Master Repurchase Agreement

 

 

This Amended and Restated Annex I (this “Annex I”), dated as of October 2, 2007, forms a part of the TBMA Master Repurchase Agreement (September 1996 Version) dated as of August 10, 2007 (the “Master Agreement” and, together with this Amended and Restated Annex I, Annex II and any schedules and exhibits hereto or thereto, this “Agreement”), between Hanover Capital Mortgage Holdings, Inc., as the Seller (the “Seller”) and RCG PB, Ltd, as buyer (the “Buyer”). Capitalized terms used but not defined in this Annex I shall have the meanings ascribed to them in the Master Agreement. To the extent that this Annex I conflicts with the terms of the Master Agreement, this Annex I shall control.

 

All references to Buyer in the Agreement shall be deemed to be references to RCG PB, Ltd, and except as is otherwise expressly provided in this Annex I to the contrary, any reference to “Seller” in the Master Agreement shall be construed to mean a reference to Hanover Capital Mortgage Holdings, Inc.

 

1. DEFINITIONS.

 

(a) For purposes of the Agreement and this Annex I, the following terms shall have the following meanings:

 

“Act of Insolvency” means the occurrence of either of the following with respect to any Person:

 

(a) (i) any case, proceeding, petition or action shall be commenced or filed, without such Person’s application or consent, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment or relief of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or substantially all of such Person’s assets, or any assignment for the benefit of the creditors of such Person, or (ii) any similar case, proceeding, petition or action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts shall be commenced or filed against such Person, and such case, proceeding, petition or action shall continue undismissed, or unstayed and in effect, for a period of 15 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the Bankruptcy Code or other similar laws now or hereafter in effect; or

 

(b) such Person shall commence or file a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect (including, without limitation, under Section 301 of the Bankruptcy Code), or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) for, such Person or for substantially all of its property, or shall make any general assignment for the benefit of creditors, or shall fail to, or admit in writing its inability to, pay its debts generally as they become due, or its board of directors or managers shall vote to implement any of the foregoing.

 

“Affiliate” when used with respect to a Person means any other Person controlling, controlled by, or under common control with, such Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities (including, without limitation, partnership interests), by contract or otherwise and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978, as amended.

 

“Business Day” means any day other than a Saturday or Sunday or a day when banks are authorized or required by law to close in New York, New York.

 

“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time, and any successor statute of similar import, in each case as in effect from time to time. References to sections of the Code also refer to any successor sections.

 

“Default” means any event, that, with the giving of notice or the passage of time or both, would constitute an Event of Default under this Agreement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections.

 

“Event of Default” shall have the meaning assigned to such term in Section 11 of this Annex I.

 

“Investment Company Act” means the United States Investment Company Act of 1940, as amended.

 

“Lien” means any lien (statutory or other), security interest, assignment, mortgage, charge, pledge, hypothecation, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease involving substantially the same economic effect as any of the foregoing and the filing of any financing statement under the UCC or any comparable law of any jurisdiction).

 

“Monthly Additional Purchase Price Payment Date” means the second Business Day following the 25^th calendar day of each month prior to the Repurchase Date.

 

“Monthly Additional Purchase Price Payment” means, for each Monthly Additional Purchase Price Payment Date, an amount equal to the excess of (A) all interest actually paid on the Purchased Securities (whether or not held by the Buyer), since the preceding Monthly Additional Purchase Price Payment Date (or, in the case of the first Monthly Additional Purchase Price Payment Date, the Purchase Date) over (B) $810,000.

 

“Person” means an individual, partnership, limited liability company, corporation (including a business trust), joint stock company, trust, incorporated or unincorporated association, joint venture, government or any agency or political subdivision thereof or any other entity.

 

“Proposal” means a written notice setting forth the following information with respect to the portfolio of securities that the Seller desires to transfer to the Buyer: (i) the CUSIP for each such Security; and (ii) the unpaid principal balance for each such Security. A Proposal shall not include any Additional Purchased Securities.

 

“SEC” means the Securities and Exchange Commission or any successor thereto.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“UCC” means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction or jurisdictions.

 

(b) The following capitalized terms shall have the respective meanings set forth below, in lieu of the meanings for such terms set forth in the Master Agreement:

 

“Confirmation” means a confirmation substantially in the form of Exhibit A delivered pursuant to Paragraph 3 of the Master Agreement.

 

“Purchase Date” means August 10, 2007.

 

“Purchase Price” means $80,932,928.35

 

“Repurchase Date” means August 9, 2008; provided, further, that, upon the declaration or deemed declaration of an Event of Default pursuant to Section 11 hereof, the Repurchase Date shall be accelerated pursuant to Section 11(b).

 

“Repurchase Price” means an amount equal to the excess of (A) the sum of (i) the Purchase Price, (ii) $9,720,000, and (iii) $4,000,000, over (B) the excess of (i) all interest actually paid on the Purchased Securities (whether or not held by the Buyer), since the Purchase Date, over (ii) the sum of the Monthly Additional Purchase Price Payments paid by the Buyer to the Seller since the Purchase Date.

