MASTER REPURCHASE AGREEMENT (SECURITIES)

Exhibit 10.56

MASTER REPURCHASE AGREEMENT (SECURITIES)

Dated as of April 14, 2006

AMONG:

Wachovia Investment Holdings, LLC, as buyer (“Buyer”, which term shall include any “Principal” as defined and provided for in Annex I), or 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.

“ 1YR Repurchase Agreement ” means that certain Second Amended and Restated Master Repurchase Agreement (Securities), dated as of April 14, 2006, among Wachovia Investment Holdings, LLC, Wachovia Bank, National Association, NovaStar Mortgage, Inc., NovaStar Assets Corp., NovaStar Certificates Financing LLC, and NovaStar Certificates Financing Corp., as amended from time to time.

“ Adjusted Tangible Net Worth ” means shall mean at any date:

(a) Book Net Worth, 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

 

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(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 for NFI Holding 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 Investment Holdings, LLC or any successor.

“ Agreement ” means this Master Repurchase Agreement (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 or (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.

“ 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 ” means, with respect to any Transaction as of any date of determination, the percentage obtained by dividing the Market Value of the Purchased Assets on the Purchase Date by the Purchase Price on the Purchase Date.

“ Change in Control ” shall mean the acquisition (excluding any conversion of convertible preferred stock to common stock) by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission

 

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under the Securities Exchange Act of 1934) of outstanding shares of voting stock of the Guarantor at any time if after giving effect to such acquisition such Person or Persons owns fifty percent (50%) or more of such outstanding voting stock.

“ 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.

“ Confirmation ” shall have the meaning assigned thereto in Section 4(b) 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 Pricing Rate plus 4% and (ii) the maximum rate permitted by applicable law.

“ Effective Date ” shall mean the date set forth on the top of the first page of this Agreement.

“ Eligible Asset ” shall mean each Eligible Residual with respect to which each of the representations and warranties set forth on Exhibit C hereto is accurate and complete as of the date of the related Transaction and as of each date thereafter through and including the related Repurchase Date, and for which Wachovia Capital Markets LLC (“WCM”) has acted as co-lead underwriter and joint book-runner of the offered securities at a minimum of 25% share of the underwriter’s concession for the respective securitization.

“ Eligible Residuals ” shall mean residual certificates arising from future securitizations of first-lien and second-lien home equity loans and mortgage loans to sub-prime borrowers originated by a Seller or an Affiliate thereof, which residual certificates are deemed to be eligible by Buyer in its sole and absolute discretion; provided , however , that any residual certificate shall cease to be an Eligible Residual if such residual has been subject to Transactions for greater than 1093 days.

“ Event of Default ” shall have the meaning assigned thereto in Section 18 hereof.

“ Event of Termination ” shall have the meaning assigned thereto in Section 18 hereof.

“ 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.

 

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“ 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.

“ Guarantor ” means NFI.

“ Guaranty ” means the Guaranty of the Guarantor in favor of the Buyer, dated as of April 14, 2006.

“ Income ” means, with respect to any Purchased Asset at any time, any principal thereof 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; (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.

“ Investment Company Act ” means the Investment Company Act of 1940, as amended, including all rules and regulations promulgated thereunder.

“ LIBOR ” shall mean, for each day of a Transaction, a rate based on the offered rates of the Reference Banks for one-month U.S. dollar deposits, as determined by the Buyer for the related Purchase Date.

“ Margin Call ” As defined in Section 6(a).

“ 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.

 

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“ Master Security and Netting Agreement ” means the Master Security and Netting Agreement dated as of April 15, 2005 among Buyer and certain Affiliates and the Guarantor and certain Affiliates as it may be further amended from time to time (including the joinder agreement dated as o April 14, 2006 executed in connection with this Agreement).

“ Material Adverse Change ” means, with respect to a Person, any material adverse change in the business, condition (financial or otherwise), operations, performance or properties taken as a whole of such Person.

“ Material Adverse Effect ” means (a) a Material Adverse Change with respect to the Guarantor or the Guarantor and its Affiliates that are party to any Program Document taken as a whole; (b) a material impairment of the ability of the 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; (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Document against the Guarantor or any Affiliate that is a party to any Program Document; or (d) a material adverse effect upon the value or marketability of a material portion of the Purchased Assets.

“ Maximum Aggregate Purchase Price ” means $150,000,000.

“ Maximum Recourse Amount ” shall have the meaning thereto in Section 19.

“ Mortgage Assets ” shall mean home equity loans or mortgage loans originated by any Seller or an Affiliate of a Seller and underlying any Purchased Assets.

“ 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.

“ NCI Repurchase Agreement ” means the Master Repurchase Agreement dated as of December 12, 2005 by and between NovaStar Capital, Inc. and Wachovia Bank, National Association.

“ NFI ” means NovaStar Financial, Inc. and its permitted successors and assigns.

