MASTER REPURCHASE AGREEMENT
(2007 INVESTMENT GRADE SECURITIES)
Dated as of May 31, 2007
AMONG:
Wachovia Bank, N.A., as buyer (the "Buyer", which term shall include any
"Principal" as defined and provided for in Annex I) and Wachovia Capital
Markets, LLC, as agent pursuant hereto ("Agent");
NovaStar Mortgage, Inc. ("NMI"), as a seller, NovaStar Certificates Financing
LLC ("NCFLLC"), as a seller and NovaStar Certificates Financing Corporation
("NCFC"), as a seller (NMI, NCFLLC and NCFC, each a Seller and jointly and
severally, collectively the "Sellers"); and
NovaStar Financial, Inc. ("NFI"), as a guarantor and NFI Holding Corporation
("NFI Holding"), as a guarantor (NFI and NFI Holding, each a Guarantor and
together, jointly and severally, together 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 the
related Seller such Purchased Assets at a date certain, against the
transfer of funds by the related Seller. Each such transaction shall be
referred to herein as a "Transaction", and, unless otherwise agreed in
writing, shall be governed by this Agreement.
2. DEFINITIONS AND 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.
"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
1
(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.
"Agent" means Wachovia Capital Markets, LLC or any successor.
"Agreement" means this Master Repurchase Agreement (2007 Investment
Grade Securities), as it may be amended, supplemented or otherwise modified from
time to time.
"Asset-Backed Security" shall mean either (i) a certificate issued
under a Trust Agreement representing 100% ownership of a Delaware business trust
that has issued bonds secured by a pool of Mortgage Assets originated in
accordance with the Underwriting Standards of the applicable Affiliate of the
related Seller; (ii) a subordinated bond issued by a Delaware business trust
that has issued bonds under an Indenture secured by a pool of Mortgage Assets
originated in accordance with the Underwriting Standards of the applicable
affiliate of the related Seller; or (iii) a certificate issued under a pooling
and servicing agreement secured by a pool of Mortgage Assets.
"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).
"Breakage Costs" shall have the meaning assigned thereto in Section
3(c) herein.
"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's Margin Amount" means, with respect to any Transaction as of
any date of determination, the amount obtained by application of Buyer's Margin
Percentage to the Repurchase Price for such Transaction as of such date.
"Buyer's Margin Percentage" shall have the meaning assigned thereto in
the Side Letter.
2
"Change of Control" shall mean any person or group of persons (other
than (i) any subsidiary of NFI or (ii) 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, and the applicable rules and regulations
thereunder).
"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, NMI and certain Affiliates as it may
be further amended from time to time.
"Combined Market Value" means the aggregate Market Value of the
Purchased Assets and the market value of the servicing rights that are purchased
pursuant to the Master Repurchase Agreement (2007 Servicing Rights).
"Commitment Letter" means the commitment letter, dated as of April 28,
2007, among the Buyer, the Agent, Wachovia Investment Holdings, LLC, NFI and
NMI.
"Confirmation" shall have the meaning assigned thereto in Section 4
hereof.
"Default" means any event, that, with the giving of notice or the
passage of time or both, would constitute an Event of Default.
"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.
"Delinquency and Loss Trigger" shall mean with respect to any Eligible
Asset, the threshold set forth in the related securitization transaction that is
included in the related Transaction Notice, if any, for allowable delinquencies
and losses with respect to such Eligible Asset.
3
"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 Buyer.
"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.
"Eligible Asset" shall mean, in Buyer's sole discretion, an
Asset-Backed Security that is either an Eligible ▇▇▇ ▇▇▇▇, Eligible Subordinate
Certificate or Eligible CBO Interest with respect to which (i) each of the
representations and warranties set forth on Exhibit C hereto (notwithstanding
that any such representations are made to the best knowledge of Seller) is
accurate and complete as of the date of the related Confirmation (and the
related Seller by including any security in any such Transaction shall be deemed
to make such representations and warranties to Buyer at and as of the date of
such Transaction) and (ii) any related Delinquency and Loss Trigger has not been
met.
"Eligible CBO Interest" shall mean any security or any evidence of
indebtedness, rated investment grade by at least one Rating Agency and which
certificates are deemed to be eligible by Buyer in its sole discretion
(including, without limitation, any note or security evidencing a debt tranche),
that represents an interest in (or represents an ownership interest in, or a
debt obligation of, a Person which owns, directly or indirectly) a pool of
asset-backed securities (including any one or more of CMBS, RMBS, consumer
asset-backed securities, commercial asset-backed securities and CDO securities)
and equity interests.
