Exhibit 10.1

 

MASTER REPURCHASE AGREEMENT

 

Dated as of December 8, 2014

 

between

 

ACRC LENDER C LLC,

 

as Seller,

 

and

 

CITIBANK, N.A.,

 

as Buyer

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

1.

APPLICABILITY

1

 

 

 

2.

DEFINITIONS

1

 

 

 

3.

INITIATION; CONFIRMATION; TERMINATION; FEES

22

 

 

 

4.

MARGIN MAINTENANCE

29

 

 

 

5.

INCOME PAYMENTS AND PRINCIPAL PAYMENTS

30

 

 

 

6.

SECURITY INTEREST

33

 

 

 

7.

PAYMENT, TRANSFER AND CUSTODY

37

 

 

 

8.

SALE, TRANSFER, HYPOTHECATION OR PLEDGE OF PURCHASED LOANS

38

 

 

 

9.

TRANSACTION CONDITIONS PRECEDENT

38

 

 

 

10.

REPRESENTATIONS OF SELLER

40

 

 

 

11.

INTENTIONALLY OMITTED

44

 

 

 

12.

COVENANTS OF SELLER

44

 

 

 

13.

SINGLE-PURPOSE ENTITY

49

 

 

 

14.

EVENTS OF DEFAULT; REMEDIES

51

 

 

 

15.

SINGLE AGREEMENT

59

 

 

 

16.

RECORDING OF COMMUNICATIONS

59

 

 

 

17.

NOTICES AND OTHER COMMUNICATIONS

59

 

 

 

18.

ENTIRE AGREEMENT; SEVERABILITY

59

 

 

 

19.

ASSIGNMENTS; PARTICIPATIONS AND REGISTERED FORM

60

 

 

 

20.

GOVERNING LAW

61

 

 

 

21.

NO WAIVERS, ETC.

61

 

 

 

22.

USE OF EMPLOYEE PLAN ASSETS

62

 

 

 

23.

INTENT

62

 

 

 

24.

DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

64

 

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25.

CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

65

 

 

 

26.

NO RELIANCE

65

 

 

 

27.

INDEMNITY

66

 

 

 

28.

DUE DILIGENCE

67

 

 

 

29.

SERVICING

68

 

 

 

30.

MISCELLANEOUS

69

 

 

 

31.

TAXES

71

 

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ANNEXES AND EXHIBITS

 

ANNEX I

Names and Addresses for Communications between Parties

 

 

SCHEDULE I

Schedule of Competitors

 

 

SCHEDULE II

Organizational Chart

 

 

EXHIBIT I

Representations and Warranties Re: Each Individual Purchased Loan

 

 

EXHIBIT II

Funding Date File Data Fields

 

 

EXHIBIT III

Form of Request for Transaction/Increase in Purchase Price

 

 

EXHIBIT IV

Form of Funding Confirmation

 

 

EXHIBIT V

Form of Irrevocable Redirection Notice

 

 

EXHIBIT VI

Form of Custodial Delivery

 

 

EXHIBIT VII

Form of Officer’s Certificate

 

 

EXHIBIT VIII

Form of Confirmation

 

 

EXHIBIT IX

Form of Servicer Notice and Agreement

 

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MASTER REPURCHASE AGREEMENT, dated as of December 8, 2014, by and between ACRC
LENDER C LLC, a Delaware limited liability company (“Seller”) and CITIBANK,
N.A., a national banking association (“Buyer”).

 

WHEREAS, Seller and Buyer entered into that certain Master Loan and Security
Agreement (the “Original Loan Agreement”), dated as of December 8, 2011, as
amended by (1) that certain First Amendment to Master Loan and Security
Agreement, dated as of April 16, 2012 (the “First Amendment”), (2) that certain
Second Amendment to Master Loan and Security Agreement, dated as of July 12,
2013 (the “Second Amendment”), (3) that certain Third Amendment to Master Loan
and Security Agreement, dated as of August 27, 2013 (the “Third Amendment”), and
(4) that certain Fourth Amendment to Master Loan and Security Agreement, dated
as of May 6, 2014 (the “Fourth Amendment”; together with the Original Loan
Agreement, the First Amendment, the Second Amendment and the Third Amendment,
collectively, the “Existing Loan Agreement”), between Seller and Buyer.

 

WHEREAS, Seller and Buyer desire to enter into this Agreement upon the terms and
conditions hereinafter set forth, so as to restructure the Existing Loan
Agreement into a master repurchase agreement, and to make certain other
modifications as more fully set forth herein.

 

NOW, THEREFORE, Seller and Buyer hereby agree as follows:

 

1.                                      APPLICABILITY

 

From time to time during the Facility Availability Period, the parties hereto
may enter into transactions in which Seller agrees to transfer to Buyer
Purchased Loans against the transfer of funds by Buyer, with a simultaneous
agreement by Buyer to transfer to Seller such Purchased Loans at a date certain,
against the transfer of funds by Seller.  Each such transaction shall be
referred to herein as a “Transaction” and, unless otherwise agreed in writing,
shall be governed by this Agreement, including any supplemental terms or
conditions contained in any exhibits identified herein as applicable hereunder.

 

2.                                      DEFINITIONS

 

“Accelerated Repurchase Date” shall have the meaning specified in
Section 14(b)(i) of this Agreement.

 

“Acceptable Hedge Counterparty” shall mean a Person that is regularly engaged in
the business of entering into Interest Rate Protection Agreements and is
reasonably acceptable to Buyer.

 

“Accepted Servicing Practices” shall have the meaning specified in
Section 29(a) of this Agreement.

 

“ACRE Management” shall mean Ares Commercial Real Estate Management LLC, a
Delaware limited liability company.

 

“Affiliate” shall mean, when used with respect to any specified Person, any
other Person directly or indirectly Controlling, Controlled by, or under common
Control with, such Person.

 

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“Agreement” shall mean this Master Repurchase Agreement, dated as of December 8,
2014, by and between ACRC LENDER C LLC, and Citibank, N.A., as the same may be
amended, modified and/or restated from time to time.

 

“Applicable Margin” shall have the meaning provided in the Fee Letter.

 

“Appraisal” shall mean a FIRREA-compliant appraisal addressed to and reasonably
satisfactory to Buyer of the related Mortgaged Property from an Independent
Appraiser, which determines “as-is” appraised value at origination of the
Eligible Loan utilizing a discounted cash flow analysis methodology, based on
stabilized occupancy and a five to ten year projection period adjusted for
fiscal year inflation and discounting..

 

“Assignment of Leases” shall mean, with respect to any Mortgage, an assignment
of leases thereunder, notice of transfer or equivalent instrument in recordable
form, sufficient under the laws of the jurisdiction wherein the Mortgaged
Property is located to reflect the assignment of leases, subject to the terms,
covenants and provisions of this Agreement.

 

“Balloon Payment” shall mean, for any Purchased Loan for which the final
principal payment is substantially greater than periodic Scheduled Principal
Payments due thereunder, the payment due on its maturity date.

 

“Bankruptcy Action” means, with respect to any Person, if such Person

 

(a)                                 makes an assignment for the benefit of
creditors,

 

(b)                                 files a voluntary petition in bankruptcy,

 

(c)                                  is adjudged a bankrupt or insolvent, or has
entered against it an order for relief, in any bankruptcy or insolvency
proceedings,

 

(d)                                 consents to or files a petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or regulation,

 

(e)                                  files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against it in
any bankruptcy or insolvency proceeding,

 

(f)                                   seeks, consents to or acquiesces in the
appointment of a trustee, receiver, liquidator, sequestrator, custodian or any
similar official of or for such Person or of all or any substantial part of its
properties,

 

(g)                                  has not had a bankruptcy proceeding
dismissed one hundred twenty (120) days after the commencement of any proceeding
against such Person seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation,

 

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(h)                                 without such Person’s consent or
acquiescence, has a trustee, receiver or liquidator be appointed with respect to
such Person or of all or any substantial part of its properties, and such
appointment is not vacated or stayed within ninety (90) days, or within ninety
(90) days after the expiration of any such stay, the appointment is not vacated
or

 

(i)                                     takes any action in furtherance of any
of the foregoing.

 

“Bankruptcy Code” shall mean Title 11 of the United States Code (11 U.S.C.
§ 101, et seq.), as amended, modified or replaced from time to time.

 

“Blocked Account Agreement” means that certain Controlled Account Agreement with
respect to the Buyer’s Account, dated as December 8, 2011, among Seller, Buyer
and Controlled Account Bank.

 

“Business Day” shall mean any day other than (a) a Saturday or a Sunday, (b) a
day on which banks in the State of New York and the State of Illinois are
authorized or obligated by law or executive order to be closed, (c) any day on
which the New York Stock Exchange, the Federal Reserve Bank of New York or the
Custodian is authorized or obligated by law or executive order to be closed, or
(d) if the term “Business Day” is used in connection with the determination of
LIBOR, a day dealings in Dollar deposits are not carried on in the London
interbank market.

 

“Buyer” shall mean Citibank, N.A., or any successor or assign.

 

“Buyer’s Account” shall mean a segregated interest bearing account established
at Controlled Account Bank, in the name of Seller, pledged to Buyer and subject
to the Blocked Account Agreement.

 

“Capital Lease Obligations” shall mean, for any Person, all obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.

 

“Capital Stock” shall mean any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent equity ownership interests in a Person which is not a
corporation, including, without limitation, any and all member or other
equivalent interests in any limited liability company, and any and all warrants
or options to purchase any of the foregoing.

 

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“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended from time to time.

 

“Certified Operating Histories” shall have the meaning specified in Exhibit I.

 

“Change of Control” shall mean any of the following events shall have occurred
without the prior approval of Buyer:

 

(i)                                     ACRE Management is no longer the manager
of substantially all (by face value) of the loan assets of Guarantor or if the
Management Agreement is modified in any material respect;

 

(ii)                                  any merger, reorganization or
consolidation of ACRE Management where ACRE Management is not the surviving
entity;

 

(iii)                               ACRE Management shall cease to be owned and
controlled, directly or indirectly, by Ares Management LLC or one or more of its
Affiliates; or

 

(iv)                              Guarantor shall cease to own and control, of
record and beneficially 100% of the Equity Interests of Seller.

 

“Closing Counsel” shall mean the attorney or law firm retained by Seller for the
origination or closing of any Purchased Loan to be transferred hereunder.

 

“Closing Counsel Letter” shall mean a letter delivered to Buyer from the Closing
Counsel with respect to any Purchased Loan in connection with the initial
Funding Date for such Purchased Loan, which states that all documents required
to be delivered to the Custodian in respect of such Purchased Loan pursuant to
this Agreement and the Custodial Agreement (i) have been executed and delivered
by the parties thereto (in partial reliance, if applicable, on an opinion of
counsel to the applicable Mortgagor), (ii) are in the possession of such Closing
Counsel and (iii) will be delivered to the Custodian within three (3) Business
Days after the applicable Funding Date.

 

“Closing Data File” shall mean, with respect to any Purchased Loan as of any
Funding Date, a computer file generated by Seller or Servicer and delivered to
Buyer and Custodian, which provides, with respect to each Purchased Loan that is
transferred or to be transferred to Buyer on such Funding Date, each of the data
fields set forth on Exhibit II attached hereto and the information responsive to
each such field, as well as any and all new, modified or updated information
with respect to such Purchased Loan that has been provided to Buyer prior to the
applicable Funding Date, in each case in a format that has previously been
approved by Buyer and is otherwise acceptable to Buyer.

 

“Code” shall mean The Internal Revenue Code of 1986 and the regulations
promulgated and rulings issued thereunder, in each case as amended, modified or
replaced from time to time.

 

“Collateral” shall have the meaning specified in Section 6(b) of this Agreement.

 

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“Collection Period” shall mean, with respect to any Payment Date, the period
from and including the immediately preceding Payment Date to but excluding such
Payment Date.

 

“Complete Submission” shall mean with respect to any Eligible Loan, the Summary
Due Diligence Materials described on Annex 2 to Exhibit III hereto for the
Eligible Loan proposed to be transferred to Buyer in accordance with, and
subject to the terms and conditions of, this Agreement.

 

“Confirmation” shall have the meaning specified in Section 3(b) of this
Agreement.

 

“Contractual Obligation”  shall mean, with respect to any Person, any provision
of any securities issued by such Person or any indenture, mortgage, deed of
trust, deed to secure debt, contract, undertaking, agreement, instrument or
other document to which such Person is a party or by which it or any of its
property or assets are bound or are subject.

 

“Control” shall mean the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise and
“Controlling” and “Controlled” shall have meanings correlative thereto.

 

“Controlled Account Agreement”  shall mean a control agreement with respect to
the Buyer’s Account, dated as of the date of this Agreement, among Seller, Buyer
and Controlled Account Bank.

 

“Controlled Account Bank” shall mean Bank of America, National Association, or
any other bank approved by Buyer.

 

“Costs” shall have the meaning provided in Section 27(a) hereof.

 

“Custodial Agreement” shall mean the Custodial Agreement, dated as of
December 8, 2011, by and among the Custodian, Seller and Buyer, as the same may
be amended, modified and/or restated from time to time.

 

“Custodial Delivery” shall mean the form executed by Seller in order to deliver
the Purchased Loan Schedule and the Purchased Loan File to Buyer or its designee
(including the Custodian) pursuant to Section 7 hereof, a form of which is
attached hereto as Exhibit VI.

 

“Custodian” shall mean U.S. Bank, National Association, a Delaware limited
liability company, as Custodian under the Custodial Agreement, and its
successors and permitted assigns thereunder.

 

“Debt Yield” shall mean, with respect to any Purchased Loan (or all Purchased
Loans, as applicable), the percentage equivalent of the quotient obtained by
dividing (i) the Underwritten Net Cash Flow for the most recent twelve month
period for which such information is available by (ii) either:

 

(a)                                 for purposes of the determination of whether
a mortgage bridge loan satisfies the Debt Yield requirement to qualify as an
Eligible Loan, the unpaid principal

 

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amount of such mortgage bridge loan (but specifically including for this purpose
the unpaid principal amount of all Junior Interests), or

 

(b)                                 for purposes of the calculation of the
Applicable Margin on the initial Funding Date on which an Eligible Loan is first
transferred to Buyer hereunder, either (i) the unpaid principal amount of such
Purchased Loan (but specifically excluding for this purpose the unpaid principal
amount of all Junior Interests), or (ii) the initial Purchase Price of such
Purchased Loan, as applicable, as specified in the Fee Letter, or

 

(c)                                  for purposes of any request from Seller to
Buyer to fund a portion of any future advance which Seller is contractually
obligated to fund (or any reborrowing of a prior initial advance or future
advance which has been prepaid by Seller), the unpaid principal amount of such
Purchased Loan, inclusive of the full amount of such future advance (and
specifically including for this purpose the unpaid principal amount of all
Junior Interests), or

 

(d)                                 for purposes of the application of Balloon
Payments, Scheduled Principal Payments, Principal Prepayments and net sale
proceeds in the event of a sale of a Purchased Loan, in each case, pursuant to
Section 5(i) of this Agreement, the aggregate outstanding Purchase Price with
respect to such Purchased Loan; or

 

(e)                                  for purposes of Section 3(a)(v),
3(a)(vi) and 5(l) of this Agreement, the aggregate outstanding Purchase Price
with respect to all of the Purchased Loans transferred hereunder.

 

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

 

“Direct Competitor” shall mean any of the Persons listed on Schedule I attached
hereto as such Schedule I may be updated from time to time pursuant to a written
notice delivered by Seller to Buyer in accordance with this Agreement; provided,
that any such Person listed on Schedule 5 (including on any such written update)
shall not be an Eligible Assignee of the type described in clause (a) of the
definition of Eligible Assignee.

 

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

 

“Due Diligence Review” shall mean the performance by Buyer of any or all of the
reviews permitted under Section 28 hereof with respect to any or all of the
Purchased Loans as desired by Buyer from time to time.

 

“Early Repurchase Date” shall have the meaning specified in Section 3(d) of this
Agreement.

 

“Effective Date” shall mean the date of this Agreement.

 

“Eligible Assignee” shall mean any of the following Persons designated by Buyer
for purposes of Section 19(a)(i), (ii) and (iii):  (a) a bank, financial
institution, pension fund, insurance company or similar Person, an Affiliate of
any of the foregoing, and an Affiliate of

 

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Buyer, and (b) any other Person to which Seller has consented; provided, that
such consent of Seller shall not be unreasonably withheld, delayed or
conditioned, except in the case of a Direct Competitor of Seller, and, provided
further, Seller’s consent under this subsection (b) shall not be required at any
time when an Event of Default exists.  Such Person shall provide to Seller such
duly executed IRS forms as Seller reasonably requests.

 

“Eligibility Breach” shall have the meaning provided in Section 5(k) hereof.

 

“Eligible Loan” shall mean a newly originated performing senior floating rate
mortgage bridge loan (i.e., either a whole mortgage loan or an A note in an
“A/B” structure) secured by a first lien which satisfies the following criteria:

 

(a)                                 such loan has been approved by Buyer in its
sole discretion prior to being transferred to Buyer hereunder,

 

(b)                                 such loan conforms to the representations
and warranties set forth in Exhibit I attached hereto (other than for exceptions
approved by Buyer),

 

(c)                                  such loan is secured by underlying real
estate which is an Eligible Property Type,

 

(d)                                 such loan has a term (inclusive of the
exercise of all extension options) not longer than sixty (60) months,

 

(e)                                  such loan has a Debt Yield equal to or
greater than 6.0%, and

 

(f)                                   such loan, at origination, has a
Loan-to-Value Ratio equal to or less than 80.0%.

 

“Eligible Property Type” shall mean any of the following types of underlying
real estate:  (a) multi-family, (b) office, (c) retail, (d) hospitality,
(e) industrial, (f) self-storage,  (g) student housing or (h) additional types
of real estate that may be approved by Buyer in its sole discretion from time to
time.

 

“Environmental Law” shall mean, any federal, state, foreign or local statute,
law, rule, regulation, ordinance, code, guideline, written policy and rule of
common law now or hereafter in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
employee health and safety or Hazardous Materials, including, without
limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. §
1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the
Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
§ 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the
Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et
seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq.; and
the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; and any state
and local or foreign counterparts or equivalents, in each case as amended from
time to time.

 

“EO13224” shall have the meaning provided in Section 10(n).

 

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“Equity Interests”  With respect to any Person, (a) any share, interest,
participation and other equivalent (however denominated) of Capital Stock of (or
other ownership, equity or profit interests in) such Person, (b) any warrant,
option or other right for the purchase or other acquisition from such Person of
any of the foregoing, (c) any security convertible into or exchangeable for any
of the foregoing, and (d) any other ownership or profit interest in such Person
(including partnership, member or trust interests therein), whether voting or
nonvoting, and whether or not such share, warrant, option, right or other
interest is authorized or otherwise existing on any date.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder. 
Section references to ERISA are to ERISA, as in effect at the date of this
Agreement and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.

 

“ERISA Affiliate” shall mean any corporation or trade or business that is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which Seller is a member and (ii) solely for purposes of potential
liability under Section 302 of ERISA and Section 412 of the Code and the lien
created under Section 303(k) of ERISA and Section 430(k) of the Code, described
in Section 414(m) or (o) of the Code of which Seller is a member.

 

“Event of Default” shall have the meaning specified in Section 14 of this
Agreement.

 

“Excluded Taxes” shall have the meaning specified in Section 31(a) of this
Agreement.

 

“Extension Fee” shall  have the meaning provided in the Fee Letter.

 

“Facility Amount” shall mean $250,000,000.

 

“Facility Availability Period” shall mean the period commencing on the date of
this Agreement and ending on December 8, 2016 (or if such date is not a Business
Day, the next succeeding Business Day).

 

“Facility Expiration Date” shall mean the last day of the Facility Availability
Period; provided, that the Facility Expiration Date shall be extendable by
Seller for up to three consecutive one year periods, to the same date in the
succeeding year (or if such date is not a Business Day, the next succeeding
Business Day), subject to the following:

 

(a) Seller delivers to Buyer a written request of the extension of the Facility
Expiration Date no earlier than ninety (90) nor later than thirty (30) days
before the then current Facility Expiration Date,

 

(b) no Default or Event of Default exists on the date of the request to extend
or on the then current Facility Expiration Date,

 

(c) no Margin Deficit exists that has not been satisfied on the then current
Facility Expiration Date, and

 

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(d) Seller shall have paid to Buyer the Extension Fee on the then current
Facility Expiration Date.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof, any agreements entered into
pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory
legislation, rules or practices adopted pursuant to any intergovernmental
agreement entered into in connection with the implementation of such sections of
the Code.

 

“Fee Letter” shall mean the letter agreement, dated as of December 8, 2014,
between Seller and Buyer.

 

“FIRREA” shall mean the Financial Institutions, Reform, Recovery and Enforcement
Act of 1989.

 

“Fitch” shall mean Fitch Ratings, Inc. and its successors and assigns.

 

“Funding Confirmation” shall have the meaning specified in Section 3(a)(iii) of
this Agreement.

 

“Funding Date” shall mean the date on which a transfer of Purchase Price is made
hereunder.

 

“GAAP” shall mean United States generally accepted accounting principles
consistently applied as in effect from time to time.

 

“Governing Documents” shall mean as to any Person, its articles or certificate
of incorporation and by-laws, its partnership agreement, its certificate of
formation and operating agreement, and/or the other organizational or governing
documents of such Person.

 

“Governmental Authority” shall mean any national or federal government, any
state, regional, local or other political subdivision thereof with jurisdiction
and any Person with jurisdiction exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.

 

“Ground Lease” shall mean any ground lease containing the following terms and
conditions:  (a) a remaining term (exclusive of any unexercised extension
options) of twenty (20) years or more from the final stated maturity date of the
related loan; (b) the right of the lessee to mortgage and encumber its interest
in the leased property without the consent of the lessor or with such consent
given; (c) the obligation of the lessor to give the holder of any mortgage lien
on such leased property written notice of any defaults on the part of the lessee
and agreement of such lessor that such lease will not be terminated until such
holder has had a reasonable opportunity to cure or complete foreclosures, and
fails to do so; (d) reasonable transferability of the lessee’s interest under
such lease, including ability to sublease; and (e) such other rights customarily
required by mortgagees making a loan secured by the interest of the holder of
the leasehold estate demised pursuant to a ground lease.

