Exhibit 10.5

 

Execution Version

 

CREDIT AND SECURITY AGREEMENT

 

by and among

 

SACHEM CAPITAL CORP.

 

as a Borrower

 

The Corporate Guarantors signatory hereto

 

and

 

WEBSTER BUSINESS CREDIT CORPORATION,

 

as a Lender and as Agent

 

and

 

BANKWELL BANK,

 

as a Lender and as Co-Syndication Agent

 

and

 

the other Lenders party hereto from time to time

 

Signing Date: As of May 11, 2018

 

   

 

 

TABLE OF CONTENTS

 

1. DEFINITIONS. 1   1.1 Accounting Terms 1   1.2 General Terms 1   1.3 Uniform
Commercial Code Terms 2         2. ADVANCES, PAYMENTS. 2   2.1 Revolving
Advances 2   2.2 Procedure for Borrowing 2   2.3 Disbursement of Advance
Proceeds 2   2.4 Maximum Revolving Advances 3   2.5 Repayment of Revolving
Advances 3   2.6 Repayment of Overadvances 3   2.7 Statement of Account 3   2.8
Additional Payments 4   2.9 Manner of Borrowing and Payment; Settlements 4  
2.10 Mandatory Prepayments 6   2.11 Use of Proceeds 6   2.12 Defaulting Lender 7
        3. INTEREST AND FEES. 8   3.1 Interest 8   3.2 Fee Letter 8   3.3 Unused
Line 8   3.4 [Reserved] 8   3.5 [Reserved] 8   3.6 Computation of Interest and
Fees 8   3.7 Maximum Charges 8   3.8 Increased Costs 9   3.9 Capital Adequacy 9
  3.10 Yield Maintenance 10   3.11 Delay in Requests 10         4. COLLATERAL;
GENERAL TERMS. 10   4.1 Security Interest in the Collateral 10   4.2 Perfection
of Security Interest 11   4.3 Disposition of Collateral; Release by Agent 12  
4.4 Preservation of Collateral 13   4.5 Ownership of Collateral 13   4.6 Defense
of Agent’s and Lenders’ Interests 14   4.7 Books and Records 14   4.8 Financial
and Other Disclosure 14   4.9 Compliance with Laws 15   4.10 Inspection of
Premises; Appraisals 15   4.11 Insurance 16

 

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  4.12 Payment of Taxes 17   4.13 Payment of Leasehold Obligations 17   4.14
Receivables 17   4.15 [Reserved] 21   4.16 [Reserved] 21   4.17 Exculpation of
Liability 21   4.18 Environmental Matters 21   4.19 No Other Financing
Statements 23   4.20 Intellectual Property 23   4.21 Mortgages on Mortgaged
Property 24   4.22 Mortgages on Real Property 24   4.23 Execution of
Supplemental Instruments 24   4.24 OFAC 24         5. REPRESENTATIONS AND
WARRANTIES. 24   5.1 Authority 24   5.2 Formation and Qualification 25   5.3 Tax
Returns 25   5.4 Financial Statements 25   5.5 Name 26   5.6 OSHA and
Environmental Compliance 26   5.7 Solvency 27   5.8 Litigation 27   5.9 No
Indebtedness 27   5.10 No Violations 27   5.11 Plans 28   5.12 Intellectual
Property 28   5.13 Licenses and Permits 28   5.14 No Default of Indebtedness 28
  5.15 No Other Defaults 29   5.16 No Burdensome Restrictions 29   5.17 No Labor
Disputes 29   5.18 Margin Regulations 29   5.19 Investment Company Act 29   5.20
Disclosure 29   5.21 No Conflicting Agreements or Orders 29   5.22 Application
of Certain Laws and Regulations 29   5.23 Business and Property of Loan Parties
30   5.24 Hedge Contracts 30   5.25 Real Property 30   5.26 Deposit Accounts 30
  5.27 Anti-Terrorism Laws 30   5.28 REIT Status 30         6. AFFIRMATIVE
COVENANTS. 30   6.1 Payment of Fees 30   6.2 Conduct of Business and Maintenance
of Existence and Assets 30

 

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  6.3 Compliance with Laws 31   6.4 Government Receivables 31   6.5 Taxes 31  
6.6 Execution of Supplemental Instruments 32   6.7 Payment of Indebtedness and
Leasehold Obligations 32   6.8 Standards of Financial Statements 32   6.9
Anti-Terrorism Laws 32   6.10 Post-Closing Matters 32   6.11 Servicing Agent 32
  6.12 [Reserved] 35   6.13 Servicing 35   6.14 Termination of Servicing Duties
36   6.15 Agent Communications 36   6.16 Periodic Due Diligence Review 36   6.17
REIT Status 37         7. NEGATIVE COVENANTS. 37   7.1 Merger, Consolidation and
Acquisitions 37   7.2 Sales of Assets 37   7.3 Creation of Liens 37   7.4
Guarantees 37   7.5 Investments 37   7.6 Loans 38   7.7 Dividends 38   7.8
Reserved 38   7.9 Indebtedness 38   7.10 Nature of Business 38   7.11
Transactions with Affiliates 38   7.12 Leases 39   7.13 Subsidiaries 39   7.14
Fiscal Year and Accounting Changes 39   7.15 Pledge of Credit 39   7.16
Amendment of Documents 39   7.17 Compliance with ERISA 39   7.18 Prepayment of
Indebtedness 40   7.19 Payment of Subordinated Debt 40   7.20 Deposit Accounts
40   7.21 [Reserved] 40   7.22 Limitations on Release of Mortgagor Customers 40
  7.23 Underwriting Guidelines 40   7.24 Long Term Mortgages 40         8.
FINANCIAL COVENANTS. 41   8.1 Controlling Definitions 41   8.2 Tangible Net
Worth 42   8.3 Fixed Charge Coverage Ratio 42   8.4 Senior Funded Debt to
Tangible Net Worth Ratio 42

 

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9. CONDITIONS PRECEDENT. 42   9.1 Conditions to the Initial Revolving Advance 42
  9.2 Conditions to Each Revolving Advance 46         10. INFORMATION AS TO LOAN
PARTIES. 46   10.1 Disclosure of Material Matters 46   10.2 Schedules 47   10.3
Environmental Compliance Certificate 47   10.4 Litigation 47   10.5 Material
Occurrences 47   10.6 [Reserved] 48   10.7 Annual Financial Statements 48   10.8
Quarterly Financial Statements 48   10.9 [Reserved] 49   10.10 Borrowing Base
Certificate 49   10.11 Other Reports 49   10.12 Additional Information 49  
10.13 Projected Operating Budget 49   10.14 [Reserved] 49   10.15 Notice of
Suits, Adverse Events 49   10.16 ERISA Notices and Requests 50   10.17
Intellectual Property 50   10.18 Additional Documents 50   10.19 Mortgage File
Reports 50         11. EVENTS OF DEFAULT. 51   11.1 Obligations 51   11.2
Misrepresentations 51   11.3 Financial Information 51   11.4 Liens 51   11.5
Covenants 51   11.6 Judgments 51   11.7 Voluntary Bankruptcy 51   11.8
Insolvency 52   11.9 Involuntary Bankruptcy 52   11.10 Material Adverse Changes
52   11.11 Agent’s Liens 52   11.12 Subordinated Debt 52   11.13 Cross Default
52   11.14 Guaranty 52   11.15 Change of Control 52   11.16 Change of Management
52   11.17 Invalidity 53   11.18 Takings 53   11.19 Seizures 53   11.20 Plans 53
  11.21 Criminal Charges 53   11.22 REIT Status 53

 

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12. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT. 54   12.1 Rights and Remedies 54
  12.2 Allocation of Payments after Event of Default 54   12.3 Agent’s
Discretion 55   12.4 Setoff 55   12.5 Rights and Remedies not Exclusive 55      
  13. WAIVERS AND JUDICIAL PROCEEDINGS. 56   13.1 Waiver of Notice 56   13.2
Delay 56   13.3 Jury Waiver 56         14. EFFECTIVE DATE AND TERMINATION. 56  
14.1 Term; Early Termination Fee 56   14.2 Termination 57         15. MULTIPLE
LOAN PARTIES. 57   15.1 Borrowing Agency Provisions 57   15.2 Waiver of
Subrogation 58         16. REGARDING AGENT. 58   16.1 Appointment 58   16.2
Nature of Duties 59   16.3 Lack of Reliance on Agent 59   16.4 Resignation of
Agent; Successor Agent 60   16.5 Certain Rights of Agent 60   16.6 Reliance 60  
16.7 Notice of Default 61   16.8 Indemnification 61   16.9 Agent in its
Individual Capacity 61   16.10 Delivery of Documents 61   16.11 Loan Parties
Undertaking to Agent 62   16.12 No Reliance on Agent’s Customer Identification
Program 62   16.13 Other Agreements 62   16.14 Other Agents 62         17.
MISCELLANEOUS. 63   17.1 GOVERNING LAW 63   17.2 Entire Understanding 63   17.3
Successors and Assigns; Participations; New Lender 67   17.4 Application of
Payments 69   17.5 Indemnity 69   17.6 Notice 70   17.7 Survival 71   17.8
Severability 71

 

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  17.9 Expenses 71   17.10 Rights to Cure 71   17.11 Injunctive Relief 72  
17.12 Consequential Damages 72   17.13 Third Party Beneficiaries 72   17.14
Captions 72   17.15 Counterparts; Telecopied Signatures; Seal 72   17.16
Construction 72   17.17 Confidentiality 72   17.18 Publicity 73   17.19 Survival
of Representations and Warranties 73   17.20 Certain Matters of Construction 73
  17.21 Destruction of Invoices 74   17.22 Time 74   17.23 Patriot Act 74  
17.24 No Tax Advice 74   17.25 Completion of Blanks 74   17.26 Exculpation of
Lenders 74   17.27 Electronic Transmissions 75         18. GUARANTY. 75   18.1
Guaranty 75   18.2 Waivers 75   18.3 No Defense 75   18.4 Guaranty of Payment 76
  18.5 Liabilities Absolute 76   18.6 Waiver of Notice 77   18.7 Agent’s
Discretion 77   18.8 Reinstatement 77

 

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List of Annexes, Exhibits and Schedules

 

Annexes       Annex One Definitions Annex Two Representations and Warranties re:
Mortgage Loans     Exhibits       Exhibit 2.1 Revolving Credit Note Exhibit 2.2
Notice of Borrowing Exhibit 9.1(c) Secretary’s Certificate Exhibit 9.1(p) Pledge
Agreement Exhibit 9.1(r) Closing Certificate Exhibit 10.8 Compliance Certificate
Exhibit 10.10 Borrowing Base Certificate Exhibit 17.3 Commitment Transfer
Supplement     Exhibit A Form of Escrow Agreement Exhibit B Underwriting
Guidelines Exhibit C Form of Servicer Notice Exhibit D Form of Term Sheet
Exhibit E Form of Customer Guaranty

 

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Schedules       Schedule 1.1 Revolving Commitments and Revolving Commitment
Percentages Schedule 4.5 Locations Schedule 4.14(c) Location of Executive
Offices Schedule 5.2 Organizational Data and Numbers; Qualifications Schedule
5.3 Federal Tax Identification Numbers Schedule 5.5 Name Schedule 5.8 Litigation
Schedule 5.9 Indebtedness Schedule 5.10 Violations Schedule 5.11 Plans Schedule
5.12 Intellectual Property Schedule 5.25 Real Property Schedule 5.26 Deposit
Accounts Schedule 6.10 Post-Closing Matters Schedule 7.11 Transactions with
Affiliates

 

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CREDIT AND SECURITY AGREEMENT

 

PREAMBLE. This Credit and Security Agreement (herein, together with all
schedules and exhibits hereto, and as it may be amended or modified from time to
time, called this “Agreement”), dated as May 11, 2018 (the “Signing Date”), is
made by and among (i) SACHEM CAPITAL CORP., a New York corporation (“Sachem”;
and together with each Person joined hereto as a Borrower from time to time,
collectively the “Borrowers”, and each, a “Borrower”); (ii) the Corporate
Guarantors signatory hereto (collectively with Borrowers, each, a “Loan Party”
and collectively, the “Loan Parties”); (iii) the financial institutions who are
now or hereafter become parties hereto as lenders (collectively, the “Lenders”
and each individually, a “Lender”); (iv) WEBSTER BUSINESS CREDIT CORPORATION, a
New York corporation (“WBCC”), individually, as a Lender hereunder and as agent
for itself and each other Lender Party (as hereinafter defined) (WBCC, acting in
such agency capacity, the “Agent”); and (v) BANKWELL BANK, a Connecticut state
non-member bank, individually, as a Lender hereunder and as co-syndication agent
(“Co-Syndication Agent”).

 

STATEMENT OF THE TRANSACTION. Capitalized terms used in this statement of the
transaction shall have the meanings ascribed to such terms in Annex One.
Borrowers have applied to WBCC for financing to retire the Existing Loans, to
pay closing costs associated herewith, and to supplement its working capital
needs on an ongoing basis. WBCC, as a Lender hereunder and as Agent for itself
and each other Lender Party, and each other Person from time to time party
hereto as a Lender, has agreed to provide this financing, subject, however, to
the terms, covenants and conditions hereinafter set forth.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Loan Parties, Lenders and Agent, each intending to be legally bound
hereby, hereby covenant and agree as follows:

 

1.DEFINITIONS.

 

1.1           Accounting Terms. As used in this Agreement, any Note, or any
certificate, report or Other Document, accounting terms not defined in Annex
One, Annex Two or elsewhere in this Agreement and accounting terms partly
defined in Annex One or Annex Two (to the extent not defined) shall have the
respective meanings given to them under GAAP; provided, however, whenever such
accounting terms are used for the purposes of determining compliance with
financial covenants in this Agreement, such accounting terms shall be defined in
accordance with GAAP as applied in preparation of the Historical Financial
Statements. Certain other definitions which are used in the calculation of the
Financial Covenants are set forth in Section 8.1.

 

1.2           General Terms. Certain other terms which are capitalized
hereinbelow, but not expressly defined hereinbelow, shall have the meanings
given to such terms in Annex One and in Annex Two, Part II.

 

   

 

 

1.3           Uniform Commercial Code Terms. All terms used herein and defined
in the Uniform Commercial Code shall have the meanings given them therein unless
otherwise defined herein. Without limitation of the foregoing, the terms
“accounts,” “chattel paper,” “instruments,” “general intangibles,” “payment
intangibles,” “commercial tort claims,” “securities,” “investment property,”
“documents,” “supporting obligations,” “deposit accounts,” “payment
intangibles,” “software,” “security entitlements,” “letter of credit rights,”
“inventory,” “equipment” and “fixtures,” as and when used in the description of
Collateral, shall have the meanings given to such terms in Articles 8 or 9 (as
applicable) of the Uniform Commercial Code.

 

2.ADVANCES, PAYMENTS.

 

2.1           Revolving Advances. Subject to the terms and conditions set forth
in this Agreement, each Lender, severally and not jointly, will make Revolving
Advances available to Borrowers in aggregate amounts outstanding at any time
equal to such Lender’s Revolving Commitment Percentage of the lesser of (i) the
Maximum Revolving Amount, or (ii) the Borrowing Base, provided that in no event
shall the obligation of any Lender to make Revolving Advances exceed such
Lender’s Revolving Commitment. The Revolving Advances shall be evidenced by one
or more secured promissory notes issued to each Lender in a principal amount
equal to such Lender’s Revolving Commitment (the “Revolving Credit Notes”),
substantially in the form attached hereto as Exhibit 2.1.

 

2.2           Procedure for Borrowing. To request a Revolving Advance hereunder,
Borrower Representative on behalf of each Borrower shall notify Agent of such
request pursuant to a Notice of Borrowing substantially in the form of Exhibit
2.2 (each a “Notice of Borrowing”) delivered not later than 11:00 a.m. one (1)
Business Day prior to the requested Funding Date. Each Notice of Borrowing shall
(1) specify the requested Funding Date (which shall be a Business Day), (2)
specify the principal amount of such Revolving Advance, (3) attach a Mortgage
Loan Schedule identifying the Eligible Mortgage Loans that the Borrowers propose
to pledge to the Agent and to be included in the Borrowing Base in connection
with such borrowing, and (4) be accompanied by all of the documents described
in, and otherwise be subject to the full satisfaction of the Funding
Requirements. A Revolving Advance can be requested in any amount. Should any
amount required to be paid as interest hereunder, or as fees or other charges
under this Agreement or any Other Document with any Lender Party, or with
respect to any other Obligation, become due, the same shall be deemed a request
for a Revolving Advance as of the date such payment is due, in the amount
required to pay in full such interest, fee, charge or Obligation under this
Agreement or any Other Document with any Lender Party, and such request shall be
irrevocable. Agent shall cause the proceeds of such Revolving Advance to be paid
to such Person.

 

2.3           Disbursement of Advance Proceeds. All Revolving Advances shall be
disbursed from whichever office or other place Agent may designate from time to
time and, together with any and all other Obligations of Borrowers to Agent or
Lenders, shall be charged to Borrowers Account on Agent’s books. During the
Term, Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowers or deemed to have been
requested by Borrowers under Section 2.2(a) hereof shall, with respect to
requested Revolving Advances to the extent Lenders make such Revolving Advances,
be made available to the applicable Borrower on the day so requested by way of
credit to such Borrower’s operating account at the Bank or such other bank as
Borrower Representative may designate following notification to Agent, in
immediately available federal funds or other immediately available funds or,
with respect to Revolving Advances deemed to have been requested by any
Borrower, be disbursed to Agent to be applied to the outstanding Obligations
giving rise to such deemed request.

 

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2.4           Maximum Revolving Advances. The aggregate balance of all Revolving
Advances outstanding at any time shall not exceed the lesser of (a) the Maximum
Revolving Amount or (b) the Borrowing Base.

 

2.5           Repayment of Revolving Advances.

 

 (a)          All Revolving Advances shall be due and payable in full on the
last day of the Term, subject to earlier prepayment, in whole or in part, as
provided in this Agreement or in any Other Document.

 

 (b)          All payments of principal, interest, fees and other amounts
payable hereunder, or under any of the Other Documents shall be made to Agent at
the Payment Office not later than 4:00 p.m. (New York time) on the due date
therefor in lawful money of the United States of America in federal funds or
other funds immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrowers’ Account or by making Revolving Advances as provided in
Section 2.2(a) hereof.

 

 (c)          Borrowers shall be obliged to pay principal, interest, fees and
all other amounts payable hereunder, or under any Other Documents as and when
due, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.

 

2.6           Repayment of Overadvances. The aggregate balance of Revolving
Advances outstanding at any time in excess of the maximum amount of Revolving
Advances permitted to be outstanding at any time hereunder (herein
“Overadvances”), shall be immediately due and payable without the necessity of
any demand, at the Payment Office, whether or not a Default or Event of Default
has occurred.

 

2.7           Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account (“Borrowers’ Account”) in the name of
Borrowers in which shall be recorded the date and amount of each Revolving
Advance made by Agent or Lenders and the date and amount of each payment in
respect thereof; provided, however, that the failure by Agent to record the date
and amount of any Revolving Advance shall not adversely affect Agent or any
Lender. Each month, Agent shall send to Borrower Representative a statement
showing the accounting for the Revolving Advances made, payments made or
credited in respect thereof, and other transactions between Agent, Lenders and
Borrowers, during such month. The monthly statements shall be deemed correct and
binding upon Borrowers in the absence of manifest error and shall constitute an
account stated between Agent, Lenders and Borrowers unless Agent receives a
written statement of Borrowers’ specific exceptions thereto within thirty (30)
days after such statement is received by Borrower Representative.

 

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2.8          Additional Payments. Any sums expended by Agent or any Lender due
to any Borrower’s failure to perform or comply with its obligations under this
Agreement or any Other Document, may be charged to Borrowers’ Account as a
Revolving Advance and added to the Obligations.

 

2.9          Manner of Borrowing and Payment; Settlements.

 

(a)          Each borrowing of Revolving Advances requested and made shall be
advanced according to the Revolving Commitment Percentages of Lenders having
Revolving Commitments in regard thereto (subject to any contrary provisions of
Section 2.12). Each payment (including each prepayment) by Borrowers to Agent on
account of the principal of the Revolving Advances shall be applied by Agent to
the Revolving Advances pro rata according to the Revolving Commitment
Percentages of Lenders having Revolving Commitments in regard thereto (subject
to any contrary provisions of Section 2.12).  Except as otherwise may be
expressly provided herein, all payments (including prepayments) to be made by
Borrowers on account of principal, interest and fees shall be made to Agent on
behalf of the Lenders at the Payment Office, in each case on or prior to 4:00
p.m., in Dollars and in immediately available funds.

 

(b)          Promptly after receipt by Agent of a request or deemed request for
a Revolving Advance pursuant to Section 2.2, Agent shall notify Lenders holding
Revolving Commitments of its receipt of such requests specifying the information
provided by Borrower Representative and the apportionment among Lenders of the
requested Revolving Advance as determined by Agent in accordance with the terms
hereof. Each Lender shall remit the principal amount of each Revolving Advance
to Agent such that Agent is able to, and Agent shall, to the extent the
applicable Lenders have made funds available to it for such purpose and, subject
to Section 9.2, fund such Revolving Advance to Borrowers in U.S. Dollars and in
immediately available funds at the Payment Office prior to the close of
business, on the applicable Funding Date; provided that if any applicable Lender
fails to remit such funds to Agent in a timely manner, Agent may elect in its
sole discretion to fund with its own funds the Revolving Advance of such Lender
on such Funding Date, and such Lender shall be subject to the repayment
obligation in Section 2.9(c).

 

(c)          If any Lender or Participant (for purposes of this section, a
“benefited Lender”) shall at any time receive any payment of all or part of its
Revolving Advances, or interest thereon, or receive any Collateral in respect
thereof (whether voluntarily or involuntarily or by set-off) in a greater
proportion than any such payment to and Collateral received by any other Lender
having the same Revolving Commitment Percentage, if any, in respect of such
other Lender’s Revolving Advances, or interest thereon, and such greater
proportionate payment or receipt of Collateral is not expressly permitted
hereunder, such benefited Lender shall purchase for cash from such other
Lender(s) a participation in such portion of each such other Lender’s Revolving
Advances, or shall provide such other Lender(s) with the benefits of any such
Collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such Collateral or
proceeds ratably with such other Lender(s); provided, however, that if all or
any portion of such excess payment or benefits is thereafter recovered from such
benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned by the Lender(s) receiving same to the extent of such
recovery, but without interest. Each benefited Lender so purchasing a portion of
another Lender’s Revolving Advances may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion.

 

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(d)          Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender having a Revolving Commitment that such Lender will not
make the amount which would constitute its applicable Revolving Commitment
Percentage of Revolving Advances available to Agent, Agent may (but shall not be
obligated to) assume that such Lender shall make such amount available to Agent
on the next Settlement Date and, in reliance upon such assumption, make
available to Borrowers a corresponding amount. Agent will promptly notify
Borrowers of its receipt of any such notice from a Lender. Notwithstanding
anything to the contrary contained in Section 2.3 and Section 2.9 of this
Agreement, each borrowing of Revolving Advances shall be advanced by Agent and
each payment by Borrowers on account of Revolving Advances shall be applied,
first, to those Revolving Advances (as the case may be) advanced by Agent, but
solely to the extent Agent has not already been reimbursed by the Lenders for
such Revolving Advance in accordance with the provisions of this Section 2.9. On
or before 1:00 P.M., on each Settlement Date commencing with the first
Settlement Date following the Closing Date, Agent and Lenders having Revolving
Commitments shall make certain payments as follows: with respect to Revolving
Advances (A) if the aggregate amount of new Revolving Advances, if any, made by
Agent during the preceding Week exceeds the aggregate amount of repayments
applied to outstanding Revolving Advances during such preceding Week, then each
such Lender shall provide Agent with funds in an amount equal to its applicable
Revolving Commitment Percentage of the difference between (1) such Revolving
Advances and (2) such repayments and (B) if the aggregate amount of repayments
applied to outstanding Revolving Advances during such Week exceeds the aggregate
amount of new Revolving Advances made during such Week, then Agent shall provide
each such Lender with funds in an amount equal to its applicable Revolving
Commitment Percentage of the difference between (1) such repayments and (2) such
Revolving Advances. Each such Lender shall be entitled to earn interest on
outstanding Revolving Advances which it has funded at the Revolving Interest
Rate from the Funding Date until the date such Revolving Advances or paid or
deemed paid by the Borrowers pursuant to Section 2.5(b). Agent shall submit to
each such Lender a certificate with respect to payments received and Revolving
Advances made during the Week immediately preceding such Settlement Date. Such
certificate of Agent shall be conclusive in the absence of manifest error. If
such amount is made available to Agent on a date after such next Settlement
Date, such Lender shall pay to Agent on demand an amount equal to the product of
(i) the daily average Federal Funds Rate (computed on the basis of a year of 360
days) during such period as quoted by Agent, times (ii) such amount, times and
(iii) the number of days from and including such Settlement Date to the date on
which such amount becomes immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing hereunder shall be
conclusive, in the absence of manifest error. If such amount is not in fact made
available to Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an amount, with
interest thereon at the Revolving Interest Rate, on demand from Borrowers;
provided, however, that Agent’s right to such recovery shall not prejudice or
otherwise adversely affect Borrowers’ rights (if any) against such Lender. As
used herein, (i) “Settlement Date” means the first Business Day of each calendar
week, and (ii) “Week” means a time period beginning with the opening of business
on a Wednesday and ending at the end of business on the following Tuesday; or,
in each case, such other date and time as Agent and such Lenders may agree from
time to time.

 

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2.10        Mandatory Prepayments.

 

(a)          Upon receipt of any payment of principal (including payment in full
of any Eligible Mortgage Loan) of any Eligible Mortgage Loan, such payment shall
promptly be remitted to Agent, for the ratable benefit of the Lenders, as a
payment of outstanding Revolving Advances.

 

(b)          Whenever any Loan Party or any Subsidiary of any Loan Party either
(i) issues any Equity Interests for cash, or (ii) incurs any Indebtedness not
otherwise expressly permitted in Section 7.9, or (iii) sells or otherwise
disposes of any Collateral, or (iv) suffers an insured loss in respect of any
Collateral, or (v) obtains any Extraordinary Receipts, then, except as otherwise
provided in Section 4.11 in respect of clause (iv) above, Loan Parties shall,
except as set forth in (a) above, repay the Revolving Advances in an amount
equal to the net proceeds derived therefrom; i.e., gross proceeds thereof less
any reasonable costs incurred by such Loan Party in connection with the receipt
of such proceeds, such prepayments to be made promptly but in no event more than
one (l) Business Day following receipt of such net proceeds, and until the date
of payment, such proceeds shall be held in trust for Agent and Lenders. The
foregoing shall not be deemed to be an implied consent to any such issuance,
incurrence sale or disposition otherwise prohibited by the terms and conditions
hereof. Such proceeds shall be applied to the Revolving Advances in such order
as Agent may determine (but subject to Section 12.2), without reduction,
however, in Borrower’s ability to reborrow Revolving Advances in accordance with
the terms hereof. Notwithstanding the foregoing, unless and until a Default or
Event of Default has occurred and is continuing, Loan Parties may sell or
otherwise dispose of Collateral not to exceed, in aggregate fair market value,
the Materiality Threshold in the aggregate, in any Fiscal Year and retain such
net proceeds solely to acquire replacement Collateral without making a mandatory
prepayment hereunder so long as (A) the fair market value of the acquired
Collateral is equal to or greater than the fair market value of the Collateral
which was sold, (B) the acquired Collateral is purchased by such Loan Party
within ninety (90) days before or after the date of the sale of the Collateral,
(C) the proceeds of such sale are remitted to Agent to be held by Agent for the
ratable benefit of the Lenders, as security for the payment of the Obligations
until the replacement Collateral is acquired, (D) the acquired Collateral shall
be deemed to be acceptable Collateral by Agent in its Permitted Discretion and
(E) the acquired Collateral shall be subject to Agent’s first priority security
interest created hereunder, subject only to Permitted Encumbrances. If any Loan
Party fails to meet any of the conditions set forth above, such Loan Party
hereby authorizes Agent to apply the proceeds held by Agent as a prepayment of
the Revolving Advances in the manner set forth above.

 

2.11         Use of Proceeds. Borrowers shall apply the proceeds of (i) any
Revolving Advances made on the Closing Date to pay closing costs and expenses
associated with this transaction and to refinance or repay in their entirety any
Existing Loans and (ii) Revolving Advances made on and after the Closing Date to
provide for their respective working capital needs and to fund loans by
Borrowers to its Mortgagor Customers for the purchase or refinance of Mortgaged
Property.

 

 6 

 

 

2.12        Defaulting Lender.

 

(a)          Notwithstanding anything to the contrary contained herein, in the
event any Lender is a Defaulting Lender, all rights and obligations hereunder of
such Defaulting Lender and of the other parties hereto shall be modified to the
extent of the express provisions of this Section 2.12 so long as such Lender is
a Defaulting Lender.

 

(b)          (i)          Except as otherwise expressly provided for in this
Section 2.12, Revolving Advances shall be made pro rata from Lenders holding
Revolving Commitments which are not Defaulting Lenders based on their respective
Revolving Commitment Percentages, and no Revolving Commitment Percentage of any
Lender or any pro rata share of any Revolving Advances required to be advanced
by any Lender shall be increased as a result of any Lender being a Defaulting
Lender. Amounts received in respect of principal of Revolving Advances shall be
applied to reduce such Revolving Advances of each Lender (other than any
Defaulting Lender) holding a Revolving Commitment in accordance with their
Revolving Commitment Percentages; provided, that, Agent shall not be obligated
to transfer to a Defaulting Lender any payments received by Agent for Defaulting
Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of
any payments hereunder (including any principal, interest or fees). Amounts
payable to a Defaulting Lender shall instead be paid to or retained by Agent.
Agent may hold and, in its discretion, re-lend to a Borrower the amount of such
payments received or retained by it for the account of such Defaulting Lender.

 

(ii)         Fees pursuant to Section 3.3 hereof shall cease to accrue in favor
of such Defaulting Lender.

 

(c)          A Defaulting Lender shall not be entitled to give instructions to
Agent or to approve, disapprove, consent to or vote on any matters relating to
this Agreement and the Other Documents, and all amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall not be deemed to be a Lender, to have any
outstanding Revolving Advances or a Revolving Commitment Percentage.

 

(d)          Other than as expressly set forth in this Section 2.12, the rights
and obligations of a Defaulting Lender (including the obligation to indemnify
Agent) and the other parties hereto shall remain unchanged. Nothing in this
Section 2.12 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.

 

(e)          In the event that Agent and Borrowers agree in writing that a
Defaulting Lender has adequately remedied all matters that caused such Lender to
be a Defaulting Lender, then Agent will so notify the parties hereto, and, if
such cured Defaulting Lender is a Lender holding a Revolving Commitment, then on
such date such Lender shall purchase at par such of the Revolving Advances of
the other Lenders as Agent shall determine may be necessary in order for such
Lender to hold such Revolving Advances in accordance with its Revolving
Commitment Percentage.

 

 7 

 

 

3.INTEREST AND FEES.

 

3.1           Interest. Interest on Revolving Advances shall be payable to Agent
for the account of Lenders in arrears on the first day of each month, commencing
on the first day of the calendar month immediately following the Closing Date.
Interest charges shall be computed on the actual principal amount of Revolving
Advances outstanding during the month (the “Monthly Advances”) at a rate per
annum equal to the Revolving Interest Rate. Whenever, subsequent to the date of
this Agreement, the Daily LIBOR Rate is increased or decreased, the Revolving
Interest Rate shall be similarly changed without notice or demand of any kind by
an amount equal to the amount of such change in the Daily LIBOR Rate during the
time such change or changes remain in effect. The Daily LIBOR Rate shall be
adjusted with respect to Daily LIBOR Rate Loans without notice or demand of any
kind on the effective date of any change in the Reserve Percentage as of such
effective date. Upon and after the occurrence of an Event of Default, and during
the continuation thereof, the Obligations shall bear interest at the otherwise
applicable Revolving Interest Rate plus an additional two (2%) percent per annum
(as applicable, the “Default Rate”).

 

3.2           Fee Letter. Borrower shall pay the amounts required to be paid in
the Fee Letter in the manner and at the times required therein.

 

3.3           Unused Line. If, for any calendar month (or portion thereof)
during the Term, the average daily unpaid balance of Revolving Advances
outstanding for each day of such monthly period does not equal the Maximum
Revolving Amount as in effect on the first day of such monthly period, then
Borrowers shall pay to Agent for the ratable benefit of Lenders a fully earned,
nonrefundable fee equal to three eighths of one percent (0.375%) per annum on
the amount by which the Maximum Revolving Amount exceeds such average daily
unpaid balance of outstanding Revolving Advances for such monthly period. Such
fee shall be due and payable monthly in arrears, commencing on the first day of
the first calendar month following the Signing Date, and continuing thereafter
on the first day of each succeeding calendar month through the end of the Term.

 

3.4           [Reserved].

 

3.5           [Reserved].

 

3.6           Computation of Interest and Fees. Interest and per annum fees
hereunder shall be computed on the basis of a year of 360 days and for the
actual number of days elapsed. If any payment to be made hereunder becomes due
and payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall be
payable at the applicable Revolving Interest Rate during such extension;
provided, however, that the foregoing extension shall not be considered when
determining Borrowers’ ongoing compliance with Financial Covenants that concern
or include scheduled principal payments within specified dates.

 

3.7           Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law. In the
event interest and other charges as computed hereunder would otherwise exceed
the highest rate permitted under law, such excess amount shall be first applied
to any unpaid principal balance owed by Borrowers, and if the then remaining
excess amount is greater than the previously unpaid principal balance, the
affected Lender or Lenders shall promptly refund such excess amount to Borrowers
and the provisions hereof shall be deemed amended to provide for such
permissible rate.

 

 8 

 

 

3.8           Increased Costs. If any applicable law, treaty or governmental
regulation or any Change in Law shall:

 

(a)          subject any Lender (which for purposes of this Section 3.8 shall
include Agent, such Lender, any other Lender Party and any corporation or bank
controlling such Lender) to any tax of any kind whatsoever with respect to its
entering into this Agreement or any Other Document, or making any financial
accommodations to Borrowers hereunder or thereunder, or change the basis of
taxation of payments to such Lender of principal, fees, interest or any other
amount payable hereunder or under any Other Documents (except in each case, any
tax or other Charges imposed on such Lender by any jurisdiction in which such
Lender does business and any tax imposed on such Lender as of the date hereof
(together, “Excluded Taxes”)); or

 

(b)          impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
any Lender, including (without limitation) pursuant to Regulation D of the Board
of Governors of the Federal Reserve System; or

 

(c)          impose on any Lender or the London interbank Eurodollar market any
other condition with respect to this Agreement or any Other Document;

 

and the result of any of the foregoing is to increase the cost to any Lender
making, converting to, continuing, renewing or maintaining its Revolving
Advances hereunder by an amount that such Lender deems to be material or to
reduce the amount of any payment (whether of principal, interest or otherwise)
in respect of any of the Revolving Advances by an amount that such Lender deems
to be material, then, in any such case; Loan Parties shall promptly pay such
Lender, upon its demand, such additional amount as will compensate such Lender
for such additional cost or such reduction, as the case may be, provided that
the foregoing shall not apply to increased costs which are reflected in the
Daily LIBOR Rate. The applicable Lender shall certify the amount of such
additional cost or reduced amount to Loan Parties, and such certification shall
be conclusive absent manifest error.

 

3.9           Capital Adequacy. In the event that any Lender shall have
determined that any applicable law, rule, regulation or guideline or any Change
in Law regarding capital adequacy or compliance by such Lender (for purposes of
this Section 3.9, the term “Lender” shall include Agent, such Lender, any other
Lender Party and any corporation or bank controlling such Person) and the office
or branch where any Lender (as so defined) makes or maintains any Revolving
Advances with any request or directive regarding capital adequacy (whether or
not having the force of law) has or would have the effect of reducing the rate
of return on such Lender’s capital as a consequence of its obligations hereunder
to a level below that which such Lender could have achieved but for such Change
in Law (taking into consideration such Lender’s policies with respect to capital
adequacy) by an amount deemed by such Lender to be material, then, from time to
time, Loan Parties shall pay upon demand to such Lender such additional amount
or amounts as will compensate such Lender for such reduction. In determining
such amount or amounts, such Lender may use any reasonable averaging or
attribution methods. The protection of this Section 3.9 shall be available to
each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition. A
certificate of each affected Lender setting forth such amount or amounts as
shall be necessary to compensate such Lender with respect to this Section 3.9
when delivered to Borrower Representative shall be conclusive absent manifest
error.

 

 9 

 

 

3.10         Yield Maintenance. In the event that any Lender (which, for
purposes of this Section 3.10 shall include Agent, any Lender, any other Lender
Party and any other corporation or bank controlling such Person) shall
determine, in in its Permitted Discretion, at any time or from time to time
hereafter, that the Daily LIBOR Rate component of the Revolving Interest Rate
charged on any Revolving Advance outstanding does not adequately and fairly
reflect the cost to such Lender of maintaining such Revolving Advance by an
amount that such Lender determines, in its Permitted Discretion, to be
reasonable in light of prevailing market conditions, then, such Lender shall
have the right to assess and collect an interest surcharge (the “Yield
Surcharge”) that Lender, in its Permitted Discretion, determines to be
sufficient in an amount to compensate such Lender for its loss of yield, by
giving notice to the Borrower Representative to such effect. Each Lender may use
reasonable attribution and averaging methods in determining the amount of the
Yield Surcharge. Such Yield Surcharge shall be billed and collected monthly by
Agent as additional interest on each such Revolving Advance as provided in
Section 3.1.

 

3.11         Delay in Requests. Each Lender shall use its reasonable commercial
efforts to notify the Borrower Representative if it believes, in its Permitted
Discretion, that it may require compensation from the Borrowers under Sections
3.8, 3.9 or 3.10; provided, however, that failure or delay on the part of any
Lender to demand compensation pursuant to such sections shall not constitute a
waiver of such Lender’s right to demand such compensation; and provided further
that the Borrowers shall not be obligated to pay any such amount which arose
more than one hundred eighty (180) days prior to the date of such demand or is
attributable to periods more than one hundred eighty (180) days prior to the
date of such demand except where the Change in Law or event giving rise to such
increased costs or reductions is retroactive, then each 180-day period referred
to above shall be extended to include the period of retroactive effect thereof.

 

4.COLLATERAL; GENERAL TERMS.