"Eligible ▇▇▇ ▇▇▇▇" shall mean a net interest margin security arising
from securitizations of a Seller's NIM securities rated investment grade by at
least one Rating Agency and which certificates are deemed to be eligible by
Buyer in its sole discretion; provided, however, that all rated securities
registered for public sale in connection with an offering on which any Affiliate
of Buyer acts as an underwriter, shall not be deemed an Eligible ▇▇▇ ▇▇▇▇ until
the expiration of any applicable SEC-mandated "cooling off period".
"Eligible Subordinate Certificates" means certificates issued from
existing securitizations which include first lien and second lien home loans
originated by a Seller or Home View Lending, Inc., to sub prime borrowers, which
certificates are rated at least "Baa3" or "BBB-" by a Rating Agency (if the
Eligible Subordinate Certificates are rated by (1) two Rating Agencies, the
lowest rating shall be used for purposes of determining eligibility or (2) three
Rating Agencies, the middle rating shall be used for purposes of determining
eligibility or (3) one Rating Agency then the rating issued by such agency shall
be used for purposes of determining eligibility) and which certificates are
deemed to be eligible by Buyer in its sole discretion; provided, however, that
all rated securities registered for public sale shall not be deemed an Eligible
Subordinate Certificate until the expiration of any applicable SEC-mandated
"cooling off" period.
"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
4
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.
"Event of Default" shall have the meaning assigned thereto in Section
18 hereof.
"Existing Agreements" shall include the agreements and facilities set
forth on Schedule 1 attached hereto.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governing Agreement" shall mean with respect to any Purchased Asset,
the pooling and servicing agreement, indenture or similar agreement.
"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 any Seller.
"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 and NFI Holding.
"Guaranty" means the Guaranty of the Guarantors, jointly and severally,
in favor of the Buyer, dated as of May 31, 2007.
"Income" means, with respect to any Purchased Asset 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.
"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
financially equivalent to obligations for borrowed money; (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 for the liabilities or obligations of any other Person.
5
"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 Buyer for the related Purchase Date.
"Lien" shall mean, any mortgage, lien, pledge, charge, security
interest, option or claim or similar encumbrance.
"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).
"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 that is an
Eligible Asset, as of any date of determination, the value ascribed to such
asset by Buyer in its sole discretion, and (ii) with respect to a Purchased
Asset that is not an Eligible Asset, zero.
"Master Repurchase Agreement (2007 Non-Investment Grade Securities)"
shall mean that certain Master Repurchase Agreement, dated as of May 31, 2007,
among Wachovia Investment Holdings, LLC as buyer, Wachovia Capital Markets, LLC,
as agent, NMI, as a seller, NCFLLC, as a seller and NCFC, as a seller.
"Master Repurchase Agreement (2007 Servicing Advance)" shall mean the
master repurchase agreement, to be negotiated, among Wachovia Bank, N.A. as
buyer, Wachovia Capital Markets, LLC, as agent and [NovaStar Mortgage Inc.], as
seller.
"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 (2007 Whole Loan)" shall mean the master
repurchase agreement, dated as of May 9, 2007, among Wachovia Bank, N.A. as
buyer, NFI Repurchase Corporation, as a seller, NMI Repurchase Corporation, as a
seller, Acceleron Lending Inc., as a seller, NMI Property Financing, Inc., as a
seller and Homeview Lending, Inc., as a seller.
"Master Repurchase Agreement (2007 Whole Loan New York)" shall mean the
master repurchase agreement, to be negotiated, between Wachovia Bank, N.A., as
buyer and NMI, as seller.
"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.
6
"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.
"Mortgage Assets" shall mean home equity loans or mortgage loans
originated by an Affiliate of a Seller.
"Non-Seller Affiliate" means an Affiliate of any Seller or Guarantor
that is not, itself, a Seller or Guarantor.
"Notice Date" shall have the meaning assigned thereto in Section 4
hereof.
"NFI" means NovaStar Financial, Inc. and its permitted successors and
assigns.
"NFI Holding" means NFI Holding Corporation and its permitted
successors and assigns.
"NMI" means NovaStar Mortgage, Inc. and its permitted successors and
assigns.
"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; (c) in the event of any proceeding for the collection or
enforcement of any of Seller's or 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.
