Exhibit 10.5

 

EXECUTION VERSION

 

SERVICING AND ASSET MANAGEMENT AGREEMENT

 

 

Between

 

BRT REALTY TRUST

 

as Servicer and Asset Manager

 

and

 

BRT RLOC LLC

 

as Lender

 

 

Dated as of June     , 2011

 

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SERVICING AND ASSET MANAGEMENT AGREEMENT

 

THIS SERVICING AND ASSET MANAGEMENT AGREEMENT (this “Agreement”) is made as of
June     , 2011, between BRT REALTY TRUST, a business trust formed under and
pursuant to the laws of the Commonwealth of Massachusetts (the “Servicer”), and
BRT RLOC LLC a New York limited liability company, as Lender (the “Lender”).

 

WHEREAS, Lender owns and/or intends to own certain mortgage loans (individually,
a “Mortgage Loan” and collectively, the “Mortgage Loans” and together with all
of the instruments and agreements now evidencing, securing, guarantying, or
otherwise relating to a Mortgage Loans, the “Loan Documents”);

 

WHEREAS, Servicer and Lender desire that Servicer manage and service collection
and administration of the Mortgage Loans identified by Lender from time to time
subject to the terms hereof and the Loan Documents.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, Lender and Servicer agree as follows:

 

ARTICLE I

 

SERVICING AND ASSET MANAGEMENT

 

Section 1.1                                    Appointment of Servicer as
Servicer.  Servicer is hereby appointed to service, administer and collect all
payments or proceeds with respect to all of the Mortgage Loans owned by Lender
and identified by Lender from time to time in accordance with the terms hereof
and the terms of the Loan Documents.  Servicer shall have full power and
authority, as required by and pursuant to the terms of the Loan Documents to do
or cause to be done any and all things in connection with such servicing,
administration and collection of each Mortgage Loan as may be necessary or
desirable to conform to Accepted Servicing Practices and the terms of the Loan
Documents and this Agreement.  If there is any conflict between the terms of
this Agreement and the Loan Documents with respect to the treatment of a
Mortgage Loan, the terms of the Loan Documents shall govern.  Any capitalized
term not otherwise defined herein shall have the meaning as specified on
Exhibit A, or if specified thereon, as specified in the LSA.

 

Section 1.2                                    Documents Evidencing Assets.
 Lender will provide to Servicer copies of each document evidencing a Mortgage
Loan and the collateral and security therefor to be serviced by Servicer from
time to time hereunder, together with such other documents as Servicer may
reasonably request in order to perform its duties under this Agreement.  Other
than as provided in the LSA and the Custodial Agreement, Servicer shall maintain
physical or imaged possession of copies of all instruments or documents
generated by or coming into the possession of Servicer that are required to
document or service a Mortgage Loan.

 

Section 1.3                                    Duties of Servicer.  Servicer’s
duties under this Agreement shall include the following:

 

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(a)                                 Servicer shall undertake all commercially
reasonable efforts in accordance with Accepted Servicing Practices to collect or
otherwise realize upon a Mortgage Loan in accordance with, and as expressly
permitted by the terms of the Loan Documents.

 

(b)                                 Servicer shall maintain reasonable records
with respect to a Mortgage Loan setting forth the status of a Mortgage Loan, the
amount and application of any funds received on account of a Mortgage Loan, the
amount of any advances made in collection of, or other realization upon a
Mortgage Loan, in accordance with the terms of the Loan Documents.

 

(c)                                  All proceeds received from a Mortgage Loan
shall either be deposited directly by the applicable Borrower pursuant to wire
transfer into the account identified by Lender or delivered by the applicable
Borrower by check to the Servicer.  Servicer shall deposit any proceeds or
deliver any checks it may receive directly from a Borrower with respect to a
Mortgage Loan into the applicable account identified by Lender for such Mortgage
Loan.

 

(d)                                 Servicer shall monitor the payment of real
estate taxes, insurance, and any other escrows or reserves, to the extent
required by, and in accordance with the Loan Documents.  To the extent permitted
under the terms of a Mortgage Loan, Servicer will manage escrow and reserve
accounts including disbursement of payments to third parties on behalf of Lender
and will perform periodic analyses of tax and insurance escrow accounts.  To the
extent required with respect to any Mortgage Loan with future advances due to
renovation or construction, Servicer shall manage draws of loan funds, determine
loan balancing, oversee the construction manager and undertake such other rights
of Lender under the Loan Documents with respect to such renovation or
construction.

 

(e)                                  Servicer shall provide covenant compliance,
and at Lender’s direction, enforcement of such compliance as required by the
Loan Documents.

