Buyer may exercise at any time after the occurrence of an Event of Default one
or more remedies, as it so desires, and may thereafter at any time and from time
to time exercise any other remedy or remedies.
21. USE OF EMPLOYEE PLAN ASSETS
No assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") shall be
used by either party hereto in a Transaction.
22. INDEMNITY
a. The Sellers agree to pay on demand (i) all reasonable out-of-pocket
costs and expenses of Agent and Buyer in connection with the preparation,
execution, delivery, modification and amendment of this Agreement (including,
without limitation, (A) all collateral review and UCC search and filing fees and
expenses and (B) the reasonable fees and expenses of counsel for Agent and Buyer
with respect to advising Agent and Buyer as to its rights and responsibilities,
or the perfection, protection or preservation of rights or interests, under this
Agreement, with respect to negotiations with the Sellers or with other creditors
of the Sellers or any of their Subsidiaries arising out of any Default or any
events or circumstances that may arise to a Default and with respect to
presenting claims in or otherwise participating in or monitoring any bankruptcy,
insolvency or other similar proceeding involving creditors' rights generally and
any proceeding ancillary thereto); and (ii) all costs and expenses of Agent and
Buyer in connection with the enforcement of this Agreement, whether in any
action, suit or litigation, any bankruptcy, insolvency or other similar
proceeding affecting creditors' rights generally (including, without limitation,
the reasonable fees and expenses of counsel for Agent and Buyer) whether or not
the transactions contemplated hereby are consummated.
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b. The Sellers agree to indemnify and hold harmless Agent and each of its
respective Affiliates and Buyer and each of their respective Affiliates and
their officers, directors, employees, agents and advisors (each, an "Indemnified
Party") from and against (and will reimburse each Indemnified Party as the same
is incurred) any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel and
allocated costs of internal counsel) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation or other proceeding (whether or not such
Indemnified Party is a party thereto) relating to, resulting from or arising out
of any of the Program Documents and all other documents related thereto, any
breach of a representation or warranty of any Seller or any Guarantor or any
Seller's or any Guarantor's officer in this Agreement or any other Program
Document, and all actions taken pursuant thereto) (i) the Transactions, the
actual or proposed use of the proceeds of the Transactions, this Agreement or
any of the transactions contemplated thereby, including, without limitation, any
acquisition or proposed acquisition or (ii) the actual or alleged presence of
hazardous materials on any Property or any environmental action relating in any
way to any Property, except to the extent such claim, damage, class, liability
or expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct or is the result of a claim made by the Sellers or the
Guarantors against the Indemnified Party, and Sellers or the Guarantors are
ultimately the successful party in any resulting litigation or arbitration. The
Sellers also agree not to assert any claim against Agent or any of its
Affiliates, Buyer or any of its Affiliates, or any of their respective officers,
directors, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise
relating to the Program Documents, the actual or proposed use of the proceeds of
the Transactions, this Agreement or any of the transactions contemplated
thereby. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY
APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE, BAD
FAITH OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.
c. Without limitation on the provisions of Section 4, if any payment of the
Repurchase Price of any Transaction is made by the related Seller other than on
the then scheduled Repurchase Date thereto as a result of an acceleration of the
Repurchase Date pursuant to Section 19 or for any other reason, such the related
Seller shall, except as otherwise provided in Sections 15 and 24, upon demand by
Buyer, pay to Buyer any Breakage Costs incurred as of a result of such payment.
d. If the related Seller fails to pay when due any costs, expenses or other
amounts payable by it under this Agreement, including, without limitation,
reasonable fees and expenses of counsel and indemnities, such amount may be paid
on behalf of the related Seller by Buyer, in its sole discretion.
e. Without prejudice to the survival of any other agreement of the related
Seller hereunder, the easements and obligations of the related Seller contained
in this Section shall survive the payment in full of the Repurchase Price and
all other amounts payable hereunder and delivery of the Purchased Assets by
Buyer against full payment therefor.
48
f. The Seller agrees to pay, and to save the Buyer harmless from, any and
all liabilities with respect to, or resulting from any delay in paying, any and
all stamp, excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the REO Stock.
23. WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS
Each Seller hereby expressly waives, to the fullest extent permitted by
law, every statute of limitation on a deficiency judgment, any reduction in the
proceeds of any Purchased Assets as a result of restrictions upon Buyer or
Custodian contained in the Program Documents or any other instrument delivered
in connection therewith, and any right that it may have to direct the order in
which any of the Purchased Assets shall be disposed of in the event of any
disposition pursuant hereto.
