HOLDBACK AGREEMENT

 

THIS ESCROWED FUNDS AGREEMENT (this "Agreement") is entered into as of June
12, 2014 by REVEN HOUSING TEXAS, LLC, a Delaware limited liability company
("Borrower"), and SILVERGATE BANK, a California corporation ("Lender").

 

R E C I T A L S

 

A. Lender has agreed to make a loan to Borrower (the "Loan") to be evidenced by
that certain Promissory Note Secured by Deeds of Trust in the face amount of
$7,570,000.00 (the “Note”) and secured by, among other things, those certain
Deeds of Trust, Assignments of Leases and Rents, Security Agreements and Fixture
Filings (individually, a “Deed of Trust”, and collectively, “Deeds of Trust”)
creating a lien on the properties (individually, a “Property”, and collectively,
the “Properties”) as described therein, of even date herewith.

 

B. To save costs and expenses (including interest), Borrower has requested that
Lender not fund the entire Loan on the date of the initial funding of the Loan
(the “Closing Date”). Lender is willing to do so on the terms and conditions
contained in this Agreement.

 

NOW, THEREFORE, in consideration of the above recitals and for other good and
valuable consideration, Lender and Borrower hereby agree as follows:

 

1. Initial Funding. The initial funding amount of the Loan shall be One Million
Two Hundred Twenty-Seven Thousand and One Hundred Dollars ($1,227,100.00).

 

2. Holdback. As requested by Borrower, Six Million Three Hundred Forty-Two
Thousand Nine Hundred and No/100 Dollars ($6,342,900.00) of the Loan shall be
retained and not funded by Lender on the Closing Date as a holdback for the Loan
(the “Holdback”). No interest shall accrue on the Holdback until funds are
actually disbursed by Lender. Subject to the general conditions for disbursement
set forth on Exhibit “A” attached to this Agreement, upon written request by
Borrower, all of the Holdback (but not part) shall be disbursed by Lender to
Borrower. Under no circumstances shall Lender be obligated to disburse any funds
from the Holdback after the date that is sixty (60) days following the Closing
Date (the “Disbursement Period”).

 

3. Holdback Account.

 

(a) As consideration for Lender not funding the entire Loan on the Closing Date,
and in consideration of Lender agreeing to make the Holdback available pursuant
to the terms and conditions of Section 2, on the Closing Date, Borrower shall
deposit Two Hundred Twenty-Seven Thousand One Hundred and No/100 Dollars
($227,100.00) (the “Availability Consideration”) into an interest bearing
account at Lender (the “Holdback Account”).

 

(b) If the Holdback is not disbursed by the end of the Disbursement Period,
Lender shall retain the Availability Consideration as consideration for having
committed to make the Holdback available to Borrower. If Lender advances the
Holdback to Borrower, the Availability Consideration shall be returned to
Borrower, concurrently with the disbursement of the Holdback.

 

4. Miscellaneous. This Agreement and the Loan is subject to the provisions
attached hereto as Exhibit “B”.

 

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EXECUTED as of the date first written above.

 

  LENDER:       SILVERGATE BANK,   a California corporation         By: /s/ Joan
Sibley   Name: Joan Sibley   Title: Vice President

 

  “BORROWER”           REVEN HOUSING TEXAS, LLC,   a Delaware limited liability
company       By: Reven Housing REIT, Inc.,     a Maryland corporation,     its
Sole Member             By: /s/ Thad Meyer     Name: Thad Meyer     Title: Chief
Financial Officer

 

 

 

 

 

Exhibit “A”

 

The advance of the Holdback, pursuant to this Agreement shall be subject to
Lender's receipt, review, approval and/or confirmation of the following, each in
form and content satisfactory to Lender in its sole discretion:

 

1. No “Event of Default” (as defined in any of the Deeds of Trust) shall have
occurred and be continuing and there shall exist no event that with the passage
of time or the giving of notice that would constitute an Event of Default
(currently and after giving effect to the requested advance).

 

2. No change shall have occurred in the financial condition of Borrower or any
“Additional Essential Party” (as defined in any of the Deeds of Trust) that
would materially affect Borrower’s ability to satisfy Borrower’s obligations
under the Loan Documents.

 

4. At the option of Lender (i) each advance request shall be submitted to Lender
at least ten (10) “Business Days” (as defined below) prior to the date of the
requested advance; and (ii) all advances shall be made at the office of Lender
or at such other place as Lender may designate unless Lender exercises its
option to make an advance directly to the person or entity to whom payment is
due. As used herein, “Business Day” shall mean any day that Lender is open for
business and accepting deposits.

 

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Exhibit “B”

 

MISCELLANEOUS

 

Section 1. MISCELLANEOUS

 

Section 1.1 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and either shall be mailed by certified mail,
postage prepaid, return receipt requested, or sent by overnight air courier
service, or personally delivered to a representative of the receiving party, or
sent by telecopy (provided an identical notice is also sent simultaneously by
mail, overnight courier, or personal delivery as otherwise provided in this
Section 1.1). All such communications shall be mailed, sent or delivered,
addressed to the party for whom it is intended at its address set forth below.