 

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“Guarantee Obligation” shall mean, as to any Person, any obligation of such
Person directly or indirectly guaranteeing any Indebtedness of any other Person
or in any manner providing for the payment of any Indebtedness of any other
Person or otherwise protecting the holder of such Indebtedness against loss
(whether by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, or to take-or-pay or otherwise);
provided that the term “Guarantee” shall not include endorsements for collection
or deposit in the ordinary course of business.  The amount of any Guarantee of a
Person shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith.  The terms
“Guarantee” and “Guaranteed” used as verbs shall have correlative meanings.

 

“Guarantor” shall mean Ares Commercial Real Estate Corporation, a Maryland
corporation.

 

“Guaranty” shall mean that certain Amended and Restated Substitute Guaranty
Agreement, dated as of May 6, 2014, from Guarantor in favor of Buyer, as the
same may be amended, modified, supplemented and/or restated from time to time.

 

“Hospitality Property” shall mean a real estate development the primary usage of
which is as a hotel or motel with individual rooms principally for short-term
rental to tenants occupying same.

 

“In Lieu of Policy” shall have the meaning specified in Exhibit I hereto.

 

“Income” shall mean, with respect to any Purchased Loan at any time, the sum of
(x) any principal paid by or on behalf of Seller and all interest, thereon and
(y) all net sale proceeds of a sale of such Purchased Loan.  Notwithstanding the
foregoing, “Income” shall be deemed not to include any fees or other amounts
(i) payable to the Servicer under the Servicing Agreement, in the form of
prepayment fees, extension fees, exit fees, defeasance fees, transfer fees,
make-whole fees, late charges, late fees, and all other fees or charges, and
(ii) that are not applied in reduction of principal or to the payment of
interest thereon (including, without limitation, due diligence and legal or
underwriting cost deposits, yield maintenance charges, penalties, default
interest, dividends, gains, receipts, allocations, rents, interests, profits,
payments in kind or returns or repayment of contributions, net sale,
foreclosure, liquidation, securitization or other disposition proceeds,
insurance payments, settlements and proceeds).

 

“Indebtedness” shall mean, for any Person at any date, without duplication,
(a) all then outstanding indebtedness of such Person for borrowed money (whether
by loan or the issuance and sale of debt securities) or for the deferred
purchase price of property or services (other than current trade liabilities
incurred in the ordinary course of business and payable in accordance with
customary practices), (b) any other then outstanding indebtedness of such Person
which is evidenced by a note, bond, debenture or similar instrument, (c) all
Capital Lease Obligations, (d) all then outstanding obligations of such Person
in respect of letters of credit, acceptances or similar instruments issued or
created for the account of such Person and (e) all then outstanding liabilities
secured by any Lien on any property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment thereof.

 

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“Indemnified Party” shall have the meaning specified in Section 27 of this
Agreement.

 

“Independent Appraiser”  shall mean an independent professional real estate
appraiser reasonably satisfactory to Buyer who is a member in good standing of
the American Appraisal Institute, and, if the state in which the subject
Mortgaged Property is located certifies or licenses appraisers, is certified or
licensed in such state, and in each such case, who has a minimum of five years
experience in the subject property type.

 

“Independent Director” shall mean a duly appointed manager or member of the
board of directors (or managers) of the relevant entity who shall not have been,
at the time of such appointment or at any time while serving as a director or
manager of the relevant entity and may not have been at any time in the
preceding five (5) years, (a) a direct or indirect legal or beneficial owner in
such entity or any of its Affiliates, (b) a creditor, supplier, employee,
officer, director (other than in its capacity as Independent Director), family
member, manager or contractor (other than in its capacity as an Independent
Director) of such entity or any of its Affiliates, or (c) a Person who controls
(directly, indirectly or otherwise) such entity or any of its Affiliates or any
creditor, supplier, employee, officer, director, family member, manager or
contractor of such Person or any of its Affiliates.

 

“Initial Advance Percentage” shall mean, with respect to any Purchased Loan, the
percentage equal to the quotient of the initial Purchase Price transferred by
Buyer in connection with a Transaction divided by the outstanding principal
amount of such Purchased Loan as of the Purchase Date on which such Purchased
Loan was first transferred to Buyer hereunder.

 

“Initial Debt Yield” shall mean the weighted average of the Initial Debt Yield
(Loan) of the Purchased Loans transferred hereunder, weighted according to each
Purchased Loan’s initial Purchase Price transferred by Buyer.

 

“Initial Debt Yield (Loan)” shall mean, with respect to any Purchased Loan, the
percentage equivalent of the quotient, calculated as of the Purchase Date on
which such Purchased Loan was first transferred to Buyer hereunder, obtained by
dividing (i) the Underwritten Net Cash Flow as of the Purchase Date by (ii) such
Purchased Loan’s initial Purchase Price transferred by Buyer.

 

“Initial Purchase Price Percentage” shall mean, with respect to any Purchased
Loan, the percentage equal to the quotient of the initial Purchase Price
transferred by Buyer in connection with a Transaction divided by the outstanding
principal amount of such Purchased Loan as of the Purchase Date on which such
Purchased Loan was first transferred to Buyer hereunder.

 

“Interest Rate Protection Agreement” shall mean, with respect to any or all of
the Purchased Loans, any short sale of U.S. Treasury Securities, futures
contract, mortgage related security, Eurodollar futures contract, options
related contract, interest rate swap, cap or collar agreement or similar
arrangement providing for protection against fluctuations in interest rates or
the exchange of nominal interest obligations, either generally or under specific
contingencies, entered into by Seller and an Acceptable Hedge Counterparty and
otherwise reasonably acceptable to Buyer.

 

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“Irrevocable Redirection Notice”  shall mean a notice in the form of Exhibit V
sent after the occurrence and during the continuance of an Event of Default
directing the remittance of Income with respect to a Purchased Loan to the
Buyer’s Account, and executed by the Seller with respect to such Purchased Loan.

 

“Junior Interest” shall mean (a) a “B-note” in an “A/B structure” in a Purchased
Loan, or (b) any other debt subordinate to a Purchased Loan transferred
hereunder that is secured by (i) all or any portion of the Mortgaged Property
and/or (ii) direct or indirect Equity Interests in the applicable Mortgagor.

 

“LIBOR” shall mean, for any Pricing Rate Period, the rate (expressed as a
percentage per annum) for deposits in Dollars, for a one-month period, that
appears on Reuters Screen LIBOR01 (or the successor thereto) as the London
interbank offered rate for deposits in Dollars as of 11:00 a.m., London time, on
the Pricing Rate Reset Date for such Pricing Rate Period.  If such rate does not
appear on Reuters Screen LIBOR01 as of 11:00 a.m., London time, on such Pricing
Rate Reset Date, Buyer shall request the principal London office of the
Reference Banks selected by Buyer to provide such banks’ offered quotation
(expressed as a percentage per annum) to leading banks in the international
Eurocurrency market for deposits in Dollars for a one-month period as of
11:00 a.m., London time, on such Pricing Rate Reset Date for amounts of not less
than the aggregate outstanding principal amount of the Transactions.  If at
least two such offered quotations are so provided, LIBOR shall be the arithmetic
mean of such quotations.  If fewer than two such quotations are so provided,
Buyer shall request any three major banks in New York City selected by Buyer to
provide such banks’ rate (expressed as a percentage per annum) for loans in
Dollars to leading banks in the international Eurocurrency market for a
one-month period as of approximately 11:00 a.m., New York City time on the
applicable Pricing Rate Reset Date for amounts of not less than the aggregate
outstanding principal amount of the Transactions.  If at least two such rates
are so provided, LIBOR shall be the arithmetic mean of such rates.  LIBOR shall
be determined by Buyer or its agent, which determination shall be conclusive
absent manifest error (it being understood and agreed that the Buyer shall not
be required to disclose to Seller or Guarantor any information regarding any
reference bank or any rate provided by such reference bank in accordance with
this definition, including, without limitation, whether a reference bank has
provided a rate or the rate provided by any individual reference bank).

 

“Lien” shall mean any mortgage, lien, encumbrance, charge or other security
interest, whether arising under contract, by operation of law, judicial process
or otherwise.

 

“Loan-to-Value Ratio” or “LTV” shall mean, as of the initial Funding Date in
respect of any Purchased Loan, the ratio of (a) the outstanding principal amount
of such Purchased Loan at such time (and specifically including for this purpose
the unpaid principal amount of all Junior Interests) to (b) the market value of
the related Mortgaged Property at such time, as determined by reference to a
third-party Appraisal of such Mortgaged Property.

 

“Management Agreement” shall mean that certain Interim Management Agreement,
dated as of December 8, 2011, between Guarantor and ACRE Management, as amended,
modified, waived, supplemented, extended, restated or replaced from time to
time.

 

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“Margin Amount” shall mean, with respect to any Purchased Loan as of any date of
determination, an amount equal to the product of the Margin Percentage and the
outstanding Purchase Price of such Purchased Loan as of such date.

 

“Margin Deficit” shall have the meaning specified in Section 4(a) hereof.

 

“Margin Percentage” shall mean, with respect to any Purchased Loan as of any
date of determination, the reciprocal of the applicable Initial Purchase Price
Percentage.

 

“Market Disruption Event” shall mean any event or events which, as determined by
Buyer, acting in a reasonable manner, shall have resulted in (i) the effective
absence of a “lending market” for financing debt obligations secured by
commercial mortgage loans, (ii) Buyer not being able to finance mortgage assets
through the “lending market” with traditional counterparties at rates which
would have been reasonable prior to the occurrence of such event or events,
(iii) the effective absence of a “securities market” for securities backed by
mortgage assets or (iv) Buyer not being able to sell securities backed by
mortgage assets at prices which would have been reasonable prior to the
occurrence of such event or events.

 

“Market Value” shall mean, with respect to any Purchased Loan as of any relevant
date, the lesser of (x) 100% of the outstanding principal balance of such
Purchased Loan and (y) the market value for such Purchased Loan on such date, as
determined by Buyer in its commercially reasonable judgment; provided, that such
market value may be adjusted from time to time if Buyer determines that any of
the following events or any similar event, occurrence or condition (each, a
“Credit Event”) has occurred:

 

(a) the deterioration in value of any Mortgaged Property relating to any
Purchased Loan (other than due to fluctuations in current interest rates and
spreads);

 

(b) any drop in the net operating income or cash flow of any Purchased Loan or
the Mortgaged Property related thereto which causes the Debt Yield to decline;

 

(c) the loss of any security interest under any document executed in connection
with any Purchased Loan;

 

(d) Seller fails to deliver the Purchased Loan File to the Custodian within the
applicable time periods provided in the Custodial Agreement subject to any
applicable cure periods set forth therein;

 

(e) any statement, affirmation or certification made or information, document,
agreement, report or notice delivered by Seller to Buyer is untrue in any
material respect; and

 

(f) Buyer determines that a Material Adverse Effect has occurred or that such
Purchased Loan is otherwise unlikely to be collectible on a timely basis (other
than due to fluctuations in current interest rates and spreads).

 

“Material Adverse Effect” shall mean a material adverse effect on (a) the
Property, business, operations, financial condition or prospects of Seller or
Guarantor, (b) the ability of

 

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Seller or Guarantor to perform its obligations under any of the Transaction
Documents to which it is a party, (c) the validity or enforceability of any of
the Transaction Documents, (d) the rights and remedies of Buyer under any of the
Transaction Documents, (e) the timely payment of the principal of or interest on
the Purchased Loans or other amounts payable in connection therewith or (f) the
Collateral taken as a whole.

 

“Maximum Transaction Amount” shall mean with respect to any individual Purchased
Loan, $50,000,000.

 

“Minimum Debt Yield” shall mean 10.00% (or, commencing on and after December 8,
2016, 11.50%).

 

“Moody’s” shall mean Moody’s Investors Service, Inc.

 

“Mortgage” shall mean a mortgage, deed of trust, deed to secure debt or other
instrument, creating a valid and enforceable first lien on or a first priority
ownership interest in an estate in fee simple in real property and the
improvements thereon, securing a mortgage note or similar evidence of
indebtedness.

 

“Mortgage Asset Report” shall have the meaning specified in Section 12(l).

 

“Mortgage Loan” shall mean a first mortgage loan on one or more multi-family or
commercial real estate properties which is originated by Seller and which first
mortgage loan is evidenced by a Mortgage Note and secured by one or more
Mortgages.

 

“Mortgage Note” shall mean a note or other evidence of indebtedness of a
Mortgagor secured by a Mortgage in connection with a Purchased Loan.

 

“Mortgaged Property” shall mean the real property securing repayment of the debt
evidenced by a Mortgage Note.

 

“Mortgagee” shall mean the record holder of a Mortgage Note secured by a
Mortgage.

 

“Mortgagor” shall mean the obligor on a Mortgage Note and the grantor of the
related Mortgage.

 

“Multiemployer Plan” shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been, or were required to
have been, made by Seller or any ERISA Affiliate during the preceding five plan
years and which is covered by Title IV of ERISA.

 

“Non-Excluded Taxes” shall have the meaning provided in Section 31(a) hereof.

 

“Non-U.S. Person” shall have the meaning provided in Section 31(b).

 

“OFAC List” shall mean the Specially Designated Nationals list maintained by the
U.S. Department of Treasury, Office of Foreign Assets Control (OFAC).

 

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“Payment Date” shall mean the fifteenth (15th) day of each calendar month, or if
such day is not a Business Day, the next succeeding Business Day

 

“PBGC” shall mean the Pension Benefit Parent Guarantee Corporation or any entity
succeeding to any or all of its functions under ERISA.

 

“Person” shall mean an individual, corporation, limited liability company,
business trust, partnership, joint tenant or tenant-in-common, trust,
unincorporated organization, or other entity, or a federal, state or local
government or any agency or political subdivision thereof.

 

“Plan” shall mean an employee benefit or other plan established or maintained by
Seller or any ERISA Affiliate during the five year period ended prior to the
date of this Agreement or to which Seller or any ERISA Affiliate makes, is
obligated to make or has, within the five year period ended prior to the date of
this Agreement, been required to make contributions and that is covered by Title
IV of ERISA or Section 302 of ERISA or Section 412 of the Code, other than a
Multiemployer Plan.

 

“Plan Party” shall have the meaning specified in Section 22(a) of this
Agreement.

 

“Pledge and Security Agreement”  shall mean the Pledge and Security Agreement,
dated as of December 8, 2011, between Buyer and Pledgor, as amended, modified,
waived, supplemented, extended, restated or replaced from time to time.

 

“Pledged Collateral” shall have the meaning given to such term in the Pledge and
Security Agreement.

 

“Pledgor”  shall mean ACRC Lender LLC, a Delaware limited liability company,
together with its successors and permitted assigns.

 

“Post-Default Rate” shall mean, in respect of the Repurchase Price of any
Transaction under this Agreement that is not paid when due to Buyer (whether by
acceleration, by optional or mandatory prepayment or otherwise), a rate per
annum during the period from and including the due date to but excluding the
date on which such amount is paid in full equal to the Pricing Rate otherwise
applicable hereunder plus 4%.

 

“Preliminary Data File” shall mean a file containing the fields set forth in
Exhibit II to this Agreement.

 

“Price Differential” shall mean, with respect to any Transaction as of any date,
the aggregate amount obtained by daily application of the Pricing Rate for such
Transaction to the outstanding Purchase Price for such Transaction on a
360-day-per-year basis for the actual number of days during the period
commencing on (and including) the Purchase Date for such Transaction and ending
on (but excluding) the date of determination (reduced by any amount of such
Price Differential previously paid by Seller to Buyer with respect to such
Transaction).

 

“Pricing Rate” shall mean with respect to each Transaction, for any Pricing Rate
Period, a rate per annum equal to the sum of (i) LIBOR as determined for such
Pricing Rate Period plus (ii) the Applicable Margin for such Transaction.

 

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“Pricing Rate Determination Date” shall mean with respect to any Pricing Rate
Period with respect to any Transaction, the second (2nd) Business Day preceding
the first day of such Pricing Rate Period.

 

“Pricing Rate Period” means, with respect to each Transaction, for each Payment
Date, the period commencing on and including the fifteenth (15th) day of the
calendar month immediately prior to the calendar month of such Payment Date and
ending on (and including) the fourteenth (14th) day of the calendar month
immediately prior to the calendar month of such Payment Date; provided that the
initial Pricing Rate Period in respect of any Transaction shall be the period
from and including the date of such Transaction to and including the last day of
the following calendar month and any Pricing Rate Period that would end after
the Repurchase Date for any Purchased Loan shall end on such Repurchase Date.

 

“Pricing Rate Reset Date”  (a) In the case of the first Pricing Rate Period for
any Purchased Loan, the Funding Date for such Purchased Loan, and (b) in the
case of any subsequent Pricing Rate Period, two (2) Business Days prior to the
Payment Date on which such Pricing Rate Period begins.

 

“Principal Prepayment” shall mean, for any Purchased Loan, (i) any amount
applied to reduce the principal or other invested amount of such Purchased Loan,
other than a Scheduled Principal Payment, including, without limitation,
(i) principal prepayments from any source and of any nature whatsoever, (ii) net
insurance or net condemnation proceeds, to the extent applied to reduce the
principal amount or other invested amount of the related Purchased Loan, and
(iii) any net proceeds from any sale, refinancing, liquidation or other
disposition of the underlying Mortgaged Property or underlying interest relating
to such Purchased Loan to the extent applied to reduce the principal amount or
the invested amount of the related Purchased Loan.

 

“Prohibited Person” shall have the meaning specified in Section 10(o).

 

“Property” shall mean any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.

 

“Purchase Date” shall mean the initial Funding Date on which a Purchased Loan is
transferred by Seller to Buyer.

 

“Purchase Price” shall mean, with respect to any Purchased Loan, (x) as of any
Funding Date for such Purchased Loan, the amount determined pursuant to
Section 3(a)(v) and (vi); and (y) thereafter, such amount referred to in clause
(x), reduced by any amount applied to reduce the Purchase Price pursuant to
Section 4(a) or 5 of this Agreement.

 

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

 

“Purchased Loan Event of Default” shall mean an “Event of Default” as such term
is used and defined in the Purchased Loan Documents for any Purchased Loan.

 

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“Purchased Loan File” shall mean, with respect to a Purchased Loan, the
documents specified as the “Mortgage Loan File” in the Custodial Agreement.

 

“Purchased Loans” shall mean, with respect to any individual Transaction, the
Eligible Loan sold by Seller to Buyer in such Transaction and “Purchased Loans”
shall mean, with respect to the Transactions involving Purchased Loans in
general, all Eligible Loans sold by Seller to Buyer.

 

“Purchased Loan Schedule” shall mean a schedule of Purchased Loans attached to
each Trust Receipt and Custodial Delivery.

 

“RCRA” shall mean the Resource Conservation and Recovery Act of 1976, as amended
from time to time.

 

“Reference Banks”  Banks each of which shall (a) be a leading bank in the
international Eurocurrency market, and (b) have an established place of business
in London.  Initially, the Reference Banks shall be JPMorgan Chase Bank,
Barclays Bank, PLC and Deutsche Bank AG.  If any such Reference Bank should be
unwilling or unable to act as such or if Buyer shall terminate the appointment
of any such Reference Bank or if any of the Reference Banks should be removed
from the Reuters Monitor Money Rates Service or in any other way fail to meet
the qualifications of a Reference Bank, Buyer may designate alternative banks
meeting the criteria specified in the preceding clauses (a) and (b).

 

“Registrar” shall have the meaning provided in Section 19(a)(iv) hereof.

 

“Regulations T, U and X” shall mean Regulations T, U and X of the Board of
Governors of the Federal Reserve System (or any successor), as the same may be
modified and supplemented and in effect from time to time.

 

“Remaining Paydown Amount” shall have the meaning specified in Section 5(i).

 

“REMIC” shall mean a real estate mortgage investment conduit, within the meaning
of Section 860D(a) of the Code.

 

“Reportable Event” shall mean a reportable event as defined in Title IV of
ERISA, except actions of general applicability by the Secretary of Labor under
Section 110 of ERISA.

 

“Repurchase Date” shall mean, with respect to each Purchased Loan, the earlier
of: (x) the Facility Expiration Date, or (y) the maturity date of such Purchased
Loan (subject to extension, if applicable, in accordance with its Purchased Loan
Documents).

 

“Repurchase Price” shall mean, with respect to any Purchased Loan as of any
date, the price at which such Purchased Loan is to be transferred from Buyer to
Seller upon termination of the related Transaction; such price will be
determined in each case as the sum of (a) the outstanding Purchase Price of such
Purchased Loan, (b) the accrued but unpaid Price Differential thereon with
respect to such Purchased Loan as of such date and (c) all other amounts due and
payable as of such date by Seller to Buyer under this Agreement or any
Transaction Document

 

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with respect to such Purchased Loan (including, but not limited to, accrued and
unpaid fees, expenses and indemnity amounts).

 

“Request for Transaction/Increase in Purchase Price” shall have the meaning
provided in Section 3(a)(ii) hereof.

 

“Requirement of Law” shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or Governing Documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

 

“Responsible Officer” shall mean, with respect to any Person, the chief
executive officer, the chief financial officer, the chief accounting officer,
the treasurer or the chief operating officer of such Person or such other
officer designated as an authorized signatory in such Person’s Governing
Documents.

 

“S&P” shall mean Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc.

 

“Scheduled Principal Payment” shall mean any payment of principal on a Purchased
Loan that is required, pursuant to the Purchased Loan Documents for such
Purchased Loan as modified by any amendments thereto, to be made at a specific
time or upon the happening of a specific event, other than a Balloon Payment.

 

“Secured Obligations” shall have the meaning specified in Section 6(b).

 

“Seller” shall mean ACRC Lender C LLC, a Delaware limited liability company.

 

“Servicer” shall have the meaning provided in Section 29(c).

 

“Servicer Notice and Agreement” shall have the meaning provided in
Section 29(c) hereof.

 

“Servicer’s Account” shall mean an account established by Servicer in connection
with the servicing of any Purchased Loan.

 

“Servicing Agreement” shall have the meaning provided in Section 12(g).