24. REIMBURSEMENT
All sums reasonably expended by Buyer in connection with the exercise of
any right or remedy provided for herein shall be and remain the Sellers'
obligation. The Sellers agree to pay, with interest at the Default Rate to the
extent that an Event of Default has occurred, the reasonable out-of-pocket
expenses and reasonable attorneys' fees incurred by Buyer and/or Custodian in
connection with the preparation, enforcement or administration of the Program
Documents, the taking of any action, including legal action, required or
permitted to be taken by Buyer (without duplication to Buyer) and/or Custodian
pursuant thereto, any "due diligence" or loan agent reviews conducted by Buyer
or on its behalf or by refinancing or restructuring in the nature of a
"workout". 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. Notwithstanding any other provisions in this Agreement, in the event of
any such change in the eurocurrency reserve requirement or the interpretation of
any law, regulation or any guideline or request from any central bank or other
Governmental Authority, the Sellers agree will have the right to terminate all
Transactions then outstanding as of a date selected by the Sellers, which date
shall be prior to the applicable Repurchase Date and which date shall thereafter
for all purposes hereof, be deemed to be the Repurchase Date. In addition, Buyer
shall promptly notify the Sellers if any events in clause (i) or (ii) of this
Section 24 occur.
25. FURTHER ASSURANCES
Each Seller and each Guarantor agree to do such further acts and things and
to execute and deliver to Buyer such additional assignments, acknowledgments,
agreements, powers and instruments as are reasonably required by Buyer to carry
into effect the intent and purposes of this Agreement, to perfect the interests
of Buyer in the Purchased Assets or to better assure and confirm unto Buyer its
rights, powers and remedies hereunder.
26. ENTIRE AGREEMENT; PRODUCT OF NEGOTIATION
49
This Agreement supersedes and integrates all previous negotiations,
contracts, agreements and understandings between the parties relating to a sale
and repurchase of Purchased Assets and additional Purchased Assets thereto, and
it, together with the other Program Documents, and the other documents delivered
pursuant hereto or thereto, contains the entire final agreement of the parties.
No prior negotiation, agreement, understanding or prior contract shall have any
validity therefor.
27. TERMINATION
The Facility shall remain in effect until the earliest of the following
(the "Termination Date"): (i) May 8, 2008, (ii) at Buyer's option upon the
occurrence of an Event of Default, (iii) Buyer, at its option, terminates the
Facility upon the occurrence of a Change of Control at any time within ninety
(90) days following such Change of Control or (iv) at Sellers' option upon five
(5) business days notice to Buyer of Sellers' intention to terminate this
Facility. However, no such termination shall affect the related Seller's
outstanding obligations to Buyer at the time of such termination. The related
Seller's obligations to indemnify Buyer pursuant to this Facility shall survive
the termination hereof. Any such termination as set forth above shall require
Sellers to pay Buyer the Repurchase Price plus the Repayment Fee. In addition,
for any such termination pursuant to clauses (ii) or (iii), Sellers shall also
pay Buyer the Default Fee or the Change in Control Fee, respectively.
28. ASSIGNMENT
The Program Documents are not assignable by the related Seller. Buyer
may from time to time assign all or a portion of its rights and obligations
under this Agreement and the Program Documents without consent of the Sellers;
provided, however, that Buyer shall maintain, for review by the related Seller
upon written 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 Document 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 another Person approved by
the related Seller (such approval not to be unreasonably withheld) which assumes
the obligations of Buyer, be released from its obligations hereunder accruing
thereafter and under the Program Documents. Unless otherwise stated in the
Assignment and Acceptance, the related Seller shall continue to take directions
solely from Buyer unless otherwise notified by Buyer in writing. Buyer may
distribute to any prospective assignee any document or other information
delivered to Buyer by the related Seller. Notwithstanding any assignment by
Buyer pursuant to this Section 28, Buyer shall remain liable as to the
Transactions.
29. AMENDMENTS, ETC.
No amendment or waiver of any provision of this Agreement nor any
consent to any failure to comply herewith or therewith shall in any event be
effective unless the same shall be in writing and signed by Sellers and Buyer,
and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
30. SEVERABILITY
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If any provision of any Program Document is declared invalid by any court
of competent jurisdiction, such invalidity shall not affect any other provision
of the Program Documents, and each Program Document shall be enforced to the
fullest extent permitted by law.
31. BINDING EFFECT: GOVERNING LAW
This Agreement shall be binding and inure to the benefit of the parties
hereto and their respective successors and assigns, except that no Seller may
assign or transfer any of its rights or obligations under this Agreement or any
other Program Document without the prior written consent of Buyer. THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF.