 

(f)                                   If the Borrower fails to obtain or
maintain the insurance Lender requires, Servicer, upon receipt of prior written
approval and funds from Lender, shall obtain such insurance with respect to
Mortgage Loan collateral and advance on behalf of such Borrower the premiums for
such insurance at the direction of Lender.  Servicer shall not incur any costs
in obtaining or maintaining such insurance.

 

(g)                                  In addition to the servicing functions
described in clauses (a) through (f) above, Servicer will provide the normal
scope of asset management services.  These services provide that Servicer manage
all aspects of Lender’s interest to the extent permitted under the terms of the
Loan Documents.

 

Servicer’s obligations under this Section 1.3, where applicable, shall be
subject to receipt of funds from Lender in accordance with this Agreement.

 

Notwithstanding anything to the contrary herein, Servicer agrees to perform
those functions and services and create and provide those documents set forth in
the LSA and the other Transaction Documents and otherwise abide by the terms and
provisions applicable to the Servicer set forth therein.  In the event of any
inconsistency between the

 

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terms and conditions of this Agreement and the LSA, the terms and conditions of
the LSA shall supersede and control to the extent of such inconsistency.

 

Section 1.4                                    Servicing Standards.  Servicer
shall administer services under this Agreement in accordance with the definition
of “Accepted Servicing Practices”, the terms and conditions of the Loan
Documents and the terms and conditions of this Agreement.

 

Section 1.5                                    Power and Authority.  Servicer is
hereby granted the full power and authority to conduct its obligations pursuant
to and in adherence with the terms of the Loan Documents and this Agreement, for
and on behalf of Lender.  All actions taken hereunder by Servicer shall be
performed in accordance with the terms of the Loan Documents.  In the event
Lender receives a request for consent and does not consent or object within five
(5) Business Days of receipt of a request for such consent, Lender shall be
deemed to have consented to such matter.  If, pursuant to the terms of the Loan
Documents, Servicer participates in any legal proceedings involving a Mortgage
Loan, Servicer is authorized and empowered to execute and deliver in its name as
servicer for Lender any notices, demands, claims, complaints, responses,
affidavits or other documents or instruments in connection with any such
proceeding.  Upon request, Lender shall furnish Servicer with any powers of
attorney or other documents which Servicer may reasonably request in order to
take such steps as Servicer deems necessary, appropriate or expedient to carry
out its servicing, administration and collection activities under this Agreement
and the Loan Documents.

 

Section 1.6                                    Non-Performance of the Loans and
REO Property.  A Mortgage Loan shall be considered a “Specially Serviced Loan”
for purposes of this Agreement when one or more of the events set forth in the
definition of “Special Servicing Event” has occurred and is continuing with
respect to such Mortgage Loan.  In addition, Lender, pursuant to the terms of
the Loan Documents, may acquire the collateral securing the Mortgage Loans as a
result of foreclosure, or by deed in lieu of foreclosure or walk-away guaranty
(at which time the Property shall be known as an “REO Property”).  At the time a
Mortgage Loan becomes either a Specially Serviced Loan or converts to an REO
Property, Servicer and Lender shall mutually agree upon the scope of additional
services to be performed not already provided for in this Agreement.  As used
herein, the term “Special Servicing Event” shall mean, with respect to a
Mortgage Loan, when any one of the following has occurred:  if (a) any payment
of principal due thereunder is in default by more than sixty (60) days, (b) any
payment of interest or other amount (other than principal) due thereunder is in
default by more than sixty (60) days, (c) the Borrower with respect to such
Mortgage Loan is in default with respect to any material financial or other
covenants under the Loan Documents for such Mortgage Loan for a period of more
than sixty (60) days, or such other criteria as may be identified by the Lender
from time to time or (d) the Servicer determines pursuant to Accepted Servicing
Practices that a Mortgage Loan is at risk of imminent default; provided,
however, that a Mortgage Loan will cease to be a Specially Serviced Loan:
(i) with respect to clauses (a) and (b) above, when all past due principal and
interest and all late charges, default interest and other amounts due under the
Loan Documents have been paid and the applicable Mortgage Loan otherwise becomes
a performing Mortgage Loan for at least sixty (60) consecutive days, in
accordance with its terms;  (ii) with respect to clause (c) above, when such
specified event has been remedied, cured or otherwise resolved and (iii) with
respect to clause (d) above, when determined by Servicer and approved by Lender.