 

(c) This Annex I is intended to supplement the Master Agreement and shall, wherever possible, be interpreted so as to be consistent with the Master Agreement; however, in the event of any conflict or inconsistency between the provisions of this Annex I and the provisions of the Master Agreement, the provisions of this Annex I shall govern and control. For purposes of this Annex I and each Confirmation, unless the context otherwise requires: (a) references to any amount as on deposit or outstanding on any particular date means such amount at the close of business on such day; (b) the term “including” means “including without limitation”; (c) references to any law or regulation refer to that law or regulation as amended from time to time and include any successor law or regulation; (d) references to any agreement refer to that agreement as from time to time amended, restated or supplemented or as the terms of such agreement are waived or modified in accordance with its terms; (e) references to any Person include that Person’s successors and assigns; and (f) headings are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.

2. DELIVERY. All Purchased Securities shall be transferred to the Buyer by the Seller delivering (or causing to be delivered) to the Buyer, on or prior to the Purchase Date, the security certificate for each Purchased Security, indorsed to the Buyer by an effective indorsement whereupon ownership of the Purchased Securities shall pass to the Buyer.

 

3. FUNDING REQUESTS; CONFIRMATIONS.

 

Paragraph 3 of the Master Agreement is hereby deleted in its entirety and replaced with the following:

(a) The Seller agrees to do such further acts and things and to execute and deliver to Buyer such additional assignments, acknowledgments, agreements, powers and instruments as are reasonably required by Buyer to carry into effect the purposes of this Agreement, to perfect the interests of Buyer in the Purchased Securities, or to better assure and confirm unto Buyer its rights, powers and remedies hereunder.

 

(b) On or prior to 7:00 a.m. New York City time on the date hereof, the Seller shall deliver to the Buyer the Proposal.

 

(c) On the Purchase Date specified in the Proposal, the Seller and Buyer shall agree, in writing through the execution of the Confirmation, on the Securities to be purchased by the Buyer, which shall be identified by CUSIP in the Confirmation. Seller shall, as soon as practicable (but no later than 11:00 a.m. New York City time on the Purchase Date), deliver to the Buyer the Confirmation, substantially in the form of Exhibit A, and if such Confirmation has been delivered in form acceptable to the Buyer and all other conditions precedent set forth in Section 12 have been satisfied to the Buyer’s satisfaction, the Buyer shall execute and return such Confirmation to the Seller.

 

(d) In the event of any conflict between the terms of such Confirmation and this Agreement, this Agreement shall prevail. For the avoidance of doubt, the parties hereby agree that there shall be only one Confirmation and only one Transaction under this Agreement.

 

4. MARGIN MAINTENANCE.

 

Paragraph 4 of the Agreement is hereby deleted in its entirety.

 

5. INCOME PAYMENTS; ADDITIONAL PURCHASE PRICE.

 

Paragraph 5 of the Master Agreement is hereby deleted in its entirety and replaced with the following:

The Buyer shall be entitled to all Income and other proceeds received on the Purchased Securities. On each Monthly Additional Purchase Price Payment Date, the Buyer shall pay to the Seller the Monthly Additional Purchase Price Payment for such Monthly Additional Purchase Price Payment Date by 11:30 a.m. New York City time, unless an Event of Default or Default shall have occurred or be continuing.

 

6. SECURITY INTEREST.

 

Paragraph 6 of the Master Agreement is hereby deleted in its entirety and replaced with the following:

Although the parties intend that the Transaction hereunder be a sale and purchase and not a loan, in the event the Transaction is deemed to be a loan, the Seller shall be deemed to have pledged to the Buyer as security for the performance by the Seller of its obligations under the Transaction, and shall be deemed to have granted to the Buyer a security interest in, all of the Purchased Securities and all Income thereon and other proceeds thereof. The Seller hereby authorizes the Buyer to file such financing statements relating to the Purchased Securities as it may deem appropriate in its sole discretion. The Seller shall pay the filing costs for any financing statements prepared pursuant hereto.

 

7. PURCHASE PRICE; REPURCHASE PRICE.

 

Paragraph 7 of the Master Agreement is hereby deleted in its entirety and replaced with the following:

(a) On the Purchase Date for the Transaction, the Buyer shall pay the Seller the Purchase Price to or at the direction of the Seller.

(b) The Seller shall pay the Repurchase Price on the Repurchase Date in immediately available funds by 11:30 a.m. New York City time on the Repurchase Date to the Buyer.

(c) The Seller may elect to repay all or any portion of the Repurchase Price on the Repurchase Date to the Buyer in kind and not in immediately available funds by delivering to the Buyer written notice of such election at least two Business days preceding the Repurchase Date. If the Seller makes such an election, the Buyer shall provide to Seller a schedule of each of the Purchased Securities or substantially similar securities and the market value (determined by Buyer in its sole discretion) with respect thereto; and Seller shall be entitled to select, by written notice to Buyer, the amount of Repurchase Price it wishes to settle in kind and which Purchased Securities or substantially similar securities to use for that purpose.

8. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SELLER.

 

In addition to the representations and warranties appearing in Paragraph 10 of the Master Agreement, the Seller represents and warrants to the Buyer that as of the date of this Agreement and as of the Purchase Date for the purchase of the Purchased Securities by Buyer from the Seller hereunder:

 

(a) It (i) is duly organized, validly existing and in good standing under the laws of the state of its formation, and (ii) has all requisite power and authority to carry on its business as now conducted in all material respects and to perform its obligations under this Agreement.