32. CONSENT TO JURISDICTION
SELLERS HEREBY WAIVE TRIAL BY JURY. SELLERS HEREBY IRREVOCABLY CONSENT TO
THE NON-EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT
OF OR RELATING TO THE PROGRAM DOCUMENTS IN ANY ACTION OR PROCEEDING. SELLERS
HEREBY SUBMIT TO, AND WAIVE ANY OBJECTION SELLERS MAY HAVE TO, NON-EXCLUSIVE
PERSONAL JURISDICTION AND VENUE IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX 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 DOCUMENTS.
33. SINGLE AGREEMENT
Each Seller, each Guarantor, the REO Subsidiary and Buyer acknowledge that,
and have entered hereinto and will enter into each Transaction hereunder in
consideration of and in reliance upon the fact that, all Transactions hereunder
constitute a single business and contractual relationship and have been made in
consideration of each other. Accordingly, each Seller, each Guarantor the REO
Subsidiary and Buyer each agree (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, and (ii) that payments, deliveries and other transfers made by any of
them in respect of any Transaction shall be deemed to have been made in
consideration of payments, deliveries and other transfer in respect of any other
Transaction hereunder, and the obligations to make any such payments, deliveries
and other transfers may be applied against each other and netted.
34. INTENT
Sellers and Buyer recognize that each Transaction with respect to: (i)
Purchased Assets (other than REO Stock) is a "repurchase agreement" as that term
is defined in Section 101 of Title 11 of the United States Code, as amended
("USC"), and (ii) Purchased Assets is a "securities contract" as that term is
defined in Section 741 of Title 11 of the USC.
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It is understood that Buyer's right to liquidate the Purchased Assets
delivered to it in connection with the Transactions hereunder or to exercise any
other remedies pursuant to Section 19 hereof is a contractual right to liquidate
such Transaction as described in Sections 555 and 559 of Title 11 of the USC.
35. NOTICES AND OTHER COMMUNICATIONS
Except as provided herein, any notice required or permitted by this
Agreement shall be in writing and shall be effective and deemed delivered only
when received by the party to which it is sent; provided, however, that a
facsimile transmission shall be deemed to be received when transmitted so long
as the transmitting machine has provided an electronic confirmation (without
error message) of such transmission. Notice to NMI, NFI or NFI Holding shall
constitute notice to each and all of such entities. Any such notice shall be
sent to a party at the address or facsimile transmission number set forth below:
if to NMI:
NovaStar Mortgage, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxx.xxxxxxxx@xxxxxxxx0.xxx
if to NMI Repurchase:
NMI Repurchase Corporation
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxx.xxxxxxxx@xxxxxxxx0.xxx
if to NFI:
NovaStar Financial, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxx.xxxxxxxx@xxxxxxxx0.xxx
if to NFI Holding:
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NFI Holding Corporation
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxx.xxxxxxxx@xxxxxxxx0.xxx
if to NFI Repurchase:
NFI Repurchase Corporation
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxx.xxxxxxxx@xxxxxxxx0.xxx
if to HVL:
HomeView Lending, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxx.xxxxxxxx@xxxxxxxx0.xxx
if to NovaStar Asset:
NMI Property Financing, Inc.
0000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
E-mail: xxxx.xxxxxxxx@xxxxxxxx0.xxx
if to Buyer or Agent:
Wachovia Bank, National Association
One Wachovia Center
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
53
Facsimile: (000) 000-0000
or, for Transaction Notices and related documents:
Attention: Xxxx Xxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
E-mail: xxxx.xxxx@xxxxxxxx.xxx
as such address or number may be changed by like notice.
36. CONFIDENTIALITY
(a) This Agreement and its terms, provisions, supplements and amendments,
and transactions and notices hereunder, are proprietary to Buyer and Agent and
shall be held by Sellers (and Sellers shall cause each Guarantor to hold it) in
strict confidence and shall not be disclosed to any third party without the
consent of Buyer except for (i) disclosure to each Seller's direct and indirect
parent companies, attorneys, agents or accountants, provided that such attorneys
or accountants likewise agree to be bound by this covenant of confidentiality or
(ii) upon prior written notice to Buyer, which is hereby given with respect to
the Form 8-K NFI will file in connection with entry into this Agreement,
disclosure required by law, rule, regulation or order of a court or other
regulatory body or (iii) with prior written notice to Buyer, any required
Securities and Exchange Commission or state securities' law disclosures or
filings, which shall not include the Side Letter unless otherwise agreed by
Buyer in writing. Notwithstanding anything herein to the contrary, each party
(and each employee, representative, or other agent of each party) may disclose
to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the transaction and all materials of any kind (including
opinions or other tax analyses) that are provided to it relating to such tax
treatment and tax structure. For this purpose, tax treatment and tax structure
shall not include (i) the identity of any existing or future party (or any
Affiliate of such party) to this Agreement or (ii) any specific pricing
information or other commercial terms, including the amount of any fees,
expenses, rates or payments arising in connection with the transactions
contemplated by this Agreement.
