EXHIBIT 10.2

 

SECURED PROMISSORY NOTE

$850,000.00

 

September 30, 2020

FOR VALUE RECEIVED, receipt of which is hereby acknowledged, Redwood Mortgage
Investors VIII, a California limited partnership (“Maker”), promises to pay to
Redwood Mortgage Investors IX, LLC, a Delaware limited liability company
(“Payee”), the principal sum of Eight Hundred and Fifty Thousand Dollars
($850,000.00) (“Principal”) together with interest as provided in this Secured
Promissory Note (“Note”) and on the following terms and conditions:

1. Secured Note. This Note is secured by that certain Pledge and Security
Agreement of even date herewith, entered into by and between Maker and Payee
(the “Pledge Agreement”). All capitalized terms not otherwise defined herein
shall have the meanings given in the Pledge Agreement.

2. Maturity Date. All unpaid Principal, Interest and any and all other sums
payable to Payee under this Note shall be due and payable, in full, on the
earlier of: (i) the closing of the Purchase Transaction contemplated in the
Pledge Agreement; and (ii) November 30, 2020 (the “Maturity Date”).

3. Interest. In addition to the repayment of the Principal amount of this Note,
Maker shall pay to Payee interest in the amounts provided herein (collectively
referred to herein as “Interest”).

(a) If Principal is repaid to Payee upon the closing of the Purchase
Transaction, Interest payable to Payee on the corresponding Maturity Date shall
be Interest equal to the sum of following: (i) Interest in an amount equal to
the Payee’s Pro Rata Share of the weighted average interest that accrues on the
Loans Held for Sale from the date of this Note through the closing of the
Purchase Transaction and corresponding Maturity Date; and (ii) Payee’s Pro Rata
Share of any prepayment premium payable to Maker in the Purchase Transaction.
For the purposes of this Note, the Payee’s “Pro Rata Share” means the fraction,
expressed as a percentage, the numerator of which is the aggregate principal
balance of the Loans Held for Sale and the denominator of which is the Principal
amount of this Note as of the Purchase Transaction closing and corresponding
Maturity Date.

(b) If the Purchase Transaction fails to close by the November 30, 2020,
Maturity Date or the provisions of subsection (a) are otherwise inapplicable:
(i) Interest payable to Payee on the Maturity Date shall be equal to the Payee’s
Pro Rata Share of the weighted average interest that accrues on the Loans Held
for Sale from the date of this Note through the Maturity Date; and (ii) Payees
Pro Rata Share of the prepayment premium described in subsection (a)(ii) above
shall be payable to Maker if and when the Purchase Transaction is closed and the
prepayment premium is paid by the purchaser.

4. Payment. No payments shall be due from Maker under this Note prior to the
Maturity Date. On the Maturity Date, Maker shall make a lump sum payment to
Payee which shall include all unpaid Principal, all Interest and any and all
other sums due under this Note. This Note may be prepaid at any time by paying
all unpaid Principal and all Interest payable as of the date of prepayment. All
payments made by Maker hereunder shall be applied first to Interest, then to the
outstanding Principal.

5. Default. The occurrence of any of the following (each, an “Event of
Default”), shall constitute a default hereunder:

(a) Failure of Maker to pay all amounts due under this Note on the Maturity
Date.

(b) Default in the performance of any obligation contained in the Pledge
Agreement or any other instrument (including any amendment, modification or
extension thereof) given by Maker for the purpose of securing this Note.

(c) Maker shall commence (or take any action for the purpose of commencing) or
Maker shall have commenced against it any proceeding under any bankruptcy,
reorganization, readjustment of debt or similar law or statute, a receiver,
trustee or custodian is appointed for a substantial part of Maker’s assets,
Maker makes assignment for the benefit of creditors, or Maker is otherwise
deemed to be insolvent.

6. Remedies. Upon the occurrence of any Event of Default, Payee, at its option
and without further notice, demand, or presentment for payment to Maker or
others, may declare immediately due and payable the unpaid Principal balance of
this Note and all Interest payable thereon together with all other sums owed by
Maker under this Note. Payment of such sums may be enforced and recovered in
whole or in part at any time by one or more of the remedies provided to Payee
under this Note and the Pledge Agreement.

 

 

 

 

 

35701.3 16918448.2

 

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7. Remedies Cumulative. The rights and remedies of Payee provided in this Note
and the Pledge Agreement are cumulative and concurrent and may be pursued
singly, successively or together, at the sole discretion Payee, and may be
exercised as often as occasion therefor shall occur. The failure of the Payee to
exercise any such right or remedy shall in no event be construed as a waiver or
release thereof.