 

4.1           Security Interest in the Collateral. To secure the prompt payment
and performance to each Lender Party of all Obligations, each Loan Party hereby
assigns, pledges and grants to Agent, as agent for the ratable benefit of each
Lender Party, a continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising and wheresoever
located. Each Loan Party shall mark its books and records as may be necessary or
appropriate to evidence, protect and perfect Agent’s security interest in the
Collateral.

 

 10 

 

 

4.2          Perfection of Security Interest.

 

(a)          Loan Parties shall take all action that may be necessary or
desirable, or that Agent may reasonably request, so as at all times to maintain
the validity, perfection, enforceability and priority of Agent’s security
interest in the Collateral or to enable Agent to protect, exercise or enforce
its rights hereunder and in the Collateral, including, but not limited to,
(i) immediately discharging all Liens other than Permitted Encumbrances,
(ii) obtaining landlords’, warehouse operators’, bailees’ or mortgagees’ lien
waivers and related agreements, (iii) delivering to Agent, endorsed or
accompanied by such instruments of assignment as Agent may specify, including
without limitation compliance with all Funding Requirements, and stamping or
marking, in such manner as Agent may specify, any and all chattel paper,
instruments, letters of credit and advices thereof and documents evidencing or
forming a part of the Collateral, (iv) entering into warehousing, lockbox and
other custodial arrangements satisfactory to Agent, (v) executing (as
appropriate) and delivering authorizations for the recording of financing
statements, instruments of pledge, mortgages, notices and assignments, in each
case in form and substance satisfactory to Agent, relating to the creation,
validity, perfection, maintenance or continuation of Agent’s security interest
under the Uniform Commercial Code or other applicable law, including without
limitation compliance with all Funding Requirements; (vi) obtaining
acknowledgments, in form and substance satisfactory to Agent, from any bailee
having possession of any Collateral at any time, stating that the bailee holds
such Collateral on behalf of Agent, (vii) obtaining “control” of any investment
property, deposit account, letter-of-credit right or electronic chattel paper
(the term “control” as used in respect of the foregoing types of Collateral
having the meaning set forth in Articles 8 and 9 of the UCC), with any
agreements establishing such “control” to be in form and substance satisfactory
to Agent, (viii) if a Loan Party at any time has or acquires a commercial tort
claim, such Loan Party shall promptly notify Agent thereof, in writing, and
grant a specific Collateral Assignment of such claim to Agent as additional
Collateral and (ix) Loan Parties shall endorse and deliver to Agent any and all
promissory notes payable to any Loan Party, as and when executed by any
Mortgagor Customer (or, in lieu of such endorsement, an allonge executed by a
Loan Party with respect thereto in form and substance satisfactory to Agent)
together with not-recorded but recordable assignments of any and all mortgages
(other than Mortgages) securing such notes, which may be recorded by Agent on
the proper land records at any time in its discretion. Agent shall have the
right to record in the applicable land records any Assignment of Mortgage and
Collateral Assignment delivered in connection with an Eligible Mortgage Loan in
its discretion, regardless of the occurrence of an Event of Default.

 

(b)          Agent is hereby authorized to file financing statements in
accordance with the applicable provisions of the UCC, including, without
limitation financing statements that describe the Collateral covered thereby as
“all personal property”, “all assets” or words of similar effect, at any time or
from time to time hereafter, in any jurisdiction; and Loan Parties hereby
ratify, approve and affirm the filing of any such financing statements
heretofore filed by Agent in respect of any Loan Party (including any
predecessor-in-interest thereof). All charges, expenses and fees Agent may incur
in doing any of the foregoing, and any local taxes relating thereto, shall be
charged to Borrowers’ Account as a Revolving Advance and added to the
Obligations, or, at Agent’s option, shall be paid to the Agent immediately upon
demand.

 

 11 

 

 

(c)          No Loan Party has assigned, pledged, or otherwise conveyed or
encumbered any Mortgage Loan or other Collateral (other than the Real Property
securing the Bankwell Mortgage Loan) to any other Person, and immediately prior
to the pledge of such Mortgage Loan or any other Collateral (other than the Real
Property securing the Bankwell Mortgage Loan) to Agent, such Loan Party was the
sole owner of such Mortgage Loan or such other Collateral and had good and
marketable title thereto, free and clear of all Liens, in each case except for
Liens to be released simultaneously with the Liens granted in favor of the Agent
hereunder and any Permitted Encumbrances. No Mortgage Loan or other Collateral
pledged to the Agent hereunder was acquired (by purchase or otherwise) by any
Loan Party from an Affiliate of such Loan Party.

 

(d)          The provisions of this Agreement are effective to create in favor
of the Agent a valid security interest in all right, title and interest of each
Loan Party in, to and under the Collateral.

 

(e)          Upon receipt by the Agent of each Mortgage Note, endorsed in blank
by a duly authorized officer of a Loan Party, the Agent shall have a fully
perfected first priority security interest therein, in the Mortgage Loan
evidenced thereby and in the Loan Party’s interest in the related Mortgaged
Property.

 

(f)          Upon the filing of financing statements on Form UCC-1 naming the
Agent as “Secured Party” and the applicable Loan Party as “Debtor”, and
describing the Collateral, in the State of New York, the security interests
granted hereunder in the Collateral will constitute perfected first priority
security interests under the Uniform Commercial Code in all right, title and
interest of such Loan Party in, to and under such Collateral to the extent such
security interest can be perfected by such filing under the Uniform Commercial
Code.

 

4.3          Disposition of Collateral; Release by Agent.

 

(a)          Each Loan Party will safeguard and protect all Collateral for
Agent’s general account and make no disposition thereof whether by sale, lease
or otherwise except upon payment by any Mortgagor Customer of the entire
principal and all accrued and unpaid interest on any loan made by Loan Party to
any Mortgagor Customer. Subject to Section 7.22 hereof, at such time as any Loan
Party shall advise Agent that it is anticipating payment in full by or on behalf
of any of its Mortgagor Customers of any note payable to any Loan Party
(including, without limitation, any Eligible Mortgage Loan), Agent shall
promptly forward such note(s) endorsed back to such Loan Party, together with
the reassignment to such Loan Party of the related Mortgage File and any
collateral securing such note(s). In the event such note(s) is (are) not fully
paid by or on behalf of such Mortgagor Customer, within fifteen (15) Business
Days after receipt by such Loan Party of such note(s), such Loan Party shall
re-endorse to and return to Agent, such note(s), the assignments of mortgages
and the balance of the related Mortgage File. Upon (i) termination of this
Agreement and payment in full in cash of all the Obligations and (ii) written
request by Loan Parties to Agent, Agent agrees to execute and deliver to Loan
Parties, at Loan Parties’ sole expense, releases of Agent’s Collateral
Assignments or reassignments to the applicable Loan Party, as appropriate, of
the Mortgage Files that have been delivered to Agent, provided that Loan Parties
shall provide Agent with the requested forms of releases or reassignments.

 

 12 

 

  

(b)          If Borrower notifies Agent of its intention to enter into a
Permitted Commercial Loan Financing or to transfer Commercial Loans to a
Permitted Commercial Loan Subsidiary in anticipation of a Permitted Commercial
Loan Financing, then Agent shall promptly (i) forward the applicable Mortgage
Notes related to such Commercial Loans endorsed back to the applicable Borrower,
together with the reassignment to the applicable Borrower of the related
Mortgage File (together with all recordable instruments and documents to release
the Lender's lien and encumbrances on the Mortgage Loan) (collectively, the
“Commercial Loan Files”) and (ii) release its Lien upon the Commercial Loan
Files. In the event such Permitted Commercial Loan Financing is not consummated
within fifteen (15) Business Days after receipt by such Borrower of such
Commercial Loan Files, such Commercial Loan Files shall be re-endorsed to and
returned to Agent.

 

4.4           Preservation of Collateral. Following the occurrence of a Default
or Event of Default and the demand by Agent for payment of all Obligations due
and owing, in addition to the rights and remedies set forth in Section 4.2 and
Section 12.1 hereof, Agent: (a) may at any time take such steps as Agent deems
necessary to protect Agent’s interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security
protection measures as Agent may deem appropriate; (b) may employ and maintain
at any Loan Party’s premises a custodian who shall have full authority to do all
acts necessary to protect Agent’s interests in the Collateral; (c) may lease
warehouse facilities to which Agent may move all or part of the Collateral;
(d) may use any Loan Party’s owned or leased lifts, hoists, trucks and other
facilities or equipment for handling or removing the Collateral; and (e) shall
have, and is hereby granted, a right of ingress and egress to the places where
the Collateral is located, and may proceed over and through any Loan Party’s
owned or leased property to obtain such Collateral. Each Loan Party shall
cooperate fully with all of Agent’s efforts to preserve the Collateral and will
take such actions to preserve the Collateral as Agent may direct. All of Agent’s
expenses of preserving the Collateral, including any expenses relating to the
bonding of a custodian, shall be charged to Loan Parties’ Account as a Revolving
Advance and added to the Obligations.

 

4.5           Ownership of Collateral. With respect to the Collateral, at the
time the Collateral becomes subject to Agent’s security interest: (a) each Loan
Party shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first priority security interest in each and
every item of its respective Collateral to Agent; and, except for Permitted
Encumbrances the Collateral shall be free and clear of all Liens and
encumbrances whatsoever; (b) each document and agreement executed by each Loan
Party or delivered to Agent in connection with this Agreement shall be true and
correct in all material respects; (c) all signatures and endorsements of each
Loan Party that appear on such documents and agreements shall be genuine and
each Loan Party shall have full capacity to execute same; and (d) each Loan
Party’s equipment and inventory shall be located as set forth on Schedule 4.5 or
at such other locations within the United States of America as Agent may receive
notice of, and approve, from time to time pursuant to Section 10.12 (all such
locations herein called, collectively, the “Collateral Locations” and,
individually, a “Collateral Location”); and shall not be removed from such
Collateral Locations without the prior written consent of Agent, which consent
shall not be unreasonably withheld, except for equipment that is moved from one
such Collateral Location of a Loan Party to another such Collateral Location of
another Loan Party.

 

 13 

 

 

4.6           Defense of Agent’s and Lenders’ Interests. Unless and until (a)
payment and performance in full of all of the Obligations and (b) termination of
this Agreement, Agent’s security interests in the Collateral shall continue in
full force and effect. During such period no Loan Party shall, without Agent’s
prior written consent, pledge, sell, assign, transfer, create or suffer to exist
a Lien upon or encumber or allow or suffer to be encumbered in any way except
for Permitted Encumbrances, any part of the Collateral. Each Loan Party shall
defend Agent’s security interest in the Collateral against any and all Persons
whatsoever. At any time following a Default or Event of Default, Agent shall
have the right to take possession of the indicia of the Collateral and the
Collateral in whatever physical form contained, including without limitation:
labels, stationery, documents, instruments and advertising materials. If Agent
exercises this right to take possession of the Collateral, Loan Parties shall,
upon demand, assemble it in the best manner possible and make it available to
Agent at a place reasonably convenient to Agent. In addition, with respect to
all Collateral, Agent and the Lender Parties shall be entitled to all of the
rights and remedies set forth herein and further provided by the Uniform
Commercial Code or other applicable law. During any period that an Event of
Default exists, each Loan Party shall, and Agent may, at its option, instruct
all suppliers, carriers, forwarders, warehouses or others receiving or holding
cash, checks, Inventory, documents or instruments in which Agent holds a
security interest to deliver same to Agent and/or subject to Agent’s order and
if they shall come into Loan Party’s possession, they, and each of them, shall
be held by such Loan Party in trust as Agent’s trustee, and Loan Party will
immediately deliver them to Agent in their original form together with any
necessary endorsement.

 

4.7           Books and Records. Each Loan Party shall (a) keep proper books of
record and account in which full, true and correct entries will be made of all
dealings or transactions of or in relation to its business and affairs; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including without limitation by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties), which
should be set aside from such earnings in connection with its business. All
determinations pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of the Accountants.

 

4.8           Financial and Other Disclosure. Each Loan Party hereby irrevocably
authorizes and directs all accountants and auditors employed by such Loan Party
at any time during the Term to exhibit and deliver to Agent copies of any of the
Loan Parties’ financial statements, trial balances or other accounting records
of any sort in the accountant’s or auditor’s possession, and to disclose to
Agent any information such accountants may have concerning such Loan Party’s
financial status and business operations. In respect of the foregoing, Borrower
Representative shall execute and deliver to its accountants and auditors
employed on the Signing Date and, if such accountants and auditors are changed
by Loan Parties subsequent to the Signing Date, a letter directly authorizing
them to act in the manner so provided hereinabove when requested by Agent. Each
Loan Party hereby authorizes all federal, state and municipal authorities to
furnish to Agent copies of reports or examinations relating to such Loan Party,
whether made by such Loan Party or otherwise; however, Agent will attempt to
obtain such information or materials directly from such Loan Party prior to
obtaining such information or materials from such accountants or such
authorities.

 

 14 

 

 

4.9          Compliance with Laws. Each Loan Party shall comply in all material
respects with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to its respective
Collateral or any part thereof or to the operation of such Loan Party’s business
the non-compliance with which could reasonably be expected to have a Material
Adverse Effect on such Loan Party. Each Loan Party may, however, contest or
dispute any acts, rules, regulations, orders and directions of those bodies or
officials in any reasonable manner, provided that any related Lien is inchoate
or stayed and sufficient reserves are established to the reasonable satisfaction
of Agent to protect Agent’s Lien on or security interest in the Collateral.

 

4.10        Inspection of Premises; Appraisals.

 

(a)          At all reasonable times, Agent shall have full access to and the
right to audit, check, inspect and make abstracts and copies from each Loan
Party’s books, records, audits, correspondence and all other papers relating to
the Collateral and the operation of each Loan Party’s business from time to time
in Agent’s sole credit judgment. Agent may also enter upon any of Loan Party’s
premises on reasonable notice at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Loan Party’s business which, initially is intended by Agent to occur at least
quarterly (if not more frequently); provided, however, so long as no Default or
Event of Default shall have occurred and be continuing, Agent shall charge Loan
Parties for no more than two (2) inspections per calendar year.

 

(b)          At any time that Agent requests, each Loan Party will at its sole
expense, provide the Agent with desktop as complete appraisals or updates
thereof of the Mortgaged Property from an appraiser selected and engaged by
Agent, and prepared on a basis satisfactory to Agent, such desktop as complete
appraisals and updates to include, without limitation, information required by
applicable law and regulations; provided, however, if no Default or Event of
Default shall have occurred and be continuing, only one (1) such appraisal or
update per calendar year shall be conducted and shall be prepared on a
“drive-by” basis with respect to a representative sampling of all Mortgaged
Property satisfactory to Agent; provided, further, that Agent may require
desktop as complete appraisals or updates more frequently at its own expense. In
the event the value of the Mortgaged Property so determined pursuant to such
appraisal is less than required, such that the Revolving Advances are in excess
of such Revolving Advances permitted hereunder, then promptly upon Agent’s
demand for same, Loan Parties shall make mandatory prepayments of their
outstanding Revolving Advances as to eliminate the excess Revolving Advances.

 

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4.11         Insurance. Each Loan Party shall bear the full risk of any loss of
any nature whatsoever with respect to the Collateral. At each Loan Party’s own
cost and expense in amounts and with carriers acceptable to Agent, each Loan
Party shall (a) keep all its insurable properties and properties in which each
Loan Party has an interest, including without limitation all Real Property,
insured against the hazards of fire, flood (if any property is in a special
flood hazard area and flood insurance is available in such area), sprinkler
leakage, those hazards covered by extended coverage insurance and such other
hazards, and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Loan Party’s including, without limitation,
products liability insurance and business interruption insurance; (b) maintain a
bond or other surety in such amounts as is customary in the case of companies
engaged in businesses similar to such Loan Party insuring against larceny,
embezzlement or other criminal misappropriation of insured’s officers and
employees who may either singly or jointly with others at any time have access
to the assets or funds of such Loan Party either directly or through authority
to draw upon such funds or to direct generally the disposition of such assets;
(c) maintain public and product liability insurance against claims for personal
injury, death or property damage suffered by others; (d) maintain all such
worker’s compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which such Loan Party is engaged in business; (e)
furnish Agent with (i) copies of all policies and evidence of the maintenance of
such policies by the renewal thereof at least thirty (30) days before any
expiration date and as required, in connection with the Funding Requirements,
and (ii) appropriate loss payable endorsements in form and substance
satisfactory to Agent, naming Agent as a co-insured and loss payee as its
interests may appear with respect to all insurance coverage referred to in
clauses (a) and (c) above, to the extent affecting or relating to Collateral and
providing (A) that all proceeds thereunder shall be payable to Agent, (B) no
such insurance shall be affected by any act or neglect of the insured or owner
of the property described in such policy, and (C) that such policy and loss
payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days’ prior written notice is given to Agent. In the event of any
loss thereunder, the carriers named therein hereby are directed by Agent and the
applicable Loan Party to make payment for such loss to Agent and not to such
Loan Party and Agent jointly. If any insurance losses are paid by check, draft
or other instrument payable to any Loan Party and Agent jointly, Agent may
endorse such Loan Party’s name thereon and do such other things as Agent may
deem advisable to reduce the same to cash. Agent is hereby authorized to adjust
and compromise claims under insurance coverage referred to in clauses (a) and
(b) above. All loss recoveries received by Agent upon any such insurance shall
either be paid over to Loan Parties or applied by the Agent as follows: (i) if
no Event of Default or Default exists, and the loss recovery so received by
Agent is less than or equal to the Materiality Threshold, then Agent shall remit
such loss recovery to the Loan Parties; (ii) if no Event of Default or Default
exists, and the loss recovery received by Agent is more than the Materiality
Threshold, then, Agent shall apply such loss recovery to the Obligations in such
order as Agent in its sole discretion shall determine and (iii) if any Event of
Default exists, then Agent shall receive and apply such loss recovery to the
Obligations in such order as Agent, in its sole discretion, shall determine (but
subject to Section 12.2). Any surplus of such proceeds remaining after such
application shall be paid by Agent to Loan Parties or applied as may be
otherwise required by law. If, however, after application of such proceeds to
the Obligations, any “Overadvance” (as defined in Section 2.6) exists, then,
Loan Parties shall comply with said Section 2.6 in respect of its elimination.
Anything hereinabove to the contrary notwithstanding, Agent shall not be
obligated to remit any insurance proceeds to Loan Parties unless Loan Parties
shall have provided Agent with evidence reasonably satisfactory to Agent that
the insurance proceeds will be used by Loan Parties to repair, replace or
restore the insured property which was the subject of the insurable loss. The
Collateral at all times shall be maintained in accordance with the requirements
of all insurance carriers which provide insurance with respect to the Collateral
so that such insurance shall remain in full force and effect. If any Loan Party
fails to obtain insurance as hereinabove provided, or to keep the same in force,
Agent, if Agent so elects, may obtain such insurance and pay the premium
therefor for Loan Parties’ Account, and charge Borrowers’ Account therefor and
such expenses so paid shall be part of the Obligations. Without limitation of
the foregoing, if as of the Signing Date or at any time thereafter Agent
determines that all or a portion of the improvements situated on any Real
Property constituting Collateral are located within an area designated by the
Federal Emergency Management Agency or the Flood Disaster Protection Act of 1973
(P.L. 93-234) as being in a “special flood hazard area,” whether now or at any
time hereafter, Loan Parties shall also furnish Agent with flood insurance
policies which conform to the requirements of said Flood Disaster Protection Act
of 1973 and the National Flood Insurance Act of 1968, as either may be amended
from time to time. The amounts of such insurance coverages shall be in an amount
equal to the lesser of (a) the maximum permitted coverage or (b) the full
insurable value and shall be maintained thereafter at all times in an amount
such that Agent will not be deemed a co-insurer under applicable insurance laws,
regulations, policies or practices. Renewals of such policies shall be so
delivered at least thirty (30) days before any such insurance shall expire. If
Loan Parties shall fail to provide any such insurance, or shall fail to replace
any of the same within five (5) Business Days after being notified that the
insuring company is no longer approved by Agent, or if any such insurance is
cancelled or lapses without replacement, Agent may, at its option, procure the
same in such amounts as are required hereunder, and the actual cost thereof may,
at Agent’s option, be charged as a Revolving Advance to Borrowers’ Account
immediately upon incurrence or at any time thereof.

 

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4.12         Payment of Taxes. Each Loan Party will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon such Loan Party
or any of the Collateral including, without limitation, real and personal
property taxes, assessments and charges and all franchise, income, employment,
social security benefits, withholding, and sales taxes. If any tax by any
Governmental Body is or may be imposed on or as a result of any transaction
between any Loan Party and Agent which Agent may be required to withhold or pay
or if any taxes, assessments, or other Charges remain unpaid after the date
fixed for their payment, or if any claim shall be made which, in Agent’s
reasonable opinion, may possibly create a valid Lien on the Collateral, Agent
may, unless the Loan Parties have done so within five (5) Business Days after
the Borrower Representative receives written notice from the Agent that they do
so, pay the taxes, assessments or other Charges and each Loan Party hereby
indemnifies and holds Agent and each Agent harmless in respect thereof. Agent
will not pay any taxes, assessments or Charges to the extent that any Loan Party
has contested or disputed those taxes, assessments or Charges in good faith, by
expeditious protest, administrative or judicial appeal or similar proceeding
provided that any related tax lien is stayed and sufficient reserves are
established to the reasonable satisfaction of Agent to protect Agent’s security
interest in or Lien on the Collateral. The amount of any payment by Agent under
this Section shall be charged to Borrowers’ Account as a Revolving Advance and
added to the Obligations and, until Loan Parties shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due
provision for the payment thereof has been made), Agent may hold without
interest any balance standing to Loan Parties’ credit and Agent shall retain its
security interest in any and all Collateral held by Agent.

 

4.13         Payment of Leasehold Obligations. Each Loan Party shall at all
times pay, when and as due, its rental obligations under all leases under which
it is a tenant, and shall otherwise comply, in all material respects, with all
other terms of such leases and keep them in full force and effect and, at
Agent’s request, will provide evidence of having done so.

 

4.14         Receivables.

 

 (a)          Each of the Receivables shall be a bona fide and valid account
representing a bona fide indebtedness incurred by the Mortgagor Customer therein
named, for a fixed sum as set forth in the invoice relating thereto (provided
immaterial or unintentional invoice errors shall not be deemed to be a breach
hereof) with respect to a loan made by Loan Party to such Mortgagor Customer or
an absolute sale or lease and delivery of goods upon stated terms of a Loan
Party, or work, labor or services theretofore rendered by a Loan Party as of the
date each Receivable is created. Same shall be due and owing in accordance with
the applicable Loan Party’s standard terms of sale without dispute, setoff or
counterclaim except as may be stated on the accounts receivable schedules
delivered by Loan Parties to Agent.

 

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(b)          Each Mortgagor Customer, to the best of each Loan Party’s
knowledge, as of the date each Receivable is created, is and will be solvent and
able to pay all Receivables on which the Mortgagor Customer is obligated in full
when due or with respect to such Mortgagor Customers of any Loan Party who are
not solvent such Loan Party has set up on its books and in its financial records
bad debt reserves adequate to cover such Receivables.

 

(c)          Each Loan Party’s chief executive office is located at the address
set forth on Schedule 4.14(c) hereto. Until written notice is given to Agent by
Borrower Representative of any other office at which any Loan Party keeps its
records pertaining to Receivables, all such records shall be kept at such
executive office.

 

(d)          On the Closing Date, each Loan Party shall have established one or
more check scanners with Agent (“Scanners”) which shall be used for the sole and
exclusive purpose of concentrating the collection of all remittances on
Receivables and proceeds of other Collateral. All remittances confirmed by
Scanners, once established, shall be transferred on a daily basis to the
Concentration Account by wire transfer of immediately available funds in a
manner satisfactory to Agent.

 

(e)          In addition to the requirements set forth in subsection (d) above,
from and after the Closing Date: Loan Parties shall establish and maintain one
or more additional Deposit Accounts of Loan Parties as blocked accounts
(“Blocked Accounts” or a “Blocked Account”) pursuant to one or more agreements
(collectively, “Blocked Account Agreements” or a “Blocked Account Agreement”)
with Bank or any other financial institution as is acceptable to Agent
(collectively, “Blocked Account Banks” or a “Blocked Account Bank”) into which
Loan Parties and Mortgagor Customers shall remit all payments on Receivables and
other proceeds of Collateral. All amounts on deposit in a Blocked Account shall
be transferred on a daily basis to the Concentration Account by wire transfer of
immediately available funds in a manner satisfactory to Agent. Unless otherwise
agreed to by Agent, each Blocked Account Bank shall acknowledge and agree
pursuant to its respective Blocked Account Agreement that all payments and
deposits made to its Blocked Account are the sole and exclusive property of
Agent; for the benefit of itself and each other Lender Party; that such Blocked
Account Bank has no right to set off against its Blocked Account except as
expressly provided on its Blocked Account Agreement; that such Blocked Account
Bank will wire transfer immediately available funds in a manner satisfactory to
Agent all funds deposited in the Blocked Account to the Concentration Account
(or another account designed by Agent) on a daily basis as soon as such funds
are collected. Each Loan Party agrees that all payments, whether by cash, check,
wire transfer or other instruments of deposit in each Blocked Account shall be
the sole and exclusive property of Agent, for the benefit of itself and each
other Lender Party, and that Loan Parties shall not have any right, title or
interest therein or in any Blocked Account. None of the Bank, Agent or any
Lender Party assumes any responsibility for such Blocked Account or
Concentration Account (unless such Person shall also be the applicable Blocked
Account Bank or Concentration Bank and in such event only as set forth in the
applicable Blocked Account Agreement applicable thereto), including without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder. Loan Parties shall remit directly all
payments constituting proceeds of Collateral to an applicable Blocked Account in
the form received. All such payments, whether by cash, check, wire transfer or
other instrument, made to each Blocked Account, shall be the exclusive property
of the Agent, for the benefit of itself, the Bank, and each other Lender Party,
and the Loan Parties shall not have any right, title or interest therein. Loan
Parties shall not, without obtaining the prior consent of the Agent, establish
any accounts, other than the Blocked Accounts and the Concentration Account,
pursuant to which payments on account of Receivables are made to or on behalf of
any of the Loan Parties. Loan Parties shall not modify in any respect, without
the prior written consent of Agent, any Blocked Account Agreement or any other
arrangement relating to any Blocked Account.

 

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(f)          In addition to the requirements set forth in subsections (d) and
(e) above, Loan Parties shall cause all Deposit Accounts (other than any Deposit
Accounts constituting a Blocked Account) existing on the Closing Date or
subsequently (with Agent’s approval) coming into existence (each such Deposit
Account, other than a Blocked Account, herein, a “Pledged Account”) to be made
the subject of a tri-party agreement among such Loan Party, the bank having such
Pledged Account and Agent, to be in form and substance reasonably satisfactory
to Agent (a “Pledged Account Agreement”), pursuant to which the pledge of such
Pledged Account and all funds on deposit therein to Agent as security for the
payment and performance of all Obligations shall be established and confirmed.

 

(g)          All amounts deposited in the Concentration Account from time to
time shall be applied to the Obligations upon (i) final collection thereof and
(ii) their transfer from the Concentration Bank to the Agent in accordance with
this subsection, effective on the Business Day that each such payment is
received (such date being called herein the “Application Date”). For purposes of
the preceding sentence, the Agent shall be deemed to have received a payment
from the Concentration Bank on a particular Business Day only if it receives by
wire transfer the same prior to 4:00 p.m. (New York time) on such Business Day
or, if received after such time, on the next following Business Day. Agent is
not, however, required to credit Borrowers’ Account for the amount of any item
of payment which is unsatisfactory to Agent and Agent may charge Borrowers’
Account for the amount of any item of payment which is returned to Agent unpaid.
The Agent shall apply all amounts deposited in the Concentration Account as
provided in Section 16.4 or, as applicable, Section 12.2. If sufficient funds
are not available to fund all payments then to be made in respect of any
Obligations, the available funds being applied with respect to such Obligations
shall be allocated to the payment of such Obligations ratably, in such order and
manner as Agent shall elect, and Loan Parties shall continue to be liable for
any deficiency.

 

(h)          If at any time Agent determines that any funds held in the Blocked
Account, the Concentration Account or any Pledged Account are subject to the
Lien of any Person, other than the Agent as herein provided, (a)  Loan Parties
agree, forthwith upon demand by Agent, to pay to Agent as additional funds to be
deposited and held in the Concentration Account, an amount equal to the amount
of funds subject to such Lien, or (b) if no such payment is made, Agent shall
establish sufficient reserves in the amount of such funds.

 

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(i)          At any time following the occurrence of an Event of Default or a
Default, Agent shall have the right to send notice of the assignment of, and
Agent’s security interest in, the Receivables to any and all Mortgagor Customers
or any third party holding or otherwise concerned with any of the Collateral.
Thereafter, Agent shall have the sole right to collect the Receivables, take
possession of the Collateral, or both. Agent’s actual collection expenses,
including, but not limited to, stationery and postage, telephone and telecopy,
secretarial and clerical expenses and the salaries of any collection personnel
used for collection, may be charged to Borrowers’ Account and added to the
Obligations.

 

(j)          Agent shall have the right to receive, endorse, assign and/or
deliver in the name of Agent or any Loan Party any and all checks, drafts and
other instruments for the payment of money relating to the Receivables, and each
Loan Party hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. Each Loan Party hereby constitutes Agent or Agent’s
designee as such Loan Party’s attorney with power at any time hereafter (i) to
endorse such Loan Party’s name upon any notes, acceptances, checks, drafts,
money orders or other evidences of payment or Collateral; (ii) to sign such Loan
Party’s name on any invoice or bill of lading relating to any of the
Receivables, drafts against Mortgagor Customers, assignments and verifications
of Receivables; (iii) in Agent’s Permitted Discretion, to send verifications of
Receivables to any Mortgagor Customer; (iv) to sign such Loan Party’s name on
any documents or instruments deemed necessary or appropriate by Agent to
preserve, protect, or perfect Agent’s interest in the Collateral and to file
same; (v) to prepare, file and sign such Borrower’s name on a proof of claim in
bankruptcy or similar document against any Mortgagor Customer; and (vi) to do
all other acts and things necessary to carry out this Agreement. Following the
occurrence of a Default or an Event of Default, and during its continuation,
each Loan Party shall hereby constitute Agent or Agent’s designee as such Loan
Party’s attorney with additional power (i) to demand payment of the Receivables;
(ii) to enforce payment of the Receivables by legal proceedings or otherwise;
(iii) to exercise all of Loan Parties’ rights and remedies with respect to the
collection of the Receivables and any other Collateral; (iv) to settle, adjust,
compromise, extend or renew the Receivables; and (v) to settle, adjust or
compromise any legal proceedings brought to collect Receivables. All acts of
said attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission nor for any
error of judgment or mistake of fact or of law, unless done willfully or with
gross (not mere) negligence; this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid. Agent shall have the
right at any time following the occurrence of an Event of Default or Default, to
change the address for delivery of mail addressed to any Loan Party to such
address as Agent may designate and to receive, open and dispose of all mail
addressed to any Loan Party.

 

(k)          Agent shall not, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the Receivables or
any instrument received in payment thereof, or for any damage resulting
therefrom, except for any such errors or omissions or delays of any kind
determined by a court of competent jurisdiction in a final proceeding to have
resulted primarily from Agent’s gross (not mere) negligence or willful
misconduct. Following the occurrence of an Event of Default or Default, Agent
may, without notice or consent from any Loan Party, sue upon or otherwise
collect, extend the time of payment of, compromise or settle for cash, credit or
upon any terms any of the Receivables or any other securities, instruments or
insurance applicable thereto and/or release any obligor thereof. Agent is
authorized and empowered to accept following the occurrence of an Event of
Default or Default the return of the goods represented by any of the
Receivables, without notice to or consent by any Loan Party, all without
discharging or in any way affecting any Loan Party’s liability hereunder.

 

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(l)          No Loan Party will, without Agent’s consent, compromise or adjust
any material amount of the Receivables (or extend the time for payment thereof)
or accept any material returns of merchandise or grant any additional discounts,
allowances or credits thereon except for those compromises, adjustments,
returns, discounts, credits and allowances as have been heretofore customary in
the Ordinary Course of Business of such Loan Party.

 

4.15        [Reserved].

 

4.16        [Reserved].

 

4.17        Exculpation of Liability. Nothing herein contained shall be
construed to constitute Agent or any Lender Party as any Loan Party’s agent for
any purpose whatsoever, nor shall Agent or any Lender Party be responsible or
liable for any shortage, discrepancy, damage, loss or destruction of any part of
the Collateral wherever the same may be located and regardless of the cause
thereof, except to the extent such shortage, discrepancy, damage, loss or
destruction is determined to have resulted primarily from Agent’s or any Lender
Party’s gross negligence or willful misconduct. Neither Agent nor any Lender
Party shall, whether by anything herein or in any assignment or otherwise,
assume any Loan Party’s obligations under any contract or agreement assigned to
Agent or such Lender Party, and neither Agent nor any Lender Party shall be
responsible in any way for the performance by Loan Parties of any of the terms
and conditions thereof.

 

4.18        Environmental Matters.

 

(a)          Loan Parties shall ensure that the Real Property remains in
compliance with all Environmental Laws in all material respects and they shall
not place or permit to be placed any Hazardous Substances on any Real Property
except as not prohibited by applicable law or appropriate governmental
authorities.

 

(b)          Loan Parties shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.

 

(c)          Loan Parties shall (i) employ in connection with the use of the
Real Property appropriate technology necessary to maintain material compliance
with any applicable Environmental Laws and (ii) dispose of any and all Hazardous
Waste generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws,
except as could not reasonably be expected to have a Material Adverse Effect.
Loan Parties shall use their best efforts to obtain certificates of disposal,
such as hazardous waste manifest receipts, from all treatment, transport,
storage or disposal facilities or operators employed by Loan Parties in
connection with the transport or disposal of any Hazardous Waste generated at
the Real Property.

 

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(d)          In the event any Loan Party obtains, gives or receives notice of
any Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a “Hazardous Discharge”) or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Loan Party’s interest therein (any of the foregoing is referred to herein as an
“Environmental Complaint”) from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the “Authority”), then Borrower
Representative shall, within five (5) Business Days, give written notice of same
to Agent detailing facts and circumstances of which any Loan Party is aware
giving rise to the Hazardous Discharge or Environmental Complaint. Such
information is to be provided to allow Agent to protect its security interest in
the Real Property and is not intended to create nor shall it create any
obligation upon Agent with respect thereto.

 

(e)          Loan Parties shall promptly forward to Agent copies of any request
for information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Substances at any other site owned, operated or used by any Loan Party
to dispose of Hazardous Substances that could result in a Material Adverse
Effect and shall continue to forward copies of correspondence between any Loan
Party and the Authority regarding such claims to Agent until the claim is
settled. Loan Parties shall promptly forward to Agent copies of all documents
and reports concerning a Hazardous Discharge at the Real Property that any Loan
Party is required to file under any Environmental Laws. Such information is to
be provided solely to allow Agent to protect Agent’s security interest in the
Real Property and the Collateral.

 

(f)          Loan Parties shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or Real Property to
any Lien. If any Loan Party shall fail to respond promptly to any Hazardous
Discharge or Environmental Complaint or any Loan Party shall fail to comply with
any of the requirements of any Environmental Laws in any material respect,
within thirty (30) days after the Borrower Representative receives written
notice from the Agent that it do so, Agent may, but without the obligation to do
so, for the sole purpose of protecting Agent’s interest in Collateral: (A) give
such notices or (B) enter onto the Real Property (or authorize third parties to
enter onto the Real Property) and take such actions as Agent (or such third
parties as directed by Agent) deem reasonably necessary or advisable, to clean
up, remove, mitigate or otherwise deal with any such Hazardous Discharge or
Environmental Complaint. All reasonable costs and expenses incurred by Agent and
(or such third parties) in the exercise of any such rights, including any sums
paid in connection with any judicial or administrative investigation or
proceedings, fines and penalties, together with interest thereon from the date
expended at the Default Rate shall be paid upon demand by Loan Parties, and
until paid shall be added to and become a part of the Obligations secured by the
Liens created by the terms of this Agreement or any Other Document.

 

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(g)          Promptly upon the written request of Agent from time to time, which
may be made at any time following the discovery of any Hazardous Discharge or
the filing of any Environmental Complaint, Loan Parties shall provide Agent, at
Loan Parties’ expense, with an environmental site assessment or environmental
audit report prepared by an environmental engineering firm acceptable in the
reasonable opinion of Agent, to assess with a reasonable degree of certainty the
existence of a Hazardous Discharge and the potential costs in connection with
abatement, cleanup and removal of any Hazardous Substances found on, under, at
or within the Real Property. Any report or investigation of such Hazardous
Discharge proposed and acceptable to an appropriate Authority that is charged to
oversee the clean-up of such Hazardous Discharge shall be acceptable to Agent.
If such estimates, individually or in the aggregate, exceed the Materiality
Threshold, Agent shall have the right to require Loan Parties to post a bond,
letter of credit or other security reasonably satisfactory to Agent to secure
payment of these costs and expenses.

 

(h)          Loan Parties shall defend and indemnify each Lender Party and hold
each Lender Party, and its respective employees, agents, directors and officers
harmless from and against all loss, liability, damage and expense, claims,
costs, fines and penalties, including attorney’s fees, suffered or incurred by
such Lender Party under or on account of any Environmental Laws, including,
without limitation, the assertion of any Lien thereunder, with respect to any
Hazardous Discharge, the presence of any Hazardous Substances affecting the Real
Property, whether or not the same originates or emerges from the Real Property
or any contiguous real estate, including any loss of value of the Real Property
as a result of the foregoing except to the extent such loss, liability, damage
and expense is attributable to any Hazardous Discharge resulting from actions on
the part of a Lender Party. Loan Parties’ obligations under this Section shall
arise upon the discovery of the presence of any Hazardous Substances at the Real
Property, whether or not any federal, state, or local environmental agency has
taken or threatened any action in connection with the presence of any Hazardous
Substances. Loan Parties’ obligation and the indemnifications hereunder shall
survive the termination of this Agreement.

 

4.19         No Other Financing Statements. Except as respects the financing
statements filed by Agent and financing statements giving notice of otherwise
Permitted Encumbrances, no financing statement covering any of the Collateral or
any proceeds thereof is on file in any public office.

