Between: LIQUID FUNDING, LTD. and FIELDSTONE MORTGAGE OWNERSHIP CORP.

Exhibit 10.24(A)

 

 

Master Repurchase
Agreement

 

September 1996 Version

 

 

Dated as of

 

OCTOBER 11, 2005

 

 

 

Between:

 

LIQUID FUNDING, LTD.

 

 

 

and

 

FIELDSTONE MORTGAGE OWNERSHIP CORP.

 

1. Applicability

From time to time the parties hereto may enter into transactions in which one party (“Seller”) agrees to transfer to the other (“Buyer”) securities or other assets (“Securities”) against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Securities at a date certain or on demand, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in Annex I hereto and in any other annexes identified herein or therein as applicable hereunder.

 

2. Definitions

(a) “Act of Insolvency”, with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or similar law, or such party seeking the appointment or election of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, or the convening of any meeting of creditors for purposes of commencing any such case or proceeding or seeking such an appointment or election, (ii) the commencement of any such case or proceeding against such party, or another seeking such an appointment or election, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appointment or election, the issuance of such a protective decree or the entry of an order having a similar effect, or (C) is not dismissed within 15 days, (iii) the making by such party of a general assignment for the benefit of creditors, or (iv) the admission in writing by such party of such party’s inability to pay such party’s debts as they become due;

 

(b) “Additional Purchased Securities”, Securities provided by Seller to Buyer pursuant to Paragraph 4(a) hereof;

 

(c) “Buyer’s Margin Amount”, with respect to any Transaction as of any date, the amount obtained by application of the Buyer’s Margin Percentage to the Repurchase Price for such Transaction as of such date;

 


 

(d) “Buyer’s Margin Percentage”, with respect to any Transaction as of any date, a percentage (which may be equal to the Seller’s Margin Percentage) agreed to by Buyer and Seller or, in the absence of any such agreement, the percentage obtained by dividing the Market Value of the Purchased Securities on the Purchase Date by the Purchase Price on the Purchase Date for such Transaction;

 

(e) “Confirmation”, the meaning specified in Paragraph 3(b) hereof;

 

(f) “Income”, with respect to any Security at any time, any principal thereof and all interest, dividends or other distributions thereon;

 

(g) “Margin Deficit”, the meaning specified in Paragraph 4(a) hereof;

 

(h) “Margin Excess”, the meaning specified in Paragraph 4(b) hereof;

 

(i) “Margin Notice Deadline”, the time agreed to by the parties in the relevant Confirmation, Annex I hereto or otherwise as the deadline for giving notice requiring same-day satisfaction of margin maintenance obligations as provided in Paragraph 4 hereof (or, in the absence of any such agreement, the deadline for such purposes established in accordance with market practice);

 

(j) “Market Value”, with respect to any Securities as of any date, the price for such Securities on such date obtained from a generally recognized source agreed to by the parties or the most recent closing bid quotation from such a source, plus accrued Income to the extent not included therein (other than any Income credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof ) as of such date (unless contrary to market practice for such Securities);

 

(k) “Price Differential”, with respect to any Transaction as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Purchase Price for such Transaction on a 360 day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction);

 

(l) “Pricing Rate”, the per annum percentage rate for determination of the Price Differential;

 

(m) “Prime Rate”, the prime rate of U.S. commercial banks as published in The Wall Street Journal (or, if more than one such rate is published, the average of such rates);

 

(n) “Purchase Date”, the date on which Purchased Securities are to be transferred by Seller to Buyer;.

 

(o) “Purchase Price”, (i) on the Purchase Date, the price at which Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter, except where Buyer and Seller agree otherwise, such price increased by the amount of any cash transferred by Buyer to Seller pursuant to Paragraph 4(b) hereof and decreased by the amount of any cash transferred by Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller’s obligations under clause (ii) of Paragraph 5 hereof;

 

(p) “Purchased Securities”, the Securities transferred by Seller to Buyer in a Transaction hereunder, and any Securities substituted therefor in accordance with Paragraph 9 hereof. The term “Purchased Securities” with respect to any Transaction at any time also shall include Additional Purchased Securities delivered pursuant to Paragraph 4(a) hereof and shall exclude Securities returned pursuant to Paragraph 4(b) hereof;

 

(q) “Repurchase Date”, the date on which Seller is to repurchase the Purchased Securities from Buyer, including any date determined by application of the provisions of Paragraph 3(c) or 11 hereof;

 

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(r) “Repurchase Price”, the price at which Purchased Securities are to be transferred from Buyer to 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;

 

(s) “Seller’s Margin Amount”, with respect to any Transaction as of any date, the amount obtained by application of the Seller’s Margin Percentage to the Repurchase Price for such Transaction as of such date;

 

(t) “Seller’s Margin Percentage”, with respect to any Transaction as of any date, a percentage (which may be equal to the Buyer’s Margin Percentage) agreed to by Buyer and Seller or, in the absence of any such agreement, the percentage obtained by dividing the Market Value of the Purchased Securities on the Purchase Date by the Purchase Price on the Purchase Date for such Transaction.

 

3. Initiation; Confirmation; Termination

(a) An agreement to enter into a Transaction may be made orally or in writing at the initiation of either Buyer or Seller. On the Purchase Date for the Transaction, the Purchased Securities shall be transferred to Buyer or its agent against the transfer of the Purchase Price to an account of Seller.

 

(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or both), as shall be agreed, shall promptly deliver to the other party a written confirmation of each Transaction (a “Confirmation”). The Confirmation shall describe the Purchased Securities (including CUSIP number, if any), identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on demand, (iv) the Pricing Rate or Repurchase Price applicable to the Transaction, and (v) any additional terms or conditions of the Transaction not inconsistent with this Agreement. The Confirmation, together with this Agreement, shall constitute conclusive evidence of the terms agreed between Buyer and Seller with respect to the Transaction to which the Confirmation relates, unless with respect to the Confirmation specific objection is made promptly after receipt thereof. In the event of any conflict between the terms of such Confirmation and this Agreement, this Agreement shall prevail.

 

(c) In the case of Transactions terminable upon demand, such demand shall be made by Buyer or Seller, no later than such time as is customary in accordance with market practice, by telephone or otherwise on or prior to the business day on which such termination will be effective. On the date specified in such demand, or on the date fixed for termination in the case of Transactions having a fixed term, termination of the Transaction will be effected by transfer to Seller or its agent of the Purchased Securities and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof ) against the transfer of the Repurchase Price to an account of Buyer.

 

4. Margin Maintenance

(a) If at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in which a particular party hereto is acting as Buyer is less than the aggregate Buyer’s Margin Amount for all such Transactions (a “Margin Deficit”), then Buyer may by notice to Seller require Seller in such Transactions, at Seller’s option, to transfer to Buyer cash or additional Securities reasonably acceptable to Buyer (“Additional Purchased Securities”), so that the cash and aggregate Market Value of the Purchased Securities, including any such Additional Purchased Securities, will thereupon equal or exceed such aggregate Buyer’s Margin Amount (decreased by the amount of any Margin Deficit as of such date arising from any Transactions in which such Buyer is acting as Seller).

 

(b) If at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in which a particular party hereto is acting as Seller exceeds the aggregate Seller’s Margin Amount for all such Transactions at such time (a “Margin Excess”), then Seller may by notice to Buyer require Buyer in such Transactions, at Buyer’s option, to transfer cash or Purchased Securities to Seller, so that the

 

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aggregate Market Value of the Purchased Securities, after deduction of any such cash or any Purchased Securities so transferred, will thereupon not exceed such aggregate Seller’s Margin Amount (increased by the amount of any Margin Excess as of such date arising from any Transactions in which such Seller is acting as Buyer).

 

(c) If any notice is given by Buyer or Seller under subparagraph (a) or (b) of this Paragraph at or before the Margin Notice Deadline on any business day, the party receiving such notice shall transfer cash or Additional Purchased Securities as provided in such subparagraph no later than the close of business in the relevant market on such day. If any such notice is given after the Margin Notice Deadline, the party receiving such notice shall transfer such cash or Securities no later than the close of business in the relevant market on the next business day following such notice.