 

(b) Its execution, delivery and performance of this Agreement (i) are within its organic powers, (ii) have been duly authorized by all necessary corporate action, and (iii) do not contravene (A) its organizational documents or (B) any law or any contractual restriction binding on the Seller, except with respect to the contravention of law or contractual restrictions which would not result in any material adverse change in the business, operations, financial condition, properties, or assets of the Seller, or which may have an adverse effect on the validity of this Agreement or the Purchased Securities or the Seller’s ability to timely perform its obligations under this Agreement.

 

(c) No authorization, consent, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body, domestic or foreign (which has not been obtained or made) is or will be necessary for the Seller’s valid execution, delivery and performance of this Agreement.

 

(d) This Agreement when executed, will constitute legal, valid and binding obligations of the Seller enforceable against the Seller in accordance with their respective terms; except that the enforcement of each such agreement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought.

 

(e) There is no action, suit, proceeding, investigation, or arbitration pending or threatened against the Seller or any of its assets, which may result in any material adverse change in the business, operations, financial condition, properties, or which may have an adverse effect on the validity of this Agreement or the Purchased Securities or the Seller’s ability to timely perform its obligations under this Agreement or requires filing with the SEC in accordance with its rules and regulations. This Seller is in compliance in all material respects with all requirements of applicable law. The Seller is not in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or governmental authority.

 

(f) The Seller has not dealt with any broker, investment banker, agent, or other Person who may be entitled to any commission or compensation in connection with the sale of Purchased Securities pursuant to this Agreement.

 

(g) No Event of Default or Default exists hereunder.

 

(h) The Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due. The Seller has not become, or is presently, financially insolvent nor will the Seller be made insolvent by virtue of its execution of or performance under this Agreement within the meaning of the bankruptcy laws or the insolvency laws of any jurisdiction. The Seller has not entered into this Agreement or the Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.

(i) The Seller is not (A) an “investment company,” or a company “controlled by an investment company,” within the meaning of the Investment Company Act of 1940, as amended, or (B) a “holding company,” or a “subsidiary company of a holding company,” or an “affiliate” of either a “holding company” or a “subsidiary company of a holding company,” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.

 

(j) The Seller has filed or caused to be filed all tax returns which to its knowledge would be delinquent if they had not been filed on or before the date hereof and has paid all taxes shown to be due and payable on or before the date hereof on such returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it and any of its assets by any governmental authority, except for such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with generally accepted accounting principles; no tax liens have been filed against any of the Seller’s assets and, to its knowledge, no claims are being asserted with respect to any such taxes, fees or other charges.

 

(k) The Seller does not sponsor, contribute to, or maintain a “single employer plan” within the meaning of Section 4001(a)(15) of ERISA, and is not a member of an ERISA Group, any member of which sponsors, contributes to, or maintains a “single employer plan.”

 

(l) The Seller represents and warrants (i) that the Transaction contemplated hereunder is a “repurchase agreement” as that term is defined in Section 101(47) of the Bankruptcy Code, eligible for relief under Section 559 of the Bankruptcy Code (except insofar as the Purchased Securities subject to the Transaction, or the term of the Transaction, would render such definition inapplicable), a “forward contract” as that term is defined in Section 101(25) of the Bankruptcy Code (except insofar as the Purchased Securities subject to the Transaction would render such definition inapplicable), a “securities contract” as that term is defined in Section 741(7) of the Bankruptcy Code, and/or a “master netting agreement” as that term is defined in Section 101(38A) of the Bankruptcy Code; and (ii) that each assignment, transfer or payment of Purchased Securities or Repurchase Price is a “margin payment” as that term is defined in Sections 101(38), 741(5) and 761(15) of the Bankruptcy Code, or a “settlement payment” as that term is defined in Sections 101(51A) and 741(8) of the Bankruptcy Code.

 

(m) The provisions of this Agreement are effective to either constitute a sale of the Purchased Securities transferred by the Seller to the Buyer or to create in favor of the Buyer a valid security interest in all right, title and interest of the Seller in, to and under such Purchased Securities.

 

(n) The Seller’s jurisdiction of organization is Maryland and its chief executive office is, and has been, located at 200 Metroplex, Suite 100, Edison, New Jersey 08817.

 

(o) As of the date hereof, the Seller has not changed its jurisdiction of formation since such entity was formed.

 

(p) The Seller keeps its books and records, including all computer tapes and records related to the Purchased Securities transferred by it hereunder at its chief executive office and its offices at 1 Exchange Plaza, 55 Broadway, Ste 3002, New York, New York 10006.

(q) The Seller does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Agreement in all material respects.

 

(r) The Seller has not selected and will not select the Purchased Securities transferred by it hereunder in a manner so as to adversely affect the Buyer’s interests.

 

(s) There is no UCC filing jurisdiction for filing of a financing statement in order to establish perfection with respect the Seller’s interest in the Purchased Securities other than Maryland.

 

(t) The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of the Seller to the Buyer in connection with the negotiation, preparation or delivery of this Agreement or included herein or delivered pursuant hereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of the Seller to the Buyer in connection with this Agreement and the transactions contemplated hereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified.