 

4.20         Intellectual Property. Loan Parties shall execute and deliver to
Agent for the benefit of all Lender Parties, immediately, either (i) on the
Closing Date with respect to any Intellectual Property, registered, or to be
registered, with the applicable Governmental Body as of the Closing Date, or
(ii) upon the creation or acquisition by Loan Party of Intellectual Property,
registered, or to be registered, with the applicable federal Governmental Body
subsequent to the Closing Date, security agreements with respect thereto, in
registrable form, each in form and substance satisfactory to Agent.

 

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4.21         Mortgages on Mortgaged Property. Loan Parties shall execute and
deliver to Agent for the benefit of all Lender Parties, either (i) within thirty
(30) days of the Closing Date (or such longer period of time as Agent may agree
in its sole discretion), with respect to all Mortgaged Property owned in fee
simple by any Mortgagor Customer of an Eligible Mortgage Loan on the Closing
Date, or (ii) immediately upon the acquisition in fee simple by any Mortgagor
Customer of an Eligible Mortgage Loan of any Mortgaged Property subsequent to
the Closing Date, an Assignment of Mortgage and Collateral Assignment with
respect to such Mortgaged Property, together with such title insurance policies
(mortgagee’s form), certified surveys, and desktop as complete appraisals with
respect thereto and such other agreements, documents and instruments which Agent
deems reasonably necessary or desirable, in form and substance satisfactory to
Agent, including without limitation all terms set forth in the Funding
Requirements.

 

4.22         Mortgages on Real Property. Within thirty (30) days of Agent’s
request, Loan Parties shall execute and deliver to Agent for the benefit of all
Lender Parties a Mortgage with respect to any Real Property owned in fee simple
by any Loan Party, whether owned on the Closing Date or hereafter acquired,
together with such title insurance policies (mortgagee’s form), certified
surveys, appraisals, local counsel opinions with respect thereto and such other
agreements, documents and instruments which Agent deems reasonably necessary or
desirable, in form and substance satisfactory to Agent. Notwithstanding the
foregoing, in no event shall any Loan Party be obligated to provide a Mortgage
to Agent on the 698 Main Street Property so long as the Bankwell Mortgage is in
effect.

 

4.23         Execution of Supplemental Instruments. Loan Parties shall execute
and deliver to Agent from time to time, promptly upon demand, such supplemental
agreements, statements, assignments and transfers, or instructions or documents
relating to the Collateral, and such other instruments as Agent may reasonably
request, in order that the full intent of this Agreement and the Other Documents
may be carried into effect.

 

4.24         OFAC. Agent may, at its option, reject, refuse to accept or return
any Collateral that Agent determines is, or may be, owed by, or due from, or
belongs to, a Sanctioned Person.

 

5.REPRESENTATIONS AND WARRANTIES.

 

Each Loan Party represents and warrants as follows:

 

5.1           Authority. Each Loan Party has full power, authority and legal
right to enter into this Agreement and the Other Documents and to perform all
its respective Obligations hereunder and thereunder. This Agreement is, and each
Other Document executed by a Loan Party constitutes, the legal, valid and
binding obligation of such Loan Party, enforceable against it in accordance with
its terms, except as such enforcement is subject to the effect of (i) any
applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors’ rights generally, and (ii) general principles of equity (regardless
of whether considered in a proceeding in equity or at law). The execution,
delivery and performance of this Agreement and of the Other Documents (a) are
within such Loan Party’s corporate (or other organizational) powers, have been
duly authorized, are not in contravention of law or the terms of such Loan
Party’s Organic Documents or to the conduct of such Loan Party’s business or of
any Material Agreement or undertaking to which such Loan Party is a party or by
which such Loan Party is bound, and (b) will not conflict with nor result in any
breach in any of the provisions of or constitute a default under or result in
the creation of any Lien (except Permitted Encumbrances) upon any asset of such
Loan Party under the provisions of any Organic Document or other instrument to
which such Loan Party or its property is a party or by which it may be bound.

 

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5.2          Formation and Qualification.

 

(a)          Each Loan Party is duly organized and in good standing under the
laws of the state or other jurisdiction listed on Schedule 5.2 and is not
required to be qualified to do business in any other jurisdiction. Each Loan
Party has delivered to Agent true and complete copies of its Organic Documents
and will promptly notify Agent of any amendment or changes thereto.

 

(b)          Each Loan Party’s identification number (if any) assigned to it by
the appropriate Governmental Body of the state of its organization, if any, is
set forth on Schedule 5.2.

 

(c)          The Subsidiaries (if any) of each Loan Party as of the Closing Date
are as set forth in Schedule 5.2.

 

(d)          The Equity Interests of each Loan Party which are authorized,
issued and outstanding on the Closing Date are set forth and described in
Schedule 5.2.

 

5.3          Tax Returns. Each Loan Party’s federal tax identification number is
set forth on Schedule 5.3. Each Loan Party has filed all federal, state and
local tax returns and other reports each is required by law to file and has paid
all taxes, assessments, fees and other governmental charges that are due and
payable, excepting therefrom, any such charges which are being contested by Loan
Parties in good faith in appropriate proceedings after the posting of adequate
reserves on the Loan Parties’ books to cover the costs thereof. The provision
for taxes on the books of each Loan Party are adequate for all years not closed
by applicable statutes, and for its current Fiscal Year, and no Loan Party has
any knowledge of any deficiency or additional assessment in connection therewith
not provided for on its books.

 

5.4          Financial Statements.

 

(a)          The historical audited financial statements of Loan Parties on a
consolidated basis for its most recently completed Fiscal Year, and the related
statements of income, changes in stockholder’s equity, and changes in cash flow
for the annual fiscal period ended on such date, all accompanied by reports
thereon containing opinions without qualification by the Accountants, and the
historical unaudited financial statements of Loan Parties on a consolidated
basis for that portion of their current Fiscal Year ended with their most
recently completed Fiscal Quarter and Fiscal Month for which financial
statements have been reported and the related statements of income, changes in
stockholder’s equity and changes in cash flow for the fiscal periods ended on
such date, (collectively, the “Historical Financial Statements”), copies of
which have been delivered to Agent, have been prepared in accordance with GAAP,
consistently applied (except for changes in application in which such
Accountants have concurred) and present fairly in all material respects the
financial position of the Loan Parties on a consolidated basis at such dates and
the results of its operations for such periods, subject to Section 6.8 hereof.
Since the last day of the Loan Parties’ most recently completed Fiscal Year,
there has been no material change in the condition, financial or otherwise, of
Loan Parties as shown on the balance sheet of each Borrowers on a consolidated
basis of such date and no change in the aggregate value of machinery, equipment
and Real Property owned by them, except changes in the Ordinary Course of
Business, none of which individually or in the aggregate has had a Material
Adverse Effect.

 

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(b)          The one year cash flow projections (presented on a monthly basis)
of the Loan Parties on a consolidated basis and their projected balance sheets
as of the Closing Date, furnished to Agent on the Closing Date (the
“Projections”), were prepared by the chief financial officer of Borrower
Representative, are based on underlying assumptions which provide a reasonable
basis for the projections contained therein and reflect Loan Parties’ collective
judgment based on present circumstances of the most likely set of conditions and
course of action for the projected period.

 

5.5          Name. Except as may be disclosed on Schedule 5.5 hereto, no Loan
Party has been known by any other organization name in the five (5) years
preceding the Closing Date and does not sell inventory under any other name nor
has any Loan Party been the surviving organization of a merger or consolidation
or acquired all or substantially all of the assets of any Person during the five
(5) years preceding the Closing Date.

 

5.6          OSHA and Environmental Compliance.

 

(a)          Each Loan Party has duly complied with, and its facilities,
business, assets, property and leaseholds are in compliance in all material
respects with, the provisions of the Federal Occupational Safety and Health Act,
the Environmental Protection Act, RCRA and all other Environmental Laws; there
have been no outstanding citations, notices or orders of non-compliance issued
to any Loan Party or relating to its business, assets, property, or leaseholds
under any such laws, rules or regulations.

 

(b)          Each Loan Party has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws.

 

(c)          (i) There are no visible signs, in any material amounts of
releases, spills, discharges, leaks or disposal (collectively referred to as
“Releases”) of Hazardous Substances at, upon, under or within any Real Property
or any premises leased by any Loan Party which do not comply in all material
respects with all applicable Environmental Laws in respect thereof; (ii) there
are no underground storage tanks or polychlorinated biphenyls on the Real
Property or any premises leased by any Loan Party; (iii) neither the Real
Property nor any premises leased by any Loan Party has ever been used as a
treatment, storage or disposal facility of Hazardous Waste; and (iv) no
Hazardous Substances are present, in any material amounts on the Real Property
or any premises leased by any Loan Party, excepting such quantities as are
handled in accordance with all applicable manufacturer’s instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of any Loan Party or of its
tenants.

 

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5.7          Solvency.

 

(a)          The Projections are based on underlying assumptions which provide a
reasonable basis for the Projections and which reflect the Loan Parties’
judgment, based on present circumstances, of a reasonably likely set of
conditions and the Loan Parties’ reasonably likely course of action for the
period projected.

 

(b)          The Projections demonstrate that the Loan Parties on a consolidated
basis will have sufficient cash flow to enable Loan Parties to pay their debts
as they mature.

 

(c)          Immediately following the execution of this Agreement and the
consummation of the transactions contemplated hereby, (i) the assets of the Loan
Parties, on a consolidated basis, at a fair valuation and at their present fair
saleable value, will be in excess of the total amount of their liabilities
(including contingent and unmatured liabilities), (ii) the Loan Parties will be
able to pay their Indebtedness as it becomes due and (iii) the Loan Parties on a
consolidated basis will not have unreasonably small capital to carry on its
business.

 

(d)          All material undisputed Indebtedness owing to third parties by the
Loan Parties are current and not past due.

 

(e)          This Agreement is, and all Other Documents will be, executed and
delivered by the Loan Parties, as applicable, to Agent and Lenders in good faith
and in exchange for reasonably equivalent value and fair consideration.

 

5.8           Litigation. Except as may be disclosed in Schedule 5.8, no Loan
Party has to its knowledge, any pending or threatened litigation, arbitration,
actions or proceedings which, if determined adversely to it, would be reasonably
expected to have a Material Adverse Effect.

 

5.9           No Indebtedness. No Loan Party has any Indebtedness for borrowed
funds on the Closing Date other than (i) the Obligations, (ii) Indebtedness
disclosed on Schedule 5.9 and (iii) Indebtedness otherwise permitted under
Section 7.9 hereof.

 

5.10         No Violations. Except as may be disclosed on Schedule 5.10, no Loan
Party is in violation of any applicable statute, regulation or ordinance in any
respect which could reasonably be expected to have a Material Adverse Effect on
Loan Party, nor is any Loan Party in violation of any order of any court,
Governmental Body or arbitration board or tribunal in any respect which would
reasonably be expected to have a Material Adverse Effect.

 

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5.11         Plans. No Loan Party nor any member of the Controlled Group
maintains or contributes to any Plan (or has assumed any liability in respect of
any Plan) other than those (if any) listed on Schedule 5.11 hereto. Except as
set forth in Schedule 5.11, (i) no Plan has incurred any “accumulated funding
deficiency,” as defined in Section 302(a)(2) of ERISA and Section 412(a) of the
Code, whether or not waived, and each Loan Party and each member of the
Controlled Group has met all applicable minimum funding requirements under
Section 302 of ERISA in respect of each Plan, (ii) each Plan which is intended
to be a qualified plan under Section 401(a) of the Code as currently in effect
has been determined by the Internal Revenue Service to be qualified under
Section 401(a) of the Code and the trust related thereto is exempt from federal
income tax under Section 501(a) of the Code, (iii) no Loan Party nor any member
of the Controlled Group has incurred any liability to the PBGC other than for
the payment of premiums, and there are no premium payments which have become due
which are unpaid, (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC
to institute proceedings under Title IV of ERISA to terminate any Plan, (v) at
this time, the current value of the assets of each Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan and no Loan
Party nor any member of the Controlled Group knows of any facts or circumstances
which would materially change the value of such assets and accrued benefits and
other liabilities, (vi) no Loan Party or any member of the Controlled Group has
breached any of the responsibilities, obligations or duties imposed on it by
ERISA with respect to any Plan, (vii) no Loan Party nor any member of a
Controlled Group has incurred any liability for any excise tax arising under
Section 4972 or 4980B of the Code, and no fact exists which could give rise to
any such liability, (viii) no Loan Party nor any member of the Controlled Group
nor any fiduciary of, nor any trustee to, any Plan, has engaged in a “prohibited
transaction” described in Section 406 of the ERISA or Section 4975 of the Code
nor taken any action which would constitute or result in a Termination Event
with respect to any such Plan which is subject to ERISA, (ix) each Loan Party
and each member of the Controlled Group has made all contributions due and
payable with respect to each Plan, (x) there exists no event described in
Section 4043(b) of ERISA, for which the thirty (30) day notice period contained
in 29 CFR §2615.3 has not been waived, (xi) no Loan Party nor any member of the
Controlled Group has any fiduciary responsibility for investments with respect
to any plan existing for the benefit of persons other than employees or former
employees of any Loan Party and any member of the Controlled Group, and (xii) no
Loan Party nor any member of the Controlled Group has withdrawn, completely or
partially, from any Multiemployer Plan so as to incur liability under the
Multiemployer Pension Plan Amendments Act of 1980.

 

5.12         Intellectual Property. All Intellectual Property owned or utilized
by any Loan Party: (i) is set forth on Schedule 5.12; (ii) is valid and has been
duly registered or filed with all appropriate Governmental Bodies; and (iii)
constitutes all of the intellectual property rights which are necessary for the
operation of its business. There is no objection to, pending challenge to the
validity of, or proceeding by any Governmental Body to suspend, revoke,
terminate or adversely modify, any such Intellectual Property and no Loan Party
is aware of any grounds for any challenge or proceedings, except as set forth in
Schedule 5.12 hereto. All Intellectual Property owned or held by any Loan Party
consists of original material or property developed by such Loan Party or was
lawfully acquired by such Loan Party from the proper and lawful owner thereof.
Each of such items has been maintained so as to preserve the value thereof from
the date of creation or acquisition thereof.

 

5.13         Licenses and Permits. Each Loan Party (a) is in compliance with and
(b) has procured and is now in possession of, all material licenses or permits
required by any applicable federal, state, provincial or local law or regulation
for the operation of its business in each jurisdiction wherein it is now
conducting or proposes to conduct business and where the failure to procure such
licenses or permits would reasonably be expected to have a Material Adverse
Effect.

 

5.14         No Default of Indebtedness. No Loan Party is in default in the
payment of the principal of or interest on any Indebtedness in excess of the
Materiality Threshold in principal amount or under any instrument or agreement
under or subject to which any Indebtedness has been issued and no event has
occurred under the provisions of any such instrument or agreement which with or
without the lapse of time or the giving of notice, or both, constitutes or would
constitute an event of default thereunder.

 

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5.15         No Other Defaults. No Loan Party is in default in the payment or
performance of any of its contractual obligations in respect of any Material
Agreement.

 

5.16         No Burdensome Restrictions. No Loan Party is party to any contract
or agreement the performance of which would reasonably be expected to have a
Material Adverse Effect on such Loan Party. No Loan Party has agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property, whether now owned or hereafter acquired, to
be subject to a Lien which is not a Permitted Encumbrance.

 

5.17         No Labor Disputes. No Loan Party is involved in any labor dispute;
there are no strikes or walkouts or union organization of any Loan Party’s
employees threatened or in existence and no labor contract presently existing
(if any) is scheduled to expire during the Term.

 

5.18         Margin Regulations. No Loan Party is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Revolving Advance will be
used for “purchasing” or “carrying” “margin stock,” as those terms are defined
in Regulation U of such Board of Governors.

 

5.19         Investment Company Act. No Loan Party is an “investment company”
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.

 

5.20         Disclosure. No representation or warranty made by any Loan Party in
this Agreement, or in any financial statement, report, certificate or any Other
Document furnished in connection herewith, including without limitation the
Perfection Certificate, contains any untrue statement of a material fact or
omits to state any material fact necessary to make the statements herein or
therein not misleading. There is no fact known to Loan Parties which Loan
Parties have not disclosed to Agent in writing with respect to the transactions
contemplated by this Agreement which would reasonably be expected to have a
Material Adverse Effect.

 

5.21         No Conflicting Agreements or Orders. No provision of any Material
Agreement or judgment, decree or order binding on any Loan Party or affecting
the Collateral conflicts with, or requires any consent which has not already
been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.

 

5.22         Application of Certain Laws and Regulations. No Loan Party nor any
Affiliate of any Loan Party is subject to any law which regulates the incurrence
of any Indebtedness, including without limitation, statutes or regulations
relative to common or interstate carriers or to the sale of electricity, gas,
steam, water, telephone, telegraph or other public utility services.

 

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5.23         Business and Property of Loan Parties. Upon and after the Closing
Date, Loan Parties do not propose to engage in any business other than business
conducted by the Loan Parties on the Closing Date and activities necessary to
conduct the foregoing. On the Closing Date, each Loan Party will own all the
property and possess all of the rights and Consents necessary for the conduct of
the business of such Loan Party.

 

5.24         Hedge Contracts. No Loan Party is party to any Hedge Contract,
except a Permitted Hedge Contract.

 

5.25         Real Property. No Loan Party has any interest as owner or tenant in
any Real Property except as disclosed on Schedule 5.25.

 

5.26         Deposit Accounts. No Loan Party has any Deposit Accounts except as
listed on Schedule 5.26.

 

5.27         Anti-Terrorism Laws. No Covered Entity (a) is a Sanctioned Person
(b) has assets located in a Sanctioned County or in possession, custody or
control of a Sanctioned Person, (c) derives revenue from investments in or
transactions with Sanctioned Persons or Sanctioned Countries or (d) engages in
any dealings or transactions prohibited by any Anti-Terrorism Law.

 

5.28         REIT Status. Sachem qualifies as a REIT and is in compliance with
all requirements and conditions imposed under the Code to allow it to maintain
its status as a REIT.

 

6.AFFIRMATIVE COVENANTS.

 

Each Loan Party shall, until payment in full of the Obligations and termination
of this Agreement:

 

6.1           Payment of Fees. Pay to Agent on demand all reasonable usual and
customary fees and expenses which Agent incurs in connection with (a) the
forwarding of Revolving Advance proceeds and (b) the establishment and
maintenance of any Blocked Account, Pledged Account or Concentration Account.
Agent may, without making demand, charge Borrowers’ Account for all such fees
and expenses.

 

6.2           Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this
Agreement), including, without limitation, all licenses, patents, copyrights,
design rights, trade names, trade secrets and trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence, (c) comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such Loan Party; and
(d) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof where the failure to do
so could reasonably be expected to have a Material Adverse Effect.

 

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6.3           Compliance with Laws. (a) Comply at all times, in all material
respects, with all requirements of Law the violation of which, or failure to
comply with which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect, and (b) promptly notify Agent in
writing of any violation by any Loan Party of any Law which violation could
reasonably be expected to have a Material Adverse Effect.

 

6.4           Government Receivables. If requested by Agent to do so in respect
of any Receivable at any time after a Default or Event of Default exists,
regardless of amount, take all steps reasonably necessary to protect Agent’s
interest in the Collateral under the Federal Assignment of Claims Act or other
applicable state or local statutes or ordinances and deliver to Agent
appropriately endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Loan Party and the United
States, any state or any department, agency or instrumentality of any of them.

 

6.5           Taxes. (a) File, prior to delinquency, all federal income, payroll
and unemployment and other material tax returns which it is required to file;
(b) pay, or provide for the payment, when due, of all income and franchise
taxes, real and personal property taxes, payroll taxes, value added taxes,
employment, social security benefits, withholding, and sales taxes, assessments
and other Charges lawfully levied or assessed upon such Loan Party or any of the
Collateral by any Governmental Body; (c) make all required withholding and other
tax deposits, and establish adequate reserves in accordance with GAAP for the
payment of all such items; and (d) provide to Agent, upon its request,
satisfactory evidence of its timely compliance with the foregoing; provided,
however, so long as the Borrower Representative has notified Agent in writing,
no Loan Party need pay any such amount referred to in clause (b) above to the
extent such amounts are being Properly Contested. If any tax by any Governmental
Body is or may be imposed on or as a result of any transaction between any Loan
Party and any Lender and, as a result of such transaction, such Lender is
required to withhold or pay or if any taxes, assessments, or other Charges
remain unpaid after the date fixed for their payment, or if any claim shall be
made which, in such Lender’s opinion, may possibly create a valid Lien on the
Collateral, such Lender may, unless the applicable Loan Party has done so within
five (5) Business Days after the Borrower Representative receives written notice
from such Lender that they do so, pay the taxes, assessments or other Charges
and each Loan Party hereby indemnifies and holds Agent and such Lender harmless
in respect thereof. No Lender or Agent will pay any taxes, assessments or
Charges to the extent that any Loan Party has contested or disputed those taxes,
assessments or Charges in good faith, by expeditious protest, administrative or
judicial appeal or similar proceeding provided that any related tax lien is
stayed and sufficient reserves are established to the reasonable satisfaction of
Agent to protect Agent’s security interest in or Lien on the Collateral. The
amount of any payment by any Lender under this Section 6.5 shall be charged to
Loan Parties’ Account as a Revolving Advance and added to the Obligations and,
until Loan Parties shall furnish Agent and Lenders with an indemnity therefor
(or supply Agent with evidence satisfactory to them that due provision for the
payment thereof has been made), Agent may hold without interest any balance
standing to Loan Parties’ credit and Agent shall retain its security interest in
any and all Collateral held by Agent.

 

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6.6           Execution of Supplemental Instruments. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement and the Other Documents may be carried
into effect.

 

6.7           Payment of Indebtedness and Leasehold Obligations. Pay, discharge
or otherwise satisfy (i) at or before maturity (subject, where applicable, to
specified grace periods) all its Indebtedness, except when the failure to do so
could not reasonably be expected to have a Material Adverse Effect or when the
amount or validity thereof is currently being Properly Contested, subject at all
times to any applicable subordination arrangement in favor of Lenders and (ii)
when due its rental obligations under all leases under which it is a tenant, and
shall otherwise comply, in all material respects, with all other terms of such
leases and keep them in full force and effect.

 

6.8           Standards of Financial Statements. Cause all financial statements
referred to herein as to which GAAP is applicable to be complete and correct in
all material respects (subject, in the case of interim financial statements, to
normal year-end audit adjustments) and to be prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as the
case may be, and disclosed therein).

 

6.9           Anti-Terrorism Laws. Each Loan Party covenants and agrees that (i)
no Covered Entity will become a Sanctioned Person, (ii) no Covered Entity,
either in its own right or through any third party, will (A) have any of its
assets in a Sanctioned Country or in the possession, custody or control of a
Sanctioned Person in violation of any Anti-Terrorism Law; (B) do business in or
with, or derive any of its income from investments in or transactions with, any
Sanctioned Country or Sanctioned Person in violation of any Anti-Terrorism Law;
(C) engage in any dealings or transactions prohibited by any Anti-Terrorism Law
or (D) use the Revolving Advances to fund any operations in, finance any
investments or activities in, or, make any payments to, a Sanctioned Country or
Sanctioned Person in violation of any Anti-Terrorism Law, (iii) the funds used
to repay the Obligations will not be derived from any unlawful activity, (iv)
each Covered Entity shall comply with all Anti-Terrorism Laws and (v) the Loan
Parties shall promptly notify the Agent in writing upon the occurrence of a
Reportable Compliance Event.

 

6.10         Post-Closing Matters. The Loan Parties shall complete the actions
specified in Schedule 6.10 within the time periods specific therein, or such
longer period of time or Agent may agree to in writing in its sole discretion.

 

6.11         Servicing Agent. Borrowers shall, subject to the terms and
conditions herein set forth, act as servicing agent for Agent in connection with
the Eligible Mortgage Loans, including performance of the following services:

 

 (a)          collect on a monthly basis all principal and interest due from
each Mortgagor Customer under the Mortgage Notes and any other Mortgage Loan
Document;

 

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(b)          collect any other revenue due in connection with the Mortgage
Notes, and any other Mortgage Loan Document, and any other revenue due in
connection with matters relating to any Mortgaged Property, including, without
limitation, any rents, security deposits, additional rent, direct and indirect
operating costs, tenant improvement charges, and any amounts due in connection
with or as a result of any casualty or exercise of eminent domain;

 

(c)          except as otherwise provided herein, instruct all Mortgagor
Customers to remit all payments in respect of the Mortgage Notes to the Blocked
Account in accordance with Section 4.14(d);

 

(d)          cause each Mortgagor Customer to keep the Mortgaged Property owned
by such Mortgagor Customer insured in accordance with Annex Two, Part I;

 

(e)          cause each Mortgagor Customer to pay on or before the date when
due, any and all general and special city and county taxes of every kind and
nature, any and all real estate and ad valorem taxes, personal property taxes,
assessments, water rates, sewer rents, fines, impositions, levies, permits,
inspection and license fees, all special assessments for public improvements
(without permitting any improvement bond to be issued for special assessments)
and all other charges now or hereafter levied or imposed upon or assessed
against the Mortgaged Property owned by such Mortgagor Customer or any part
thereof by any municipality or other governmental authority or upon the
revenues, rents, issues, income and profits of such Mortgaged Property or
arising in respect of the occupancy, use or possession thereof or the use of
walks, chutes, areas and other space beyond the lot line of such Mortgaged
Property and on or abutting the public sidewalks and/or highways in front or
adjoining such Mortgaged Property or pursuant to any environmental protection
act for the use of any furnace, compactors, incinerators, parking areas or for
other matters covered by any such act, together with any penalties and interest
on any of the foregoing (hereinafter collectively referred to as “Taxes”), and
in the event of a default thereof, Agent may pay the same, which costs shall be
secured by the Liens granted pursuant to this Agreement with interest thereon as
herein provided. Borrowers will repay all such costs upon demand. Borrowers
agree to notify Agent and the appropriate taxing authorities immediately upon
the happening of any event which does or may affect the value of the Mortgaged
Property, or any portion thereof, the basis of the Mortgaged Property, or any
portion thereof, or the availability of any exemption to which Borrowers are or
may be entitled;

 

(f)          notify Agent of any default by any Mortgagor Customer under the
terms, covenants and conditions of any Mortgage Loan Collateral within five (5)
Business Days after the date any Borrower discovers such default;

 

(g)          notify the appropriate Mortgagor Customer of any default under the
terms of any Mortgage Loan Collateral in accordance with the terms of the
applicable Mortgage Loan Documents, and otherwise communicate with such
Mortgagor Customer on Agent’s behalf as and when required pursuant to the terms
of such Mortgage Loan Documents. At Agent’s option, after the discovery of any
default by a Mortgagor Customer, Borrowers shall refer the matter to Agent’s
attorneys, whereafter Borrowers shall cooperate with said attorneys in
connection therewith, including, without limitation, in connection with any
action to foreclose on such defaulted Mortgage Loan Collateral;

 

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(h)          notify Agent of (1) any abandonment by a Mortgagor Customer of such
Mortgaged Property or a closure of its business; (2) any Loan Party’s receipt of
a notice from a Mortgagor Customer alleging that Agent is in default in the
performance of its obligations under the Mortgage Loan Collateral or that any
other right, entitlement, protection or condition for the benefit of a Mortgagor
Customer is not being observed, performed or satisfied; (3) any Loan Party’s
receipt of any notice of a proposed or threatened exercise of the right of
eminent domain with respect to the Mortgaged Property or any portion thereof;
and (4) any casualty, damage or injury to the Mortgaged Property or a portion
thereof which could create a risk of a material, immediate diminution in the
revenue earned by or generated from the Mortgaged Property;

 

(i)          communicate with each Mortgagor Customer on all matters concerning
such Mortgagor Customer’s Mortgage Loan Collateral and promptly forward to Agent
upon its request copies of all notices, correspondence, bills, invoices,
documents and instruments by or between each Mortgagor Customer or any Borrower
or otherwise received by Borrower with respect to the Mortgage Loan Collateral
or the Mortgaged Property;

 

(j)          cooperate and assist in any legal proceedings by or against Agent
with regard to the Mortgage Loan Collateral or the Mortgaged Property and
involving third parties;

 

(k)          following an event of a default by any Mortgagor Customer which is
not timely cured within any applicable notice and cure period, promptly advise
Agent thereof, and take such action as may be necessary or appropriate with
respect to such default, including, without limitation, retaining counsel on
Agent’s behalf, but at Borrowers’ sole cost and expense, to foreclose the
defaulting Mortgage Loan Collateral. Agent shall not be responsible for
advancing the fees and disbursements of counsel in connection with any legal
proceedings commenced in connection with the Mortgage Loan Collateral, but shall
fully cooperate with and assist counsel in connection therewith;

 

(l)          maintain and keep in good order separate, accurate and complete
accounts and records (other than books of account maintained by Agent’s
accountants) for Agent, and maintain orderly files containing records of
interest and principal paid, insurance policies, leases and subleases,
correspondence, receipted bills and vouchers, and all other documents and papers
pertaining to the Mortgage Loan Collateral and the Mortgaged Property or the
operation thereof;

 

(m)          at Agent’s option, either audit and verify the accuracy of any
statements and information required to be submitted by any Mortgagor Customer
with respect to its Mortgage Loan Collateral or refer said matter to Agent’s
accountants and cooperate with said accountants in the conduct of any such
audit;

 

(n)          take service, if requested, for Agent of legal notices; advise
Agent’s attorneys as promptly as possible of such service; advise Agent of the
receipt of information concerning any claim of injury, damage or other liability
against Agent or any Agent and, to the extent available, other relevant
information concerning such claim; and provide copies of all relevant legal
papers to Agent’s attorneys. Borrowers will give notice of claims and forward
documents to Agent’s insurance carrier whenever appropriate, and furnish Agent
with copies of insurance claims made against or on behalf of Agent; and

 

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(o)          generally, do all things reasonably deemed necessary or desirable
for the proper servicing of Mortgage Loan Collateral.

 

6.12        [Reserved].

 

6.13        Servicing.

 

(a)          Each Loan Party covenants to maintain or cause the servicing of the
Mortgage Loans to be maintained in conformity with the Accepted Servicing
Practices. In the event that the preceding language is interpreted as
constituting one or more servicing contracts, each such servicing contract shall
terminate automatically upon the earliest of (i) an Event of Default, (ii) the
date on which all the Obligations have been paid in full or (iii) the transfer
of servicing approved by the Loan Parties.

 

(b)          If the Mortgage Loans are serviced by the Loan Parties, (i) the
Loan Parties agree that the Agent is the collateral assignee of all servicing
records, including but not limited to any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof
of insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records, and any other records relating to or
evidencing the servicing of Mortgage Loans (the “Servicing Records”), and (ii)
the Loan Parties grant the Agent a security interest in all servicing fees and
rights relating to the Mortgage Loans and all Servicing Records to secure the
obligation of the Loan Parties or their designee to service in conformity with
this Section and any other obligation of the Loan Parties to the Agent. The Loan
Parties covenant to safeguard such Servicing Records and to deliver them
promptly to the Agent or its designee at the Agent’s request.

 

(c)          If the Mortgage Loans are serviced by a third party servicer (such
third party servicer, the “Servicer”), the Loan Parties (i) shall provide a copy
of the servicing agreement to the Agent, which shall be in form and substance
acceptable to the Agent (the “Servicing Agreement”), and (ii) shall provide a
Servicer Notice to the Servicer substantially in the form of Exhibit C hereto (a
“Servicer Notice”) and shall cause the Servicer to acknowledge and agree to the
same. Any successor or assignee of a Servicer shall be approved in writing by
the Agent and shall acknowledge and agree to a Servicer Notice prior to such
successor’s assumption of servicing obligations with respect to the Mortgage
Loans.

 

(d)          If the servicer of the Mortgage Loans is a Loan Party or the
Servicer is an Affiliate of a Loan Party, such Loan Party shall provide to the
Agent a letter from such Loan Party or the Servicer, as the case may be, to the
effect that upon the occurrence of an Event of Default, the Agent may terminate
any Servicing Agreement and in any event transfer servicing to the Agent’s
designee, at no cost or expense to the Agent, it being agreed that the Loan
Parties will pay any and all fees required to terminate the Servicing Agreement
and to effectuate the transfer of servicing to the designee of the Agent.

 

(e)          After the Funding Date, until the pledge of any Mortgage Loan is
relinquished by the Agent, the Loan Parties will have no right to modify or
alter the terms of such Mortgage Loan and the Loan Parties will have no
obligation or right to repossess such Mortgage Loan or substitute another
Mortgage Loan, except as provided herein.

 

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(f)          In the event the Loan Parties or their Affiliate are servicing the
Mortgage Loans, the Loan Parties shall permit the Agent from time to time to
inspect the Loan Parties’ or their Affiliates’ servicing facilities, as the case
may be, for the purpose of satisfying the Agent that the Loan Parties or their
Affiliates, as the case may be, has the ability to service the Mortgage Loans as
provided in this Agreement.

 

6.14         Termination of Servicing Duties. At any time following an Event of
Default, Agent may elect to discontinue a Loan Party’s duties pursuant to
Section 6.13 of this Agreement. Following any such election by Agent, Agent
shall designate and retain a subsidiary, affiliate or agent of Agent (“Agent’s
Designee”) to perform said duties. Promptly after being discharged of its duties
in accordance with the terms of this Section 6.14, such Loan Party shall forward
to Agent or Agent’s Designee any amounts then being held by any Loan Party in
connection with the Mortgage Loan Collateral or the Mortgaged Property.

 

6.15         Agent Communications. As long as there is no Event of Default, (a)
Agent shall permit Loan Parties to communicate with the Mortgagor Customers on
Agent’s behalf on all matters concerning the Mortgage Loan Collateral and the
Mortgaged Property, and (b) if Agent requests or requires additional information
or communication with any Mortgagor Customer, Agent shall forward a request for
same to Borrower Representative who shall then use its best efforts to obtain
such information or forward such communication to such Mortgagor Customer.
Following an Event of Default, Agent, at its sole option, may communicate
directly with any Mortgagor Customer on any and all matters concerning the
Mortgage Loan Collateral.

 

6.16         Periodic Due Diligence Review. The Loan Parties acknowledge that
the Agent has the right to perform continuing due diligence reviews with respect
to the Mortgage Loans, for purposes of verifying compliance with the
representations, warranties and specifications made hereunder, or otherwise, and
the Loan Parties agree that upon reasonable (but no less than one (1) Business
Day’s) prior notice to the Borrower Representative, the Agent or its authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts of, the Mortgage Files and any and all
documents, records, agreements, instruments or information relating to such
Mortgage Loans in the possession or under the control of the Loan Parties. The
Loan Parties also shall make available to the Agent a knowledgeable financial or
accounting officer for the purpose of answering questions respecting the
Mortgage Files and the Mortgage Loans. Without limiting the generality of the
foregoing, the Loan Parties acknowledge that the Agent may make Daily LIBOR Rate
Loans to the Loan Parties based solely upon the information provided by the Loan
Parties to the Agent and the representations, warranties and covenants contained
herein, and that the Agent, at its option, has the right at any time to conduct
a partial or complete due diligence review on some or all of the Mortgage Loans
securing such Loan, including without limitation ordering new credit reports and
new desktop as complete appraisals on the related Mortgaged Properties and
otherwise re-generating the information used to originate such Mortgage Loan.
The Agent may underwrite such Mortgage Loans itself or engage a mutually agreed
upon third party underwriter to perform such underwriting. The Loan Parties
agree to cooperate with the Agent and any third party underwriter in connection
with such underwriting, including, but not limited to, providing the Agent and
any third party underwriter with access to any and all documents, records,
agreements, instruments or information relating to such Mortgage Loans in the
possession, or under the control, of the Loan Parties. The Loan Parties further
agree that the Loan Parties shall reimburse the Agent for any and all reasonable
out-of-pocket costs and expenses incurred by the Agent in connection with the
Agent’s activities pursuant to this Section 6.16, provided that Loan Parties
shall not be responsible to reimburse Agent with respect to more than two (2)
such inspections per calendar year unless a Default or Event of Default shall
have occurred.

 

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6.17         REIT Status. Sachem shall at all times maintain its status as a
REIT.

 

7.NEGATIVE COVENANTS.

 

Subsequent to the Signing Date, no Loan Party shall, nor shall any Loan Party
permit any of its Subsidiaries to, until satisfaction in full of the Obligations
and termination of this Agreement:

 

7.1           Merger, Consolidation and Acquisitions. Enter into any merger,
consolidation or other reorganization with or into any other Person or acquire
all or a substantial portion of the assets or Equity Interests of any Person or
permit any other Person to consolidate with or merge with it, except that, to
the extent multiple Loan Parties exist at any time, so long as Borrower
Representative gives Agent at least thirty (30) days advance written notice to
such effect, (i) any Loan Party may merge into, or consolidate with, any other
Loan Party, so long as a Loan Party is the survivor of such merger or
consolidation, (ii) any Loan Party may acquire all or any substantial portion of
the assets or Equity Interests of any other Loan Party.

 

7.2           Sales of Assets. Sell, lease, transfer or otherwise dispose of any
of its properties or assets, including any Collateral except (i) in connection
with a Permitted Commercial Loan Financing and (ii) as permitted in Section 4.3
hereof.

 

7.3           Creation of Liens. Create or suffer to exist any Lien other than
Permitted Encumbrances.

 

7.4           Guarantees. Become liable upon the obligations of any Person, by
assumption, endorsement or guaranty thereof or otherwise (other than to Agent,
Bank, or any other Lender Party in connection with this Agreement and the
transactions contemplated herein), except (a) guarantees made in the Ordinary
Course of Business up to an aggregate amount not exceeding the Materiality
Threshold; (b) the endorsement of checks for collection in the Ordinary Course
of Business; and (c) guarantees made by one Loan Party of the Obligations of
another Loan Party or Loan Parties.

 

7.5           Investments. Purchase or acquire obligations or Equity Interests
of, or any other interest in, any Person, including, without limitation the
acquisition of all, or substantially all, or any material portion of the assets
or Equity Interests of a Person or the assets of (a) any division or line of
business of a Person and (b) any partnership or joint venture; provided,
however, so long as there does not exist a Default or Event of Default, or a
Default or Event of Default would not result therefrom, Borrowers may invest in
a Permitted Commercial Loan Subsidiary by way of transferring Commercial Loans
to such Subsidiary in connection with a Permitted Commercial Loan Financing.

 

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7.6           Loans. Make advances, loans or extensions of credit to any Person,
including particularly, but without limitation, to any Subsidiary or any other
Affiliate, except loans made to Mortgagor Customers of Eligible Mortgage Loans
in the Ordinary Course of Business.