 

“Servicing Records” shall have the meaning provided in Section 29(b) hereof.

 

“Servicing Rights” shall mean Seller’s right, title and interest in and to any
and all of the following:  (a) any and all rights to service the related
Purchased Loan; (b) any payments to or monies received by such Seller or any
other Person for servicing such Purchased Loan; (c) any late fees, penalties or
similar payments with respect to such Purchased Loan; (d) all agreements or
documents creating, defining or evidencing any such servicing rights to the
extent they relate to such servicing rights and all rights of such Seller or any
other Person thereunder; (e) escrow payments or other similar payments with
respect to such Purchased Loan and any amounts

 

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actually collected by such Seller or any other Person with respect thereto;
(f) the right, if any, to appoint a special servicer or liquidator of such
Purchased Loan; and (g) all accounts and other rights to payment related to the
servicing of such Purchased Loan.

 

“Servicing Transfer Event” shall mean the event where the Servicer no longer
(i) has a servicer rating of “Average” or higher from S&P, (ii) has a servicer
rating of “CPS3” or higher from Fitch or (iii) is on the list of approved
servicers maintained by Moody’s.

 

“Significant Purchased Loan Modification” means any written modification or
amendment of a Purchased Loan transferred to Buyer hereunder which

 

(A)                               reduces the principal amount of the Purchased
Loan in question other than (1) with respect to a dollar-for-dollar principal
payment or (2) reductions of principal to the extent of deferred, accrued or
capitalized interest added to principal which additional amount was not taken
into account by Buyer in determining the related Debt Yield,

 

(B)                               increases the principal amount of a Purchased
Loan other than increases which are derived from accrual or capitalization of
deferred interest which is added to principal or protective advances,

 

(C)                               modifies the amount or timing of any regularly
scheduled payments of principal and non-contingent interest of the Purchased
Loan in question,

 

(D)                               changes the frequency of scheduled payments of
principal and interest in respect of a Purchased Loan,

 

(E)                                subordinates the lien priority of the
Purchased Loan in question or the payment priority of the Purchased Loan in
question other than subordinations required under the then existing terms and
conditions of the Purchased Loan in question (provided, however, the foregoing
shall not preclude the execution and delivery of subordination, nondisturbance
and attornment agreements with tenants, subordination to tenant leases,
easements, plats of subdivision and condominium declarations and similar
instruments which in the commercially reasonable judgment of Seller do not
materially adversely affect the rights and interest of the holder of the
Purchased Loan in question),

 

(F)                                 releases any collateral for the Purchased
Loan in question other than releases required under the then existing Purchased
Loan Documents or releases in connection with eminent domain or under threat of
eminent domain,

 

(G)                               waives, amends or modifies any cash management
or reserve account requirements of the Purchased Loan other than changes
required under the then existing Purchased Loan Documents, or

 

(H)                              waives any due-on-sale or due-on-encumbrance
provisions of the Purchased Loan in question other than waivers required to be
given under the then existing Purchased Loan documents, or

 

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(I)                                   waives, amends or modifies the underlying
insurance requirements of the Purchased Loan.

 

“Single Employer Plan” shall mean as to any Person any Plan of such Person which
is not a Multiemployer Plan.

 

“Solvent” shall mean with respect to any Person at any time, having a state of
affairs such that all of the following conditions are met at such time:  (a) the
fair value of the assets and property of such Person is greater than the amount
of such Person’s liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for purposes
of Section 101(32) of the Bankruptcy Code, (b) the present fair salable value of
the assets and property of such Person in an orderly liquidation of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts as they become absolute and matured, and (c) such
Person is not engaged in a business or a transaction, and is not about to engage
in a business or a transaction, for which such Person’s assets and property
would constitute unreasonably small capital.

 

“Special Purpose Bankruptcy Remote Entity” shall have the meaning specified in
Section 13.

 

“Subsidiary” shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.

 

“Summary Due Diligence Materials” shall mean those materials described on Annex
2 to Exhibit III.

 

“System” shall mean all hardware or software, or any system consisting of one or
more thereof, including, without limitation, any and all enhancements, upgrades,
customizations, modifications and the like utilized by any Person for the
benefit of such Person to perform its obligations and to administer and track,
store, process, provide, and where appropriate, insert, true and accurate dates
and calculations for dates and spans with respect to the Purchased Loan.

 

“Table-Funded Eligible Loan” shall mean an Eligible Loan originated by Seller
and transferred to Buyer simultaneously with the origination thereof by Seller,
and which origination is financed in part with the Purchase Price of a
Transaction hereunder.

 

“Taxes” shall have the meaning specified in Section 31(a) hereof.

 

“Testing Date” shall have the meaning specified in Exhibit I hereof.

 

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“Title Escrow Letter” shall mean with respect to any Purchased Loan, a letter
agreement in such form as shall be reasonably acceptable to Buyer, executed by
the title insurance company obligating it to issue title insurance insuring the
lien of the Mortgage for such Purchased Loan as reflected in an attached
marked-up title commitment and to record or file such Mortgage and other certain
security instruments securing such Purchased Loan and addressing the mechanics
of funding of such Purchased Loan.

 

“Title Exceptions” shall have the meaning specified in Exhibit I hereof.

 

“Title Policy” shall have the meaning specified in Exhibit I(11).

 

“Transaction” shall have the meaning set forth in Section 1.

 

“Transaction Documents” shall mean, collectively, this Agreement, any applicable
Annexes to this Agreement, the Guaranty, the Custodial Agreement, the Blocked
Account Agreement, any Servicing Agreement, all Confirmations executed pursuant
to this Agreement in connection with specific Transactions, the Fee Letter, any
and all other documents and agreements relating to any such documents executed
by Seller or Guarantor, and any written modifications, extensions, renewals,
restatements, or replacements of any of the foregoing.

 

“Trust Receipt” shall have the meaning assigned to such terms in the Custodial
Agreement.

 

“UCC” shall mean the New York Uniform Commercial Code.

 

“UCC Financing Statement” shall mean a financing statement on Form UCC-1 or the
proper national UCC form, naming Buyer as “Secured Party” and Seller as “Debtor”
and describing the Purchased Loans.

 

“Underwritten Net Cash Flow” shall mean, with respect to any Purchased Loan, in
place underwritten net cash flow from the Mortgaged Property securing such
Purchased Loan, as determined by Buyer in its sole discretion (a) in connection
with the Purchase Date on which an Eligible Loan is first made the subject of a
Transaction with Buyer hereunder, (b) in connection with any request from Seller
to Buyer to fund a portion of any future advance which Seller is contractually
obligated to fund (or any reborrowing of a prior initial advance or future
advance which has been prepaid by Seller), and (c) for purposes of the
application of Balloon Payments, Scheduled Principal Payments, Principal
Prepayments and net sale proceeds in the event of a sale of a Purchased Loan
made pursuant to Section 5(i) of this Agreement, in each case subject to
adjustments for, but not limited to, (i) a vacancy allowance, (ii) projected
increases in expenses, (iii) mark-to-market of in place rents and exclusion of
non-sustainable income, (iv) market management fees and (v) normalized reserves.

 

“Utilization Fee” shall mean an amount equal to the product of (x) 0.25%
multiplied by (y) the daily average of an amount equal to the Facility Amount
minus the aggregate outstanding Purchase Price of the Transactions for each day
during the Collection Periods (or portion thereof) for which the Utilization Fee
is payable multiplied by (z) the number of days in the Collection Periods (or
portion thereof) for which the Utilization Fee is payable divided by 365.

 

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“Whole Loans” shall mean a whole Purchased Loan.

 

3.                                      INITIATION; CONFIRMATION; TERMINATION;
FEES

 

(a)                                 (i) Subject to the terms and conditions set
forth in this Agreement, an agreement to enter into a Transaction shall be made
in writing at the initiation of Seller as provided below; provided, however,
that (A) the aggregate outstanding Purchase Price at any time for all
Transactions shall not exceed the Facility Amount, (B) Buyer shall not have any
obligation to enter into new Transactions with Seller after the occurrence and
during the continuance of a Default or an Event of Default or after the Facility
Availability Period and (C) this Agreement is not a commitment to enter into
Transactions but rather sets forth the procedures to be used in connection with
periodic requests to enter into Transactions and Seller hereby acknowledges that
Buyer is under no obligation to agree to enter into, or to enter into, any
Transaction pursuant to this Agreement.

 

(ii)                                  Seller may request a Transaction or an
increase in Purchase Price hereunder, on any Business Day during the Facility
Availability Period, by delivering to Buyer a written request for Transaction or
an increase in Purchase Price, substantially in the form of Exhibit III hereto
(a “Request for Transaction/Increase in Purchase Price”).  Each Request for
Transaction /Increase in Purchase Price shall:

 

(A)                               relate to the funding of an Eligible Loan to
be transferred (or previously transferred) hereunder at the time of the transfer
of the Purchase Price that is the subject of such Request for Transaction
/Increase in Purchase Price (including any future advances of such Purchased
Loan);

 

(B)                               in the case of the Purchase Date of an
Eligible Loan, (x) be accompanied by a Complete Submission, and (y) attach a
schedule identifying the Eligible Loan that Seller proposes to fund and to
transfer to Buyer in connection with such Transaction substantially in the form
of Annex 1 to Exhibit IV;

 

(C)                               specify the requested Funding Date and the
amount requested to be funded;

 

(D)                               specify any subsequent advances which may be
required,

 

(E)                                attach an officer’s certificate signed by a
Responsible Officer of Seller as required by Section 9(a)(ix) hereof;

 

(F)                                 indicate whether Seller desires such
Purchased Loan to be a Table Funded Eligible Loan, which table funding shall be
subject to Buyer’s prior approval in Buyer’s sole discretion; and

 

(G)                               contain (by attachment) such other information
reasonably requested by Buyer from time to time.

 

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Buyer may from time to time waive certain requirements of a Complete Submission
in its sole and absolute discretion if, at the time of the submission thereof,
certain documents called for as part of such Complete Submission are then
unavailable; provided that Seller shall use its best efforts to provide such
documents as soon as they become available.

 

(iii)                               Solely with respect to the Purchase Date for
an Eligible Loan, following receipt of a Request for Transaction/Increase in
Purchase Price and a Complete Submission, Buyer shall inform Seller in its sole
discretion of its election to proceed with a Transaction hereunder by delivering
to Seller a funding confirmation, substantially in the form of Exhibit IV hereto
(a “Funding Confirmation”), as follows.  Within ten (10) Business Days following
receipt of a Complete Submission (and any other materials reasonably requested
by Buyer relating to a proposed funding in connection with Buyer conducting its
own due diligence investigation of the Eligible Loan proposed to be funded by
Buyer), Buyer shall conduct its diligence review and notify Seller in such
Funding Confirmation as to whether it approves of such Eligible Loan (including
in the case of a request for a Table Funded Eligible Loan, whether it approves
of same) and its Schedule of Exceptions to Representations and Warranties.  If,
with respect to any Mortgage Loan, Buyer does not respond to Seller within the
time frames specified in the preceding sentence, Buyer shall be deemed to have
elected not to make a Loan secured by such Mortgage Loan.

 

(iv)                              Following receipt of a Funding Confirmation
from Buyer pursuant to Section 3(a)(iii), Seller shall, not later than 12:00
noon New York City time on the Business Day prior to the requested Funding Date,
(i) in the case of a Table Funded Eligible Loan, deliver the Title Escrow Letter
with respect thereto to Custodian, with a copy to Buyer, as provided in the
Custodial Agreement, and (ii) deliver the Closing Counsel Letter to Buyer. 
Following Buyer’s receipt of the Title Escrow Letter (if applicable) and Closing
Counsel Letter, and Buyer’s final determination that the Mortgage Loan is an
Eligible Loan, subject to Section 9 hereof, Buyer shall transfer the Purchase
Price pursuant to the wiring instructions Seller delivers to Buyer or in the
case of a Table Funded Eligible Loan, set forth in the Title Escrow Letter to
partially fund the applicable Purchased Loan in an amount determined in
accordance with Section 3(a)(v) below, which transfer shall constitute the entry
into a Transaction hereunder in the amount of the Purchase Price.  Pursuant to
the Title Escrow Letter, the title insurance company party thereto shall return
to Buyer the Purchase Price so advanced if Seller fails to advance its portion
of such Purchased Loan on such Funding Date.  A Title Escrow Letter shall not be
required for Purchased Loans which have been previously made the subject of a
Transaction.

 

(v)                                 The amount of the Purchase Price with
respect to any Purchased Loan on the Purchase Date shall be an amount up to the
least of (i) 75% of such

 

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Purchased Loan’s aggregate initial principal amount (or 70% of such Purchased
Loan’s aggregate initial principal amount with respect to any Purchased Loan
secured by a Hospitality Property) or (ii) 56% of the value of the related
Mortgaged Property as set forth in an Appraisal delivered to Buyer or (iii) the
amount that would cause the Debt Yield calculated with respect to all of the
Purchased Loans to be less than the Minimum Debt Yield.

 

(vi)                              With respect to any Purchased Loan where Buyer
has funded the Purchase Price on the Purchase Date as provided for herein,
following receipt of a Request for Transaction/Increase in Purchase Price, which
shall be delivered by Seller no less than three (3) Business Days prior to the
proposed Funding Date, and of all items required to be delivered to Buyer
pursuant to this Agreement (including, without limitation Section (9)), Buyer
shall fund a portion of any future advance which Seller shall be contractually
obligated to fund under the related Purchased Loan Documents in an amount equal
to the product of (x) the amount of such future advance multiplied by (y) the
percentage equal to the quotient of the Purchase Price transferred by Buyer in
connection with the Purchase Date divided by the aggregate initial funded amount
of such Purchased Loan, subject in each case to satisfaction of the following
conditions precedent:

 

(A)                               the aggregate Purchase Price transferred by
Buyer with respect to any Purchased Loan shall not exceed 75% of the outstanding
principal balance of such Purchased Loan (or 70% of such Purchased Loan’s
outstanding principal balance with respect to any Purchased Loan secured by a
Hospitality Property) and shall not cause the Debt Yield calculated with respect
to all of the Purchased Loans to be less than the Minimum Debt Yield;

 

(B)                               Buyer shall not have any obligation to fund
such future advance unless the Debt Yield with respect to such Purchased Loan as
of the date of the future advance is greater than the Debt Yield as of the date
of the initial advance of such Purchased Loan by 1.00% (or, solely with respect
to Purchased Loans that had a Debt Yield equal to or greater than 7.00% on the
date of the initial advance, by 0.75%);

 

(C)                               Seller shall not receive a Funding Date for
future advances with respect to each Purchased Loan more than one time during
each calendar month or during the final twelve months of the term of any
Purchased Loan;

 

(D)                               the amount of Purchase Price transferred for a
future advance with respect to each Purchased Loan shall be in an amount not
less than $250,000; and

 

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(E)                                Seller shall have delivered to Buyer evidence
reasonably satisfactory to Buyer that the underlying Mortgagor with respect to
the applicable Purchased Loan shall have delivered all items required to be
delivered as conditions precedent to the making of such future advance and shall
have given Buyer a period of time reasonably satisfactory to Buyer within which
to review such items.

 

(vii)                           Notwithstanding anything herein to the contrary,
the aggregate outstanding Purchase Price with respect to any individual
Purchased Loan (inclusive of the Purchase Date and all future Funding Dates)
shall not exceed the Maximum Transaction Amount.

 

(viii)                        On the Business Day that Custodian receives the
complete Purchased Loan Documents, Custodian will notify Buyer of its receipt of
such Purchased Loan Documents and deliver to Buyer a Trust Receipt, with a copy
to Seller.  Seller shall cause the Closing Counsel to deliver the Purchased Loan
Documents with respect to each Purchased Loan within three (3) Business Days
following the Purchase Date to the Custodian and shall deliver the Complete
Submission with respect to such Purchased Loan to Buyer.

 

(ix)                              Notwithstanding any other provision hereunder,
the fact that Buyer has conducted or has failed to conduct any partial or
complete examination or any other due diligence review of any Purchased Loan
shall in no way affect any rights Buyer may have hereunder or otherwise with
respect to any representations or warranties or other rights hereunder,
including without limitation, the right to determine at any time that such
Purchased Loan is the subject of an Eligibility Breach.

 

(b)                                 Upon agreeing to enter into a Transaction or
to increase the Purchase Price hereunder, Buyer shall promptly deliver to Seller
a written confirmation in the form of Exhibit VIII attached hereto of such
Transaction or increase in Purchase Price (a “Confirmation”).  Such Confirmation
shall describe the Purchased Loan, shall identify Buyer and Seller, and shall
set forth:

 

(i)                                     the Purchase Date/Funding Date,

 

(ii)                                the Initial Purchase Price Percentage, the
Margin Percentage and the Purchase Price for such Purchased Loan,

 

(iii)                             the Repurchase Date,

 

(iv)                              the Pricing Rate (including the Applicable
Margin), and

 

(v)                                 any additional terms or conditions not
inconsistent with this Agreement.

 

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With respect to any Transaction, the Pricing Rate shall be determined initially
on the Pricing Rate Determination Date applicable to the first Pricing Rate
Period for such Transaction, and shall be reset on each subsequent Pricing Rate
Determination Date for the next succeeding Pricing Rate Period for such
Transaction.  Buyer or its agent shall determine in accordance with the terms of
this Agreement the Pricing Rate on each Pricing Rate Determination Date for the
related Pricing Rate Period and notify Seller of such rate for such period on
such subsequent Pricing Rate Determination Date.

 

(c)                                  Each Confirmation, together with this
Agreement, shall be conclusive evidence of the terms of the
Transaction(s) covered thereby unless specific objection is made in writing no
less than three (3) Business Days after the date thereof.  In the event of any
conflict between the terms of such Confirmation and the terms of this Agreement,
the Confirmation shall prevail.  It is understood and agreed that once a
Confirmation has been executed by Buyer and Seller, such Confirmation shall be
binding on the parties hereto (absent manifest error) and shall constitute
evidence of Buyer’s approval of the applicable Purchased Loan and the terms of
the applicable Transaction.

 

(d)                                 No Transaction shall be terminable on demand
by Buyer (other than upon the occurrence and during the continuance of an Event
of Default).  Seller shall be entitled to terminate a Transaction on demand, in
whole only, and repurchase the Purchased Loan subject to a Transaction on any
Business Day prior to the Repurchase Date (an “Early Repurchase Date”);
provided, however, that:

 

(i)                                     Seller notifies Buyer in writing of its
intent to terminate such Transaction and repurchase such Purchased Loan no later
than three (3) Business Days prior to such Early Repurchase Date,

 

(ii)                                  on such Early Repurchase Date, Seller pays
to Buyer an amount equal to the sum of (x) the Repurchase Price for such
Transaction and (y) any other amounts payable under this Agreement with respect
to such Transaction against transfer to Seller or its agent of such Purchased
Loan,

 

(iii)                               if a Margin Deficit is in existence on such
Early Repurchase Date and Buyer has notified Seller thereof in accordance with
Section 4(a), then, simultaneously with such repurchase, Seller cures such
Margin Deficit, and

 

(iv)                              no Event of Default has occurred and is
continuing on the date of such early repurchase.

 

Such notice shall set forth the Early Repurchase Date and shall identify with
particularity the Purchased Loans to be repurchased on such Early Repurchase
Date.

 

(e)                                  On the Repurchase Date or any Early
Repurchase Date (including, without limitation, in order to cure a Margin
Deficit), termination of the applicable Transaction will be effected by transfer
to Seller or its designee of the applicable Purchased Loan and any Income in
respect thereof received by Buyer (and not previously credited or transferred
to, or applied to the obligations of, Seller pursuant to Section 5 of this
Agreement) against the simultaneous transfer

 

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to an account of Buyer of the Repurchase Price and any other amounts payable
under this Agreement with respect to such Transaction.

 

(f)                                   Seller may reduce the outstanding Purchase
Price of the Transactions, in whole or in part, on any Payment Date without
premium or penalty.  If Seller shall reduce the outstanding Purchase Price on
any day other than a Payment Date, Seller shall be responsible for all breakage
costs pursuant to Section 3(h).  Any amounts paid shall reduce the outstanding
Purchase Price of the Transactions (together with Price Differential thereon) so
designated by Seller until paid in full.  Amounts paid may be re-advanced as
increases in Purchase Price in accordance with the terms of this Agreement.  If
Seller intends to reduce the outstanding Purchase Price of the Transactions in
whole or in part from any source, Seller shall give at least two (2) Business
Days’ prior written notice thereof to Buyer, specifying the date and amount of
payment.  If such notice is given, the amount specified in such notice shall be
due and payable on the date specified therein, together with accrued Price
Differential to such date on the amount prepaid.  Partial payments shall be in
an aggregate principal amount of at least $100,000 or the outstanding balance of
the designated Purchased Loan(s), if less.

 

(g)                                  Anything herein to the contrary
notwithstanding, if, on or prior to the determination of LIBOR for any Pricing
Rate Period:

 

(i)                                     Buyer determines in good faith, which
determination shall be conclusive and binding upon Seller, absent manifest
error, that quotations of Pricing Rates for the relevant deposits referred to in
the definition of “LIBOR” in Section 1 hereof are not being provided in the
relevant amounts or for the relevant maturities for purposes of determining
rates of interest for Transactions as provided herein or

 

(ii)                                  it becomes unlawful for Buyer to honor its
obligation to make or maintain Transactions hereunder using LIBOR, and Buyer has
determined in its sole good faith discretion that it is unable to assign its
rights and obligations hereunder to an Affiliate reasonably acceptable to Seller
to avoid any such restrictions or prohibitions,

 

then Buyer shall give Seller prompt notice thereof and, if the parties cannot
agree on a substitute Pricing Rate within fifteen (15) days of the commencement
of such condition, (i) Buyer shall be under no obligation to enter into
additional Transactions or increase the Purchase Price, and Seller shall, at its
option, either repay all such Transactions as may be outstanding (and Seller
shall not be liable for any LIBOR breakage fees associated therewith) or pay
interest on such Transactions at a rate per annum as reasonably determined by
Buyer taking into account the increased cost to Buyer.