 

(d) Any cash transferred pursuant to this Paragraph shall be attributed to such Transactions as shall be agreed upon by Buyer and Seller.

 

(e) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer or Seller (or both) under subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin Deficit or Margin Excess, as the case may be, exceeds a specified dollar amount or a specified percentage of the Repurchase Prices for such Transactions (which amount or percentage shall be agreed to by Buyer and Seller prior to entering into any such Transactions).

 

(f) Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer and Seller under subparagraphs (a) and (b) of this Paragraph to require the elimination of a Margin Deficit or a Margin Excess, as the case may be, may be exercised whenever such a Margin Deficit or Margin Excess exists with respect to any single Transaction hereunder (calculated without regard to any other Transaction outstanding under this Agreement).

 

5. Income Payments

Seller shall be entitled to receive an amount equal to all Income paid or distributed on or in respect of the Securities that is not otherwise received by Seller, to the full extent it would be so entitled if the Securities had not been sold to Buyer. Buyer shall, as the parties may agree with respect to any Transaction (or, in the absence of any such agreement, as Buyer shall reasonably determine in its discretion), on the date such Income is paid or distributed either (i) transfer to or credit to the account of Seller such Income with respect to any Purchased Securities subject to such Transaction or (ii) with respect to Income paid in cash, apply the Income payment or payments to reduce the amount, if any, to be transferred to Buyer by Seller upon termination of such Transaction. Buyer shall not be obligated to take any action pursuant to the preceding sentence (A) to the extent that such action would result in the creation of a Margin Deficit, unless prior thereto or simultaneously therewith Seller transfers to Buyer cash or Additional Purchased Securities sufficient to eliminate such Margin Deficit, or (B) if an Event of Default with respect to Seller has occurred and is then continuing at the time such Income is paid or distributed.

 

6. Security Interest

Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as security for the performance by Seller of its obligations under each such Transaction, and shall be deemed to have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions hereunder and all Income thereon and other proceeds thereof.

 

7. Payment and Transfer

Unless otherwise mutually agreed, all transfers of funds hereunder shall be in immediately available funds. All Securities transferred by one party hereto to the other party (i) shall be in suitable form for transfer or shall be accompanied by duly executed instruments of transfer or assignment in blank and such other

 

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documentation as the party receiving possession may reasonably request, (ii) shall be transferred on the book-entry system of a Federal Reserve Bank, or (iii) shall be transferred by any other method mutually acceptable to Seller and Buyer.

 

8. Segregation of Purchased Securities

To the extent required by applicable law, all Purchased Securities in the possession of Seller shall be segregated from other securities in its possession and shall be identified as subject to this Agreement. Segregation may be accomplished by appropriate identification on the books and records of the holder, including a financial or securities intermediary or a clearing corporation. All of Seller’s interest in the Purchased Securities shall pass to Buyer on the Purchase Date and, unless otherwise agreed by Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Securities or otherwise selling, transferring, pledging or hypothecating the Purchased Securities, but no such transaction shall relieve Buyer of its obligations to transfer Purchased Securities to Seller pursuant to Paragraph 3, 4 or 11 hereof, or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Paragraph 5 hereof.

 

Required Disclosure for Transactions in Which the Seller Retains Custody of the Purchased Securities

Seller is not permitted to substitute other securities for those subject to this Agreement and therefore must keep Buyer’s securities segregated at all times, unless in this Agreement Buyer grants Seller the right to substitute other securities. If Buyer grants the right to substitute, this means that Buyer’s securities will likely be commingled with Seller’s own securities during the trading day. Buyer is advised that, during any trading day that Buyer’s securities are commingled with Seller’s securities, they [will]* [may]** be subject to liens granted by Seller to [its clearing bank]* [third parties]** and may be used by Seller for deliveries on other securities transactions. Whenever the securities are commingled, Seller’s ability to resegregate substitute securities for Buyer will be subject to Seller’s ability to satisfy [the clearing]* [any]** lien or to obtain substitute securities.

 

* Language to be used under 17 C.F.R. ß403.4(e) if Seller is a government securities broker or dealer other than a financial institution.

 

** Language to be used under 17 C.F.R. ß403.5(d) if Seller is a financial institution.

 

9. Substitution

(a) Seller may, subject to agreement with and acceptance by Buyer, substitute other Securities for any Purchased Securities. Such substitution shall be made by transfer to Buyer of such other Securities and transfer to Seller of such Purchased Securities. After substitution, the substituted Securities shall be deemed to be Purchased Securities.

 

(b) In Transactions in which Seller retains custody of Purchased Securities, the parties expressly agree that Buyer shall be deemed, for purposes of subparagraph (a) of this Paragraph, to have agreed to and accepted in this Agreement substitution by Seller of other Securities for Purchased Securities; provided, however, that such other Securities shall have a Market Value at least equal to the Market Value of the Purchased Securities for which they are substituted.

 

10.Representations

Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into Transactions contemplated hereunder and to perform its obligations

 

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hereunder and has taken all necessary action to authorize such execution, delivery and performance, (ii) it will engage in such Transactions as principal (or, if agreed in writing, in the form of an annex hereto or otherwise, in advance of any Transaction by the other party hereto, as agent for a disclosed principal), (iii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of any such disclosed principal), (iv) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such authorizations are in full force and effect and (v) the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance, charter, by-law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected. On the Purchase Date for any Transaction Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it.

 

00.Xxxxxx of Default

In the event that (i) Seller fails to transfer or Buyer fails to purchase Purchased Securities upon the applicable Purchase Date, (ii) Seller fails to repurchase or Buyer fails to transfer Purchased Securities upon the applicable Repurchase Date, (iii) Seller or Buyer fails to comply with Paragraph 4 hereof, (iv) Buyer fails, after one business day’s notice, to comply with Paragraph 5 hereof, (v) an Act of Insolvency occurs with respect to Seller or Buyer, (vi) any representation made by Seller or Buyer shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, or (vii) Seller or Buyer shall admit to the other its inability to, or its intention not to, perform any of its obligations hereunder (each an “Event of Default”):

 

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

 

(b) In all Transactions in which the defaulting party is acting as Seller, if the nondefaulting party exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph, (i) the defaulting party’s obligations in such Transactions to repurchase all Purchased Securities, at the Repurchase Price therefor on the Repurchase Date determined in accordance with subparagraph (a) of this Paragraph, shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by the nondefaulting party and applied to the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder, and (iii) the defaulting party shall immediately deliver to the nondefaulting party any Purchased Securities subject to such Transactions then in the defaulting party’s possession or control.

 

(c) In all Transactions in which the defaulting party is acting as Buyer, upon tender by the nondefaulting party of payment of the aggregate Repurchase Prices for all such Transactions, all right, title and interest in and entitlement to all Purchased Securities subject to such Transactions shall be deemed transferred to the nondefaulting party, and the defaulting party shall deliver all such Purchased Securities to the nondefaulting party.

 

(d) If the nondefaulting party exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph, the nondefaulting party, without prior notice to the defaulting party, may:

 

(i) as to Transactions in which the defaulting party is acting as Seller, (A) immediately sell, in a recognized market (or otherwise in a commercially reasonable manner) at such price or prices as the nondefaulting party may reasonably deem satisfactory, any or all Purchased Securities subject

 

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to such Transactions and apply the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities, to give the defaulting party credit for such Purchased Securities in an amount equal to the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source, against the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder; and

 

(ii) as to Transactions in which the defaulting party is acting as Buyer, (A) immediately purchase, in a recognized market (or otherwise in a commercially reasonable manner) at such price or prices as the nondefaulting party may reasonably deem satisfactory, securities (“Replacement Securities”) of the same class and amount as any Purchased Securities that are not delivered by the defaulting party to the nondefaulting party as required hereunder or (B) in its sole discretion elect, in lieu of purchasing Replacement Securities, to be deemed to have purchased Replacement Securities at the price therefor on such date, obtained from a generally recognized source or the most recent closing offer quotation from such a source.