 

7.7           Dividends. Declare, pay or make any dividend or distribution on
any shares of Equity Interests of any Loan Party (other than dividends or
distributions payable in its Equity Interests, or split-ups or reclassifications
of its Equity Interests) or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any Equity Interests, or of any
options to purchase or acquire any Equity Interests of any Loan Party; provided,
however, so long as there does not exist a Default or Event of Default, or a
Default or Event of Default would not result therefrom, (a) any Subsidiary of
Borrower or another Loan Party may pay dividends or make other distributions to
Borrower or such other Loan Party and (b) Borrower may make cash distributions
to its equity holders (including REIT Distributions) on a quarterly basis, so
long as (i) Borrowers’ average Undrawn Availability for the immediately
preceding ninety (90) days is not less than $500,000, and (ii) after giving
effect to such distribution and any Revolving Advances funded in connection
therewith, Borrowers shall have a minimum pro forma Undrawn Availability as of
the date of consummation of such distribution and on an average basis for the
ninety (90) days immediately thereafter of not less than $500,000.

 

7.8           Reserved.

 

7.9           Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of commercial trade debt incurred in the Ordinary Course
of Business) except in respect of (i) the Obligations; (ii) Permitted
Subordinated Debt; (iii) the Bankwell Mortgage Loan; (iv) the Existing Loans,
pending their full payment on the Signing Date; (v) Permitted Hedge Contracts;
(vi) purchase money Indebtedness incurred for Capital Expenditures in an
aggregate amount not to exceed the Materiality Threshold at any time
outstanding; (vii) a Permitted Commercial Loan Financing; and (viii)
Indebtedness to fund the renovation of the 698 Main Street Property so long as
any Lien securing such Indebtedness (if any) is limited to a Mortgage upon the
698 Main Street Property.

 

7.10         Nature of Business. Substantially change the nature of the business
in which it is engaged, on the Signing Date, or, except as otherwise
specifically permitted hereby purchase or invest, directly or indirectly, in any
assets or property other than in the Ordinary Course of Business for assets or
property which are useful in, necessary for and are to be used in its business
as presently conducted.

 

7.11         Transactions with Affiliates. Except as set forth on Schedule 7.11
hereto, directly or indirectly, purchase, acquire or lease any property from, or
sell, transfer or lease any property to, or otherwise deal with, any Affiliate,
except (i) transactions which do not exceed the Materiality Threshold,
individually or collectively, (ii) other transactions, in excess of the
Materiality Threshold, individually or collectively, which occur in the Ordinary
Course of Business, on an arm’s length basis on terms no less favorable than
terms which would have been obtainable from a Person other than an Affiliate,
and which have been fully disclosed to Agent, (iii) transfers of Commercial
Loans to a Permitted Commercial Loan Subsidiary in connection with a Permitted
Commercial Loan Financing, provided that (A) each such transfer shall be
accounted for at book value, and (B) no Default or Event of Default shall exist
either before or after giving effect thereto, and (iv) transactions described
in, and governed by, Section 7.5 or 7.7 hereof (as to which neither of clauses
(i) or (ii) of this Section 7.11 shall be applicable).

 

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7.12         Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 8.5 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed the Materiality Threshold in any one Fiscal Year of Loan
Parties.

 

7.13         Subsidiaries. Either: (a) create or acquire any Subsidiary;
(b) enter into any partnership, joint venture or similar arrangement, provided,
however, so long as no Default or Event of Default shall have occurred or would
result therefrom, Borrowers may create a Permitted Commercial Loan Subsidiary in
connection with a Permitted Commercial Loan Financing; or (c) dispose of any
Equity Interests of any Subsidiary. Without limitation of the foregoing, if and
to the extent any Subsidiary is created or acquired hereafter with Agent’s prior
written consent, then, as a condition to such consent becoming effective, each
such Subsidiary must be joined as a Loan Party hereunder (either as a Borrower
or a Corporate Guarantor, as determined by Agent), on terms satisfactory to
Agent.

 

7.14         Fiscal Year and Accounting Changes. Change its Fiscal Year from
that in use on the Signing Date or make any significant change (i) in accounting
treatment and reporting practices except as required by GAAP or (ii) in tax
reporting treatment except as required by law.

 

7.15         Pledge of Credit. Pledge (or purport to pledge) Agent’s credit on
any purchases or for any purpose whatsoever or use any portion of any Revolving
Advance in or for any business other than such Loan Party’s business as
conducted on the Signing Date.

 

7.16         Amendment of Documents. Amend, modify or waive any term or
provision of its Organic Documents or any Material Agreement, unless (i)
required by law to do so or (ii) such amendment, modification or waiver does not
cause any contravention of, or conflict with, any material term or condition of
this Agreement and would not otherwise reasonably be expected to have a Material
Adverse Effect.

 

7.17         Compliance with ERISA. (i) (x) Maintain, or permit any member of
the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any Plan, other than those Plans disclosed on Schedule 5.11(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
“prohibited transaction”, as that term is defined in Section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any “accumulated funding deficiency”, as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of any Loan Party or any member of the Controlled Group
or the imposition of a lien on the property of any Loan Party or any member of
the Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit
any member of the Controlled Group to assume, any obligation to contribute to
any Multiemployer Plan not disclosed on Schedule 5.11, (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
applicable laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.

 

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7.18         Prepayment of Indebtedness. Except as permitted in Section 7.19
hereof, at any time, directly or indirectly, either (i) prepay any Indebtedness
(other than to Agent or Bank), or (ii) prior to its stated maturity, repurchase,
redeem, retire or otherwise acquire any Indebtedness of any Loan Party or any
Subsidiary of any Loan Party.

 

7.19         Payment of Subordinated Debt. At any time, directly or indirectly
pay the principal of, interest on or any other charge or fee in respect of any
Permitted Subordinated Debt then outstanding except as expressly permitted by
the Subordination Agreement applicable thereto.

 

7.20         Deposit Accounts. Open any Deposit Account unless a Blocked Account
Agreement or Pledged Account Agreement, as appropriate, is first executed in
respect thereof.

 

7.21         [Reserved].

 

7.22         Limitations on Release of Mortgagor Customers. No Loan Party shall,
without the prior written consent of Agent, which consent, in the case of
clauses (i) and (ii) below shall be subject to the Permitted Discretion of
Agent, do any of the following: (i) release any Mortgagor Customer, or any
guarantor of a Mortgage Loan from any liability to such Loan Party under any
Mortgage Loan Documents other than in connection with a full repayment of such
Mortgage Loan; (ii) release any collateral securing any Mortgage Loan other than
in connection with a full repayment of such Mortgage Loan; or (iii) subordinate
any obligation owing to such Loan Party or any Lien granted to such Loan Party,
under any Mortgage Loan. Each Loan Party recognizes and agrees that any such
release or subordination by such Loan Party (even if not consented to by such
Loan Party) shall automatically deem the subject Mortgage Loan ineligible for
borrowing purposes. Loan Parties shall provide Agent with at least five (5)
Business Days prior written notice of any such release or subordination.

 

7.23         Underwriting Guidelines. Loan Parties shall not modify its
Underwriting Guidelines without the prior written consent of Agent.

 

7.24         Long Term Mortgages. Loan Parties shall not permit Mortgage Loans
which are outstanding more than twenty-four (24) months after their Origination
Date to comprise more than twenty percent (20%) of Loan Parties’ total portfolio
of Mortgage Loans at any time; provided, that Long Term Mortgages existing on
the Closing Date shall not be included in the foregoing calculation unless and
until such Long Term Mortgages are outstanding more than thirty-six (36) months
after their Origination Date.

 

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8.FINANCIAL COVENANTS.

 

Loan Parties shall, until payment in full of the Obligations and termination of
this Agreement, comply with financial covenants set forth below:

 

8.1           Controlling Definitions. As used in this Article 8:

 

“Capital Expenditures” shall mean all expenditures (or commitments to make
expenditures) of Borrowers on a consolidated basis for fixed or capital assets
(including any made or committed to be made pursuant to capitalized leases)
which, in accordance with GAAP, constitute capital expenditures in the period
made.

 

“Capitalized Lease Obligations” shall mean any Indebtedness of any Borrowers on
a consolidated basis represented by obligations under a lease that is required
to be capitalized for financial reporting purposes in accordance with GAAP.

 

“EBITDA” shall mean, for any fiscal period the sum of (i) net income (or loss)
of a Borrowers on a consolidated basis (as applicable) for such period
(excluding extraordinary gains and losses), plus (ii) to the extent deducted in
determining such net income (or loss) of Borrowers on a consolidated basis, the
following: (A) all interest expense of Borrowers on a consolidated basis for
such period; and (B) all charges against income of Borrowers on a consolidated
basis for such period for federal, state and local income taxes actually paid;
(C) depreciation expenses of Borrowers on a consolidated basis for such period;
and (D) amortization expenses of Borrowers on a consolidated basis for such
period.

 

“Fixed Charge Coverage Ratio” shall mean and include, with respect to any
applicable Test Period of Borrowers on a consolidated basis, the ratio of
(a) EBITDA for such Test Period, minus any Unfinanced Capital Expenditures made
during such period, minus distributions and dividends (other than REIT
Distributions) made during such period, minus, all charges against income of
Borrowers on a consolidated basis for such period for federal, state and local
income taxes actually paid during such period to (b) Fixed Charges for such Test
Period.

 

“Fixed Charges” shall mean and include, with respect to any applicable fiscal
period of Borrowers on a consolidated basis, the sum of (i) all scheduled
payments (excluding mandatory prepayments) of principal made on Funded
Indebtedness of Borrowers on a consolidated basis outstanding during such period
(excluding Revolving Advances), plus (ii) all interest expense of Borrowers on a
consolidated basis (including Revolving Advances) during such period, plus
(iii) all capitalized lease payments of Borrowers on a consolidated basis made
during such period.

 

“Funded Indebtedness” shall mean (with duplication) all Indebtedness: (i) for
money borrowed, including the Revolving Advances, (ii) which is evidenced by
notes, drafts, bonds, debentures, credit documents or similar instruments, (iii)
for the deferred payment for a term of one (1) year or more of the purchase
price of any asset, (iv) consisting of Capitalized Lease Obligations, (v)
consisting of reimbursement obligations with respect to letters of credit or
guaranties of letters of credit, and (vi) consisting of guaranties of any
Indebtedness described in clauses (i) through (vi) hereof owing by another
Person.

 

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“Net Worth” shall mean, at a particular date, (a) the aggregate amount of all
assets of Borrowers on a consolidated basis as may properly be classified as
such in accordance with GAAP, less (b) the aggregate amount of all liabilities
of the Borrowers on a consolidated basis as may properly be classified as such
in accordance with GAAP.

 

“Senior Funded Debt” shall mean the Obligations.

 

“Senior Funded Debt to Tangible Net Worth Ratio” shall mean, as of any date of
determination, the ratio of (a) the Senior Funded Debt on such date, to (b)
Tangible Net Worth of Borrowers on a consolidated basis.

 

“Tangible Net Worth” shall mean at a particular date, Net Worth less the sum of
the following on such date: (i) all “intangible assets” of the Borrowers on a
consolidated basis as may be properly classified as such in accordance with
GAAP, and (ii) the aggregate amount of all Indebtedness owed to Borrowers (or
any of them) by any of Borrowers’ Affiliates.

 

“Test Period” shall mean each twelve (12) month period ending at the end of each
Fiscal Month or such other period as specified in the Agreement.

 

“Unfinanced Capital Expenditures” shall mean Capital Expenditures not financed
by the incurrence of purchase money Indebtedness permitted to be incurred
pursuant to Section 7.8.

 

8.2           Tangible Net Worth. Maintain at all times Tangible Net Worth in an
amount not less than $52,000,000.

 

8.3           Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage
Ratio as of the end of each Fiscal Quarter for the Test Period then ended,
beginning with the Fiscal Quarter ending March 31, 2018 of not less than 1.25 to
1.

 

8.4           Senior Funded Debt to Tangible Net Worth Ratio. Maintain at the
end of each Fiscal Quarter, beginning with the Fiscal Quarter ending March 31,
2018, a Senior Funded Debt to Tangible Net Worth Ratio of not more than 2.0 to
1.

 

9.CONDITIONS PRECEDENT.

 

9.1           Conditions to the Initial Revolving Advance. The agreement of
Agent to make the Initial Revolving Advance requested to be made on the Closing
Date is subject to the satisfaction, or waiver by Agent, immediately prior to or
concurrently with the making of such Initial Revolving Advance, of the following
conditions precedent (in addition to, and cumulative with, any such conditions
precedent set forth and described in the Commitment Letter relative hereto):

 

(a)         Loan Documents. Agent shall have received this Agreement (including
all Schedules and Exhibits), the Notes and any Other Documents to which Loan
Parties, or a Loan Party are parties, duly executed and delivered by a
Designated Officer of each applicable Loan Party;

 

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(b)          Filings, Registrations, Recordings and Searches. (i) Each document
(including, without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any Other Document, under applicable law or
otherwise as reasonably requested by the Agent to be filed, registered or
recorded in order to create, in favor of Agent, a perfected security interest in
or lien upon the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or recordation
thereof is so required or requested, and Agent shall have received an
acknowledgment copy, or other evidence satisfactory to it, of each such filing,
registration or recordation and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto; (ii) the Agent shall also have
received UCC, tax and judgment lien searches with respect to each Loan Party in
such jurisdictions as Agent shall require, and the results of such searches
shall be satisfactory to Agent; and (iii) Agent shall have received from
Borrower Representative, for each Loan Party, a perfection certificate, the form
of which shall be supplied by Agent to Borrower Representative prior to the
Closing Date;

 

(c)          Secretary’s Certificates. Agent shall have received a certificate
of the Secretary (or Assistant Secretary or other appropriate officer) of each
Loan Party, dated the Signing Date, in form and substance acceptable to Agent,
certifying as to (i) the incumbency and signature of the officers (or other
representatives) of each Loan Party executing this Agreement and any Other
Documents, and (ii) the authorizations by the board of directors (or other
governing body) of such Loan Party to such officers or other representatives to
enter into and carry out such transactions as are contemplated pursuant to this
Agreement and the Other Documents; and including therewith copies of the Organic
Documents of such Loan Party as in effect on the Signing Date;

 

(d)          Good Standing Certificates. Agent shall have received good standing
certificates for each Loan Party dated not more than thirty (30) days prior to
the Signing Date, issued by the secretary of state or other appropriate official
of each Loan Party’s jurisdiction of organization and each jurisdiction where
the conduct of each Loan Party’s business activities or the ownership of its
properties necessitates qualification;

 

(e)          Legal Opinion. Agent shall have received the executed legal opinion
of legal counsel to the Loan Parties, in form and substance satisfactory to
Agent, which shall cover such matters incident to the transactions contemplated
by this Agreement, the Notes and all Other Documents such as Agent may
reasonably require, and each Loan Party hereby authorizes and directs such
counsel to deliver such opinions to Agent;

 

(f)          No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against any Loan Party or against the officers or directors of any
Loan Party (A) in connection with the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material or (B) which could, in the reasonable opinion of Agent, have a Material
Adverse Effect; and (ii) no injunction, writ, restraining order or other order
of any nature materially adverse to any Loan Party or the conduct of its
business or inconsistent with the due consummation of the transactions
contemplated hereunder shall have been issued by any Governmental Body;

 

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(g)         Material Agreements. Agent shall have reviewed all Material
Agreements and been satisfied therewith, in its sole credit judgment;

 

(h)         Collateral Examination. Agent shall have completed examinations and
received appraisals, the results of which shall be satisfactory in form and
substance to Agent, of the Collateral and all books and records in connection
therewith;

 

(i)          Fees. Agent shall have received all fees and expenses payable to
Agent and/or Lenders on or prior to the Closing Date pursuant hereto or under
any Other Document, including, without limitation, the Fee Letter, provided that
all fees and expenses payable on the Closing Date shall have been paid on or
prior to the Closing Date;

 

(j)          Financial Statements. Agent shall have received copies of the
Projections and copies of the Historical Financial Statements, each of which
shall be satisfactory in all respects to Agent;

 

(k)         Insurance. Agent shall have received in form and substance
satisfactory to Agent, (i) evidence that adequate insurance, including, without
limitation, casualty and liability insurance, required to be maintained under
this Agreement is in full force and effect, (ii) insurance certificates issued
by Loan Parties’ insurance broker containing such information regarding Loan
Parties’ casualty and liability insurance policies as Agent shall request and
naming Agent as an additional insured, lenders loss payee and/or mortgagee, as
applicable, and (iii) loss payable endorsements issued by Loan Parties’ insurer
naming Agent as lenders loss payee and mortgagee, as applicable;

 

(l)          Blocked Accounts. Agent shall have received duly executed
agreements establishing the Concentration Account and any Blocked Accounts to
the extent required under Section 4.14 to be delivered on the Closing Date;

 

(m)        Consents. Agent shall have received any and all Consents necessary to
permit the effectuation of the transactions contemplated by this Agreement and
the Other Documents; and, Agent shall have received such Consents and waivers of
such third parties as might assert claims with respect to the Collateral, as
Agent and its counsel shall deem necessary;

 

(n)         No Adverse Material Change. Since December 31, 2017 there shall not
have occurred any event, condition or state of facts which could reasonably be
expected to have a Material Adverse Effect on any Loan Party or any Subsidiary
and no representations made or information supplied to Agent shall have been
proven to be inaccurate or misleading in any material respect;

 

(o)         Landlord’s Agreements, Mortgagee Waivers, Etc. Unless Agent
otherwise has agreed to waive such requirement in one or more instances (and
impose reserves with the Borrowing Base in regard thereto), Agent shall have
received waivers or related agreements satisfactory to Agent with respect to all
premises owned by, leased by, licensed to or otherwise used by Loan Parties at
which Collateral is located, such waivers or related agreements to be in form
and substance satisfactory to Agent;

 

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(p)          Pledge Agreements. Agent shall have received a pledge agreement
from Borrower in respect of the Equity Interests of each Subsidiary owned by it
(limited, in the case of Foreign Subsidiaries, to sixty-five percent (65%) of
such Equity Interests), in form and substance satisfactory to Agent (the
“Subsidiary Pledge Agreement”);

 

(q)          Intellectual Property. To the extent any Loan Party owns any
trademarks or patents (or applications therefor) which are registered with the
United States Patent and Trademark Office, or any copyrights (or applications
therefore) which are registered with the United States Copyright Office, such
Loan Party shall have executed in favor of Agent and Intellectual Property,
Security Agreement, in form and substance satisfactory to Agent;

 

(r)          Closing Certificate. Agent shall have received a closing
certificate signed by a Designated Officer of each Loan Party dated the Closing
Date, in form and substance satisfactory to Agent, stating that (i) all
representations and warranties set forth in this Agreement and the Other
Documents are true and correct on and as of such date, (ii) Loan Parties are on
such date in compliance with all the terms and provisions set forth in this
Agreement and the Other Documents and (iii) on such date, no Default or Event of
Default has occurred or is continuing;

 

(s)          Undrawn Availability at Closing. Agent shall have received evidence
satisfactory to it to the effect that after giving effect to the making of the
Initial Revolving Advances hereunder, Borrowers shall have on the Closing Date
Undrawn Availability of at least Two Million Dollars ($2,000,000), it being
agreed that such requirement shall only apply on the Closing Date and not
thereafter;

 

(t)          Subordination Agreement. Agent shall have received a Subordination
Agreement from each Affiliate to which any Borrower is indebted on the Closing
Date or is expected to become indebted thereafter, in form and substance
satisfactory to Agent;

 

(u)          Validity and Support Agreement. Agent shall have received a
Validity and Support Agreement, in form and substance satisfactory to Agent,
from each Principal (the “Validity Guaranty”).

 

(v)          Corporate and Legal Structure. Agent shall be satisfied with the
corporate and legal structure and capitalization of Borrowers and their
Subsidiaries;

 

(w)          Long Term Indebtedness. Agent shall be reasonably satisfied with
the terms and conditions of any existing long-term Indebtedness of the Loan
Parties and Guarantors to remain outstanding after the Signing Date, and to the
extent requested by Lender, each holder of such long-term Indebtedness shall
have entered into a Subordination Agreement with Lender;

 

(x)          Computer Information Systems. Agent shall be satisfied with Loan
Parties’ computer information systems and Loan Parties’ ability to report
information to Agent regarding the Collateral and Loan Parties’ financial
condition; and

 

(y)          All Other Matters. Agent shall have received all Other Documents
which Agent determines to be necessary to consummate the transactions
contemplated to occur on or after the Signing Date pursuant to this Agreement,
and all corporate and other proceedings, and all documents, instruments and
other legal matters in connection with the transactions contemplated herein
shall be satisfactory in form and substance to Agent and its legal counsel.

 

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9.2           Conditions to Each Revolving Advance. The agreement of Agent or
any Lender to make any Revolving Advance requested to be made on any date
(including, without limitation, the Initial Revolving Advance), is subject to
the satisfaction of the following conditions precedent as of the date such
Revolving Advance is made (each, a “Revolving Advance Request Date”):

 

(a)          Representations and Warranties. Each of the representations and
warranties made by any Loan Party in or pursuant to this Agreement and any Other
Document (including without limitation those made in Annex Two hereto) to which
it is a party, and each of the representations and warranties contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement or any related agreement shall be
true and correct in all material respects on and as of such Revolving Advance
Request Date as if made on and as of such Revolving Advance Request Date;

 

(b)          No Default. No Event of Default or Default shall have occurred and
be continuing on such date, or would exist after giving effect to the Revolving
Advances requested to be made, on such date and, in the case of the Initial
Revolving Advance, after giving effect to the consummation of the transactions
contemplated hereby; provided, however that Agent and Lenders, in their sole and
absolute discretion, may continue to make Revolving Advances notwithstanding the
existence of an Event of Default or Default and that any Revolving Advances so
made shall not be deemed a waiver of any such Event of Default or Default;

 

(c)          Maximum Revolving Advances. In the case of any Revolving Advance
requested to be made, after giving effect thereto, the aggregate amount of all
Revolving Advances shall not exceed the maximum amount of Revolving Advances
permitted under Section 2.1 hereof; and

 

(d)          Funding Requirements. As to each Revolving Advance made, the
Funding Requirements shall have been completely fulfilled.

 

Each request for a Revolving Advance by any Loan Party hereunder shall
constitute a representation and warranty by each Loan Party as of the date of
such Revolving Advance that the conditions contained in this subsection shall
have been satisfied.

 

10.INFORMATION AS TO LOAN PARTIES.

 

Each Loan Party shall, until satisfaction in full of the Obligations and the
termination of this Agreement:

 

10.1         Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral including, without limitation,
any Loan Party’s reclamation or repossession of, or the return to any Loan Party
of, a material amount of goods or claims or disputes asserted by any Mortgagor
Customer or other obligor.

 

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10.2         Schedules. Deliver to Agent on or before the fifteenth (15th) day
of each calendar month as and for the prior month (a) Receivables agings, and
(b) accounts payable agings. In addition, each Loan Party will deliver to Agent
at such intervals as Agent may require: (i) confirmatory assignment schedules,
(ii) copies of each Mortgagor Customer’s invoices, and (iii) such further
schedules, documents and/or information regarding the Collateral as Agent, in
its sole credit judgment, may require including, without limitation, trial
balances and test verifications. Agent shall also have the right to confirm and
verify all Receivables by any manner and through any medium it considers
commercially advisable and do whatever it may deem commercially necessary to
protect its interests hereunder. The items to be provided under this Section
shall be in form satisfactory to Agent and executed by the Borrower
Representative and delivered to Agent from time to time solely for Agent’s
convenience in maintaining records of the Collateral, and any failure to deliver
any of such items to Agent shall not affect, terminate, modify or otherwise
limit Agent’s Lien with respect to the Collateral.

 

10.3         Environmental Compliance Certificate. Furnish Agent, at its request
from time to time, with a certificate signed by a Designated Officer of Borrower
Representative stating, to the best of his knowledge, that each Loan Party is in
compliance in all material respects with Environmental Laws. To the extent any
Loan Party is not in compliance with the foregoing laws, the certificate shall
set forth with specificity all areas of non-compliance and the proposed action
Loan Party will implement in order to achieve full compliance.

 

10.4         Litigation. Promptly notify Agent in writing of (i) any Commercial
Tort Claim arising in a Loan Party’s favor subsequent to the Signing Date or
(ii) any litigation, suit or administrative proceeding affecting any Loan Party,
whether or not the claim is covered by insurance, and of any suit or
administrative proceeding, which in any such case could reasonably be expected
to have a Material Adverse Effect on any Loan Party.

 

10.5         Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event, development or
circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any Loan
Party as of the date of such statements; (c) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Code, could subject any
Loan Party to a tax imposed by Section 4971 of the Code; (d) each and every
default by any Loan Party in respect of any Indebtedness which, individually or
when aggregated, exceeds the Materiality Threshold and that could reasonably be
expected to result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
(e) the termination (or receipt of notice of pending termination) of any
Material Agreement; and (f) any other development in the business or affairs of
any Loan Party which could reasonably be expected to have a Material Adverse
Effect; in each case describing the nature thereof and the action that Loan
Parties propose to take with respect thereto.

 

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10.6         [Reserved].

 

10.7         Annual Financial Statements. Furnish Agent within ninety (90) days
after the end of each Fiscal Year of Borrowers, audited financial statements of
Borrowers on a consolidating and consolidated basis including statements of
income and stockholders’ equity and cash flow from the beginning of the current
Fiscal Year to the end of such Fiscal Year and the balance sheet as at the end
of such Fiscal Year, all prepared in accordance with GAAP applied on a basis
consistent with prior practices, and in reasonable detail and reported upon
without qualification by an independent certified public accounting firm
selected by Borrowers and satisfactory to Agent (the “Accountants”). The report
of the Accountants shall, if requested by the Agent, be accompanied by a
statement of the Accountants certifying that (i) they have caused this Agreement
to be reviewed, (ii) in making the examination upon which such report was based,
either no information came to their attention which to their knowledge
constituted an Event of Default or a Default under this Agreement or any Other
Document or, if such information came to their attention, specifying any such
Default or Event of Default, its nature, when it occurred and whether it is
continuing, and such report shall contain or have appended thereto calculations
which set forth Borrowers’ compliance with the requirements or restrictions
imposed by the Financial Covenants. In addition, the reports shall be
accompanied by a certificate of a Designated Officer of the Borrower
Representative which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default, its
nature, when it occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such event, and such certificate shall have appended
thereto calculations which set forth Borrowers’ compliance with the requirements
or restrictions imposed by the Financial Covenants. Agent hereby acknowledges
that Hoberman & Lesser, LLP is currently Sachem’s Accountants and deems such
firm is satisfactory.

 

10.8         Quarterly Financial Statements. Furnish Agent within forty five
(45) days after the end of each Fiscal Quarter of Borrowers, financial
statements of Borrowers on a consolidated and consolidating basis including
unaudited statements of income and stockholders’ equity and cash flow of Sachem
reflecting results of operations from the beginning of the Fiscal Year to the
end of such Fiscal Quarter and for such Fiscal Quarter, prepared on a basis
consistent with prior practices but in accordance with GAAP and complete and
correct in all material respects, subject to normal year-end adjustments
(together with comparative reports for the corresponding period(s) in the prior
Fiscal Year and for the projected reports for the current Fiscal Year required
under Section 10.13). The reports shall be accompanied by a certificate signed
by a Designated Officer of the Borrower Representative, substantially in the
form of Exhibit 10.8 (a “Compliance Certificate”), which shall state that, based
on an examination sufficient to permit him to make an informed statement, no
Default or Event of Default exists, or, if such is not the case, specifying such
Default or Event of Default, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrowers with respect to such default
and, such certificate shall have appended thereto calculations which set forth
Borrowers’ compliance with the requirements or restrictions imposed by the
Financial Covenants.

 

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10.9           [Reserved].

   

10.10         Borrowing Base Certificate. Deliver to Agent a certificate of a
Designated Officer of Borrower Representative (a “Borrowing Base Certificate”)
in the form of Exhibit 10.10 hereto or in such other form as maybe required or
approved by Agent from time to time, which shall state the Borrowing Base as of
the date thereof (including a calculation of such Borrowing Base). This
Borrowing Base Certificate shall be delivered monthly, by the second Business
Day of each calendar month, as of the last Business Day of the preceding
calendar month, which shall include a reconciliation and “roll forward” from the
prior month’s reporting thereof pursuant to Section 10.2.

 

10.11         Other Reports. Furnish Agent as soon as available, but in any
event within ten (10) Business Days after the issuance thereof, with copies of
such financial statements, reports and returns as each Loan Party shall send to
the owners of its Equity Interests generally or filed with the U.S. Securities
and Exchange Commission or any other Governmental Body.

 

10.12         Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent to
determine whether the terms, covenants, provisions and conditions of this
Agreement and the Notes have been complied with by Loan Parties including,
without limitation and without the necessity of any request by Agent, (a) copies
of all environmental audits and reviews, (b) at least thirty (30) days prior
thereto, notice of any Loan Party’s opening or establishing of any new
Collateral Location or any Loan Party’s closing of any existing Collateral
Location, and (c) promptly upon any Loan Party’s learning thereof, notice of any
labor dispute to which any Loan Party may become a party, any strikes or
walkouts relating to any of its plants or other facilities, and the expiration
of any labor contract to which any Loan Party is a party or by which any Loan
Party is bound.

 

10.13         Projected Operating Budget. Furnish Agent, no later than March 31
of each Borrower’s Fiscal Years, commencing with its first Fiscal Year ending
after the Signing Date, the following projections, on a month-to-month basis for
such Fiscal Year, for Borrower and its Subsidiaries, on a consolidated and
consolidating basis, to-wit operating budget, balance sheet, income statement,
statement of cash flow, Financial Covenant compliance (including projected
amounts of all financial components used in determining compliance) and
borrowing availability, such projections to be accompanied by a certificate
signed by a Designated Officer of the Borrower Representative to the effect that
such projections have been prepared on the basis of sound financial planning
practice consistent with past budgets and financial statements and that such
officer has no reason to question the reasonableness of any material assumptions
on which such projections were prepared.

 

10.14         [Reserved].

 

10.15         Notice of Suits, Adverse Events. Furnish Agent with prompt notice
of (i) any lapse or other termination of any Consent issued to any Loan Party by
any Governmental Body or any other Person that is material to the operation of
any Loan Party’s business, (ii) any refusal by any Governmental Body or any
other Person to renew or extend any such Consent; and (iii) copies of any
periodic or special reports filed by any Loan Party with any Governmental Body
or Person, if such reports indicate any material change in the business,
operations, affairs or condition of any Loan Party, or if copies thereof are
requested by Agent, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate to
any Loan Party.

 

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10.16         ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) any Loan Party or any member of the Controlled
Group knows or has reason to know that a Termination Event has occurred,
together with a written statement describing such Termination Event and the
action, if any, which such Loan Party or member of the Controlled Group has
taken, is taking, or proposes to take with respect thereto and, when known, any
action taken or threatened by the IRS, Department of Labor or PBGC with respect
thereto, (ii) any Loan Party or any member of the Controlled Group knows or has
reason to know that a prohibited transaction (as defined in Sections 406 of
ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Loan Party or any member
of the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Loan Party or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Loan Party or any member of the
Controlled Group was not previously contributing shall occur, (v) any Loan Party
or any member of the Controlled Group shall receive from the PBGC a notice of
intention to terminate a Plan or to have a trustee appointed to administer a
Plan, together with copies of each such notice, (vi) any Loan Party or any
member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the IRS regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Loan Party or any member of the Controlled Group shall receive a notice
regarding the imposition of withdrawal liability, together with copies of each
such notice; (viii) any Loan Party or any member of the Controlled Group shall
fail to make a required installment or any other required payment under
Section 412 of the Code on or before the due date for such installment or
payment; (ix) any Loan Party or any member of the Controlled Group knows that
(a) a Multiemployer Plan has been terminated, (b) the administrator or plan
sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or
(c) the PBGC has instituted or will institute proceedings under Section 4042 of
ERISA to terminate a Multiemployer Plan.

 

10.17         Intellectual Property. Notify Agent promptly if, subsequent to the
Signing Date, any Loan Party applies for, or acquires, any patent, trademark or
copyright registered (or registrable) under the federal law, and execute and
deliver to Agent, upon request, such documents and agreements as Agent may
request to evidence, confirm or perfect Agent’s Lien on and security interest in
such Collateral.

 

10.18         Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.

 

10.19         Mortgage File Reports. On the fifteenth (15th) day of each
calendar month, the Loan Parties shall provide the Agent with a report with
respect to each Mortgage File, which report shall include, among other items,
(a) a summary of each Loan Party's delinquency and loss experience and payment
history with respect to all Mortgage Loans pledged to Agent, plus any such
additional reports as the Agent may reasonably request with respect to each Loan
Party’s or any servicer's servicing portfolio or pending originations of
Mortgage Loans and (b) any other information reasonably requested by Agent with
respect to the Mortgage Loans.

 

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11.EVENTS OF DEFAULT.

 

The occurrence of any one or more of the following events shall constitute an
“Event of Default”:

 

11.1         Obligations. Failure by any Loan Party to pay any Obligations when
due, whether at maturity or by reason of acceleration pursuant to the terms of
this Agreement or by notice of intention to prepay, or by required prepayment or
failure to pay any other liabilities or make any other payment, fee or charge
provided for herein when due or in any Other Document;

 

11.2         Misrepresentations. Any representation or warranty of any material
fact, circumstance or condition made or deemed made by any Loan Party in this
Agreement, any Other Document or any related agreement or in any certificate,
document or financial or other statement furnished at any time in connection
herewith or therewith shall prove to have been misleading in any material
respect on the date when made or deemed to have been made;

 

11.3         Financial Information. Failure by any Loan Party to (i) furnish
financial information required by Sections 10.2, 10.7, 10.8, and 10.10 when due,
(ii) any other information when requested pursuant hereto which is unremedied
for a period of five (5) Business Days, or (iii) permit the inspection of its
books or records by Agent when requested pursuant hereto;

 

11.4         Liens. Issuance of a notice of Lien, levy, assessment, injunction
or attachment against a material portion of any Loan Party’s property which is
not stayed or lifted within sixty (60) days (but not later than its being
executed, however);

 

11.5         Covenants. Either (i) except as otherwise provided in
Section 11.3(i) above or clause (ii) below of this Section 11.5, failure or
neglect of any Loan Party to perform, keep or observe any term, provision,
condition, covenant herein contained, or contained in any Other Document, now or
hereafter entered into between any Loan Party and Agent or any Lender (without
any cure or grace period); or (ii) a failure or neglect of Loan Parties to
perform, keep or observe any term, provision, condition or covenant, contained
in Sections 4.6, 4.7, 4.9, 4.11, 6.3, 6.4, 10.4 or 10.6 hereof which is not
cured within fifteen (15) days from the occurrence of such failure or neglect;

 

11.6         Judgments. Any judgment or judgments are rendered or judgment liens
filed against any Loan Party for an aggregate amount in excess of the
Materiality Threshold which within thirty (30) days of such rendering or filing
(but not later than its being executed, however) is not satisfied, stayed,
bonded or discharged of record;

 

11.7         Voluntary Bankruptcy. Any Loan Party, any Subsidiary of any Loan
Party or any Guarantor shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee, liquidator
or similar fiduciary of itself or of all or a substantial part of its property,
(ii) make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) apply for, consent
to or suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (vi) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (vii) file a petition seeking to take advantage of any other
law providing for the relief of debtors, or (viii) take any action for the
purpose of effecting any of the foregoing;

 

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11.8         Insolvency. Any Loan Party shall admit in writing its inability, or
be generally unable, to pay its Indebtedness as it becomes due or shall cease
operations of its present business;

 

11.9         Involuntary Bankruptcy. Any Loan Party, any Subsidiary of a Loan
Party or any Guarantor shall acquiesce in, or fail to have dismissed, within
sixty (60) days, any petition filed against it in any involuntary case under any
state or federal bankruptcy laws (as now or hereafter in effect), or take any
action for the purpose of effecting any of the foregoing;

 

11.10         Material Adverse Changes. Any change in any Loan Party’s condition
or affairs (financial or otherwise) which has a Material Adverse Effect;

 

11.11         Agent’s Liens. Any Lien created hereunder or provided for hereby
or under any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;

 

11.12         Subordinated Debt. A default or event of default shall occur under
or in respect of any Subordinated Debt, which default shall not have been cured
or waived within any applicable grace period, or if any Person party to a
Subordination Agreement breaches or violates, or attempts to terminate or
challenge the validity of, such agreement, or any payment is made or received in
respect of any Subordinated Debt in violation of the Subordination Agreement;

 

11.13         Cross Default. Either (x) any specified “event of default” under
any Indebtedness (other than the Obligations) of any Loan Party, any of its
Subsidiaries or any Guarantor with a then-outstanding principal balance (or, in
the case of any Indebtedness not so denominated, with a then-outstanding total
obligation amount) of $250,000 or more, or any other event or circumstance which
would permit the holder of any such Indebtedness of any Loan Party, any of its
Subsidiaries or any Guarantor to accelerate such Indebtedness (and/or the
obligations of Loan Party thereunder) prior to the scheduled maturity or
termination thereof, shall occur (regardless of whether the holder of such
Indebtedness shall actually accelerate, terminate or otherwise exercise any
rights or remedies with respect to such Indebtedness), or (y) a default of the
obligations of any Loan Party, any of its Subsidiaries or any Guarantor under
any Material Agreement to which it is a party shall occur which has or is
reasonably likely to have a Material Adverse Effect;

 

11.14         Guaranty. Termination or breach of any Guaranty, security
agreement, Pledge Agreement or similar agreement executed and delivered to Agent
in connection with the Obligations of any Loan Party, or if any Guarantor
attempts to terminate, challenges the validity of, or its liability under, any
such Guaranty, security agreement, Pledge Agreement or similar agreement;

 

11.15         Change of Control. Any Change of Control shall occur;

 

11.16         Change of Management. Any Change of Management shall occur;

 

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11.17         Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on any Loan Party,
or any Loan Party shall so claim in writing to Agent;

 

11.18         Takings. (i) Any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or trade name
of any Loan Party, the continuation of which is material to the continuation of
any Loan Party’s business, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit, trademark, trade name or
patent and such proceedings shall not be dismissed or discharged within sixty
(60) days or (ii) any Material Agreement shall be revoked or terminated and not
replaced by a substitute acceptable to Agent within thirty (30) days after the
date of such revocation or termination, and such revocation or termination and
non-replacement would reasonably be expected to have a Material Adverse Effect
on any Loan Party;

 

11.19         Seizures. Any material portion of the Collateral shall be seized
or taken by a Governmental Body, or any Loan Party or the title and rights of
any Loan Party shall have become the subject matter of litigation which could
reasonably be expected, in the opinion of Agent, upon final determination, to
result in impairment or loss of the security provided by this Agreement or the
Other Documents;

 

11.20         Plans. An event or condition specified in Sections 7.16 or 10.15
hereof shall occur or exist with respect to any Plan and, as a result of such
event or condition, together with all other such events or conditions, any Loan
Party or any member of the Controlled Group shall incur, or in the opinion of
Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both)
which, in the reasonable judgment of Agent, would have a Material Adverse Effect
on any Loan Party; or

 

11.21         Criminal Charges. Any Loan Party, or any Principal shall become
the subject of a criminal indictment in respect of or pertaining to, the
operation or conduct of a Loan Party’s business, its reporting of any financial
data, its application for, or receipt of, any credit, its “laundering” of any
funds or its non-payment (or underpayment) of any taxes or any other Charges, or
shall admit its guilt or complicity in respect of any of the foregoing, or shall
pay any fine or suffer any penalty in respect thereof (including as part of any
plea bargain or arrangement).