 

(h)                                 If Seller makes a repayment of any
Transactions on any day which is not a Payment Date, Seller shall be required to
pay Buyer LIBOR breakage fees (but specifically excluding lost profits,
consequential and punitive damages) equal to the amount of Price Differential on
the amount being repaid at the applicable Pricing Rate payable by Buyer on
deposits from which such funds were obtained for the period from the date of
such payment through the following Payment Date less the amount of interest
realized by Buyer in redeploying the funds not utilized by reason of such
payment for such period.  Buyer shall, at the request of

 

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Seller, notify Seller of the amounts of costs to be paid by Seller if a
Transaction is prepaid.  This Section 3(h) shall survive termination of this
Agreement .

 

(i)                                     If any Requirement of Law or any change
in the interpretation or application thereof or compliance by Buyer with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:

 

(i)                                     shall subject Buyer to any Taxes with
respect to this Agreement or any Transaction entered into by it (other than
Excluded Taxes) or change the basis of taxation of payments to Buyer in respect
thereof,

 

(ii)                                  shall impose, modify or hold applicable
any reserve, special deposit, compulsory loan or similar requirement against
assets held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other acquisition of
funds by, any office of Buyer which is not otherwise included in the
determination of the LIBOR hereunder,

 

(iii)                               shall impose on Buyer any other condition,

 

and the result of any of the foregoing is to increase the cost to Buyer, by an
amount which Buyer deems to be material, of making or maintaining any
Transactions or to reduce any amount receivable hereunder in respect thereof,
then, in any such case, Seller shall, upon receipt of prior written notice of
such fact and a reasonably detailed description of the circumstances, and in
accordance with Section 3(k), either (i) prepay all such Transactions as may be
outstanding (and Seller shall not be liable for any LIBOR breakage fees
associated therewith) or (ii) pay Buyer such additional amount or amounts as
will compensate Buyer for such increased cost or reduced amount receivable,
provided Buyer will not treat Seller differently from similarly situated
customers in requiring the payment of such amount or amounts.

 

(j)                                    If Buyer shall have determined that the
adoption of or any change in any Requirement of Law regarding capital adequacy
or in the interpretation or application thereof or compliance by Buyer or any
corporation controlling Buyer with any request or directive regarding capital
adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on Buyer’s or such corporation’s capital as a consequence of
its obligations hereunder by an amount deemed by Buyer to be material (taking
into consideration Buyer’s or such corporation’s policies with respect to
capital adequacy) (a “Rate of Return Reduction Event”), then from time to time,
Seller shall in accordance with Section 3(k) pay to Buyer such additional amount
or amounts as will compensate Buyer for such reduction, provided Buyer will not
treat Seller differently from similarly situated customers in requiring the
payment of such amount or amounts.  Seller’s obligation to pay such additional
amounts shall terminate if the Rate of Return Reduction Event precipitating such
obligation shall no longer have the effect of reducing the rate of return on
Buyer’s or such corporation’s capital as a consequence of its obligations
hereunder by an amount deemed by Buyer to be material (taking into consideration
Buyer’s or such corporation’s policies with respect to capital adequacy).

 

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(k)                                 If Buyer becomes entitled to claim any
additional amounts pursuant to Section 3(i) or (j), it shall promptly notify
Seller of the event by reason of which it has become so entitled.  A certificate
as to any additional amounts payable pursuant to Section 3(i) or (j) submitted
by Buyer to Seller shall be conclusive in the absence of manifest error.  All
payments required under Section 3(i) or (j) shall be made by Seller within ten
(10) Business Days after notice thereof from Buyer to Seller.

 

(l)                                     Seller shall pay those certain fees
required to be paid pursuant to and in accordance with the Fee Letter.

 

(m)                             On the Payment Date occurring in each of April,
July, October and January, Seller shall pay to Buyer the Utilization Fee with
respect to the three Collection Periods of the immediately preceding calendar
quarter; provided, that no Utilization Fee shall accrue or be due and payable
with respect to any period after the expiration of the Facility Availability
Period.

 

4.                                      MARGIN MAINTENANCE

 

(a)                                 If at any time following the occurrence of a
Credit Event, the aggregate Market Value of the Purchased Loans shall be less
than the sum of the Margin Amounts calculated individually with respect to each
Purchased Loan (a “Margin Deficit”) and such Margin Deficit is greater than
$500,000, then Buyer may by notice to Seller require Seller to cure such Margin
Deficit by either:

 

(i)                                     transferring to Buyer additional cash
collateral in an amount at least equal to the sum of the amounts, calculated
individually for each Purchased Loan, equal to the product of (x) the difference
between the Margin Amount with respect to such Purchased Loan and the Market
Value of such Purchased Loan multiplied by (y) the applicable Initial Purchase
Price Percentage, which cash collateral shall be held by Buyer as additional
Collateral with respect to the applicable Purchased Loan(s);

 

(ii)                                  reducing the outstanding Purchase Price of
the Transactions with respect to any Purchased Loan, as applicable, such that
the aggregate Market Value of the Purchased Loans is at least equal to the sum
of the Margin Amounts of the Purchased Loans; or

 

(iii)                               making a repayment of the Transactions, in
whole, with respect to any Purchased Loan pursuant to Sections 3(f) and (h) of
this Agreement which repayment results in a cure of such Margin Deficit.

 

Any cash transferred to Buyer pursuant to clause (ii) of this Section 4(a) of
this Agreement with respect to any Purchased Loan shall be applied to reduce the
outstanding Purchase Price for each Purchased Loan on a dollar-for-dollar basis
for which there was a Margin Deficit.

 

(b)                                 If any notice is given by Buyer under
Section 4(a) of this Agreement on any Business Day and Seller transfers cash
pursuant to Section 4(a)(i) or (ii), Seller shall transfer cash in the full
amount required in Section 4(a)(i) or (ii) by no later than the close of
business on the fifth (5th) Business Day following the Business Day on which
such notice is given. The failure of Buyer, on any one or more occasions, to
exercise its rights under Section 4(a) of this Agreement shall not change or
alter the terms and conditions to which this Agreement is subject

 

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or limit the right of Buyer to do so at a later date. Buyer and Seller agree
that any failure or delay by Buyer to exercise its rights under Section 4(a) of
this Agreement shall not limit such party’s rights under this Agreement or
otherwise existing by law or in any way create additional rights for such party.

 

5.                                      INCOME PAYMENTS AND PRINCIPAL PAYMENTS

 

(a)                                 Subject to Section 5(l), with respect to
each Purchased Loan, Seller hereby promises to repay in full on or prior to the
Repurchase Date the then aggregate outstanding Repurchase Price with respect to
such Purchased Loan.

 

(b)                                 Seller hereby promises to pay to Buyer on
each Payment Date until the date each Transaction shall be paid in full accrued
unpaid Price Differential on the outstanding Purchase Price of each Transaction
for the period from and including the date of such Transaction to but excluding
the date such Transaction shall be paid in full, at a rate per annum equal to
the Pricing Rate.  Promptly after the determination of the Pricing Rate provided
for herein or any change therein, Buyer shall give notice thereof to Seller.

 

(c)                                  Except to the extent otherwise provided
herein, all payments of Purchase Price, Price Differential and other amounts to
be made by Seller under this Agreement, shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to Buyer at the
following account maintained by Buyer:  Account No. 40784524, for the account of
Buyer, Account Title: SSB, ABA No. 021000089, Ref:  ARES, not later than
2:00 p.m.,  New York City time, on the date on which such payment shall become
due (and each such payment made after such time on such due date shall be deemed
to have been made on the next succeeding Business Day).  Seller acknowledges
that it has no rights of withdrawal from the foregoing
account.(d)                               Except to the extent otherwise
expressly provided herein, if the due date of any payment under this Agreement
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and Price Differential shall be
payable for any amount so extended for the period of such extension.

 

(e)                                  Price Differential on the Transactions
shall be computed on the basis of a 360-day year for the actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable.

 

(f)                                   The Buyer’s Account shall be established
by Seller subject to the Blocked Account Agreement concurrently with or prior to
the execution and delivery of this Agreement.

 

(g)                                  Pursuant to the Servicing Agreement, Seller
shall cause all Income in respect of each Purchased Loan to be collected by the
Servicer and paid directly to the Servicing Account.  Any Income in respect of
any Purchased Loan paid directly to Seller, shall be deposited by Seller into
the Servicing Account within two (2) Business Days of receipt.  All such Income
shall be held in trust for Buyer and shall constitute the property of Buyer. 
Seller covenants and agrees that no payments shall be made by any obligor to
Servicer (except as specifically permitted by the terms of the Servicing
Agreement in respect of certain fees and other amounts to which Servicer may be
entitled), and if any such payment is made, Seller shall cause Servicer to
deposit such payment into the Servicing Account within two (2) Business Days of
receipt and, pending

 

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such deposit, shall cause the Servicer to hold such amount in trust for Buyer. 
Seller shall cause Servicer to process any payments received in the Servicing
Account with respect to the Purchased Loans and to remit such payments to the
Buyer’s Account.  So long as an Event of Default has not occurred and is not
continuing, any Income received on the Purchased Loans (other than Scheduled
Principal Payments, Balloon Payments, Principal Prepayments and net sale
proceeds of a sale of a Purchased Loan) and transferred to Buyer’s Account as
required hereunder shall be remitted from the Buyer’s Account to an account
designated in writing by Seller on a daily basis.  Notwithstanding the
foregoing, upon the occurrence of an Event of Default or a Servicing Transfer
Event, Buyer may send to each Mortgagor an Irrevocable Redirection Notice
pursuant to which Seller shall cause all Income in respect of each Purchased
Loan to be paid by the underlying Mortgagor directly to the Buyer’s Account. 
The Buyer’s Account shall be under the sole dominion and control of the Buyer
and prior to an Event of Default, Seller shall have rights of withdrawal
therefrom subject to the terms hereof and the Blocked Account Agreement.

 

(h)                                 Subject to Section 5(j), solely with respect
to any Purchased Loan as to which a Purchased Loan Event of Default has occurred
and is continuing, Buyer shall apply the entire amount of Balloon Payments,
Scheduled Principal Payments, Principal Prepayments and net sale proceeds from
the sale of a Purchased Loan received in the Buyer’s Account during each
Collection Period to repay on the related Payment Date the outstanding Purchase
Price of the Transaction with respect to the related Purchased Loan until such
Purchase Price of such Transaction has been reduced to zero.  So long as a
Default or an Event of Default has not occurred and is not continuing, any
Balloon Payments, Scheduled Principal Payments, Principal Prepayments and net
sale proceeds from the sale of a Purchased Loan received during each Collection
Period in excess of the outstanding Purchase Price of a Transaction shall be
remitted to Seller within one (1) Business Day.

 

(i)                                     Subject to Section 5(j), except as
otherwise provided in Section 5(h) above, Buyer shall apply the entire amount of
Balloon Payments, Scheduled Principal Payments, Principal Prepayments and net
sale proceeds from the sale of a Purchased Loan received during each Collection
Period to repay on the related Payment Date the outstanding Purchase Price of
the Transaction with respect to the related Purchased Loan until the Debt Yield
(calculated for this purpose with reference to such Purchased Loan and such
Purchase Price of the Transaction with respect to such Purchased Loan) is equal
to the greater of (i) the original Debt Yield (calculated for this purpose with
reference to such Purchased Loan and such Purchase Price of the Transaction made
on the initial Funding Date with respect to such Purchased Loan) and
(ii) 12.00%.  Upon satisfaction of the Debt Yield requirement referred to in the
preceding sentence, Buyer shall apply the remaining amount of such Balloon
Payments, Scheduled Principal Payments, Principal Prepayments and net sale
proceeds (such amount, the “Remaining Paydown Amount”) to repay the outstanding
Purchase Price of the Transaction made with respect to the related Purchased
Loan in an amount equal to (x) the Remaining Paydown Amount multiplied by
(y) the percentage equal to the quotient of the initial Purchase Price on the
Purchase Date with respect to such Purchased Loan divided by the aggregate
initial funded amount of such Purchased Loan until such outstanding Purchase
Price of the Transaction has been reduced to zero.  So long as a Default or an
Event of Default has not occurred and is not continuing, the excess of such
Remaining Paydown Amount after making the distribution

 

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described in the immediately preceding sentence shall be remitted to Seller
within one (1) Business Day.

 

(j)                                    If a Default shall have occurred and is
continuing, Buyer shall hold in the Buyer’s Account the entire amount of Balloon
Payments, Scheduled Principal Payments, Principal Prepayments and net sale
proceeds from the sale of a Purchased Loan until the earlier of the cure of the
event that caused such Default or the occurrence of an Event of Default
following which time such amount shall be applied in accordance with Sections
5(h), 5(i) and 5(j).  Upon the occurrence and during the continuation of an
Event of Default, funds deposited in the Buyer’s Account, shall be held therein
until the next Payment Date.  On such Payment Date, Buyer shall withdraw any
funds on deposit in the Buyer’s Account and apply such funds as follows:

 

(i)                                     first, to Buyer in payment of any
accrued and unpaid Price Differential on the Transactions and any fees then
payable to Buyer, including the fees of any replacement Servicer retained by
Buyer, as notified by Buyer to Seller;

 

(ii)                                  second, to the payment of all other costs
and fees payable to Buyer pursuant to this Agreement;

 

(iii)                               third, any remaining amounts shall be
applied to reduce the outstanding Purchase Price of the Transactions and any
other obligations owing to Buyer hereunder in such manner, order or priority as
Buyer shall determine in its sole discretion, until such Purchase Price and
other obligations shall have been paid in full; and

 

(iv)                              fourth, to pay the surplus, if any, to whoever
may be lawfully entitled to receive such surplus.

 

(k)                                 If Seller shall have made any
representations and warranties set forth in Exhibit I without actual knowledge
that they were materially false or misleading at the time made, and any such
representations and warranties shall have been determined by Buyer in its
reasonable discretion to be materially false or misleading with respect to a
Purchased Loan transferred hereunder (an “Eligibility Breach”), Seller shall
within five (5) Business Days after notice of such determination from Buyer
prepay the outstanding Purchase Price with respect to such Purchased Loan,
together with all accrued Price Differential thereon and fees and expenses
accruing with respect thereto.

 

(l)                                     By not later than sixty (60) days after
the occurrence of a Purchased Loan Event of Default (including, without
limitation, a maturity default), Seller shall prepay the outstanding Purchase
Price with respect to such Purchased Loan, together with all accrued Price
Differential thereon and fees and expenses accruing with respect thereto.

 

(m)                             If at any time the Debt Yield calculated with
respect to all of the Purchased Loans is less than the lesser of (i) the Minimum
Debt Yield and (ii) the Initial Debt Yield, then Seller shall within five
(5) Business Days after notice of such determination from Buyer prepay the
aggregate outstanding Purchase Price of the Transactions in the amount necessary
to cause the Debt Yield calculated with respect to all of the Purchased Loans to
be equal to or greater than the Minimum Debt Yield or the Initial Debt Yield, as
applicable.

 

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6.                                      SECURITY INTEREST

 

(a)                                 Pursuant to the Custodial Agreement,
Custodian shall hold the Purchased Loan Documents as exclusive bailee and agent
for the benefit of Buyer pursuant to the terms of the Custodial Agreement and
shall deliver to Buyer Trust Receipts (as defined in the Custodial Agreement)
each to the effect that it has reviewed such Purchased Loan Documents in the
manner and to the extent required by the Custodial Agreement and identifying any
deficiencies in such Purchased Loan Documents as so reviewed.

 

(b)                                 Buyer and Seller intend that all
Transactions hereunder be sales to Buyer of the Purchased Loans and not loans
from Buyer to Seller secured by the Purchased Loans.  However, in the event any
such Transaction is deemed to be a loan, Seller hereby pledges all of its right,
title, and interest in, to and under and grants a first priority lien on, and
security interest in, all of the following property, whether now owned or
hereafter acquired, now existing or hereafter created and wherever located
(collectively, the “Collateral”) to Buyer to secure the payment and performance
of all other amounts or obligations owing to Buyer pursuant to this Agreement
and the related documents described herein (collectively, the “Secured
Obligations”):

 

(i)                                     each Purchased Loan and the Servicing
Rights related thereto;

 

(ii)                                all Purchased Loan Documents, including
without limitation all promissory notes, and all Servicing Records, Servicing
Agreements and any other collateral pledged or otherwise relating to such
Purchased Loan, 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 all
Purchased Loan and all claims and payments thereunder;

 

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

 

(v)                                 all Interest Rate Protection Agreements,
relating to or constituting any and all of the foregoing;

 

(vi)                              the Buyer’s Account and all monies from time
to time on deposit in the Buyer’s Account;

 

(vii)                         any and all “securities accounts”, as defined in
the UCC, relating to any of the foregoing and each “financial asset”, as defined
in the UCC, contained therein, including, without limitation, any accounts
described in Section 5(f);

 

(viii)                      all collateral, however defined, under any other
agreement between Seller on the one hand and Buyer or any of its Affiliates on
the other hand;

 

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(ix)                              all “general intangibles”, “accounts,”
“instruments”, “investment property”, “deposit accounts” and “chattel paper” as
defined in the UCC relating to or constituting any and all of the foregoing; and

 

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

 

(c)                                  Intentionally Omitted.

 

(d)                                 Buyer acknowledges and agrees that,
notwithstanding anything to the contrary contained herein, (i) the rights of
Seller as holder of the Collateral are subject to the terms of the Purchased
Loan Documents; (ii) Buyer’s interest in the Collateral is subject to the terms
of the Purchased Loan Documents; (iii) unless an Event of Default shall have
occurred and be continuing, Buyer shall permit Seller to exercise any and all
voting, consent or other rights with respect to the Collateral; and (iv) upon
completion of any foreclosure of the Collateral, Buyer, its designee or
transferee will assume all of the obligations of the holders of the applicable
Purchased Loan from and after such foreclosure.

 

(e)                                  At any time and from time to time, upon the
written request of Buyer, and at the sole expense of Seller, Seller will
promptly and duly execute and deliver, or will promptly cause to be executed and
delivered, such further instruments and documents and take such further action
as Buyer may reasonably request for the purpose of obtaining or preserving the
full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the UCC in effect in any jurisdiction with respect to the Liens
created hereby.  Seller also hereby authorizes Buyer to file any such financing
or continuation statement without the signature of Seller to the extent
permitted by applicable law.  Seller hereby authorizes Buyer and its counsel to
file UCC financing statements in form and substance satisfactory to Buyer
describing as the collateral covered thereby “all assets of the debtor, whether
now owned or existing or hereafter acquired or arising and all proceeds and
products thereof” or words to that effect, and any limitations on such
collateral description, notwithstanding that such collateral description may be
broader in scope than the Collateral described herein.

 

(f)                                   Seller shall not (i) change the location
of its chief executive office/chief place of business from that specified in
Section 10(h) hereof, (ii) change its name, identity or corporate structure (or
the equivalent) or change the location where it maintains its records with
respect to the Collateral or (iii) reincorporate or reorganize under the laws of
another jurisdiction unless it shall have given Buyer at least 30 days prior
written notice thereof and shall have delivered to Buyer all UCC financing
statements and amendments thereto as Buyer shall reasonably request and taken
all other actions deemed reasonably necessary by Buyer to continue its perfected
status in the Collateral with the same or better priority.  Seller’s
organizational identification number is 5044234.  Seller shall promptly notify
Buyer of any change in such organizational identification number

 

(g)                                  Seller hereby irrevocably constitutes and
appoints Buyer and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Seller and in the name of Seller
or in its

 

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own name, from time to time following the occurrence and during the continuance
of an Event of Default to take any and all appropriate action and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement, and, without limiting the generality
of the foregoing, Seller hereby gives Buyer the power and right, on behalf of
Seller, without assent by, but with notice to, Seller, if an Event of Default
shall have occurred and be continuing, to do the following:

 

(i)                                     in the name of Seller or its own name,
or otherwise, to take possession of and endorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys due under any
mortgage insurance or payable on or on account of any other Collateral and to
file any claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by Buyer for the purpose of collecting
any and all such moneys due under any such mortgage insurance or with respect to
any other Collateral whenever payable,

 

(ii)                                  to pay or discharge taxes and Liens levied
or placed on or threatened against the Collateral, and

 

(iii)                               (A) to direct any party liable for any
payment under any Collateral to make payment of any and all moneys due or to
become due thereunder directly to Buyer or as Buyer shall direct; (B) to ask or
demand for, collect, receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect of or
arising out of any Collateral; (C) to sign and endorse any invoices,
assignments, verifications, notices and other documents in connection with any
of the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof and to enforce any other right in
respect of any Collateral; (E) to defend any suit, action or proceeding brought
against Seller with respect to any Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described in clause (E) above and, in
connection therewith, to give such discharges or releases as Buyer may deem
appropriate; and (G) generally, to sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though Buyer were the absolute owner thereof for all purposes, and
to do, at Buyer’s option and Seller’s expense, at any time, and from time to
time, all acts and things which Buyer deems reasonably necessary to protect,
preserve or realize upon the Collateral and Buyer’s Liens thereon and to effect
the intent of this Agreement, all as fully and effectively as Seller might do.

 

Seller hereby ratifies all that said attorneys shall lawfully do or cause to be
done by virtue hereof.  This power of attorney is a power coupled with an
interest and shall be irrevocable until the Secured Obligations shall have been
irrevocably paid in full.

 

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(h)                                 Seller also authorizes Buyer, at any time
and from time to time, to execute, in connection with any sale provided for in
Section 14(b) hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral and to file any initial
financing statements amendments thereto and continuation statements with or
without the signature of any Seller as authorized by applicable law, as
applicable to all or any part of the Collateral and to file any initial
financing statements, amendments thereto and continuation statements with or
without the signature of any Seller as authorized by applicable law, as
applicable to all or any part of the Collateral.

 

(i)                                     The powers conferred on Buyer are solely
to protect Buyer’s interests in the Collateral and shall not impose any duty
upon Buyer to exercise any such powers.  Buyer shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and neither Buyer nor any of its officers, directors, or employees shall be
responsible to Seller for any act or failure to act hereunder, except for its
own gross negligence or willful misconduct.