 

Section 1.8                                    Advances.  Servicer shall, in no
event, be required to make any advances to protect a Mortgage Loan or the
underlying collateral, including without limitation, taxes,

 

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insurance and assessments; attorneys’ fees; trustee’s fees, recording, filing
and publication fees; title report and title search costs; court costs; witness
fees; other costs incurred with respect to any foreclosure sale, trustee’s sale
or acquisition in lieu of foreclosure, or with respect to the marketing, sale or
disposition of a Mortgage Loan collateral; inspections, engineering surveys or
environmental assessments; repair, restoration, maintenance or protection of a
Mortgage Loan collateral (“Protective Advances”).  In the event Servicer decides
to make any Protective Advance, such Protective Advance will only be made after
Servicer has obtained the funds required to make such Protective Advances from
Lender and Servicer has obtained written consent of Lender.  Lender shall be
under no obligation to agree to any Protective Advances.  Servicer shall have no
liability hereunder for failure to make Protective Advances due to Lender’s
refusal or failure to fund the same.

 

SECTION II

 

SERVICING FEES; REIMBURSEMENT OF EXPENSES

 

Section 2.1                                    Servicing Fees. Lender shall pay
an annual fee to Servicer of $10,000.00 (the “Servicing Fee”).

 

Section 2.2                                    Costs.  Servicer shall only be
required to incur costs, including of collection, in connection with its
servicing, administration and collection activities with respect to a Mortgage
Loan to the extent funds are received therefor from Lender.

 

Section 2.3                                    Expenses of Servicer.  Servicer
shall be responsible for payment of all overhead expenses of Servicer, salaries,
wages or other compensation of employees of Servicer, as set forth in the Loan
Documents.

 

SECTION III

 

ACCOUNTING, STATEMENTS AND REPORTS

 

Section 3.1                                    Books and Records.  Servicer
shall keep satisfactory books and records pertaining to a Mortgage Loan and
shall make periodic reports in accordance with this Section.  All such records
and all Mortgage Loan documents, whether or not developed or originated by
Servicer, reasonably required to document or properly administer a Mortgage Loan
shall remain at all times the property of Lender, although Servicer shall be
entitled to copies thereof.  Upon termination of this Agreement, Servicer shall
deliver all such records and Mortgage Loan documents to Lender or its designee.

 

Section 3.2                                    Periodic Reporting.  Servicer
shall provide to Lender the periodic reporting requested from time to time by
Lender.

 

Section 3.3                                    Inspection Rights.  Servicer
shall provide Lender and its accountants or other representatives with free and
unlimited access during normal business hours at Servicer’s offices upon
reasonable prior notice to Servicer to, and the ability to make copies of, all
books and records relating to the Mortgage Loans.

 

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SECTION IV

REPRESENTATIONS AND WARRANTIES

 

Section 4.1                                    Representations and Warranties of
Servicer.  Servicer hereby represents and warrants to Lender the following:

 

(a)                                 Servicer is a business trust duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts.  Servicer has all requisite corporate power and authority to own
and operate its properties, carry out its business as presently conducted and as
proposed to be conducted and to enter into and discharge its obligations under
this Agreement.

 

(b)                                 The execution and delivery by Servicer of
this Agreement and the other documents to which it is a party, and performance
and compliance by Servicer with the terms of this Agreement and the other
documents to which it is a party have been duly authorized by all necessary
corporate action on the part of Servicer and will not violate Servicer’s
declaration of trust or by-laws, or constitute a default under any indenture or
loan or credit agreement or any other material agreement, lease or instrument to
which Servicer is a party or by which it or its properties may be bound or
affected.

 

(c)                                  This Agreement constitutes the valid, legal
and binding obligation of Servicer, enforceable against it in accordance with
the terms hereof, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law).

 

(d)                                 Servicer agrees to comply with the terms and
conditions of the Loan Documents, to the extent Servicer’s compliance is
required thereunder, and pursuant to the terms thereof, subject to Lender’s
consent if required per this Agreement and, if applicable, Lender providing
funds.

 

Section 4.2                                    Representations and Warranties of
Lender. Lender hereby represents and warrants to Servicer the following:

 

(a)                                 Lender is a limited liability company duly
formed, validly existing and in good standing under the laws of the State of New
York, and is duly qualified to transact business and is in good standing in each
jurisdiction in which the nature of its business make such qualification
necessary, except where the failure to be so qualified does not materially
affect Lender’s business operations.  Lender has all requisite corporate power
and authority to own and operate its properties, carry out its business as
presently conducted and as proposed to be conducted and to enter into and
discharge its obligations under this Agreement.