 

11.22         REIT Status. Sachem shall fail to maintain its status as a REIT.

 

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12.LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.

 

12.1         Rights and Remedies. Upon and after the occurrence of an Event of
Default pursuant to Sections 11.7, 11.8 or 11.9, all Obligations shall be
immediately due and payable and this Agreement and all Commitments of Lenders
shall be deemed terminated. Upon the occurrence of any other Event of Default
not specified in the preceding sentence, and at any time thereafter during the
continuation of such Event of Default, Agent may, and at the direction of the
Required Lenders shall, declare all Obligations to be immediately due and
payable and Agent or the Required Lenders shall have the right to terminate this
Agreement and to terminate the Commitments of Lenders to make Revolving
Advances. Upon and after the occurrence of any Event of Default, and during its
continuation, Agent shall have the right to exercise any and all other rights
and remedies provided for herein, the Other Documents, under the Uniform
Commercial Code and at law or equity generally, including, without limitation,
the right to (i) foreclose the security interests granted herein and to realize
upon any Collateral by any available judicial procedure and/or to take
possession of and sell any or all of the Collateral with or without judicial
process and (ii) exercise all rights and powers with respect to the Collateral
as Loan Party might exercise (including, without limitation, taking any action
permitted under any power of attorney received by Agent with respect to any
collateral securing any Mortgage Loan, except as may be limited by applicable
Law). Agent may enter any Loan Party’s premises or other premises without legal
process and without incurring liability to any Loan Party therefor, and Agent
may thereupon, or at any time thereafter, in its discretion without notice or
demand, take the Collateral and remove the same to such place as Agent may deem
advisable and Agent may require Loan Parties to make the Collateral available to
Agent at a convenient place. With or without having the Collateral at the time
or place of sale, Agent may sell the Collateral, or any part thereof, at public
or private sale, at any time or place, in one or more sales, at such price or
prices, and upon such terms, either for cash, credit or future delivery, as
Agent may elect. Except as to that part of the Collateral which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Agent shall give Loan Parties reasonable notification of such
sale or sales, it being agreed that in all events written notice mailed to Loan
Parties at least ten (10) Business Days prior to such sale or sales is
reasonable notification. At any public sale Agent or any Lender may bid for and
become the purchaser, and Agent or any Lender, or any other purchaser at any
such sale thereafter shall hold the Collateral sold absolutely free from any
claim or right of whatsoever kind, including any equity of redemption and such
right and equity are hereby expressly waived and released by each Loan Party. In
connection with the exercise of the foregoing remedies, Agent is granted
permission to use all of each Loan Party’s trademarks, trade styles, trade
names, patents, patent applications, licenses, franchises and other proprietary
rights which are used in connection with any Collateral.

 

12.2         Allocation of Payments after Event of Default. Notwithstanding any
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by Agent on account of the Obligations, or in respect of the Collateral may, at
Agent’s discretion, be paid over or delivered as follows:

 

FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of Agent in connection with enforcing its
rights and the rights of Lenders under this Agreement and the Other Documents,
and any Out-of-Formula Loans and Protective Advances funded by Agent with
respect to the Collateral under or pursuant to the terms of this Agreement;

 

SECOND, to payment of any fees owed to Agent (including, without limitation,
fees owed to Agent pursuant to the Fee Letter);

 

THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of each of the Lenders to the extent
owing to such Lender pursuant to the terms of this Agreement;

 

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FOURTH, to the payment of all Obligations arising under this Agreement and the
Other Documents consisting of accrued fees and interest (other than Obligations
in respect of Bank Products and Agent’s fees as set forth above);

 

FIFTH, to the payment of the outstanding principal amount of the Obligations
arising under this Agreement (other than Obligations in respect of Bank
Products);

 

SIXTH, to the payment of liabilities owing under any Agent Provided Bank
Products to the extent not paid under “FIRST” through “FIFTH” above;

 

SEVENTH, to the payment of liabilities owing under any Bank Products other than
Agent Provided Bank Products to the extent not paid under “FIRST” through
“SIXTH” above;

 

EIGHTH, to the payment of all other Obligations arising under this Agreement
which shall have become due and payable (hereunder, under the Other Documents or
otherwise) and not repaid pursuant to clauses “FIRST” through “SEVENTH” above;
and

 

NINTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.

 

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; and (ii) each of the Lenders shall receive (so long as it
is not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Revolving Advances held by such Lender
bears to the aggregate then outstanding Revolving Advances) of amounts available
to be applied pursuant to clauses “FOURTH”, “FIFTH”, “SEVENTH” and “EIGHTH”
above.

 

12.3         Agent’s Discretion. Agent and Required Lenders shall have the right
in their sole discretion to determine which rights, Liens, security interests or
remedies Agent may at any time pursue, relinquish, subordinate, or modify, which
procedures, timing and methodologies to employ, or to take any other action with
respect thereto and such determination will not in any way modify or affect
Agent’s or any Lender’s rights hereunder.

 

12.4         Setoff. In addition to any other rights which any Lender Party may
have under applicable law, upon the occurrence of an Event of Default hereunder,
each Lender Party shall have a right to apply any Loan Party’s property held by
it to reduce the Obligations.

 

12.5         Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
right or remedy shall not preclude the exercise of any other right or remedies
provided for herein or in any Other Document or otherwise provided by law, all
of which shall be cumulative and not alternative.

 

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13.WAIVERS AND JUDICIAL PROCEEDINGS.

 

13.1         Waiver of Notice. Each Loan Party hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.

 

13.2         Delay. No delay or omission on Agent or any Lender’s part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.

 

13.3         Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(A) ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENT, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT OR THE RELATED
TRANSACTIONS, IN EACH CASE, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

14.EFFECTIVE DATE AND TERMINATION.

 

14.1         Term; Early Termination Fee. This Agreement, which shall inure to
the benefit of and shall be binding upon, the respective successors and
permitted assigns of each Loan Party, Agent and Lenders, shall become effective
on the Closing Date and shall continue in full force and effect until that date
which is the fourth (4th) anniversary of the Closing Date (the “Term”) unless
sooner terminated as herein provided. Borrower may terminate this Agreement at
any time upon ninety (90) days’ prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full prior to the last
day of the Term (the date of such prepayment hereinafter referred to as the
“Early Termination Date”), Borrower shall pay to Agent, for the ratable benefit
of the Lenders, an early termination fee (the “Early Termination Fee”), for the
loss of its bargain (and not as a penalty) in an amount equal to (i) one
percent (1%) of the Maximum Revolving Amount, if the Early Termination Date
occurs during the first Loan Year, (ii) three quarters of one percent (0.75%) of
the Maximum Revolving Amount if the Early Termination Date occurs during the
second Loan Year, (iii) one half of one percent (0.50%) of the Maximum Revolving
Amount if the Early Termination Date occurs during the third Loan Year and (iv)
zero percent (0%) if the early termination occurs during the fourth year of the
but before the stated expiration of the Term.

 

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14.2        Termination. The termination of the Agreement shall not affect any
Loan Party’s, Agent’s, any Lender’s, the Bank’s, or any other Lender Party’s
rights, or any of the Obligations having their inception prior to the effective
date of such termination, and the provisions hereof shall continue to be fully
operative until all transactions entered into, rights or interests created or
Obligations have been fully disposed of, concluded or liquidated. The security
interests, Liens and rights granted to Agent, the Lenders, the Bank, and the
other Lender Parties hereunder and the financing statements filed hereunder
shall continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that Borrowers’ Account may from time to time be
temporarily in a zero or credit position, until all of the Obligations of each
Loan Party have been paid or performed in full after the termination of this
Agreement or each Loan Party has furnished Agent, Lenders, the Bank, and the
other Lender Parties with an indemnification satisfactory to such parties with
respect thereto and an unconditional release from any liabilities hereunder.
Accordingly, each Loan Party waives any rights which it may have under the
applicable provisions of the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and neither Agent nor any
Lender shall be required to send such termination statements to each Loan Party,
or to file them with any filing office, unless and until this Agreement shall
have been terminated in accordance with its terms and all Obligations paid in
full in immediately available funds. All representations, warranties, covenants,
waivers and agreements contained herein shall survive termination hereof until
all Obligations are paid or performed in full.

 

15.MULTIPLE LOAN PARTIES.

 

15.1        Borrowing Agency Provisions. If and to the extent that at any time
or from time to time there are multiple Loan Parties, then:

 

(a)          Each Loan Party acknowledges that it, together with each other Loan
Party, make up a related organization of various entities constituting a single
economic and business enterprise and sharing a substantial identity of interests
such that, without limitation, Loan Parties render services to or for the
benefit of each other, purchase or sell and supply goods to or from or for the
benefit of each other, make loans, advances and provide other financial
accommodations to or for the benefit of each other (including the payment of
creditors and guarantees of Indebtedness), provide administrative, marketing,
payroll and management services to or for the benefit of each other; have
centralized accounting, common officers and directors; and are in certain
circumstances are identified to creditors as a single economic and business
enterprise. Accordingly, and without limitation, any credit or other financial
accommodation extended to anyone Loan Party pursuant hereto will result in
direct and substantial economic benefit to each other Loan Party, and each Loan
Party will likewise benefit from the economies of scale associated with the Loan
Parties, as a group, applying for credit or other financial accommodations
pursuant hereto on a collective basis.

 

(b)          Each Loan Party hereby irrevocably designates Borrower
Representative to be its attorney and agent and in such capacity to borrow, sign
and endorse notes, and execute and deliver all instruments, documents, writings
and further assurances now or hereafter required hereunder, on behalf of such
Loan Party or Loan Parties, and hereby authorizes Agent and Lenders to pay over
or credit all loan proceeds hereunder in accordance with the request of Borrower
Representative.

 

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(c)          The handling of this credit facility as a co-borrowing facility
with a Borrower Representative in the manner set forth in this Agreement is
solely as an accommodation to Loan Parties and at their request. None of the
Lender Parties shall incur any liability to Loan Parties as a result thereof. To
induce the Lender Parties to do so and in consideration thereof, each Loan Party
hereby indemnifies the Lender Parties and holds the Lender Parties harmless from
and against any and all liabilities, expenses, losses, damages and claims of
damage or injury asserted against the Lender Parties by any Person arising from
or incurred by reason of the handling of the financing arrangements of Loan
Parties as provided herein, reliance by any of the Lender Parties on any request
or instruction from Borrower Representative or any other action taken by any of
the Lender Parties with respect to this Section except due to willful misconduct
or gross (not mere) negligence by the indemnified party.

 

(d)          All Obligations shall be joint and several, and each Loan Party
shall make payment upon the maturity of the Obligations by acceleration or
otherwise, and such obligation and liability on the part of each Loan Party
shall in no way be affected by any extensions, renewals and forbearance granted
by Agent or any Lender to any Loan Party, failure of Agent or Lenders to give
any Loan Party notice of borrowing or any other notice, any failure of Agent or
Lenders to pursue or preserve its rights against any Loan Party, the release by
Agent of any Collateral now or thereafter acquired from any Loan Party, and such
agreement by each Loan Party to pay upon any notice issued pursuant thereto is
unconditional and unaffected by prior recourse by Agent to the other Loan
Parties or any Collateral for such Loan Party’s Obligations or the lack thereof.

 

15.2         Waiver of Subrogation. Each Loan Party expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such Loan Party may now or hereafter have against the
other Loan Parties or other Person directly or contingently liable for the
Obligations hereunder, or against or with respect to the other Loan Parties’
property (including, without limitation, any property which is Collateral for
the Obligations), arising from the existence or performance of this Agreement,
until termination of this Agreement and repayment in full of the Obligations.

 

16.REGARDING AGENT.

 

16.1         Appointment. Each Lender hereby designates WBCC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and interest (except as otherwise set forth herein), fees
(except the fees set forth in any Fee Letter), charges and collections received
pursuant to this Agreement, for the ratable benefit of Lenders. Agent may
perform any of its duties hereunder by or through its agents or employees. As to
any matters not expressly provided for by this Agreement (including collection
of the Note) Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
Required Lenders, and such instructions shall be binding; provided, however,
that Agent shall not be required to take any action which, in Agent’s
discretion, exposes Agent to liability or which is contrary to this Agreement or
the Other Documents or any applicable law unless Agent is furnished with an
indemnification reasonably satisfactory to Agent with respect thereto.

 

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16.2         Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment), or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Loan Party or
any officer thereof contained in this Agreement, or in any of the Other
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by Agent under or in connection with, this
Agreement or any of the Other Documents or for the value, validity,
effectiveness, genuineness, due execution, enforceability or sufficiency of this
Agreement, or any of the Other Documents or for any failure of any Loan Party to
perform its obligations hereunder. Agent shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, this Agreement or any of the
Other Documents, or to inspect the properties, books or records of any Loan
Party. The duties of Agent as respects the Revolving Advances to Borrowers shall
be mechanical and administrative in nature; Agent shall not have by reason of
this Agreement a fiduciary relationship in respect of any Lender; and nothing in
this Agreement, expressed or implied, is intended to or shall be so construed as
to impose upon Agent any obligations in respect of this Agreement or the
transactions described herein except as expressly set forth herein.

 

16.3         Lack of Reliance on Agent. Independently and without reliance upon
Agent or any other Lender, each Lender has made and shall continue to make (i)
its own independent investigation of the financial condition and affairs of each
Loan Party in connection with the making and the continuance of the Revolving
Advances hereunder and the taking or not taking of any action in connection
herewith, and (ii) its own appraisal of the creditworthiness of each Loan Party.
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before making of the Revolving
Advances or at any time or times thereafter except as shall be provided by any
Loan Party pursuant to the terms hereof. Agent shall not be responsible to any
Lender for any recitals, statements, information, representations or warranties
herein or in any agreement, document, certificate or a statement delivered in
connection with or for the execution, effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Agreement or any Other
Document, or of the financial condition of any Loan Party, or be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement, the Note, the Other Documents
or the financial condition or prospects of any Loan Party, or the existence of
any Event of Default or any Default.

 

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16.4         Resignation of Agent; Successor Agent. Agent may resign on sixty
(60) days written notice to each Lender and Borrower Representative and upon
such resignation, Required Lenders will promptly designate a successor Agent
reasonably satisfactory to Loan Parties (provided that no such approval by Loan
Parties shall be required (i) in any case where the successor Agent is one of
the Lenders or (ii) after the occurrence and during the continuance of any Event
of Default). Any such successor Agent shall succeed to the rights, powers and
duties of Agent, and shall in particular succeed to all of Agent’s right, title
and interest in and to all of the Liens in the Collateral securing the
Obligations created hereunder or any Other Document (including any Mortgages and
all account control agreements), and the term “Agent” shall mean such successor
agent effective upon its appointment, and the former Agent’s rights, powers and
duties as Agent shall be terminated, without any other or further act or deed on
the part of such former Agent. However, notwithstanding the foregoing, if at the
time of the effectiveness of the new Agent’s appointment, any further actions
need to be taken in order to provide for the legally binding and valid transfer
of any Liens in the Collateral from former Agent to new Agent and/or for the
perfection of any Liens in the Collateral as held by new Agent or it is
otherwise not then possible for new Agent to become the holder of a fully valid,
enforceable and perfected Lien as to any of the Collateral, former Agent shall
continue to hold such Liens solely as agent for perfection of such Liens on
behalf of new Agent until such time as new Agent can obtain a fully valid,
enforceable and perfected Lien on all Collateral, provided that Agent shall not
be required to or have any liability or responsibility to take any further
actions after such date as such agent for perfection to continue the perfection
of any such Liens (other than to forego from taking any affirmative action to
release any such Liens). After Agent’s resignation as Agent, the provisions of
this Article 16, and any indemnification rights under this Agreement, including
without limitation, rights arising under Section 16.5 hereof, shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement (and in the event resigning Agent continues to hold any
Liens pursuant to the provisions of the immediately preceding sentence, the
provisions of this Article 16 and any indemnification rights under this
Agreement, including without limitation, rights arising under Section 16.5
hereof, shall inure to its benefit as to any actions taken or omitted to be
taken by it in connection with such Liens).

 

16.5         Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from Required Lenders; and Agent shall not incur liability
to any Person by reason of so refraining. Without limiting the foregoing,
Lenders shall not have any right of action whatsoever against Agent as a result
of its acting or refraining from acting hereunder in accordance with the
instructions of Required Lenders.

 

16.6         Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, email, facsimile, telex, teletype or telecopier message, cablegram,
order or other document or telephone message believed by it to be genuine and
correct and to have been signed, sent or made by the proper person or entity,
and, with respect to all legal matters pertaining to this Agreement and the
Other Documents and its duties hereunder, upon advice of counsel selected by it.
Agent may employ agents and attorneys-in-fact and shall not be liable for the
default or misconduct of any such agents or attorneys-in-fact selected by Agent
with reasonable care.

 

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16.7         Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrower
Representative referring to this Agreement or the Other Documents, describing
such Default or Event of Default and stating that such notice is a “notice of
default”. In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by Required Lenders;
provided, that, unless and until Agent shall have received such directions,
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of Lenders.

 

16.8         Indemnification. To the extent Agent is not reimbursed and
indemnified by Loan Parties, each Lender severally agrees to reimburse and
indemnify Agent in proportion to its respective portion of the outstanding
Revolving Advances (or, if no Revolving Advances are outstanding, pro rata
according to the percentage that its Revolving Commitment Amount constitutes of
the total aggregate Revolving Commitment), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against Agent in performing its duties
hereunder, or in any way relating to or arising out of this Agreement or any
Other Document; provided that Lenders shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent’s gross (not mere)
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment).

 

16.9         Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Revolving Advances made by it shall have
the same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term “Lender” or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
any Loan Party as if it were not performing the duties specified herein, and may
accept fees and other consideration from any Loan Party for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.

 

16.10         Delivery of Documents. To the extent Agent (i) receives schedules,
financial statements, projections or reports required under Sections 10.2, 10.7,
10.8, 10.13, 10.19 or Borrowing Base Certificates from any Loan Party pursuant
to the terms of this Agreement or (ii) prepares or receives any report or
document showing the results of appraisals (other than appraisals included in
any Mortgage File, which shall be available to Lenders upon request) or
environmental reports or field examinations conducted pursuant to the terms of
this Agreement (each, a “Report” and collectively with the items in clause (i)
above, the “Borrower Materials”), Agent will promptly furnish such documents and
information to Lenders to the extent Borrower is not obligated to deliver such
documents and information to each Lender under this Agreement. Each Lender
agrees (a) that Reports are not intended to be comprehensive audits or
examinations, and that Agent or any other Person performing an audit or
examination will inspect only limited information and will rely significantly
upon Loan Parties’ books, records and representations; (b) that Agent makes no
representation or warranty as to the accuracy or completeness of any Borrower
Materials and shall not be liable for any information contained in or omitted
from any Borrower Materials, including any Report; and (c) to keep all Borrower
Materials confidential and strictly for such Lender’s internal use, not to
distribute any Report or other Borrower Materials (or the contents thereof) to
any Person (except to such Lender’s Participants, attorneys and accountants),
and to use all Borrower Materials solely for administration of the Obligations.
Each Lender shall indemnify and hold harmless Agent and any other Person
preparing a Report from any action such Lender may take as a result of or any
conclusion it may draw from any Borrower Materials, as well as from any claims,
liabilities, obligations, losses, damages, penalties, judgments, proceedings,
interest, costs and expenses of any kind arising as a direct or indirect result
of Agent furnishing same to such Lender.

 

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16.11         Loan Parties Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Loan Party hereby undertakes with Agent to pay to Agent from time to time
on demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Loan Party’s obligations to make payments for the account
of Lenders or the relevant one or more of them pursuant to this Agreement.

 

16.12         No Reliance on Agent’s Customer Identification Program. To the
extent the Revolving Advances or this Agreement is, or becomes, syndicated in
cooperation with other Lenders, each Lender acknowledges and agrees that neither
such Lender, nor any of its Affiliates, participants or assignees, may rely on
Agent to carry out such Lender's, Affiliate's, participant's or assignee's
customer identification program, or other obligations required or imposed under
or pursuant to the USA PATRIOT Act or the regulations thereunder, including the
regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the
“CIP Regulations”), or any other Anti-Terrorism Law, including any programs
involving any of the following items relating to or in connection with any of
Loan Parties, their Affiliates or their agents, the Other Documents or the
transactions hereunder or contemplated hereby: (i) any identity verification
procedures, (ii) any recordkeeping, (iii) comparisons with government lists,
(iv) customer notices or (v) other procedures required under the CIP Regulations
or such Anti-Terrorism Laws.

 

16.13         Other Agreements. Each of the Lenders agrees that it shall not,
without the express consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to any Loan Party or any deposit
accounts of any Loan Party now or hereafter maintained with such Lender.
Anything in this Agreement to the contrary notwithstanding, each of the Lenders
further agrees that it shall not, unless specifically requested to do so by
Agent, take any action to protect or enforce its rights arising out of this
Agreement or the Other Documents, it being the intent of Lenders that any such
action to protect or enforce rights under this Agreement and the Other Documents
shall be taken in concert and at the direction or with the consent of Agent or
Required Lenders.

 

16.14         Other Agents. The designation of any Lender as “Co-Syndication
Agent” shall not confer upon it any right, power, obligation, liability,
responsibility or duty under this Agreement. Without limiting the foregoing,
none of the Lenders, or Affiliates thereof, so identified as “Co-Syndication
Agent” shall have or be deemed to have any fiduciary relationship with any
Lender. Each Lender acknowledges that it has not relied, and will not rely, on
any of the parties so identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.

 

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17.MISCELLANEOUS.

 

17.1         GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLIED TO CONTRACTS TO BE
PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK. ANY JUDICIAL PROCEEDING BROUGHT
BY OR AGAINST ANY LOAN PARTY WITH RESPECT TO ANY OF THE OBLIGATIONS, THIS
AGREEMENT OR ANY OTHER DOCUMENT MAY BE BROUGHT IN ANY COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK, UNITED STATES OF AMERICA, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY ACCEPTS FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER DOCUMENT. EACH LOAN PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO BORROWING REPRESENTATIVE
AT ITS ADDRESS SET FORTH IN SECTION 17.6 AND SERVICE SO MADE SHALL BE DEEMED
COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE MAILS
OF THE UNITED STATES OF AMERICA, OR, AT THE AGENT’S AND/OR ANY LENDER’S OPTION,
BY SERVICE UPON THE SECRETARY OF STATE OF THE STATE OF NEW YORK, WHICH EACH LOAN
PARTY IRREVOCABLY APPOINTS AS SUCH LOAN PARTY’S AGENT FOR THE PURPOSE OF
ACCEPTING SERVICE WITHIN THE STATE OF NEW YORK. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
OF AGENT TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER
JURISDICTION. EACH LOAN PARTY WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF
ANY ACTION INSTITUTED HEREUNDER AND SHALL NOT ASSERT ANY DEFENSE BASED ON LACK
OF JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS. ANY JUDICIAL
PROCEEDING BY ANY LOAN PARTY AGAINST AGENT OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER OR CLAIM IN ANY WAY ARISING OUT OF, RELATED TO OR
CONNECTED WITH THIS AGREEMENT OR ANY OTHER DOCUMENT, SHALL BE BROUGHT ONLY IN A
FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK, STATE OF NEW YORK.

 

17.2        Entire Understanding.

 

(a)          This Agreement and the Other Documents executed concurrently
herewith contain the entire understanding between and among each Loan Party,
Agent and each Lender and supersedes all prior agreements and understandings, if
any, relating to the subject matter hereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing, signed by the respective officers of the
party making such promises, representations, warranties, or guarantees. Neither
this Agreement nor any Other Document nor any portion or provisions hereof or
thereof may be changed, modified, amended, waived, supplemented, discharged,
cancelled or terminated orally or by any course of dealing, or in any manner
other than by an agreement in writing, signed by the party to be charged. Each
Loan Party acknowledges that it has been advised by counsel in connection with
the execution of this Agreement and the Other Documents and is not relying upon
oral representations or statements inconsistent with the terms and provisions of
this Agreement or any Other Document.

 

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(b)          Required Lenders, Agent with the consent in writing of Required
Lenders, and Loan Parties may, subject to the provisions of this Section
17.2(b), from time to time enter into written supplemental agreements to this
Agreement or the Other Documents executed by Loan Parties, for the purpose of
adding or deleting any provisions or otherwise changing, varying or waiving in
any manner the rights of Lenders, Agent or Loan Parties thereunder or the
conditions, provisions or terms thereof or waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall:

 

(i)          increase the Revolving Commitment Percentage or the maximum dollar
amount of the Revolving Commitment Amount of any Lender without the consent of
such Lender directly affected thereby;

 

(ii)         whether or not any Revolving Advances are outstanding, extend the
Term or the time for payment of principal or interest of any Revolving Advance
(excluding the due date of any mandatory prepayment of an Revolving Advance), or
any fee payable to any Lender, or reduce the principal amount of or the rate of
interest borne by any Revolving Advances or reduce any fee payable to any
Lender, without the consent of each Lender directly affected thereby (except
that Required Lenders may elect to waive or rescind any imposition of the
Default Rate under Section 3.1 hereof or of default rates of letter of credit
fees (unless imposed by Agent));

 

(iii)        increase the Maximum Revolving Amount without the consent of all
Lenders;

 

(iv)        alter the definition of the term “Required Lenders” or alter, amend
or modify this Section 17.2(b) without the consent of all Lenders;

 

(v)         alter, amend or modify the provisions of Section 12.2 hereof without
the consent of all Lenders;

 

(vi)        release and/or subordinate Agent’s Liens on any Collateral during
any calendar year (other than in accordance with the provisions of this
Agreement) having an aggregate value in excess of the Materiality Threshold
without the consent of all Lenders;

 

(vii)       change the rights and duties of Agent without the consent of all
Lenders;

 

(viii)      subject to clause (e) below, permit any Revolving Advance to be made
if after giving effect thereto the total of Revolving Advances outstanding
hereunder would exceed the Borrowing Base for more than sixty (60) consecutive
Business Days or exceed one hundred and ten percent (110%) of the Borrowing Base
without the consent of each Lender directly affected thereby;

 

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(ix)         increase the Applicable Advance Rate above the Applicable Advance
Rate in effect on the Closing Date or alter the definition of “Eligible Mortgage
Loans” (or adjust the applicability of the criteria therein, including, without
limitation, any part of Annex Two, Part I hereof, the definition of Funding Cap,
or the definition of Funding Requirements) in a manner that has the effect of
increasing the Borrowing Base or the availability of Revolving Advances, in any
case, without the consent of all Lenders;

 

(x)          release any Loan Party without the consent of all Lenders; or

 

(xi)         permit Borrower to assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of Agent and
each Lender.

 

(c)          Any such supplemental agreement shall apply equally to each Lender
and shall be binding upon Loan Parties, Lenders and Agent and all future holders
of the Obligations. In the case of any waiver, Loan Parties, Agent and Lenders
shall be restored to their former positions and rights, and any Event of Default
waived shall be deemed to be cured and not continuing, but no waiver of a
specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.

 

(d)          In the event that Agent requests the consent of a Lender pursuant
to this Section 17.2 and such consent is denied, then Agent may, at its option,
require such Lender to assign its interest in the Revolving Advances to Agent or
to another Lender or to any other Person designated by Agent (the “Designated
Lender”), for a price equal to (i) the then outstanding principal amount thereof
plus (ii) accrued and unpaid interest and fees due such Lender, which interest
and fees shall be paid when collected from Loan Parties. In the event Agent
elects to require any Lender to assign its interest to Agent or to the
Designated Lender, Agent will so notify such Lender in writing within forty five
(45) days following such Lender’s denial, and such Lender will assign its
interest to Agent or the Designated Lender no later than five (5) days following
receipt of such notice pursuant to a Commitment Transfer Supplement executed by
such Lender, Agent or the Designated Lender, as appropriate, and Agent.

 

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(e)          Notwithstanding (i) the existence of a Default or an Event of
Default, (ii) that any of the other applicable conditions precedent set forth in
Section 9.2 hereof have not been satisfied or the commitments of Lenders to make
Revolving Advances hereunder have been terminated for any reason, or (iii) any
other contrary provision of this Agreement, Agent may at its discretion and
without the consent of any Lender, voluntarily permit the outstanding Revolving
Advances at any time to exceed the Borrowing Base by up to ten percent (10%) of
the Borrowing Base for up to thirty (30) consecutive days (the “Out-of-Formula
Loans”); provided, that, Required Lenders may at any time revoke Agent’s
authorization to make or permit Out-of-Formula Loans under this Section 17.2(e)
and any such revocation must be in writing and shall become effective
prospectively upon the Agent’s receipt thereof. If Agent is willing in its sole
and absolute discretion to permit such Out-of-Formula Loans, Lenders holding the
Revolving Commitments shall be obligated to fund such Out-of-Formula Loans in
accordance with their respective Revolving Commitment Percentages, and such
Out-of-Formula Loans shall be payable on demand and shall bear interest at the
Default Rate for Revolving Advances; provided that, if Agent does permit
Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have
changed the limits of Section 2.1(a) nor shall any Lender be obligated to fund
Revolving Advances in excess of its Revolving Commitment. For purposes of this
paragraph, the discretion granted to Agent hereunder shall not preclude
involuntary Overadvances that may result from time to time due to the fact that
the Borrowing Base was unintentionally exceeded for any reason, including, but
not limited to, Collateral previously deemed to be “Eligible Mortgage Loans”,
becomes ineligible, collections of Receivables applied to reduce outstanding
Revolving Advances are thereafter returned for insufficient funds or
Overadvances are made to protect or preserve the Collateral. In the event Agent
involuntarily permits the outstanding Revolving Advances to exceed the Borrowing
Base by more than ten percent (10%), Agent shall use its efforts to have Loan
Parties decrease such excess in as expeditious a manner as is practicable under
the circumstances and not inconsistent with the reason for such excess.
Revolving Advances made after Agent has determined the existence of involuntary
Overadvances shall be deemed to be involuntary Overadvances and shall be
decreased in accordance with the preceding sentence. To the extent any
Out-of-Formula Loans are not actually funded by the other Lenders as provided
for in this Section 17.2(e), Agent may elect in its discretion to fund such
Out-of-Formula Loans and any such Out-of-Formula Loans so funded by Agent shall
be deemed to be Revolving Advances made by and owing to Agent, and Agent shall
be entitled to all rights (including accrual of interest) and remedies of a
Lender holding a Revolving Commitment under this Agreement and the Other
Documents with respect to such Revolving Advances.

 

(f)          In addition to (and not in substitution of) the discretionary
Revolving Advances permitted above in this Section 17.2, Agent is hereby
authorized by Loan Parties and Lenders, at any time in Agent’s sole discretion,
regardless of (i) the existence of a Default or an Event of Default, (ii)
whether any of the other applicable conditions precedent set forth in Section
9.2 hereof have not been satisfied or the commitments of Lenders to make
Revolving Advances hereunder have been terminated for any reason, or (iii) any
other contrary provision of this Agreement, to make Revolving Advances
(“Protective Advances”) to Loan Parties on behalf of Lenders which Agent, in its
reasonable business judgment, deems necessary or desirable (a) to preserve or
protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Revolving Advances and other
Obligations, or (c) to pay any other amount chargeable to Loan Parties pursuant
to the terms of this Agreement; provided, that the aggregate amount of all
Protective Advances and Out-of-Formula Loans shall not exceed ten percent (10%)
of the Maximum Revolving Amount and, provided, further, that at any time after
giving effect to any such Protective Advances and any outstanding Out-of-Formula
Loans, the outstanding Revolving Advances do not exceed the Maximum Revolving
Amount. Lenders holding the Revolving Commitments shall be obligated to fund
such Protective Advances (to the extent permitted above) and effect a settlement
with Agent therefor upon demand of Agent in accordance with their respective
Revolving Commitment Percentages. To the extent any Protective Advances are not
actually funded by the other Lenders as provided for in this Section 17.2(f),
any such Protective Advances funded by Agent shall be deemed to be Revolving
Advances made by and owing to Agent, and Agent shall be entitled to all rights
(including accrual of interest) and remedies of a Lender holding a Revolving
Commitment under this Agreement and the Other Documents with respect to such
Revolving Advances.

 

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17.3        Successors and Assigns; Participations; New Lender.

 

(a)          This Agreement shall be binding upon and inure to the benefit of
Loan Parties, Agent and Lenders, the Bank, each other Lender Party and all
future holders of the Obligations and their respective successors and assigns,
except that no Loan Party may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.

 

(b)          Each Loan Party acknowledges that in the regular course of
commercial banking business any Lender may at any time and from time to time
sell participating interests in the Revolving Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
“Transferee”). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Revolving Advances held by it or other Obligations payable hereunder as fully as
if such Transferee were the direct holder thereof provided that Loan Parties
shall not be required to pay to any Transferee more than the amount which it
would have been required to pay to the Lender which granted an interest in its
Revolving Advances or other Obligations payable hereunder to such Transferee had
such Lender retained such interest in the Revolving Advances hereunder or other
Obligations payable hereunder and in no event shall Loan Parties be required to
pay any such amount arising from the same circumstances and with respect to the
same Revolving Advances or other Obligations payable hereunder to both such
Lender and such Transferee. Each Loan Party hereby grants to any Transferee a
continuing security interest in any deposits, moneys or other property actually
or constructively held by such Transferee as security for the Transferee’s
interest in the Revolving Advances.

 

(c)          Any Lender, with the consent of Agent (not to be unreasonably
withheld or delayed) may sell, assign or transfer all or any part of its rights
under this Agreement and the Other Documents to one or more additional banks or
financial institutions and one or more additional banks or financial
institutions may commit to make Revolving Advances hereunder (each a “Purchasing
Lender”), pursuant to a Commitment Transfer Supplement, executed by a Purchasing
Lender, the transferor Lender, and Agent delivered to Agent for recording. Upon
such execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement, (i)
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Commitment Transfer Supplement, have the rights and obligations of a
Lender thereunder with a Revolving Commitment Percentages set forth therein, and
(ii) the transferor Lender thereunder shall, to the extent provided in such
Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the Revolving
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Each Loan Party hereby consents to the
addition of such Purchasing Lender and the resulting adjustment of the Revolving
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Loan Parties shall execute and deliver
such further documents and do such further acts and things in order to
effectuate the foregoing.

 

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(d)          Any Lender, with the consent of Agent (not to be unreasonably
withheld or delayed) may directly or indirectly sell, assign or transfer all or
any portion of its rights and obligations under or relating to Revolving
Advances under this Agreement and the Other Documents to an entity, whether a
corporation, partnership, trust, limited liability company or other entity that
(i) is engaged in making, purchasing, holding or otherwise investing in bank
loans and similar extensions of credit in the ordinary course of its business
and (ii) is administered, serviced or managed by the assigning Lender or an
Affiliate of such Lender (a “Purchasing CLO” and together with each Participant
and Purchasing Lender, each a “Transferee” and collectively the “Transferees”),
pursuant to a Commitment Transfer Supplement modified as appropriate to reflect
the interest being assigned (“Modified Commitment Transfer Supplement”),
executed by any intermediate purchaser, the Purchasing CLO, the transferor
Lender, and Agent as appropriate and delivered to Agent for recording. Upon such
execution and delivery, from and after the transfer effective date determined
pursuant to such Modified Commitment Transfer Supplement, (i) Purchasing CLO
thereunder shall be a party hereto and, to the extent provided in such Modified
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder and (ii) the transferor Lender thereunder shall, to the extent
provided in such Modified Commitment Transfer Supplement, be released from its
obligations under this Agreement, the Modified Commitment Transfer Supplement
creating a novation for that purpose. Such Modified Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing CLO. Each Loan
Party hereby consents to the addition of such Purchasing CLO. Loan Parties shall
execute and deliver such further documents and do such further acts and things
in order to effectuate the foregoing.

 

(e)          Agent shall maintain at its address a copy of each Commitment
Transfer Supplement and Modified Commitment Transfer Supplement delivered to it
and a register (the “Register”) for the recordation of the names and addresses
of each Lender and the outstanding principal, accrued and unpaid interest and
other fees due hereunder. The entries in the Register shall be conclusive, in
the absence of manifest error, and each Loan Party, Agent and Lenders may treat
each Person whose name is recorded in the Register as the owner of the Revolving
Advance recorded therein for the purposes of this Agreement. The Register shall
be available for inspection by Borrower Representative or any Lender at any
reasonable time and from time to time upon reasonable prior notice. Agent shall
receive a fee in the amount of $3,500 payable by the applicable Purchasing
Lender and/or Purchasing CLO upon the effective date of each transfer or
assignment (other than to an intermediate purchaser) to such Purchasing Lender
and/or Purchasing CLO.

 

(f)          Nothing contained herein, however, shall limit in any way the right
of any Lender to assign all or a portion of the Revolving Advances owing to it
from time to time to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System any Operating Circular issued by such Federal Reserve
Bank, but no such assignment shall release the assigning Lender from its
obligations hereunder.

 

(g)          Each Loan Party authorizes each Lender to disclose to any
Transferee and any prospective Transferee any and all financial information in
such Lender’s possession concerning Loan Parties which has been delivered to
such Lender by or on behalf of such Loan Party pursuant to this Agreement or any
Other Document or in connection with such Lender’s credit evaluation of such
Loan Party.

