Exhibit 10.10

 

PARTICIPATION AGREEMENT

 

among

 

RED CAPITAL PARTNERS, LLC

 

and

 

SENTIO GEORGETOWN, LLC

 

and

 

SENTIO GEORGETOWN TRS, LLC

 

 

 

August 31, 2016

The Delaney at Georgetown Village
Georgetown, Texas

 

 

 

 

Table of Contents

 

Page

 

Section 1: DEFINITIONS; RULES OF CONSTRUCTION 2 1.1 Definitions 2 1.2 Rules of
Construction 13 Section 2: CREATION OF PARTICIPATIONS AND CONVEYANCE OF SENIOR
PARTICIPATION 14 2.1 Creation of Participations 14 2.2 Current Principal
Balances of Participations 14 2.3 Nature of Participations 14 2.4 Conveyance of
Senior Participation 14 2.5 Issuance of Certificates 14 2.6 Appointment of Agent
14 2.7 Custody of the Loan Documents 14 2.8 Option Agreement 15 Section 3:
PURCHASE PRICE AND FUTURE ADVANCES 15 3.1 Purchase Price 15 3.2 Future Funding
Commitment 15 3.3 Funding Conditions – Project Costs 15 3.4 Funding Conditions –
Interest Reserve 17 3.5 Protective Advances 17 Section 4: ADMINISTRATION OF THE
LOAN 18 4.1 Appointment of Agent 18 4.2 Servicer 19 4.3 Confirmation of
Authority of Agent 21 4.4 Distributions 21 4.5 Books, Records, and Reports to
Participants 21 4.6 Reports to Participants Following Event of Default 22 4.7
Administration of Construction and Construction Disbursements 23 4.8
Administration of REO Property 23 Section 5: DISTRIBUTIONS 24 5.1 Collection
Account 24

 

i

 

 

Table of Contents

(continued)

Page

 

5.2 Distributions in the Absence of a Continuing Event of Default 24 5.3
Payments During a Continuing Event of Default 27 5.4 Clarifications Applicable
to All Distribution Provisions 29 5.5 Return of Excess Payments and Agent’s
Right of Offset 29 5.6 Exit Fee 30 5.7 Commitment and Origination Fees 30 5.8
Extension Fee 30 Section 6: WORKOUTS AND REALIZED LOAN LOSSES 31 6.1 Limitation
of Impact of Workouts on Senior Participation 31 6.2 Economic Effect of Realized
Loan Losses Borne by Participants in Reverse Sequential Order 31 6.3
Distributions on Participations When Property is REO Property 31 Section 7:
[RESERVED] 31 Section 8: LIMITATION ON LIABILITY 31 8.1 Liability of Senior
Participant to Junior Participant 31 8.2 Liability of Junior Participant to
Senior Participant 31 8.3 Liability of Agent 32 Section 9: PURCHASE OF SENIOR
PARTICIPATION BY JUNIOR PARTICIPANT 32 9.1 Grant of Junior Participant Purchase
Option 32 9.2 Conditions of Junior Participant Purchase Option 32 9.3 Closing of
Purchase and Sale Pursuant to Junior Participant Purchase Option 32 9.4 Deferral
of Change of Control While Purchase and Sale is Pending 32 9.5 Exit Fee Payable
Upon Exercise of Junior Participant Purchase Option 33 Section 10: CURE RIGHTS
33 Section 11: [RESERVED] 34 Section 12: REPRESENTATIONS AND WARRANTIES OF THE
PARTICIPANTS 34 12.1 Representations and Warranties 34 Section 13: INDEPENDENT
ANALYSIS OF SENIOR PARTICIPANT 35

 

ii

 

 

Table of Contents

(continued)

Page

 

13.1 Independent Analysis of Credit Decision 35 Section 14: TRANSFER OF
PARTICIPATIONS OR COMMITMENTS 36 14.1 Consents to Transfer Required 36 14.2
Standards for Granting Consent 36 14.3 Certain Exceptions to Restrictions on
Transfer 37 14.4 Transfers of Agent’s Interest 37 14.5 Transfers to Borrower or
Affiliates of Borrower 38 14.6 Procedures for Proposed Transfers 38 14.7 Release
from Liability 38 14.8 Registration of Transfers 38 Section 15: [RESERVED] 39
Section 16: AUTHORITY AND LIABILITIES OF THE AGENT 39 16.1 Authority of Agent 39
16.2 Absence of Fiduciary Relationship 39 16.3 Exclusive Right of Agent to
Institute Loan Enforcement and Foreclosure Proceedings 39 16.4 Limitation on
Agent’s Liability; Agent’s Ability to Rely on Advice of Experts 39 Section 17:
CONSULTATIONS AND MAJOR DECISIONS 40 17.1 Consultations Between Agent and
Participants 40 17.2 Major Decisions 40 17.3 Action Notice for Major Decisions
42 17.4 Restrictions on Powers of Participants 42 Section 18: APPOINTMENT OF NEW
AGENT FOLLOWING LOSS OF CONTROL EVENT; CONTROL RETENTION COLLATERAL 43 18.1
Required Control Appraisal 43 18.2 Loss of Control Event 43 18.3 Second Opinion
re Loss of Control Event 43 18.4 Transfer of Agent Rights 43 18.5 Posting of
Control Retention Collateral to Defer Loss of Control Event 44

 

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Table of Contents

(continued)

Page

 

18.6 Restoration of Agent’s Rights to Junior Participant 44 18.7 Release of
Excess Control Retention Collateral 44 18.8 Application of Control Retention
Collateral Upon Final Recovery Determination 44 Section 19: CERTAIN MATTERS
AFFECTING THE AGENT 44 19.1 Certain Rights of Agent 44 Section 20: MISCELLANEOUS
45 20.1 No Pledge or Loan 45 20.2 No Creation of a Partnership or Exclusive
Purchase Right 45 20.3 Other Business Activities of the Participants 45 20.4 Not
a Security 46 20.5 Governing Law; Submission to Jurisdiction 46 20.6 Waiver of
Jury Trial 46 20.7 Successors and Assigns; Third Party Beneficiaries 46 20.8
Counterparts 46 20.9 Captions 46 20.10 Notices 47 20.11 Severability 47 20.12
Withholding Taxes 47

 

iv

 

 

PARTICIPATION AGREEMENT

 

This Participation Agreement (the “Agreement”), dated as of August 31, 2016 (the
“Effective Date”), is made by and among RED CAPITAL PARTNERS, LLC, an Ohio
limited liability company (“RCP”), SENTIO GEORGETOWN, LLC, a Delaware limited
liability company (“Sentio”), and SENTIO GEORGETOWN TRS, LLC, a Delaware limited
liability company (“Sentio TRS”).

 

RECITALS

 

Whereas, pursuant to the terms, provisions and conditions set forth in that
certain Construction Loan Agreement (as amended, restated, replaced,
supplemented or otherwise modified from time to time, the “Loan Agreement”),
dated as of January 15, 2015 (the “Closing Date, between Westminster – LCS
Georgetown LLC, an Iowa limited liability company, as “Borrower”, and Sentio and
Sentio TRS, collectively, as “Lender”, Sentio and Sentio TRS made a loan to
Borrower in the maximum committed amount of $41,912,000 (the “Loan”). The Loan
is evidenced by a Promissory Note A dated as of the Closing Date in face amount
of $40,912,000.00, payable by Borrower to Sentio (“Note A”), and by a Promissory
Note B dated as of the Closing Date in face amount of $1,000,000.00, payable by
Borrower to Sentio TRS (“Note B”). Pursuant to the Loan Agreement, Sentio
committed to Borrower to advance up to the face amount of Note A, and Sentio TRS
committed to Borrower to advance up to the face amount of Note B, with advances
to be made on a pro rata basis. Pursuant to the Loan Agreement, advances under
the Loan are available to pay Project Costs for the development of a senior
living project to be known as The Delaney at Georgetown Village, located in
Georgetown, Texas (the “Property”). Also, a portion of the Loan is allocated to
an interest reserve, from which advances may be made to pay interest accruing on
the Loan. Note A and Note B are secured by, among other things, a Deed of Trust,
Assignment of Leases and Rents, Security Agreement, and Fixture Filing
encumbering the Property dated as of the Closing Date (the “Mortgage”).

 

Whereas, as of the Effective Date, Sentio and Sentio TRS collectively have
advanced to Borrower $30,159,414.47 in respect of the Loan, and the committed
but unfunded amount of the Loan is $11,752,585.53.

 

Whereas, Sentio and Sentio TRS desire to sell to RCP, and RCP desires to
purchase from Sentio and Sentio TRS, a participation in the Loan.

 

Whereas, the parties hereto intend that the participation in the Loan to be
acquired by RCP shall be senior to the participation in the Loan to be retained
by Sentio and Sentio TRS upon and subject to the terms and conditions of this
Agreement.

 

Whereas, the parties hereto desire to enter into this Agreement to memorialize
the terms and conditions under which the senior participation will be purchased
and sold and the Loan will be administered after the sale of the senior
participation.

 

Now, Therefore, in consideration of the mutual covenants herein contained, the
parties hereto mutually agree as follows:

 

 

 

 

Section 1:   DEFINITIONS; RULES OF CONSTRUCTION

 

1.1              Definitions. Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Loan Agreement. Unless otherwise
defined, two defined terms used together (e.g., “Senior Participation” and
“Principal Balance”) shall have the combined meaning of the two terms. As used
in this Agreement, the following capitalized terms shall have the respective
meanings set forth below unless the context clearly requires otherwise:

 

“Accepted Servicing Practices” shall mean a contractual (non-fiduciary) duty to
service and administer the Loan in the best interests of, and for the benefit of
the Participants, in accordance with applicable law, the terms of this
Agreement, and the terms of the Loan Agreement, and to the extent consistent
with the foregoing in the same manner as is generally considered to be normal
and usual in the commercial mortgage loan industry with regard to its general
mortgage servicing activities for commercial mortgage loans comparable to the
Loan, and to exercise the same degree of care that administrative agents and
servicers customarily apply in administering construction loans similar to the
Loan, or that the Agent or Servicer would apply if it were administering the
entire Loan solely for its own account, whichever is higher, without regard to
conflicting interests, and with a view to maximizing return on a cost-effective
and present value basis, to all Participants, as a collective whole. In the
event that circumstances pose a conflict as to the foregoing, the order of
priority (from highest to lowest priority) shall be (A) applicable law, (B) the
Loan Agreement, and (C) this Agreement. As used herein, “conflicts of interest”
includes:

 

(i)       Any other relationship that Agent or any of its Affiliates may have
with Borrower, with any other direct or indirect investor in the Property or
neighboring properties, with either Participant, or with any of their
Affiliates;

 

(ii)       any other interest in the Property or neighboring properties that
Agent or any of its Affiliates may have other than as Lender or Participant in
this transaction;

 

(iii)       any ownership, servicing or management by Agent or any of its
Affiliates for others of any other mortgage loan or property;

 

(iv)       the right of Agent to receive indemnity and reimbursement of Costs
under this Agreement; and

 

(v)       the sufficiency of any compensation or reimbursement payable to Agent
under this Agreement.