 

(b)                                 The execution and delivery by Lender of this
Agreement and the other documents to which it is a party and performance and
compliance by Lender with the terms of this Agreement and the other documents to
which it is a party have been duly authorized by all necessary corporate action
on the part of Lender and will not violate Lender’s certificate of formation or
limited liability company agreement, or constitute a default under any indenture
or loan or credit agreement or any other material agreement,

 

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lease or instrument to which Lender is a party or by which it or its properties
may be bound or affected.

 

(c)                                  This Agreement constitutes the valid, legal
and binding obligation of Lender, enforceable against it in accordance with the
terms hereof, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and by general principles of equity (whether
considered in a proceeding or action in equity or at law).

 

SECTION V

TERMINATION

 

Section 5.1  Termination Events.  Any of the following acts or occurrences shall
constitute a Termination Event under this Agreement (each, a “Termination
Event”):

 

(a)                                 gross negligence, willful misconduct, bad
faith or felony act on the part of Servicer; or

 

(b)                                 any failure on the part of Servicer to
observe or perform in any material respect any other of the covenants or
agreements thereof contained in this Agreement which continues unremedied for a
period of thirty (30) days after the date on which written notice of such
failure, requiring the same to be remedied; provided, however, that if such
covenant or agreement is capable of being cured and Servicer is diligently
pursuing such cure such thirty (30) day period shall be extended for an
additional forty-five (45) days; or

 

(c)                                  with or without cause, either party may
terminate this Agreement by sixty (60) day notice to the other party; provided,
however, that upon a Servicer Default or an Event of Default, Lender or Agent
may replace Servicer as servicer with respect to the Pledged Receivables..

 

SECTION VI

INTENTIONALLY OMITTED

 

SECTION VII

INDEMNIFICATION AND LIABILITY

 

Section 7.1   Indemnification for Third Party Claims.   Each of Servicer and
Lender (each an “Indemnitor”) shall indemnify and hold harmless the other, its
directors, officers, employees and agents from any third party claims arising
from its gross negligence or willful misconduct.

 

Section 7.2   Liability.  Servicer and any officer, employee or agent may rely
in good faith on any document of any kind, which is in its good faith belief
properly executed and submitted by any person with respect to matters hereunder.

 

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SECTION VIII

MISCELLANEOUS

 

Section 8.1                                    Severability Clause.  Any part,
provision, representation or warranty of this Agreement which is prohibited or
which is held to be void or unenforceable shall be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof.  Any part, provision, representation or warranty of this
Agreement which is prohibited or unenforceable or is held to be void or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.  To the extent permitted by applicable law, the parties
hereto waive any provision of law which prohibits or renders void or
unenforceable any provision hereof.  If the invalidity of any part, provision,
representation or warranty of this Agreement shall deprive any party of the
economic benefit intended to be conferred by this Agreement, the parties shall
negotiate in good faith to develop a structure the economic effect of which is
as nearly as possible the same as the economic effect of this Agreement without
regard to such invalidity.

 

Section 8.2                                    Notices. All notices, demands,
requests, consents, approvals or other communications (each of the foregoing, a
“Notice”) required or permitted to be given hereunder or pursuant hereto or that
are given with respect to this Agreement to any party shall be in writing and
shall be (a) personally delivered, (b) sent by both registered or certified
mail, postage prepaid and return receipt requested, and regular first class
mail, (c) sent both by facsimile transmission with receipt of transmission
confirmed electronically or by telephone and by regular first class mail, or
(d) sent by reputable overnight courier service with charges prepaid and
delivery confirmed, to the intended recipient at its respective address as set
forth below; provided, however, that, if a party sending any Notice has received
written notice in accordance with this Section 8.2 of a more recent address for
any intended recipient referred to below, any Notice to such intended recipient
shall be delivered or sent to it at the most recent address of which such Party
has received such a notice:

 

If to Lender:

 

BRT RLOC LLC
c/o BRT Realty Trust
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
Attn:  Jeffrey A. Gould, President
Facsimile number:  (516) 773-2770

 

If to Servicer:

 

BRT Realty Trust
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
Attn:  Mark Lundy, Senior Vice President, and David Kalish
Facsimile number:  (516) 684-4903 and (516) 773-2778

 

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Any Notice delivered or sent as provided above shall be deemed given when so
delivered or sent and shall be deemed received (a) when personally delivered,
(b) three (3) Business Days after being mailed as above provided, (c) when sent
by facsimile transmission as above provided, or (d) one (1) Business Day after
being sent by courier as above provided; provided, however, that any Notice
specifying a new address to which any Notice shall be sent shall be deemed
received only when actually received; and provided further that any Notice that
is personally delivered after 4 PM or is sent by facsimile after 4 PM shall be
deemed to have been delivered on the next Business Day.