 

(j)                                    If Seller fails to perform or comply with
any of its agreements contained in the Transaction Documents beyond any notice
or grace period contained herein Buyer may itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the
out-of-pocket expenses of Buyer incurred in connection with such performance or
compliance, together with interest thereon at a rate per annum equal to the
Post-Default Rate, shall be payable by Seller to Buyer upon ten (10) days notice
that such amounts are due and payable, unless an Event of Default shall have
occurred and is continuing, in which case such amounts shall be due and payable
on demand and, in either case, shall constitute Secured Obligations.

 

(k)                                 Buyer’s duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the UCC or otherwise, shall be to deal with it in the same
manner as Buyer deals with similar property for its own account.  Subject to the
immediately preceding sentence, neither Buyer nor any of its directors, officers
or employees shall be liable for failure to demand, collect or realize upon all
or any part of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
Seller or otherwise

 

(l)                                     All authorizations and agencies herein
contained with respect to the Collateral are irrevocable until the Secured
Obligations shall have been irrevocably paid in full and are powers coupled with
an interest.

 

(m)                             Upon termination of this Agreement and repayment
to Buyer of the Repurchase Price and the performance of all obligations under
the Transaction Documents, Buyer shall promptly release its security interest in
any remaining Collateral; provided that if any payment, or any part thereof, of
any of the Secured Obligations is rescinded or must otherwise be restored or
returned by Buyer upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Seller, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or a trustee or similar officer for,
Seller or any substantial part of its property, or otherwise, this Agreement,
all rights hereunder and the Liens created hereby shall continue to be
effective, or be reinstated, as though such payments had not been made until
such time as such payments have been indefeasibly made.  Upon the release of the
security interest in the Purchased Loans

 

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pursuant to this Section, Buyer shall promptly release to Seller the Purchased
Loan Files and execute, acknowledge and deliver to Seller any and all documents,
instruments and agreements necessary to release all security interests in such
Purchased Loans.  Upon repayment to Buyer of the Repurchase Price with respect
to a Purchased Loan, Buyer shall release to Seller the Purchased Loan Files
relating to the Purchased Loans transferred in connection with such Loans and
execute, acknowledge and deliver to Seller any and all documents, instruments
and agreements necessary to release all Liens in the Purchased Loans securing
such Loans; provided, however, that whether or not an Event of Default has
occurred and is continuing hereunder, Buyer shall be required to release the
Purchased Loan File relating to a Purchased Loan and execute, acknowledge and
deliver all necessary release documents if (x) the related Mortgagor has paid
the entire principal amount of such Purchased Loan and all other amounts due to
the applicable Seller under the related Purchased Loan Documents and (y) the
required prepayment of the Loans in respect of such Purchased Loan has been made
hereunder in accordance with Section 5(h).

 

7.                                      PAYMENT, TRANSFER AND CUSTODY

 

(a)                                 On the Purchase Date for each Transaction,
ownership of the Purchased Loans shall be transferred to Buyer or its designee
(including the Custodian) against the simultaneous transfer of the Purchase
Price to an account of Seller specified in writing by Seller relating to such
Transaction.

 

(b)                                 On or before each Purchase Date, Seller
shall deliver or cause to be delivered to Buyer or its designee the Custodial
Delivery in the form attached hereto as Exhibit VI.  In connection with each
sale, transfer, conveyance and assignment of a Purchased Loan, Seller shall
deliver or cause to be delivered and released the Purchased Loan File pertaining
to such Purchased Loan to the Custodian in accordance with the Custodial
Agreement.

 

From time to time, Seller shall forward to the Custodian additional original
documents or additional documents evidencing any assumption, modification,
consolidation or extension of a Purchased Loan in accordance with the terms of
the Custodial Agreement, and upon receipt of any such other documents, the
Custodian shall hold such other documents in accordance with the Custodial
Agreement.  With respect to any documents which have been delivered or are being
delivered to recording offices for recording and have not been returned to
Seller in time to permit their delivery hereunder at the time required, in lieu
of delivering such original documents, Seller shall deliver to Buyer a true copy
thereof with an officer’s certificate certifying that such copy is a true,
correct and complete copy of the original, which has been transmitted for
recordation.  Seller shall deliver or cause to be delivered such original
documents to the Custodian promptly when they are received.  Buyer shall deposit
the Purchased Loan Files representing the Purchased Loans, or direct that the
Purchased Loan Files be deposited directly, with the Custodian.  The Purchased
Loan Files shall be maintained in accordance with the Custodial Agreement.  Any
Purchased Loan Files not delivered to Buyer or its designee (including the
Custodian) are and shall be held in trust by Seller or its designee for the
benefit of Buyer as the owner thereof.  Seller or its designee shall maintain a
copy of the Purchased Loan File and the originals of the Purchased Loan File not
delivered to Buyer or its designee.  The possession of the Purchased Loan File
by Seller or its designee is at the will of Buyer for the sole purpose of
servicing the related Purchased Loan, and such retention and possession by
Seller or its designee

 

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is in a custodial capacity only.  The books and records (including, without
limitation, any computer records or tapes) of Seller or its designee shall be
marked appropriately to reflect clearly the sale of the related Purchased Loan
to Buyer.  Seller or its designee (including the Custodian) shall release its
custody of the Purchased Loan File only in accordance with the Custodial
Agreement or as otherwise required by law. Upon the repurchase of any Purchased
Loan pursuant to this Agreement or the payment in full of such Purchased Loan,
as applicable, in either case which shall be evidenced by the Custodian’s
receipt of a request for release in the form set forth in the Custodial
Agreement, Buyer and Custodian shall promptly release the related Purchased Loan
File to Seller or its designee.

 

8.                                      SALE, TRANSFER, HYPOTHECATION OR PLEDGE
OF PURCHASED LOANS

 

(a)                                 Title to all Purchased Loans shall pass to
Buyer on the applicable Purchase Date, and Buyer shall have free and
unrestricted use of all Purchased Loans, subject however, to the terms of this
Agreement.  Nothing in this Agreement or any other Transaction Document shall
preclude Buyer from engaging in repurchase transactions with the Purchased Loans
or otherwise selling, transferring, pledging, repledging, hypothecating, or
rehypothecating the Purchased Loans, but no such transaction shall relieve Buyer
of its obligations to transfer the Purchased Loans to Seller pursuant to
Section 3 of this Agreement or of Buyer’s obligation to credit or pay Income to,
or apply Income to the obligations of, Seller pursuant to Section 5 hereof.

 

(b)                                 Nothing contained in this Agreement or any
other Transaction Document shall obligate Buyer to segregate any Purchased Loans
delivered to Buyer by Seller.  Notwithstanding anything to the contrary in this
Agreement or any other Transaction Document, no Purchased Loan shall remain in
the custody of Seller or an Affiliate of Seller.

 

9.                                      TRANSACTION CONDITIONS PRECEDENT

 

(a)                                 The obligation to consider each Request for
Transaction/Increase in Purchase Price on any Business Day is subject to the
satisfaction of the following further conditions precedent, both immediately
prior to the entry into such Transaction or increase in Purchase Price and also
after giving effect thereto and to the intended use thereof:

 

(i)                                     No Default.  No Default or Event of
Default shall have occurred and be continuing,

 

(ii)                                  Representations and Warranties.  Both
immediately prior to the entry into such Transaction or increase in Purchase
Price and also after giving effect thereto and to the intended use thereof, the
representations and warranties made by Seller in Section 10 hereof, and
elsewhere in each of the Transaction Documents (other than Exhibit I hereof),
shall be true, correct and complete in all material respects on and as of the
date of the entry into such Transaction or increase in Purchase Price with the
same force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date) and in Exhibit I hereof, shall be true,
correct and complete in all material respects on and as of the date of the entry
into such Transaction or increase in Purchase Price with respect to the related
Purchased Loan with the same force and effect as if

 

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made on and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such specific
date),

 

(iii)                               Request for Transaction/Increase in Purchase
Price; Complete Submission.  Buyer shall have received a Request for
Transaction/Increase in Purchase Price and a Complete Submission, and Seller
shall have pledged to deliver a complete Purchased Loan File with respect to any
Purchased Loan identified on such Request for Transaction/Increase in Purchase
Price within three (3) Business Days of the related Purchase Date or Funding
Date; provided, that, if Buyer’s diligence review of the Purchased Loan File
requires the delivery of a mortgage file, document or instrument or the
equivalent that Seller cannot deliver, or cause to be delivered, to Custodian at
the time they are required to be delivered, solely because of a delay caused by
the public recording office where such document or instrument has been delivered
for recordation, the delivery requirements set forth in this Agreement and the
Custodial Agreement shall be deemed to have been satisfied as to such
non-delivered Purchased Loan File, document or instrument if a copy thereof
(certified by Seller or Closing Counsel to be a true and complete copy of the
original thereof submitted for recording) is delivered to the Custodian on or
before the date on which such original is required to be delivered, and either
the original of such non-delivered document or instrument, or a photocopy
thereof, with evidence of recording thereon, is delivered to Custodian within
ninety (90) days of the related Funding Date, and, provided, further, that Buyer
may, but is not obligated to, consent to a later date for delivery of any part
of the Purchased Loan File in its sole discretion,

 

(iv)                              Servicing Agreements.  With respect to any
Purchased Loan identified on the Request for Transaction/Increase in Purchase
Price which is not serviced pursuant to a Servicing Agreement that has been
approved by Buyer previously, Seller shall have provided to Buyer a copy of the
related Servicing Agreement, certified as a true, correct and complete copy of
the original, together with the Servicer Notice and Agreement, fully executed by
Seller and the Servicer,

 

(v)                                 Funding Confirmation; Confirmation.  Buyer
shall have delivered to Seller (x) a Funding Confirmation, dated the date of the
requested Transaction, with a Purchased Loan Funding Confirmation Schedule and
an Exceptions to Representations and Warranties Schedule attached thereto and
(y) a Confirmation,

 

(vi)                              Due Diligence.  Without limiting Buyer’s right
to perform one or more supplemental Due Diligence Reviews pursuant to Section 28
hereof, Buyer shall have completed its due diligence review of the Purchased
Loan Documents for each Purchased Loan and such other documents, records,
agreements, instruments, mortgaged properties or information relating to such
Purchased Loan as Buyer in its sole discretion deems appropriate to review and
such review shall be satisfactory to Buyer in its sole discretion,

 

(vii)                           Title Escrow Letter, Closing Counsel Letter and
Trust Receipt.  Seller shall have delivered (i) the Title Escrow Letter, if
applicable, to the Custodian, with a copy to Buyer, and (ii) the Closing Counsel
Letter to Buyer.  Buyer shall have received a Trust Receipt and an Irrevocable
Direction Notice with respect to the applicable Purchased Loan,

 

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(viii)                        Fees and Expenses.  Buyer shall have received all
fees and expenses of counsel to Buyer for which an invoice has been submitted as
contemplated by Section 27 which amount, at Buyer’s option, may be netted from
the Purchase Price advanced under this Agreement,

 

(ix)                              Officer’s Certificate.  Buyer shall have
received a certificate of a Responsible Officer of Seller, substantially in the
form of Exhibit VII, (i) stating that, to the best of such Responsible Officer’s
actual knowledge, each of Seller, Servicer and Guarantor has observed or
performed in all material respects all of its covenants and other agreements,
and satisfied every condition, contained in this Agreement and the related
documents to be observed, performed or satisfied by it and that such Responsible
Officer has obtained no actual knowledge of any Default or Event of Default
except as specified in such certificate, (ii) on the Purchase Date for a
Purchased Loan only, certifying that each Purchased Loan File delivered by
Seller represents a true and correct copy of the documents contained therein,
and that the applicable Purchased Loan Schedule and Closing Data File, together
with all other information contained therein prepared by Seller or its
Affiliates and delivered by Seller to Buyer immediately prior to the Purchase
Date, is true and correct and conforms in all material respects to the Summary
Due Diligence Materials included in the Complete Submission and Preliminary Data
File previously provided to Buyer, and (iii) certifying as to the truth,
accuracy and completeness of the representations and warranties made by Seller
in Section 10 and in Exhibit I hereof (limited in the case of Exhibit I to the
applicable Purchased Loan for which the Transaction is being entered into),

 

(x)                                 Maximum Transaction Amount.  Each Request
for Transaction/Increase in Purchase Price shall be in an amount not more than
the Maximum Transaction Amount,

 

(xi)                              Interest Rate Protection Agreements.  Buyer
shall have received fully-executed copies of any Interest Rate Protection
Agreements, if any, to the extent assignable, each certified as a true, correct
and complete copy of the original,

 

(xii)                           Additional Matters.  All corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents shall be reasonably satisfactory in form and substance to
Buyer, and Buyer shall have received such other documents in respect of any
aspect or consequence of the transactions contemplated hereby or thereby as it
shall reasonably request, and

 

(xiii)                        No Material Adverse Effect or Market Disruption
Event.  There shall not have occurred one or more events that, in the reasonable
judgment of Buyer, constitutes a Material Adverse Effect or Market Disruption
Event.

 

10.                               REPRESENTATIONS OF SELLER

 

Seller represents and warrants to Buyer that throughout the term of this
Agreement and as long as any Transaction funded by Buyer to Seller pursuant to
this Agreement is outstanding:

 

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(a)                                 Financial Condition.

 

(i)                                     The financial statements of Guarantor
furnished to Buyer are complete and correct and present fairly, in accordance
with GAAP, the financial condition of Guarantor as of the date(s) thereof and
the results of operations of Guarantor for the period(s) covered thereby,

 

(ii)                                  Such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved,

 

(iii)                               Guarantor did not have, as of the date(s) of
such financial statements, any material Guarantee Obligation, known contingent
liability or liability for taxes for which adequate reserves have not been
established, or any long-term lease or unusual forward or long-term commitment,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction, or other financial derivative, which is not reflected in
the foregoing statements or in the notes thereto, to the extent required by
GAAP,

 

(iv)                              From and after the date of the financial
statements referred to in Section 10(a) there has been no development or event
nor any prospective development or event which has had a Material Adverse
Effect,

 

(b)                                 Existence; Compliance with Law; Ownership of
Seller.  Seller (a) is an entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, (b) (i) has all
requisite organizational power and authority, and (ii) has all governmental
licenses, authorizations, consents and approvals necessary, to own and operate
its property and to carry on its business as now being or as proposed to be
conducted, except in the case of clause (ii) where the lack of such license,
authorization, consent or approval would not reasonably be expected to have a
Material Adverse Effect, (c) is duly qualified to do business and is in good
standing under the laws of each jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure to be
so qualified would reasonably be expected to have a Material Adverse Effect, and
(d) is in compliance in all material respects with all Requirements of Law and
obligations under the Governing Documents.  The organizational chart attached
hereto as Schedule II (or identified as an update thereto after the Effective
Date and delivered to Buyer) is complete and accurate as of the Effective Date
and illustrates all Persons who have a direct ownership interest in Seller and
Seller’s Sole Member set forth on such schedule,

 

(c)                                  Authorization; Enforceable Obligations.

 

(i)                                     Seller has all requisite organizational
power and authority, and the legal right, to make, deliver and perform this
Agreement and each other Transaction Document, and to enter into Transactions
hereunder, and has taken all necessary action to authorize the entry into
Transactions on the terms and conditions of this Agreement and each other
Transaction Document to which it is a party, and the execution, delivery and
performance of this Agreement and each other Transaction Document,

 

(ii)                                  No consent or authorization of, approval
by, notice to, filing with or other act by or in respect of, any Governmental
Authority or any other Person is required or necessary

 

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in connection with the Transactions hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement or any other
Transaction Document, except (i) for filings and recordings in respect of the
Transactions pursuant to this Agreement, and (ii) as previously obtained and
currently in full force and effect,

 

(iii)                               Each Transaction Document to which Seller is
a party has been duly and validly executed and delivered by Seller and
constitutes, a legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with their terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law),

 

(d)                                 No Legal Bar.  The execution, delivery and
performance of this Agreement and the Transactions hereunder and the use of the
proceeds thereof will not violate any Requirement of Law, any provision of the
Governing Documents or Contractual Obligation of Seller and will not result in,
or require, the creation or imposition of any Lien (other than the Liens created
hereunder) on any of its property or revenues pursuant to any such Requirement
of Law or Contractual Obligation,

 

(e)                                  No Material Litigation.  There are no
actions, suits, arbitrations, investigations or proceedings of or before any
arbitrator or Governmental Authority pending or, to the actual knowledge of
Seller, threatened against Seller or against any of its properties or revenues
which would reasonably be expected to have a Material Adverse Effect,

 

(f)                                   No Default.  Seller is not in default
under or with respect to any of its Contractual Obligations in any respect which
would reasonably be expected to have a Material Adverse Effect.  No Event of
Default has occurred and is continuing,

 

(g)                                  Collateral; Collateral Security.

 

(i)                                   Seller has not assigned, pledged, or
otherwise conveyed or encumbered any of the Collateral to any Person other than
Buyer, and immediately prior to the pledge of such Collateral, Seller was the
sole owner of its Collateral and had good and marketable title thereto, free and
clear of all Liens, in each case except for Liens that have been released or are
to be released simultaneously with the Liens granted in favor of Buyer
hereunder;

 

(ii)                                The provisions of this Agreement are
effective to create in favor of Buyer a valid security interest in all right,
title and interest of Seller in, to and under the Collateral;

 

(iii)                             Upon (i) receipt by Custodian of each Mortgage
Note, endorsed in blank by a duly authorized officer of Seller and (ii) the
issuance by Custodian to Buyer of a Trust Receipt therefor, Buyer shall have a
fully perfected first priority security interest therein, in the Purchased Loan
evidenced thereby and in Seller’s interest in the related Mortgaged Property;

 

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(iv)                            Upon the filing of financing statements on
Form UCC-1 naming Buyer as “Secured Party” and Seller as “Debtor”, and
describing the Collateral, in the office of the Secretary of State for the State
of Delaware, the security interests granted hereunder in the Collateral will
constitute fully perfected first priority security interests under the Uniform
Commercial Code of the State of Delaware in all right, title and interest of
Seller in, to and under such Collateral which can be perfected by filing under
the Uniform Commercial Code of the State of Delaware.

 

(h)                                 Chief Executive Office.  Seller’s chief
executive office is located at c/o Ares Management LLC, One North Wacker Drive,
48th Floor, Chicago, Illinois 60606, or such other location as may be notified
to Buyer.  On the Effective Date, Seller’s jurisdiction of organization is
Delaware,

 

(i)                                     Location of Books and Records.  The
location where Seller keeps its books and records, including all computer tapes
and records relating to the Collateral is its chief executive office or in
another location identified by Seller to Buyer in writing,

 

(j)                                    No Burdensome Restrictions.  No
Requirement of Law to which Seller or its Affiliates is subject or Contractual
Obligation of Seller would reasonably be expected to have a Material Adverse
Effect,

 

(k)                                 Taxes.  Seller has filed all Federal and
state income tax returns and all other material tax returns that are required to
be filed by it (subject to the timely filing of any extension thereof) and has
paid all taxes due pursuant to such returns or pursuant to any assessment
received by it, except for any such taxes or assessments, if any, that are being
appropriately contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves in conformity with GAAP
have been provided.  No tax Lien has been filed, and, to the actual knowledge of
Seller, no claim is being asserted, with respect to any such tax or assessment,

 

(l)                                     Margin Regulations.  No part of the
proceeds of any Transactions will be used for “purchasing” or “carrying” any
“margin stock” within the respective meanings of each of the quoted terms under,
or for any other purpose which violates or would be inconsistent with the
provisions of, Regulation G, T, U or X,

 

(m)                             Investment Company Act; Other Regulations. 
Seller is not required to register as an “investment company”, or a company
“controlled” by an “investment company”, within the meaning of the Investment
Company Act of 1940, as amended.  Seller is not subject to regulation under any
Federal or state statute or regulation which limits its ability to incur
Indebtedness, except in each case where such limitation would not be reasonably
likely to have a Material Adverse Effect,

 

(n)                                 Assets.  At the time transferred, each
Purchased Loan initially included in the Collateral was an Eligible Loan (except
with respect to any condition waived in writing by Buyer; it being acknowledged
that Buyer shall be deemed to have waived compliance with any of the eligibility
criteria or other representations contained herein applicable to any Purchased

 

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Loan, to the extent such non-compliance with same was disclosed as of the
Funding Date for such Purchased Loan),

 

(o)                                 No Prohibited Persons.  Seller or any of its
officers, directors, partners, members, Affiliates or shareholders is not an
entity or person:  (i) that is listed in the Annex to, or is otherwise subject
to the provisions of Executive Order 13224 issued on September 24, 2001
(“EO13224”); (ii) whose name appears on the OFAC List; (iii) who commits,
threatens to commit or supports “terrorism”, as that term is defined in EO13224;
or (iv) who is otherwise affiliated with any entity or person listed above (any
and all parties or persons described in clauses (i) through (iv) above are
herein referred to as a “Prohibited Person”),

 

(p)                                 Seller Solvent; Fraudulent Conveyance.  As
of the date hereof and immediately after giving effect to each Transaction,
Seller is Solvent.  Seller is not transferring any Purchased Loan with any
intent to hinder, delay or defraud any of its creditors,

 

(q)                                 ERISA.  Seller is not an “employee benefit
plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and
none of the assets of Seller constitutes or will constitute “plan assets” of one
or more such plans within the meaning of 29 C.F.R. Section 2510.3-101,

 

(r)                                    True and Complete Disclosure.  The
information, reports, financial statements, exhibits and schedules prepared by
Seller and furnished in writing by Seller to Buyer in connection with the
negotiation, preparation or delivery of this Agreement and the other Transaction
Documents or included herein or therein or delivered pursuant hereto or thereto,
do not contain any untrue statement of material fact or omit to state any
material fact necessary to make the statements herein or therein not
misleading.  To the extent such information, reports, financial statements,
exhibits and schedules were prepared by third parties, to the actual knowledge
of Sellers, none of the aforementioned documents contain any untrue statement of
material act nor do they omit to state any material fact necessary to make the
statements therein not misleading.  All written information furnished by Seller
to Buyer in connection with this Agreement and the other Transaction Documents
and the transactions contemplated hereby and thereby are true, correct and
accurate, in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified.  To the actual knowledge of Seller, there is no fact that has not
been disclosed herein, in the other Transaction Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to Buyer for use in connection with the transactions contemplated
hereby or thereby that would reasonably be expected to have a Material Adverse
Effect.