 

(u) The use of all funds acquired by the Seller under this Agreement will not conflict with or contravene any of Regulations T, U or X promulgated by the Board of Governors of the Federal Reserve System.

 

(v) As of the date hereof, the exact legal name of the Seller is, and since the Seller was formed has been, the name set forth for it on the signature page hereto and the Seller has not had (i) any prior name or (ii) any trade names.

 

(w) The consideration received by the Seller in connection with the transfer of the Purchased Securities by the Seller under this Agreement constitutes fair consideration and reasonably equivalent value for such Purchased Securities.

 

(x) The consummation of the transactions contemplated by this Agreement are in the ordinary course of business of the Seller.

 

9. NEGATIVE COVENANTS OF THE SELLER.

 

The Seller shall not without the prior written consent of Buyer:

 

(a) take any action which would directly or indirectly impair or adversely affect Buyer’s title to the Purchased Securities;

 

(b) move its chief executive office from the address or change its jurisdiction of organization from the jurisdiction referred to in Section 8(p) of this Annex I unless it shall have provided the Buyer 30 days’ prior written notice of such change;

(c) engage in any conduct or activity that could subject its assets to forfeiture or seizure;

 

(d) make any material change in the nature of its business as carried on at the date hereof;

 

(e) create, incur, assume or suffer to exist Liens of any nature whatsoever on any of the Purchased Securities, whether real, personal or mixed, now or hereafter owned, other than the Liens created in connection with the transactions contemplated by this Agreement; nor shall such Seller cause any of the Purchased Securities to be sold, pledged, assigned or transferred; or

 

(f) transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge or hypothecate, directly or indirectly, any interest in the Purchased Securities (or any of them) to any Person other than Buyer, or engage in repurchase transactions or similar transactions with respect to the Purchased Securities (or any of them) with any Person other than Buyer so long as such Purchased Securities are subject to the Agreement.

 

10. AFFIRMATIVE COVENANTS OF THE SELLER.

 

(a) The Seller shall promptly notify Buyer of any material adverse change in its business operations and/or financial condition; provided, however, that nothing in this Section 10 shall relieve the Seller of its obligations under the Agreement.

 

(b) The Seller (1) shall defend the right, title and interest of Buyer in and to the Purchased Securities against, and take such other action as is necessary to remove, the Liens, security interests, claims and demands of all Persons (other than security interests by or through Buyer) and (2) shall take all action reasonably requested by the Buyer to ensure that Buyer will have a first priority security interest in the Purchased Securities subject to the Transaction in the event the Transaction is recharacterized as a secured financing.

 

(c) The Seller will permit Buyer, or any designated representative thereof, to inspect such Seller’s records with respect to the Purchased Securities and the conduct and operation of its business related thereto upon reasonable prior written notice from Buyer, or any designated representative thereof, at such reasonable times and with reasonable frequency, and to make copies of extracts of any and all thereof.

 

(d) If the Seller shall at any time become entitled to receive or shall receive any rights, whether in addition to, in substitution of, as a conversion of, or in exchange for the Purchased Securities, or otherwise in respect thereof, the Seller shall accept the same as Buyer’s agent, hold the same in trust for Buyer and deliver the same forthwith to Buyer in the exact form received, duly endorsed by the Seller to Buyer, if required, together with an undated bond or other securities power covering such certificate duly executed in blank to be held by Buyer hereunder as additional collateral security for the Transaction. If any sums of money or property so paid or distributed in respect of the Purchased Securities shall be received by the Seller, the Seller shall promptly deliver such amounts to the Buyer.

 

(e) At any time from time to time upon prior written request of Buyer, at the sole expense of the Seller, the Seller will promptly and duly execute and deliver such further instruments and documents and take such further actions as Buyer may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement including the first priority security interest granted hereunder and of the rights and powers herein granted (including, among other things, filing such UCC financing statements as Buyer may reasonably request). If any amount payable under or in connection with any of the Purchased Securities shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be promptly delivered to Buyer, duly endorsed in a manner satisfactory to Buyer, to be held as a Purchased Security under the Transaction pursuant to this Agreement, and the documents delivered in connection herewith.

(f) If any amounts are required to be withheld for U.S. federal income tax purposes with respect to any payments to Buyer in connection with the Transaction effected by this Agreement, Seller shall so withhold (if so required) and shall make payments to Buyer so that the net amount received by Buyer after such withholding equals the amount Buyer would have received if such withholding were not required. The Buyer will deliver such form or forms as the Seller reasonably requests to minimize or avoid any such withholding.

 

(g) The Seller shall provide Buyer with the following financial and reporting information:

 

(i) Within 45 days after the last day of the first three fiscal quarters in any fiscal year, an unaudited statement of the Seller’s income and expenses for such quarter and assets and liabilities as of the end of such quarter; and

 

(ii) Within 90 days after the last day of its fiscal year, an audited statement of the Seller’s income and expenses for such year and assets and liabilities as of the end of such year.

 

(h) The Seller shall timely file all tax returns that are required to be filed by them and shall timely pay all taxes due, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided.

 

(i) The Seller shall give notice to the Buyer immediately after a responsible officer of the Seller has any knowledge of the occurrence of any Event of Default or Default.