 

Unless otherwise provided in Annex I, the parties acknowledge and agree that (1) the Securities subject to any Transaction hereunder are instruments traded in a recognized market, (2) in the absence of a generally recognized source for prices or bid or offer quotations for any Security, the nondefaulting party may establish the source therefor in its sole discretion and (3) all prices, bids and offers shall be determined together with accrued Income (except to the extent contrary to market practice with respect to the relevant Securities).

 

(e) As to Transactions in which the defaulting party is acting as Buyer, the defaulting party shall be liable to the nondefaulting party for any excess of the price paid (or deemed paid) by the nondefaulting party for Replacement Securities over the Repurchase Price for the Purchased Securities replaced thereby and for any amounts payable by the defaulting party under Paragraph 5 hereof or otherwise hereunder.

 

(f) For purposes of this Paragraph 11, the Repurchase Price for each Transaction hereunder in respect of which the defaulting party is acting as Buyer shall not increase above the amount of such Repurchase Price for such Transaction determined as of the date of the exercise or deemed exercise by the nondefaulting party of the option referred to in subparagraph (a) of this Paragraph.

 

(g) The defaulting party shall be liable to the nondefaulting party for (i) the amount of all reasonable legal or other expenses incurred by the nondefaulting party in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all fees, expenses and commissions) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (iii) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.

 

(h) To the extent permitted by applicable law, the defaulting party shall be liable to the nondefaulting party for interest on any amounts owing by the defaulting party hereunder, from the date the defaulting party becomes liable for such amounts hereunder until such amounts are (i) paid in full by the defaulting party or (ii) satisfied in full by the exercise of the nondefaulting party’s rights hereunder. Interest on any sum payable by the defaulting party to the nondefaulting party under this Paragraph 11(h) shall be at a rate equal to the greater of the Pricing Rate for the relevant Transaction or the Prime Rate.

 

(i) The nondefaulting party shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law.

 

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12.Single Agreement

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

 

13.Notices and Other Communications

Any and all notices, statements, demands or other communications hereunder may be given by a party to the other by mail, facsimile, telegraph, messenger or otherwise to the address specified in Annex II hereto, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence.

 

14.Entire Agreement; Severability

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

 

15.Non-assignability; Termination

(a) The rights and obligations of the parties under this Agreement and under any Transaction shall not be assigned by either party without the prior written consent of the other party, and any such assignment without the prior written consent of the other party shall be null and void. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. This Agreement may be terminated by either party upon giving written notice to the other, except that this Agreement shall, notwithstanding such notice, remain applicable to any Transactions then outstanding.

 

(b) Subparagraph (a) of this Paragraph 15 shall not preclude a party from assigning, charging or otherwise dealing with all or any part of its interest in any sum payable to it under Paragraph 11 hereof.

 

16.Governing Law

This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof.

 

00.Xx Waivers, Etc.

No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to Paragraph 4(a) or 4(b) hereof will not constitute a waiver of any right to do so at a later date.

 

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18.Use of Employee Plan Assets

(a) If assets of an employee benefit plan subject to any provision of the Employee Retirement Income Security Act of 1974 (“ERISA”) are intended to be used by either party hereto (the “Plan Party”) in a Transaction, the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed.

 

(b) Subject to the last sentence of subparagraph (a) of this Paragraph, any such Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition.

 

(c) By entering into a Transaction pursuant to this Paragraph, Seller shall be deemed (i) to represent to Buyer that since the date of Seller’s latest such financial statements, there has been no material adverse change in Seller’s financial condition which Seller has not disclosed to Buyer, and (ii) to agree to provide Buyer with future audited and unaudited statements of its financial condition as they are issued, so long as it is a Seller in any outstanding Transaction involving a Plan Party.

 

19.Intent

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

 

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

 

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

 

(d) It is understood that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation”, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

 

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20.Disclosure Relating to Certain Federal Protections

The parties acknowledge that they have been advised that:

 

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

 

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

 

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

 

 

Liquid Funding, Ltd.

Fieldstone Mortgage Ownership Corp.

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Marco Montarsolo

 

By:

/s/ Xxxx X. Xxxxx

 

Name: Marco Montarsolo

Name: Xxxx X. Xxxxx

Title: Alt Director

Title: Sr. Vice President & Treasurer

Date: October 12, 2005

Date: October 11, 2005

 

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Annex I

 

Supplemental Terms and Conditions

 

This Annex I forms a part of the TBMA Master Repurchase Agreement (September 1996 Version) (the “Repurchase Agreement”) dated as of October 11, 2005 between LIQUID FUNDING, LTD. (“Buyer”) and FIELDSTONE MORTGAGE OWNERSHIP CORP. (“Seller”) (the Repurchase Agreement, this Annex I, Annex I-A, Annex II and the applicable Confirmation are collectively referred to herein as the “Agreement”). Capitalized terms used but not defined in this Annex I shall have the meanings ascribed to such terms in the Repurchase Agreement. If there is any inconsistency between this Annex I and the Repurchase Agreement, this Annex I shall control.

 

1.                           Other Applicable Annexes. Please select any/all of the optional Annexes below to form a part of the Agreement. The Annexes which are initialed shall form a part of this Agreement and shall be applicable hereunder.

 

 

 

Initials

 

 

 

(a)

Annex III (International Transactions)

 

(b)

Annex IV (Party Acting as Agent)

 

(c)

Annex V (Margin for Forward Transactions)

 

(d)

Annex VI (Buy/Sell Back Transactions)

 

(e)

Annex VII (Transactions Involving Registered Investment Companies)

 

 

 

2.                           “Margin Notice Deadline” means 10:00 a.m. (New York time).

 

3.                           Margin calls may be made orally by telephone directly to one of the individuals set forth on Annex II (but in no event by voice mail).

 

4.                           Definitions

 

“Amount of Transactions” shall mean the aggregate of all Purchase Prices paid for all Purchased Securities hereunder and not repaid to the Buyer.

 

“Applicable Table” shall have such meaning with respect to a particular Transaction hereunder as is set forth in the relevant Confirmation for such Transaction.

 

“Business Day” shall mean each day on which both (i) commercial banks in New York City and (ii) the New York Stock Exchange are open for business.

 


 

“Buyer’s Margin Ratio” shall mean, with respect to each Purchased Security, the Buyer’s Margin Ratio determined in accordance with Section 7 herein and the applicable Confirmation.

 

“Confirmation” shall mean a Confirmation issued pursuant to the Agreement setting forth terms applicable to a Transaction hereunder.

 

“Diversity Requirement”, for a Transaction, shall have the meaning set forth in the applicable Confirmation.

 

“Exit Fee”, for a Transaction, shall mean a termination fee as agreed to by the parties in the relevant Confirmation; provided, however, that if the Confirmation for the relevant Transaction does not specify an Exit Fee, the Exit Fee shall be deemed to be zero.

 

“LIBOR” shall mean the rate for deposits in U.S. dollars for a period of one (1) month as such rate appears on Telerate Page 3750 as of 11:00 a.m., London time, on the day that is two (2) “London Business Days” (meaning a day on which commercial banks are open for business in London, England) preceding a given Reset Date. If such rate does not appear on Telerate Page 3750, the applicable rate for that Reset Date shall be determined by reference to “USD-LIBOR-Reference Banks.”  “USD-LIBOR-Reference Banks” means, for purposes of this definition, the rates at which deposits in U.S. dollars are offered by four (4) reference banks selected by Buyer at approximately 11:00 a.m., London time, on the day that is two (2) London Business Days preceding a given Reset Date to prime banks in the London interbank market for a period equal to one (1) month commencing on that Reset Date and in a representative amount. Buyer shall request the principal London office of each of the reference banks to provide a quotation of its LIBOR rate. If at least two such quotations are received, the rate for the Reset Date will be the arithmetic mean of such quotations. If fewer than two quotations are received, the rate for that Reset Date will be the arithmetic mean of the rates quoted by major banks in New York City (selected by Buyer), at approximately 11:00 a.m. New York time on that Reset Date, for loans in U.S. dollars to leading European banks for a period of one (1) month commencing on that Reset Date and in a representative amount.