(b) Buyer acknowledges that certain of the information provided to it by or
on behalf of any Seller or any Guarantor in connection with this Agreement and
the transactions contemplated hereby is or may be confidential, and Buyer agrees
that, unless such Seller or such Guarantor, as applicable, shall otherwise agree
in writing (subject to subsections (c) and (d) below), Buyer will not disclose
to any other person or entity any information regarding any non-public financial
statements, reports and other information furnished by any Seller or any
Guarantor to Buyer pursuant to or in connection with any Program Document,
unless such information was known to Buyer on a non-confidential basis prior to
disclosure by any Seller or any Guarantor.
54
(c) Each party may disclose certain confidential information to (i) any of
such party's attorneys, consultants, accountants, financial advisors and
independent auditors, (ii) any actual or potential assignee or participant of
Buyer under this Agreement, (iii) any municipal, state, federal or other
regulatory body in order to comply with any law, order, regulation, request or
ruling or (iv) in the event such party is legally compelled by subpoena or other
similar process. After an Event of Default, Buyer may disclose any confidential
information in connection with the sale of the Purchased Assets.
(d) Notwithstanding anything contained herein to the contrary, Buyer shall
not disclose or otherwise take any action with respect to any information
furnished by any Seller, any Guarantor or any attorney or other representative
of any Seller or any Guarantor, that would cause any Seller, any Guarantor or
any affiliate thereof, to be in violation of any requirement of any law, rule or
regulation prohibiting the disclosure of information regarding mortgagors.
37. JOINT AND SEVERAL LIABILITY
The Sellers hereby acknowledge and agree that they are jointly and
severally liable to the Buyer for all representations, warranties, covenants,
obligations and liabilities of each of the Sellers hereunder. The Sellers hereby
further acknowledge and agree that any Default, Event of Default or breach of a
representation, warranty or covenant by any Seller under this Agreement is
hereby considered a Default, Event of Default or breach by each Seller. A
Seller's subrogation claims arising from payments to Buyer shall constitute a
capital investment in another Seller (1)subordinated to any claims of Buyer, and
(2) equal to a ratable share of the equity interests in such Seller. The Sellers
hereby: (a) acknowledge and agree that the Buyer shall have no obligation to
proceed against one Seller before proceeding against the other Seller, (b) waive
any defense to their obligations under this Agreement or any other Program
Document based upon or arising out of the disability or other defense or
cessation of liability of one Seller versus the other or of any other Person,
and (c) waive any right of subrogation or ability to proceed against any Person
or to participate in any security for the Obligations until the Obligations have
been paid and performed in full.
38. CROSS COLLATERALIZATION
Purchased Assets subject to any Transaction hereunder, purchased assets
pursuant to any Existing Agreement, or purchased assets pursuant to any
repurchase agreement or similar financing agreement among the Buyer, Sellers and
Guarantors or any Affiliates of Sellers or Guarantors shall be cross
collateralized with the purchased assets subject to any purchase transaction
pursuant to the Agreement, each Existing Agreement and any repurchase agreement
or similar financing agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, Sellers, Guarantors, Buyer and Agent have caused their
names to be signed to this Master Repurchase Agreement by their respective
officers thereunto duly authorized as of the date first above written.
NFI REPURCHASE CORPORATION,
as a Seller
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: VP, Treasurer & Controller
--------------------------------------
NMI REPURCHASE CORPORATION,
as a Seller
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: VP, Treasurer & Controller
--------------------------------------
HOMEVIEW LENDING, INC.,
as a Seller
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: VP
---------------------------------------
NMI PROPERTY FINANCING, INC.,
as a Seller
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: VP & Treasurer
--------------------------------------
WACHOVIA BANK, NATIONAL ASSOCIATION, as Buyer and Agent
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Name: Xxxxxx X. Xxxxx
---------------------------------------
Title: Director
--------------------------------------
Acknowledged and Agreed:
NFI HOLDING CORPORATION, as a Guarantor
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: VP, Treasurer & Controller
--------------------------------------
NOVASTAR FINANCIAL, INC., as a Guarantor
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: VP, Treasurer & Controller
--------------------------------------
NOVASTAR MORTGAGE INC., as a Guarantor
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: VP, Treasurer & Controller
--------------------------------------
HOMEVIEW LENDING, INC., as a Guarantor
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
---------------------------------------
Title: VP
--------------------------------------