 

(j) All information, reports, exhibits, schedules, financial statements or certificates of the Seller or any of its officers furnished to the Buyer hereunder and during the Buyer’s diligence of the Seller is and will be true and complete and not fail to disclose any material facts or omit to state any material fact necessary to make the statements therein or therein, in light of the circumstances in which they are made, not misleading. All required financial statements delivered by the Seller to the Buyer pursuant to this Agreement shall be prepared in accordance with GAAP, or as applicable, in the case of SEC filings, the appropriate SEC accounting requirements.

 

(k) If an Event of Default has been declared or deemed declared, the Seller shall cooperate reasonably with the Buyer.

11. EVENTS OF DEFAULT; INDEMNITY.

 

Paragraph 11 of the Master Agreement is hereby deleted in its entirety and replaced with the following:

 

(a) After the occurrence and during the continuance of an Event of Default hereunder, the Seller hereby appoints the Buyer as its attorney-in-fact for the purpose of carrying out the provisions of this Agreement and taking any action and executing or endorsing any instruments that Buyer may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Each of the following shall constitute an “Event of Default” hereunder:

 

(i) the Seller fails to transfer the Purchased Securities to Buyer upon payment of the Purchase Price on the Purchase Date;

 

(ii) the Seller fails to repurchase the Purchased Securities or substantially similar securities held by the Buyer on the Repurchase Date by paying the Repurchase Price and such failure continues unremedied for two consecutive Business Days;

 

(iii) an Act of Insolvency occurs with respect to the Seller or any Affiliate thereof;

 

(iv) the Seller shall have defaulted in any of its obligations under the Stock Purchase Agreement;

 

(v) any representation made by the Seller (other than any representations regarding the eligibility of the Purchased Securities set forth in Section 19 of this Annex I), shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated and shall not have been cured within 5 days of the date the Seller has actual knowledge or has received written notice of such breach;

 

(vi) the Seller shall admit its inability to, or its intention not to, perform any of its obligations hereunder;

 

(vii) the Seller shall have assigned or purported to assign this Agreement, or any of its rights hereunder, except to an Affiliate, without obtaining the prior written consent of Buyer; or

 

(viii) the Seller fails to comply with any of its other agreements or covenants in, or provisions of, this Agreement and such failure continues for a period of 5 days after the earlier of (i) the date on which the Seller obtains knowledge thereof or (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by Buyer.

 

(b) Provided an Event of Default has occurred and is continuing, the Buyer may, at its option (which option shall be deemed to have been exercised immediately upon the occurrence of an event described in clause (iii) of Section 11(a)), declare an Event of Default to have occurred hereunder and, upon the exercise or deemed exercise of such option, the Transaction shall terminate, meaning that the Repurchase Date hereunder shall, if it has not already occurred, be deemed immediately to occur. The Buyer shall (except upon the occurrence of any event deemed to have been declared an Event of Default pursuant to the preceding sentence) give notice to the Seller of the exercise of such option as promptly as practicable.

(c) If the Buyer exercises or is deemed to have exercised the option referred to in clause (b) of this Section, (i) the Seller’s obligation to repurchase all Purchased Securities or substantially similar securities held by Buyer, at the Repurchase Price, shall thereupon become immediately due and payable, and (ii) all Income paid after such exercise or deemed exercise shall be retained by Buyer applied to the unpaid Repurchase Price and any other amounts owing by the Seller hereunder.

 

(d) If the Buyer exercises or is deemed to have exercised the option referred to in clause (b) of this Section, the Seller hereby acknowledges and agrees that the Purchased Securities or substantially similar securities (A) may be sold by the Buyer, or (B) in Buyer’s sole discretion, in lieu of selling all or a portion of the Purchased Securities or substantially similar securities, may give the Seller credit for such Purchased Securities or substantially similar securities in an amount equal to the price therefor obtained from a generally recognized source or the most recent closing bid quotation from such a source.

 

(e) The parties acknowledge and agree that (1) the Purchased Securities 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, Buyer may establish the source therefor in its sole discretion, (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), and (4) any sale of the Securities by the Buyer shall be deemed to have been conducted in a commercially reasonable manner for all purposes under applicable law.

 

(f) Buyer shall pay to the Seller an amount equal to the excess of the aggregate purchase price paid by the purchasers in any sale of the Purchased Securities or substantially similar securities (or an amount equal to the excess of such credit as determined in Section 11(d)(B) above) following the declaration or deemed declaration of an Event of Default, as reduced by any expenses incurred by Buyer in connection with such sale or liquidation, over the aggregate Repurchase Price hereunder and any other amounts payable by the Seller hereunder.

 

(g) To the extent permitted by applicable law, the Seller shall be liable to Buyer for interest on any amounts owing by the Seller hereunder, from the date the Seller becomes liable for such amounts hereunder until such amounts are (i) paid in full by the Seller or (ii) satisfied in full by the exercise of the rights hereunder. Interest on any sum payable by the Seller to Buyer under this Section 11 shall be at a rate equal to 14% per annum.

 

(h) Subject to the notice and grace periods set forth herein, each party to this Agreement may exercise any or all of the remedies available to such party immediately upon the declaration or deemed declaration of an Event of Default and at any time during the continuance thereof. Neither any failure nor any delay on the part of any party to this Agreement in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege.