 

“Action Notice” has the meaning assigned to such term in Section 17.3.

 

“Additional Servicing Compensation” shall mean Late Charges to the extent
actually collected from Borrower and any one-time fees paid by Borrower for
services provided by Agent, in its capacity as Servicer, including assumption
application fees, modification fees, fees for reviewing Borrower requests, and
other one-time, service-related fees; but not including Default Interest,
assumption fees, or any fees based on “points” or calculated as a percentage of
the outstanding principal balance of the Loan.

 

2 

 

 

“Affiliate” shall mean as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling,” “controlled by” and “under common
control with”) as applied to any Person means the power, directly or indirectly,
either to set or direct or cause the direction of the management and policies of
such Person, whether by contract, voting rights, or otherwise.

 

“Agent” shall mean Junior Participant except during any period during which a
Loss of Control Event has occurred and is continuing, in which event Senior
Participant shall have the right to become the Agent pursuant to the terms and
conditions hereof. Neither the Borrower nor any Affiliate of the Borrower or
Borrower Related Party may be the Agent.

 

“Agreement” shall mean this Agreement, the exhibits and schedules hereto and all
amendments hereof and supplements hereto.

 

“Appraisal” shall mean a third party property level MAI appraisal of the fair
market value of the Property prepared by an appraiser acceptable to both
Participants.

 

“Appraisal Event” shall mean a Monetary Event of Default or material
Non-Monetary Event of Default that, in either case, becomes a Continuing Event
of Default that would entitle Agent to accelerate the Loan.

 

“Appraisal Update” means an update to a previously delivered Appraisal that
provides an updated opinion of the Appraised Value of the Property based on
changes in circumstances since delivery of the prior Appraisal.

 

“Appraised Value” shall mean the value of the Property as determined by an
Appraisal or, if applicable, an Appraisal Update.

 

“Available Funds” shall have the meaning ascribed to it in Section 5.2.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code, as amended from
time to time, any successor statute or rule promulgated thereto.

 

“Borrower” shall mean Westminster – LCS Georgetown LLC, an Iowa limited
liability company and any successor or assign thereof with respect to the Loan.

 

“Borrower Related Party” shall mean Guarantor, any other direct obligor under
any Loan Document, and any Affiliate of the foregoing.

 

“Business Day” shall mean any day that is not a Saturday or Sunday, and that is
not a legal holiday in Columbus, Ohio, Georgetown, Texas, Orlando, Florida, New
York, New York, or any other city that serves as the principal place of business
for the Agent, either Participant, or Borrower, nor a day that banking
institutions or savings associations in any of the foregoing cities are closed
for business.

 

“Certificate” shall have the meaning assigned to such term in Section 2.1.

 

3 

 

 

“Closing Date” shall have the meaning assigned to such term in the recitals of
this Agreement.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Collection Account” shall mean with respect to each Participation, an account
controlled by Agent in which amounts are segregated (by ledger entries or
otherwise) and held for the benefit of the related Participant.

 

“Commitment” means, with respect to each Participant, the amount specified in
Section 3.1, as such amount may be increased or decreased from time to time by
agreement of the necessary parties or pursuant to the terms and conditions of
this Agreement.

 

“Commitment Percentage” shall mean the Senior Participation Commitment
Percentage with respect to Senior Participant and the Junior Participant
Commitment Percentage with respect to Junior Participant.

 

“Construction Disbursement” shall have the meaning provided in the Loan
Agreement.

 

“Continuing Event of Default” shall mean (i) a Monetary Event of Default or
material Non-Monetary Event of Default has occurred and is continuing under the
Loan Documents, and (ii) all rights of Junior Participant under this Agreement
to receive notice of and opportunity to cure such Event of Default have expired
without a cure.

 

“Control Retention Collateral” shall mean, at the option of Junior Participant,
either (i) a first priority and duly perfected security interest in favor of
Senior Participant in cash or cash equivalents in the amount required by Section
18.5, or (ii) an unconditional and irrevocable standby letter of credit in the
amount required by Section 18.5 that is payable to Senior Participant as
beneficiary on sight demand, with a term of not less than one year, and issued
by a major money center bank reasonably approved by Senior Participant. If the
Control Retention Collateral is delivered in the form of a letter of credit,
Junior Participant must enter into an agreement with Senior Participant, in
customary commercial form, providing for the right of Senior Participant to draw
on the letter of credit and hold the proceeds thereof as cash collateral for the
Control Retention Guaranty in the event that (a) the letter of credit is not
renewed at least 30 days before its expiration date, or (b) the issuer thereof
delivers notice of its intention to cancel the letter of credit.

 

“Control Retention Guaranty” shall mean a guaranty of repayment of the Loan,
signed by an Affiliate of Junior Participant (which Affiliate need own no
material assets other than the Control Retention Collateral) and delivered to
Senior Participant. The Control Retention Guaranty shall be in customary
commercial form under the laws governing the other Loan Documents for a guaranty
of repayment of a loan secured by cash collateral, except that (i) it shall be
secured by the Control Retention Collateral, and (ii) its terms shall provide
that the holder thereof, in its capacity as Agent, must make a Final Recovery
Determination in accordance with Accepted Servicing Practices before commencing
any action or proceeding to enforce the Control Retention Guaranty or sell,
foreclose on, draw on, or otherwise realize on the Control Retention Collateral.

 

4 

 

 

“Costs” shall mean all out-of-pocket costs, fees, expenses, interest, payments,
losses, liabilities, judgments or causes of action reasonably suffered or
incurred or paid by Agent (including in its capacity as Servicer) in carrying
out the duties of Agent and Servicer, including costs of enforcement of the Loan
Documents and legal fees, except to the extent proximately caused by the
negligence or willful misconduct of Agent; provided however, that neither
(i) the costs and expenses relating to the origination of the Loan, (ii) the
costs and expenses related to a participation of the Loan, including the
negotiation of this Agreement and any costs or expenses of Borrower or any of
its Affiliates, nor (iii) the overhead of Agent’s normal operations, shall be
included in or deemed to be “Costs.”

 

“Cure Option Notice” shall have the meaning assigned to such term in Section 10.

 

“Cure Payment” shall have the meaning assigned to such term in Section 10.

 

“Cure Period” shall have the meaning assigned to such term in Section 10.

 

“Cure Right” shall have the meaning assigned to such term in Section 10.

 

“Curing Participant” shall have the meaning assigned to such term in Section 10.

 

“Default Interest” shall mean any interest actually collected by Agent from
Borrower at the Default Rate during any period of determination in excess of the
amount of interest that would have been due and payable by Borrower with respect
to the same period of determination in the absence of an Event of Default.

 

“Default Rate” shall have the meaning assigned to such term in the Loan
Agreement.

 

“Distribution Spreadsheet” shall mean a spreadsheet in substantially the same
form as the spreadsheet attached hereto as Exhibit D, or such other form as the
Participants may mutually approve in writing.

 

“Distribution Date” shall mean, with respect to each receipt by Agent of
Available Funds, the second (2nd) Business Day after such receipt; provided
that, with respect to a Scheduled Payment, the Distribution Date shall be the
later of the second (2nd) Business Day of the month in which the related Payment
Date occurs or two (2) Business Days after the Scheduled Payment is actually
received.

 

“Eligible Transferee” shall have the meaning ascribed to such term in the Loan
Agreement.

 

“Exit Fee” shall mean a fee in the amount of $400,000 payable to Senior
Participant pursuant to Section 2.8, Section 5.2, or Section 5.3, without
duplication.

 

“Extension Fee” shall mean a fee in the amount of $100,000 payable to the Senior
Participant pursuant to Section 5.8.

 

“Event of Default” shall mean an “Event of Default” as defined in the Loan
Agreement.

 

5 

 

 

“Final Recovery Determination” shall mean that Agent has determined, in
accordance with Accepted Service Practices, that substantially all amounts
likely to be recovered with respect to the Loan have been recovered.

 

“Funding Conditions” shall mean, with respect to any Loan Advance, the
conditions to Lender’s commitment to fund such Loan Advance in the Loan
Agreement.

 

“In Balance” shall have the meaning provided in the Loan Agreement.

 

“Interest Reserve” shall have the meaning provided in the Loan Agreement.

 

“Junior Participant” shall have the meaning assigned to such term in Section
2.1.

 

“Junior Participation” shall have the meaning assigned to such term in Section
2.1.

 

“Junior Participation Certificate” shall have the meaning assigned to such term
in Section 2.1.

 

“Junior Participation Commitment Percentage” shall mean Fifty Two and 281/1000
percent (52.281%).

 

“Junior Participation Interest Strip” shall mean, with respect to any period of
time, an amount equal to (i) the amount of interest accrued on the Loan
Principal Balance during such period of time at the Loan Interest Rate (or, when
and to the extent applicable, at the Loan Default Interest Rate), minus (ii) the
amount of interest accrued on the Senior Participation Balance during such
period of time (other than on portions thereof attributable to Protective
Advances and interest on Protective Advances) at the Senior Participation
Interest Rate (or, when and to the extent applicable, at the Senior
Participation Default Interest Rate), minus (iii) the amount of interest accrued
on portions of the Senior Participation Principal Balance attributable to
Protective Advances (and accrued interest thereon) during such period of time at
the Protective Advance Interest Rate (or, when and to the extent applicable, at
the Protective Advance Default Interest Rate).