 

  If to Borrower: Reven Housing Texas, LLC     7911 Herschel Avenue       Suite
201       La Jolla, California 92037       Attention: Thad Meyer             If
to Lender: Silvergate Bank       4275 Executive Square       Suite 800       La
Jolla, California 92037       Attention: Commercial Loan Department  

 

Any communication so addressed and mailed shall be deemed to be given on the
earliest of (1) when actually delivered, (2) on the first Business Day after
deposit with an overnight air courier service, or (3) on the third Business Day
after deposit in the United States mail, postage prepaid, in each case to the
address of the intended addressee (except as otherwise provided in the
Mortgage), and any communication so delivered in person shall be deemed to be
given when receipted for by, or actually received by Lender or Borrower, as the
case may be. If given by telecopy, a notice shall be deemed given and received
when the telecopy is transmitted to the party's telecopy number specified above
and confirmation of complete receipt is received by the transmitting party
during normal business hours or on the next Business Day if not confirmed during
normal business hours, and an identical notice is also sent simultaneously by
mail, overnight courier, or personal delivery as otherwise provided in this
Section 1.2. Either party may designate a change of address by written notice to
the other by giving at least ten (10) days prior written notice of such change
of address.

 

Section 1.3 Amendments and Waivers. No failure by Lender to insist upon the
strict performance of any covenant, agreement, term or condition of this
Agreement, the Note, the Deeds of Trust, or any other document relating to the
Loan (the "Loan Documents") or any other Document or to exercise any right,
power or remedy consequent upon a breach thereof shall constitute a waiver,
express or implied, of any such breach or of such covenant, agreement, term or
condition. No amendment or waiver of any provision of the Loan Documents shall
be effective unless in writing and signed by the party against whom enforcement
is sought.

 

Section 1.4 Invalid Provisions. If any provision of any Loan Document is held to
be illegal, invalid or unenforceable, such provision shall be fully severable;
the Loan Documents shall be construed and enforced as if such illegal, invalid
or unenforceable provision had never comprised a part thereof; the remaining
provisions thereof shall remain in full effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance therefrom; and
in lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as a part of such Loan Document a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible to be legal,
valid and enforceable.

 

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Section 1.5 Intentionally Omitted.

 

Section 1.6 Lender Not in Control; No Partnership. None of the covenants or
other provisions contained in this Agreement shall, or shall be deemed to, give
Lender the right or power to exercise control over the affairs or management of
Borrower, the power of Lender being limited to the rights to exercise the
remedies referred to in the Loan Documents. The relationship between Borrower
and Lender is, and at all times shall remain, solely that of debtor and
creditor. No covenant or provision of the Loan Documents is intended, nor shall
it be deemed or construed, to create a partnership, joint venture, agency or
common interest in profits or income between Lender and Borrower or to create an
equity in the Properties in Lender. Lender neither undertakes nor assumes any
responsibility or duty to Borrower or to any other person with respect to any of
the Properties or the Loan, except as expressly provided in the Loan Documents;
and notwithstanding any other provision of the Loan Documents: (1) Lender is
not, and shall not be construed as, a partner, joint venturer, alter ego,
manager, controlling person or other business associate or participant of any
kind of Borrower or its stockholders, members, or partners and Lender does not
intend to ever assume such status; (2) Lender shall in no event be liable for
any Debts, expenses or losses incurred or sustained by Borrower; and (3) Lender
shall not be deemed responsible for or a participant in any acts, omissions or
decisions of Borrower or its stockholders, members, or partners. Lender and
Borrower disclaim any intention to create any partnership, joint venture, agency
or common interest in profits or income between Lender and Borrower, or to
create an equity in any of the Properties in Lender, or any sharing of
liabilities, losses, costs or expenses.

 

Section 1.7 Time of the Essence. Time is of the essence with respect to this
Agreement.

 

Section 1.8 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Lender and Borrower and their respective successors and
assigns of Lender and Borrower, provided that neither Borrower nor any other
Essential Party shall, without the prior written consent of Lender, assign any
rights, duties or obligations hereunder.

 

Section 1.9 Renewal, Extension or Rearrangement. All provisions of the Loan
Documents shall apply with equal effect to each and all promissory notes and
amendments thereof hereinafter executed which in whole or in part represent a
renewal, extension, increase or rearrangement of the Loan.

 

Section 1.10 Waivers. No course of dealing on the part of Lender, its officers,
employees, consultants or agents, nor any failure or delay by Lender with
respect to exercising any right, power or privilege of Lender under any of the
Loan Documents, shall operate as a waiver thereof.

 

Section 1.11 Cumulative Rights. Rights and remedies of Lender under the Loan
Documents shall be cumulative, and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other right or remedy.

 

Section 1.12 Singular and Plural. Words used in this Agreement and the other
Loan Documents in the singular, where the context so permits, shall be deemed to
include the plural and vice versa. The definitions of words in the singular in
this Agreement and the other Loan Documents shall apply to such words when used
in the plural where the context so permits and vice versa.