(i) Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and the Seller hereby expressly waives any defenses the Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives any defense the Seller might otherwise have arising from the use of nonjudicial process, disposition of any or all of the Purchased Securities or substantially similar securities, or from any other election of remedies. The Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

 

(j) The Seller hereby agree to indemnify Buyer and its Affiliates and each of their officers, directors, employees and agents (each, an “Indemnified Party”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, taxes (including stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Purchased Securities or in connection with this Agreement or any of the transactions contemplated by this Agreement and the documents delivered in connection herewith), fees, costs, expenses (including reasonable attorneys fees and disbursements actually incurred to external counsel) or disbursements (all of the foregoing, collectively “Indemnified Amounts”) which may at any time (including, without limitation, such time as this Agreement shall no longer be in effect and the Transaction shall have been repaid in full) be imposed on or asserted against any Indemnified Party in any way whatsoever arising out of or in connection with, or relating to, this Agreement or the Transaction hereunder or any action taken or omitted to be taken by any Indemnified Party under or in connection with any of the foregoing, including without limitation in connection with the enforcement of this Agreement or any other agreement evidencing the Transaction, whether in action, suit or litigation or bankruptcy, insolvency or other similar proceeding affecting creditors’ rights generally; provided, that the Seller shall not be liable for Indemnified Amounts resulting from the gross negligence or willful misconduct of any Indemnified Party.

 

(k) Notwithstanding anything herein to the contrary, any payment made by the Seller, within the applicable grace period described above, to cure any failure by the Seller to repurchase the Purchased Securities or substantially similar securities held by Buyer on the Repurchase Date, shall be made by it on or before 2:00 p.m. (New York time) on the date such failure is so cured. Any such payment received by or on behalf of the Buyer after 2:00 p.m. (New York time) shall be deemed to be received on (the next succeeding Business Day.

 

12. CONDITIONS PRECEDENT.

 

The Buyer’s agreement to enter into the initial Transaction under the Agreement is subject to the prior or contemporaneous satisfaction of all of the following conditions precedent (the first date on which all such conditions precedent shall have been satisfied, the “Effective Date”):

 

(a) Agreements. The Buyer shall have received the Agreement, duly executed and delivered by each of the parties hereto. In addition, the Seller and the Buyer shall have received the Stock Purchase Agreement, dated as of the date hereof (the “Stock Purchase Agreement”), duly executed and delivered by the Seller and the Buyer. The Buyer shall have received one or more cross receipts, satisfactory to the Buyer in its sole discretion and duly executed and delivered by the applicable repo lender(s) for the Seller, to the effect that upon its receipt of the payment of certain amounts by the Buyer, such repo lender(s) shall deliver the Purchased Securities in its possession to the Buyer or the Buyer shall have previously received the Purchased Securities held by any repo lender which has not provided such a cross receipt.

 

(b) Seller’s Certificate. The Buyer shall have received a certificate from the secretary of the Seller, in form and substance satisfactory to the Buyer, attaching a good standing certificate and certified copies of the Seller’s charter and by-laws (or equivalent documents) and of all corporate or other authority of the Seller with respect to the execution, delivery and performance of the Agreement and each other document to be delivered by it from time to time in connection herewith and certifying as to the incumbency of each person authorized to execute on behalf of the Seller the Agreement or any related document on behalf (and the Buyer may conclusively rely on such certificate until it receives notice in writing from the Seller to the contrary).

 

(c) Opinions of Counsel. The Buyer shall have received opinions of legal counsel to the Seller with respect to the Agreement and the matters contemplated hereunder, including, without limitation, a customary due authority opinion, which opinions shall be satisfactory to the Buyer in form and substance.

 

(d) Other Documents. The Buyer shall have received such other documents as the Buyer, or its counsel, may reasonably request.

 

(e) Representations and Warranties. Both immediately before and after giving effect to such Transaction, all of the representations and warranties made by the Seller pursuant to the Agreement shall be true, correct and complete in all material respects on and as of the Purchase Date for such Transaction with the same force and effect as if made on and as of such date (or, if any representation or warranty is expressly stated to have been made as of a specific date, or with respect to a specific period, as of such specific date or period).

 

(f) Fees and Expenses. The Buyer shall have received payment from Seller of an amount equal to the actual costs and expenses incurred by the Buyer in connection with the development, preparation and execution of the Agreement, and any other documents prepared in connection herewith, including, without limitation, the fees and expenses of Mayer, Brown, Rowe & Maw LLP, counsel to the Buyer, provided that a statement of such fees shall have been delivered prior to 11:00 A.M. New York City time on the date hereof.

 

13. USE OF EMPLOYEE PLAN ASSETS.

 

Paragraph 18 of the Master Agreement is hereby deleted in its entirety and replaced with the following:

 

Both the Buyer and the Seller represent, warrant and covenant to the other with respect to the Transaction that it is not, and is not acting on behalf of, (i) an “employee benefit plan” as defined in Section 3(3) of ERISA, whether or not subject to Title I of ERISA, (ii) a “plan” as defined in Section 4975 of the Code, or (iii) an entity deemed to hold plan assets of any of the foregoing.