 

“Margin Deficit Amount” shall mean, when referring to a particular Transaction under the Agreement, the amount, if any, by which (a) the aggregate of (i) the Repurchase Prices for all Purchased Securities governed by the relevant Confirmation and (ii) the Replacement Cost Amounts (defined below) for all such Purchased Securities, exceeds (b) the aggregate of the products of (i) the applicable Buyer’s Margin Ratio and (ii) the Market Value of each such Purchased Security. For purposes of this Annex I, “Replacement Cost Amount” for a Purchased Security shall be an amount equal to the amount (if any) Seller would owe under Paragraphs 11(g)(ii) and (iii) of the Repurchase Agreement, as determined by Buyer in its sole discretion acting in good faith, if an Event of Default with Seller as the defaulting party were to occur pursuant to Paragraph 11 of the Repurchase Agreement on such date on which the Replacement Cost Amount for such Purchased Security is being calculated.

 

“Margin Excess Amount” shall mean, when referring to a particular Transaction under the Agreement, the amount, if any, by which the aggregate of the Repurchase Prices for all Purchased Securities governed by the relevant Confirmation is less than the aggregate of

 

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the products of (a) the applicable Buyer’s Margin Ratio and (b) the Market Value of each such Purchased Security.

 

“Market Value” shall mean, with respect to all Purchased Securities, the market value determined by Buyer daily in its sole discretion acting in good faith.

 

“Maximum Amount” shall have the meaning specified in the applicable Confirmation.

 

“Purchased Security” shall mean any Security transferred by Seller to Buyer in a Transaction or any Securities substituted therefore in accordance with Paragraph 9 of the Repurchase Agreement (as amended), in each case under the Agreement, that have not been repurchased or liquidated pursuant to the Agreement. The term “Purchased Security” with respect to any Transaction shall also include Securities delivered pursuant to Paragraph 4(a) of the Repurchase Agreement (as amended).

 

“Ratings Category” means the following groupings of ratings, each of which shall be a separate Ratings Category:

 

(i)

 

Aaa/AAA/AAA

(ii)

 

Aa1/AA+/AA+

(iii)

 

Aa2/AA/AA

(iv)

 

Aa3/AA-/AA-

(v)

 

A1/A+/A+

(vi)

 

A2/A/A

(vii)

 

A3/A-/A-

(viii)

 

Baa1/BBB+/BBB+

(ix)

 

Baa2/BBB/BBB

(x)

 

Baa3/BBB-/BBB-

(xi)

 

Ba1/BB+/BB+

(xii)

 

Ba2/BB/BB

(xiii)

 

Ba3/BB-/BB-

(xiv)

 

B1/B+/B+

(xv)

 

B2/B/B

(xvi)

 

B3/B-/B-

(xvii)

 

Below B3/B-/B- or Not Rated

 

The foregoing ratings are as published by Xxxxx’x Investors Service, Inc., Standard & Poor’s Ratings Services, a division of The XxXxxx-Xxxx Companies, Inc. or Fitch Ratings, Inc. (in that order) on Purchased Securities. If more than one rating agency rates the Purchased Securities, the lowest of the ratings shall set the Ratings Category. If either (i) no rating agency rates the Purchased Securities or (ii) any rating agency withdraws its rating of the Purchased Securities, the Ratings Category “Not Rated” shall apply.

 

“Relevant Spread”, for a Transaction, shall have the meaning set forth in the applicable Confirmation.

 

“Repurchase Price” shall mean, with respect to each Purchased Security, the price at which such Purchased Security is to be transferred from Buyer to Seller upon termination of the applicable Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of (a) the Purchase Price, (b) the Price Differential,

 

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and (c) if the Repurchase Date occurs pursuant to Paragraph 11 of the Repurchase Agreement, any amounts Seller owes under Paragraphs 11(g)(ii) and (iii) of the Repurchase Agreement, as determined by Buyer in its sole discretion acting in good faith, each as of the date of determination.

 

“Reset Date” shall mean, if applicable,  the date on which LIBOR is reset with respect to a Transaction, which date shall be the 15th day of each month or such other date as Buyer may specify in the Confirmation for such Transaction (or, if such date is not a Business Day, the next following Business Day, unless that day falls in the next calendar month, in which case that date will be the first preceding day that is a Business Day).

 

“Termination Date”, for a Transaction, shall have the meaning set forth in the applicable Confirmation.

 

“Transaction”, with respect to the Repurchase Agreement, means any transaction under this Agreement and does not include transactions under any other master repurchase agreement or any other agreement.

 

5.                           Notwithstanding the definition of Purchase Price in Paragraph 2 of the Repurchase Agreement and the provisions of Paragraph 4 of the Repurchase Agreement (as amended), the parties agree (i) that the Purchase Price will not be increased or decreased by the amount of any cash or Securities transferred by one party to the other pursuant to Paragraph 4 of the Repurchase Agreement and (ii) that transfer of such cash shall be treated as if it constituted a transfer of Securities (with a Market Value equal to the U.S. dollar amount of such cash) pursuant to Paragraph 4(a) or (b) of the Repurchase Agreement (as amended), as the case may be (including for purposes of the definition of “Additional Purchased Securities”).

 

6.                           Determination of Pricing Rate and Payment of Price Differential

 

(a)                      The Pricing Rate for each Transaction will be as specified in the applicable Confirmation. If the Pricing Rate is specified in the applicable Confirmation to be LIBOR plus a Relevant Spread, the Pricing Rate will be reset on each Reset Date.

 

(b)                     All accrued Price Differential incurred in connection with each Transaction in each calendar month will be due and payable to Buyer on such payment dates as are specified in the applicable Confirmation.

 

7.                           Determination of Purchase Price, Buyer’s Margin Ratio, Margin Excess Amount and Margin Deficit Amount

 

(a)                      The Purchase Price shall be determined separately for all Purchased Securities within a Ratings Category based on the Purchase Price set forth in the Applicable Table which corresponds to the Ratings Category for such Purchased Securities.

 

(b)                     The Buyer’s Margin Ratio shall be determined separately for each Ratings Category based on the “Buyer’s Margin Ratio” set forth in the Applicable Table corresponding to such Ratings Category.

 

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(c)                      If there is no Applicable Table, the Purchase Price and Buyer’s Margin Ratio will be determined by Buyer in its sole discretion.

 

(d)                     Margin Excess Amounts and Margin Deficit Amounts shall each be determined separately for each Ratings Category and then aggregated.

 

8.         Purchase Fee

 

If provided for in the applicable Confirmation, Seller will pay to Buyer, in lieu of a portion of the Pricing Rate, an upfront amount on the applicable Purchase Date in the amount set forth in the relevant Confirmation; provided, however, that the foregoing fee shall not be payable in connection with any repricing pursuant to Section 13 below or any substitution of Securities permitted under the Agreement.

 

9.         Early Termination of Transactions

 

(a)  Seller may elect to terminate any Transaction prior to the Termination Date specified in the applicable Confirmation and repurchase the relevant Purchased Securities from Buyer on five (5) Business Days’ notice by paying an Exit Fee.

 

(b)  If the Amount of Transactions with respect to the Agreement exceeds the Maximum Amount at any time, Seller shall repurchase sufficient Purchased Securities to reduce the Amount of Transactions to not greater than the Maximum Amount not later than the first (1st) Business Day after notice from Buyer (which date shall constitute a Repurchase Date with respect to the Purchased Securities to be repurchased hereunder and for the purpose of Paragraph 11(ii) of the Repurchase Agreement).