 

“Junior Participation Principal Balance” as of any date of determination, shall
mean (i) $21,912,000.00, plus (ii) all advances made by Junior Participant in
respect of Project Costs pursuant to Section 3.2 after the Effective Date, to
the extent the same are not advanced by the Senior Participant in accordance
with this Agreement, plus (iii) all advances deemed made by Junior Participant
in respect of the Interest Reserve pursuant to Section 3.3 after the Effective
Date, to the extent the same are not advanced by the Senior Participant in
accordance with this Agreement, plus (iv) all Protective Advances made by Junior
Participant, plus (v) the Junior Participation Interest Strip, minus (vi) all
distributions made by Agent to Junior Participant pursuant to Section 5.2 or
Section 5.3 in respect of interest and principal (including return of and on
Protective Advances), minus (vii) all Realized Loan Losses allocated to Junior
Participant pursuant to Section 6.2. The Junior Participation Interest Strip
shall be calculated and added to the Junior Participation Principal Balance on
each Payment Date or, when appropriate with respect to partial months, on a
daily basis, in a manner consistent with the Loan Agreement and Accepted
Servicing Practices.

 

6 

 

 

“Junior Participant Purchase Option” shall have the meaning assigned to such
term in Section 9.1.

 

“Junior Participant Purchase Option Closing Date” shall have the meaning
assigned to such term in Section 9.3.

 

“Junior Participant Purchase Option Notice” shall have the meaning assigned to
such term in Section 9.2.

 

“Junior Participant Purchase Option Price” shall mean the sum (without
duplication) of the following, determined as of the Junior Participant Purchase
Option Closing Date:

 

(i)                 the Senior Participation Principal Balance; plus

 

(ii)               interest accrued on the Senior Participation Principal
Balance that has not previously been added to the Senior Participation Principal
Balance, at the Senior Participation Interest Rate, to but not including the
Junior Participant Purchase Option Closing Date; plus

 

(iii)             accrued but unpaid or unrecovered Costs and (without
duplication) Additional Servicing Compensation with respect to any period of
time that Senior Participant served as Agent.

 

The Junior Participant Purchase Option Price shall exclude any Default Interest
(including Default Interest previously added to principal), any interest on
Default Interest, and any Senior Participant Yield Maintenance Premium. The Exit
Fee shall be payable, in addition to the Junior Participant Purchase Option
Price, to the extent provided in Section 9.5.

 

“Late Charges” shall mean any amounts actually collected from Borrower pursuant
to Section 2.8 of the Loan Agreement.

 

“Lender” shall mean the named “Lender” under the Loan Documents or, when the
context requires, Agent in its capacity as the authorized representative of the
Participants in exercising the rights and prerogatives of “Lender” under the
Loan Documents.

 

“Lender Consultant” shall have the meaning provided in the Loan Agreement.

 

“Loan” shall have the meaning assigned to such term in the recitals. For the
avoidance of doubt, “Loan” means Loan A and Loan B (as such terms are used in
the Loan Agreement), collectively.

 

“Loan Advance” means an advance of funds to Borrower pursuant to the Loan
Agreement for the purposes described therein.

 

“Loan Agreement” shall have the meaning assigned to such term in the recitals.

 

7 

 

 

“Loan Documents” shall have the meaning assigned to such term in the Loan
Agreement; provided that, for the avoidance of doubt, the Option Agreement is
not a Loan Document and Senior Participant is not obtaining any right, title, or
interest therein.

 

“Loan Default Interest Rate” shall mean the Loan Interest Rate plus four percent
(4.0%).

 

“Loan Interest Rate” shall mean Seven and 90/100 percent (7.90%) per annum.

 

“Loan Principal Balance” shall mean the outstanding principal balance of the
Loan, determined by Agent in accordance with the Loan Documents and Acceptable
Servicing Practices, as if the Loan were evidenced by a single promissory note.

 

“Loss of Control Event” shall mean that any of the following has occurred:

 

(a)                Based on the most recent Appraisal or Appraisal Update
obtained pursuant to the terms hereof following the occurrence of an Appraisal
Event, the value of the collateral for the Loan (plus, if applicable, the value
of any Control Retention Collateral delivered pursuant to the terms hereof) is
less than or equal to One Hundred Thirty Percent (130%) of the sum of the
following (determined as of the valuation date of such Appraisal or Appraisal
Update): (i) the Senior Participation Principal Balance (excluding any portion
thereof that constitutes Default Interest that was added to principal, and
interest accrued on such portion), plus (ii) accrued and unpaid interest on the
Senior Participation Principal Balance at the Senior Participation Interest Rate
(without duplication of interest previously added to principal) (which, for
clarification, shall exclude Default Interest), plus (iii) delinquent real
estate taxes and assessments and insurance premiums (to the extent funds to pay
the same are not available in a reserve or escrow held or controlled by Agent).

 

(b)               The Agent has filed for bankruptcy, has sought the protection
of a receivership, has made an assignment for the benefit of creditors, or is
otherwise deemed insolvent under applicable law.

 

(c)                The creditors of Agent have sought to have the Agent
adjudicated as bankrupt or have sought a receivership for the assets or affairs
of Agent.

 

(d)               The normal operations of Agent are suspended for a material
period of time, whether voluntarily or involuntarily.

 

(e)                Junior Participant transfers the Junior Participation in
violation of the terms and conditions hereof.

 

(f)                Junior Participant, whether in its capacity as Agent,
Servicer or Participant, (i) fails to remit to Senior Participant any amount
that it is required to remit under the terms of this Agreement, and such failure
continues and remains uncured for five (5) Business Days after receipt of
written notice from Senior Participant of such failure or (ii) otherwise
breaches its obligations under the terms of this Agreement, or of any of its
representations or warranties set forth in this Agreement, in each case which
materially and adversely affects the interests of a Participant and which
continues unremedied for sixty (60) days after receipt of written notice from
any Participant of such breach; provided, however, if such breach is not
reasonably capable of cure within sixty (60) days and Junior Participant has
diligently commenced and prosecuted such cure, the cure period shall be extended
an additional thirty (30) days.

 

8 

 

 

“Major Decision” shall have the meaning set forth in Section 17.2.

 

“Maturity Date” shall have the meaning assigned to such term in the Loan
Agreement.

 

“Monetary Event of Default” shall mean the failure of the Borrower to make a
payment of principal or interest on the Loan or any other Event of Default that
can be cured by payment of readily identifiable amount of money (after
expiration of the applicable grace periods, if any, under the applicable Loan
Documents).

 

“Mortgage” shall have the meaning assigned to such term in the recitals of this
Agreement.

 

“Non Exempt Person” shall mean any Person other than a Person who is either
(a) a U.S. Person or (b) has on file with the Agent (or any Servicer on its
behalf) for the relevant year such duly executed form(s) or statement(s) as may,
from time to time, be prescribed by law and which, pursuant to applicable
provisions of (i) any income tax treaty between the United States and the
country of residence of such Person, (ii) the Code or (iii) any applicable rules
or regulations in effect under clauses (i) or (ii) above, permit Agent to make
distributions hereunder to such Person free of any obligation or liability for
withholding.

 

“Non-Monetary Event of Default” shall mean an Event of Default under the Loan
Documents that is not a Monetary Event of Default.

 

“Note A” shall have the meaning ascribed to such term in the recitals.

 

“Note B” shall have the meaning ascribed to such term in the recitals.

 

“Objection Narrative” shall have the meaning provided in Section 4.7(d).

 

“Option Agreement” shall mean the Option Agreement, dated January 15, 2015,
between Borrower as “Seller” and Sentio as “Buyer”, together with the Purchase
and Sale Agreement incorporated therein as Exhibit B thereto, and the Memorandum
of Option referenced in Section 7 of the Option Agreement.

 

“Organizational Documents” shall mean, with respect to any entity that is:

 

(i)       a corporation, its certificate or articles of incorporation and
bylaws,

 

(ii)       a limited liability company, its certificate of formation and its
limited liability company agreement (howsoever designated),

 

(iii)       a trust, its trust agreement,

 

(iv)       a general partnership, its partnership agreement,

 

9 

 

 

(v)       a limited partnership, its certificate of limited partnership and
limited partnership agreement, and

 

(vi)       any other type of entity, its Organizational Documents of a similar
nature.

 

“Participant” shall have the meaning assigned to such term in Section 2.1.

 

“Participation” shall have the meaning assigned to such term in Section 2.1. For
the avoidance of doubt, the term “Participation”, as used herein, is not the
same as the “Participation” under the Loan Agreement.

 

“Participation Amount” shall have the meaning provided in the Loan Agreement.

 

“Percentage Interest” shall mean (a) as to the Senior Participation, the ratio
of the Senior Participation Principal Balance to the Loan Principal Balance, and
(b) as to the Junior Participation, the ratio of the Junior Participation
Principal Balance to the Loan Principal Balance; in each case, expressed as a
percentage.

 

“Person” means an individual, a corporation, a partnership, an association, a
trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.

 

“Prior Agent” means a Participant that served as Agent hereunder but was
replaced by another Participant on account of a Loss of Control Event.

 

“Property” shall have the meaning assigned to such term in the recitals of this
Agreement.

 

“Protective Advance” shall mean an advance made by a lender under a mortgage
loan to protect the interests of the mortgage lender in the loan or in the
underlying collateral, including (i) advances customarily deemed protective
advances under normal and customary practices of mortgage loan administration,
such as the payment of delinquent taxes or casualty insurance premiums and the
payment of Costs incurred by a lender or its administrative agent or servicer in
connection with the enforcement and administration of the Loan, and (ii)
advances beyond the original commitment of the mortgage lender, or within the
original commitment of the mortgage lender but at a time when such original
commitment is not binding due to an event of default or failure to satisfy an
applicable condition, made in order to complete construction of the improvements
contemplated by the terms of the mortgage loan.

 

“Protective Advance Interest Rate” shall mean, as of any date of determination,
the Loan Interest Rate as of such date.

 

“Protective Advance Default Interest Rate” shall mean the Protective Advance
Interest rate plus four percent (4.0%).

 

“Purchase Notice” shall have the meaning assigned to such term in Section
9.3(i).

 

“Purchase Trigger” shall have the meaning assigned to such term in Section
9.1(i).

 

10 

 

 

“RCP” shall have the meaning assigned to such term in the preamble to this
Agreement.

 

“Realized Loan Loss” means any permanent reduction in the amount recoverable
under the Loan, whether as a result of a Loan modification, a modification by a
bankruptcy court, or a disposition of the Property for less than the sum of the
total amount owing by Borrower.

 

“Related Payment Date” means, with respect to monthly distributions to the
Participants, the Payment Date immediately preceding the date of distribution.