8. Costs. Maker agrees to pay immediately upon demand all costs, expenses and
fees, including without limitation reasonable attorneys’ fees incurred by Payee
in any proceeding for the collection of the debt evidenced by this Note, in any
litigation or controversy arising from or connected with the enforcement of this
Note or the Pledge Agreement, and/or in any proceedings to enforce payment of
Maker’s obligations hereunder by an action or participation in, or in connection
with, a case or proceeding under Chapter 7, 11 or 13 of the Bankruptcy Code, or
any successor statute thereto.

9. Assignment. This Note may not be assigned, transferred, pledged or
hypothecated by Maker without the prior written consent of Payee, which may be
withheld by Payee in its sole discretion. Payee shall have the absolute right to
assign this Note without Maker’s consent

10. Severability. If any provision of this Note, or the application of it to any
party or circumstance is held to be invalid, such provision shall be
ineffective, but the remainder of this Note, and the application of such
provision to the other parties or circumstances, shall not be affected thereby.

 

MAKER:

REDWOOD MORTGAGE INVESTORS VIII

 

a California limited partnership

 

 

 

 

By:

Redwood Mortgage Corp.,

 

 

a California corporation, its General Partner

 

 

By:

/s/ Michael Burwell

 

 

 

 

Michael Burwell, President

 

 

 

 

2

 

35701.3 16955818.1

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PLEDGE AND SECURITY AGREEMENT

This Pledge and Security Agreement (this “Agreement”) is made and entered into
on September 30, 2020, (“Effective Date”) by and between Redwood Mortgage
Investors IX, LLC, a Delaware limited liability company (the “Secured Party”),
and Redwood Mortgage Investors VIII, a California limited partnership
(“Pledgor”), with reference to the following facts:

RECITALS

A. Contemporaneously herewith, Secured Party has made a short term loan to
Pledgor in the amount of $850,000 (the “Loan”). which Loan is evidenced by the
that certain Secured Promissory Note made by Pledgor in favor of Secured Party
and dated as of the Effective Date hereof (the “Secured Note”).

B. Peldgor is a mortgage fund in the business of making loans secured by
California real estate and, as of the Effective Date, Pledgor is holding the
loans identified in Exhibit A of this agreement for sale to third parties (the
“Loans Held for Sale”). Pledgor has received and is assessing competing bids for
the purchase of its Loans Held for Sale and currently expects that a purchase
and sale transaction with one of existing bidders will occur and be closed in
October or November of 2020 (the “Purchase Transaction”). Pledgor also intends
to utilize the proceeds from the Loan Purchase Transaction to: (i) repay all of
Pledgor’s obligations due to Western Alliance Bank (“Credit Line Lender”) under
its existing credit line with Credit Line Lender (“Credit Line Agreement”) that
are secured by the Loans Held for Sale (as applicable) (the “Credit Line
Obligations”); and (ii) repay all of the obligations due to Secured Party under
the Secured Note.

D. Secured Party is only willing to make the Loan to Pledgor on the express
condition that the Loan and Pledgor’s obligations to Secured Party under the
Secured Note be secured by a pledge of Pledgor’ s interest in the Purchase
Transaction proceeds (net of the Credit Line Obligations), Pledgor’s right to
receive payments under the Loans Held for Sale (after payment of all applicable
Credit Line Obligations) and all other Collateral (as defined herein) on the
terms set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein, the parties hereby agree as follows:

I. Recitals. The above stated Recitals are true and correct as of the Effective
Date and are hereby incorporated into this Agreement in their entirety.

2. Pledge of Collateral. Pledgor hereby pledges and grants to Secured Party, as
collateral security for the prompt and complete payment and performance of the
Obligations (as defined in Section 3, below), a first priority security interest
in all right title and interest of Pledgor, whether now existing or hereafter
from time to time arising or acquired in and to the following (“Collateral”):

(a) all sale proceeds payable to Pledgor from the Purchase Transaction and any
other sale of the Loans Held for Sale to the extent they exceed the Credit Line
Obligations with respect the Loans Held For Sale (as applicable);

(b) all payment premiums payable to Pledgor with respect to the sale of any of
the Loans Held for Sale, whether in a currently contemplated Purchase
Transaction or otherwise; and

(c) all payments of principal, interest and other monies due or to become due
with respect to the Loans Held for Sale in excess of the Credit Line Obligations
payable with respect to any Loans Held For Sale (as applicable); and

(d) all claims, rights and interests in proceeds, collections, and recoveries
with respect to the foregoing.

3. Secured Obligations. The pledge set forth in Section 2, is made by Pledgor in
favor of Secured Party to secure the prompt and complete performance of
Pledgor’s obligations under the Secured Note and this Agreement (collectively,
the “Obligations”).