 

(c)  Seller shall pay the Exit Fee with respect to any and all Purchased Securities transferred to Seller on any such Repurchase Date that precedes the Termination Date with respect to such Purchased Securities. The acceleration of such Repurchase Date for any reason shall not excuse Seller from paying the Exit Fee, except if such acceleration results from (i) an Event of Default where Buyer is the defaulting party or (ii) the occurrence of an Enforcement Event. No Exit Fee shall be payable upon (i) a repricing pursuant to Section 13 hereof, or (ii) a substitution of securities as permitted under the Agreement, provided that the Exit Fee shall be payable to Buyer upon any termination resulting from Buyer’s election not to accept a substitution of Securities pursuant to Section 15 below.

 

10.       Mandatory Early Repurchase Date

 

(a)           Notwithstanding any provision of the Repurchase Agreement, and subject to no condition precedent, the tenth (10th) Business Day following the date on which an “Enforcement Event” (as defined below) occurs shall automatically and irrevocably become the Repurchase Date in respect of all Transactions hereunder (the “Mandatory Early Repurchase Date”), whether or not the Enforcement Event is then continuing. In the event of the occurrence of an Enforcement Event, in lieu of the delivery of the

 

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Repurchase Price by Seller on the Mandatory Early Repurchase Date, Seller shall be obliged to pay to Buyer, with respect to each Transaction hereunder, an amount (the “Mandatory Early Repurchase Amount”) equal to (i) the Repurchase Price as of the Mandatory Early Repurchase Date minus (ii) the value (positive or negative) of any agreement entered into by Buyer for the purpose of hedging any exposure resulting from its entry into the Transaction. Buyer shall promptly notify Seller of the occurrence of an Enforcement Event and of the resulting Mandatory Early Repurchase Date, which notice shall state that on the Mandatory Early Repurchase Date all Transactions will be terminated in their entirety and shall specify the aggregate amount of the Mandatory Early Repurchase Amounts for all Transactions as of the Mandatory Early Repurchase Date.

 

(b)           “Enforcement Event” will have the meaning specified in the Offering Circular dated April 9, 2004 for Buyer’s Global Medium-Term Note Program. A copy of the relevant excerpt is attached hereto as Exhibit A.

 

(c)           “Security Trustee” means XX Xxxxxx Xxxxx Bank, N.A. (formerly The Chase Manhattan Bank), or such other person as may then be acting as security trustee for certain of Buyer’s creditors.

 

11.       Change in Ratings Category of Purchased Securities

 

(a)                      Seller shall give Buyer notice of any change in the rating of a Purchased Security within one (1) Business Day after Seller becomes aware of such change.

 

(b)                     If the rating on a particular Purchased Security is upgraded and such upgrade results in a change in the Ratings Category of such Purchased Security, then, at Seller’s written request, the resulting change in the Purchase Price and the Buyer’s Margin Ratio of such Purchased Security shall be effected on the first (1st) Business Day following Buyer’s receipt of such request.

 

(c)                      If the rating on a particular Purchased Security is downgraded and such downgrade results in a change in the Ratings Category of such Purchased Security, then the resulting change in the Purchase Price and the Buyer’s Margin Ratio of such Purchased Security shall be effected automatically on the Business Day on which Buyer becomes aware of such downgrade.

 

(d)                     If the rating on a particular Purchased Security is upgraded or downgraded and such upgrade or downgrade results in a change in the Ratings Category of such Purchased Security, then the resulting change in the Pricing Rate of such Purchased Security shall be effected automatically on the applicable date specified in the relevant Confirmation, provided that if no such date is specified, any resulting change in the Pricing Rate of such Purchased Security shall be effected automatically on the next payment date for Seller’s payment of Price Differential to Buyer after the date of such upgrade or downgrade.

 

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12.       Change of Applicable Tables

 

If a change in the composition of Purchased Securities results in failure to satisfy the Diversity Requirement set forth in the applicable Confirmation where such Diversity Requirement was previously satisfied, or a change in the composition of Purchased Securities results in satisfaction of the Diversity Requirement set forth in the applicable Confirmation where such Diversity Requirement was not previously satisfied, and consequently causes a different Applicable Table to apply, then the resulting change in the Purchase Price and the Buyer’s Margin Ratio of the applicable Purchased Securities shall be effected automatically on the Business Day on which Buyer becomes aware of such change.

 

13.       Repricing

 

If the Purchase Price of a Purchased Security is to be changed pursuant to the terms hereof, then as of the date on which such Purchase Price is to be changed (each a “Repricing Date”), (i) the Repurchase Date with respect to the applicable Purchased Security will be accelerated automatically to the Repricing Date, (ii) the Repurchase Price and any other amounts owed by Seller to Buyer with respect to such Transaction (excluding accrued Price Differential not yet due) shall be due and payable, (iii) Buyer shall be obligated to purchase such Purchased Security as a new Transaction at the new Purchase Price, and (iv) the amounts owing pursuant to subparagraphs (ii) and (iii) of this Section 13 shall be offset and any net amount shall be due and payable by Buyer or Seller, as applicable.

 

14.       Procedures Regarding Margin Deficit Amounts and Margin Excess Amounts

 

Paragraphs 4(a), 4(b) and 4(c) of the Repurchase Agreement are deleted and the following paragraphs are substituted therefor:

 

“(a)                Notwithstanding anything in this Agreement to the contrary, if on any day there is a Margin Deficit Amount, Buyer may by notice to Seller require Seller to (i) transfer to Buyer sufficient cash or additional Securities acceptable to Buyer in its sole discretion, which cash or additional Securities shall constitute Additional Purchased Securities within the meaning of Paragraph 2(b) of this Agreement, and/or (at Seller’s election), in the alternative, (ii) pay such amount of the Purchase Price so that, after such transfer(s) and/or payment of Purchase Price, there is no Margin Deficit Amount, provided that any such payment of the Purchase Price pursuant to (ii) above shall be considered an early termination of a Transaction and shall be subject to the payment of an Exit Fee with respect to such amount so transferred or paid by Seller to Buyer.

 

(b)                     Notwithstanding anything in this Agreement to the contrary, if on any day there is a Margin Excess Amount, Seller may by notice to Buyer require Buyer to transfer cash or Purchased Securities to Seller, so that, after such transfer(s), there is no Margin Excess Amount.

 

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(c)                      If any notice is given by Buyer or Seller under subparagraph (a) or (b) of this Paragraph 4 at or before the Margin Notice Deadline on any Business Day, the party receiving such notice shall transfer cash or Purchased Securities as provided in such subparagraph no later than the close of business in the relevant market on such Business Day. If any such notice is given after the Margin Notice Deadline, the party receiving such notice shall transfer such cash or Purchased Securities no later than the close of business in the relevant market on the next Business Day following such notice. Buyer or Seller may dispute the existence or amount of a Margin Deficit Amount or Margin Excess Amount by providing a notice of dispute to the other party within one (1) Business Day of receipt of the notice provided pursuant to subparagraph (a) or (b) of this Paragraph 4. If no notice of dispute is delivered within one (1) Business Day, the notice delivered under subparagraph (a) or (b) of this Paragraph 4 shall be binding upon the parties hereto. If a notice of dispute is delivered within one (1) Business Day, the parties hereto agree to use good faith efforts to resolve any disputes within two (2) Business Days of such notice; provided, however, that the parties shall remain obligated to make margin transfers and/or payments in the time periods set forth in the first and second sentences of this Paragraph 4(c). If the parties cannot resolve any such disputes within two (2) Business Days, Buyer’s reasonable good faith determination shall be final. Any transfers that are determined to be appropriate as a result of the resolution of such disputes shall be made within one (1) Business Day of such determination.”