 

“REO Holding Company” shall have the meaning provided in Section 4.8.

 

“REO Major Decision” shall have the meaning ascribed to such term in Section
4.8(iii).

 

“REO Property” shall mean the Property if it shall have been acquired by the
Agent or Participants following an Event of Default.

 

“Scheduled Payment” shall mean the monthly payment of interest and, if
applicable, principal, due from Borrower on the Loan.

 

“Senior Participant” shall have the meaning assigned to such term in Section
2.1.

 

“Senior Participation” shall have the meaning assigned to such term in Section
2.1.

 

“Senior Participation Certificate” shall have the meaning assigned to such term
in Section 2.1.

 

“Senior Participation Commitment Percentage” shall mean Forty Seven and 719/1000
percent (47.719%).

 

“Senior Participation Default Interest Rate” shall mean the Senior Participation
Interest Rate plus four percent (4.0%).

 

“Senior Participation Interest Rate” shall mean five and 25/100 percent (5.25%)
per annum.

 

“Senior Participation Principal Balance” as of any date of determination, shall
mean (i) the amount of the Loan Principal Balance as of the Effective Date that
is allocated to the Senior Participation by Section 2.2, plus (ii) all advances
made by Senior Participant in respect of Project Costs pursuant to Section 3.2
after the Effective Date, plus (iii) all advances deemed made by Senior
Participant in respect of the Interest Reserve pursuant to Section 3.3 after the
Effective Date, plus (iv) all Protective Advances made by Senior Participant,
plus (v) interest accrued after the Effective Date on the Senior Participation
Balance (other than portions thereof attributable to Protective Advances and
interest on Protective Advances) at the Senior Participation Interest Rate (or,
when and to the extent applicable, the Senior Participation Default Interest
Rate), plus (vi) interest accrued after the Effective Date on the portion of the
outstanding Senior Participation Principal Balance attributable to Protective
Advances (and accrued interest thereon) at the Protective Advance Interest Rate
(or, when and to the extent applicable, the Protective Advance Default Interest
Rate), minus (vii) all distributions made by Agent to Senior Participant
pursuant to Section 5.2 or Section 5.3 in respect of interest and principal
(including return of and on Protective Advances), minus (viii) all Realized Loan
Losses allocated to Senior Participant pursuant to Section 6.2. Accrued interest
shall be calculated and added to the Senior Participation Principal Balance on
each Payment Date or, when appropriate with respect to partial months, on a
daily basis, in a manner consistent with the Loan Agreement and Accepted
Servicing Practices.

 

11 

 

 

“Senior Participation Yield Maintenance Premium” shall mean an amount equal to
the greater of: (i) one percent (1%) of the principal amount of the Senior
Participant Principal Balance being prepaid from the related distribution, or
(ii) the present value as of the Prepayment Date of the Calculated Payments from
the Prepayment Date through the Stated Maturity Date (giving effect to
extensions of the Stated Maturity Date only if the right to extend the Stated
Maturity Date has been exercised by Agent (A) prior to the Prepayment Date, or
(B) if a Yield Maintenance Premium becomes due and payable under the Loan
Agreement on account of an acceleration following an Event of Default, prior to
the acceleration, determined by discounting such payments at the Discount Rate).
As used in this definition, the term “Prepayment Date” means the date on which
the applicable prepayment is tendered to Agent. As used in this definition, the
term “Calculated Payments” means the monthly payments of interest only with
respect to the Senior Participation which would be distributable to Senior
Participant hereunder based on the principal amount of the Senior Participation
being distributed on the applicable Distribution Date and assuming an interest
rate per annum equal to the difference (if such difference is greater than zero)
between (y) the Senior Participation Interest Rate and (z) the Yield Maintenance
Treasury Rate. As used in this definition, the term “Discount Rate” means the
rate which, when compounded monthly, is equivalent to the Yield Maintenance
Treasury Rate, when compounded semi-annually. As used in this definition, the
term “Yield Maintenance Treasury Rate” means the yield calculated by Agent by
the linear interpolation of the yields, as reported in the Federal Reserve
Statistical Release H.15 Selected Interest Rates under the heading U.S.
Government Securities/Treasury Constant Maturities for the week ending prior to
the Prepayment Date, of U.S. Treasury Constant Maturities with maturity dates
(one longer and one shorter) most nearly approximating the Stated Maturity Date.
In the event that Release H.15 is no longer published, Agent shall select a
comparable publication to determine the Yield Maintenance Treasury Rate. In no
event, however, shall Agent be required to reinvest any prepayment proceeds in
U.S. Treasury obligations or otherwise. Agent’s determination of the Yield
Maintenance Premium shall be final and binding absent manifest error.

 

“Sentio” shall have the meaning assigned to such term in the preamble to this
Agreement.

 

“Sentio TRS” shall have the meaning assigned to such term in the preamble to
this Agreement.

 

“Servicer” shall mean Agent, in its capacity as Servicer under this Agreement
and Section 14.19 of the Loan Agreement.

 

“Taxes” shall mean any income or other taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature, now or hereafter imposed by any
jurisdiction or by any department, agency, state or other political subdivision
thereof or therein.

 

12 

 

 

“Transfer” shall have the meaning assigned to such term in Section 14.1.

 

“UCC” shall mean the Uniform Commercial Code of the applicable state.

 

1.2              Rules of Construction. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:

 

(i)                 the use of any gender herein shall be deemed to include the
other genders;

 

(ii)               all references in this Agreement to designated Sections,
Subsections, Paragraphs, Articles, Exhibits, Schedules and other subdivisions or
addenda without reference to a document are to the designated sections,
subsections, paragraphs and articles and all other subdivisions of and exhibits,
schedules and all other addenda to this Agreement, unless otherwise specified;

 

(iii)             a reference to a Subsection without further reference to a
Section is a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall apply to Paragraphs and other
subdivisions;

 

(iv)             the headings and captions used in this Agreement are for
convenience of reference only and do not define, limit or describe the scope or
intent of the provisions of this Agreement;

 

(v)               the terms “includes” or “including” shall mean without
limitation by reason of enumeration;

 

(vi)             the words “herein”, “hereof”, “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
provision;

 

(vii)           the term “or” includes “and/or”;

 

(viii)         any defined term which relates to a document, instrument, or
agreement includes within its definition any amendments, modifications,
renewals, restatements, extensions, supplements, or substitutions which are
hereafter executed and delivered in compliance with the terms hereof and
thereof; and

 

(ix)             any agreement not to unreasonably withhold consent or approval
shall be construed to include an agreement not to unreasonably condition or
delay such consent or approval.

 

Section 2:   CREATION OF PARTICIPATIONS AND CONVEYANCE OF SENIOR PARTICIPATION.

 

2.1              Creation of Participations. Sentio and Sentio TRS hereby create
a senior participation in the Loan (the “Senior Participation”) and a junior
participation in the Loan (the “Junior Participation”). The Senior Participation
and the Junior Participation are each referred to herein as a “Participation”
and are collectively referred to herein as the “Participations”). The Senior
Participation shall be evidenced by a certificate in the form attached hereto as
Exhibit A (the “Senior Participation Certificate”). The Junior Participation
shall be evidenced by a certificate in the form attached hereto as Exhibit B
(the “Junior Participation Certificate”). The Senior Participation Certificate
and the Junior Participation Certificate are each referred to herein as a
“Certificate” and are collectively referred to herein as the “Certificates”. The
holder (or holders) of the Senior Participation (including any permitted
transferee thereof) is referred to herein as the “Senior Participant”. The
holder (or holders) of the Junior Participation (including any permitted
transferee thereof) is referred to herein as the “Junior Participant”. The
Senior Participant and the Junior Participant are each referred to herein as a
“Participant” and are collectively referred to herein as the “Participants”).
The rights and obligations of Participants with respect to the Loan, the
collateral for the Loan, and their respective Participations shall be governed
by and subject to this Agreement.

 

13 

 

 

2.2              Current Principal Balances of Participations. Junior
Participant represents and warrants to Senior Participant as of the date hereof
that, as of the Effective Date, the outstanding principal balance of the Loan is
$30,159,414,47, which consists of the following components: (i) Advances of
$28,808,870.64 made by Junior Participant prior to the Effective Date in respect
of Project Costs, and (ii) advances of $1,350,544.10 made by Junior Participant
prior to the Effective Date in respect of the Interest Reserve. The outstanding
principal balance of the Loan is hereby allocated as follows: $21,912,000.00 to
the Junior Participation and $8,247,414.47 to the Senior Participation.

 

2.3              Nature of Participations. Each Participation represents an
undivided participation interest in the Loan, the Loan Documents (including Note
A and Note B), and the collateral for the Loan, subject in all respects to the
terms and conditions of this Agreement.

 

2.4              Conveyance of Senior Participation. Subject to the terms and
conditions herein, Sentio and Sentio TRS hereby sell and convey the Senior
Participation to RCP.

 

2.5              Issuance of Certificates. On the Effective Date, concurrently
with execution and delivery of this Agreement, Sentio and Sentio TRS are issuing
a Senior Participation Certificate to RCP and a Junior Participation Certificate
to themselves.

 

2.6              Appointment of Agent. Subject to the terms and conditions of
this Agreement, the Participants appoint Junior Participant as Agent and Junior
Participant accepts such appointment. Junior Participant’s appointment as Agent
is subject to replacement by Senior Participant upon a Loss of Control Event
pursuant to the terms and conditions of this Agreement.

 

2.7              Custody of the Loan Documents. Each Participant shall hold its
own Certificate. The Agent shall have custody of all of the Loan Documents,
including Note A and Note B.

 

2.8              Option Agreement. Participants acknowledge that (i) the Option
Agreement is not a Loan Document, (ii) the rights under the Option Agreement are
not part of the Loan, and (iii) Senior Participant is not acquiring any right,
title, or interest in the Option Agreement or in the option granted under the
Option Agreement. If a transaction under the Option Agreement is consummated,
the proceeds thereof shall be accounted for hereunder and distributed as
Available Funds and (subject to Section 5.6 and Section 5.8) Junior Participant
shall pay the Exit Fee and (if it has become payable under Section 5.8 but has
not previously been paid) the Extension Fee to Senior Participant.
Notwithstanding the foregoing or any provision in the Option Agreement to the
contrary, Junior Participant acknowledges and agrees that Junior Participant (or
its permitted successor or assignee) shall not be entitled to close a sale of
the Property pursuant to an exercise of its rights under the Option Agreement if
the proceeds from the sale of the Property pursuant thereto would not result in
Senior Participant receiving less than an amount equal to the Senior
Participation Principal Balance (together with all interest accrued thereon and
not previously distributed ) and, if applicable, the Exit Fee and (if it has
become payable under Section 5.8 but has not previously been paid) the Extension
Fee.