 

14. BUYER AS ATTORNEYS-IN-FACT. The Buyer is hereby appointed to act after the declaration or deemed declaration of a Default or Event of Default as the attorney-in-fact of the Seller for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instruments that Buyer may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, Buyer shall have the right and power after the declaration or deemed declaration of any Default or Event of Default to receive, endorse and collect all checks made payable to the order of the Seller representing any payment on account of the principal of or interest on any of the Purchased Securities and to give full discharge for the same.

 

15. REPURCHASE TRANSACTIONS. Buyer may engage in repurchase transactions with the Purchased Securities or otherwise pledge, transfer, hypothecate or rehypothecate the Purchased Securities, but no such transaction shall relieve the Buyer of its obligations to resell and transfer securities that, in the reasonable discretion of the Buyer, are substantially similar to the Purchased Securities (based on weighted average coupon, weighted average life, weighted average FICO of the underlying mortgagors, weighted average loan to value of the underlying mortgage loans, occupancy status and documentation type) to the Seller pursuant to the terms hereof.

 

16. NOTICES AND OTHER COMMUNICATIONS.

 

Paragraph 13 of the Master Agreement is hereby deleted and replaced in its entirety with the following:

Except as otherwise expressly provided herein, all notices or communications shall be in writing (including, without limitation, by e-mail, facsimile or telex communication) or confirmed in writing and such notices and other communications shall, when mailed, e-mailed, communicated by facsimile transmission or telexed, be effective when received at the address for notices for the party to whom such notice or communications is to be given as set forth in Annex II hereto.

 

Notwithstanding the foregoing, a facsimile transmission shall be deemed to be received when transmitted so long as the transmitting machine has provided an electronic confirmation of such transmission. Any notices or communications sent via e-mail shall be followed with a telephone call on the same day to confirm receipt of such e-mail. Either party may revise any information relating to it by notice in writing to the other party, which notice shall be effective on the third Business Day following receipt thereof.

 

17. EXPENSES. The Seller shall pay its own expenses and all reasonable out-of-pocket costs and expenses (including reasonable fees and disbursements of counsel) of Buyer incident to the enforcement of payment of amounts due under the Agreement, whether by judicial proceedings or otherwise, including, without limitation, in connection with bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar proceedings involving the Seller. Notwithstanding any provision hereof to the contrary, the obligations of the Seller under this Section 17 shall be effective and enforceable whether or not the Transaction remains outstanding and shall survive payment of all other obligations owed by the Seller to Buyer.

18. COUNTERPARTS. The Agreement may be executed in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall constitute but one and the same instrument.

 

19. REPRESENTATIONS RELATING TO THE PURCHASED SECURITIES. The Seller hereby represents and warrants, with respect to each Purchased Security, as follows:

 

(a) Upon payment of the Purchase Price as directed by Seller pursuant hereto, such Purchased Securities are free and clear of any lien, encumbrance or impediment to transfer (including any “adverse claim” as defined in Section 8-102(a)(1) of the UCC), and Seller is the recordholder and beneficial owner of and has good and marketable title to and the right to sell and transfer such Purchased Securities to Buyer and, upon transfer of such Purchased Securities to Buyer, Buyer shall be the owner of such Purchased Securities free of any adverse claim. In the event the Transaction is recharacterized as a secured financing of the Purchased Securities, the provisions of the Agreement are effective to create in favor of Buyer a valid security interest in all rights, title and interest of Seller in, to and under the Purchased Securities and Buyer shall have a valid, perfected first priority security interest in the Purchased Securities;

 

(b) information set forth in the Confirmation is true and correct in all material respects;

 

(c) no payment under such Security is currently past its contractual due date or has been past its contractual due date since its issuance date;

 

(d) the Seller has received all consents and approvals required by the terms of such Security to the transfer to Buyer of its interest and rights in such Security; and

 

(e) Buyer’s purchase of such Security shall not constitute a violation of any restriction on transfer applicable to such Security pursuant to its terms, or a breach of Section 5 of the Securities Act.

 

20. AMENDMENT/WAIVERS.

 

(a) Amendments. Any amendment, modification or supplement to this Annex I or the Agreement shall be in writing signed by the parties hereto.

 

(b) Waiver. Any waiver of any provision of this Agreement, and any consent to any departure by the Buyer from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand upon the Buyer in any instance hereunder shall entitle the Buyer to any other or further notice or demand in similar or other circumstance.

(c) Costs and Expenses. The costs and expenses associated with any amendment, modification or supplement pursuant to this Section 20 shall be borne by the party requesting such amendment, modification or supplement.

 

21. TAX TREATMENT. Each Party intends that the Transaction effected by this Agreement be treated as a sale of the Purchased Securities for U.S. federal income tax purposes, and the Parties hereby agree to file all tax returns and otherwise treat the transaction for U.S. federal income tax purposes consistently therewith. All provisions of the Agreement shall be construed to achieve the aforementioned treatment for U.S. federal, state, and local income and franchise tax purposes. None of the parties to this Agreement shall take any contrary position unless required by applicable law.

 

22. SUBMISSION TO JURISDICTION AND WAIVER OF IMMUNITY.

 

(a) Each Party irrevocably and unconditionally (i) submits to the non-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 this Agreement or relating in any way to this Agreement or the Transaction under this Agreement and (ii) 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.

