MASTER REPURCHASE AGREEMENT (2007 RESIDUAL SECURITIES)
Dated as of April 18, 2007
AMONG:
Wachovia
Investment
Holdings,
LLC
("Buyer",
which
term shall
include
any
"Principal"
as defined and
provided
for in Annex I), as buyer,
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
collectively,
jointly and severally, the "Sellers").
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 (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
Residual
Securities), as it may be amended,
supplemented or otherwise modified from time
to time.
"
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.
"
Change of Control
"
shall mean any person or group of persons
(other than
(i) any
subsidiary of the NFI or (ii) any employee or director
benefit plan or
stock plan of the NFI or any
subsidiary
of the 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 the 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 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).
"
Combined Maximum Aggregate Purchase Price
" shall have the meaning assigned
thereto
in the Side
Letter.
"
Combined
Purchase
Price
"
means
the
aggregate
Purchase
Price
of the
Purchased
Assets
and the
purchase
price
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 11,
2007, among the Buyer, the Agent, Wachovia Bank, N.A., 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 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
Residual
Security, 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 Residual Security.
"
Dividend
Securities
"
shall mean notes,
bonds,
debentures
or common or
preferred stock of NFI or its subsidiaries
that qualify as property and will be
treated as a deductible
dividend to NFI
shareholders
under the Code,
and are
reasonably acceptable to the Buyer.
"
Effective Date
" shall mean the date set forth on the top of the first page
of this Agreement.
"
Eligible
Asset
" shall mean each
Residual
Security
issued from existing
securitizations
which
include
either
Seller's
originated
first-lien
and
second-lien home loans to sub-prime borrowers (except securities
issued pursuant
to the NovaStar
Mortgage
Funding
Trust,
Series
2006-MTA1),
3
which residual
certificates
may have previously been pledged and included in a
net
interest
margin
security
and are deemed to be
eligible by the Buyers in
their sole and
absolute
discretion
and 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 the Sellers) 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.
"
ERISA
" shall mean the Employee
Retirement Income Security Act of 1974, as
amended from time to time.
"
ERISA Affiliate
" shall mean any corporation or trade or business that is a
member of any group of
organizations
(i) described in Section 414(b) or (c) of
the Code of which
Seller is a member and (ii) solely for
purposes of potential
liability under Section
302(c)(11) of ERISA and Section
412(c)(11) of the Code
and the lien created
under
Section
302(f) of ERISA and Section
412(n) of the
Code,
described
in
Section
414(m)
or (o) of the Code of which
Seller
is a
member.
"
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, NFI Holding,
NovaStar
Mortgage Inc. and Homeview
Lending, Inc.
"
Guaranty
" means the Guaranty of the Guarantors,
jointly and severally, in
favor of the Buyer, dated as of April 18, 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.
4
"
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.
"
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.
"
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 Servicing
Rights)
" means that certain
master
repurchase
agreement (MSR),
dated as of April 18, 2007, among Wachovia
Bank, National Association and NovaStar Mortgage,
Inc., as amended from time to
time.
"
Material
Adverse
Chang
e"
means
any
material
adverse
change
in
the
business,
financial performance,
assets, operations or condition (financial or
otherwise) of NFI and its consolidated subsidiaries, taken as a
whole.
"
Material
Adverse Effect
" means (a) a Material Adverse Change with respect
to a Guarantor or a Guarantor and its
Affiliates
that are party to any Program
Document
taken
as a whole;
(b) a
material
impairment
of the
ability
of a
Guarantor or any
Affiliate
that is a party to any Program
Document to perform
under any Program Document and to avoid any Event of Default;
or (c) a
5
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.
"
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.
"
Person
"
shall
mean
any
legal
person,
including
any
individual,
corporation,
partnership,
association,
joint-stock
company,
trust,
limited
liability company,
unincorporated
organization,
governmental
entity or other
entity of similar nature.
"
Plan
"
shall
mean an
employee
benefit
or
other
plan
established
or
maintained
by Seller or any ERISA
Affiliate
and covered by Title IV of ERISA,
other than a Multiemployer Plan.
"
Price
Differential
"
means,
with respect to each
Transaction
as of any
date, the aggregate amount obtained by daily application of the
Pricing Rate for
such
Transaction
to the
Purchase
Price on a
360-day-per-year
basis for the
actual
number of days
during
the period
commencing
on (and
including)
the
Purchase Date and ending on (but excluding) the date of
determination
(reduced
by any amount of such Price
Differential
in respect of such period
previously
paid by the related Seller to Buyer) with respect to such
Transaction.
6
"
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 Residual
Securities 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 Moody's 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.
"
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.
"
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.
"
REIT
" shall mean a real estate investment trust, as defined in Section
856
of the Code.
7
"
REMIC
"
means a "real
estate
mortgage
investment
conduit"
within
the
meaning of Section 860D of the Code.