 

15.       The following 2 paragraphs shall be added to Paragraph 9 of the Repurchase Agreement:

 

“(c)  In the case of any Transaction for which the Repurchase Date is other than the Business Day immediately following the Purchase Date and with respect to which Seller does not have any existing right to substitute substantially the same Securities for the Purchased Securities, Seller shall have the right, subject to the proviso to this sentence, upon notice to Buyer, which notice shall be given at or prior to 10:00 a.m. (New York time) on such Business Day, to substitute substantially the same Securities for any Purchased Securities; provided, however, that Buyer may elect, by the close of business on the Business Day notice is received, or by the close of the next Business Day if notice is given after 10:00 a.m. (New York time) on such day, not to accept such substitution. In the event such substitution is accepted by Buyer, such substitution shall be made by Seller’s transfer to Buyer of such other Securities and Buyer’s transfer to Seller of such Purchased Securities, and after such substitution, the substituted Securities shall be deemed to be Purchased Securities. In the event Buyer elects not to accept such substitution, Buyer shall offer Seller the right to terminate the Transaction with the payment of an Exit Fee as calculated pursuant to the relevant Confirmation, plus payment of the amount calculated pursuant to subparagraph (d) below.

 

(d) In the event Seller exercises its right to substitute or terminate under subparagraph (c), Seller shall be obligated to pay to Buyer, by the close of the Business Day of such substitution or termination, as the case may be, an amount equal to (A) Buyer’s actual cost (including all fees, expenses and commissions) of (i) entering into replacement transactions, (ii) entering into or terminating hedge transactions, and/or (iii) terminating transactions or substituting securities in like transactions with third parties in connection with or as a result of such substitution or termination; and (B) to the extent Buyer determines not to enter into replacement transactions, the loss incurred by Buyer directly

 

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arising or resulting from such substitution or termination. The foregoing amounts shall be solely determined and calculated by Buyer in good faith.”

 

16.       Tax Treatment

 

(a)                                  The parties acknowledge that, to the extent relevant, it is their intent, solely for purposes of U.S. federal, state and local income and franchise taxes, to treat the Transactions as indebtedness of the Seller that is secured by the Purchased Securities and the Purchased Securities as owned by the Seller for federal income tax purposes in the absence of an Event of Default by the Seller. The parties agree to such treatment and agree to take no action inconsistent with this treatment, unless required by law.

 

(b)                                 Paragraph 6 of the Repurchase Agreement is deleted and the following paragraph is substituted thereof:

 

“Although the parties intend that all Transactions hereunder be sales and purchases and not loans (other than for federal income tax purposes), in the event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as security for the performance by Seller of its obligations under each such Transaction, and shall be deemed to have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions hereunder and all Income thereon and other proceeds thereof.”

 

(c)                                  The third sentence of Paragraph 8 of the Repurchase Agreement is deleted and the following sentence is substituted thereof:

 

“All of Seller’s interest in the Purchased Securities shall pass to Buyer on the Purchase Date and, unless otherwise agreed by Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Securities or otherwise selling, transferring, pledging or hypothecating the Purchased Securities, but no such transaction shall relieve Buyer of its obligations to transfer the Purchased Securities (which shall mean securities with the same CUSIP number as the Purchased Securities) to Seller pursuant to Paragraph 3, 4 or 11 hereof, or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Paragraph 5 hereof.”

 

17.       Additional Events of Default

 

Paragraph 11 of the Repurchase Agreement is amended to delete the word “or” before (vii) and to add the following after “obligations hereunder” and prior to “(each an “Event of Default”)”:

 

“(viii) Seller fails to make any payment of Price Differential within one (1) Business Day after such payment becomes due, (ix) Seller fails to comply with any other material obligation to Buyer and such failure continues for a period of fifteen (15) days after notice thereof is given to Seller by Buyer, (x) with respect to any Transaction to which Annex I-A

 

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to the Repurchase Agreement (“Annex I-A”) applies, Seller fails to comply with Section 6 of Annex I-A and such failure continues for a period of fifteen (15) Business Days after notice thereof is given to Seller by Buyer, or (xi) Seller (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least two Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); where “Specified Transaction” means (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between Seller and any financial institution which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) all other financial transactions and financial agreements entered into between Seller and any financial institution, including, without limitation, futures, stock lending agreements, repurchase agreements and reverse repurchase agreements, loans of any kind, purchases and sales of equity and debt securities of any kind, including mortgages, whether or not on margin, and (c) any combination of these transactions”

 

Upon the occurrence of any Event of Default or any event which with the passage of time or delivery of notice would become an Event of Default under the Agreement, the defaulting party shall give immediate notice thereof to the nondefaulting party.

 

18.       Early Retirement of Purchased Securities

 

Unless otherwise specified in the applicable Confirmation, in the event that a Purchased Security is retired by the issuer thereof prior to the scheduled maturity of such Purchased Security pursuant to a call feature, call provision, “sinking fund” provision, optional acceleration feature or otherwise, such early retirement of the Purchased Security shall be treated as a voluntary early termination by Seller of the applicable Transaction under Section 9 hereof and Seller shall pay an Exit Fee in accordance with Section 9 hereof to Buyer with respect to such deemed voluntary early termination. The Repurchase Date with respect to any such Transaction shall be considered to be the date on which such early retirement of the applicable Purchased Security by the issuer thereof occurs.

 

19.       Single Obligation

 

Seller’s obligations under the Agreement consist of a single obligation, notwithstanding that the Transactions are margined on a Transaction-by-Transaction basis. Upon an Event of Default, all Purchased Securities, all cash and other property held pursuant to the Agreement (including, but not limited to, all principal and interest payments received by Buyer as the owner of the Purchased Securities under all Transactions under the

 

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Agreement), and all payments and performance due under the Agreement, may be utilized by Buyer to satisfy Seller’s obligations under the Agreement. Notwithstanding anything to the contrary herein, Seller and Buyer agree in accordance with Paragraph 4(f) of the Repurchase Agreement that the calculation of the Buyer’s Margin Ratio, the Margin Deficit Amount and the Margin Excess Amount and the obligation of Seller to eliminate the Margin Deficit Amount shall be determined separately with respect to each Transaction pursuant to this Agreement and the applicable Confirmation.

 

20.       Miscellaneous

 

(a)           No Proceedings against Buyer. Seller hereby agrees (which agreement shall, pursuant to the terms of this Agreement, be binding upon its successors and assigns) that it shall not institute against, or join any other person in instituting against, Buyer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any Bermuda or United States federal or state bankruptcy or similar law, for two years and a day after the latest maturing commercial paper note, medium-term note or other rated indebtedness issued by Buyer is paid. The provisions of this Section 20(a) shall survive the termination of this Agreement.

 

(b)           Acknowledgement of Security. Pursuant to that certain Collateral Trust and Security Agreement dated as of November 9, 2001 and amended as of June 27, 2003 among Buyer, the Security Trustee (as defined in Section 10(c) above) and Bear, Xxxxxxx Securities Corp., as securities intermediary, Buyer has granted to the Security Trustee a first priority security interest in all of Buyer’s right, title and interest in and to this Agreement and each Transaction hereunder. Seller acknowledges such security interest and understands that (i) the Security Trustee has the right to enforce the rights of Buyer hereunder, including the right of Buyer to give notices to Seller, to declare a Termination Date on behalf of Buyer hereunder, to determine Market Value and to calculate the Mandatory Early Repurchase Amount with respect to a Transaction as of the Mandatory Early Repurchase Date; (ii) the Security Trustee is an express third party beneficiary of this Agreement; and (iii) in no event will the Security Trustee incur any obligations or liabilities hereunder. Buyer acknowledges that the arrangement described in this subparagraph imposes no additional duties or obligations upon Seller.

 

(c)           No Recourse. No recourse shall be had against any incorporator, shareholder, officer, director or employee of Buyer or Seller with respect to any of the covenants, agreements, representations or warranties of the other party hereto contained in the Agreement.

 

(d)           Pricing Information. Seller agrees to make available to Buyer any password in the possession of Seller which Buyer may reasonably require to enable Buyer to determine the Market Value of any Purchased Security (including the cashflows due thereon). Seller acknowledges and agrees that Buyer may from time to time furnish, or require that Seller furnish, such passwords to an independent pricing source with the consent of Seller, which consent shall not be unreasonably withheld.

 

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21.       Intent

 

Notwithstanding anything to the contrary in the Agreement, Buyer shall not be deemed to have waived any right which it may have or be deemed to have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount due and owing under the provisions of the Agreement.