 

 

16918003.2

 

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4. Perfection of Security Interest. This Agreement shall constitute a security
agreement under California Uniform Commercial Code (“UCC”). Pledgor acknowledges
that the perfection of the security interest provided for herein shall be made
by filing a financing statement in the form attached hereto as Exhibit B
(“Financing Statement”) with the California Secretary of state. Pledgor hereby
authorized Secured Party to file the Financing Statement and to take any other
actions and make any other filings Secured Party deems necessary to perfect or
continue the perfection of the security interest granted by Pledgor under this
Agreement.

5. Representations and Warranties; Covenants.

(a) Pledgor hereby represents and warrants to the Secured Party that Pledgor has
good title (to the Collateral, free and clear of all claims, pledges, security
interests, liens or encumbrances of every nature whatsoever.

(b) Pledgor agrees that, until the Obligations are fully satisfied, Pledgor will
not (whether voluntarily, involuntarily or by operation of law) sell, assign,
dispose or otherwise transfer (or attempt to sell, assign, dispose or otherwise
transfer), or grant or create (or attempt to grant or create) any security
interest, lien, pledge, claim or other encumbrance with respect to, any of the
Collateral. Any transfer or encumbrance of any Collateral in violation of this
Section 5(b) shall be deemed null and void ab initio.

6. Rights on Default. Upon the occurrence of a default by Pledgor with respect
the Obligations, Secured Party shall have all of the rights and remedies granted
to the Secured Party under the UCC and any other applicable laws, and such
rights, powers and remedies will be exercisable by the Secured Party with
respect to all or any portion of the Collateral.

7. Further Assurances. Pledgor and Secured Party hereby agree that, from time to
time, Pledgor will promptly execute, deliver and file such instruments,
certificates and documents and take such further acts as the Secured Party may
reasonably request in order to perfect, preserve, protect and defend the pledge
or security interest granted or purported to be granted hereunder or to enable
the Secured Party to exercise and enforce its rights and remedies hereunder with
respect to any or all of Collateral.

8. Waiver. No failure, forbearance or delay by the Secured Party to insist upon
the strict performance of any term, condition, covenant or agreement of this
Agreement, or to exercise any right, power or remedy consequent upon a breach
thereof, shall constitute a waiver of any such term, condition, covenant or
agreement or of any such breach, or preclude the Secured Party from exercising
any such right, power or remedy at any later time or times. No waiver of any of
the provisions contained in this Agreement shall be valid unless made in writing
and executed by the waiving party.

9. Miscellaneous.

(a) Th is Agreement shall be governed by and construed in accordance with the
laws of the State of California without regard to any conflict of laws
principles of that or any other jurisdiction.

(b) This Agreement and the Secured Note constitute the entire agreement between
the parties with respect to the subject matter hereof, and supersede any prior
agreements with respect to the subject matter hereof.

(c) If any provision of this Agreement is held to be invalid or unenforceable,
the invalidity or enforceability of any such provision shall not affect the
validity or enforceability of any other provision hereof. This Agreement may not
be assigned by either party without the prior written consent of the other
party. Any assignment in violation of this Section 9(c) shall be null and void.
This Agreement shall (i) be binding upon the Pledgor’s successors and assigns
and (ii) inure to the benefit of the successors and permitted assigns of the
Secured party.

(d) If any dispute between the parties under this Agreement or the Secured Note
results in litigation or arbitration, the prevailing party shall be entitled to
recover all reasonable costs incurred by such party in connection with such
action, including, but not limited to, reasonable attorneys’ fees and expenses
and, if Secured Party is the prevailing party, Secured Party’s reasonable
collection costs.

(e) All headings are used herein for convenience of reference only and shall not
be used to construe or interpret this Agreement. Unless varied by this
Agreement, all terms used herein which are defined by the Delaware Uniform
Commercial Code shall have the same meanings hereunder as assigned to them by
the Delaware Uniform Commercial Code.

 

 

16918003.2

 

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IN WITNESS WHEREOF, the parties hereto have executed this Pledge & Security
Agreement effective as of the Effective Date.

 

SECURED PARTY

PLEDGOR:

 

 

REDWOOD MORTGAGE INVESTORS IX, LLC

REDWOOD MORTGAGE INVESTORS VIII

a Delaware limited liability company

a California limited partnership

 

 

 

 

By:

Redwood Mortgage Corp.,

By:

Redwood Mortgage Corp.,

 

a California corporation, its Manager

 

a California corporation, its General Partner

 

By:

/s/ Michael Burwell

 

By:

/s/ Michael Burwell

 

 

Michael Burwell, President

 

 

 

Michael Burwell, President

 

 

 

 

16918003.2

 

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EXHIBIT A

LOANS HELD FOR SALE

 

Loan Number.

Name of Borrower

Original Principal Balance

 

 

 

 

 

4715

University J, LLC

$

1,600,000.00

 

 

 

 

 

 

4683

Clara J., LLC

$

2,300,000.00

 

 

16918003.2