 

(b) 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 or 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 this Agreement or the Transaction under this Agreement.

 

23. CHARACTERIZATION OF THIS AGREEMENT. Each of the Seller and the Buyer hereby acknowledges and agrees:

 

(a) that the Transaction is a “repurchase agreement” as that term is defined in Section 101(47) of Title 11 of the Bankruptcy Code (except insofar as the Purchased Securities subject to such Transaction, or the term of such Transaction, would render such definition inapplicable), a “forward contract” as that term is defined in Section 101(25) of the Bankruptcy Code (except insofar as the Purchased Securities subject to such Transaction would render such definition inapplicable), a “securities contract” as that term is defined in Section 741(7) of the Bankruptcy Code, and/or a “master netting agreement” as that term is defined in Section 101(38A) of the Bankruptcy Code; and

 

(b) that each assignment, transfer or payment of Purchased Securities or Repurchase Price is a “margin payment” as that term is defined in Sections 101(38), 741(5) and 761(15) of the Bankruptcy Code, or a “settlement payment” as that term is defined in Sections 101(51A) and 741(8) of the Bankruptcy Code.

 

Seller and Buyer further intend that Buyer’s right to liquidate, terminate or accelerate the Purchased Securities delivered to Buyer in connection with the Transaction hereunder, and to exercise any other remedies pursuant to Section 11 hereof, are contractual rights to liquidate, terminate or accelerate such Transaction as described in Sections 555, 556, 559 and 561 of the Bankruptcy Code.

Each of the Buyer and the Seller hereby covenants and agrees that it shall not challenge such characterizations of this Agreement, the Transaction hereunder or of any of the payments or actions referred to above.

24. NO RECOURSE. Except with respect to any indemnification rights the Buyer may have against the Seller, no recourse shall be had against the Seller with respect to any of the payment obligations, covenants, agreements, representations or warranties of the Seller contained in this Agreement, and the Buyer’s recourse shall be limited to its rights in the Purchased Securities.

 

25. BINDING TERMS. All of the covenants, stipulations, promises and agreements in the Agreement shall bind the successors and assigns of the parties hereto, whether expressed or not.

 

26. TERMINATION.

 

Paragraph 15(a) of the Master Agreement is hereby deleted in its entirety and replaced with the following:

 

The rights and obligations of the parties under this Agreement and under the Transaction shall not be assigned by either party other than to one of its Affiliates 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. The Seller shall maintain a register of the ownership of the Buyer’s rights hereunder, and in the event of any assignment of this agreement by the Buyer, the Buyer shall present a copy of such assignment to the Seller, and the Seller shall record the name(s) and address(es) of the assignee(s) in the register. The parties shall be entitled to rely upon the register as proof of the ownership of the Buyer’s rights hereunder. Subject to the foregoing, this Agreement and the Transaction shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, Buyer and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

 

RCG PB, LTD, as Buyer
By:      /s/ Jeffrey M. Solomon
Name: Jeffrey M. Solomon
Title:   Authorized Signatory
HANOVER CAPITAL MORTGAGE HOLDINGS, INC., as Seller
By:      /s/ John A. Burchett
Name: John A. Burchett
Title:   President and CEO

 

 

 

TO:         Hanover Capital Mortgage Holdings, Inc. 200 Metroplex Drive Edison, NJ  08817 Attention: Harold McElraft Tel:  732 ###-###-#### Fax: 732 ###-###-#### and Hanover Capital Mortgage Holdings, Inc. 1 Exchange Plaza/55 Broadway Suite 3002 New York, NY  1006 Attention: James Strickler Tel:  212 ###-###-#### Fax:  212 ###-###-####

FROM:   RCG PB, Ltd c/o Ramius Advisors, LLC 666 Third Avenue, 26th Floor New York, New York 10017 Attention: Julian Vulliez / John Holmes / Owen Littman Tel.: 212 ###-###-#### / 212 ###-###-#### / 212 ###-###-#### Fax: 212 ###-###-#### / 212 ###-###-#### / 212 ###-###-####

 

RE:

 

RCG PB, Ltd (the “Buyer”) is pleased to confirm your sale and our purchase of the Purchased Securities described below pursuant to the Master Repurchase Agreement (including the supplemental terms set forth in the Amended and Restated Annex I thereto dated as of October 2, 2007), dated as of August 10, 2007 (the “Agreement”).

 

 

CUSIP	Unpaid Principal Balance

The Agreement is incorporated by reference into this Confirmation and made a part hereof as if it were fully set forth herein. All capitalized terms used herein but not otherwise defined shall have the meanings specified in the Agreement.

 

	BY: RCG PB, LTD
	By:________________________________
	Name:______________________________
	Title:_______________________________

 

200 Metroplex Drive

Edison, NJ  08817

Attention: Suzette Berrios

Tel:  732 ###-###-####

Fax:  732 ###-###-####

c/o Ramius Advisors, LLC

666 Third Avenue, 26th Floor

New York, New York 10017

Attention: Julian Vulliez / John Holmes / Owen Littman

Tel.: 212 ###-###-#### / 212 ###-###-#### / 212 ###-###-####

Fax: 212 ###-###-#### / 212 ###-###-#### / 212 ###-###-####