 

(s)                                   True Sales.  Any Purchased Loan originated
by an originator other than Seller has been conveyed to Seller pursuant to a
true and legal sale.

 

11.                               INTENTIONALLY OMITTED

 

12.                               COVENANTS OF SELLER

 

Seller covenants and agrees with Buyer that, so long as any Transaction is
outstanding and until payment in full of the Repurchase Price:

 

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(a)                                 Financial Statements.  Seller shall cause
Guarantor to deliver to Buyer:

 

(i)                                   as soon as available and in any event
within sixty (60) days after the end of each of the first three quarterly fiscal
periods of each fiscal year of Guarantor, the balance sheet of Guarantor as at
the end of such period and the related unaudited statements of income and of
cash flows for Guarantor for such period and the portion of the fiscal year
through the end of such period, if applicable, setting forth in each case the
figures for the previous year, accompanied by a certificate of a Responsible
Officer of Guarantor, which certificate shall state that said financial
statements fairly present the financial condition and results of operations of
Guarantor in accordance with GAAP, consistently applied, as at the end of, and
for, such period (subject to normal year-end adjustments);

 

(ii)                                as soon as available and in any event within
one hundred twenty (120) days after the end of each fiscal year of Guarantor,
the audited balance sheets of Guarantor as at the end of such fiscal year and
the related statements of income and retained earnings and of cash flows for
Guarantor for such year, if applicable, setting forth in each case the figures
for the previous year, prepared in accordance with GAAP, and certified by an
independent certified public accountant of recognized national standing, without
qualification as to scope of audit or going concern;

 

(iii)                             on or before one hundred and twenty (120) days
after the end of each fiscal year of Seller, Seller shall provide Buyer with a
certificate certifying that, as of the date thereof, there does or does not
exist any Default or Event of Default or, if any Default or Event of Default
exists specifying the nature thereof; and

 

(iv)                            promptly and in any event within five
(5) Business Days following request therefor by Buyer directed to the persons to
whom notice is to be given pursuant to Section 17, from time to time such other
information regarding the financial condition, operations, or business of Seller
as Buyer may reasonably request (and provided same is in Seller’s possession or
available to Seller).

 

(b)                                 Litigation.  Seller will promptly, and in
any event within 10 days after service of process on any of the following, give
to Buyer notice of all litigation, actions, suits, arbitrations, investigations
(including, without limitation, any of the foregoing which are pending or
threatened) or other legal or arbitrable proceedings affecting Seller or
affecting any of Seller’s Property before any Governmental Authority that
(i) questions or challenges the validity or enforceability of any of the
Transaction Documents or any action to be taken in connection with the
transactions contemplated hereby, (ii) makes a claim or claims in an aggregate
amount greater than $100,000, or (iii) which, individually or in the aggregate,
if adversely determined, could be reasonably likely to have a Material Adverse
Effect.

 

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(c)                                  Existence, Etc.  Seller will:

 

(i)                                   preserve and maintain its legal existence
and all of its material rights, material privileges, material licenses and
material franchises;

 

(ii)                                preserve and maintain all of its material
rights, privileges, licenses and franchises necessary to operate its business
and perform its obligations hereunder;

 

(iii)                             comply with the requirements of all applicable
laws, rules, regulations and orders of Governmental Authorities (including,
without limitation, all environmental laws, all laws with respect to unfair and
deceptive lending practices and predatory lending practices) if failure to
comply with such requirements would be reasonably likely (either individually or
in the aggregate) to have a Material Adverse Effect;

 

(iv)                            keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied;

 

(v)                                 not move its chief executive office from the
address referred to in Section 10(h) or change its jurisdiction of organization
from the jurisdiction referred to in Section 10(h) unless it shall have provided
Buyer thirty (30) days’ prior written notice of such change;

 

(vi)                              pay and discharge all taxes, assessments and
governmental charges or levies imposed on it or on its income or profits or on
any of its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which adequate
reserves are being maintained in conformance with GAAP; and

 

(vii)                           permit representatives of Buyer, during normal
business hours, on three (3) Business Days’ prior notice to examine, copy and
make extracts from its books and records, to inspect any of its Properties, and
to discuss its business and affairs with its officers, all to the extent
reasonably requested by Buyer.

 

(d)                                 Prohibition of Fundamental Changes.  Seller
shall not enter into any transaction of merger or consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up
or dissolution) or sell all or substantially all of its assets.

 

(e)                                  Notices.  Seller shall give notice to Buyer
promptly, and in any event within two (2) Business Days following receipt of
notice or actual knowledge of any of the following:

 

(i)                                     the occurrence of any Event of Default;

 

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(ii)                                upon service of process on Seller, or any
agent thereof for service of process, in respect of any legal or arbitrable
proceedings affecting Seller (a) that questions or challenges the validity or
enforceability of any of the Transaction Documents or (b) which, if determined
adversely to Seller would give rise to a liability of Seller of $100,000 or
more;

 

(iii)                             upon Seller becoming aware of any Purchased
Loan Event of Default under the Purchased Loan Documents for any Purchased Loan
and any event or change in circumstances which has or would reasonably be
expected to have a Material Adverse Effect;

 

(iv)                            upon Seller becoming aware that the Mortgaged
Property in respect of any Purchased Loan has been damaged by waste, fire,
earthquake or earth movement, windstorm, flood, tornado or other casualty, or
otherwise damaged, in any case so as to materially and adversely affect the
value of such Purchased Loan;

 

(v)                               upon Seller’s becoming aware of any Principal
Prepayment of any Purchased Loan, and in any event within two (2) Business Days
after receipt thereof;

 

(vi)                              of entry of a judgment or decree resulting in
a liability to Seller in an amount in excess of $100,000.

 

Each notice pursuant to this Section shall be accompanied by a statement setting
forth details of the occurrence referred to therein and stating what action
Seller has taken or proposes to take with respect thereto.

 

(f)                                   Special Purpose Entity.  Seller shall at
all times be a Special Purpose Bankruptcy Remote Entity.

 

(g)                                  Transactions with Affiliates.  Seller will
not enter into any transaction, including without limitation any purchase, sale,
loan, lease, exchange of property, or the rendering of any service, with any
Affiliate unless such transaction is (a) otherwise permitted under this
Agreement, (b) in the ordinary course of Seller’s business and (c) upon fair and
reasonable terms no less favorable to Seller than it would obtain in a
comparable arm’s length transaction with a Person which is not an Affiliate, or
make a payment that is not otherwise permitted by this Section 12(g) to any
Affiliate.  Notwithstanding the foregoing, Buyer hereby approves and authorizes
the Management Agreement and that certain Interim Servicing Agreement by and
among Buyer, Seller and ARES Commercial Real Estate Services LLC dated as of
December 11, 2011 (the “Servicing Agreement”).

 

(h)                                 Limitation on Sale or Other Disposition of
Collateral.  Seller will not transfer, assign, sell or otherwise dispose of any
Collateral other than in connection with obtaining a release of a Purchased Loan
transferred hereunder in accordance with Section 3(d) hereof.

 

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(i)                                     Limitation on Liens on Collateral. 
Seller will not, nor will it permit or allow any other Person, to create, incur
or permit to exist any Lien on the Collateral, except for Liens on the
Collateral created hereunder.  Seller will defend the Collateral against, and
will take such other action as is necessary to remove any Lien on or to the
Collateral, other than Liens created under this Agreement, and Seller will
defend the right, title and interest of Buyer in and to any of the Collateral
against the claims and demands of all Persons whomsoever, other than Persons
claiming through Buyer.

 

(j)                                    Limitations on Modifications, Waivers and
Extensions of Asset Documents.  Seller will not, nor will it permit or allow
others to, enter into or permit a Significant Purchased Loan Modification to
occur, without Buyer’s prior written consent, which consent shall not be
unreasonably withheld or delayed.

 

(k)                                 Limitation on Distributions.  After the
occurrence and during the continuation of any Event of Default, Seller shall not
declare any dividends upon any shares of Seller’s stock now or hereafter
outstanding, except dividends payable in the Capital Stock of Seller, nor shall
Seller set apart assets for, a sinking or other analogous fund for the purchase,
redemption, defeasance, retirement or other acquisition of any equity or
partnership interest of Seller, whether now or hereafter outstanding, or make
any other distribution in respect of any of the foregoing or to any shareholder
or equity owner of Seller, either directly or indirectly, whether in cash or
property or in obligations of Seller.  Notwithstanding the foregoing, Seller
shall at all times be entitled to pay any dividends or distributions necessary
to maintain the status of the Guarantor as a real estate investment trust.

 

(l)                                     Servicer; Servicing File.  Seller shall
provide to Buyer no later than the tenth (10th) Business Day of each month a
report, in a form acceptable to Buyer (such report, a “Mortgage Asset Report”),
containing (i) copies of all financial statements, operating statements, rent
rolls, budgets and material notices received by Seller from any Mortgagor, any
property manager or other party pursuant to the terms of any of the Purchased
Loan Documents for any Purchased Loan relating to such Mortgagor, any guarantor
with respect to such Purchased Loan or any Mortgaged Property (and Seller hereby
covenants and agrees to use reasonable efforts to cause each Mortgagor to comply
in all material respects with the financial reporting requirements of their
respective Purchased Loan Documents), (ii) an updated Closing Data File on a
loan-by-loan basis and in the aggregate, with respect to any Purchased Loan
serviced hereunder by Seller or any Servicer, and (iii) reporting on any
material damage to any Mortgaged Property by waste, fire, earthquake or earth
movement, windstorm, hurricane, flood, tornado or other casualty, or otherwise
so as to affect adversely the collateral value of such transferred Purchased
Loan. Seller shall not cause or permit the Purchased Loan to be serviced or
sub-serviced by any Servicer other than a Servicer expressly approved in writing
by Buyer.

 

(m)                             ERISA.  Seller shall not establish any employee
benefit plans or other plans pursuant to ERISA, the Code or any other Federal or
State Law.

 

(n)                                 Prohibited Persons.  Seller covenants and
agrees that neither Seller nor any of its Affiliates, officers, directors,
partners or members will knowingly:  (i) conduct any business, nor engage in any
transaction or dealing, with any Prohibited Person, including, but not limited
to, the making or receiving of any contribution of funds, goods, or services, to
or for the

 

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benefit of a Prohibited Person; or (ii) engage in or conspire to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in EO13224.  Seller
further covenants and agrees to deliver (from time to time) to Buyer any such
certification or other evidence as may be requested by Buyer in its sole and
absolute discretion, confirming that:  (i) neither Seller nor any of its
officers, directors, partners, members or Affiliates is a Prohibited Person; and
(ii) neither Seller nor its officers, directors, partners, members or Affiliates
has to its knowledge engaged in any business, transaction or dealings with a
Prohibited Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a Prohibited
Person.

 

13.                               SINGLE-PURPOSE ENTITY

 

Seller is a Special Purpose Bankruptcy Remote Entity.  A “Special Purpose
Bankruptcy Remote Entity” means a corporation, limited partnership or limited
liability company which at all times since its formation and at all times
thereafter:

 

(a)                                 was and will be organized solely for the
purpose of engaging in (a) the origination, purchase, ownership, servicing, sale
and securitization, directly or indirectly, of one or more Purchased Loans to be
transferred hereunder and (b) any and all activities necessary, convenient or
incidental to the foregoing;

 

(b)                                 has not engaged and will not engage in any
business unrelated to the purposes enumerated in paragraph 13(a) herein;

 

(c)                                  has not had and will not have any assets
other than one or more Purchased Loans, cash, cash equivalents and assets of a
similar nature;

 

(d)                                 has not engaged, sought or consented to and
will not engage in, seek or consent to any dissolution, winding up, liquidation,
consolidation, merger, asset sale (except as expressly permitted by the
Transaction Documents), transfer of partnership or membership interests or the
like, or material amendment of its limited partnership agreement, articles of
incorporation, articles of organization, certificate of formation or operating
agreement (as applicable) (except as expressly permitted by the Transaction
Documents);

 

(e)                                  has an Independent Director whose
affirmative vote is required for any Bankruptcy Action;

 

(f)                                   has not, and without the unanimous consent
of all of its partners, directors or members, as applicable, will not take any
Bankruptcy Action;

 

(g)                                  maintains and intends to maintain adequate
capital in light of its contemplated business operations, provided, however, in
no event shall the foregoing require the Seller’s partners, members or
shareholders, as applicable, to make any additional capital contribution to
Seller;

 

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(h)                                 has not failed and will not fail to correct
any known misunderstanding regarding the separate identity of such entity;

 

(i)                                     has maintained and will maintain its
accounts (other than the Servicer’s Account), books and records separate from
any other Person and will file its own tax returns, except as expressly required
under the Transaction Documents and except to the extent such entity is treated
as a “disregarded entity” for tax purposes;

 

(j)                                    has maintained and will maintain its
books, records, resolutions and agreements as official records;

 

(k)                                 has not commingled and will not commingle
its funds or assets with those of any other Person, except as expressly required
under the Transaction Documents;

 

(l)                                     has held and will hold its assets in its
own name;

 

(m)                             has conducted and will conduct its business in
its name only, and has not and will not use any trade name, except as expressly
disclosed to Buyer in writing;

 

(n)                                 has maintained and will maintain its
financial statements, accounting records and other entity documents separate
from any other Person, provided that any Seller may be included in a
consolidated financial statement of an Affiliate provided that such Seller’s
separate legal existence and assets and liabilities are adequately disclosed
therein;

 

(o)                                 has paid and will pay its own liabilities,
including the salaries of its own employees, out of its own funds and assets;

 

(p)                                 has observed and will observe all
partnership, corporate or limited liability company formalities, as applicable;

 

(q)                                 has maintained and will maintain an
arm’s-length relationship with its Affiliates, except for contractual
arrangements approved by Buyer or contemplated by this Agreement (including,
without limitation, the Management Agreement);

 

(r)                                    has and will have no Indebtedness other
than unsecured trade payables in the ordinary course of business which (1) do
not exceed, at any time, $10,000 in the aggregate and (2) are paid within
forty-five (45) days of the date incurred;

 

(s)                                   has not and will not assume or guarantee
or become obligated for any Guarantee Obligation;

 

(t)                                    has not and will not acquire obligations
or securities of its partners, members or shareholders, except as otherwise
expressly required pursuant to the Transaction Documents;

 

(u)                                 has allocated and will allocate fairly and
reasonably shared expenses, if any, including shared office space (if any);

 

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(v)                                 if such entity shares any employees with
other Persons, the salaries of and the expenses related to providing benefits to
such employees have been fairly and non-arbitrarily allocated among such
Persons, with the result that each such Person bears its fair share of the
salary and benefit costs associated with all such common employees;

 

(w)                               except in connection with the Transactions
hereunder, has not pledged and will not pledge its assets for the benefit of any
other Person;

 

(x)                                 has held itself out and identified itself
and will hold itself out and identify itself as a separate and distinct entity
under its own name and not as a division or part of any other Person;

 

(y)                                 has maintained and will maintain its assets
in such a manner that it will not be costly or difficult to segregate, ascertain
or identify its individual assets from those of any other Person;

 

(z)                                  has not made and will not make loans to any
Person, except for any Purchased Loan now or hereafter transferred hereunder;

 

(aa)                          has not identified and will not identify its
partners, members or shareholders, or any Affiliate of any of them, as a
division or part of it;

 

(bb)                          has not entered into or been a party to, and will
not enter into or be a party to, any transaction with its partners, members,
shareholders or Affiliates except in the ordinary course of its business and on
terms which are no less favorable to it than would be obtained in a comparable
arm’s-length transaction with an unrelated third party; and

 

(cc)                            will consider the interests of its creditors in
connection with all corporate, partnership or limited liability company actions,
as applicable.

 

14.                               EVENTS OF DEFAULT; REMEDIES

 

(a)                                 Each of the following events shall
constitute an event of default (an “Event of Default”) hereunder:

 

(i)                                     Seller shall default in the payment of
any outstanding Purchase Price or Price Differential when due (whether upon
acceleration, at mandatory prepayment, or otherwise), and in the case of a
default with respect to the payment of Price Differential, such default shall
remain unremedied for two (2) Business Days; or

 

(ii)                                  Seller shall default in the payment of any
other amount payable by it hereunder or under any other Transaction Document
after notification by Buyer of such default, and such default shall have
continued unremedied for five (5) Business Days; or

 

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(iii)                               If (A) any representation, warranty or
statement contained in this Agreement or any of the Transaction Documents or in
any affidavit or other instrument executed or delivered pursuant to the
Transaction Documents or with respect to the Transactions (other than breaches
of the representations or warranties in Exhibit I to this Agreement made without
knowledge of the Seller that they were materially false or misleading at the
time made) is determined by Buyer to be false or misleading in any material
respect as of the date hereof or thereof or shall become so at any time prior to
the repayment in full of the Transactions and such false or misleading statement
continues unremedied for ten (10) Business Days after the earlier of receipt of
notice thereof from Buyer or the discovery of such false or misleading statement
by Seller, or (B) any material representation, warranty or statement contained
in Exhibit I to this Agreement is determined by Buyer to be false or misleading
in any material respect with respect to a Purchased Loan and such
representation, warranty or statement was made by the Seller with knowledge of
the Seller that it was materially false or misleading at the time made; or

 

(iv)                              Seller shall fail to comply with the
requirements of Section 12(c)(i), Section 12(d), Sections 12(e)(i), (iii) or
(iv), Section 12(g), Section 12(k), or Section 12(m) hereof; or Seller shall
fail to observe or perform any other covenant or agreement contained in this
Agreement or any other Transaction Document and such failure to observe or
perform shall continue unremedied for a period of ten (10) Business Days
following the earlier of notice or actual knowledge of such failure;

 

(v)                                 Either of the following shall occur:

 

(A)                               the commencement of any enforcement action
(including, but not limited to, the giving of a notice of acceleration) by an
obligee against Seller or Guarantor with respect to any Indebtedness, Guarantee
Obligation and/or Contractual Obligation, provided that the aggregate amount of
the Indebtedness, Guarantee Obligations and/or Contractual Obligations in
respect of which such enforcement action is commenced (either individually or in
the aggregate) is in excess of $500,000 with respect to Seller, or $5,000,000
with respect to Guarantor; or

 

(B)                               (x) Seller or Guarantor shall default in
making any payment required to be made under one or more agreements for borrowed
money to which it is a party in an aggregate amount in excess of $500,000 with
respect to Seller, or $15,000,000 with respect to Guarantor, and any such
failure is not cured within the applicable cure period, if any, provided for
under the related agreement, or (y) Seller or Guarantor shall default in making
any payment required to be made under one of more agreements for borrowed money
to which it is a party in an aggregate amount in excess of $500,000

 

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with respect to Seller, or $5,000,000 with respect to Guarantor and such default
shall remain uncured for a period of forty-five (45) days.

 

(vi)                              A default, after notice and beyond the
expiration of applicable grace periods, shall have occurred and be continuing
under any other Transaction Document which has not been waived by Buyer in
writing; or

 

(vii)                           a final judgment or judgments for the payment of
money shall be rendered against Seller in excess of $250,000 or shall be
rendered against Guarantor in excess of $5,000,000 by one or more courts,
administrative tribunals or other bodies having jurisdiction and the same shall
not be satisfied, discharged (or provision shall not be made for such discharge)
or bonded, or a stay of execution thereof shall not be procured, within 30 days
from the date of entry thereof, and Seller or Guarantor shall not, within said
period of 30 days, or such longer period during which execution of the same
shall have been stayed or bonded, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or

 

(viii)                        Seller or Guarantor shall admit in writing its
inability to pay its debts as such debts become due; or

 

(ix)                              Seller or Guarantor shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator or the like of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of its creditors, (iii) commence a voluntary case under the Bankruptcy Code,
(iv) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or
winding-up, or composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take any
corporate or other action for the purpose of effecting any of the foregoing; or

 

(x)                                 a proceeding or case shall be commenced,
without the application or consent of Seller or Guarantor, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner, liquidator or the like of Seller or Guarantor or
of all or any substantial part of its property, or (iii) similar relief in
respect of Seller or Guarantor under any law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and

 

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in effect, for a period of sixty (60) or more days; or an order for relief
against Seller or Guarantor shall be entered in an involuntary case under the
Bankruptcy Code; or

 

(xi)                              the Custodial Agreement (but not if terminated
in accordance with its terms), the Guaranty or any other Transaction Document
shall for whatever reason be terminated or cease to be in full force and effect,
or the enforceability thereof shall be contested by Seller or Guarantor; or

 

(xii)                         Seller shall grant, or suffer to exist, any Lien
on any Collateral except the Liens contemplated hereby, or the Liens
contemplated hereby shall cease to be first priority perfected Liens on the
Collateral in favor of Buyer or shall be Liens in favor of any Person other than
Buyer; or

 

(xiii)                        a Change of Control shall have occurred.

 

(b)                                 If an Event of Default shall occur and be
continuing, the following rights and remedies shall be available to Buyer:

 

(i)                                     At the option of Buyer, exercised by
written notice to Seller (which option shall be deemed to have been exercised,
even if no notice is given, immediately upon the occurrence of the events
described in Section 13(a)(ix) or (x)), the Repurchase Date for each Transaction
hereunder shall, if it has not already occurred, be deemed immediately to occur
(the date on which such option is exercised or deemed to have been exercised
being referred to hereinafter as the “Accelerated Repurchase Date”).

 

(ii)                                  If Buyer exercises or is deemed to have
exercised the option referred to in Section 14(b)(i) of this Agreement:

 

(A)                               Seller’s obligations hereunder to repurchase
all Purchased Loans shall become immediately due and payable on and as of the
Accelerated Repurchase Date; and

 

(B)                               to the extent permitted by applicable law, the
Repurchase Price with respect to each Transaction (determined as of the
Accelerated Repurchase Date) shall be increased by the aggregate amount obtained
by daily application of, on a 360 day per year basis for the actual number of
days during the period from and including the Accelerated Repurchase Date to but
excluding the date of payment of the Repurchase Price (as so increased), (x) the
Post-Default Rate for such Transaction multiplied by (y) the outstanding
Repurchase Price for such Transaction (decreased by (I) any amounts actually
remitted to Buyer by the Controlled Account Bank or Seller from time to time
pursuant to Sections 4 or 5 of this Agreement and applied to such Repurchase
Price, and (II) any amounts applied to the Repurchase Price pursuant to
Section 14(b)(iii) of this Agreement); and

 

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(C)                               the Custodian shall, upon the request of
Buyer, deliver to Buyer all instruments, certificates and other documents then
held by the Custodian relating to the Purchased Loans.