 

14 

 

 

Section 3:   PURCHASE PRICE AND FUTURE ADVANCES.

 

3.1              Purchase Price. On the Effective Date, Senior Participant is
paying to Junior Participant an amount in cash equal to (i) the Senior
Participation Principal Balance as of the Effective Date (after giving effect to
the allocation provided in Section 2.2), less (ii) an origination fee of
$200,000.00.

 

3.2              Future Funding Commitment. As additional consideration for the
purchase and sale of the Senior Participation, Senior Participant commits to
fund all Loan Advances that Lender is committed to fund under the Loan Documents
to the extent not already funded by Junior Participant as of the Effective Date.
From time to time, Agent shall determine if and when Borrower is eligible for a
Loan Advance (including advances for Project Costs and advances in respect of
the Interest Reserve). Agent shall make such determinations in accordance with
the Funding Conditions, Section 3.3 hereof, Section 3.4 hereof, and Accepted
Servicing Practices. Senior Participant commits that, upon determination by
Agent that Borrower is eligible for a Loan Advance (including advances for
Project Costs and advances in respect of the Interest Reserve), Senior
Participant shall make such Loan Advance in accordance with instructions from
Agent; provided that Senior Participant’s commitment hereunder in respect of
Loan Advances is capped at $20,000,000.

 

3.3              Funding Conditions – Project Costs. Agent shall determine
Borrower’s eligibility for Loan Advances in respect of Project Costs in
accordance with the applicable Funding Conditions, this Section 3.3, and
Accepted Servicing Practices.

 

(a)                Promptly upon receipt of a Disbursement Request pursuant to
Section 4.3(a) of the Loan Agreement, Agent shall forward to each Participant,
by e-mail, as soon as reasonably practicable, the following:

 

(i)                 A complete copy of the Disbursement Request with all
enclosures and supporting information provided by the Borrower in connection
with the Disbursement Request.

 

(ii)               A cover message that lists the information and documents
being provided, states the amount to be funded by Senior Participant, estimates
the date on which funding will be required, and states the date by which any
Objection Narrative must be delivered, provided that in no event shall Senior
Participant have fewer than five (5) days after receipt of the Disbursement
Request to provide an Objection Narrative. Agent shall use commercially
reasonable efforts to deliver the Disbursement Request the Senior Participant at
least seven (7) days prior to the date on which funding will be required.

 

15 

 

 

(b)               Following receipt of a Disbursement Request, Agent shall
forward to each Participant, as soon as reasonably practicable after receipt,
the following (to the extent applicable to the requested Loan Advance):

 

(i)                 The Distribution Spreadsheet.

 

(ii)               The signed G702/703 and subcontractor back-up with lien
waivers if requested by a Participant.

 

(iii)             Copies of change orders with all relevant back-up materials,
if applicable.

 

(iv)             For any Loan Advance to be used as a deposit under a purchase
contract (a) a copy of the contract, and (b) an invoice for the payment then
due.

 

(v)               For off-site stored materials (a) photographs of materials
that note that the materials are for the proposed improvements and (b) a
certificate of insurance naming Agent as mortgagee and Participants as loss
payee as to such materials.

 

(vi)             If required by the title insurer as a condition of insuring the
priority of such Loan Advance, either a title examination or title rundown
advance letter or a Proforma title insurance date down endorsement (whichever is
required under local custom and practice as a condition of insuring the priority
of such advance) confirming such advance will have the same priority as prior
Loan Advances with no intervening title exceptions, which confirmation may
consist of an e-mail with any actual endorsement (if required) to be provided
prior to the following Loan Advance.

 

(vii)           Invoices for all soft costs.

 

(viii)         A written construction inspection report from the Lender
Consultant (or, in the alternative, confirmation from Agent that it has received
a verbal or e-mailed approval from the Lender Consultant and, to the extent not
previously supplied, the name and telephone number of the individual
representative of the Lender Consultant that each Participant may contact
directly, at its option, for confirmation or to discuss any issue, and in each
case the written report that confirms any verbal or e-mailed approval shall be
submitted prior to the funding of the following advance.

 

(ix)             If not already included in the report from the Lender
Consultant, Agent’s determination as to whether the Loan is In Balance and
calculations supporting same.

 

(x)               If not previously supplied, the applicable wire transfer
instructions for the Loan Advance.

 

16 

 

 

(c)                Agent shall consult in good faith with the Participants as to
whether the applicable Funding Conditions have been satisfied. If any
Participant believes that any applicable Funding Conditions have not been
satisfied, such Participant may deliver to Agent a written narrative that
discloses the basis for such belief (an “Objection Narrative”); and Agent shall
give good faith consideration to any Objection Narrative that is timely
delivered. The Participants acknowledge, however, that time is of the essence in
connection with Loan Advances, and that failure to fund a Loan Advance in a
timely manner could result in damage to Borrower and liabilities and costly
disputes with Borrower. Accordingly, Participants hereby delegate to Agent the
right to make the final determination whether the applicable Funding Conditions
have been satisfied, and the determination of the Agent shall be final and
binding on the Participants.

 

(d)               Once Agent has determined that the applicable Funding
Conditions have been satisfied, Agent shall deliver to the Participants written
notice of such determination and instructions for funding. Senior Participant
shall effect the funding in accordance with such instructions.

 

(e)                Senior Participant acknowledges that, prior to the Effective
Date, it has received as satisfactory opportunity to review and approve all Loan
Advances in respect of Project Costs that were made prior to the Effective Date.
As between the Participants, all Funding Conditions with respect to such Loan
Advances are hereby deemed satisfied.

 

3.4              Funding Conditions – Interest Reserve. On each Payment Date, to
the extent that Borrower is credited under the Loan Documents with a Loan
Advance in respect of the Interest Reserve, Senior Participant shall make a Loan
Advance. Agent shall determine the amount of the Loan Advance in accordance with
the applicable Funding Conditions and Accepted Servicing Practices. Such Loan
Advance shall be distributed to the Participants in accordance with Section 5.2.
Agent shall notify the Participants of the amount of each Loan Advance in
respect of the Interest Reserve at least five (5) Business Days prior to the
applicable Payment Date. To the extent that a Loan Advance made by Senior
Participant in respect of the Interest Reserve will immediately be distributed
back to Senior Participant pursuant to Section 5.2, Agent shall make
commercially reasonable efforts to net the anticipated distribution against the
required Loan Advance (and to the extent of such netting, such Loan Advance and
distribution may be made by book entry). However, to the extent that a Loan
Advance made by Senior Participant in respect of the Interest Reserve will be
distributed to Junior Participant, such Loan Advance shall be made by Senior
Participant in cash, to Agent, on the applicable Payment Date.

 

3.5              Protective Advances.

 

(a)                If Agent believes that a Protective Advance is needed or is
advisable, Agent shall recommend such Protective Advance to the Participants. If
a Participant believes that a Protective Advance is needed or is advisable, the
Participant may recommend to the other Participant that the Participants fund a
Protective Advance.

 

(b)               The Participants shall each have the right, but not the
obligation, to fund a Protective Advance recommended by the Agent or by the
other Participant. However, no Participant shall fund a Protective Advance
unless and until Agent and all Participants have a reasonable opportunity to
confer in good faith with regard to the need or advisability of the proposed
Protective Advance. Participants acknowledge that time may be of the essence
with respect to recommended Protective Advances, and shall make commercially
reasonable efforts to consult expeditiously with regard thereto.

 

17 

 

 

(c)                If both Participants, after good faith consultation, elect to
participate in a given Protective Advance, then they shall fund such Protective
Advance on a pari passu basis, based on the Senior Participation Commitment
Percentage and the Junior Participation Commitment Percentage.

 

(d)               If, after good faith consultation, only one Participant elects
to participate in a given Protective Advance, then that Participant, in its
discretion, may fund such Protective Advance unilaterally; provided that absent
consent by both Participants, unrecovered Protective Advances, to the extent
funded unilaterally by one Participant for any purpose other than specified in
clause (i) of the definition of “Protective Advance”, may not exceed $2,000,000
at any time during the life of the Loan.

 

(e)                Any Protective Advance shall be funded by the Participant or
Participants directly to Agent, and then shall be administered by Agent in
accordance with the Loan Documents and Accepted Servicing Practices.

 

(f)                Protective Advances to the extent funded by Senior
Participant shall be added to the Senior Participation Principal Balance when
actually funded. Protective Advances to the extent funded by Junior Participant
shall be added to the Junior Participation Principal Balance when actually
funded. Interest thereon, to the extent attributable to Protective Advances
(including interest thereon that was previously added to principal), shall
accrue at the Protective Advance Interest Rate (or, when and to the extent
applicable, at the Protective Advance Default Interest Rate), and shall be added
to the Senior Participation Principal Balance or the Junior Participation
Principal Balance, as applicable, on each Payment Date.

 

(g)               Agent, in its capacity as Agent, shall have no obligation to
make a Protective Advance from its own funds.

 

Section 4:   ADMINISTRATION OF THE LOAN

 

4.1              Appointment of Agent. Subject to the terms and conditions of
this Agreement, the Participants appoint Junior Participant as Agent, and Junior
Participant accepts such appointment. Junior Participant’s appointment as Agent
is subject to replacement by Senior Participant upon a Loss of Control Event
pursuant to the terms and conditions of this Agreement. Except to the extent
provided herein with respect to Major Decisions, the Agent shall have all of the
power and authority to exercise the rights and prerogatives of the “Lender”
under the Loan Documents and applicable law. Such power and authority shall
include the power and authority to evaluate Borrower’s compliance with terms of
the Loan Documents and applicable law, evaluate Borrower’s satisfaction of
conditions, and evaluate and grant or deny Borrower’s requests for consents to
actions that require Lender’s consent under the Loan Documents, amendments to
the Loan Documents, and waivers of Lender’s rights under the Loan Documents, in
each case, subject to Section 17. Such power and authority shall include the
right to exercise the rights and remedies of the Lender under the Loan Documents
or to forebear from exercising such rights and remedies, in each case, subject
to Section 17. Subject to applicable law, the terms of this Agreement, the terms
of the Loan Documents, and Acceptable Servicing Practices, Agent shall have the
authority, acting alone, to do or cause to be done any and all things in
connection with the servicing and administration of the Loan that it deems
necessary or desirable.