"Other Facilities" means the repurchase or financing facilities
identified on Schedule 4 attached hereto.
"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.
7
"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 and any other agreement entered into by any of the Sellers and/or a
Guarantor, on the one hand, and Buyer or one of its Affiliates 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" means the price at which Purchased Assets are
transferred by Sellers to Buyer in a Transaction, which shall (unless otherwise
agreed) be equal to the Purchase Price Percentage times the Market Value of the
related Purchased Assets.
"Purchase Price Percentage" shall have the meaning assigned thereto in
the Side Letter.
"Purchased Assets" means, with respect to a Transaction, the Eligible
Assets which are the subject of such Transaction, together with the related
Records and other Collateral, and all instruments, chattel paper, and general
intangibles comprising or relating to all of the foregoing.
"Rating Agency" means each of ▇▇▇▇▇'▇ Investors Service, Inc.,
Standard & Poor's, a division of The McGraw Hill Companies, Inc. or Fitch
Ratings.
"Records" means all instruments, agreements and other books, records,
and reports and data generated by other media for the storage of information
maintained by the related Seller or any other person or entity with respect to a
Purchased Asset. Records shall include the certificates with respect to any
Purchased Asset and any other instruments necessary to document or service a
Purchased Asset.
8
"Reference Banks" mean 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.
"REIT" shall mean a real estate investment trust, as defined in Section
856 of the Code.
"Relevant System" shall mean, (i) The Depository Trust Company in New
York, New York, or (ii) such other clearing organization or book-entry system as
is designated in writing by Buyer.
"REMIC" means a "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"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.
"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 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 NFI
and its consolidated Subsidiaries, 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%
---------------------------------------------------------- ----------
9
---------------------------------------------------------- ----------
Percentage
Asset Class Multiplier
---------------------------------------------------------- ----------
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%
---------------------------------------------------------- ----------
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.
"Residual Security" shall mean a non-rated mortgage-backed security
that receives cash flows consisting of excess interest, and/or release of
over-collateralization or reserve funds, or any other type of cash flow
including mortgage principal and interest payments, prepayment charges and
liquidation proceeds.
"SEC" shall mean the Securities and Exchange Commission.
"Servicer" shall mean the designated servicer under each Servicing
Agreement.
"Servicer Report" shall mean the service report to be provided to the
Buyers substantially in the form of Exhibit F attached hereto.
10
"Servicing Agreement" shall mean any servicing agreement pursuant to
which any Mortgage Assets are serviced.
"Side Letter" means the Pricing Side Letter, dated as of May 31, 2007,
among the Sellers, Guarantors and Buyer.
"Structuring Fee" shall have the meaning assigned thereto in the Side
Letter.
"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 D 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 that 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 the related Seller to
enter into a Transaction, in the form attached hereto as Exhibit B which is
delivered to Buyer.
"Trust Agreement" shall mean each of the trust agreements pursuant to
which an Asset-Backed Security has been issued.
"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 ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ 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 ▇▇ ▇▇▇▇▇▇ Chase Bank, NA, as trustee.
"Trustee" shall mean, as applicable, the entity designated as such
pursuant to each Trust Agreement.
11
"Trustee Instruction Letter" shall mean a letter substantially in the
form of Exhibit E.
"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.
b. 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 the related Seller. 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 document, or any information recorded in computer disk form. Where
the related Seller 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
12
otherwise expressly stated, the Buyer may give or withhold, or give
conditionally, approvals and consents, and may form opinions and make
determinations at their 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 1, 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 all Purchased Assets from Buyer
on each related Repurchase Date. 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 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, and the most recent, related Servicer Report has been
provided to the Buyer, each Purchased Asset that is repurchased by the related
Seller on the 26th day of each month (or, if such 26th 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.
c. If the related Seller chooses to repurchase Purchased Assets on any
day which is not a Repurchase Date for such Purchased Assets, the related 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 the related Seller,
absent manifest error. This Section shall survive termination of this Agreement
and the repurchase of all Purchased Assets subject to Transactions hereunder.