 

(iii)                             Buyer may exercise, in addition to all other
rights and remedies granted to it in this Agreement and in any other instrument
or agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the UCC.  Without limiting the
generality of the foregoing, Buyer without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon Seller or any other Person
(each and all of which demands, presentments, protests, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell (on a servicing released basis, at Buyer’s option),
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels or as an entirety at public or private sale
or sales, at any exchange, broker’s board or office of Buyer or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk.  Buyer shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in Seller, which right or equity is hereby waived or
released.  Buyer shall give Seller ten (10)  days advance notice of any such
sale, whether public or private.  Seller further agrees, at Buyer’s request, to
assemble the Collateral and make it available to Buyer at places which Buyer
shall reasonably select, whether at Seller’s premises or elsewhere.  Buyer shall
apply the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of Buyer
hereunder, including without limitation reasonable attorneys’ fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as Buyer may elect, and only after such application and after the
payment by Buyer of any other amount required or permitted by any provision of
law, including without limitation Section 9-615 of the UCC, need Buyer account
for the surplus, if any, to Seller.  To the extent permitted by applicable law,
Seller waives all claims, damages and demands it may acquire against Buyer
arising out of the exercise by Buyer of any of its rights hereunder during the
continuance of an Event of Default, other than those claims, damages and demands
arising from the gross negligence or willful misconduct of Buyer.  If any notice
of a proposed sale or other disposition of Collateral shall be required by law,
such notice shall be deemed reasonable and

 

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proper if given at least 10 days before such sale or other disposition.  Seller
shall remain liable for any deficiency (plus accrued interest thereon as
contemplated pursuant to Section 5(b) hereof) if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Secured
Obligations and the reasonable fees and disbursements of any attorneys employed
by Buyer to collect such deficiency.

 

(iv)                              An Event of Default shall be deemed to be
continuing unless expressly waived by Buyer in writing.  Upon the occurrence and
during the continuance of one or more Events of Default hereunder, Buyer’s
obligation to make additional Loans to Seller shall automatically terminate
without further action by any Person.

 

(v)                                 [Intentionally Omitted].

 

(vi)                              In addition to the remedies provided in
Section 14(b)(iii) hereof and otherwise provided in this Agreement, Buyer shall
have the right to obtain physical possession of the Servicing Records and all
other files of Seller relating to the Collateral and all documents relating to
the Collateral which are then or may thereafter come in to the possession of
Seller or any third party acting for Seller and Seller shall deliver to Buyer
such assignments as Buyer shall request.  Seller shall be responsible for paying
any fees of any servicer resulting from the termination of a servicer due to an
Event of Default.  Buyer shall have the right to demand transfer of all
servicing rights and obligations to a new servicer acceptable to Buyer.  Buyer
shall be entitled to specific performance of all agreements of Seller contained
in this Agreement.

 

(vii)                         Buyer shall have the right to direct all Servicers
then servicing any Purchased Loan to remit all collections thereon to Buyer, and
if any payments are received by Seller, Seller shall not commingle the amounts
received with other funds of Seller and shall promptly pay them over to Buyer. 
Buyer shall also have the right to terminate any one or all of the Servicers
then servicing any Purchased Loan with or without cause.

 

(viii)                      Seller shall be liable to Buyer for (i) the amount
of all reasonable legal or other expenses, including, without limitation, all
costs and expenses of Buyer in connection with the enforcement of this Agreement
or any other agreement evidencing a Loan, whether in action, suit or litigation
or bankruptcy, insolvency or other similar proceeding affecting creditors’
rights generally, further including, without limitation, the reasonable fees and
expenses of counsel incurred in connection with or as a result of an Event of
Default, (ii) damages in an amount equal to the cost (including all fees,
expenses and commissions) of entering into or terminating hedge transactions in
connection with or as a result of an Event of Default, and (iii) any other loss,
damage, cost or expense directly arising or resulting from the occurrence of an
Event of Default.

 

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

 

(x)                                 Buyer shall have, in addition to its rights
and remedies under the Transaction Documents, all of the rights and remedies
provided by applicable federal, state, foreign, and local laws (including,
without limitation, the rights and remedies of a secured party under the UCC of
the State of New York, to the extent that the UCC is applicable, and the right
to offset any mutual debt and claim), in equity, and under any other agreement
between Buyer and Seller.  Without limiting the generality of the foregoing,
Buyer shall be entitled to set off the proceeds of the liquidation of the
Purchased Loan against all of Seller’s obligations to Buyer, only if such
obligations are then due, without prejudice to Buyer’s right to recover any
deficiency.

 

(xi)                            Subject to the notice and grace periods set
forth herein, each party to this Agreement may exercise any or all of the
remedies available to such party immediately upon the occurrence of an Event of
Default and at any time during the continuance thereof without prior notice to
the other parties hereto.  Except as expressly provided herein, all rights and
remedies arising under the Transaction Documents, as amended from time to time,
are cumulative and not exclusive of any other rights or remedies which each
party to this Agreement may have.  No modification, amendment, extension,
discharge, termination or waiver of any provision of this Agreement or of any
other Transaction Document, nor consent to any departure by any party to this
Agreement therefrom, shall in any event be effective unless the same shall be in
a writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given.  Except as otherwise expressly provided herein, no
notice to, or demand on any party to this Agreement, shall entitle such party to
any other or future notice or demand in the same, similar or other
circumstances.  Neither any failure nor any delay on the part of any party to
this Agreement in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under any other Transaction Document shall operate as or
constitute a waiver thereof, nor shall a single or partial exercise thereof
preclude any other future exercise, or the exercise of any other right, power,
remedy or privilege.

 

(xii)                         Buyer may enforce its rights and remedies
hereunder without prior judicial process or hearing, and Seller hereby expressly
waives any defenses Seller might otherwise have to require Buyer to enforce its
rights by judicial

 

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process.  Seller also waives any defense Seller might otherwise have arising
from the use of non-judicial process, disposition of any or all of the Purchased
Loans, or from any other election of remedies.  Seller recognizes that
non-judicial remedies are consistent with the usages of the trade, are
responsive to commercial necessity and are the result of a bargain at arm’s
length.

 

(xiii)                      Upon the occurrence of an Event of Default, Buyer
shall without regard to the adequacy of the security for the Transactions, be
entitled to the appointment of a receiver by any court having jurisdiction,
without notice, to take possession of and protect, collect, manage, liquidate,
and sell the Purchased Loans or any portion thereof, collect the payments due
with respect to the Purchased Loans or any portion thereof, and do anything that
Buyer is authorized hereunder to do.  Seller shall pay all reasonable costs and
expenses incurred by Buyer in connection with the appointment and activities of
such receiver.

 

(xiv)                     The powers conferred on Buyer hereunder are solely to
protect Buyer’s interests in the Collateral and shall not impose any duty upon
it to exercise any such powers.  Buyer shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers, and
neither it nor any of its officers, directors, employees or agents shall be
responsible to Seller for any act or failure to act hereunder, except for its or
their own gross negligence or willful misconduct.

 

(xv)                        Upon the designation of any Accelerated Repurchase
Date, Buyer may, without prior notice to Seller, set off any sum or obligation
(whether or not arising under this Agreement, whether matured or unmatured,
whether or not contingent and irrespective of the currency, place of payment or
booking office of the sum or obligation) owed by Seller to Buyer or any
Affiliate of Buyer against any sum or obligation (whether or not arising under
this Agreement, whether matured or unmatured, whether or not contingent and
irrespective of the currency, place of payment or booking office of the sum or
obligation) owed by Buyer or any Affiliate of Buyer to Seller.  Buyer will give
written notice to the other party of any set off effected under this
Section 14(b)(xv).  If a sum or obligation is unascertained, Buyer may in good
faith estimate that obligation and set-off in respect of the estimate, subject
to the relevant party accounting to the other when the obligation is
ascertained.  Nothing in this Section 14(b)(xv) shall be effective to create a
charge or other security interest.  This Section 14(b)(xv) shall be without
prejudice and in addition to any right of set-off, combination of accounts, lien
or other rights to which any party is at any time otherwise entitled (whether by
operation of law, contract or otherwise).

 

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15.                               SINGLE AGREEMENT

 

Buyer and Seller acknowledge that, and have entered hereinto and will enter into
each Transaction hereunder in consideration of and in reliance upon the fact
that, all Transactions hereunder constitute a single business and contractual
relationship and have been made in consideration of each other.  Accordingly,
each of Buyer and Seller agrees (i) to perform all of its obligations in respect
of each Transaction hereunder, and that a default in the performance of any such
obligations shall constitute a default by it in respect of all Transactions
hereunder, (ii) that each of them shall be entitled to set off claims and apply
property held by them in respect of any Transaction against obligations owing to
them in respect of any other Transactions hereunder and (iii) that payments,
deliveries and other transfers made by either of them in respect of any
Transaction shall be deemed to have been made in consideration of payments,
deliveries and other transfers in respect of any other Transactions hereunder,
and the obligations to make any such payments, deliveries and other transfers
may be applied against each other and netted.

 

16.                               RECORDING OF COMMUNICATIONS

 

EACH OF BUYER AND SELLER SHALL HAVE THE RIGHT (BUT NOT THE OBLIGATION) FROM TIME
TO TIME TO MAKE OR CAUSE TO BE MADE TAPE RECORDINGS OF COMMUNICATIONS BETWEEN
ITS EMPLOYEES, IF ANY, AND THOSE OF THE OTHER PARTY WITH RESPECT TO
TRANSACTIONS; PROVIDED, HOWEVER, THAT SUCH RIGHT TO RECORD COMMUNICATIONS SHALL
BE LIMITED TO COMMUNICATIONS OF EMPLOYEES TAKING PLACE ON THE TRADING FLOOR OF
THE APPLICABLE PARTY.  EACH OF BUYER AND SELLER HEREBY CONSENTS TO THE
ADMISSIBILITY OF SUCH TAPE RECORDINGS IN ANY COURT, ARBITRATION, OR OTHER
PROCEEDINGS, IF AND TO THE EXTENT CONSISTENT WITH APPLICABLE LAW AND THE RULES
OF COURT AND EVIDENCE.

 

17.                               NOTICES AND OTHER COMMUNICATIONS

 

Except as otherwise expressly permitted by this Agreement, all notices, requests
and other communications provided for herein (including without limitation any
modifications of, or waivers, requests or consents under, this Agreement) shall
be given or made in writing (including without limitation by telecopy) delivered
to the intended recipient at the “Address for Notices” specified below its name
on the signature pages hereof); or, as to any party, at such other address as
shall be designated by such party in a written notice to each other party. 
Except as otherwise provided in this Agreement and except for notices given
under Sections 3(f), (g), (i), (k), 4, and 5 (which shall be effective only on
receipt), all such communications shall be deemed to have been duly given when
transmitted by telecopy before 5:30 p.m. recipient local time on a Business Day,
and otherwise on the next succeeding Business Day, or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.

 

18.                               ENTIRE AGREEMENT; SEVERABILITY

 

This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions.  Each
provision and agreement herein

 

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shall be treated as separate and independent from any other provision or
agreement herein and shall be enforceable notwithstanding the unenforceability
of any such other provision or agreement.

 

19.                               ASSIGNMENTS; PARTICIPATIONS AND REGISTERED
FORM

 

(a)                                 Seller may assign any of its rights or
obligations hereunder only with the prior written consent of Buyer in its sole
discretion.  Buyer may assign or transfer all or any of its rights or
obligations under this Agreement and the other Transaction Documents to any
Eligible Assignee; provided, that, so long as an Event of Default has not
occurred and is not continuing, following any such assignment or transfer, the
initial Buyer shall remain as the sole party which Seller shall be required to
interact with as the agent for the Transactions (irrespective of whether such
Buyer retains any ownership interest in the Transactions).  Subject to
Section 19(a)(i)(A), Buyer may furnish any information concerning Seller in the
possession of Buyer from time to time to assignees (including prospective
assignees), without any representation or recourse except as expressly provided
in this Agreement.  Such assignee or transferee shall provide to Seller or any
agent thereof the appropriate forms, certificates and statements described in
Section 31 of this Agreement.

 

(i)                                   All information regarding the terms set
forth in any of the Transaction Documents or the Purchased Loans shall be kept
confidential and shall not be disclosed by Buyer or Buyer’s assignee to any
Person (including prospective assignees) except (a) to the Affiliates of Buyer
or its assignee or the respective directors, officers, employees, agents,
advisors and other representatives of either who are informed of the
confidential nature of such information and instructed to keep it confidential,
(b) to the extent requested by any regulatory authority or required by
Requirements of Law, (c) to the extent required to be included in the financial
statements of Buyer, Buyer’s assignee or an Affiliate thereof, (d) to the extent
required to exercise any rights or remedies under the Transaction Documents or
Mortgaged Properties, (e) to the extent required to consummate and administer a
Purchased Loan, or (f) to any actual or prospective Eligible Assignee that
agrees to comply with Section 19(a)(i).

 

(ii)                                Seller agrees to maintain the
confidentiality of any information relating to a rate provided by a reference
bank (as described in the definition of LIBOR), except (a) to its directors,
officers, employees, advisors or affiliates on a confidential and need-to-know
basis in connection herewith, (b) as consented to by the applicable reference
bank or (c) as required by any Requirement of Law, or as requested or required
by an Governmental Authority or regulatory authority or exchange (in which case
Seller agrees to inform the applicable reference bank promptly thereof prior to
such disclosure).

 

(b)                                 Buyer may, in accordance with applicable
law, at any time sell to one or more other entities (“Participants”)
participating interests in any Transaction, its commitment to enter into
Transactions, or any other interest of Buyer hereunder and under the other
Transaction

 

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Documents.  In the event of any such sale by Buyer of participating interests to
a Participant, Buyer’s obligations under this Agreement to Seller shall remain
unchanged, Buyer shall remain solely responsible for the performance thereof,
and Seller shall continue to deal solely and directly with Buyer in connection
with Buyer’s rights and obligations under this Agreement and the other
Transaction Documents.

 

(c)                                  Seller agrees to cooperate, at no expense
to Seller, with Buyer in connection with any such assignment and/or
participation, to execute and deliver such replacement notes, and to enter into
such restatements of, and amendments, supplements and other modifications to,
this Agreement and the other Transaction Documents in order to give effect to
such assignment and/or participation.

 

(d)                                 Buyer, acting solely for this purpose as an
agent of Seller, shall maintain at one of its offices in the United States, a
copy of each assignment and assumption delivered to it and a register for the
recordation of the names and addresses of Buyers, and the amounts (and stated
interest) owing to, each Buyer pursuant to the terms hereof from time to time. 
The entries in the register shall be conclusive absent manifest error, and
Seller and Buyer shall treat each person whose name is recorded in the register
pursuant to the terms hereof as a Buyer hereunder for all purposes of this
Agreement.  The register shall be available for inspection by Seller and any
Buyer at any reasonable time and from time to time upon reasonable prior notice.

 

(e)                                  If Buyer sells a participation, it shall,
acting solely for this purpose as an agent of Seller, maintain a register on
which it enters the name and address of each participant and the principal
amounts (and stated interest) of each participant’s interest herein or
obligations under the Transaction Documents, provided that no Buyer shall have
any obligation to disclose all or any portion of the register (including the
identity of any participant or any information relating to a participant’s
interest in any obligations under any Transaction Document) to any person except
to the extent that such disclosure is necessary to establish that such
commitment, loan, letter of credit or other obligation is in registered form
under Section 5f.103-1(c) of the United States Treasury Regulations.  The
entries in the register shall be conclusive absent manifest error, and Buyer and
Seller shall treat each person whose name is recorded in the register as the
owner of such participation for all purposes of this Agreement notwithstanding
any notice to the contrary.

 

20.                               GOVERNING LAW

 

THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO CHOICE OF LAW DOCTRINE (BUT WITH REFERENCE TO SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW, WHICH BY ITS TERMS APPLIES TO THIS AGREEMENT),
AND SHALL CONSTITUTE A SECURITY AGREEMENT WITHIN THE MEANING OF THE UCC.

 

21.                               NO WAIVERS, ETC.

 

No failure on the part of Buyer to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power or privilege under any
Transaction Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or

 

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privilege under any Transaction Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.  The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.

 

22.                               USE OF EMPLOYEE PLAN ASSETS

 

(a)                                 If assets of an employee benefit plan
subject to any provision of the Employee Retirement Income Security Act of 1974
(“ERISA”) are intended to be used by either party hereto (the “Plan Party”) in a
Transaction, the Plan Party shall so notify the other party prior to the
Transaction.  The Plan Party shall represent in writing to the other party that
the Transaction does not constitute a prohibited transaction under ERISA or is
otherwise exempt therefrom, and the other party may proceed in reliance thereon
but shall not be required so to proceed.

 

(b)                                 Subject to the last sentence of subparagraph
(a) of this Section, any such Transaction shall proceed only if Seller furnishes
or has furnished to Buyer its most recent available unaudited statement of its
financial condition.

 

(c)                                  By entering into a Transaction pursuant to
this Section, Seller shall be deemed (i) to represent to Buyer that since the
date of Seller’s latest such financial statements, there has been no material
adverse change in Seller’s financial condition which Seller has not disclosed to
Buyer, and (ii) to agree to provide Buyer with future audited and unaudited
statements of its financial condition as they are issued, so long as it is a
Seller in any outstanding Transaction involving a Plan Party.

 

23.                               INTENT

 

(a)                                 The parties intend that:  (i) each of this
Agreement and the Guaranty with respect to each Transaction constitutes a
“repurchase agreement” as that term is defined in Section 101(47) of the
Bankruptcy Code (except to the extent the related Transaction has a duration
that renders such term inapplicable) and a “securities contract” as that term is
defined in Section 741(7) of the Bankruptcy Code and that this Agreement
constitutes a “master netting agreement” as defined in Section 101(38A) of the
Bankruptcy Code with respect to the Transaction so constituting a “repurchase
agreement” or “securities contract”, (ii) any transfers of the Repurchase Price
to or for the benefit of the Buyer under this Agreement are “margin payments” or
“settlement payments,” as defined in Section 741 of the Bankruptcy Code or are
transfers in connection with a “securities contract”, and (iii) the grant of a
security interest set forth in Sections 6 and 29(b) hereof and the Guaranty,
each of which secures the rights of Buyer hereunder also constitutes a
“repurchase agreement” as contemplated by Section 101(47)(A)(v) of the
Bankruptcy Code (except to the extent the related Transaction has a duration
that renders such term inapplicable) and a “securities contract” as contemplated
by Section 741(7)(A)(xi) of the Bankruptcy Code.

 

(b)                                 The parties intend that each of Buyer and
Seller is a “repo participant” as that term is defined in Section 101(46) of the
Bankruptcy Code and that the Buyer is a “financial institution” or financial
participant” as each term is defined in 108(22) and 101(22)(A) respectively.

 

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(c)                                  The parties intend that each party (for so
long as each is either a “financial institution,” “financial participant,” repo
participant, or “master netting participant” or other entity listed in
Section 555, 559, 561, 362(b)(6), or 362(b)(7) of the Bankruptcy Code) shall be
entitled to the “safe harbor” benefits and protections afforded under the
Bankruptcy Code with respect to a “repurchase agreement” and a “securities
contract” and a “master netting agreement,” including (x) the rights set forth
in Sections 3 and 14 and in Section 555, 559, and 561 of the Bankruptcy Code to
liquidate the Purchased Loans and/or accelerate or terminate this Agreement, and
(y) the right to offset or net out termination payments, payment amounts or
other transfer obligations and otherwise exercise contractual rights as set
forth in Sections 362(b)(6), 362(b)(7), 362(b)(27), 362(o), and 546 of the
Bankruptcy Code.

 

(d)                                 Each party hereto hereby further agrees that
it shall not challenge the characterization of (i) this Agreement as a
“repurchase agreement” (except to the extent the related Transaction has a
duration that renders such term inapplicable), “securities contract” and/or
“master netting agreement”, or (ii) each party as a “repo participant” within
the meaning of the Bankruptcy Code except insofar as, in the case of a
“repurchase agreement”, the term of the Transactions, would render such
definition inapplicable.

 

(e)                                  It is understood that either party’s right
to accelerate or terminate this Agreement or to liquidate assets delivered to it
in connection with the Transactions hereunder or to exercise any other remedies
based on an ipso facto default is intended to be a contractual right to
accelerate, terminate or liquidate this Agreement or the Transactions as
described in Sections 555 and 559 of the Bankruptcy Code.  It is further
understood and agreed that the parties intend that either party’s right to cause
the termination, liquidation, or acceleration of, or to offset net termination
values, payment amounts or other transfer obligations arising under or in
connection with, this Agreement or the Transactions hereunder based on an ipso
facto default is a contractual right to cause the termination, liquidation, or
acceleration of, or to offset net termination values, payment amounts or other
transfer obligations arising under or in connection with, this Agreement as
described in Section 561 of the Bankruptcy Code.

 

(f)                                   The parties agree and acknowledge that if
a party hereto is an “insured depository institution,” as such term is defined
in the Federal Deposit Insurance Act, as amended (“FDIA”), then each of the
Transactions hereunder is a “qualified financial contract,” as that term is
defined in FDIA and any rules, orders or policy statements thereunder (except
insofar as the type of assets subject to the Transactions would render such
definition inapplicable).

 

(g)                                  It is understood that this Agreement
constitutes a “netting contract” as defined in and subject to Title IV of the
Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and
each payment entitlement and payment obligation under the Transactions hereunder
shall constitute a “covered contractual payment entitlement” or “covered
contractual payment obligation”, respectively, as defined in and subject to
FDICIA (except insofar as one or both of the parties is not a “financial
institution” as that term is defined in FDICIA).