 

Section 1.13 Phrases. When used in this Agreement and the other Loan Documents,
the phrase "including" shall mean "including, but not limited to," the phrase
"satisfactory to Lender" shall mean "in form and substance satisfactory to
Lender in all respects," the phrase "with Lender's consent" or "with Lender's
approval" shall mean such consent or approval at Lender's discretion, and the
phrase "acceptable to Lender" shall mean "acceptable to Lender at Lender's sole
discretion."

 

Section 1.14 Exhibits and Schedules. The exhibits and schedules attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for the purposes stated herein.

 

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Section 1.15 Titles of Articles, Sections and Subsections. All titles or
headings to articles, sections, subsections or other divisions of this Agreement
and the other Loan Documents or the exhibits hereto and thereto are only for the
convenience of the parties and shall not be construed to have any effect or
meaning with respect to the other content of such articles, sections,
subsections or other divisions, such other content being controlling as to the
agreement between the parties hereto. As used herein, “Business Day” shall mean
any day that Lender is open for business and accepting deposits.

 

Section 1.16 Intentionally Omitted.

 

Section 1.17 Survival. All of the representations, warranties, covenants, and
indemnities hereunder, and under the indemnification provisions of the other
Loan Documents shall survive the repayment in full of the Loan and the release
of the liens evidencing or securing the Loan, and shall survive the transfer (by
sale, foreclosure, conveyance in lieu of foreclosure or otherwise) of any or all
right, title and interest in and to any of the Properties to any party, whether
or not an affiliate of Borrower; provided, however, that Borrower’s liability
hereunder is subject to the limitation on liability provisions of the Addendum
to the Note.

 

Section 1.18 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN)
OR ACTION OF EITHER PARTY OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE
RIGHTS UNDER THE LOAN DOCUMENTS OR IN ANY WAY RELATING TO THE LOAN OR ANY OF THE
PROPERTIES (INCLUDING, WITHOUT LIMITATION, ANY ACTION TO RESCIND OR CANCEL THIS
AGREEMENT, AND ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS
FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER IS A
MATERIAL INDUCEMENT FOR LENDER TO ENTER THIS AGREEMENT.

 

Section 1.19 Transfers, Assignments and Securitizations.

 

(A) Lender may, at any time, (i) sell, transfer, assign or grant participations
in the Loan and any of the Loan Documents or (ii) issue mortgage pass-through
certificates or other securities evidencing a beneficial interest in, or secured
by, all or any portion of the Loan in a rated or unrated public offering or
private placement (a “Securitization”), and may forward to each purchaser,
transferee, assignee or servicer of or participant or investor in such sale,
participation or Securitization, or a statistical rating agency that has
assigned a rating to securities sold in such Securitization all documents and
information Lender has with respect to the Loan, the applicable Property and the
financial condition of Borrower, any person or entity with an ownership interest
in Borrower, whether direct or indirect, and as Lender determines in sole
discretion to be necessary or desirable. Without limitation, Lender shall have
the right (i) to sell or otherwise transfer the Loan as a whole loan, (ii) to
sell participation interests in the Loan or (iii) to securitize the Loan in a
single asset securitization or a pooled loan securitization.

 

(B) If requested by Lender, Borrower shall assist Lender in satisfying any
good-faith requirements of any purchaser of the Loan or a participation interest
therein or otherwise satisfying any requirements of any securitization,
including to: provide updated financial and other information with respect to
the applicable Property, the business operated at the applicable Property,
Borrower, provide updated budgets relating to the applicable Property and
execute amendments to the Loan Documents and Borrower’s organizational documents
reasonably requested by Lender (including splitting the Note into several
notes).

 

Section 1.20 Governing Law. The Loan Documents are being executed and delivered,
and are intended to be performed, in the State of Texas and the laws of the
State of Texas and of the United States of America shall govern the rights and
duties of the parties hereto and the validity, construction, enforcement and
interpretation of the Loan Documents, except to the extent otherwise specified
in any of the Loan Documents.

 

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Section 1.21 Entire Agreement. This Agreement and the other Loan Documents
embody the entire agreement and understanding between Lender and Borrower and
supersede all prior agreements and understandings between such parties relating
to the subject matter hereof and thereof. Accordingly, the Loan Documents may
not be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties. If any conflict or inconsistency exists between the Commitment and this
Agreement or any of the other Loan Documents, the terms of this Agreement and
the other Loan Documents shall control.

 

Section 1.22 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, but all of which shall
constitute one document.

 

Section 1.23 Lender's Consent. Except as expressly stated otherwise, whenever
any provision of this Agreement or any Loan Document requires Lender's consent,
such consent may be withheld for any reason or no reason or given upon such
terms and conditions as Lender deems necessary or appropriate, all within
Lender's absolute and sole discretion.

 

Section 1.24 Limitation on Liability of Lender's Officers, Employees, etc. Any
obligation or liability whatsoever of Lender which may arise at any time under
this Agreement or any other Loan Document shall be satisfied, if at all, out of
the Lender's assets only. No such obligation or liability shall be personally
binding upon, nor shall resort for the enforcement thereof be had to, the
property of any of Lender's shareholders, directors, officers, employees or
agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.

 

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