 

18 

 

 

4.2              Servicer.

 

(a)                Agent shall have all of the rights, prerogatives, and
obligations of “Servicer” under the Loan Agreement. Participants acknowledge
that, pursuant to Section 14.19(c) of the Loan Agreement, Sentio and Sentio TRS
appointed Sentio as the “Servicer”. Sentio shall continue to exercise the rights
and prerogatives of “Servicer” under the Loan Agreement and have the obligations
relating thereto for so long as Junior Participant is the Agent hereunder. If,
pursuant to the terms and conditions of this Agreement, Senior Participant
becomes the Agent hereunder, then concurrently therewith Senior Participant
shall acquire the rights and prerogatives under Section 14.19 of the Loan
Agreement pertaining to appointment of a Servicer and shall assume the
obligations relating thereto, and Sentio (or any person previously acting as
Servicer) shall (i) relinquish such rights and prerogatives, (ii) be relieved
from such obligations, effective as of such date and (iii) provide Borrower with
written notice of such replacement Servicer in accordance with Section 14.19(b)
of the Loan Agreement.

 

(b)               Without limiting the generalities of those duties generally
considered to be normal and customary in the commercial mortgage loan industry
with regard to its general mortgage servicing activities for commercial mortgage
loans comparable to the Loan, Agent, in its capacity as Servicer, shall perform
the following duties with respect to the Loan in accordance with the Loan
Agreement and Accepted Servicing Practices:

 

(i)                 Use reasonable efforts to collect all payments and other
amounts due from Borrower and its Affiliates.

 

(ii)               Establish, maintain, and administer lockbox accounts and
disburse proceeds therefrom in accordance with the applicable provisions of the
Loan Agreement.

 

(iii)             Hold all mortgage escrows and reserve payments that are
required to be deposited into escrow or reserve accounts and disburse such
proceeds in accordance with the applicable provisions of the Loan Agreement.

 

(iv)             Accept prepayments on the Loan and defeasance payments with
respect to the Loan where the Borrower is entitled to pay the same as a matter
of right.

 

(v)               Segregate from its corporate funds all funds received on
account of the Loan and deposit such funds in a trust or custodial account or
accounts.

 

(vi)             Keep a complete and accurate account of all amounts collected
on account of the Loan and the application thereof.

 

19 

 

 

(vii)           Track and calculate the Loan Principal Balance, the Senior
Participation Principal Balance, and the Junior Participation Principal Balance,
all components thereof, and all interest accruing thereon, at least on a monthly
basis, and whenever necessary for effective administration of the Loan and this
Agreement, in accordance with the terms of the Loan Documents, this Agreement,
and Accepted Servicing Practices.

 

(viii)         Monitor all UCC financing statements and file all UCC
continuation statements in appropriate jurisdictions as necessary to avoid a
lapse in continuation of a security interest on the personal property
constituting collateral for the Loan.

 

(ix)             Use reasonable efforts to obtain from Borrower and its
Affiliates on a timely basis all financial statements, reports and other
documents required to be furnished by Borrower and its Affiliates pursuant to
the Loan Documents.

 

(x)               Provide Borrower with a statement outlining the information
relating to the Loan as required by the Internal Revenue Service or any other
applicable law within the time frame required.

 

(xi)             Provide each Participant with a certification quarterly, within
30 days after the end of each calendar quarter, stating that all amounts
collected by Servicer with respect to the Loan have been properly applied in
accordance with the terms of the Loan Agreement and this Agreement.

 

(xii)           Furnish a Participant, within a reasonable time of a
Participant’s written request therefor, with all information relating to the
Loan that such Participant may reasonably request to the extent such information
is in possession of Servicer and can reasonably be produced without material
cost to Servicer.

 

(c)                Servicer shall maintain a servicing file with respect to the
Loan, as custodian for the Participants, and retain in such servicing file its
copies of the mortgage loan documents and all other records and documents with
respect to the Loan prepared by or which come into the possession of Servicer.
Servicer may subcontract with a document custodian to maintain such servicing
file. Servicer shall furnish or cause to be furnished copies of all records or
documents with respect to the Loan which are held by it to the Participants upon
request.

 

(d)               If any payment due under the Loan Agreement and not deferred
with the written consent of the Participants (to the extent such consent is
required hereunder) is not paid when the same becomes due and payable, or if the
Borrower or its Affiliates fails to perform any other material covenant or
obligation under the Loan, the Servicer shall promptly notify the Participants
in accordance with its usual practice. If such delinquency or failure continues
beyond the applicable grace periods provided in the Loan Agreement, the Servicer
shall promptly notify the Participants and shall take such further actions as
the Servicer deems appropriate, subject to Accepted Servicing Practices and the
rights and obligations hereunder pertaining to Cure Rights and Major Decisions.

 

20 

 

 

(e)                Servicer, in its capacity as Servicer, shall have no
obligation to make any advances to Borrower, for the benefit of Borrower, or for
the account of Borrower, and no obligation to make any Protective Advances or
other servicing advances.

 

(f)                In consideration for its services as Servicer hereunder,
Agent shall be entitled to reimbursement of its actual Costs, and shall be
entitled to retain any Additional Servicing Compensation to the extent actually
collected from Borrower (to the extent not duplicative of reimbursement of
Costs); but otherwise shall not be entitled to any servicing fees.

 

4.3              Confirmation of Authority of Agent. The Participants shall
execute and deliver such documentation as Agent may reasonably require to enable
Borrower and third parties to rely on the power and authority granted or
delegated to Agent (including Agent in its capacity as Servicer) in this
Agreement.

 

4.4              Distributions. The Agent shall distribute to each Participant,
in accordance with Section 5, all payments due to each such Participant under
this Agreement; provided, however, that before calculating any amount of
interest or principal due on any particular date to the Participants, the Agent
shall apply all Realized Loan Losses realized as of any Payment Date to reduce
the Loan Principal Balance until it has been reduced to zero, and shall allocate
such Realized Loan Losses in accordance with Section 6.2.

 

4.5              Books, Records, and Reports to Participants. Agent shall
maintain books and records with respect to the Loan and the Participations in
accordance with Accepted Servicing Practices. The Agent shall provide to each
Participant, when available:

 

(i)                 a summary of the current status of principal and interest
payments on the Loan, and an accounting of the Loan Principal Balance, the
Senior Participation Principal Balance, and the Junior Participation Principal
Balance;

 

(ii)               copies of the Borrower’s current financial statements, to the
extent in the Agent’s possession,

 

(iii)             current information, if any, as to the value of the Property,
to the extent in the Agent’s possession,

 

(iv)             agreements that govern the administration of the Loan by the
Agent (if any),

 

(v)               copies of any default or acceleration notices sent to the
Borrower with respect to the Loan and all material correspondence related
thereto;

 

(vi)             other reporting customarily provided by administrative agents
and servicers of syndicated construction loans to noteholders and participants
in such loans;

 

(vii)           copies of any Appraisals;

 

21 

 

 

(viii)         all notices, requests for approval and other correspondence
received from Borrower, Guarantor or any third party that is party to any Loan
Document, including without limitation, all requests for disbursements of Loan
Proceeds or Borrower equity funds, promptly upon Agent’s receipt of the same;
and

 

(ix)             any other information with respect to the Borrower or the Loan
reasonably requested by any Participant, to the extent in the Agent’s possession
and can be reasonably produced without material costs to Agent.

 

4.6              Reports to Participants Following Event of Default. In addition
to continuing to provide the materials set forth in Section 4.5 as required
thereunder, the Agent shall prepare a report in accordance with this Section 4.6
if an Event of Default has occurred and is continuing. Such report shall be
delivered, in electronic format, to each Participant that is not the Borrower or
a Borrower Related Party. Agent shall update such report from time to time as is
reasonably necessary as a result of material changes in circumstances or
material changes in Agent’s proposed strategies for dealing with the Event of
Default. Such report shall set forth such information regarding the Loan as is
necessary to enable the Participants to make informed decisions hereunder and
fulfill their reporting obligations to their investors and regulators, and shall
include the following information to the extent reasonably determinable:

 

(i)                 summary of the status of the Loan and any negotiations with
the Borrower;

 

(ii)               a discussion of the legal and environmental considerations
reasonably known at such time to the Agent that are applicable to the exercise
of remedies and to the enforcement of any related guaranties or other collateral
for the Loan and whether outside legal counsel has been retained;

 

(iii)             the most current rent rolls and income or operating statements
available for the Properties;

 

(iv)             the Agent’s recommendations on how such Loan might be returned
to performing status;

 

(v)               the Appraised Value of the Property together with the
assumptions used in the calculation thereof;

 

(vi)             the status of any foreclosure actions or other proceedings
undertaken with respect thereto, any proposed workouts with respect thereto and
the status of any negotiations with respect to such workouts, and an assessment
of the likelihood of additional Events of Default thereon;

 

(vii)           a summary of any material proposed actions and an analysis of
whether or not taking such action is reasonably likely to produce a greater
recovery on a present value and cost-effective basis than not taking such
action, setting forth the basis on which the Agent made such determination;

 

22 

 

 

(viii)         such other information as the Agent deems relevant in light of
Accepted Servicing Practices; and

 

(ix)             to the extent reasonably determinable by and available to the
Agent, such other information regarding the Loan as may be reasonably requested
by any Participant (the costs associated with providing such other information
to be reimbursed by such Participant).

 

4.7              Administration of Construction and Construction Disbursements.
Agent shall administer the provisions of the Loan Agreement relating to the
construction activities of the Borrower in accordance with the Loan Agreement,
Section 3.3, and Accepted Servicing Practices.

 

4.8              Administration of REO Property. In the event that Agent, on
behalf of the Participants, acquires the Property by foreclosure or deed in lieu
thereof, title to the Property shall be taken by a newly formed Delaware limited
liability company (the “REO Holding Company”). The Participant then serving as
Agent from time to time shall serve as the managing member of the REO Holding
Company. The other Participant shall become a member of the REO Holding Company.
The Participants shall negotiate in good faith the terms of a limited liability
company operating agreement and other Organizational Documents to govern the REO
Holding Company and the ownership, operation, maintenance, management, leasing
and marketing of the REO Property. The Participants agree that the terms of the
operating agreement will include the following:

 

(i)                 Priorities for distribution of excess cash flow and proceeds
of capital events that replicate, to the extent reasonably possible, the
distribution priorities in Section 5.3 hereof.