“ NFI Holding ” means NFI Holding Corp. and its permitted successors and assigns.

“ NMI Master Repurchase Agreement ” means the Amended and Restated Master Repurchase Agreement dated as of May 14, 2004, between Wachovia Bank, National Association and NovaStar Mortgage, Inc.

“ Obligations ” means (a) all of Sellers’ and Guarantor’s 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 Sellers’ or Guarantor’s

 

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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 Guarantor’s 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.

“ 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 ” means the per annum percentage rate for determination of the Price Differential as set forth in Section 3(b) hereof or as otherwise set forth 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 Master Security and Netting Agreement, the Guaranty, the Side Letter, the Swap Agreement and any other agreement entered into by any of the Sellers and/or the 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 ” shall mean 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 ” with respect to each Purchased Asset shall be equal to either (A) 75%, after the completion of the pre-funding period of the related securitization; or (B) the product of (x) 75% and (y) a fraction, the numerator of which is the unpaid principal balance of the underlying mortgage loans as of the applicable cut-off date, and the denominator of which is the aggregate balance of all of the bonds (including, without limitation, publicly offered, non-publicly offered and any bonds representing over collateralization or the right to receive prepayment

 

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penalties) comprising the related securitization with respect to Purchased Assets that are residuals, prior to the completion of the pre-funding period of the related securitization (the “ Pre-Funded Purchase Price Percentage ”).

“ Purchased Assets ” means, with respect to a Transaction, the Eligible Assets subject thereto, 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.

“ 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(d) 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 termination of 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 the Guarantor (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 the Guarantor and its consolidated Subsidiaries for each asset class set forth in the table below (or if such asset class is owned by NFI or a consolidated Subsidiary but cannot be determined by combining the relevant figures for the Guarantor and its consolidated Subsidiaries, the fair market value thereof as calculated by the Companies subject, however, to the approval of the Buyer which will not be unreasonably withheld) by the Percentage Multipliers set forth opposite such asset class in the table below:

 

 

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“ Revolving Term ” shall mean the period of time beginning on the Effective Date of this Agreement and ending on the earlier to occur: (i) 364 days following the Effective Date of the Agreement and (ii) the date an Event of Default or Event of Termination exists.

“ 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 14, 2006, among the Sellers, Guarantor and Buyer.

 

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“ 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 Buyers.

“ Substitute Assets ” has the meaning assigned thereto in Section 16(a).

“ Swap Agreement ” means the ISDA master swap agreement between Wachovia Bank, National Association and NovaStar Mortgage, Inc. dated as of September 15, 2003.

“ Termination Date ” has the meaning assigned thereto in Section 27.

“ Total Liabilities ” shall mean total liabilities of NFI and its consolidated Subsidiaries determined in accordance with GAAP (or with such non-GAAP principles as may be disclosed to and approved by Buyer from time to time) provided ; for purposes of this Agreement, such term shall not include $50,000,000 of any unsecured junior subordinated notes issued pursuant to the Indenture dated as of March 15, 2005 between NMI and JPMorgan Chase Bank, N.A.

“ 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.

“ Trustee ” shall mean, as applicable, the entity designated as such pursuant to each Trust Agreement.

“ Underwriting Standards ” means NMI’s underwriting guidelines in effect as of the date of this Agreement as the same may be amended from time to time.

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

“ WL Master Repurchase Agreement ” means that certain Second Amended and Restated Master Repurchase Agreement (Whole Loan), dated as of April 14, 2006, among Wachovia Bank, National Association, NFI Repurchase Corporation, NMI Repurchase Corporation, Acceleron Lending, Inc., HomeView Lending, Inc., and NovaStar Certificates Financing Corporation, as further amended from time to time.

 

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“ Whole Loan Outstanding Balance ” means on any date of determination, the aggregate purchase price with respect to all mortgage loans subject to transactions under the WL Master Repurchase Agreement.

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 the 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, Guarantor 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

 

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of any particular provision of this Agreement or this Agreement itself. Except where otherwise expressly stated, the Buyer may give or withhold, or give conditionally, approvals and consents, and may form opinions and make determinations at its absolute discretion. Any requirement of good faith, discretion or judgment by the Buyer shall not be construed to require Buyer to request or await receipt of information or documentation not immediately available from or with respect to the related Seller, the Guarantor, a servicer of the Purchased Assets, any other Person or the Purchased Assets themselves.