 

Section 8.3                                    Counterparts

 

(a)                                 A party to this Agreement may deliver
executed signature pages to this Agreement by facsimile transmission or
electronic mail attachment to any other parties, which facsimile copy or
electronic mail attachment shall be deemed to be an original executed signature
page; provided, however, that such party shall deliver an original signature
page to the other promptly thereafter.  For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which shall be
deemed to be an original, and together shall constitute and be one and the same
instrument.

 

Section 8.4                                    Governing Law; Waiver of Jury
Trial

 

(a)                                 Governing Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.  Any dispute arising hereunder or related to this Agreement shall be
resolved in the federal court sitting in New York, New York, and Lender and
Servicer hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in such federal court.

 

(b)                                 WAIVER OF JURY TRIAL.  EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
AGREEMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.

 

Section 8.5                                    Amendments

 

(a)  This Agreement may be amended from time to time by a written instrument
signed by Servicer and Lender and consented to by Agent (which consent shall not
be unreasonably withheld) and no waiver of any of the terms hereof by any party
shall be effective unless it is in writing and signed by the other parties and
Agent.

 

Section 8.6                                    Headings Descriptive.  The
headings of the sections and subsections of this Agreement are inserted for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Agreement.

 

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Section 8.7                                    General Definitional Provisions.

 

(a)                                 The words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
section, subsection, appendix and exhibit references are to this Agreement,
unless otherwise specified.

 

(b)                                 The meanings given to terms defined herein
shall be equally applicable to the singular and plural forms of such terms.

 

Section 8.8                                    Judicial Interpretation.  Should
any provision of this Agreement require judicial interpretation, it is agreed
that a court interpreting or construing the same shall not apply a presumption
that the terms hereof shall be more strictly construed against any person by
reason of the rule of construction that a document is to be construed more
strictly against the person who itself or through its agent prepared the same,
it being agreed that all parties hereto have participated in the preparation of
this Agreement.

 

Section 8.9                                    Integration.  The Agreement
comprises the final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof as of the date hereof
and shall constitute the entire agreement among the parties hereto with respect
to such subject matter, superseding all prior oral or written understandings.

 

Section 8.10.                          Successors and Assigns; No Third Party
Beneficiary.  This Agreement and the provisions hereof shall be binding upon and
enforceable against each of the parties hereto and their respective successors
and assigns and shall inure to the benefit of and be enforceable by each of the
parties hereto and their respective successors and permitted assigns.  This
Agreement is not intended to confer any rights or benefits on any persons other
than the parties hereto, Agent and their respective successors and permitted
assigns.

 

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed by
their authorized officer as of the day and year first above written.

 

 

LENDER:

 

SERVICER:

 

 

 

BRT RLOC LLC

 

BRT REALTY TRUST

 

 

 

By:

/s/ Mark H. Lundy

 

By:

/s/ Mark H. Lundy

 

Mark H. Lundy

 

 

Mark H. Lundy

 

Senior Vice President

 

 

Senior Vice President

 

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Exhibit A

Certain Definitions

 

“Accepted Servicing Practices” shall mean the obligation of Servicer to service
and administer the Mortgage Loans solely in the best interests and for the
benefit of Lender, generally exercising the same basic care, skill, prudence,
diligence and practices which Servicer utilizes for loans which Servicer or its
Affiliate owns for its own account, in each case, acting in accordance with the
terms of this Agreement and with a view to the maximization of timely recovery
of principal and interest on the Mortgage Loans.

 

“Affiliate” means, with respect to any specified Person, (a) any other Person
directly or indirectly controlling, controlled by, or under common control with
such specified Person, (b) any individual who is an executive or other senior
officer, general partner, manager or managing member (or Person serving in a
similar capacity) of or with such specified Person or of any other Person
described in clause (a) of this definition or (c) any other Person directly or
indirectly controlling, controlled by, or under common control with any
individual or groups of individuals described in clause (b) of this definition.

 

“Business Day” means any day that is not a Saturday or Sunday or a day on which
banks are required or permitted to be closed in the State of New York.

 

“Fiscal Quarter” means a three-month period commencing on January 1st,
April 1st, July 1st or October 1st, as the case may be.

 

“LSA” means that certain Loan and Security Agreement, dated as of June [ ],
2011, by and among, Servicer, Lender, Servicer, as guarantor, Capital One,
National Association, as agent, and the lenders from time to time party thereto
(as amended, supplemented, restated or otherwise modified from time to time)

 

“Person” means any individual, partnership, corporation, limited liability
company, trust or other entity.

 

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