 

(ii)               Terms contemplating the possible transfer of the rights and
responsibilities of the managing member between the members that replicate, to
the extent reasonably possible, the terms hereof pertaining to Loss of Control
Events.

 

(iii)             Consent rights for the non-managing member if the non-managing
member is Senior Participant, and notice and consultation rights, but not
consent rights, if the non-managing member is Junior Participant, with regard to
major decisions pertaining to management and disposition of the Property (each
an “REO Major Decision”). The list of REO Major Decisions shall be reasonably
consistent with lists of major decision consent rights customarily included in
institutional two-party property-owning joint ventures for properties similar to
the Property.

 

(iv)             Special purpose entity terms reasonably consistent with the
requirements of institutional mortgage lenders.

 

(v)               Acknowledgement that the Property will not be held as a
long-term investment but shall be marketed and sold by managing member in an
orderly manner, in an arm’s length transaction after proper exposure to the
market. Managing member shall make commercially reasonable efforts to complete
the sale, consistent with the terms of the operating agreement, within twelve
months after foreclosure or after acceptance of a deed-in-lieu of foreclosure.
If such a sale is not completed within twelve months after foreclosure or
acceptance of a deed-in-lieu of foreclosure and Junior Participant is still
serving as managing member, then the REO Holding Company shall appoint Senior
Participant as its special agent and representative with sole authority to
market and sell the Property, and managing member shall cooperate in good faith
with Senior Participant’s exercise of such authority.

 

23 

 

 

(vi)             If managing member is Junior Participant, then, after proper
exposure to the market, managing member may unilaterally accept any bona fide
arm’s length offer that pays off the Senior Participation in full.

 

(vii)           If managing member is Senior Participant (or if Senior
Participant is acting as the special agent and representative of the REO Holding
Company as provided above), then, after proper exposure to the market, managing
member (or, if applicable, Senior Participant in its capacity as special
representative or agent) may unilaterally accept any bona fide arm’s length
offer; except that if such offer does not pay off the Junior Participation in
full, then managing member (or special representative and agent) shall not
accept such offer or place the Property under binding contract to be sold until
it first extends to Junior Participant a ten (10) Business Day opportunity to
enter into a binding agreement to purchase the Property on price and material
economic terms substantially equivalent to those contained in the offer. Such a
binding agreement shall provide for a minimum of 45 days from the date of
execution to the date of closing.

 

(viii)         The members of the REO Holding Company shall waive any rights to
partition the Property.

 

Section 5:   DISTRIBUTIONS

 

5.1              Collection Account. Agent shall establish a Collection Account
for each Participant. Each Participant hereby directs Agent, in accordance with
the priorities set forth in Section 5.2 or Section 5.3, as applicable, to
deposit into each Participant’s Collection Account, not later than the
Distribution Date, all amounts distributable to the Participants hereunder.
Delinquent payments received by Agent after the Related Payment Date shall be
remitted by the Agent to such Collection Accounts in accordance with the terms
hereof within two (2) Business Days following receipt. If the Effective Date is
not on a Payment Date, the distributions with respect to the first Payment Date
following the Effective Date shall be prorated appropriately so that Junior
Participant receives all interest on the Loan, at the Loan Interest Rate, for
the portion of the month in which it still owned the entire Loan.

 

5.2              Distributions in the Absence of a Continuing Event of Default.
If no Continuing Event of Default shall have occurred and then be continuing,
all amounts actually tendered by or on behalf of the Borrower or otherwise
actually available for payment on the Loan (including Scheduled Payments,
advances by a Participant in respect of the Interest Reserve, any amounts
received in connection with any guaranty or indemnity agreement included in the
Loan Documents, principal prepayments, balloon payments, liquidation proceeds,
Yield Maintenance Premiums, Cure Payments (to the extent such Cure Payments
represent payments due on the Loan rather than Protective Advances), Late
Charges, and other fees, any proceeds of the consummation of a transaction under
the Option Agreement that are applied by Borrower to repayment of the Loan, and
the Participation Amount; but excluding proceeds under title, hazard or other
insurance policies or awards or settlements in respect of condemnation
proceedings or similar exercise of the power of eminent domain (other than any
amounts thereof that are applied to repayment of the Loan) (individually or
collectively, “Available Funds”) shall be distributed on the applicable
Distribution Date by Agent and applied in the following order of priority (at
such times, and out of such funds, as are specified (if any) and the appropriate
clause herein):

 

24 

 

 

(i)                 To Agent (and any Prior Agent), to reimburse any Costs
incurred by Agent (and any Prior Agent) (including Costs incurred in its
capacity as Servicer) in connection with its servicing of the Loan.

 

(ii)               To Agent, any Additional Servicing Compensation actually
collected from Borrower (except to the extent that such Additional Servicing
Compensation is duplicative of reimbursement of Costs pursuant to the prior
paragraph).

 

(iii)             To each Participant that has made any Protective Advances in
accordance with the terms hereof, in reimbursement of such Protective Advances,
until it has recovered all of its Protective Advances and interest accrued
thereon at the Protective Advance Interest Rate or, with respect to any period
when the Borrower is obligated to pay interest at the Default Rate, interest
accrued thereon at the Protective Advance Default Interest Rate, to but not
including the most recent Payment Date. Protective Advances and interest thereon
shall be recovered in reverse in chronological order from when such Protective
Advances were made (i.e., with the most recent Protective Advances recovered
first). If both Participants participate pro-rata in funding any particular
Protective Advance, such Protective Advance shall be deemed made, for purposes
of this Section 5.2(iii), on the date that both Participants have delivered to
Agent their respective pro rata shares of the amount requested by Agent to fund
a Protective Advance, and recovery of that Protective Advance and interest
thereon shall be pro-rata based on the Percentage Interest of Senior Participant
and the Percentage Interest of Junior Participant as of the date such Protective
Advance was made.

 

(iv)             To Senior Participant until Senior Participant has received all
interest accrued on the Senior Participation Principal Balance to (but not
including) the most recent Payment Date at the Senior Participant Interest Rate
(giving effect to the netting contemplated by Section 3.4 to the extent
applicable).

 

(v)               To Junior Participant until Junior Participant has received
the Junior Participation Interest Strip to (but not including) the most recent
Payment Date.

 

(vi)             To Junior Participant, an amount sufficient to reimburse any
unreimbursed Cure Payments previously made by Junior Participant.

 

(vii)           To Senior Participant until Senior Participant has recovered
Realized Losses (if any) previously allocated to Senior Participant pursuant to
Section 6.2.

 

25 

 

 

(viii)         To Junior Participant until Junior Participant has recovered
Realized Losses (if any) previously allocated to Junior Participant pursuant to
Section 6.2.

 

(ix)             To the extent that Available Funds being distributed include
amounts applicable to repayment or prepayment of principal with respect to the
Loan, pro rata to Senior Participant and Junior Participant based on the Senior
Participant Percentage Interest and the Junior Participant Percentage Interest,
until the Loan Principal Balance is reduced to zero.

 

(x)               To the extent that Available Funds being distributed include
any interest calculated at the Loan Interest Rate through (but not including the
applicable Distribution Date) that has not previously been distributed, to
Senior Participant until Senior Participant has received interest on the Senior
Participant Principal Balance through (but not including) the applicable
Distribution Date at the Senior Participation Interest Rate, and the balance of
such interest to Junior Participant.

 

(xi)             To Senior Participant in respect of the Exit Fee, subject to
Section 5.6.

 

(xii)           To Senior Participant in respect of the Extension Fee, to the
extent payable under Section 5.8 but not previously paid.

 

(xiii)         To the extent that Available Funds being distributed include any
fees paid by Borrower that are not reimbursement of Costs, Additional Servicing
Compensation, Participation Amount, or Yield Maintenance Premium, pro rata to
Senior Participant and Junior Participant based on the Senior Participant
Percentage Interest and the Junior Participant Percentage Interest (or, if the
Loan Principal Balance has been reduced to zero, pro rata based on the Senior
Participant Commitment Percentage and the Junior Participant Commitment
Percentage).

 

(xiv)         To the extent that Available Funds being distributed include any
Yield Maintenance Premium actually collected, to Senior Participant until Senior
Participant has received the Senior Participation Yield Maintenance Premium, and
the balance of the Yield Maintenance Premium to Junior Participant.

 

(xv)           To the extent that Available Funds being distributed include any
Participation Amount actually collected, to Junior Participant only (and Senior
Participant acknowledges that it has no right, title, or interest in any
Participation Amount); provided that if after application of Section 5.6 Senior
Participant is entitled to the Exit Fee, the Exit Fee must be paid in full
before Junior Participant receives any Participation Amount.

 

(xvi)         To the extent that Available Funds being distributed include any
Default Interest actually collected, pro rata to Senior Participant and Junior
Participant based on the Senior Participant Percentage Interest and the Junior
Participant Percentage Interest (or, if the Loan Principal Balance has been
reduced to zero, based on the Senior Participation Commitment Percentage and the
Junior Participation Commitment Percentage).

 

26 

 

 

(xvii)       Any remaining amount pro rata to Senior Participant and Junior
Participant based on the Senior Participation Commitment Percentage and the
Junior Participation Commitment Percentage.

 

5.3              Payments During a Continuing Event of Default. If a Continuing
Event of Default has occurred and is continuing, Available Funds (including
distributable cash flow from REO Property and the proceeds of disposition of REO
Property) shall be distributed on the applicable Distribution Date by Agent and
applied in the following order of priority (at such times, and out of such
funds, as are specified (if any) and the appropriate clause herein):

 

(i)                 To Agent (and any Prior Agent), to reimburse any Costs
incurred by Agent (and any Prior Agent) (including Costs incurred in its
capacity as Servicer) in connection with its servicing and enforcement of the
Loan and its administration and disposition of REO Property.

 

(ii)               To Agent, any Additional Servicing Compensation actually
collected from Borrower (except to the extent that such Additional Servicing
Compensation is duplicative of reimbursement of Costs pursuant to the prior
paragraph).