4. ENTERING INTO TRANSACTIONS, TRANSACTION NOTICE CONFIRMATIONS
13
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; provided, however, that in no event shall Buyer be
obligated to enter into more than four (4) Transactions per month or more than
one (1) Transaction in any day. Unless otherwise agreed, the related Seller
shall give Buyer notice of any proposed Purchase Date prior to 2:00 p.m. New
York City time on the second (2nd) Business Day preceding 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 request that Buyer enter into a Transaction
by furnishing to Buyer a Transaction Notice. On such Notice Date, the related
Seller shall (I) with respect to Eligible Assets that shall be delivered or held
in definitive, certificated form, deliver to Buyer the original of the relevant
certificate with respect to the related Eligible Assets either (i) registered in
the name of Buyer or (ii) if Buyer consents thereto in its sole discretion, in
form suitable for transfer, with accompanying, duly executed (with a medallion
guarantee with respect to the signatures thereon) instruments of transfer or
appropriate instruments of assignment (including all Transfer Documents)
executed in blank, transfer tax stamps, and any other documents or instruments
necessary in the opinion of Buyer to effect and perfect a legally valid delivery
of such security or other item of investment property to Buyer, (II) with
respect to Eligible Assets that shall be delivered or held in uncertificated
form and the ownership of which is registered on books maintained by the issuer
thereof or its transfer agent, the Seller shall cause the registration of such
security or other item of investment property in the name of Buyer and at the
request of the Buyer, shall take such other and further steps, and shall execute
and deliver such documents or instruments necessary in the opinion of the Buyer,
to effect and perfect a legally valid delivery of the relevant interest granted
therein to Buyer hereunder and (III) with respect to Eligible Assets that shall
be delivered through a Relevant System in book entry form and credited to or
otherwise held in an account, (i) the Seller shall cause the giving of written
instructions to the relevant financial institution or other entity, and shall
provide a copy thereof to the Buyer, sufficient if complied with to effect and
perfect a legally valid delivery of the relevant interest granted therein to
Buyer hereunder, (ii) in connection with any account to which the Eligible
Assets are credited or otherwise held, the Seller shall execute and deliver such
other and further documents or instruments necessary, to effect and perfect a
legally valid delivery of the relevant interest granted therein to Buyer
hereunder and (iii) any account to which the Eligible Assets are credited or
otherwise shall be designated as Buyer may direct. Unless otherwise instructed
by Buyer, any delivery of a security or other item of investment property in
definitive, certificated form shall be made to Buyer in accordance with its
instructions. Any delivery of a security in accordance with this subsection, or
any other method acceptable to Buyer in its sole discretion, shall be sufficient
to cause Buyer to have a perfected, first priority security interest in, and to
be the "entitlement holder" (as defined in Section 8-102(a)(7) of the Uniform
Commercial Code of the State of New York) with respect to the security. No
Purchased Assets shall, whether certificated or uncertificated, (i) remain in
the possession of the Seller, or (ii) remain in the name of the Seller or any of
its agents, or in any account in the name of the Seller or any of its agents. In
the event Buyer consents to delivery of any certificate representing one or more
of Eligible Assets not registered in the name of Buyer, concurrently with the
delivery thereof, (A) the Seller shall have (1) notified the Trustee in
connection with the related securitization transaction of the pledge of the
related Eligible Assets hereunder, and (2) instructed the Trustee to pay all
amounts payable to the holders of the Eligible Assets to an account specified by
the Buyer, in the form of the instruction letter attached hereto as Exhibit E
(the "Trustee Instruction Letter") and (B) the Trustee shall have acknowledged
in writing the instructions set forth in clause (A) above, and
14
a copy of the fully executed Trustee Instruction Letter shall be delivered to
the Buyer. Buyer shall exercise all voting and corporate rights relating to such
Purchased Assets in accordance with Seller's direction for so long as no Default
or Event of Default shall have occurred and be continuing; provided, however,
that no vote shall be cast or corporate right exercised or other action taken
which would impair, reduce the value of or otherwise adversely affect the
Purchased Assets or which would be inconsistent with or result in any violation
of any provision of this Agreement, any other Program Document or the Guaranty.
Sellers hereby agree to pay all costs and expenses incurred by any party
(including reasonable attorney's fees and expenses) in connection with any such
registration in the name of Buyer and any ultimate re-registration in the name
of Sellers, if applicable. Without the prior written consent of Buyer, no Seller
will (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any
option with respect to, the Purchased Assets, or (ii) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Purchased Assets, or any interest therein, except for the lien
provided for by this Agreement, or (iii) enter into any agreement or undertaking
(other than pursuant to this Agreement) restricting the right or ability of the
Seller or Buyer to sell, assign or transfer any of the Purchased Assets.