 

22.       Governing Law; Consent to Jurisdiction; Waiver of Immunity

 

The Agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to the conflict of laws principles thereof.

 

Each party irrevocably and unconditionally (x) submits to the exclusive jurisdiction of any United States Federal or New York State court sitting in Manhattan, and any appellate court from any such court, solely for the purpose of any suit, action or proceeding brought to enforce its obligations under the Agreement or relating in any way to the Agreement or any Transaction under the Agreement and (y) waives, to the fullest extent it may effectively do so, any defense of an inconvenient forum to the maintenance of such action or proceeding in any such court and any right of jurisdiction on account of its place of residence or domicile.

 

To the extent that either party has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) with respect to itself or any of its property, such party hereby irrevocably waives and agrees not to plead or claim such immunity in respect of any action brought to enforce its obligations under the Agreement or relating in any way to the Agreement or any Transaction under the Agreement.

 

23.       Costs and Expenses

 

Each party to the Agreement shall bear its own costs and expenses in connection with the negotiation and documentation of the Agreement.

 

24.       Buyer to Provide Written Confirmation

 

Buyer shall provide Seller with a written Confirmation for each Transaction within five (5) Business Days of the Purchase Date.

 

25.       Recording

 

Each party (i) consents to the monitoring or recording, at any time and from time to time, by the other party of any and all communications in connection with the Agreement or any potential Transaction between the parties and their respective officers, directors, partners,

 

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members, employees and agents and (ii) waives any further notice of such monitoring or recording.

 

26.       Final and Complete Expression of the Agreement

 

The Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions between the parties hereto, whether verbal or written, with respect to such subject matter.

 

 

LIQUID FUNDING, LTD.

FIELDSTONE MORTGAGE OWNERSHIP CORP.

 

 

 

 

By:

/s/ Marco Montarsolo

 

By:

/s/ Xxxx X. Xxxxx

 

 

 

 

 

 

 

 

Name:

Marco Montarsolo

 

 

Name:

Xxxx X. Xxxxx

 

 

 

 

 

 

 

 

 

 

Title:

Alt Director

 

 

Title:

Sr. Vice President & Treasurer

 

 

 

 

 

 

 

 

 

 

Date:

12 October 2005

 

 

Date:

October 11, 2005

 

 

13


 

EXHIBIT A

 

EXCERPT FROM OFFERING CIRCULAR

 

OF LIQUID FUNDING, LTD.

 

(A COMPLETE COPY OF THE OFFERING CIRCULAR WILL BE PROVIDED UPON REQUEST)

 

The occurrence of any of the following events shall constitute an “Enforcement Event”:

 

(i)            the occurrence of an “Event of Default” with respect to the Notes of any Series (subject to any applicable cure period);

 

(ii)           a failure of the Issuer to make a payment with respect to Commercial Paper which shall not have been cured within one (1) Business Day;

 

(iii)          the occurrence of an “LFL Event of Default” under any GIC Transaction (subject to any applicable cure period);

 

(iv)          the declaration of an “Early Termination Date” as a result of the occurrence of an “Event of Default” under any Hedging Transaction where the Issuer is the defaulting party;

 

(v)           the occurrence of an “Event of Default” under any Liquidity Facility (subject to any applicable cure period);

 

(vi)          any Note shall be rated below “A” or “A2” (as the case may be) by any Rating Agency which has been engaged by the Issuer to provide a rating on such Note;

 

(vii)         the occurrence of a Capital Adequacy Failure;

 

(viii)        the failure of the Interest Rate Neutrality Test to be satisfied for five (5) consecutive Business Days; or

 

(ix)           the failure of the Liquidity Sufficiency Test to be satisfied for five (5) consecutive Business Days.

 

14


 

Annex I-A

 

This Annex I-A forms a part of the TBMA Master Repurchase Agreement (September 1996 Version) (the “Repurchase Agreement”) dated as of October 11, 2005 between LIQUID FUNDING, LTD. (“Buyer”) and FIELDSTONE MORTGAGE OWNERSHIP CORP. (“Seller”). This Annex I-A shall apply to all Transactions in which Buyer is the buyer of (i) certain subordinated commercial mortgage-backed securities (“CMBS”) issued by securitization trusts (each a “Trust”) with respect to pools of commercial loans, and/or (ii) certain subordinated residential mortgage-backed securities (“RMBS”) issued by Trusts with respect to pools of residential loans, and/or (iii) certain home equity mortgage-backed securities (“HELS” and “HELX”)  (“CMBS”, “RMBS”, “HELS” and “HELX” are collectively referred to herein as “MBS”), from Seller in accordance with the terms described below (each such Transaction, a “MBS Transaction”). For the avoidance of doubt, each MBS Transaction between Seller and Buyer will be subject to the Repurchase Agreement, Annex I, Annex II, this Annex I-A, and the applicable Confirmation under the Repurchase Agreement (collectively, the “Agreement”), and each purchased MBS shall constitute a Purchased Security under this Agreement. If there is any inconsistency between this Annex I-A and either the Repurchase Agreement or Annex I, this Annex I-A (including the applicable Confirmation issued hereunder) shall control. Each MBS Transaction shall constitute a sale by Seller to Buyer of the related MBS. Capitalized terms used but not defined in this Annex I-A shall have the meanings ascribed to them in the Repurchase Agreement or Annex I, as applicable.

 

1.                                      Definitions

 

“Affirmative Control” shall mean, with respect to any purchased CMBS, the ability to exercise the rights of the Controlling Class (by whatever name denominated in the documents governing the applicable Trust) with respect to the Trust which issued such CMBS or otherwise to direct, approve or consent to or vote on specified actions to be taken with respect to the underlying commercial mortgage loans or the applicable Trust, or, if such Trust does not provide for a Controlling Class, to appoint, retain or remove the Trust’s special servicer, such ability to be exercisable without interruption, regardless of any change in the Controlling Class or future reductions in the principal balance of the securities issued by the Trust.

 

“Controlling Class” shall mean, with respect to each Trust, the class of certificates issued by it that vests the holders in the aggregate of such certificates with the right to appoint, retain or remove the Trust’s special servicer (and to otherwise exercise the rights of the controlling class, however denominated in the issuing Trust’s governing documentation).

 

2.                                      Sale and Purchase of the MBS

 

(a) Buyer and Seller may enter into certain MBS Transactions, subject to the terms of the Agreement, including the applicable Confirmation. Each MBS Transaction shall be subject to the approval of Buyer in its sole discretion. Each MBS Transaction shall constitute a Transaction under the Repurchase Agreement. The aggregate amount of MBS Transactions with respect to the Agreement outstanding at any time, together with all Transactions which are not MBS Transactions, shall not exceed the Maximum Amount as set forth in Annex I to the Repurchase Agreement (“Annex I”). The Purchase Price and Buyer’s Margin Ratio for each MBS Transaction shall be determined in accordance with Section 7 of Annex I, and the Pricing Rate for each MBS Transaction shall be determined in accordance with Section 6 of Annex I.

 


 

(b)  Each offer by Seller to sell MBS to Buyer in a MBS Transaction (i) shall disclose any confidentiality agreement or other agreement that might prevent Seller from disclosing or limit Seller’s ability to disclose information with respect to the Security subject to such offer to Buyer and (ii) shall include a copy of any and all such agreements. Seller shall use commercially reasonable efforts to add Buyer, any entity designated by Buyer and any transferee of an interest in such Security from any of the foregoing as permitted recipients of any information which Seller receives or has the right to receive in respect of any Purchased Security. No later than two (2) Business Days prior to the Purchase Date, Seller shall provide Buyer with any form of confidentiality agreement that is required to be used in connection with providing Buyer with such confidential information.

 

(c) Seller shall deliver to Buyer all of the Securities proposed to be purchased hereunder, and, if necessary, a complete set of all transfer documents in form sufficient to allow transfer and registration of such Purchased Security, to Buyer no later than the proposed Purchase Date for the relevant MBS Transaction. Seller shall deliver to Buyer the related prospectus or private placement memorandum and such other documentation as Buyer shall request no later than two (2) Business Days prior to the proposed Purchase Date for the relevant MBS Transaction.