3. THE TRANSACTIONS

a. Under the terms and conditions of the Program Documents, during the Revolving Term Buyer hereby agrees to enter into new Transactions with a Purchase Price up to the Maximum Aggregate Purchase Price. 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 preceding Business Day (the date on which such notice is so given, the “Notice Date”). On the Notice Date, the related Seller or the Guarantor shall request that Buyer enter into a Transaction by furnishing to Buyer a Transaction Notice.

b. The related Transaction Notice, together with this Agreement, shall constitute conclusive evidence of the terms agreed between Buyer and the related Seller with respect to the Transaction.

c. 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.

d. 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 25th day of each month (or, if such 25th 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 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.

e. 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

 

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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. [RESERVED]

5. PAYMENT AND TRANSFER

Unless otherwise agreed, all transfers of funds hereunder shall be in immediately available funds and all Purchased Assets transferred shall be transferred to the 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 given 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 given 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, the 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 otherwise existing by law or in any way create additional rights for the related Seller or the Guarantor.

c. If the Sellers and the Guarantor fail to cure a Margin Deficit up to the Maximum Recourse Amount within the time period set forth in subsection (b) above, such failure shall be considered an Event of Default under Section 18 of this Agreement. If the Sellers and the Guarantor fail to cure the amount of a Margin Deficit that is in excess of the Maximum Recourse Amount (the “Excess Deficit Amount”) within the time period set forth in subsection (b) above, all collections on Eligible Assets that are subject to this Agreement must be immediately deposited by Seller into a controlled account (the “Buyer Controlled Account”) for the benefit of the Buyer. The Buyer may use such collections in the Buyer Controlled Account to satisfy any amount owed to Buyer under this Agreement, including, but not limited to, the Excess Deficit Amount. The Sellers and the Guarantor

 

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shall have five (5) calendar days to pay the Excess Deficit Amount to the Buyer by wire transfer in immediately available funds (such time period, the “Excess Deficit Amount Grace Period”) to Buyer, provided that no Event of Default exists under this Agreement. If the Sellers and the Guarantor fail to provide the Excess Deficit Amount to Buyer prior to the end of such Excess Deficit Amount Grace Period, such failure shall be considered an Event of Termination under Section 18 of this Agreement (but not an Event of Default).

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 the 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. Notwithstanding the foregoing and subject to Section 6(c) above, Buyer agrees that prior to the occurrence of a Default, the related Seller shall be entitled to receive an amount equal to all Income received, whether by the Guarantor, Buyer or any servicer or any other Person, which is not otherwise received by the related Seller, in respect of the Purchased Assets minus an amount equal to the related Price Differential plus any Margin Deficit and any other amounts due to the Buyer pursuant to this Agreement; provided, however, that any income received by or on behalf of the related Seller while the related Transaction is outstanding shall be deemed held by the related Seller solely in trust for Buyer pending the repurchase on the related Repurchase Date.

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) The Program Documents duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver;

 

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(ii) Evidence that all other actions necessary or, in the opinion of Buyer, desirable to perfect and protect Buyer’s 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;

(iii) A certified copy of each Seller’s and the 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;

(iv) An incumbency certificate of the secretaries of each Seller and the Guarantor certifying the names, true signatures and titles of each Seller’s and the Guarantor’s representatives duly authorized to request Transactions hereunder and to execute the Program Documents and the other documents to be delivered thereunder;

(v) An opinion of each Seller’s and the Guarantor’s counsel as to such matters as Buyer (including, without limitation, a corporate opinion, a New York enforceability opinion, a security interest opinion, an investment company opinion and a “repurchase agreement” under federal bankruptcy law opinion), may reasonably request and in form and substance acceptable to Buyer, including;

(vi) A copy of the Underwriting Standards certified by an officer of NMI;

(vii) The Guaranty;

(viii) All of the conditions precedent in the Guaranty shall have been satisfied; and

(ix) Any other documents reasonably requested by Buyer.

b. The obligation of Buyer to enter into each 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 Asset in the name of Buyer or, if such Purchased Asset is registered on DTC or similar depository, evidence satisfactory to Buyer that the records of DTC or such depository show the Buyer as the beneficial ownership of such Purchased Asset;

 

(C)

each Governing Agreement with respect to each Purchased Asset; and

 

 

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(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 on the date of such Transaction.

(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 Guarantor 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) Buyer shall have determined that all actions necessary or, in the opinion of Buyer, desirable to maintain Buyer’s perfected interest in the Purchased Assets and other Collateral have been taken, including, without limitation, duly executed and filed Uniform Commercial Code financing statements on Form UCC-1.

(xi) Buyer shall not be obligated to enter into more than one Transaction per month (excluding any automatic Transaction pursuant to Section 3(d)).

(xii) Seller shall have paid to Buyer a fee equal to 1.00% of the initial Market Value of each Eligible Asset (as communicated in writing by the Buyer to the Seller), payable on the first Purchase Date for such Eligible Asset.

 

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(xiii) The aggregate Purchase Price for the requested Transaction, when added to the aggregate Purchase Price of all Eligible Seasoned Residuals (as defined in the 1YR Repurchase Agreement) outstanding under the 1YR Repurchase Agreement shall not exceed $200,000,000.

(xiv) 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 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 the 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 the 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 the 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 the 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.

 

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c. Due Authorization . The execution, delivery and performance of the Program Documents by each Seller and the 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 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, injunc