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 Buyer. Any Repurchase Price or Price Differential received by a
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 the aggregate Market Value of all Purchased Assets
subject to all Transactions is less than the aggregate Buyer's Margin Amount for
all such Transactions (a "Margin Deficit"), then Buyer may by notice to the
related Seller require the related Seller in such Transactions to transfer to
Buyer cash so that the cash and aggregate Market Value of the Purchased Assets
will thereupon equal or exceed such aggregate Buyer's Margin Amount (such
requirement, a "Margin Call"). If a Seller fails to satisfy a Margin Deficit in
accordance with this Section 6(a), then Buyer may, in its sole discretion,
immediately 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.
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. The
related Seller, 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
15
otherwise existing by law or in any way create additional rights for the related
Seller 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 paid directly to Buyer and be the property of Buyer;
provided, however, that all such Income shall be applied by Buyer to reduce the
Obligations of Sellers hereunder.
8. SECURITY INTEREST
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 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, the contractual right to service or arrange for the servicing of each
Mortgage Asset to the extent, if any, the related Seller has such rights, any
servicing agreements with respect to each Mortgage Asset, including the rights
of the related Seller, if any, under any Servicing Agreements to the extent such
rights under the Servicing Agreements are assignable by the related Seller, and
any proceeds and distributions with respect to any of the foregoing
(collectively the "Collateral").
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;
16
(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.
(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) and (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);
(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 and each Guarantor 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;
17
(xii) Agent shall have received an opinion of each Seller's
and each Guarantor's counsel as to such matters (including, without
limitation, a corporate opinion, a New York law enforceability opinion,
a security interest opinion, an investment company act opinion and a
"securities contract" under federal bankruptcy law opinion) as Buyer
may reasonably request and in form and substance acceptable to Buyer;
(xiii) All of the conditions precedent in the Guaranty shall
have been satisfied; and
(xiv) 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 delivered pursuant to Section 4(a);
(B) the definitive certificate representing ownership of such
Purchased Assets that are subject to such Transaction in the name of
Buyer or, if such Purchased Assets that are subject to such Transaction
are registered on DTC or similar depository, evidence satisfactory to
Buyer that the records of DTC or such depository show Buyer as the
beneficial ownership of such Purchased Assets that are subject to such
Transaction;
(C) each Governing Agreement with respect to each Purchased
Asset; and
(D) 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.
18
(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) The Purchase Price for the requested Transaction shall
not be less than $1,000,000, or an integral multiple of $500,000
thereafter.
(x) Agent 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.
(xi) Buyer shall not be obligated to enter into more than four
(4) Transactions per month (excluding any automatic Transaction
pursuant to Section 3(b)) or one (1) Transaction per day.
(xii) Any other documents reasonably requested by Buyer.
10. RELEASE OF PURCHASED ASSETS
Upon timely payment in full of the Repurchase Price 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 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 the related
Seller of the amount thereof and the related Seller 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 the related Seller or the Guarantor in acting upon,
any request or other communication
19
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 Guarantor's behalf.
12. REPRESENTATIONS AND WARRANTIES
Each Seller and each Guarantor 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 and each
Guarantor is duly organized, validly existing and in good standing
under the laws of the jurisdiction under whose laws it is organized.
Each Seller and each Guarantor 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 and each Guarantor 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 and each Guarantor 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. None of the execution and delivery of the
Program Documents by the related Seller or the related Guarantor or the
consummation of the Transactions and transactions thereunder:
i) conflicts with, breaches or violates any provision
of any Seller's charter documents, bylaws, operating agreement
or any similar agreement, any material agreement of any Seller
or the Guarantor or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently
in effect having applicability to the related Seller or the
related Guarantor or its properties, except as would not have
a Material Adverse Effect;
ii) constitutes a default by the related Seller or
the Guarantor under any loan or repurchase agreement,
mortgage, indenture or other material agreement or instrument
to which the related Seller or the related Guarantor is a
party or by which it or any of its properties is or may be
bound or affected; or
20
iii) results in or requires the creation of any lien
upon or in respect of any of the assets of the related Seller
or the related Guarantor 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 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 Sellers or any Guarantor is a party, when executed
and delivered by Sellers or such Guarantor, as applicable, will
constitute the legal, valid and binding obligations of the related
Seller or such Guarantor, as applicable, enforceable against the
related Seller or such Guarantor, 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 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 Sellers or any Guarantor and
provided by Sellers or any Guarantor to Buyer relating to Sellers' or
the Guarantor's financial condition contain any statement of a material
fact with respect to Sellers or any Guarantor 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 Sellers or any Guarantor, 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 Sellers or any Guarantor of this
Agreement or the consummation by Sellers or any Guarantor of any other
Program Document, other than any that have heretofore been obtained,
given or made.