 

(d) If an issuer (in the case of physical Purchased Securities) and/or The Depository Trust Company (in the case of book-entry Purchased Securities) fails or refuses to transfer to, or register the Purchased Securities in the name of, Buyer, (i) Buyer shall have the right to cancel any MBS Transaction with respect to such Purchased Securities and (ii) Seller agrees to pay to Buyer within five (5) Business Days of notice (which date shall constitute a Repurchase Date) any Purchase Price paid by Buyer plus any accrued Price Differential plus any costs, losses, damages or fees incurred in connection with any hedge entered into or unwound by Buyer as a result of such cancellation.

 

3.                                      Repurchase by Seller

 

(a) All Purchased Securities with respect to a MBS Transaction under a Confirmation shall be repurchased by Seller no later than the Termination Date for such MBS Transaction; provided, however, that if Buyer, in its sole discretion, enters into a new MBS Transaction with respect to such Confirmation (including, without limitation, “rolling” any outstanding MBS Transaction) after such date, the Agreement shall continue to control such MBS Transactions.

 

(b) On the Termination Date, all Repurchase Prices and other amounts owed by Seller with respect to a MBS Transaction under the applicable Confirmation will be due and payable and Seller shall pay all such amounts to Buyer.

 

4.                                      Control

 

(a)  Seller acknowledges that Buyer will not enter into a Transaction with respect to a CMBS in a Ratings Category lower than Ba3/BB-/BB- unless Seller has Affirmative Control with respect to the Trust which issued such CMBS. Seller shall deliver to Buyer no later than the Purchase Date for the relevant CMBS such documentation as Buyer may reasonably request to effect or confirm Buyer’s right to exercise Affirmative Control with respect to such Trust. Notwithstanding anything to the contrary herein, for so long as no Event of Default has occurred with respect to Seller under the Agreement and any other agreement between Seller and Buyer, Buyer grants Seller a license to exercise Affirmative Control with respect to each purchased CMBS and pursuant to such license Seller shall have the sole and exclusive right to exercise Affirmative Control. Immediately upon notice by Buyer to Seller of the occurrence of an Event of Default with respect to Seller, the foregoing license shall terminate automatically and all rights of Affirmative

 

2


 

Control shall automatically re-vest in Buyer until such time, if any, as such Event of Default is waived by Buyer in its sole discretion by written notice to Seller. Buyer and Seller shall enter into such agreements, give such notices and obtain such acknowledgements as may be necessary or desirable for Seller to have the right to exercise Affirmative Control prior to the occurrence of any Event of Default and for Buyer to have the right to exercise Affirmative Control upon the occurrence of such Event of Default on a Trust-by-Trust basis. This Section 4(a) shall survive any transfer by Buyer of an interest in (including by way of pledge, sale, hypothecation, repurchase agreement or other means) a purchased CMBS and shall be binding on any transferee of the purchased CMBS, and Buyer shall notify any purchaser of the purchased CMBS of this provision to the extent such transferee would otherwise have such rights. Seller shall indemnify and hold Buyer harmless from and against any and all losses, damages, liabilities, obligations, penalties, judgments and awards arising from or related to claims, and to pay, on demand, all direct and indirect costs, liabilities and damages incurred by Buyer (including, without limitation, costs of collection, reasonable third-party attorneys’ fees, court costs and other expenses arising from or related to the foregoing, but excluding any actual or alleged diminution in the Market Value of any purchased CMBS) in connection with any action or failure to take action by Seller with respect to the foregoing license of Affirmative Control (“Control Costs”). In each case, whether or not demand has been made therefor, Buyer may, in its sole discretion, treat the Control Costs as a Margin Deficit Amount. This indemnity shall survive the termination of this Agreement.

 

(b) If at any time during this Agreement, subject only to the license described in Section 4(a) above, Buyer does not have Affirmative Control with respect to any MBS Transaction relating to a CMBS in a Ratings Category lower than Ba3/BB-/BB-, then (i) Buyer shall have the right to cancel such Transaction and (ii) Seller agrees to pay to Buyer within five (5) Business Days of notice (which date shall constitute a Repurchase Date) any Purchase Price paid by Buyer plus any accrued Price Differential plus any costs, losses, damages or fees incurred in connection with any hedge entered into or unwound by Buyer as a result of such cancellation.

 

(c) Seller may not exercise its right to terminate any Transaction and repurchase Purchased Securities pursuant to Section 9(a) of Annex I with respect to CMBS which are required by Seller for it to exercise Affirmative Control with respect to a Trust unless Seller also so accelerates with respect to all purchased CMBS issued by such Trust.

 

5.                                      Prepayment of the Underlying MBS

 

Unless otherwise specified in the applicable Confirmation, in the event of the prepayment of all or a portion of the outstanding principal amount of any MBS subject to a MBS Transaction by the applicable Trust, such prepayment shall be treated as a voluntary early termination (whether in part or in full, as applicable) by Seller of such MBS Transaction under Section 9 of Annex I and Seller shall pay an Exit Fee in accordance with Section 9 of Annex I to Buyer with respect to such termination (a “Prepayment Termination”). The Repurchase Date with respect to any such MBS Transaction (or portion of a Transaction in the event of a partial prepayment) shall be considered to be the date on which such MBS securities are prepaid by the applicable Trust.

 

3


 

6.                                      Seller’s Obligation to Provide Information

 

Seller shall provide to Buyer (a) any reports or other written information that Seller provides to its limited partners, partners, members or equity or residual holders relating to the Purchased Securities within five (5) Business Days of delivery thereof by Seller and (b) any material written information received by Seller from the trustee or the master servicer for any issuer of Purchased Securities, including, without limitation, watch lists and borrower or periodic summary property financial reports but excluding (i) any periodic bond remittance reports that are otherwise available to Buyer directly from the applicable trustee and (ii) any loan files corresponding to loans that have been transferred from the applicable master servicer to the applicable special servicers, within two (2) Business Days of receipt thereof by Seller (Seller shall make items (b)(i) and (b)(ii) available to Buyer upon Buyer’s request). Seller shall notify Buyer of any material information relating to any mortgage loans underlying any Purchased Securities and any material correspondence that Seller receives with respect to any such underlying mortgage loans, including, without limitation, information that could materially affect the performance or Market Value of any Purchased Security. Seller shall make such notification within three (3) Business Days of Seller’s receipt of such information (except in the case of information respecting the timing and amount of receipt of loan payments, Seller shall make such notification no earlier than is permitted under the issuing trust’s governing documentation). Seller’s asset management and credit surveillance staff shall be made reasonably available to Buyer to respond to periodic inquiries from Buyer regarding the status of the Purchased Securities and the status of assets underlying the Purchased Securities.

 

7.                                      REMIC Status Required

 

At all times (i) each pool of mortgage loans relating to a Purchased Security subject to a MBS Transaction shall be qualified under sections 860A through 860G of the Internal Revenue Code as a real estate mortgage investment conduit (“REMIC”), or (ii) the Purchased Security shall include an opinion that it should be treated as debt for tax purposes. If at any time such Purchased Security does not qualify for either (i) or (ii) in the preceding sentence of this Section 7, then the Market Value of such Purchased Security shall be deemed to be zero.

 

 

LIQUID FUNDING, LTD.

 

FIELDSTONE MORTGAGE OWNERSHIP CORP.

 

 

 

 

 

By:

/s/ Marco Montarsolo

 

 

By:

/s/ Xxxx X. Xxxxx

 

 

 

Name:

Marco Montarsolo

 

 

 

Name:

Xxxx X. Xxxxx

 

 

 

Title:

Alt Director

 

 

 

Title:

Sr. Vice President & Treasurer

 

 

Date:

12 October 2005

 

 

 

Date:

October 11, 2005

 

 

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Filed: April 14th, 2006
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