 

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(h)          Upon a Loan Party's reasonable request, each Lender Party that is a
“United States person” as defined under Section 7701(a)(30) of the Code shall
deliver to Agent and such Loan Party two properly completed and executed IRS
Form W-9 (or applicable successor form) to establish that such Lender Party is
not subject to United States federal backup withholding tax.

 

(i)          Agent shall maintain at one of its offices in the United States a
register for the recordation of the names and addresses of each Lender Party,
and the Obligations of, and principal amount of the Daily LIBOR Rate Loans owing
to, such Lender Party pursuant to the terms hereof. The entries in such register
shall be conclusive, and Loan Parties and Lender Parties may treat each Person
whose name is recorded therein pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. Such register shall be available for inspection by Loan Parties and
any Lender Party, at any reasonable time upon reasonable prior notice to Agent.
The requirement for a register set forth in this Section 17.3(g) shall be
construed so that the Daily LIBOR Rate Loans are at all times maintained in
“registered form” within the meaning of Sections 163(f), 871(h)(2), 881(c)(2)
and 4701 of the Code.

 

17.4         Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that any
Loan Party makes a payment or Agent receives any payment or proceeds of the
Collateral for any Loan Party’s benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.

 

17.5         Indemnity. Each Loan Party shall indemnify each Lender Party, and
each of its respective officers, directors, Affiliates, employees from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever (including, without limitation, fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against such Lender
Party in any litigation, proceeding or investigation instituted or conducted by
any governmental agency or instrumentality or any other Person specifically with
respect to any aspect of, or any transaction contemplated by or any matter
related to, this Agreement or the Other Documents, except to the extent that any
of the foregoing arises out of the willful misconduct or gross negligence of the
party being indemnified.

 

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17.6        Notice. Any notice or request hereunder may be given to any Loan
Party or to Agent at their respective addresses set forth below or at such other
address as may hereafter be specified in a notice designated as a notice of
change of address under this Section. Any notice or request hereunder shall be
given by (a) hand delivery, (b) overnight courier, (c) registered or certified
mail, return receipt requested, or (d) Electronic Transmission subsequently
confirmed by registered or certified mail or (e) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with electronic confirmation of its receipt.
Any notice or other communication required or permitted pursuant to this
Agreement shall be deemed given (a) when personally delivered to any officer of
the party to whom it is addressed, (b) on the earlier of actual receipt thereof
or three (3) days following posting thereof by certified or registered mail,
postage prepaid, or (c) upon actual receipt thereof when sent by a recognized
overnight delivery service or (d) upon actual receipt thereof when sent by
Electronic Transmission or by telecopier to the address or number set forth
below with electronic confirmation of its receipt, in each case addressed to
each party at its address set forth below or at such other address as has been
furnished in writing by a party to the other by like notice:

 

(A) If to Agent at: Webster Business Credit Corporation     360 Lexington Avenue
    New York, New York 10017     Attention: Account Executive – Sachem Capital
Corp.     Fax: (212) 806-4530     Email: mmurphy@websterbcc.com           with a
copy to: Hahn & Hessen LLP     488 Madison Avenue     New York, New York 10022  
  Attention: Daniel D. Batterman, Esq.     Fax: (212) 478-7400     Email:
dbatterman@hahnhessen.com

 

(B)If to any Lender other than Agent, as specified on Schedule 1.1

 

(C)If to Borrower Representative

  or any Loan Party, at: Sachem Capital Corp.     23 Laurel Street     Branford,
CT 06405     Attention: John L. Villano,       Co Chief Executive Officer    
Fax: (203) 483-0082     Email: jlv@sachemcapitalcorp.com           with a copy
to: Morse, Zelnick, Rose & Lander, LLP     825 Third Avenue, 16th Floor     New
York, NY 10022     Attention: Joel J. Goldschmidt, Esq.     Fax: (212) 208-6809
    Email: jgoldschmidt@mzrl.com

 

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17.7         Survival. The obligations of Loan Parties under Sections 3.10,
4.18(h), 17.5 and 17.9 together with any Section, terms or provisions hereof
which by its terms so provides shall survive any termination of this Agreement
and the Other Documents and payment in full of the Obligations.

 

17.8         Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.

 

17.9         Expenses. Loan Parties shall pay (i) all out-of-pocket expenses
incurred by Agent and its Affiliates (including the reasonable fees, charges and
disbursements of counsel for Agent), and shall pay all fees and time charges and
disbursements for attorneys who may be employees of Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
Other Documents or any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated) and (ii) all out-of-pocket expenses incurred by
Agent or any Lender (including the fees, charges and disbursements of any
counsel for Agent or any Lender), and shall pay all fees and time charges for
attorneys who may be employees of Agent or any Lender, in connection with the
enforcement or protection of its rights (A) in connection with this Agreement
and the Other Documents, including its rights under this Section, or (B) in
connection with the Revolving Advances made hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Daily LIBOR Rate Loans.

 

17.10         Rights to Cure. Agent may, in its reasonable credit judgment, with
written notice to Borrower Representative (a) cure any default by any Loan Party
under any Material Agreement that affects the Collateral, its value or the
ability of Agent to collect, sell or otherwise dispose of any Collateral or the
rights and remedies of Agent therein or the ability of any Loan Party to perform
its obligations hereunder or under any of the Other Documents, (b) pay or bond
on appeal any judgment entered against any Loan Party, (c) discharge any
Charges, Liens, security interests or other encumbrances at any time levied on
or existing with respect to the Collateral and (d) pay any amount, incur any
expense or perform any act which Agent, in its Permitted Discretion, determines
is necessary or appropriate to preserve, protect, insure or maintain the
Collateral and the rights of Agent with respect thereto. Agent may add any
amounts so expended to the Obligations and charge Borrowers’ Account therefor,
such amounts to be repayable by Loan Parties on demand, shall bear interest at
the Default Rate until paid in full, shall be part of the Obligations, and shall
be secured by the Collateral. Agent shall be under no obligation to effect such
cure, payment or bonding and shall not, by doing so, be deemed to have assumed
any obligation or liability of any Loan Party. Any payment made or other action
taken by Agent under this Section shall be without prejudice to any right to
assert an Event of Default and to proceed accordingly.

 

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17.11         Injunctive Relief. Each Loan Party recognizes that, in the event
any Loan Party fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders and/or Agent and; therefor, Agent, if Agent so requests, shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving that actual damages are not an adequate remedy.

 

17.12         Consequential Damages. NO LENDER PARTY, NOR ANY AGENT OR ATTORNEY
FOR ANY OF THEM, SHALL BE LIABLE TO ANY LOAN PARTY FOR CONSEQUENTIAL DAMAGES
ARISING FROM ANY BREACH OF CONTRACT, TORT OR OTHER WRONG RELATING TO THE
ESTABLISHMENT, ADMINISTRATION OR COLLECTION OF THE OBLIGATIONS OR ANY RELATED
TRANSACTION.

 

17.13         Third Party Beneficiaries. Except for the Loan Parties, no Person
is intended to be, or shall be permitted, presumed or construed to be, a third
party beneficiary of this Agreement or any Other Document.

 

17.14         Captions. The captions at various places in this Agreement and any
Other Document are intended for convenience only and do not constitute and shall
not be interpreted as part of this Agreement or any Other Document.

 

17.15         Counterparts; Telecopied Signatures; Seal. This Agreement and the
Other Documents may be executed in any number of separate counterparts and by
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute one and the same agreement. Delivery of a counterpart hereto by
facsimile transmission or by Electronic Transmission of an Adobe portable
document format file (also known as a “PDF file”) shall be as effective as
delivery of an original counterpart hereto. If this Agreement or any Other
Document provides for imposition of a seal by any party thereto, the word “seal”
placed adjacent to the party’s name shall be a sufficient indication thereof.

 

17.16         Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and each Other Document and that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement and each Other Document or any amendments, schedules or exhibits
thereto.

 

17.17         Confidentiality. Agent, each Lender Party and each Transferee
shall hold all non-public information obtained by Agent, or any Lender Party
pursuant to the requirements of this Agreement and each Other Document in
accordance with each Lender Party’s customary procedures for handling
confidential information of this nature; provided, however, each Lender Party
may disclose such confidential information (a) to its examiners, affiliates,
outside auditors, counsel and other professional advisors, (b) to any other
prospective Transferees or Purchasing Lender, if, but only if, such prospective
Transferee or Purchasing Lender shall agree in writing to be bound by the
provisions of this Section 17.17, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal process,
including, without limitation, in the course of any regulatory examination of
such Person; provided, further, that (i) unless specifically prohibited by
applicable law or court order, each Lender Party shall use its best efforts
prior to disclosure thereof, to notify the Borrower Representative of the
applicable request for disclosure of such non-public information (A) by a
Governmental Body or representative thereof (other than any such request in
connection with an examination of the financial condition of such Lender Party
by such Governmental Body) or (B) pursuant to legal process and (ii) in no event
shall any Lender Party be obligated to return any materials furnished by any
Loan Party other than those documents and instruments in possession of such
Lender Party in order to perfect its Lien on the Collateral once the Obligations
have been paid in full and this Agreement has been terminated.

 

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17.18         Publicity. Each Loan Party hereby authorizes each Lender Party to
make appropriate announcements of the financial arrangement contemplated
hereunder, including, without limitation, announcements which are commonly known
as “tombstones,” in such publications and to such selected parties as each
Lender Party shall in its sole and absolute discretion deem appropriate. Without
limiting the foregoing Loan Parties authorize each Lender Party to utilize any
logo or other distinctive symbol associated with the Loan Parties in connection
with any such announcement or any other promotion, advertising or marketing
undertaken by each Lender Party. In no event, however, shall any Loan Party use
the name of any Lender Party, or any logo or distinctive symbol associated with
any of them, unless, as appropriate, such Lender Party has given its prior
written consent thereto. Notwithstanding the foregoing, Lenders acknowledge that
the transactions contemplated hereby may be required to be disclosed from time
to time by Sachem in a current report on Form 8-K to be filed with the U.S.
Securities and Exchange Commission and that this Agreement and certain Other
Documents may need to be filed as exhibits to such reports.

 

17.19         Survival of Representations and Warranties. All representations
and warranties of each Loan Party contained in this Agreement and the Other
Documents shall be true at the time of such Loan Party’s execution of this
Agreement and the Other Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto.

 

17.20         Certain Matters of Construction. Unless the context otherwise
requires, (a) the terms “herein”, “hereof” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision; (b) terms used herein in the singular also
include the plural and vice versa; (c) all references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations; (d) all references to any instruments or agreements to which Agent
or any Lender is a party, including, without limitation, references to any of
the Other Documents, shall include any and all modifications or amendments
thereto and any and all extensions or renewals thereof; (e) references herein or
in any Other Document to any actions being taken (or omitted to be taken) by any
Lender Party after a Default shall be presumed to mean, unless otherwise
expressly provided, while such Default or Event of Default is continuing; (f)
any pronoun shall include the corresponding masculine, feminine and neuter
forms; (g) the words “include,” “includes” and “including” shall be deemed to be
followed by the phrase “without limitation”; (h) the word “will” shall be
construed to have the same meaning and effect as the word “shall”; (i) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein);
(j) any reference herein to any Person shall be construed to include such
Person’s successors and assigns (subject to any restrictions on such assignments
set forth herein); (k) the words “herein”, “hereof” and “hereunder”, and words
of similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof; (l) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Section of, and Exhibits and Schedules to, this Agreement; and (m)
the words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.

 

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17.21         Destruction of Invoices. Borrower Representative hereby authorizes
and directs Agent and each Lender in accordance with its standard document
retention policies in such regards to destroy all invoices, agings, inventory
reports, financial statements and other data provided from time to time by Loan
Parties to Agent or any Lender pursuant hereto.

 

17.22         Time. Time is of the essence in this Agreement and each Other
Document. Unless otherwise expressly provided, all references herein and in any
Other Documents to time shall mean and refer to New York time.

 

17.23         Patriot Act. Federal law requires Agent and each Lender to obtain,
verify and record information that identifies each Person that opens an account
or applies for a loan or lease. Loan Parties agree to cooperate with Agent and
each Lender in maintaining compliance with such law on an ongoing basis.

 

17.24         No Tax Advice. Each Loan Party hereby acknowledges and agrees
that, with respect to all tax and accounting matters relating to this Agreement,
the Other Documents, or the transactions contemplated herein and therein, it has
not relied on any representations made, consultation provided by, or advice
given or rendered by any Lender Party or any of its representatives, agents, or
employees; and, instead, each Loan Party has sought, and relied upon, the advice
of its own tax and accounting professionals with respect to all such matters

 

17.25         Completion of Blanks. If this Agreement or any Other Document
contains any blank spaces, such as for dates or amounts, Loan Parties hereby
authorize Agent, in good faith, with written notice to Borrower Representative,
to complete any such blank spaces according to the terms upon which the
transactions contemplated hereby or thereby were contemplated, provided,
however, that the doing thereof shall not increase Loan Parties’ obligations or
diminish Loan Parties’ rights in any manner which is contrary to those set forth
in this Agreement or any Other Documents, unless and except to the extent that
any Event of Default which is then continuing.

 

17.26         Exculpation of Lenders. Nothing herein contained shall be
construed to constitute any Lender Party as any Loan Party’s agent for any
purpose whatsoever, nor shall any Lender Party be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof. No Lender
Party shall, whether by anything herein or in any assignment or otherwise,
assume any Loan Party’s obligations under any contract or agreement assigned to
such Lender Party, and no Lender Party shall be responsible in any way for the
performance by any Loan Party of any of the terms and conditions thereof.

 

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17.27         Electronic Transmissions. Subject to the provisions of this
Section 17.27, each of the Loan Parties, the Agent and the other Lender Parties
is authorized (but not required) to transmit, post or otherwise make or
communicate, in its sole discretion, Electronic Transmissions in connection
herewith and the transactions contemplated herein. Each of the Loan Parties
hereby acknowledges and agrees that the use of Electronic Transmissions is not
necessarily secure and that there are risks associated with such use, including
risks of interception, disclosure and abuse and each indicates it assumes and
accepts such risks by hereby authorizing the transmission of Electronic
Transmissions. All uses of an E-System shall be governed by and subject to, in
addition to the terms and conditions of this Agreement, separate terms and
conditions posted or referenced in such E-System and related contractual
obligations executed by the Loan Parties or Agent in connection with the use of
such E-System. All E-Systems and Electronic Transmissions shall be provided “as
is” and “as available.” Neither Agent nor any other Lender Party warrants the
accuracy, adequacy or completeness of any E-Systems or Electronic Transmission,
and each disclaims all liability for errors or omissions therein. No warranty of
any kind is made by Agent or any Lender Party in connection with any E-systems
or Electronic Transmission, including any warranty or merchantability, fitness
for a particular purpose, non-infringement of third-party rights or freedom from
viruses or other code defects. Each of the Loan Parties agrees that neither
Agent nor any Lender Party has no responsibility for maintaining or providing
any equipment, software, services or any testing required in connection with any
Electronic Transmission or otherwise required for any E-System.

 

18.GUARANTY.

 

18.1         Guaranty. Each Corporate Guarantor hereby unconditionally
guarantees, as a primary obligor and not merely as a surety, jointly and
severally with each other Corporate Guarantor when and as due, whether at
maturity, by acceleration, by notice of prepayment or otherwise, the due and
punctual performance of all Obligations. Each payment made by any Corporate
Guarantor pursuant to this Guaranty shall be made in lawful money of the United
States in immediately available funds.

 

18.2         Waivers. Each Corporate Guarantor hereby absolutely,
unconditionally and irrevocably waives (i) promptness, diligence, notice of
acceptance, notice of presentment of payment and any other notice hereunder,
(ii) demand of payment, protest, notice of dishonor or nonpayment, notice of the
present and future amount of the Obligations and any other notice with respect
to the Obligations, (iii) any requirement that Agent or any Lender protect,
secure, perfect or insure any security interest or Lien on any property subject
thereto or exhaust any right or take any action against any other Loan Party, or
any Person or any Collateral, (iv) any other action, event or precondition to
the enforcement hereof or the performance by each such Corporate Guarantor of
the Obligations, and (v) any defense arising by any lack of capacity or
authority or any other defense of any Loan Party or any notice, demand or
defense by reason of cessation from any cause of Obligations other than payment
and performance in full of the Obligations by the Loan Parties and any defense
that any other guarantee or security was or was to be obtained by Agent.

 

18.3         No Defense. No invalidity, irregularity, voidableness, voidness or
unenforceability of this Agreement or any Other Document or any other agreement
or instrument relating thereto, or of all or any part of the Obligations or of
any collateral security therefor shall affect, impair or be a defense hereunder.

 

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18.4         Guaranty of Payment. The Guaranty hereunder is one of payment and
performance, not collection, and the obligations of each Corporate Guarantor
hereunder are independent of the Obligations of the other Loan Parties, and a
separate action or actions may be brought and prosecuted against any Corporate
Guarantor to enforce the terms and conditions of this Article 18, irrespective
of whether any action is brought against any other Loan Party or other Persons
or whether any other Loan Party or other Persons are joined in any such action
or actions. Each Corporate Guarantor waives any right to require that any resort
be had by Agent or any Lender to any security held for payment of the
Obligations or to any balance of any deposit account or credit on the books of
Agent or any Lender in favor of any Loan Party or any other Person. No election
to proceed in one form of action or proceedings, or against any Person, or on
any Obligations, shall constitute a waiver of Agent’s right to proceed in any
other form of action or proceeding or against any other Person unless Agent has
expressed any such right in writing. Without limiting the generality of the
foregoing, no action or proceeding by Agent against any Loan Party under any
document evidencing or securing indebtedness of any Loan Party to Agent shall
diminish the liability of any Corporate Guarantor hereunder, except to the
extent Agent receives actual payment on account of Obligations by such action or
proceeding, notwithstanding the effect of any such election, action or
proceeding upon the right of subrogation of any Corporate Guarantor in respect
of any Loan Party.

 

18.5         Liabilities Absolute. The liability of each Corporate Guarantor
hereunder shall be absolute, unlimited and unconditional and shall not be
subject to any reduction, limitation, impairment, discharge or termination for
any reason, including, without limitation, any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to any claim,
defense or setoff, counterclaim, recoupment or termination whatsoever by reason
of the invalidity, illegality or unenforceability of any other Obligation or
otherwise. Without limiting the generality of the foregoing, the obligations of
each Corporate Guarantor shall not be discharged or impaired, released, limited
or otherwise affected by:

 

(a)          any change in the manner, place or terms of payment or performance,
and/or any change or extension of the time of payment or performance of,
release, renewal or alteration of, or any new agreements relating to any
Obligation, any security therefor, or any liability incurred directly or
indirectly in respect thereof, or any rescission of, or amendment, waiver or
other modification of, or any consent to departure from, this Agreement or any
Other Document, including any increase in the Obligations resulting from the
extension of additional credit to any Loan Party or otherwise;

 

(b)          any sale, exchange, release, surrender, loss, abandonment,
realization upon any property by whomsoever at any time pledged or mortgaged to
secure, or howsoever securing, all or any of the Obligations, and/or any offset
there against, or failure to perfect, or continue the perfection of, any Lien in
any such property, or delay in the perfection of any such Lien, or any amendment
or waiver of or consent to departure from any other guaranty for all or any of
the Obligations;

 

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(c)          the failure of Agent or any Lender to assert any claim or demand or
to enforce any right or remedy against any Loan Party or any other Loan Party or
any other Person under the provisions of this Agreement or any Other Document or
any other document or instrument executed and delivered in connection herewith
or therewith;

 

(d)          any settlement or compromise of any Obligation, any security
therefor or any liability (including any of those hereunder) incurred directly
or indirectly in respect thereof or hereof, and any subordination of the payment
of all or any part thereof to the payment of any obligation (whether due or not)
of any Loan Party to creditors of any Loan Party other than any other Loan
Party;

 

(e)          any manner of application of Collateral, or proceeds thereof, to
all or any of the Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Obligations or any other assets of any Loan
Party; and

 

(f)          any other agreements or circumstance of any nature whatsoever that
may or might in any manner or to any extent vary the risk of any Corporate
Guarantor, or that might otherwise at law or in equity constitute a defense
available to, or a discharge of, the Guaranty hereunder and/or the obligations
of any Corporate Guarantor, or a defense to, or discharge of, any Loan Party or
any other Person or party hereto or the Obligations or otherwise with respect to
the Revolving Advances or other financial accommodations to Loan Parties
pursuant to this Agreement and/or the Other Documents.

 

18.6         Waiver of Notice. Agent, any Lender and any other Lender Party
shall have the right to do any of the above without notice to or the consent of
any Corporate Guarantor and each Corporate Guarantor expressly waives any right
to notice of, consent to, knowledge of and participation in any agreements
relating to any of the above or any other present or future event relating to
Obligations whether under this Agreement or otherwise or any right to challenge
or question any of the above and waives any defenses of such Corporate Guarantor
which might arise as a result of such actions.

 

18.7         Agent’s Discretion. Agent may at any time and from time to time
(whether prior to or after the revocation or termination of this Agreement)
without the consent of, or notice to, any Corporate Guarantor, and without
incurring responsibility to any Corporate Guarantor or impairing or releasing
the Obligations, apply any sums by whomsoever paid or howsoever realized to any
Obligations regardless of what Obligations remain unpaid.

 

18.8         Reinstatement.

 

 (a)          The Guaranty provisions herein contained shall continue to be
effective or be reinstated, as the case may be, if claim is ever made upon Agent
or any Lender for repayment or recovery of any amount or amounts received by
such Person in payment or on account of any of the Obligations and such Person
repays all or part of said amount for any reason whatsoever, including, without
limitation, by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over such Person or the respective
property of each, or any settlement or compromise of any claim effected by such
Person with any such claimant (including any Loan Party); and in such event each
Corporate Guarantor hereby agrees that any such judgment, decree, order,
settlement or compromise or other circumstances shall be binding upon such
Corporate Guarantor, notwithstanding any revocation hereof or the cancellation
of any note or other instrument evidencing any Obligation, and each Corporate
Guarantor shall be and remain liable to Agent and/or Lenders for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by such Person(s).

 

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(b)          Agent shall not be required to marshal any assets in favor of any
Corporate Guarantor, or against or in payment of Obligations, unless so ordered
by a court of competent jurisdiction.

 

(c)          No Corporate Guarantor shall be entitled to claim against any
present or future security held by Agent from any Person for Obligations in
priority to or equally with any claim of Agent, or assert any claim for any
liability of any Loan Party to any Corporate Guarantor in priority to or equally
with claims of Agent for Obligations, and no Corporate Guarantor shall be
entitled to compete with Agent with respect to, or to advance any equal or prior
claim to any security held by Agent for Obligations.

 

(d)          If any Loan Party makes any payment to Agent, which payment is
wholly or partly subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to any Person under any federal
or provincial statute or at common law or under equitable principles, then to
the extent of such payment, the Obligation intended to be paid shall be revived
and continued in full force and effect as if the payment had not been made, and
the resulting revived Obligation shall continue to be guaranteed, uninterrupted,
by each Corporate Guarantor hereunder.

 

(e)          All present and future monies payable by any Loan Party to any
Corporate Guarantor, whether arising out of a right of subrogation or otherwise,
are assigned to Agent as security for such Corporate Guarantor’s liability to
Agent hereunder and are postponed and subordinated to Agent’s prior right to
payment in full of Obligations. Except to the extent prohibited otherwise by
this Agreement, all monies received by any Corporate Guarantor from any Loan
Party shall be held by such Corporate Guarantor as agent and trustee for Agent.
This assignment, postponement and subordination shall only terminate when the
Obligations are paid in full in cash and this Agreement is irrevocably
terminated.

 

(f)          Each Loan Party acknowledges this assignment, postponement and
subordination and, except as otherwise set forth herein, agrees to make no
payments to any Corporate Guarantor without the prior written consent of Agent.
Each Loan Party agrees to give full effect to the provisions hereof.

 

[Signature pages follow]

 

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Each of the parties has signed this Agreement as of the day and year first above
written.

 

  “BORROWERS”       SACHEM CAPITAL CORP.         By: /s/ John Villano   Name:
John Villano, CPA   Title: Co - CEO

 

[Signature Page to Credit and Security Agreement]

 

   

 

  

  “CORPORATE GUARANTORS”       SACHEM CAPITAL REALTY, LLC         By: /s/ John
Villano   Name: John Villano   Title: Manager         SACHEM CAPITAL PARTNERS,
LLC         By: /s/ John Villano   Name: John Villano   Title: Manager

 

[Signature Page to Credit and Security Agreement]

 

   

 

  

  WEBSTER BUSINESS CREDIT CORPORATION, as Agent and a Lender         By: /s/
Matthew Murphy   Name: Matthew Murphy   Title: Senior Vice President

 

[Signature Page to Credit and Security Agreement]

 

   

 

  

  BANKWELL BANK, as Co-Syndication Agent and a Lender         By: /s/ Paul
Larsen   Name: Paul Larsen   Title: Senior Vice President

 

[Signature Page to Credit and Security Agreement]

 

   

 

  

  BERKSHIRE BANK, as a Lender         By: /s/ Diane Williams   Name: Diane
Williams       Title: Vice President

 

[Signature Page to Credit and Security Agreement]

 

   

 

  

ANNEX ONE — GENERAL DEFINITIONS

 

This Annex One is incorporated by reference into, and constitutes an integral
part of, the Credit and Security Agreement, dated as of May 11, 2018 (as it may
be amended or modified from time to time, the “Credit Agreement”), made by and
among (i) SACHEM CAPITAL CORP., a New York corporation (“Sachem”; and together
with each Person joined hereto as a Borrower from time to time, collectively the
“Borrowers”, and each, a “Borrower”), (ii) the Corporate Guarantors signatory
hereto (collectively with Borrowers, each, a “Loan Party” and collectively, the
“Loan Parties”); (iii) the financial institutions who are now or hereafter
become parties thereto as lenders (collectively, the “Lenders” and each
individually, a “Lender”) and (iv) WEBSTER BUSINESS CREDIT CORPORATION, a New
York corporation (“WBCC”), individually, as a Lender thereunder and as agent for
itself and each other Lender Party (as hereinafter defined) (WBCC, acting in
such agency capacity, the “Agent”); and (v) BANKWELL BANK, a Connecticut state
non-member bank, individually, as a Lender thereunder and as co-syndication
agent (“Co-Syndication Agent”). The following terms shall have the following
meanings as and when used in the Credit Agreement and the Other Documents.
References in such defined terms to “this Agreement,” “hereof,” “hereto” or the
like, shall mean and refer to the Credit Agreement.

 

“698 Main Street Property” shall mean the real property owned by Sachem Capital
Partners, LLC located at 698 Main Street, Branford, CT 06405.

 

“Accepted Servicing Practices” shall mean, with respect to any Mortgage Loan,
those mortgage servicing practices of prudent mortgage lending institutions
which service mortgage loans of the same type as such Mortgage Loans in the
jurisdiction where the related Mortgaged Property is located.

 

“Accountants” shall have the meaning set forth in Section 10.7 hereof.

 

“Affiliate” of any Person shall mean (a) any Person which, directly or
indirectly, is in Control of, is Controlled by, or is under common Control with
such Person, or (b) any Person who is a shareholder, director, officer or
employee (or relative of any shareholder, director, officer or employee) (i) of
such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. Solely for purposes of determining Affiliate
status, “Control” of a Person shall mean the power, direct or indirect, (x) to
vote ten percent (10%) or more of the Equity Interests having ordinary voting
power for the election of the directors, partners or managers of such Person, or
(y) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.

 

“Agent” shall have the meaning set forth in the preamble to this Agreement and
shall include its successors and assigns.

 

“Agent Fee Letter” shall mean that certain Fee Letter, dated as of the Closing
Date, among the Loan Parties and Agent executed in connection with this
Agreement.

 

“Agent Provided Bank Products” shall mean Bank Products provided by Agent, Bank
or any Affiliate of Agent or Bank.

 

 Annex One - 1 

 

 

“Agreement” shall have the meaning set forth in the preamble to this Agreement.

 

“Annex One” shall mean this Annex One attached to this Agreement.

 

“Annex Two” shall mean Annex Two attached to this Agreement.

 

“Anti-Terrorism Laws” shall mean any Laws relating to terrorism, trade sanctions
programs and embargoes, import/export licensing, money laundering or bribery,
and any regulation, order, or directive promulgated, issued or enforced pursuant
to such Laws, all as amended, supplemented or replaced from time to time.

 

“Applicable Advance Rate” shall mean seventy five percent (75%).

 

“Applicable Margin” shall mean four percent (4%).

 

“Application Date” shall have the meaning given to such term in Section 4.14(g)
hereof.

 

“Assignment of Mortgage” shall mean an assignment executed by Loan Parties for
the benefit of Agent, for the ratable benefit of the Lender Parties, which
assigns to Agent, for the ratable benefit of the Lender Parties, all of Loan
Party’s rights in a mortgage or deed of trust that secures a Mortgage Loan, such
assignment (a) to be in recordable form and otherwise satisfactory to Agent and
(b) to be held by Agent, subject to the provisions of Section 4.2(a) (ix)
hereof.

 

“Availability Reserves” shall mean such reserves as Agent, in its Permitted
Discretion, may elect to impose from time to time in respect of borrowing
availability.

 

“Bank” shall mean Webster Bank, National Association, together with its
successors and assigns.

 

“Bank Products” shall mean, collectively, (i) any cash management service,
including through the use of any Blocked Account, (ii) any Hedge Contract, (iii)
any derivative product or (iv) any, similar (or dissimilar) bank product or
service offered by the Bank, any Lender or any Affiliate of the Bank (including
Agent) to any Loan Party from time to time.

 

“Bankwell Mortgage” shall mean that certain mortgage in favor of Bankwell Bank
on the 698 Main Street Property, which mortgage secures the Bankwell Mortgage
Loan.

 

“Bankwell Mortgage Loan” shall mean the mortgage term loan made by Bankwell Bank
to Sachem Capital Partners, LLC evidenced by that certain $310,000 Promissory
Note, dated as of December 29, 2016, of which approximately $297,769 remains
outstanding as of the Closing Date.

 

“Blocked Account” shall have the meaning given to such term in Section 4.14(e)
hereof.

 

 Annex One - 2 

 

 

“Blocked Account Agreement” shall have the meaning given to such term in Section
4.14(e) hereof.

 

“Blocked Account Bank” shall have the meaning given to such term in
Section 4.14(e) hereof.

 

“Borrower” or “Borrowers” shall have the meaning set forth in the preamble to
this Agreement; and shall extend to all permitted successors and assigns of such
Persons.

 

“Borrower Representative” shall mean Sachem or such other Person among the Loan
Parties as the Loan Parties may elect.

 

“Borrower Reports” shall man any reports (whether financial, with respect to
Collateral, as to operating condition or otherwise) required to be delivered to
Agent pursuant hereto or to any Other Document, including, particularly,
pursuant to Article 10.

 

“Borrowers on a consolidated basis” shall mean, as appropriate, the
consolidation in accordance with GAAP of the accounts or other items of
Borrowers and their respective Subsidiaries (if any).

 

“Borrowers’ Account” shall have the meaning set forth in Section 2.7 hereof.

 

“Borrowing Base” shall mean the sum of the following: (i) the product of the
Applicable Advance Rate times the lesser of (x) the Collateral Value of Eligible
Mortgage Loans or (y) the Funding Cap applicable to such Eligible Mortgage
Loans; minus (ii) the Availability Reserves. It is understood and agreed by
Borrowers in connection with the foregoing that any imposition (or increase) in
any Availability Reserves or any change in the composition of Eligible Mortgage
Loans instituted by Agent pursuant hereto from time to time may limit or
restrict the amount of Revolving Advances available to Borrowers hereunder.

 

“Borrowing Base Certificate” shall have the meaning set forth in Section 10.10
hereof.

 

“Business Day” shall mean any day other than a day on which commercial banks in
New York and Connecticut are authorized or required by law to close.

 

“Capital Expenditures” shall have the meaning set forth in Section 8.1 hereof.

 

“Capitalized Lease Obligations” shall have the meaning set forth in Section 8.1
hereof.

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

 

 Annex One - 3 

 

 

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental Body
or (c) the making or issuance of any guideline or directive (whether or not
having the force of law) by any Governmental Body; provided, however, for the
purposes of this Agreement: (x) the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all requests, rules, guidelines or directives thereunder or
issued in connection therewith and (y) all requests, rules, guidelines or
directives promulgated by the Bank for International Settlements, the Basel
Committee on Banking Supervision (or any successor or similar authority) or the
United States regulatory authorities, in each case pursuant to Basel III, shall
in each case be deemed to be a “Change in Law”, regardless of the date enacted,
adopted or issued.

 

“Change of Management” shall mean that if neither Principal is actively involved
in the day-to-day executive management of Loan Parties, either by death,
disability, retirement, termination of employment or otherwise.

 

“Change of Control” shall mean: (a) any person or group of persons (within the
meaning of Section 13(d) or 14(a) of the Exchange Act) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC
under the Exchange Act) of twenty percent (20%) or more of the voting Equity
Interests of Sachem; provided, however, that any increase in the beneficial
ownership of voting Equity Interests of Sachem held by either or both the
Principals shall not constitute a Change of Control; or (b) during any period of
twelve (12) consecutive months, a majority of the members of the board of
directors of Sachem ceases to be composed of individuals (i) who were members of
that board or equivalent governing body on the first day of such period, (ii)
whose election or nomination to that board was approved by individuals referred
to in clause (i) above constituting at the time of such election or nomination
at least a majority of that board, or (iii) whose election or nomination to that
board was approved by individuals referred to in clauses (i) and (ii) above
constituting at the time of such election or nomination at least a majority of
that board; or (c) any merger, consolidation or sale of substantially all of the
property or assets of any Loan Party, except to another Loan Party.

 

“Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, license, withholding, payroll, employment, social security,
unemployment, excise, severance, stamp, occupation and property taxes, custom
duties, fees, assessments, liens, claims and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional
amounts, imposed by any taxing or other authority, domestic or foreign
(including, without limitation, the PBGC or any environmental agency or
superfund), upon any Collateral, any Loan Party or any of its Affiliates.

 

“Closing Date” shall mean the date on which the Initial Revolving Advance is
made, which date may be on the Signing Date but, unless otherwise approved by
Agent, in its credit judgment, shall not be later than ten (10) days after the
Signing Date.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time and the regulations promulgated thereunder.

 

 Annex One - 4 

 

  

“Collateral” shall mean and include all assets of each Loan Party (subject to
the limitation on Equity Interests set forth in subsection (f) below),
including, without limitation, all of the following assets:

 

(a)          all Receivables;

 

(b)          all Equipment;

 

(c)          all General Intangibles;

 

(d)          all Inventory;

 

(e)          all Contract Rights;

 

(f)          all Equity Interests of each Domestic Subsidiary, and sixty-five
percent (65%) of the Equity Interests of each Foreign Subsidiary;

 

(g)          all Securities;

 

(h)          all Leasehold Interests;

 

(i)          all commercial Tort Claims (including, particularly any described
in Schedule 5.8);

 

(j)          all of each Loan Party’s right, title and interest in and to
(i) its respective goods and other property including, but not limited to, all
merchandise returned or rejected by Mortgagor Customers, relating to or securing
any of the Receivables; (ii) all of each Loan Party’s rights as a consignor, a
consignee, an unpaid vendor, mechanic, artisan, or other lienor, including
stoppage in transit, setoff, detinue, replevin, reclamation and repurchase;
(iii) all additional amounts due to any Loan Party from any Mortgagor Customer
relating to the Receivables; (iv) other property, including warranty claims,
relating to any goods securing this Agreement; (v) all of each Loan Party’s
contract rights, rights of payment which have been earned under a contract
right, instruments, investment property, documents, chattel paper, warehouse
receipts, deposit accounts, money and securities; (vi) if and when obtained by
any Loan Party, all real and personal property of third parties in which such
Loan Party has been granted a lien or security interest as security for the
payment or enforcement of Receivables; (vii) all supporting obligations that
secure payment or performance of any account, chattel paper, document, general
intangible, instrument or investment property; (viii) all Extraordinary Receipts
and (ix) any other goods, personal property or real property now owned or
hereafter acquired in which any Loan Party has expressly granted a security
interest or may in the future grant a security interest to Agent hereunder, or
in any amendment or supplement hereto or thereto, or under any Other Document
between Agent and any Loan Party and (x) any and all indebtedness owing to a
Loan Party and any and all Collateral securing such indebtedness;

 

(k)          all Mortgage Loan Collateral;

 

(l)          all of each Loan Party’s ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by any Loan Party or in which it has an interest), computer
programs, tapes, disks and documents relating to clauses (a) through (l) of this
definition; and

 

 Annex One - 5 

 

 

(m)          all proceeds and products of clauses (a) through (m) of this
definition, in whatever form, including, but not limited to: cash, Deposit
Accounts (whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds.

 

Notwithstanding the foregoing, upon the consummation of a Permitted Commercial
Loan Financing and until the repayment in full thereof, Collateral shall not
include any Commercial Loans.

 

“Collateral Assignment” shall mean a collateral assignment by a Mortgagor
Customer to Loan Party of all rents, issues and profits of Mortgaged Property.

 

“Collateral Locations” shall have the meaning assigned to such term in
Section 4.5 hereof.

 

“Collateral Value” shall mean, with respect to each Eligible Mortgage Loan, an
amount determined by Agent in its Permitted Discretion equal to the lesser of
(a) the outstanding principal balance of such Mortgage Loan and (b) the Market
Value of such Mortgage Loan; provided, however, the Collateral Value shall be
deemed to be zero with respect to each Mortgage Loan (i) in respect of which
there is a breach of a representation and warranty set forth on Annex Two
(assuming each representation and warranty is made as of the date Collateral
Value is determined) or (ii) in respect of which there is a delinquency in the
payment of principal and/or interest which continues for a period in excess of
thirty (30) days (without regard to any applicable grace periods).

 

“Commercial Loan Files” shall have the meaning set forth in Section 4.3(b).

 

“Commercial Loans” shall mean Mortgage Loans secured by Commercial Mortgaged
Property.

 

“Commercial Mortgaged Property” shall mean Mortgaged Property used primarily for
non-residential purposes, existing on and after the date a Permitted Commercial
Loan Financing is consummated.

 

“Commitment” or “Commitments” shall mean the aggregate amount of the total
commitments of each Lender or all Lenders (as the case may be) to make Revolving
Advances under this Agreement as in effect on the Closing Date.

 

“Commitment Letter” shall mean any Commitment Letter heretofore issued by Agent
or any Lender to Loan Parties, or Borrower Representative on their behalf
relative to the undertakings contemplated hereby.