21
j. Compliance With Law. Etc. No practice, procedure or policy
employed or proposed to be employed by Sellers 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 Sellers or
any Guarantor or a Material Adverse Effect.
k. Solvency: Fraudulent Conveyance. Each Seller and each
Guarantor is solvent and will not be rendered insolvent by the
Transaction and, after giving effect to such Transaction, neither
Sellers nor any Guarantor will be left with an unreasonably small
amount of capital with which to engage in its business. Neither Sellers
nor any Guarantor intends to incur, nor believes that it has incurred,
debts beyond its ability to pay such debts as they mature. Neither
Sellers nor any Guarantor 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 Sellers or any Guarantor or any of their assets.
The amount of consideration being received by Sellers upon the sale of
the Purchased Assets to Buyer constitutes reasonably equivalent value
and fair consideration for such Purchased Assets. Sellers are not
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 under the control of an
"investment company" as defined under the Investment Company Act.
m. Taxes. Each Seller and each Guarantor has 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
the Sellers or any Guarantor in connection with a Transaction and the
execution and delivery of the Program Documents have been paid.
n. Additional Representation. With respect to each Purchased
Asset, the related Seller hereby makes all of the applicable
representations and warranties set forth in each Confirmation to which
such Purchased Asset is or has been subject, in each case as of the
related Purchase Date, and the related Seller understands that if the
substance of any such representation or warranty ceases to be true
because of events occurring after such date, the Market Value could be
adversely affected.
o. No Broker. Neither any Seller nor any Guarantor 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 Sellers or any Guarantor 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 the related Seller or such Guarantor, as applicable.
22
p. Adequate Capital. The capital of Sellers and each Guarantor
is adequate for the respective business and undertakings of Sellers and
each Guarantor.
q. [Reserved].
r. Governing Agreements. Each Governing Agreement is in full
force and effect and has not been modified, amended or supplemented
except for any modifications, amendments and supplements approved by
Buyer.
s. Purchased Assets. With respect to each Purchased Asset, (i)
the related Seller has sold to Buyer a one hundred percent (100%)
interest in each class of such Purchased Asset; (ii) the related Seller
shall be at the time it delivers any Purchased Assets for any
Transaction, and shall continue to be, through the Purchase Date
relating to each such Transaction, the legal and beneficial owner of
such Purchased Assets free and clear of any Lien; (iii) the Seller has
the unqualified right to sell (and to the extent applicable, pledge and
grant a first priority security interest in) the Purchased Assets as
provided herein without the consent of any other person or entity,
except for such consents which shall have been obtained prior to the
Purchase Date; and (iv) upon the consummation of each Transaction,
Buyer shall be the legal and beneficial owner of such Purchased Assets
free and clear of any lien.
t. 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).
u 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 AND GUARANTOR
Each Seller and each Guarantor, as applicable, hereby covenants with
Buyer as follows:
23
a. Defense of Title. Each Seller and each Guarantor 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, neither any Seller, any Guarantor nor those acting on any
Seller's or any Guarantor'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
Program Documents.
c. No Assignment. Except as permitted herein, neither any
Seller nor any Guarantor 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. Servicer Report. At least five (5) Business Days prior to
each Repurchase Date, with respect to an Eligible Asset originated by a
Seller, the Sellers shall provide the Buyer with the most recent,
related Servicing Report substantially in the form of Exhibit F
attached hereto, and with respect to an Eligible Asset not originated
by a Seller, the Sellers shall provide the Buyer with the most recent
trustee report, certificateholder report or such other report as the
Sellers have received related to the Eligible Asset.
e. Preservation of Collateral; Collateral Value. Each Seller
and each Guarantor 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 and each Guarantor 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. Neither any 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 and
each Guarantor shall require, and each Seller or the Guarantors 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. Each Seller or the Guarantors of the Purchased Assets
will maintain all such Records not in the possession of Buyer 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 Buyer's possession unless Buyer otherwise
approves.