 

(h)                                 In light of the intent set forth above in
this Section 23, Seller agrees that, from time to time upon the written request
of Buyer, Seller will cooperate in good faith with Buyer to execute and deliver
any supplements, modifications, addendums or other documents as may be necessary
or desirable in order to cause this Agreement and the Transactions contemplated

 

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hereby to qualify for, comply with the provisions of, or otherwise satisfy,
maintain or preserve the criteria for safe harbor treatment under the Bankruptcy
Code for “repurchase agreements” (except to the extent the related Transaction
has a duration that renders such term inapplicable), “securities contracts” and
“master netting agreements”; in each case provided that Buyer has a reasonable
basis for requiring the same, including, without limitation, as a result of the
adoption of or any change in any applicable law, statute or regulation or in the
interpretation or application thereof (provided, that any such request shall be
on terms substantially consistent with, and no less favorable in any material
respect to Seller than, Buyer’s requirements for other, similarly situated
parties for whom Buyer has established comparable facilities).  Buyer’s failure
to request, or Buyer’s or Seller’s failure to execute, such supplements,
modifications, addendums or other documents does not in any way alter or
otherwise change the intention of the parties hereto that this Agreement and the
Transactions hereunder constitute “repurchase agreements” (except to the extent
the related Transaction has a duration that renders such term inapplicable),
“securities contracts” and/or a “master netting agreement” as such terms are
defined in the Bankruptcy Code.

 

(i)                                     Notwithstanding anything to the contrary
in this Agreement, it is the intention of the parties that, for U.S. Federal,
state and local income and franchise tax purposes, the Transactions constitute a
loan from Buyer to Seller, and that Seller is and, so long as no Event of
Default shall have occurred and be continuing, will continue to be, treated as
the owner of the Purchased Loans for such purposes.  Unless prohibited by
applicable law, Seller and Buyer (and its assignees and participants, if any)
shall treat the Transactions as described in the preceding sentence for all U.S.
Federal, state and local income and franchise tax purposes (including, without
limitations, on any and all filings with any U.S. Federal, state or local taxing
authority).

 

24.                               DISCLOSURE RELATING TO CERTAIN FEDERAL
PROTECTIONS

 

The parties acknowledge that they have been advised that:

 

(a)                                 in the case of Transactions in which one of
the parties is a broker or dealer registered with the Securities and Exchange
Commission (“SEC”) under Section 15 of the Securities Exchange Act of 1934
(“1934 Act”), the Securities Investor Protection Corporation has taken the
position that the provisions of the Securities Investor Protection Act of 1970
(“SIPA”) do not protect the other party with respect to any Transaction
hereunder;

 

(b)                                 in the case of Transactions in which one of
the parties is a government securities broker or a government securities dealer
registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide
protection to the other party with respect to any Transaction hereunder; and

 

(c)                                  in the case of Transactions in which one of
the parties is a financial institution, funds held by the financial institution
pursuant to a Transaction hereunder are not a deposit and therefore are not
insured by the Federal Deposit Insurance Corporation or the National Credit
Union Share Insurance Fund, as applicable.

 

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25.                               CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

 

(a)                                 EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY:

 

(i)                                     SUBMITS FOR ITSELF AND ITS PROPERTY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN
RESPECT THEREOF, TO THE EXCLUSIVE GENERAL JURISDICTION OF ANY UNITED STATES
FEDERAL OR NEW YORK STATE COURT SITTING IN MANHATTAN, AND APPELLATE COURTS FROM
ANY THEREOF.

 

(ii)                                  CONSENTS THAT ANY SUCH ACTION OR
PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW,
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME.

 

(iii)                               AGREES THAT SERVICE OF PROCESS IN ANY SUCH
ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO
ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF
WHICH BUYER SHALL HAVE BEEN NOTIFIED.

 

(iv)                              AGREES THAT NOTHING HEREIN SHALL AFFECT THE
RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.

 

(b)                                 WAIVER OF JURY TRIAL.  SELLER AND BUYER
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

 

26.                               NO RELIANCE

 

Each of Buyer and Seller hereby acknowledges, represents and warrants to the
other that, in connection with the negotiation of, the entering into, and the
performance under, the Transaction Documents and each Transaction thereunder:

 

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(a)                                 It is not relying (for purposes of making
any investment decision or otherwise) upon any advice, counsel or
representations (whether written or oral) of the other party to the Transaction
Documents, other than the representations expressly set forth in the Transaction
Documents;

 

(b)                                 It has consulted with its own legal,
regulatory, tax, business, investment, financial and accounting advisors to the
extent that it has deemed necessary, and it has made its own investment, hedging
and trading decisions (including decisions regarding the suitability of any
Transaction) based upon its own judgment and upon any advice from such advisors
as it has deemed necessary and not upon any view expressed by the other party;

 

(c)                                  It is a sophisticated and informed Person
that has a full understanding of all the terms, conditions and risks (economic
and otherwise) of the Transaction Documents and each Transaction thereunder and
is capable of assuming and willing to assume (financially and otherwise) those
risks;

 

(d)                                 It is entering into the Transaction
Documents and each Transaction thereunder for the purposes of managing its
borrowings or investments or hedging its underlying assets or liabilities and
not for purposes of speculation; and

 

(e)                                  It is not acting as a fiduciary or
financial, investment or commodity trading advisor for the other party and has
not given the other party (directly or indirectly through any other Person) any
assurance, guaranty or representation whatsoever as to the merits (either legal,
regulatory, tax, business, investment, financial accounting or otherwise) of the
Transaction Documents or any Transaction thereunder.

 

27.                               INDEMNITY

 

(a)                                 Seller agrees to hold Buyer, and its
Affiliates and their officers, directors, employees, agents and advisors (each
an “Indemnified Party”) harmless from and indemnify any Indemnified Party
against all liabilities, losses, damages, judgments, costs and expenses of any
kind which may be imposed on, incurred by or assessed against such Indemnified
Party (collectively, the “Costs”) relating to or arising out of this Agreement,
any other Transaction Document or any transaction contemplated hereby or
thereby, or any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Agreement, any other Transaction Document
or any transaction contemplated hereby or thereby, that, in each case, results
from anything other than any Indemnified Party’s gross negligence or willful
misconduct.  In any suit, proceeding or action brought by Buyer in connection
with any Purchased Loan for any sum owing thereunder, or to enforce any
provisions of any such Purchased Loan, Seller will save, indemnify and hold
Buyer harmless from and against all expense, loss or damage suffered by reason
of any defense, set-off, counterclaim, recoupment or reduction or liability
whatsoever of the account debtor or obligor thereunder, arising out of a breach
by Seller of any obligation of Seller thereunder which occurs prior to the date
upon which Buyer acquires record title to such Purchased Loan or succeeds to be
the absolute owner and holder of such Purchased Loan.  Without limiting the
generality of the foregoing, Seller, agrees to hold any Indemnified Party
harmless from and indemnify such Indemnified Party against all Costs with
respect to all Purchased Loan relating to or arising out of any violation or
alleged violation of any

 

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environmental law, rule or regulation that, in each case, results from anything
other than such Indemnified Party’s gross negligence or willful misconduct.

 

(b)                                 Seller also agrees to reimburse an
Indemnified Party for all such Indemnified Party’s costs and expenses incurred
in connection with the enforcement or the preservation of such Indemnified
Party’s rights under this Agreement, any other Transaction Document or any
transaction contemplated hereby or thereby, including without limitation the
fees and disbursements of its counsel as and when billed by such Indemnified
Party.  This Section 27 shall not apply with respect to Taxes other than Taxes
that represent losses, claims, damages, etc. arising from any non-Tax claim.

 

(c)                                  Seller agrees to pay as and when billed by
Buyer all of the reasonable out-of-pocket costs and expenses incurred by Buyer
in connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement, any other Transaction
Document or any other documents prepared in connection herewith or therewith. 
Seller agrees to pay as and when billed by Buyer all of the reasonable
out-of-pocket costs and expenses incurred in connection with the consummation
and administration of the transactions contemplated hereby and thereby including
without limitation (i) all the fees, disbursements and expenses of counsel to
Buyer and (ii) all the due diligence, inspection, testing and review costs and
expenses incurred by Buyer with respect to Collateral under this Agreement,
including, but not limited to, those costs and expenses incurred by Buyer
pursuant to Section 27(a) and 28 hereof, provided that such fees and expenses
shall not exceed (x) $5,000 for the pre-funding diligence review for each
Eligible Loan submitted by Seller pursuant to a Request for Transaction/Increase
in Purchase Price and (y) so long as an Event of Default has not occurred and is
not continuing, $3,000 per Purchased Loan per annum for ongoing administration
and surveillance of each Purchased Loan.

 

(d)                                 The obligations of Seller under
Sections 3(i) and 27(a) and (b) hereof shall survive the repayment of the Loans
and the termination of this Agreement for a period of six (6) months.  In
addition, each representation and warranty made or deemed to be made by a
Request for Transaction/Increase in Purchase Price, herein or pursuant hereto
shall survive the making of such representation and warranty, and Buyer shall
not be deemed to have waived, by reason of making any Loan, any Default that may
arise because any such representation or warranty shall have proved to be false
or misleading, notwithstanding that Buyer may have had notice or knowledge or
reason to believe that such representation or warranty was false or misleading
at the time such Loan was made.

 

28.                               DUE DILIGENCE

 

Seller acknowledges that Buyer has the right to perform continuing due diligence
reviews with respect to the Purchased Loan and the manner in which the were
originated, for purposes of verifying compliance with the representations,
warranties and specifications made hereunder, or otherwise, and Seller agrees
that, unless a Default has occurred (in which case no notice is required), upon
reasonable (but no less than three (3) Business Day’s) prior notice to Seller,
Buyer or its authorized representatives will be permitted during normal business
hours to examine, inspect, and make copies and extracts of, the Purchased Loan
Files and any and all documents, records, agreements, instruments or information
relating to such Purchased Loan in

 

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the possession or under the control of Seller and/or Custodian.  Seller also
shall make available to Buyer a knowledgeable financial or accounting officer
for the purpose of answering questions respecting the Purchased Loan Files and
the Purchased Loan.  Seller further agrees that Seller shall reimburse Buyer for
any and all out-of-pocket costs and expenses incurred by Buyer in connection
with Buyer’s activities pursuant to this Section 28 as and when billed by Buyer,
provided that an Event of Default has occurred and is continuing hereunder.

 

29.                               SERVICING

 

(a)                                 Seller and Buyer agree that all Servicing
Rights with respect to the Purchased Loans will be transferred hereunder to
Buyer on the applicable Purchase Date and such Servicing Rights shall be
transferred by Buyer to Seller upon Seller’s payment of the Repurchase Price for
such applicable Purchased Loan.  Notwithstanding the purchase and sale of the
Purchased Loans and Servicing Rights hereby, Seller or, upon request by Seller,
Servicer shall be granted a revocable license to exercise the Servicing Rights
with respect to the Purchased Loans for the benefit of Buyer and, if Buyer shall
exercise its rights to pledge or hypothecate a Purchased Loan prior to the
Repurchase Date pursuant to Section 8, Buyer’s assigns (which license shall be
deemed automatically revoked upon the occurrence and during the continuance of
an Event of Default); provided, however, that the obligations of Seller or
Servicer to service the Purchased Loans shall cease, at Seller’s option, upon
the payment by Seller to Buyer of the Repurchase Price therefor.  Seller
covenants to maintain or cause the servicing of the Purchased Loans to be
maintained in conformity with the Accepted Servicing Practices (as defined in
the Servicing Agreement) (“Accepted Servicing Practices”).  Seller shall obtain
the written consent of Buyer prior to appointing any third party Servicer for a
Purchased Loan or entering into any Servicing Agreement with a Servicer (other
than the initial Servicing Agreement with ARES Commercial Real Estate Servicer
LLC, a Delaware limited liability company as initial Servicer).

 

(b)                                 Seller agrees that, upon Buyer’s purchase of
each Purchased Loan, Buyer is the owner 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
Purchased Loan (the “Servicing Records”) until the Repurchase Price for such
Purchased Loan has been paid to Buyer.  Seller grants Buyer a security interest
in all servicing fees and rights relating to the Purchased Loan and all
Servicing Records to secure the obligation of Seller or its designee to service
in conformity with this Section and any other obligation of Seller to Buyer. 
Seller covenants to safeguard such Servicing Records and to deliver them
promptly to Buyer or its designee (including Custodian) at Buyer’s request.

 

(c)                                  If any Purchased Loan is, at any time
during the term of this Agreement, serviced by a third party servicer (including
any Affiliate of Seller) (such third party servicer, the “Servicer”), Seller
(i) shall provide a copy of the Servicing Agreement to Buyer, which shall be in
form and substance reasonably acceptable to Buyer, and (ii) shall provide a
Servicer Notice and Agreement to Servicer substantially in the form of
Exhibit IX hereto (a “Servicer Notice and Agreement”) and shall cause Servicer
to acknowledge and agree to the same.  Any successor or assignee of a Servicer
shall be reasonably approved in writing by Buyer and shall acknowledge

 

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and agree to a Servicer Notice and Agreement prior to such successor’s
assumption of servicing obligations with respect to the Purchased Loan.

 

(d)                                 After the Funding Date, until the transfer
of any Purchased Loan is relinquished by Custodian, Seller will have no
obligation or right to repossess such Purchased Loan or substitute another
Purchased Loan.

 

(e)                                  In the event Seller or its Affiliate is
servicing the Purchased Loan, Seller shall permit Buyer from time to time to
inspect Seller’s or its Affiliate’s servicing facilities, as the case may be,
for the purpose of satisfying Buyer that Seller or its Affiliate, as the case
may be, during normal business hours and upon reasonable prior notice, has the
ability to service the Purchased Loan as provided in this Agreement.

 

(f)                                   Upon the occurrence and during the
continuance of an Event of Default, Buyer may, in its sole discretion, (i) sell
its right to the Purchased Loans on a servicing released basis or (ii) terminate
any Seller or Servicer of the Purchased Loans with or without cause, in each
case without payment of any termination fee.

 

(g)                                  Seller shall not employ or permit Servicer
to employ sub-servicers to service the Purchased Loans without the prior written
approval of Buyer (such approval not to be unreasonably withheld, conditioned or
delayed); provided, that in the event the commercial primary servicer rating of
any such sub-servicer is not at least “Average” by S&P (or its equivalent by
another nationally recognized statistical ratings organization), then the prior
written approval of Buyer shall be in its sole discretion.

 

30.                               MISCELLANEOUS

 

(a)                                 All rights, remedies and powers of Buyer
hereunder and in connection herewith are irrevocable and cumulative, and not
alternative or exclusive, and shall be in addition to all other rights, remedies
and powers of Buyer whether under law, equity or agreement.  In addition to the
rights and remedies granted to it in this Agreement, to the extent this
Agreement is determined to create a security interest, Buyer shall have all
rights and remedies of a secured party under the UCC.

 

(b)                                 [Intentionally omitted].

 

(c)                                  Each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or be invalid
under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

 

(d)                                 This Agreement contains a final and complete
integration of all prior expressions by the parties with respect to the subject
matter hereof and thereof and shall constitute the entire agreement among the
parties with respect to such subject matter, superseding all prior oral or
written understandings.

 

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(e)                                  The parties understand that this Agreement
is a legally binding agreement that may affect such party’s rights.  Each party
represents to the other that it has received legal advice from counsel of its
choice regarding the meaning and legal significance of this Agreement and that
it is satisfied with its legal counsel and the advice received from it.

 

(f)                                   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 have
participated in the preparation of this Agreement.

 

(g)                                  Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by Seller and Buyer and any provision of
this Agreement may be waived by Buyer.

 

(h)                                 This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.

 

(i)                                     The table of contents and captions and
section headings appearing herein are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.

 

(j)                                    This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.

 

(k)                                 Seller hereby acknowledges that:

 

(i)                                     it has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the other Transaction
Documents,

 

(ii)                                Buyer has no fiduciary relationship to
Seller, and the relationship between Seller and Buyer is solely that of debtor
and creditor, and Guarantor and guaranteed party, respectively; and

 

(iii)                               no joint venture exists between Buyer and
Seller.

 

(l)                                     In addition to any rights and remedies
of Buyer provided by this Agreement and by law, Buyer shall have the right,
without prior notice to Seller, any such notice being expressly waived by Seller
to the extent permitted by applicable law, upon any amount becoming due and
payable by Seller hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by Buyer or any Affiliate thereof to or for the credit or the
account of Seller.  Buyer agrees to notify Seller at the time of any such
set-off and application made by

 

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Buyer; provided that the failure to give such notice shall not affect the
validity of such set-off and application

 

31.                               TAXES

 

(a)                                 All payments made by Seller under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority (“Taxes”), excluding,  (i) Taxes that are imposed on its overall net
income (and franchise taxes imposed in lieu thereof) by the jurisdiction under
the laws of which the Buyer is organized or of its applicable lending office, or
any political subdivision thereof, unless such Taxes are imposed as a result of
the Buyer having executed, delivered or performed its obligations or received
payments under, or enforced, this Existing Loan Agreement, (ii) net income Taxes
and franchise Taxes (imposed in lieu of net income Taxes) imposed on Buyer as a
result of a present or former connection between Buyer and the jurisdiction of
the Governmental Authority imposing such Tax or any political subdivision or
taxing authority thereof or therein (other than any such connection arising
solely from Buyer having executed, delivered or performed its obligations or
received a payment under, or enforced, this Agreement), (iii) any Tax imposed on
Buyer or other recipient of a payment hereunder that is attributable to such
Buyer’s or other recipient’s failure to comply with relevant requirements set
forth in clause (b), (iv) any withholding Tax that is imposed on amounts payable
to or for the account of Buyer or other recipient of a payment hereunder
pursuant to a law in effect on the date such person becomes a party to or under
this Existing Loan Agreement, or such person changes its lending office and
(v) any U.S. federal withholding Taxes imposed under FATCA (all such excluded
Taxes in clauses (i) — (v) being referred to, collectively, as “Excluded
Taxes”).  If any such non-Excluded Taxes, levies, imposts, duties, charges, fees
deductions or withholdings (“Non-Excluded Taxes”) are required to be withheld
from any amounts payable to Buyer hereunder, the amounts so payable to Buyer
shall be increased to the extent necessary to yield to Buyer (after payment of
all Non-Excluded Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement.  Whenever any
Non-Excluded Taxes are payable by Seller, as promptly as reasonably possible
thereafter Seller shall send to Buyer, as the case may be, a certified copy of
an original official receipt received by Seller showing payment thereof.  If
Seller fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fail to remit to Buyer the required receipts or other required
documentary evidence, Seller shall indemnify Buyer for any incremental taxes,
interest or penalties that are paid or that may become payable by Buyer as a
result of any such failure.  The agreements in this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.

 

(b)                                 If a Person acquires the rights and
obligations of a Buyer under this Agreement and the other Transaction Documents
pursuant to Section 19(a) hereof or becomes a Participant as permitted
hereunder, and such Person is not a United States Person within the meaning of
Code Section 7701(a)(30) (a “Non-U.S. Person”), such Non-U.S. Person shall
deliver to Seller, or any agent thereof, on or before the date on which such
Person becomes a party to this Agreement or becomes such a Participant, two duly
completed and executed copies of, as applicable, IRS Form W-8BEN, IRS
Form W-8BEN-E or IRS Form W-8ECI or any successor forms thereto designated as
such by the IRS.  Notwithstanding anything to the contrary in the

 

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preceding sentence, the completion, execution and submission of such
documentation shall not be required if in Buyer’s reasonable judgment such
action would subject such Buyer to any material unreimbursed cost or would
materially prejudice the legal or commercial position of such Buyer.  If the
Non-U.S. Person is eligible for and wishes to claim exemption from or reduction
in U.S. federal withholding Tax through benefit of a treaty, such Person shall
deliver a Form W-8ECI.  If the Non-U.S. Person is eligible for and wishes to
claim exemption from U.S. federal withholding Tax under Section 871(h) or
Section 881(c) of the Code with respect to payments of “portfolio interest,”
such Person shall deliver both the Form W-8BEN or IRS Form W-8BEN-E and a
statement certifying that such Person is not a bank, a “10 percent shareholder”
or a “controlled foreign corporation” within the meaning of Section 881(c)(3) of
the Code.  If any previously delivered form or statement becomes inaccurate with
respect to the Non-U.S. Person that delivered it, the Non-U.S. Person shall
promptly notify Seller of this fact.  In addition, a Non-U.S. Person shall, to
the extent it is legally entitled to do so, deliver to Seller executed originals
of any other IRS Form prescribed by applicable law as a basis for claiming a
reduction in U.S. federal withholding Tax, duly completed, together with such
supplementary documentation as may be prescribed by applicable law to permit
Seller to determine the withholding or deduction required to be made.  If a
payment made to a Non-U.S. Person would be subject to U.S. federal withholding
Tax imposed by FATCA if such Buyer were to fail to comply with the applicable
reporting requirements of FATCA, such Buyer shall deliver to Seller at the time
or times prescribed by law and at such time or times reasonably requested by
Seller such documentation prescribed by applicable law and such additional
documentation reasonably requested by Seller as may be necessary for Seller to
comply with its obligations under FATCA and to determine that such Buyer has
complied with such Buyer’s obligations under FATCA or to determine the amount to
deduct and withhold from such payment.

 

(c)                                  Each Buyer (or assignee) that is not a
Non-U.S. Person shall provide Seller, on or prior to the date on which such
person becomes a Buyer (or acquires an interest in this Agreement), and from
time to time thereafter upon the reasonable request of Seller, a duly completed
and executed IRS Form W-9 certifying that it is not subject to backup
withholding.

 

(d)                                 If Buyer determines that it has received a
refund of any Taxes as to which it has been indemnified pursuant to this
Section 31 (including by payment of any additional amounts pursuant to
Section 31), it shall pay to Seller an amount equal to such refund (but only to
the extent of indemnity payments made under this Section with respect to the
Taxes giving rise to such refund), net of out-of-pocket expenses (including
Taxes) of such Buyer.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day first
written above.

 

 

BUYER:

 

 

 

CITIBANK, N.A.

 

 

 

 

 

By:

/s/ Richard B. Schlenger

 

 

Name: Richard B. Schlenger

 

 

Title: Authorized Signatory

 

[Signatures Continue on Following Page]

 

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SELLER:

 

 

  

ACRC LENDER C LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

/s/ Thomas A. Jaekel

 

 

Name: Thomas A. Jaekel

 

 

Title: Vice President

 

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