 

“Commitment Transfer Supplement” shall mean a document in the form of
Exhibit 17.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent, by which the Purchasing Lender purchases and assumes a
portion of the obligation of a Lender to make Revolving Advances under this
Agreement.

 

 Annex One - 6 

 

 

“Compliance Certificate” shall have the meaning set forth in Section 10.8
hereof.

 

“Concentration Account” shall mean a Blocked Account into which collections from
all other Blocked Accounts are concentrated. If there is only one Blocked
Account, it shall also be the Concentration Account and must be a Deposit
Account with the Bank.

 

“Concentration Bank” shall mean the Blocked Account Bank selected by Agent at
which the Concentration Account is to be opened and maintained pursuant to a
Blocked Agreement. If there is only one Blocked Account Bank, it shall be the
Concentration Bank.

 

“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and other third parties, domestic or foreign, (i) necessary to carry on any Loan
Party’s business, including, without limitation, any consents required under all
applicable federal, state or other applicable law, and (ii) required to
effectuate the transactions and agreements contemplated in this Agreement and
the Other Documents.

 

“Contract Rights” shall mean all rights of each Loan Party arising under or in
connection with any contract, to the extent that such Loan Party may grant a
security interest in such rights under such contract. “Contract Rights” shall
include, without limitation, all rights of each Loan Party under all license
agreements to which it is party as licensor or licensee and all letter of credit
rights of each Loan Party.

 

“Control” has the meaning set forth in the definition of Affiliate.

 

“Controlled Group” shall mean all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with any Loan Party, are treated as a single employer under
Section 414 of the Code.

 

“Corporate Guarantor” or “Corporate Guarantors” shall mean any Persons (other
than individuals), including their permitted successors and assigns, who may
hereafter become a signatory hereto as a guarantor of the payment and
performance of all the Obligations pursuant to Article 18 hereof.

 

“Co-Syndication Agent” shall have the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.

 

“Co-Syndication Agent Fee Letter” shall mean that certain Fee Letter, dated as
of the Closing Date, among the Loan Parties and Co-Syndication Agent executed in
connection with this Agreement.

 

“Covered Entity” shall mean (a) each Loan Party, each of Loan Party’s
Subsidiaries, all Guarantors and all pledgors of Collateral and (b) each Person
that, directly or indirectly, is in control of a Person described in clause (a)
above. For purposes of this definition, control of a Person shall mean the
direct or indirect (x) ownership of, or power to vote, 25% or more of the issued
and outstanding Equity Interests having ordinary voting power for the election
of directors of such Person or other Persons performing similar functions for
such Person, or (y) power to direct or cause the direction of the management and
policies of such Person whether by ownership of Equity Interests, contract or
otherwise.

 

 Annex One - 7 

 

 

“Customer Group” shall mean, collectively a Mortgagor Customer, each Affiliate
of a Mortgagor Customer and each of its common guarantors and/or related
entities.

 

“Customer Guaranty” shall mean the joint and several guaranty of payment of an
Eligible Mortgage Loan, executed by all principals of a Mortgagor Customer,
substantially in form and content set forth as Exhibit E hereto.

 

“Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by the
Agent by dividing (x) the Published Rate by (y) a number, expressed as a
decimal, equal to 1.00 minus the Reserve Percentage. Such rate is not
necessarily the best or lowest rate of interest charged by Agent in connection
with extensions of credit to borrowers and shall be subject to increase or
decrease as the case may be effective as of the day any such change occurs.

 

“Daily LIBOR Rate Loan” shall mean any Revolving Advance that bears interest
based upon the Daily LIBOR Rate.

 

“Default” shall mean an event which, with the giving of notice or passage of
time or both, would constitute an Event of Default.

 

“Default Rate” shall have the meaning set forth in Section 3.1 hereof.

 

“Defaulting Lender” shall mean any Lender that: (a) has failed, within two (2)
Business Days of the date required to be funded or paid, to (i) fund any portion
of its applicable Revolving Commitment Percentage of Revolving Advances, (ii) if
applicable, fund any portion of its participation in letters of credit issued
pursuant to this agreement or (iii) pay over to Agent, any Lender or any other
Lender Party any other amount required to be paid by it hereunder, unless, in
the case of clause (i) above, such Lender notifies Agent in writing that such
failure is the result of such Lender’s good faith determination that a condition
precedent to funding (specifically identified and including a particular Default
or Event of Default, if any) has not been satisfied; (b) has notified Loan
Parties or Agent in writing, or has made a public statement to the effect, that
it does not intend or expect to comply with any of its funding obligations under
this Agreement or generally under any other agreements in which it commits to
extend credit; (c) has failed, within two (2) Business Days after request by
Agent, acting in good faith, to provide a certification in writing from an
authorized officer of such Lender that it will comply with its obligations (and
is financially able to meet such obligations) to fund prospective Revolving
Advances and, if applicable, participations in then outstanding letters of
credit under this Agreement, provided that such Lender shall cease to be a
Defaulting Lender pursuant to this clause (c) upon Agent’s receipt of such
certification in form and substance satisfactory to the Agent; (d) has become
the subject of an Insolvency Event; or (e) has failed at any time to comply with
the provisions of Section 2.13(b) with respect to purchasing participations from
the other Lenders, whereby such Lender’s share of any payment received, whether
by setoff or otherwise, is in excess of its pro rata share of such payments due
and payable to all of the Lenders.

 

 Annex One - 8 

 

 

“Deposit Account” shall mean any checking account, savings account, time deposit
account, certificate of deposit, investment account or other account (howsoever
denominated), in which from time to time any cash of any Loan Party is or may be
deposited.

 

“Designated Lender” shall have the meaning set forth in Section 17.2(d) hereof.

 

“Designated Officer” shall mean the chief executive officer, chief financial
officer or chief operating officer of a Loan Party (regardless of title), or
such other officer, lender or representative of a Loan Party which Agent may, at
such Loan Party’s request, permit to be a “Designated Officer” from time to
time.

 

“Dollars” and the sign “$” shall mean lawful money of the United States of
America.

 

“Domestic Subsidiary” shall mean a Subsidiary organized under the laws of the
United States or any political subsidiary thereof.

 

“Early Termination Date” shall have the meaning set forth in Section 14.1
hereof.

 

“Early Termination Fee” shall have the meaning set forth in Section 14.1 hereof.

 

“EBITDA” shall have the meaning set forth in Section 8.1 hereof.

 

“Electronic Transmission” means each document, notice, demand, instruction,
authorization, file, information and any other communication transmitted, posted
or otherwise made or communicated by e-mail or E-Fax, or otherwise to or from an
E-System or other equivalent service (agreed to by Agent).

 

“Eligible Mortgage Loans” shall mean Mortgage Loans secured by a first mortgage
lien on real property, (a) as to which the representations and warranties in
Section 4.2 and Annex Two, Part I hereof are correct, (b) as to which the LTV is
not greater than seventy percent (70%), (c) as to which the principal amount of
such Mortgage Loans do not exceed the applicable Funding Caps, (d) (i) with
respect to Mortgage Loans made prior to the Closing Date, as to which the
Mortgage Note has a stated maturity that does not exceed thirty-six (36) months
and does not provide for, or have, any extension beyond thirty-six (36) months
from the original due date of such Mortgage Note (ii) with respect to Mortgage
Loans made after the Closing Date, as to which the Mortgage Note has a stated
maturity that does not exceed twenty-four (24) months and does not provide for,
or have, any extension beyond twenty-four (24) months from the original due date
of such Mortgage Note, (e) as to which the Mortgage File has been delivered to
Agent and the Funding Requirements have been satisfied, and (f) that were
approved by Agent in its Permitted Discretion for inclusion as Collateral;
provided that, in no event shall any Eligible Mortgage Loan be (i) a security
for purposes of any securities or blue-sky laws or (ii) a mortgage lien on real
property used primarily for commercial purposes.

 

“Environmental Complaint” shall have the meaning set forth in Section 4.19(d)
hereof.

 

 Annex One - 9 

 

 

“Environmental Laws” shall mean all federal, state and local environmental, land
use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.

 

“Equity Interests” shall mean: (i) in the case of a corporation, its capital
stock, including its common stock and any preferred stock; (ii) in the case of a
partnership, all partnership interests therein, including special, limited and
general interests; (iii) in the case of a limited liability company, all
membership interests therein; and (iv) in the case of any other entity, all
interests evidencing equity ownership therein.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.

 

“E-System” means any electronic system, including Intralinks®, Syndtrak and any
other internet or extranet-based site, whether such electronic system is owned,
operated or hosted by Agent, any Lender Party or any other Person, providing for
access to data protected by passcodes or other security system.

 

“Event of Default” shall mean the occurrence and continuance of any of the
events set forth in Article 11 hereof.

 

“Existing Loans” shall mean all Indebtedness owing by Loan Parties on the
Closing Date under one or more loan facilities with Bankwell Bank (other than
the Bankwell Mortgage Loan).

 

“Extraordinary Receipts” shall mean any cash proceeds received by a Loan Party
or any of its Subsidiaries not in the Ordinary Course of Business, including,
without limitation, (i) foreign, United States, state or local tax refunds, (ii)
pension plan reversions, (iii) judgments, proceeds of settlements or other
consideration of any kind in connection with any cause of action, (v)
condemnation awards (and payments in lieu thereof), (vi) indemnity payments and
(vii) any adjustment received in connection with any purchase price in respect
of an acquisition.

 

“Federal Funds Rate” shall mean, for any day, the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day which
is a Business Day, the average of quotations for such day on such transactions
received by the Bank from three Federal funds brokers of recognized standing
selected by the Bank.

 

“Financial Covenants” shall mean the financial covenants set forth in Article 8.

 

“Fiscal Year” shall mean Loan Parties’ Fiscal Year as in effect on the Signing
Date; and the terms “Fiscal Quarter” and “Fiscal Month” shall have correlative
meanings.

 

 Annex One - 10 

 

 

“Fixed Charge Coverage Ratio” shall have the meaning set forth in Section 8.1
hereof.

 

“Fixed Charges” shall have the meaning set forth Section 8.1 hereof.

 

“Foreign Subsidiary” shall mean any Subsidiary which is not a Domestic
Subsidiary.

 

“Funding Caps” shall mean (i) with respect to any single Mortgage Loan, the
principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) and
(ii) with respect to Mortgage Loans owing at any one time by any Customer Group
to Borrowers, an aggregate principal amount of Four Million Dollars
($4,000,000).

 

“Funded Indebtedness” shall have the meaning set forth in Section 8.1 hereof.

 

“Funding Date” shall mean the date upon which a Revolving Advance is made
hereunder.

 

“Funding Requirements” shall mean, (a) with respect to each Revolving Advance
other than Table Funding Advances, the following requirements:

 

(i)          Borrowers shall submit to Agent a Notice of Borrowing.

 

(ii)         Borrowers shall provide to Agent the executed original Eligible
Mortgage Loan duly endorsed to Agent or, in lieu of such endorsement, an allonge
executed by Borrowers with respect thereto in form and substance satisfactory to
Agent, together with all related Mortgage Loan Documents which in the case of
Mortgage Loan Documents to be filed or recorded, shall be the non-recorded,
executed, duplicate originals thereof provided that all such recorded related
Mortgage Loan Documents shall be forwarded directly to Agent to the address set
forth in Section 17.6.

 

(iii)        Borrowers shall provide to Agent a Related Title Policy.

 

(iv)        All payments required to be made on such Eligible Mortgage Loan
shall have been made and credited. No default, breach, violation or other event
shall have occurred under the terms of such Eligible Mortgage Loan or any
related Mortgage Loan Document. There shall have been no amendment, modification
or waiver to such Eligible Mortgage Loan or any of such related Mortgage Loan
Documents.

 

(v)         Within two (2) Business Days after Agent’s receipt of such Notice of
Borrowing, Eligible Mortgage Loan, related Mortgage Loan Documents and Related
Title Policy, Agent shall either (x) provide such funding as is so requested,
but, in any event, not in excess of the Applicable Advance Rate, and provided
that, after giving effect to such requested Revolving Advance, the aggregate
amount of all outstanding Revolving Advances is not in excess of the lesser of
(i) the Borrowing Base, or (ii) the Maximum Revolving Amount, or (y) advise
Borrowers that Agent, in its sole discretion, will not make such requested
Revolving Advance.

 

 Annex One - 11 

 

 

(b)          Table Funding Advances. With respect to Revolving Advances which
are requested by Borrowers prior to the funding by Borrowers of the Eligible
Mortgage Loan to which such requested Revolving Advance relates (“Table Funding
Advances”), an independent attorney or title insurance company, in all respects
acceptable to Agent in its sole and absolute discretion shall act as Escrow
Agent (the “Escrow Agent”) pursuant to the Escrow Agreement attached hereto as
Exhibit A with respect to each such Revolving Advance, which Escrow Agreement
shall be subject to such additional changes or requirement as Agent may
determine form time to time. The procedure respecting each such Table Funding
Advance shall be as follows:

 

(i)          At least one (1) Business Day prior to the date such Revolving
Advance is requested to be made, Borrowers shall provide written notification of
such request by forwarding to Agent the Notice of Borrowing form together with
the term sheet substantially in the form of Exhibit D (or equivalent document)
and related materials; provided that in lieu of an appraisal as set forth in
section (g) of the definition of Mortgage File, Borrowers shall provide an
internal valuation of the Mortgaged Property described in the Mortgage which
secures such Mortgage Note, which valuation shall be acceptable to Agent in form
and content.

 

(ii)         In the event Agent, in its sole discretion, shall elect to make
such Revolving Advance, such Revolving Advance shall be made to the Escrow Agent
to an account at the Agent designated by the Escrow Agent and existing solely
for the purpose of receiving such Revolving Advances.

 

(iii)        The Escrow Agent shall hold such Revolving Advance pending receipt
by the Escrow Agent of (i) a fully executed Mortgage Note endorsed to Agent as
follows: “Pay to the order of Webster Business Credit Corporation as Agent” or,
in lieu of such endorsement, an allonge executed by Borrowers with respect
thereto in form and substance satisfactory to Agent, (ii) fully executed related
Mortgage Loan Documents and (iii) fully executed assignments of all related
Mortgage Loan Documents to Agent.

 

(iv)        Upon the issuance by or caused by the Escrow Agent of a Related
Title Policy duly endorsed to Agent as first mortgagee, the Escrow Agent may
release such Revolving Advance to Borrowers.

 

(v)         Within two (2) Business Days after the Escrow Agent has released
such Revolving Advance, the Escrow Agent shall send to Agent by a nationally
recognized receipted overnight delivery service the following: (i) such endorsed
Eligible Mortgage Loan, (ii) all related Mortgage Loan Documents and assignments
thereof, which in the case of related Mortgage Loan Documents to be filed or
recorded, shall be the non-recorded executed duplicate originals thereof
(provided that such recorded Mortgage Loan Documents shall be forwarded directly
to Agent) and (iii) such title insurance policy and endorsement.

 

(vi)        No Table Funding Advances shall be made if after giving effect
thereto the outstanding balance of all Table Funding Advances (i.e., before all
documentation required to be received by Agent is in fact in Agent’s possession)
would exceed Two Million Dollars ($2,000,000) in the aggregate.

 

 Annex One - 12 

 

 

(vii)       The Escrow Agent shall mark the Mortgage and other recorded Mortgage
Loan Documents to be returned directly to Agent to the address set forth in the
Agreement.

 

“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time.

 

“General Intangibles” shall mean and include as to each Loan Party all of such
Loan Party’s general intangibles, whether now owned or hereafter acquired
including, without limitation, all payment intangibles, choses in action, causes
of action, corporate or other business records, inventions, designs, patents,
patent applications, equipment formulations, manufacturing procedures, quality
control procedures, trademarks, trade names, service marks, trade secrets,
goodwill, copyrights, design rights, registrations, licenses, license fees,
franchises, customer lists, tax refunds, tax refund claims, pension fund
refunds, pension fund refund claims, overpayments, overpayment claims,
reclamation rights, computer programs, software, all claims under guaranties,
security interests or other security held by or granted to such Loan Party to
secure payment of any of the Receivables by a Mortgagor Customer, all rights of
indemnification and all other intangible property of every kind and nature
(other than Receivables).

 

“Governmental Body” shall mean any nation or government, any state or other
political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.

 

“Guarantor” shall mean any Person (other than a Loan Party) who may hereafter
guarantee payment or performance of the whole or any part of the Obligations.
“Guarantors” means collectively all such Persons.

 

“Guaranty” shall mean any guaranty of the payment or performance of the whole or
any part of the Obligations, in whole or in part, executed at any time by a
Guarantor in favor of Agent for the ratable benefit of Agent.

 

“Hazardous Discharge” shall have the meaning set forth in Section 4.18(d)
hereof.

 

“Hazardous Substance” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, Hazardous Wastes, hazardous or Toxic Substances or related materials
as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49
U.S.C. Section 1801, et seq.), RCRA, Articles 15 and 27 of the New York State
Environmental Conservation Law or any other applicable Environmental Law and in
the regulations adopted pursuant thereto.

 

“Hazardous Wastes” shall mean all waste materials subject to regulation under
CERCLA, RCRA or applicable state law, and any other applicable Federal and state
laws now in force or hereafter enacted relating to hazardous waste disposal.

 

 Annex One - 13 

 

 

“Hedge Contract” shall mean any “hedge,” “swap,” “collar,” “cap” or similar
agreement between a Loan Party and any other financial institution, including,
but not limited to, WBCC, Bank, any Lender or any other Affiliate thereof,
intended to fix the relative amount of such Loan Party’s risk in respect of
changes in interest rates and foreign currency exchange.

 

“Historical Financial Statements” shall have the meaning set forth in
Section 5.4(a) hereof.

 

“Initial Revolving Advance” shall mean the initial Revolving Advance (or series
of initial Revolving Advances) to be made on the Closing Date.

 

“Indebtedness” of a Person at a particular date shall mean all obligations of
such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except trade payable incurred in the Ordinary Course of
Business, Equity Interests and surplus earned or otherwise) and in any event,
without limitation by reason of enumeration, shall include all indebtedness,
debt and other similar monetary obligations of such Person whether direct or
guaranteed, and all premiums, if any, due at the required prepayment dates of
such indebtedness, and all indebtedness secured by a Lien on assets owned by
such Person, whether or not such indebtedness actually shall have been created,
assumed or incurred by such Person. Any indebtedness of such Person resulting
from the acquisition by such Person of any assets subject to any Lien shall be
deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.

 

“Insolvency Event” shall mean, with respect to any Person, including without
limitation any Lender, such Person or such Person’s direct or indirect parent
company (a) becomes the subject of a bankruptcy or insolvency proceeding
(including any proceeding under Title 11 of the United States Code), or
regulatory restrictions, (b) has had a receiver, conservator, trustee,
administrator, custodian, assignee for the benefit of creditors or similar
Person charged with the reorganization or liquidation of its business appointed
for it or has called a meeting of its creditors, (c) admits in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business, (d) with respect to a Lender, such Lender is
unable to perform hereunder due to the application of applicable Law, or (e) in
the good faith determination of Agent, has taken any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in, any such
proceeding or appointment of a type described in clauses (a) or (b), provided
that an Insolvency Event shall not result solely by virtue of any ownership
interest, or the acquisition of any ownership interest, in such Person or such
Person’s direct or indirect parent company by a Governmental Body or
instrumentality thereof if, and only if, such ownership interest does not result
in or provide such Person with immunity from the jurisdiction of courts within
the United States or from the enforcement of judgments or writs of attachment on
its assets or permit such Person (or such Governmental Body or instrumentality)
to reject, repudiate, disavow or disaffirm any contracts or agreements made by
such Person.

 

“Intellectual Property” shall mean property constituting a patent, copyright,
trademark (or any application in respect of the foregoing), service mark,
copyright, copyright application, trade name, mask work, trade secrets, design
right, assumed name or license or other right to use any of the foregoing under
applicable Law.

 

 Annex One - 14 

 

 

“IRS” shall mean the Internal Revenue Service of the United States Treasury, and
any successor thereto.

 

“Law” shall mean any law(s) (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, issued guidance, release, ruling,
order, executive order, injunction, writ, decree, bond, judgment, authorization
or approval, lien or award of or any settlement arrangement, by agreement,
consent or otherwise, with any Governmental Body, foreign or domestic, including
all disclosure and other requirements of ERISA, the requirements of
Environmental Laws and environmental permits, the requirements of OSHA and the
requirements of the Department of Labor.

 

“Leasehold Interests” shall mean all of each Loan Party’s right, title and
interest in and to any Real Property owned by a Person other than Loan Party,
whether as tenant, lessee, licensee, operator or otherwise.

 

“Lender” or “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of such Lender.

 

“Lender Party” shall mean Agent, Lenders, the Bank, any Purchasing Lender and
any Participant, together with each other holder from time to time of any
interest in any of the Obligations.

 

“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction.

 

“Loan Party” or “Loan Parties” shall have the meaning set forth in the preamble
to this Agreement; and shall extend to all permitted successors and assigns of
such Persons.

 

“Loan Year” means each 12 month period commencing on the Closing Date and on
each anniversary of the Closing Date.

 

“Lock-Box Account” shall have the meaning set forth in Section 4.14(d).

 

“Lock-Box Agreement” shall have the meaning set forth in Section 4.14(d).

 

“Lock-Box Bank” shall have the meaning set forth in Section 4.14(d).

 

“Market Value” shall mean, as of any date in respect of an Eligible Mortgage
Loan, the price at which such Eligible Mortgage Loan could readily be sold as
determined in good faith by the Agent, which price may be determined to be zero.
The Agent's determination of Market Value shall be conclusive upon the parties
absent manifest error on the part of the Agent.

 

 Annex One - 15 

 

 

“Material Adverse Effect” shall mean a material adverse effect on (a) the
condition, operations, assets, business or prospects of the applicable Person or
Persons, (b) Loan Parties’ ability to pay the Obligations in accordance with the
terms thereof, (c) the value of the Collateral, or Agent’s Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of
the benefits of Agent’s and each Agent’s rights and remedies under this
Agreement and the Other Documents.

 

“Material Agreements” shall mean and include, in the case of each Loan Party,
any Subsidiary of any Loan Party or any Guarantor the following: (i) any lease
of Real Property, (ii) any lease of personal property having aggregate annual
rentals in excess of the Materiality Threshold, (iii) any license agreement for
the use of any intellectual property necessary for, or material to, to the
operation of its business, (iv) any agreement evidencing, pertaining to or
securing the payment of, any Indebtedness, (v) any labor or union contract, (vi)
any employment contracts with executive officers of Loan Parties, (vii) any
long-term purchase or supply contracts, and (viii) any other contract or
agreement the termination of which (without its contemporaneous replacement)
would reasonably be expected to have a Material Adverse Effect.

 

“Materiality Threshold” shall mean Two Hundred Fifty Thousand Dollars
($250,000.00).

 

“Maximum Revolving Amount” shall mean the maximum amount of Revolving Advances
which may be outstanding at any one time, determined without regard to the
Borrowing Base, which as of the Closing Date equals Thirty Five Million Dollars
($35,000,000.00).

 

“Modified Commitment Transfer Supplement” shall have the meaning set forth in
Section 17.3(d) hereof.

 

“Monthly Advances” shall have the meaning set forth in Section 3.1 hereof.

 

“Mortgage” shall mean the mortgage, deed of trust or other instrument securing a
Mortgage Note which creates a first lien on the fee in real property securing
such Mortgage Note executed to secure a Mortgage Note.

 

 Annex One - 16 

 

 

“Mortgage File” shall mean, for any Mortgage Loan, (a) the original Mortgage
Note bearing all intervening endorsements, duly endorsed to Agent, (b) the
original Mortgage(s) securing each Mortgage Note with evidence of recording
thereon or copies certified by the related recording office, (c) the original
Customer Guaranties (if any) which guaranty the payment and/or performance of
each Mortgage Note, (d) the Assignment of Mortgage conveying the related
Mortgage to the Agent, (e) the Collateral Assignment executed in connection with
such Mortgage(s) and Customer Guaranties, (f) any original stock certificates
(accompanied by applicable stock powers), instruments, chattel paper or other
collateral securing any Mortgage Loan in which the perfection of Loan Party’s
Lien is based upon Loan Party’s possession thereof, (g) the valuation or desktop
as complete appraisal of the subject Mortgaged Property prepared by a third
party valuation or appraisal service, (h) the Related Title Policy, (i) the
personal covenants relating to such Mortgage Note and the evidence of liability
and property/casualty coverage relating to the Mortgaged Property, (j) the
credit report and credit application respecting the Mortgagor Customer of each
Mortgage Note, (k) any and all instruments and documents necessary to comply
with the United States Patriot Act, the rules and regulations of the Office of
Foreign Asset Control respecting each Mortgage Note, (l) an opinion of
independent counsel in all respects acceptable to Agent, addressed to Agent that
the Mortgage Note, the Mortgage(s), the Assignment of Mortgage, the Collateral
Assignment and Customer Guaranties are the valid and binding obligations of the
parties thereto enforceable in accordance with their terms and have been duly
and validly endorsed or assigned to Agent, (m) any internal review write-up, (n)
the contract of sale (if applicable), (o) environmental reports (if applicable),
(p) closing letter, (q) engineer’s report (if applicable), (r) original or copy
of assignment of rents (if applicable), (s) original Loan Party’s and guarantors
certificate, (t) consent of shareholders, (u) marked title commitment/title
policy, assigned to Agent and including Patriot Act and OFAC searches, (v) deed,
(w) certificate of incorporation, (x) proof of identification, and (y) to the
extent not listed herein, each of the documents listed on Annex Two hereto.

 

“Mortgage Loan” shall mean a mortgage loan provided by Loan Party to a Mortgagor
Customer and which mortgage loan includes, without limitation, (i) a Mortgage
Note, the related Mortgage and all other Mortgage Loan Documents and (ii) all
right, title and interest of any Loan Party in and to the Mortgaged Property
covered by such Mortgage.

 

“Mortgage Loan Collateral” shall mean: All of the Loan Party's right, title and
interest in, to and under each of the following items of property, whether now
owned or hereafter acquired, now existing or hereafter created and wherever
located:

 

(i)          all Mortgage Loans;

 

(ii)         all Mortgage Loan Documents, including without limitation all
promissory notes, and all Servicing Records (as defined in Section 6.13(b)),
servicing agreements and any other collateral pledged or otherwise relating to
such Mortgage Loans, together with all files, documents, instruments, surveys,
certificates, correspondence, appraisals, computer programs, computer storage
media, accounting records and other books and records relating thereto;

 

(iii)        all mortgage guaranties and insurance (issued by governmental
agencies or otherwise) and any mortgage insurance certificate or other document
evidencing such mortgage guaranties or insurance relating to any Mortgage Loan
and all claims and payments thereunder;

 

(iv)        all other insurance policies and insurance proceeds relating to any
Mortgage Loan or the related Mortgaged Property;

 

(v)         all interest rate protection agreements, relating to or constituting
any and all of the foregoing;

 

(vi)        the Blocked Accounts and all other deposit accounts or collection
accounts and all monies from time to time on deposit in therein;

 

 Annex One - 17 

 

 

(vii)       all collateral, however defined, under any Other Document between
the Loan Party or any of its Affiliates on the one hand and the Agent or any of
its Affiliates on the other hand;

 

(viii)      all “general intangibles”, “accounts” and “chattel paper” as defined
in the Uniform Commercial Code relating to or constituting any and all of the
foregoing; and

 

(ix)         any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing.

 

“Mortgage Loan Documents” shall mean, with respect to a Mortgage Loan, the
documents comprising the Mortgage File for such Mortgage Loan.

 

“Mortgage Loan Schedule” shall mean a list of Eligible Mortgage Loans to be
pledged to Agent hereunder attached to each Notice of Borrowing setting forth,
as to each Eligible Mortgage Loan, the applicable information specified on Annex
Two, Part III hereof.

 

“Mortgage Note” shall mean the original executed promissory note or other
evidence of the indebtedness of a Mortgagor Customer with respect to a Mortgage
Loan.

 

“Mortgaged Property” shall mean the real property (including all improvements,
buildings, fixtures, building equipment and personal property thereon and all
additions, alterations and replacements made at any time with respect to the
foregoing) and all other collateral securing repayment of the debt evidenced by
a Mortgage Note.

 

“Mortgagor Customer” shall mean the obligor on a Mortgage Note.

 

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in
Sections 3(37) and 4001(a)(3) of ERISA.

 

“Net Worth” shall have the meaning set forth in Section 8.1 hereof.

 

“Note” shall mean each Revolving Credit Note and any other promissory note at
any time evidencing any other portion of the Obligations. “Notes” shall refer,
collectively, thereto.

 

“Notice of Borrowing” shall have the meaning set forth in Section 2.2(a) hereof.

 

“Obligations” shall mean and include any and all of each Loan Party’s
Indebtedness and/or liabilities to Agent and each other Lender Party, of every
kind, nature and description, direct or indirect, secured or unsecured, joint,
several, joint and several, absolute or contingent, due or to become due, now
existing or hereafter arising, contractual or tortious, liquidated or
unliquidated, regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, including, but not limited to, any and all of any Loan
Party’s Indebtedness and/or liabilities to Agent and each other Lender Party,
under this Agreement, the Other Documents, any Permitted Hedge Contracts, any
Bank Product or under any other agreement between Agent and each other Lender
Party, and any Loan Party and all obligations of any Loan Party to Agent and
each other Lender Party, to perform acts or refrain from taking any action.

 

 Annex One - 18 

 

 

“Ordinary Course of Business” shall mean, with respect to any Loan Party, the
ordinary course of such Loan Party’s business as conducted on the Signing Date.

 

“Organic Documents” shall mean: (i) for a corporation, its articles (or
certificate) of incorporation and bylaws; (ii) for a partnership, its articles
of organization (if any) and partnership agreement; and (iii) for a limited
liability company, its articles (or certificate) of organization and any
operating agreement; together with, for each such entity and any other entity
not described above, such other, similar documents as are integral to its
formation or the conduct of its business operations.

 

“Origination Date” shall mean, with respect to each Mortgage Loan, the date of
the Mortgage Note relating to such Mortgage Loan, unless such information is not
provided by the Borrowers with respect to such Mortgage Loan, in which case the
Origination Date shall be deemed to be the date that is forty (40) days prior to
the date of the first payment under the Mortgage Note relating to such Mortgage
Loan.

 

“OSHA” means Occupation Safety and Health Administration 29 U.S.C. §§ 651 et
seq., as same may be amended from time to time.

 

“Other Documents” shall mean the Notes, any Mortgage and any and all other
agreements, instruments and documents, including, without limitation,
guaranties, security agreements, pledges, powers of attorney or any Guaranty,
any Pledge Agreement, consents, and all other writings heretofore, now or
hereafter executed by any Loan Party or any Guarantor and/or delivered to Agent
or any other Lender Party, in respect of the transactions contemplated by this
Agreement. The term “Other Documents” includes, without limitation, all those
documents to which any Loan Party or any Guarantor is a party described in
Section 9.1.

 

“Out-of-Formula Loans” shall have the meaning set forth in Section 17.2(e)
hereof.

 

“Participant” shall mean each Person who shall be granted the right by any
Lender to participate in any of the Revolving Advances and who shall have
entered into a participation agreement in form and substance satisfactory to
such Lender.

 

“Payment Office” shall mean, initially, 360 Lexington Avenue, New York, New York
10017; thereafter, such other office of Agent located in the United States of
America, if any, which it may designate by notice to Borrower Representative to
be the Payment Office.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation.

 

“Perfection Certificate” shall mean, collectively, the Perfection Certificate
for each Loan Party and the responses thereto provided by such Loan Party and
delivered to Agent on or prior to the Closing Date.

 

 Annex One - 19 

 

 

“Permitted Commercial Loan Financing” shall mean a financing made on
commercially reasonable market terms between a Loan Party or a Permitted
Commercial Loan Subsidiary and one or more third party financial institution(s)
providing loans secured by Commercial Loans and pursuant to which the following
additional conditions have been satisfied: (i) Agent shall have received at
least ten (10) Business Days’ prior notice of such proposed financing, which
notice shall include a reasonably detailed description of such proposed
financing; (ii) immediately prior to and after giving effect thereto, no Default
or Event of Default shall have occurred and be continuing or would result
therefrom; (iii) immediately prior to and after giving effect thereto, the Loan
Parties shall be in pro forma compliance with the Financial Covenants; (iv) all
proceeds of such financing shall be remitted to Agent upon the consummation
thereof for application to the Revolving Advances; (v) on or prior to the date
of such proposed financing, Agent shall have received copies of the
documentation governing such Permitted Commercial Loan Financing; and (vi) any
Liens securing such proposed financing shall be limited to a collateral
assignment of Commercial Loans and the related Commercial Mortgaged Property,
promissory notes and mortgage files and the proceeds thereof.

 

“Permitted Commercial Loan Subsidiary” shall mean a Subsidiary of a Borrower
created to own Commercial Loans in connection with a Permitted Commercial Loan
Financing.

 

“Permitted Discretion” means a determination made in good faith and in the
exercise (from the perspective of a secured asset-based lender) of commercially
reasonable business judgment.

 

“Permitted Encumbrances” shall mean (a) Liens in favor of Agent for the benefit
of itself and each other Lender Party which, in each case, secure Obligations;
(b) Liens for taxes, assessments or other governmental charges not delinquent or
being Properly Contested; (c) deposits or pledges to secure obligations under
worker’s compensation, social security or similar laws, or under unemployment
insurance; (d) judgment Liens which do not otherwise constitute an Event of
Default under Section 11.6, that have been (and remain) stayed or bonded and are
being Properly Contested; (e) deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of any Loan Party’s business; (f) mechanic’s,
worker’s, materialmen’s or other like Liens arising in the ordinary course of
any Loan Party’s business with respect to obligations which are not due or which
are being Properly Contested; (g) Liens placed upon fixed assets or capital
hereafter acquired to secure a portion of the purchase price thereof, provided
that (1) any such lien shall not encumber any other property of the Loan Parties
and (2) the aggregate amount of Indebtedness secured by such Liens incurred as a
result of such purchases during any Fiscal Year shall not exceed the amount
provided for in Section 7.9 (iv); (h) Liens in the nature of ownership interests
of lessors of real and personal property, to the extent such leases are
permitted under Sections 7.19 hereof; (i) the Bankwell Mortgage and any other
Liens upon the 698 Main Street Property in favor of Bankwell or any other Person
securing Indebtedness incurred to fund the renovation thereof; (j) Liens in
respect of Permitted Commercial Loan Financing; and (k) other Liens incidental
to the conduct of Loan Parties’ business or the ownership of its property and
assets which were not incurred in connection with the borrowing of money or the
obtaining of advances or credit, and which do not in the aggregate materially
detract from Agent’s rights in and to the Collateral or the value of Loan
Parties’ property or assets or which do not materially impair the use thereof in
the operation of Loan Parties’ business.

 

 Annex One - 20 

 

 

“Permitted Hedge Contracts” shall mean any Hedge Contracts entered into in the
ordinary course of, and pursuant to the reasonable requirements of, Loan
Parties’ business, and not for speculative purposes in any event.

 

“Permitted Subordinated Debt” shall mean and include such Subordinated Debt as
the Agent may consent to be incurred (or carried) by Loan Parties at any time or
from time to time, which shall at all times be subject to a Subordination
Agreement in favor of Agent and the Lenders. As of the Closing Date, there is no
Permitted Subordinated Debt.

 

“Person” shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether Federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).

 

“Plan” shall mean any employee benefit plan within the meaning of Section 3(3)
of ERISA, maintained for employees of Loan Parties or any member of the
Controlled Group or any such Plan to which any Loan Party or any member of the
Controlled Group is required to contribute on behalf of any of its employees.

 

“Pledge Agreement” shall mean that certain pledge agreement from each Loan Party
in favor of Agent, for the pro rata benefit of the Lender Parties, in respect of
the Equity Interest of each Subsidiary owned by it (limited, in the case of
Foreign Subsidiaries, to sixty-five percent (65%) of such Equity Interests), in
form and substance satisfactory to Lender.

 

“Pledged Account” shall have the meaning given to such term in Section 4.14(e)
hereof.

 

“Pledged Account Agreement” shall have the meaning given to such term in Section
4.14(e).

 

“Principals” shall mean John L. Villano and Jeffrey C. Villano.

 

“Projections” shall have the meaning set forth in Section 5.4(b) hereof.

 

“Properly Contested” shall mean, in the case of any Indebtedness, Lien or Taxes,
as applicable, of any Person that are not paid as and when due or payable by
reason of such Person’s bona fide dispute concerning its liability to pay the
same or concerning the amount thereof: (a) such Indebtedness, Lien or Taxes, as
applicable, are being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; (b) such Person has
established appropriate reserves as shall be required in conformity with GAAP;
(c) the non-payment of such Indebtedness or Taxes will not have a Material
Adverse Effect or will not result in the forfeiture of any assets of such
Person; (d) no Lien is imposed upon any of such Person’s assets with respect to
such Indebtedness or taxes unless such Lien (x) does not attach to any
Receivables or inventory, (y) is at all times junior and subordinate in priority
to the Liens in favor of the Agent (except only with respect to property Taxes
that have priority as a matter of applicable state law) and, (z) enforcement of
such Lien is stayed during the period prior to the final resolution or
disposition of such dispute; and (e) if such Indebtedness or Lien, as
applicable, results from, or is determined by the entry, rendition or issuance
against a Person or any of its assets of a judgment, writ, order or decree,
enforcement of such judgment, writ, order or decree is stayed pending a timely
appeal or other judicial review.

 

 Annex One - 21 

 

 

“Protective Advances” shall have the meaning set forth in Section 17.2 hereof.

 

“Published Rate” shall mean the rate of interest published each Business Day in
the Wall Street Journal “Money Rates” listing under the caption “London
Interbank Offered Rates” for a one month period (or, if no such rate is
published therein for any reason, then the Published Rate shall be the LIBOR
Rate for a one month period as published in another publication selected by
Agent or, if LIBOR becomes unavailable or impracticable to use as an index rate,
such other equivalent rate selected by Agent); provided, however, that if the
Published Rate is less than zero, such rate shall be deemed to be zero for
purposes of this Agreement.

 

“Purchasing CLO” shall have the meaning set forth in Section 17.3(d) hereof.

 

“Purchasing Lender” shall have the meaning set forth in Section 17.3(c) hereof.

 

“RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901
et seq., as same may be amended from time to time.

 

“Real Property” shall mean all premises or real property owned or leased
premises by a Loan Party, existing on or after the Closing Date, including,
particularly, the real property identified on Schedule 5.25 hereto.