24
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 Buyer, each Seller
and each Guarantor shall (x) make any and all such Records available to
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 each Seller or such
Guarantor with its respective chief operating officer and chief
financial officer and to discuss the affairs, finances and accounts of
each Seller or such Guarantor with its independent certified public
accountants.
g. Financial Statements: Accountants' Reports: Other
Information. Each Seller and each Guarantor 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 prepared in
accordance with GAAP (subject, in the case of interim
statements, to normal year-end adjustments) and certified by
NFI's treasurer.
ii) 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.
iii) Monthly Servicing Reports. Each Seller shall
deliver to Buyer monthly servicing reports which shall include
information as to static pool analyses and Liquidity (as
defined herein).
h. Notice of Material Events. Each Seller and each Guarantor
shall promptly inform Buyer in writing of any of the following:
25
i) any Default, Event of Default or default or breach
by any Seller or any Guarantor of any other material
obligation under any Program Document, or the occurrence or
existence of any event or circumstance that any 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 or any Guarantor 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 or any Guarantor,
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 or any Guarantor;
v) the occurrence of any material employment dispute
and a description of the strategy for resolving it; and
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 or
any Guarantor 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 and each
Guarantor 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 the related
Seller to Buyer shall be free and clear of, and without deduction or
withholding for, any taxes; provided, however, that if the related
Seller shall be required by law to deduct or withhold any taxes from
any sums payable to Buyer, then the related 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 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, neither any Seller nor any Guarantor shall
pay any dividends or distributions with
26
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 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. [Reserved].
r. 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 D, without thirty (30) days prior written 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
27
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 Facility
and require the Sellers to pay Buyer an amount equal to (i) the
Repurchase Price, plus (ii) the Change in Control Fee.
t. 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.
u. 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.
v. 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, (ii) subject to the further provisions of
this clause (v), 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 (v), 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
28
case of debt-like securities, may be less than the face amount
thereof) for purposes of determining compliance with the REIT
distribution test.
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.
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 the Existing Agreements (provided there is additional
capacity) on mutually acceptable terms to Buyer and Sellers.
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. 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.
b. 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
29
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.
30
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,
provided that, in all cases, such counterparty provides Sellers with executed
tax forms claiming a zero tax withholding rate, 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 with respect to the
Purchased Assets hereunder 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. either any Seller or a Guarantor shall fail to perform, observe or
comply with any other material term, covenant or agreement contained in the
Program Documents 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 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 any Seller or a Guarantor (or
any of any Seller's or such Guarantor's officers) in the Program Documents or in
any other document delivered in connection therewith 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 Material Adverse Change with
respect to any Seller or Guarantor, except for the representations and
warranties set forth in Section 12(n) and Exhibit C hereof with respect to the
Residual Securities and Collateral, 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
31
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, the Guarantor or any of Sellers' or 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, the Guarantor or any of Sellers' or
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
32
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;
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 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 (a) termination by any Seller of any Servicer or subservicer or
the Mortgage Assets without the prior written consent of Buyer to the extent any
Seller's consent is required for such termination or (b) amendment of any
Servicing Agreement without the prior written consent of Buyer to the extent any
Seller's consent is required for such occurrences, (c) failure by any Seller (if
it is the Servicer) or any Servicer to service the Mortgage Assets in accordance
with (i) industry standards for similar loans with third parties or (ii) the
standards set forth in the Servicing Agreement;
33
s. 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;
t. any failure by Sellers or Guarantors to pay any Price Differential,
Margin Deficit or other amount payable under this Agreement or the Existing
Agreements after any applicable grace periods;
u. any event of default under the Existing Agreements;
v. 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;
w. 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
x. failure to allow Buyer to exercise its options as set forth in
Section 6 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 related Seller's 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 related
Seller hereunder; the related Seller and each Guarantor shall immediately
deliver to Buyer or its designee any and all original papers, records and files
relating to the Purchased Assets subject to such Transaction then in any
Seller's and any Guarantor's 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 related Seller 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
related Seller hereunder. The related Seller shall remain
34
liable to 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 the 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.
d. Reserved.
e. 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, the 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.
f. In addition to its rights hereunder, Buyer shall have the right to
proceed against any of the related Seller's assets which may be in the
possession of Buyer, any of Buyer's Affiliates or its designee, 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 and Additional
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.
g. Buyer may direct all Persons servicing the Purchased Assets to take
such action with respect to the Purchased Assets as Buyer determines
appropriate.
h. The related Seller 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. Sellers shall also be required to pay to Buyer the Default
Fee.
i. Each Seller and each Guarantor shall cause all sums received by it
with respect to the Purchased Assets to be remitted to Buyer (or such other
Person as Buyer may direct) after receipt thereof.