"
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
5%
(securitized in an owners trust)
----------------------------------------------------------------------------
Mortgage loans held-in-portfolio including accrued interest
1.75%
(securitized in a REMIC trust)
----------------------------------------------------------------------------
AAA-Rated I/O and Prepay (P) Certificates booked on-B/S
25%
----------------------------------------------------------------------------
BBB NIM Certificates
25%
----------------------------------------------------------------------------
Residuals from whole loan securitizations
35%
----------------------------------------------------------------------------
Residuals from NIM/CAPS
100%
----------------------------------------------------------------------------
Non-rated subordinate bonds (excluding residuals)
100%
----------------------------------------------------------------------------
A-Rated Mortgage-Backed Securities not in CDO
20%
----------------------------------------------------------------------------
BBB-Rated Mortgage-Backed Securities not in CDO
25%
----------------------------------------------------------------------------
BB-Rate Mortgage-Backed Securities not in CDO
50%
----------------------------------------------------------------------------
Mortgage-Backed Securities in CDO
5%
----------------------------------------------------------------------------
8
----------------------------------------------------------------------------
Percentage
Asset Class
Multiplier
----------------------------------------------------------------------------
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
35%
collateral calls)
----------------------------------------------------------------------------
Other assets
- Hedging Agreements (Value of reserves that are not reflected
100%
in Marks to Market that impact equity)
- All Other Assets (all else remaining - including Other
35%
Receivables & PP&E
----------------------------------------------------------------------------
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
liquidiation proceeds.
"
SEC
" shall mean the Securities and Exchange Commission.
"
Servicer
"
shall
mean
the
designated
servicer
under
each
Servicing
Agreement.
"
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 April 18, 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
9
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.
"
TMP
REIT
Securities
"
means the
Residual
Securities
for the
NovaStar
Mortgage
Funding
Trust,
Series 2006-1 and NovaStar
Mortgage
Funding
Trust,
Series 2006-MTA1.
"
Total
Liabilities
"
shall
mean
total
liabilities
of
NFI
and
its
consolidated
Subsidiaries
determined
in
accordance
with
GAAP (or with such
non-GAAP
principles
as may be
disclosed to and approved by Buyer from time to
time); provided; for purposes of this Agreement, such term shall
not include any
Trust Preferred Securities.
"
Transaction
" has the meaning assigned thereto in Section 1.
"
Transaction Notice
" means a written request of 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
a Residual 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 JP Morgan Chase 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 JP Morgan Chase Bank, NA, as trustee.
"
Trustee
" shall mean, as applicable, the entity designated as such pursuant
to each Trust Agreement.
"
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.
"
Usage Fee
" shall have the meaning assigned thereto in the Side Letter.
10
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
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
11
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
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,
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
repurchases
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
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. In no event shall Buyer be required to
enter into more
than one 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
12
City time on the second
(2nd)
preceding
Business
Day (the date on which such
notice is so given,
the "Notice Date"),
provided that the initial
Transaction
shall only require one (1) Business Day prior
notice.
On the Notice Date,
the
related Seller or a Guarantor
shall 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
(including
for TMP
REIT
Securities),
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 the 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
the
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 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
13
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.
Seller
hereby
agrees 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 Seller,
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
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").
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 the Buyer each agree that a failure or delay
by Buyer to
exercise
its
rights
hereunder
shall not limit or waive
Buyer's
rights under this
Agreement
or otherwise
existing by law or in any way create
additional rights for the related Seller or any Guarantor.
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.
14
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;
(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
15
condition (financial or otherwise) of Sellers and their
subsidiaries, taken
as a whole since December 31, 2006;
(vi) The Sellers
shall have
delivered to the Agent and the Buyer (i)
an
unaudited
consolidated
balance
sheet of NFI dated not
earlier
than
February 28, 2007 prior to the date hereof
showing
Adjusted
Tangible Net
Worth
of not
less
than
$400,000,000
(which
may or may not
have
been
prepared in accordance with GAAP),
(ii) an unaudited
summary
schedule of
estimated
consolidated
financial
results of NFI and its subsidiaries for
the three
months
ended
March 31,
2007
(which
may or may not have been
prepared
in
accordance
with GAAP) and (iii) a
certificate
of the Chief
Financial Officer of NFI certifying to the best of his knowledge as
to such
balance sheet after
reasonable
inquiry and further stating that he is not
aware of any
information
or other
matter
that would make the
financial
information set forth therein materially inaccurate or incomplete;
(vii)
There
shall not exist any
violation
of
applicable
laws and
regulations (including,
without limitation,
ERISA, margin regulations and
environmental
laws)
which
could
reasonably
be
expected to result in a
Material Adverse Change, except as disclosed on Schedule 3 attached
hereto;
(viii) The
representations
and warranties
contained herein shall be
true and correct in all material respects as of the date hereof;
(ix) No event shall have
occurred and be
continuing
or would result
from the Facility 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;
(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.
16
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
Residual
Securities which are subject to such Transaction in the
name of Buyer or, if such Residual
Securities
which 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
Residual Securities which 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.
(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.
17
(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 one
Transaction
per week
(excluding
any
automatic
Transaction
pursuant to
Section 3(b)).
(xii) Any other documents reasonably requested by Buyer.
(xiii)
Buyer
shall
have
received
from the
Seller
payment of the
applicable Usage Fee as set forth in the Side Letter.
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 man