 

“Receivables” shall mean and include, as to each Loan Party, all of such Loan
Party’s accounts, contract rights, instruments (including those evidencing
indebtedness owed to Loan Parties by their respective Affiliates), documents,
chattel paper (including electronic chattel paper), general intangibles relating
to accounts, drafts and acceptances (including payment intangibles), and all
other forms of obligations owing to such Loan Party arising out of or in
connection with a Mortgage Loan, the sale or lease of Inventory or the rendition
of services, all guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to Agent hereunder.

 

“Register” shall have the meaning set forth in Section 17.3(e) hereof.

 

“REIT” means a real estate investment trust under Sections 856-860 of the Code.

 

“REIT Distributions” means dividends or distributions required to be made by a
real estate investment trust under Sections 856-860 of the Code.

 

“Related Title Policy” shall mean a policy of title insurance insuring the first
priority of a Mortgage, in the form described in clause (o) of Annex Two, Part I
hereof.

 

 Annex One - 22 

 

 

“Release” shall have the meaning set forth in Section 5.6(c)(i) hereof.

 

“Reportable Event” shall mean a reportable event described in Section 4043(b) of
ERISA or the regulations promulgated thereunder.

 

“Reportable Compliance Event” shall mean that any Covered Entity becomes a
Sanctioned Person, or is charged by indictment, criminal complaint or similar
charging instrument, arraigned, or custodially detained in connection with any
Anti-Terrorism Law or any predicate crime to any Anti-Terrorism Law, or has
knowledge of facts or circumstances to the effect that it is reasonably likely
that any aspect of its operations is in actual or probable violation of any
Anti-Terrorism Law.

 

“Required Lenders” shall mean Lenders (not including any Defaulting Lender)
holding greater than fifty percent (50%) of either (a) the aggregate of the
Revolving Commitment Amounts of all Lenders (excluding any Defaulting Lender),
or (b) after the termination of all Commitments of Lenders hereunder, the sum of
(x) the outstanding Revolving Advances; provided, however, if there are fewer
than three (3) Lenders, Required Lenders shall mean all Lenders (excluding any
Defaulting Lender).

 

“Reserve Percentage” shall mean as of any day the maximum effective percentage
in effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as “Eurocurrency
Liabilities”).

 

“Revolving Advances” shall mean and include any loans, advances or other
financial accommodations made under, pursuant to or in connection with this
Agreement or any Other Document.

 

“Revolving Advance Request Date” shall have the meaning set forth in Section 9.2
hereof.

 

“Revolving Commitment” shall mean, as to any Lender, the obligation of such
Lender (if applicable), to make Revolving Advances in an aggregate principal
and/or face amount not to exceed the Revolving Commitment Amount (if any) of
such Lender.

 

“Revolving Commitment Amount” shall mean, as to any Lender, the Revolving
Commitment amount (if any) set forth below such Lender’s name on Schedule 1.1
hereof (or, in the case of any Lender that became party to this Agreement after
the Closing Date pursuant to Section 17.3(c) or (d) hereof, the Revolving
Commitment amount (if any) of such Lender as set forth in the applicable
Commitment Transfer Supplement).

 

“Revolving Commitment Percentage” shall mean, as to any Lender, the Revolving
Commitment Percentage (if any) set forth below such Lender’s name on Schedule
1.1 hereof (or, in the case of any Lender that became party to this Agreement
after the Closing Date pursuant to Section 17.3(c) or (d) hereof, the Revolving
Commitment Percentage (if any) of such Lender as set forth in the applicable
Commitment Transfer Supplement).

 

 Annex One - 23 

 

 

“Revolving Credit Note(s)” shall mean the promissory note(s) referred to in
Section 2.1(a) hereof evidencing Indebtedness of Borrower to a Lender arising
from the making of Revolving Advances.

 

“Revolving Interest Rate” shall mean an interest rate per annum equal to the sum
of the Daily LIBOR Rate plus the Applicable Margin.

 

“Sanctioned Country” shall mean a country subject to a sanctions program
maintained under any Anti-Terrorism Law.

 

“Sanctioned Person” shall mean any individual person, group, regime, entity or
thing listed or otherwise recognized as a specially designated, prohibited,
sanctioned or debarred person, group, regime, entity or thing or subject to any
limitations or prohibitions (including but not limited to the blocking of
property or rejection of transactions), under any Anti-Terrorism Law.

 

“Securities” shall mean and include, as to each Loan Party, all marketable
securities and investment property owned by Loan Party, whether now existing or
hereafter created, including any held by any intermediary in any “street” name,
pursuant to any custody arrangement or otherwise.

 

“Senior Funded Debt” shall have the meaning set forth in Section 8.1 hereof.

 

“Senior Funded Debt to Tangible Net Worth Ratio” shall have the meaning set
forth in Section 8.1 hereof.

 

“Settlement Date” shall have the meaning set forth in Section 2.9(d) hereof.

 

“Signing Date” shall have the meaning set forth in the preamble to the
Agreement.

 

“Subordinated Debt” shall mean Indebtedness which has been subordinated, in
right of payment and claim, to the rights and claims of Agent and Lenders in
respect of the Obligations, on terms satisfactory to Agent, pursuant to a
Subordination Agreement.

 

“Subordination Agreement” shall mean an agreement, satisfactory in form and
substance to Agent, among (i) Agent, for the benefit of Lenders, (ii) a creditor
holding Indebtedness permitted to be incurred hereunder, and (iii) the Loan
Parties (whether directly or by consent), setting forth the terms by which such
Indebtedness held by such creditor shall become Permitted Subordinated Debt
hereunder.

 

“Subsidiary” shall mean a corporation or other entity of whose shares of Equity
Interests having ordinary voting power (other than Equity Interests having such
power only by reason of the happening of a contingency) to elect a majority of
the directors of such corporation or other entity, or other Persons performing
similar functions for such corporation or entity, are owned, directly or
indirectly, by such Person. Unless otherwise expressly provided herein,
references herein to a “Subsidiary” or the “Subsidiaries” shall mean and refer
to Subsidiaries of the Loan Parties, including any not in being on the Signing
Date in anticipation of their subsequent creation or acquisition in accordance
with the terms hereof.

 

 Annex One - 24 

 

 

“Subsidiary Pledge Agreement” shall mean that certain pledge agreement from
Borrower in favor of Agent in respect of the Equity Interest of each Subsidiary
owned by it (limited, in the case of Foreign Subsidiaries, to sixty-five percent
(65%) of such Equity Interests), in form and substance satisfactory to Agent.

 

“Table Funding Advances” see section (b) of the definition of Funding
Requirements.

 

“Tangible Net Worth” shall have the meaning set forth in Section 8.1 hereof.

 

“Taxes” shall mean all present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Body, including any interest, additions to tax or penalties
applicable thereto.

 

“Term” shall have the meaning set forth in Section 14.1 hereof.

 

“Termination Event” shall mean: (i) a Reportable Event with respect to any Plan
or Multiemployer Plan; (ii) the withdrawal of any Loan Party or any member of
the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a “substantial employer” as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
any Loan Party or any member of the Controlled Group from a Multiemployer Plan.

 

“Test Period” shall have the meaning set forth in Section 8.1 hereof.

 

“Title Insurer” the issuer of a title insurance policy which insures a Mortgage.

 

“Toxic Substance” shall mean and include any material present on the Real
Property which has been shown to have significant adverse effect on human health
or which is subject to regulation under the Toxic Substances Control Act (TSCA),
15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal
or state laws now in force or hereafter enacted relating to toxic substances.
“Toxic Substance” includes but is not limited to asbestos, polychlorinated
biphenyls (PCBs) and lead-based paints.

 

“Transferee” shall have the meaning set forth in Section 17.3(b) hereof.

 

 Annex One - 25 

 

 

“Undrawn Availability” at a particular date shall mean an amount equal to
(a) the lesser of (i) the Borrowing Base or (ii) the Maximum Revolving Amount,
minus (b) the sum of (i) the outstanding amount of Revolving Advances plus
(ii) all amounts due and owing to Loan Parties’ trade creditors which are
outstanding beyond normal trade terms, plus (iii) all fees and expenses for
which Loan Parties are liable hereunder but which have not been paid or charged
to Borrowers’ Account.

 

“Unfinanced Capital Expenditures” shall have the meaning set forth in Section
8.1 hereof.

 

“Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as
adopted in the State of New York.

 

“United States” or “U.S.” means the United States of America.

 

“Validity Guaranty” shall have the meaning set forth in Section 9.1(u) hereof.

 

“Yield Surcharge” shall have the meaning set forth in Section 3.11 hereof.

 

“WBCC” shall have the meaning set forth in the preamble to this Agreement; and
shall include its successors and assigns.

 

 Annex One - 26 

 

   

  ANNEX ONE, Acknowledged and Agreed:       “Borrower” or “Borrower
Representative”       SACHEM CAPITAL CORP.         By: /s/ John Villano   Name:
John Villano   Title: Co - CEO         May 11, 2018

 

Signature Page to Annex One

 

   

 

  

ANNEX TWO

 

REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS

 

Part I. Eligible Mortgage Loans

 

As to each Mortgage Loan included in the Borrowing Base on a Funding Date (and
the related Mortgage, Mortgage Note, Assignment of Mortgage, Collateral
Assignment and Mortgaged Property), the Borrowers shall be deemed to make the
following representations and warranties to the Agent as of such date and as of
each date Collateral Value is determined (certain defined terms used herein and
not otherwise defined in the Loan Agreement appearing in Part II to this Annex
Two):

 

(a)          Mortgage Loans as Described. The information set forth in the
Mortgage Loan Schedule and in each Notice of Borrowing with respect to the
Mortgage Loan is complete, true and correct in all material respects.

 

(b)          Payments Current. All payments required to be made up to the
Funding Date for the Mortgage Loan under the terms of the Mortgage Note have
been made and credited. No payment required under the Mortgage Loan is
delinquent nor has any payment under the Mortgage Loan been delinquent at any
time since the origination of the Mortgage Loan. The first Monthly Payment shall
be made, or shall have been made, with respect to the Mortgage Loan on its Due
Date or within the grace period, all in accordance with the terms of the related
Mortgage Note.

 

(c)          No Outstanding Charges. There are no defaults in complying with the
terms of the Mortgage securing the Mortgage Loan, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges, leasehold
payments or ground rents which previously became due and owing have been paid,
which Borrowers and Mortgagor Customer are endeavoring and undertaking to cure
or an escrow of funds has been established in an amount sufficient to pay for
every such item which remains unpaid and which has been assessed but is not yet
due and payable. Borrower has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a party other than the Mortgagor
Customer, directly or indirectly, for the payment of any amount required under
the Mortgage Loan, except for interest accruing from the date of the Mortgage
Note or date of disbursement of the proceeds of the Mortgage Loan, whichever is
earlier, to the day which precedes by one month the Due Date of the first
installment of principal and interest thereunder.

 

(d)          Original Terms Unmodified. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any respect,
from the date of origination; except by a written instrument which has been
recorded, if necessary to protect the interests of the Agent, and which has been
delivered to the Agent and the terms of which are reflected in the Mortgage Loan
Schedule. The substance of any such waiver, alteration or modification has been
approved by the title insurer, to the extent required, and its terms are
reflected on the Mortgage Loan Schedule. No Mortgagor Customer in respect of the
Mortgage Loan has been released, in whole or in part, except in connection with
an assumption agreement approved by the title insurer, to the extent required by
such policy, and which assumption agreement is part of the Mortgage File
delivered to the Agent and the terms of which are reflected in the Mortgage Loan
Schedule.

 

 Annex Two - 1 

 

 

(e)          No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto, and no Mortgagor Customer in respect of the Mortgage Loan was a
debtor in any state or Federal bankruptcy or insolvency proceeding at the time
the Mortgage Loan was originated. The Borrowers have no knowledge nor has it
received any notice that any Mortgagor Customer in respect of the Mortgage Loan
is a debtor in any state or federal bankruptcy or insolvency proceeding.

 

(f)          Hazard Insurance. The Mortgaged Property is insured by a fire and
extended perils insurance policy, issued by a Qualified Insurer, and such other
hazards as are customary in the area where the Mortgaged Property is located,
and to the extent required by the Borrowers as of the date of origination
consistent with the Underwriting Guidelines, against earthquake and other risks
insured against by Persons operating like properties in the locality of the
Mortgaged Property, in an amount not less than the greatest of (i) 100% of the
replacement cost of all improvements to the Mortgaged Property, (ii) the
outstanding principal balance of the Mortgage Loan, or (iii) the amount
necessary to avoid the operation of any co-insurance provisions with respect to
the Mortgaged Property, and consistent with the amount that would have been
required as of the date of origination in accordance with the Underwriting
Guidelines. If any portion of the Mortgaged Property is in an area identified by
any federal Governmental Body as having special flood hazards, and flood
insurance is available, a flood insurance policy meeting the current guidelines
of the Federal Emergency Management Agency is in effect with a generally
acceptable insurance carrier, in an amount representing coverage not less than
the least of (1) the outstanding principal balance of the Mortgage Loan, (2) the
full insurable value of the Mortgaged Property, and (3) the maximum amount of
insurance available under the National Flood Insurance Act of 1968, as amended
by the Flood Disaster Protection Act of 1974. All such insurance policies
(collectively, the “hazard insurance policy”) contain a standard mortgagee
clause naming the Borrower, its successors and assigns (including without
limitation, subsequent owners of the Mortgage Loan), as mortgagee, and may not
be reduced, terminated or canceled without 30 days' prior written notice to the
mortgagee. No such notice has been received by the Borrowers. All premiums on
such insurance policy have been paid. The related Mortgage obligates the
Mortgagor Customer to maintain all such insurance and, at such Mortgagor
Customer's failure to do so, authorizes the mortgagee to maintain such insurance
at the Mortgagor Customer's cost and expense and to seek reimbursement therefor
from such Mortgagor Customer. Where required by state law or regulation, the
Mortgagor Customer has been given an opportunity to choose the carrier of the
required hazard insurance, provided the policy is not a “master” or “blanket”
hazard insurance policy covering a condominium, or any hazard insurance policy
covering the common facilities of a planned unit development. The hazard
insurance policy is the valid and binding obligation of the insurer and is in
full force and effect. The Borrowers have not engaged in, and has no knowledge
of the Mortgagor Customer's having engaged in, any act or omission which would
impair the coverage of any such policy, the benefits of the endorsement provided
for herein, or the validity and binding effect of either including, without
limitation, no unlawful fee, commission, kickback or other unlawful compensation
or value of any kind has been or will be received, retained or realized by any
attorney, firm or other Person, and no such unlawful items have been received,
retained or realized by the Borrower.

 

 Annex Two - 2 

 

 

(g)          Compliance with Applicable Laws. Any and all requirements of any
federal, state or local law may be applicable to the Mortgage Loan have been
complied with, the consummation of the transactions contemplated hereby will not
involve the violation of any such laws or regulations.

 

(h)          No Satisfaction of Mortgage. The Mortgage has not been satisfied,
canceled, subordinated or rescinded, in whole or in part, and the Mortgaged
Property has not been released from the lien of the Mortgage, in whole or in
part, nor has any instrument been executed that would affect any such release,
cancellation, subordination or rescission. The Borrowers have not waived the
performance by the Mortgagor Customer of any action, if the Mortgagor Customer's
failure to perform such action would cause the Mortgage Loan to be in default,
nor has any Borrower waived any default resulting from any action or inaction by
the Mortgagor Customer.

 

(i)          Location and Type of Mortgaged Property. The Mortgaged Property is
located in the state identified in the Mortgage Loan Schedule and consists of a
commercial mortgage for a single parcel of real property used primarily for
residential purposes. No Mortgaged Property is secured by raw land or located in
a distressed area or zoned as such. No Mortgaged Property is located in a
condominium unit or project. No Mortgage Loan was used in connection with an
infrastructure project. No mortgages for real property used primarily for
commercial purposes shall be included as Eligible Mortgage Loans.

 

(j)          Valid Lien. The Mortgage is a valid, subsisting, enforceable and
perfected first lien, on the property included in the Mortgaged Property,
including all buildings on the Mortgaged Property and all installations and
mechanical, electrical, plumbing, heating and air conditioning systems located
in or annexed to such buildings, and all additions, alterations and replacements
made at any time with respect to the foregoing. The lien of the Mortgage is
subject only to:

 

(i)          the lien of current real property taxes and assessments not yet due
and payable;

 

(ii)         covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording acceptable to
prudent mortgage lending institutions generally and specifically referred to in
the lender's title insurance policy delivered to the originator of the Mortgage
Loan and (a) referred to or otherwise considered in the appraisal made for the
originator of the Mortgage Loan or (b) which do not adversely affect the
Appraised Value of the Mortgaged Property set forth in such appraisal; and

 

(iii)        other matters to which like properties are commonly subject which
do not materially interfere with the benefits of the security intended to be
provided by the Mortgage or the use, enjoyment, value or marketability of the
related Mortgaged Property.

 

 Annex Two - 3 

 

 

Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first lien and first priority security interest on
the property described therein and the Borrowers have full right to pledge and
assign the same to the Agent. The Mortgaged Property was not, as of the date of
origination of the Mortgage Loan, encumbered by any deeds of trust, deed to
secure debt or other security instrument creating a lien subordinate to the lien
of the Mortgage.

 

(k)          Validity of Mortgage Documents. The Mortgage Note and the Mortgage
and any other agreement executed and delivered by a Mortgagor Customer or
guarantor, if applicable, in connection with a Mortgage Loan, are genuine, and
each is the legal, valid and binding obligation of the maker thereof enforceable
in accordance with its terms. All parties to the Mortgage Note, the Mortgage and
any other such related agreement had legal capacity to enter into the Mortgage
Loan and to execute and deliver the Mortgage Note, the Mortgage and any such
other related agreement, and the Mortgage Note, the Mortgage and any other such
related agreement have been duly and properly executed by such parties. No
fraud, error, omission, misrepresentation, negligence or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any Person, including,
without limitation, the Mortgagor Customer, any appraiser, any builder or
developer, or any other party involved in the origination of the Mortgage Loan.
The Borrowers have reviewed all of the documents constituting the Mortgage File
and has made such inquiries as it deems necessary to make and confirm the
accuracy of the representations set forth herein.

 

(l)          Full Disbursement of Proceeds. The Mortgage Loan has been closed
and the proceeds of the Mortgage Loan have been fully disbursed and there is no
further requirement for future advances thereunder, except in the case of
construction loans, and any and all requirements as to completion of any on-site
or off-site improvement and as to disbursements of any escrow funds therefor
have been complied with. All costs, fees and expenses incurred in making or
closing the Mortgage Loan and the recording of the Mortgage were paid, and the
Mortgagor Customer is not entitled to any refund of any amounts paid or due
under the Mortgage Note or Mortgage.

 

(m)          Ownership. The Borrowers are the sole owner and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged, and each Borrower
has good, indefeasible and marketable title thereto, and has full right to
transfer, pledge and assign the Mortgage Loan to the Agent free and clear of any
encumbrance, equity, participation interest, lien, pledge, negative pledge,
charge, claim or security interest, and has full right and authority subject to
no interest or participation of, or agreement with, any other party, to assign,
transfer and pledge each Mortgage Loan pursuant to this Loan Agreement and
following the pledge of each Mortgage Loan, the Agent will hold such Mortgage
Loan free and clear of any encumbrance, equity, participation interest, lien,
pledge, charge, claim or security interest except any such security interest
created pursuant to the terms of this Agreement.

 

(n)          Doing Business. All parties which have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest, were) (i) in
compliance with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (ii) either (A) organized
under the laws of such state, (B) qualified to do business in such state, (C) a
federal savings and loan association, a savings bank or a national bank having a
principal office in such state, or (D) not doing business in such state.

 

 Annex Two - 4 

 

 

(o)          Title Insurance. The Mortgage Loan is covered by either (i) an
attorney's opinion of title and abstract of title, the form and substance of
which is acceptable to prudent mortgage lending institutions making mortgage
loans in the area wherein the Mortgaged Property is located or (ii) an ALTA
lender's title insurance policy or other generally acceptable form of policy or
insurance acceptable to FNMA or FHLMC and each such title insurance policy is
issued by a title insurer acceptable to FNMA or FHLMC and qualified to do
business in the jurisdiction where the Mortgaged Property is located, insuring
each Borrower, its successors and assigns, as to the first priority lien of the
Mortgage in the original principal amount of the Mortgage Loan (or to the extent
a Mortgage Note provides for negative amortization, the maximum amount of
negative amortization in accordance with the Mortgage), subject only to the
exceptions contained in clauses (1), (2) and (3) of paragraph (j) of this Part I
of Annex Two, and any other matters that Borrowers agreed to allow to be
outstanding against the Mortgaged Property, provided that such matters, would
not affect the recovery of funds in the event of foreclosure, and in the case of
adjustable rate Mortgage Loans, against any loss by reason of the invalidity or
unenforceability of the lien resulting from the provisions of the Mortgage
providing for adjustment to the Mortgage Interest Rate and Monthly Payment.
Where required by state law or regulation, the Mortgagor Customer has been given
the opportunity to choose the carrier of the required mortgage title insurance.
Additionally, such lender's title insurance policy affirmatively insures ingress
and egress and against encroachments by or upon the Mortgaged Property or any
interest therein. The title policy does not contain any special exceptions
(other than the standard exclusions) for zoning and uses. The Borrower, its
successors and assigns, are the sole insureds of such lender's title insurance
policy, and such lender's title insurance policy is valid and remains in full
force and effect and will be in force and effect upon the consummation of the
transactions contemplated by this Loan Agreement. No claims have been made under
such lender's title insurance policy, and no prior holder or servicer of the
related Mortgage, including the Borrower, has done, by act or omission, anything
which would impair the coverage of such lender's title insurance policy,
including, without limitation, no unlawful fee, commission, kickback or other
unlawful compensation or value of any kind has been or will be received,
retained or realized by any attorney, firm or other Person, and no such unlawful
items have been received, retained or realized by the Borrower. Each title
policy includes a clean Patriot Act and OFAC search.

 

(p)          No Defaults. There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and no event has
occurred which, with the passage of time or with notice and the expiration of
any grace or cure period, would constitute a default, breach, violation or event
of acceleration, and neither the Borrowers nor their predecessors have waived
any default, breach, violation or event of acceleration. No payment under any
Mortgage Loan is more than sixty (60) days past due.

 

(q)          No Mechanics' Liens. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property which are or may be liens prior to, or equal or coordinate
with, the lien of the Mortgage.

 

 Annex Two - 5 

 

 

(r)          Location of Improvements; No Encroachments. All improvements which
were considered in determining the Appraised Value of the Mortgaged Property lie
wholly within the boundaries and building restriction lines of the Mortgaged
Property, and no improvements on adjoining properties encroach upon the
Mortgaged Property.

 

(s)          Intentionally Deleted.

 

(t)          Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial foreclosure. Upon default by a Mortgagor Customer on a Mortgage Loan
and foreclosure on, or trustee's sale of, the Mortgaged Property pursuant to the
proper procedures, the holder of the Mortgage Loan will be able to deliver good
and merchantable title to the Mortgaged Property. There is no homestead or other
exemption available to a Mortgagor Customer which would interfere with the right
to sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage.

 

(u)          Conformance with Underwriting Guidelines and Agency Standards. The
Mortgage Loan was underwritten in accordance with the Underwriting Guidelines.
The Borrowers have not made any representations to a Mortgagor Customer that are
inconsistent with the mortgage instruments used.

 

(v)          Occupancy of the Mortgaged Property. As of the Funding Date, all
uses of the Mortgaged Property are lawful, and if the Mortgaged Property is or
becomes occupied, then it is or it will be lawfully occupied. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of the Mortgaged Property and, with respect to the use and
occupancy of the same, including but not limited to certificates of occupancy
and fire underwriting certificates, have been made or obtained from the
appropriate authorities. The Borrowers have not received notification from any
Governmental Body that the Mortgaged Property is in material non-compliance with
such laws or regulations, is being used, operated or occupied unlawfully or has
failed to have or obtain such inspection, licenses or certificates, as the case
may be, which Borrowers and Mortgagor Customer are not endeavoring to cure. The
Borrowers have not received notice of any violation or failure to conform with
any such law, ordinance, regulation, standard, license or certificate. The
Mortgagor Customer represented at the time of origination of the Mortgage Loan
that the Mortgagor Customer would NOT occupy the Mortgaged Property as a
residence.

 

(w)          No Additional Collateral. The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to in clause (j) above.

 

(x)          Deeds of Trust. In the event the Mortgage constitutes a deed of
trust, a trustee, authorized and duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is named in the
Mortgage, and no fees or expenses are or will become payable by the Agent to the
trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor Customer.

 

 Annex Two - 6 

 

 

(y)          Delivery of Mortgage Documents. The Mortgage Note, the Mortgage,
the Assignment of Mortgage and any other documents required to be delivered
under the Loan Agreement for each Mortgage Loan have been delivered to Agent..
The Borrowers or their agent is in possession of a complete, true and accurate
Mortgage File, except for such documents the originals of which have been
delivered to Agent.

 

(z)          Transfer of Mortgage Loans. The Assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.

 

(aa)         Due-On-Sale. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder.

 

(bb)         No Buydown Provisions; No Graduated Payments or Contingent
Interests. The Mortgage Loan does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any separate
account established by the Borrower, the Mortgagor Customer, or anyone on behalf
of the Mortgagor Customer, or paid by any source other than the Mortgagor
Customer nor does it contain any other similar provisions which may constitute a
“buydown” provision. The Mortgage Loan is not a graduated payment mortgage loan
and the Mortgage Loan does not have a shared appreciation or other contingent
interest feature.

 

(cc)         Consolidation of Future Advances. Any future advances made to the
Mortgagor Customer prior to the Funding Date have been consolidated with the
outstanding principal amount secured by the Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term.
The lien of the Mortgage securing the consolidated principal amount is expressly
insured as having first lien priority by a title insurance policy, an
endorsement to the policy insuring the mortgagee's consolidated interest or by
other title evidence acceptable to FNMA and FHLMC. The consolidated principal
amount does not exceed the original principal amount of the Mortgage Loan.

 

(dd)         Mortgaged Property Undamaged. There have not been any condemnation
proceedings with respect to the Mortgaged Property and the Borrowers have no
knowledge of any such proceedings.

 

(ee)         Collection Practices; Escrow Deposits; Interest Rate Adjustments.
The origination and collection practices used by the originator, each servicer
of the Mortgage Loan and the Borrowers with respect to the Mortgage Loan have
been in all respects in compliance with Accepted Servicing Practices, applicable
laws and regulations, and have been in all respects legal and proper. With
respect to escrow deposits and Escrow Payments, if any, all such payments are in
the possession of, or under the control of, the Borrowers and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. All Escrow Payments have been collected in
full compliance with state and federal law. An escrow of funds is not prohibited
by applicable law and has been established in an amount sufficient to pay for
every item that remains unpaid and has been assessed but is not yet due and
payable. No escrow deposits or Escrow Payments or other charges or payments due
the Borrowers have been capitalized under the Mortgage or the Mortgage Note. All
Mortgage Interest Rate adjustments have been made in strict compliance with
state and federal law and the terms of the related Mortgage Note. Any interest
required to be paid pursuant to state, federal and local law has been properly
paid and credited.

 

 Annex Two - 7 

 

 

(ff)         Fixed Interest Rate. The Mortgage Loan is a fixed interest rate
Mortgage Loan.

 

(gg)         Other Insurance Policies. No action, inaction or event has occurred
and no state of facts exists or has existed that has resulted or will result in
the exclusion from, denial of, or defense to coverage under any applicable
special hazard insurance policy, PMI Policy or bankruptcy bond, irrespective of
the cause of such failure of coverage. In connection with the placement of any
such insurance, no commission, fee, or other compensation has been or will be
received by the Borrowers or by any officer, director, or employee of the
Borrowers or any designee of the Borrowers or any corporation in which the
Borrowers or any officer, director, or employee had a financial interest at the
time of placement of such insurance.

 

(hh)         Soldiers’ and Sailors’ Civil Relief Act. The Mortgagor Customer has
not notified the Borrower, and the Borrowers have no knowledge, of any relief
requested or allowed to the Mortgagor Customer under the Soldiers' and Sailors'
Civil Relief Act of 1940.

 

(ii)         Appraisal and Special Provisions re: Amounts. With respect to
Eligible Mortgage Loans equal to or greater than $250,000 (except with respect
to Table Funding Advances), such Mortgage File contains a third party desktop as
complete appraisal of the related Mortgaged Property, which desktop as complete
appraisal shall be acceptable to Agent in form and content, signed prior to the
approval of the Mortgage Loan application by a qualified appraiser, duly
appointed by the Borrower, who had no interest, direct or indirect in the
Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Mortgage
Loan, and the appraisal and appraiser both satisfy the requirements under the
licensing department of the respective state where such Mortgaged Property is
located. With respect to Table Funding Advances and Eligible Mortgage Loans less
than $250,000, such Eligible Mortgage loan shall be accompanied by an internal
valuation of the Mortgaged Property described in the Mortgage which secures such
Mortgage Note, which valuation shall be acceptable to Agent in form and content.
Notwithstanding any of the foregoing, the Borrowers accept, agree and
acknowledge that Agent may, as part of its process to verify Collateral values
in connection with this Agreement, conduct such independent desktop as complete
appraisals at Borrower’s cost of a sample of the Mortgaged Property as it deems
necessary. The Borrowers further accept, agree and acknowledge that if an Event
of Default shall have occurred and be continuing, the Agent may, at its sole
discretion, conduct such independent desktop as complete appraisals at
Borrowers’ cost on the Mortgaged Property as it deems necessary.

 

(jj)         Disclosure Materials. If applicable, the Mortgagor Customer has
executed a statement to the effect that the Mortgagor Customer has received all
disclosure materials required by applicable law with respect to the making of
adjustable rate mortgage loans, and the Borrowers maintain such statement in the
Mortgage File.

 

 Annex Two - 8 

 

 

(kk)         No Defense to Insurance Coverage. No action has been taken or
failed to be taken, no event has occurred and no state of facts exists or has
existed on or prior to the Funding Date (whether or not known to the Borrowers
on or prior to such date) which has resulted or will result in an exclusion
from, denial of, or defense to coverage under any private mortgage insurance
(including, without limitation, any exclusions, denials or defenses which would
limit or reduce the availability of the timely payment of the full amount of the
loss otherwise due thereunder to the insured) whether arising out of actions,
representations, errors, omissions, negligence, or fraud of the Borrower, the
related Mortgagor Customer or any party involved in the application for such
coverage, including the appraisal, plans and specifications and other exhibits
or documents submitted therewith to the insurer under such insurance policy, or
for any other reason under such coverage, but not including the failure of such
insurer to pay by reason of such insurer's breach of such insurance policy or
such insurer's financial inability to pay.

 

(ll)           Capitalization of Interest. The Mortgage Note does not by its
terms provide for the capitalization or forbearance of interest.

 

(mm)        No Equity Participation. No document relating to the Mortgage Loan
provides for any contingent or additional interest in the form of participation
in the cash flow of the Mortgaged Property or a sharing in the appreciation of
the value of the Mortgaged Property. The indebtedness evidenced by the Mortgage
Note is not convertible to an ownership interest in the Mortgaged Property or
the Mortgagor Customer and the Borrowers have not financed nor do they own
directly or indirectly, any equity of any form in the Mortgaged Property or the
Mortgagor Customer.

 

(nn)         Proceeds of Mortgage Loan. The proceeds of the Mortgage Loan have
not been and shall not be used to satisfy, in whole or in part, any debt owed or
owing by the Mortgagor Customer to the Borrower or any Affiliate or
correspondent of the Borrower.

 

(oo)         Mortgage Submitted for Recordation. The Mortgage either has been or
will promptly be submitted for recordation in the appropriate governmental
recording office of the jurisdiction where the Mortgaged Property is located.

 

(pp)         Rejection for Purchase by Whole Loan Buyer. Except as previously
disclosed to the Agent by the Borrower and approved by Agent in writing, no
Mortgage Loan has been rejected for purchase by a whole loan buyer.

 

(qq)         Environmental Matters. To the best of Borrowers’ knowledge, the
Mortgaged Property is free from any and all toxic or hazardous substances and
there exists no violation of any local, state or federal environmental law, rule
or regulation.

 

(rr)          Value of Mortgaged Property. The Borrowers have no knowledge of
any circumstances existing that should reasonably be expected to adversely
affect the value or the marketability of the Mortgaged Property or the Mortgage
Loan or to cause the Mortgage Loan to prepay during any period materially faster
or slower than the Mortgage Loans acquired by the Borrowers generally.

 

 Annex Two - 9 

 

 

(ss)        HOEPA. No Mortgage Loan is (a) subject to the provisions of the
Homeownership and Equity Protection Act of 1994 as amended (“HOEPA”), (b) a
“high cost” mortgage loan, “covered” mortgage loan or “predatory” mortgage loan
or any other comparable term, no matter how defined under any federal, state or
local law, or (c) subject to any comparable federal, state or local statutes or
regulations, including, without limitation, the provisions of the Georgia Fair
Lending Act, the City of Oakland, California Anti-Predatory Lending Ordinance
No. 12361 or any other statute or regulation providing assignee liability to
holders of such mortgage loans.

 

(tt)         No Predatory Lending. No predatory, abusive or deceptive lending
practices, including but not limited to, the extension of credit to a Mortgagor
Customer without regard for the Mortgagor Customer’s ability to repay the
Mortgage Loan and the extension of credit to a Mortgagor Customer which has no
tangible net benefit to the Mortgagor Customer, were employed in connection with
the origination of the Mortgage Loan.

 

(uu)        Assignment of Mortgage. Each Mortgage File is accompanied by an
enforceable Assignment of Mortgage and the Collateral Assignment.

 

(vv)        Notifications to Title Insurance Company. Borrowers shall cause
Agent to be noted as additional insured on all insurance certificates presented
in association with each Mortgage Loan. Borrowers have notified the title
insurance company of the assignment of the loan to Agent and, at any time
following the occurrence of an Event of Default or a Default, such insurance
policies shall be transferred to Agent.

 

(ww)       Lead Paint. To the best of Borrower’s knowledge, there is no pending
action or proceeding involving any Mortgaged Property in which the compliance
with any lead paint law, rule or regulation is an issue. Nothing further remains
to be done to satisfy in full all requirements of each such law, rule or
regulation that constitutes a prerequisite to the use and enjoyment of such
property.

 

Part II. Defined Terms

 

In addition to terms defined elsewhere in the Loan Agreement, the following
terms shall have the following meanings when used in this Annex Two:

 

“ALTA” means the American Land Title Association.

 

“Appraised Value” shall mean the value set forth in a desktop as complete
appraisal made in connection with the origination of the related Mortgage Loan
as the value of the Mortgaged Property.

 

“Best’s” means Best's Key Rating Guide, as the same shall be amended from time
to time.

 

“Due Date” means the day of the month on which the Monthly Payment is due on a
Mortgage Loan, exclusive of any days of grace.

 

 Annex Two - 10 

 

 

“Escrow Payments” means with respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor Customer with the mortgagee pursuant to the Mortgage or any other
document.

 

“FHLMC” means the Federal Home Loan Mortgage Corporation, or any successor
thereto.

 

“FNMA” means the Federal National Mortgage Association, or any successor
thereto.

 

“LTV” means with respect to any Mortgage Loan, the ratio of the original
outstanding principal amount of the Mortgage Loan to the lesser of (a) the
Appraised Value of the Mortgaged Property at origination or (b) if the Mortgaged
Property was purchased within 12 months of the origination of the Mortgage Loan,
the purchase price of the Mortgaged Property.

 

“Monthly Payment” means the scheduled monthly payment of principal and interest
on a Mortgage Loan in the Mortgage Interest Rate pursuant to the provisions of
the Mortgage Note.

 

“Mortgage Interest Rate” means the annual rate of interest borne on a Mortgage
Note.

 

“PMI Policy” means a policy of primary mortgage guaranty insurance issued by a
Qualified Insurer.

 

“Qualified Insurer” means an insurance company duly qualified as such under the
laws of the states in which the Mortgaged Property is located, duly authorized
and licensed in such states to transact the applicable insurance business and to
write the insurance provided, and approved as an insurer by FNMA and FHLMC and
whose claims paying ability is rated in the two highest rating categories by any
of the rating agencies with respect to primary mortgage insurance and in the two
highest rating categories by Best's with respect to hazard and flood insurance.

 

“Underwriting Guidelines” means the Borrower’s written underwriting guidelines
attached as Exhibit B hereto, as such underwriting guidelines may be amended or
supplemented from time to time in accordance with this Agreement.

 

Part III. Mortgage Loan Schedule

 

Information to be provided, or which is contained in the loan documents of each
Mortgage Loan, with respect to Eligible Mortgage Loans

 

For each Mortgage Loan, the Borrowers shall provide the following information:

 

(a)the mortgage loan identifying number;

 

 Annex Two - 11 

 

 

(b)the mortgagor’s name;

 

(c)the mortgage property’s street address, city, state and zip code;

 

(d)the lien position/status – always first lien;

 

(e)the property type;

 

(f)occupancy;

 

(g)loan purpose;

 

(h)original balance;

 

(i)original P&I;

 

(j)current P&I, as applicable;

 

(k)Origination Date;

 

(l)first payment date;

 

(m)maturity date;

 

(n)original term;

 

(o)Balloon Flag;

 

(p)Original LTV;

 

(q)original desktop as complete appraisal, BPO Value, property purchase amount;

 

(r)payment frequency;

 

(s)prepayment penalty period; and

 

(t)prepayment penalty description.

 

 Annex Two - 12 

 

  

Schedule 1.1

   

Lenders   Revolving
Commitment     Revolving
Commitment
Percentage   WBCC   $ 13,750,000       39.29 %                   Address:      
          Webster Business Credit Corporation                 360 Lexington
Avenue                 New York, New York 10017                 Attention:
Account Executive –                   Sachem Capital Corp.                 Fax:
(212) 806-4530                 Email: mmurphy@websterbcc.com                    
              Bankwell Bank   $ 13,750,000       39.29 %                  
Address:                 Bankwell Bank                 1 Sasco Hill Road        
        Fairfield, Connecticut 06824                 Attention: Damon Ralph    
            Email: dralph@mybankwell.com                                  
Berkshire Bank   $ 7,500,000       21.43 %                   Address:          
      Berkshire Bank                 4420 Route 27                 Kingston, New
Jersey 08528                 Attention: Diane Williams                 Email:
drwilliams@berkshirebank.com                

 

 Schedule 1.1