j. 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
35
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 the Buyer is authorized hereunder to do. The
related Seller shall pay all costs and expenses incurred by Buyer in connection
with the appointment and activities of such receiver.
k. Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and the related Seller hereby expressly waives, to
the extent permitted by law, any right the related Seller might otherwise have
to require Buyer to enforce its rights by judicial process. The related Seller
also waives, to the extent permitted by law, any defense the related 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. The related 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.
l. 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.
m. 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 the related Seller.
n. The related Seller hereby authorizes Buyer, at the related Seller's
expense, to file such financing statement or statements relating to the
Purchased Assets and the Collateral without the related Seller's signature
thereon as Buyer at its option may deem appropriate, and appoints Buyer as the
related Seller's attorney-in-fact to execute any such financing statement or
statements in the related 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 and execute assignments on behalf of the related
Seller as its attorney-in-fact. This power of attorney is coupled with an
interest and is irrevocable without Buyer's consent.
o. Buyer may direct a Seller, or its Affiliate, to resign as the
servicer of the Mortgage Assets and to cooperate with any successor servicer.
36
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 related Seller agrees 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 related
Seller or with other creditors of the related Seller or any of its 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.
b. The related Seller agrees 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
37
any Guarantor or any Seller's or any Guarantor's officers 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 any Seller or any Guarantor against the Indemnified Party, and the related
Seller or such Guarantor is ultimately the successful party in any resulting
litigation or arbitration. The related Seller also agrees 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, 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.
23. WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS
The related 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 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 related
Seller's obligation. The related Seller
38
agrees 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 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) pursuant thereto, any "due diligence" or loan
agent reviews conducted by Buyer or on their 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 related Seller agrees to pay to Buyer, from time to time,
upon demand by Buyer 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 related Seller will have the right to terminate all Transactions then
outstanding as of a date selected by the related Seller, 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 Seller if any events in clause (i) or (ii) of this Section 24
occur.
25. FURTHER ASSURANCES
The Sellers 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
This Agreement supersedes and integrates all previous negotiations,
contracts, agreements and understandings between the parties relating to a sale
and repurchase of 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 29, 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 ▇▇▇▇▇▇▇▇▇▇
▇▇
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
and, in all cases, that such assignee will provide tax forms to Sellers claiming
a zero rate of withholding. 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
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 Sellers may not
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.
40
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 ▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ 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 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 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, Guarantors and Buyer recognize that each Transaction is a
"securities contract" as that term is defined in Section 741 of Title 11 of the
United States Code, as amended ("USC").
It is understood that a 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, NCFLLC or NCFC:
41
NovaStar Mortgage, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
if to NFI:
NovaStar Financial, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
if to NFI Holding:
NFI Holding Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
if to Wachovia Bank, N.A.:
Wachovia Bank, N.A.
One Wachovia Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
With a copy to:
Wachovia Capital Markets, LLC
One Wachovia Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
42
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
or, for Transaction Notices and related documents:
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇.▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
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 the Guarantor in connection with this Agreement
and the transactions contemplated hereby is or may be confidential, and Buyer
agrees that, unless such Seller or the 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
the 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 the Guarantor.
43
(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, the Guarantor or any attorney or other representative
of any Seller or the Guarantor, that would cause any Seller, the 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
The Purchased Assets subject to any Transaction hereunder, purchased
assets pursuant to the Existing Agreements or purchased assets pursuant to any
repurchase agreement or similar financing agreement among 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 any of the existing facilities.
[Signature Page Follows]
44
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.
NOVASTAR MORTGAGE, INC., as Seller
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Title: Vice President, Treasurer &
Controller
-----------------------------------
NOVASTAR CERTIFICATES FINANCING LLC, as
Seller
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Title: Vice President, Treasurer &
Controller
-----------------------------------
NOVASTAR CERTIFICATES FINANCING
CORPORATION, as Seller
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Title: Vice President, Treasurer &
Controller
-----------------------------------
WACHOVIA BANK, N.A., as Buyer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Title: Director
-----------------------------------
WACHOVIA CAPITAL MARKETS, LLC, as Agent
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Title: Vice President
-----------------------------------
Acknowledged and Agreed:
NFI HOLDING CORPORATION, as Guarantor
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Title: Vice President, Treasurer &
Controller
---------------------------------
NOVASTAR FINANCIAL, INC., as Guarantor
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Title: Vice President, Treasurer &
Controller
---------------------------------