 

(iii)             To each Participant that has made any Protective Advances in
accordance with the terms hereof, in reimbursement of such Protective Advances,
until it has recovered all of its Protective Advances and interest accrued
thereon at the Protective Advance Interest Rate or, with respect to any period
when the Borrower is obligated to pay interest at the Default Rate, interest
accrued thereon at the Protective Advance Default Interest Rate, to but not
including the most recent Payment Date. Protective Advances and interest thereon
shall be recovered in reverse in chronological order from when such Protective
Advances were made (i.e., with the most recent Protective Advances recovered
first). If both Participants participate pro-rata in funding any particular
Protective Advance, such Protective Advance shall be deemed made, for purposes
of this Section 5.3(iii), on the date that both Participants have delivered to
Agent their respective pro rata shares of the amount requested by Agent to fund
a Protective Advance, and recovery of that Protective Advance and interest
thereon shall be pro-rata based on the Percentage Interest of Senior Participant
and the Percentage Interest of Junior Participant as of the date such Protective
Advance was made.

 

(iv)             To Senior Participant until the Senior Participation Principal
Balance and all interest accrued thereon through but not including the
applicable Distribution Date, at the Senior Participation Interest Rate, has
been paid in full (excluding any Default interest or any portion of the Senior
Participation Principal Balance attributable to Default Interest).

 

(v)               To Junior Participant until the Junior Participation Principal
Balance and the Junior Participation Interest Strip accrued thereon through but
not including the applicable Distribution Date has been paid in full (excluding
any Default interest or any portion of the Senior Participation Principal
Balance attributable to Default Interest).

 

27 

 

 

(vi)             To Junior Participant, an amount sufficient to reimburse any
unreimbursed Cure Payments previously made by Junior Participant.

 

(vii)           To Senior Participant until Senior Participant has recovered
Realized Losses (if any) previously allocated to Senior Participant pursuant to
Section 6.2.

 

(viii)         To Junior Participant until Junior Participant has recovered
Realized Losses (if any) previously allocated to Junior Participant pursuant to
Section 6.2.

 

(ix)             To Senior Participant in respect of the Exit Fee, subject to
Section 5.6.

 

(x)               To Senior Participant in respect of the Extension Fee, to the
extent payable under Section 5.8 but not previously paid.

 

(xi)             To the extent that Available Funds being distributed include
any fees paid by Borrower that are not reimbursement of Costs, Additional
Servicing Compensation, Participation Amount, or Yield Maintenance Premium, pro
rata to Senior Participant and Junior Participant based on the Senior
Participant Percentage Interest and the Junior Participant Percentage Interest
(or, if the Loan Principal Balance has been reduced to zero, pro rata based on
the Senior Participant Commitment Percentage and the Junior Participant
Commitment Percentage).

 

(xii)           To the extent that Available Funds being distributed include any
Yield Maintenance Premium actually collected, to Senior Participant until Senior
Participant has received the Senior Participation Yield Maintenance Premium, and
the balance of the Yield Maintenance Premium to Junior Participant.

 

(xiii)         To the extent that Available Funds being distributed include any
Participation Amount actually collected, to Junior Participant only (and Senior
Participant acknowledges that it has no right, title, or interest in any
Participation Amount); provided that if after application of Section 5.6 Senior
Participant is entitled to the Exit Fee, the Exit Fee must be paid in full
before Junior Participant receives any Participation Amount.

 

(xiv)         Pro rata to Senior Participant and Junior Participant based on the
Senior Participation Commitment Percentage and the Junior Participation
Commitment Percentage until all Default Interest payable by Borrower under the
Loan Documents but not previously collected by Agent and distributed to the
Participants has been distributed to the Participants; except that, for purposes
hereof, Default Interest shall cease accruing on the date that Agent acquires
the REO Property by foreclosure or deed-in-lieu thereof.

 

(xv)           Any remaining amount pro rata to Senior Participant and Junior
Participant based on the Senior Participation Commitment Percentage and the
Junior Participation Commitment Percentage.

 

5.4              Clarifications Applicable to All Distribution Provisions.
Notwithstanding anything to the contrary in this Agreement:

 

28 

 

 

(i)                 During any period when Cure Payments are being timely made
by the Junior Participant (to the extent permitted hereunder), the Loan will be
treated, as between the Participants, as if no Event of Default is continuing,
and enforcement of remedies against Borrower (other than the sending of notices
of default and similar communications) will be deferred or suspended.

 

(ii)               Following any period during which the terms of Section 5.3
come into in effect, if the applicable Continuing Event of Default is no longer
continuing, whether as a result of a restructuring in connection with a workout
or otherwise, and no other Continuing Event of Default has occurred and is
continuing, the terms of Section 5.3 shall be suspended and Section 5.2 shall
again be in effect, subject, however, to the terms of Section 6.

 

5.5              Return of Excess Payments and Agent’s Right of Offset.

 

(i)                 If Agent determines, or a court of competent jurisdiction
orders, at any time, that any amount received or collected in respect of the
Loan or either Participation pursuant to any insolvency, bankruptcy, fraudulent
conveyance, preference or similar law, must be returned to the Borrower or any
other Person, Agent shall be not required to distribute any portion thereof to
any Participant, and each Participant shall promptly on demand repay to the
Agent any portion thereof which shall have been theretofore distributed to the
Participant, together with interest thereon at such rate, if any, as such Agent
shall have been required to pay to the Borrower or such other Person with
respect thereto. Each Participant agrees that if at any time it shall receive
from any source whatsoever (other than as a distribution from Agent to which it
is entitled hereunder) any payment on account of the Loan, it will promptly
remit such payment to the Agent for distribution in accordance with this
Agreement. If Agent determines that a distribution to a Participant was in error
or contrary to law, this Agreement, the Loan Documents, or any other applicable
agreement, the Participant that received such distribution shall promptly on
demand remit such payment to Agent for proper redistribution.

 

(ii)               The obligations of each Participant under this Section 5.5
are separate and distinct obligations from one another, and each Participant
understands that Agent shall have no right or obligation to enforce the
obligations of Senior Participant against Junior Participant or the obligations
of Junior Participant against Senior Participant. The obligations of each
Participant under this Section 5.5 constitute absolute, unconditional and
continuing obligations and Agent shall be deemed a third party beneficiary of
these provisions.

 

(iii)             Agent shall have the right to offset any amounts due under
this Section 5.5 from any Participant with respect to the Loan against any
future payments due to such Participant hereunder.

 

5.6              Exit Fee.

 

29 

 

 

(i)                 The right to the Exit Fee is personal to RCP and its
Affiliates, may not be assigned, and shall not inure to the benefit of any
assignee of the Senior Participation which is not an Affiliate of RCP. The Exit
Fee shall be payable, pursuant to Section 2.8 or Section 9, or distributable
pursuant to Section 5.2 or Section 5.3, only if, at the time that the Loan is
paid in full or (if applicable) on the Junior Participant Purchase Option
Closing Date, a fifty percent (50%) or greater beneficial interest in the Senior
Participation is owned by RCP or an Affiliate of RCP.

 

(ii)               Senior Participant shall waive the Exit Fee if the Loan is
repaid from the proceeds of a permanent loan (“Permanent Financing”), including
but not limited to, any Fannie Mae or FHA/HUD mortgage insurance processing
services and other permanent loan executions, offered by Red Mortgage Capital,
LLC (“RMC”) or an Affiliate thereof; provided, however, that neither RMC nor any
of its Affiliates shall have any obligation to provide any such Permanent
Financing.

 

5.7              Commitment and Origination Fees. Junior Participant shall
retain the $419,120.00 loan commitment fee paid by Borrower on the Closing Date,
and no distribution with respect thereto shall be made hereunder. However,
pursuant to Section 3.1, Senior Participant has received a credit on the
Effective Date representing an origination fee of $200,000.00.

 

5.8              Extension Fee. In the event that the “Maturity Date” of the
Loan occurs after January 15, 2020 as a result of elections made by Sentio
pursuant to terms contained in the definitions of “Maturity Date” or “Stated
Maturity Date” or negotiated written agreements between Sentio (in its capacity
as Agent) and Borrower, Junior Participant shall pay the Extension Fee to the
Senior Participant on or before January 15, 2020. Notwithstanding a Loss of
Control Event, the right of Lender to extend the “Maturity Date” by operation of
terms in the definitions of “Maturity Date” or “Stated Maturity Date” is
reserved to Sentio, and may not be exercised by Senior Participant in its
capacity as Agent. For clarification, an extension of the “Maturity Date”
negotiated by Senior Participant, in its capacity as Agent after a Loss of
Control Event, shall not trigger any obligation to pay an Extension Fee. Also,
for clarification, a delay in repayment of the Loan until after January 15,
2020, shall not give rise to any obligation to pay the Extension Fee unless
Sentio actually made the foregoing elections or, in its capacity as Agent,
actually entered into a written agreement with Borrower extending the Maturity
Date beyond such date.

 

Section 6:   WORKOUTS AND REALIZED LOAN LOSSES.

 

6.1              Limitation of Impact of Workouts on Senior Participation.
Notwithstanding anything to the contrary contained herein, but subject to the
consent rights of the Participants in accordance with this Agreement, if in
connection with a workout or proposed workout of the Loan the terms thereof are
modified such that:

 

(i)                 the Loan Principal Balance is decreased,

 

(ii)               the Loan Interest Rate is reduced,

 

30 

 

 

(iii)             payments of interest or principal on the Loan are waived or
reduced or deferred (other than a deferral of principal resulting solely from
the extension of the Maturity Date of the Loan), or

 

(iv)             any other adjustment is made to any of the payment terms of the
Loan, then

 

all payments to the Senior Participant pursuant to Section 5.2 and Section 5.3,
as applicable, shall be made as though such workout did not occur (except to the
extent of Realized Loan Losses allocated to the Senior Participation in
accordance with Section 6.2).

 

6.2              Economic Effect of Realized Loan Losses Borne by Participants
in Reverse Sequential Order. The full economic effect of any Realized Loan
Losses shall be allocated first to the Junior Participation until the Junior
Participation Principal Balance is reduced to zero, and only thereafter to
Senior Participation in reduction of the Senior Participation Principal Balance.

 

6.3              Distributions on Participations When Property is REO Property.
If the Property shall become an REO Property, the priority of distributions
among the Participants shall continue to be made in accordance with the terms of
Section 5.3 that would be applicable following the occurrence and during the
continuation of a Continuing Event of Default (whether or not the applicable
Loan Documents then remain in effect).

 

Section 7:   [RESERVED]

 

Section 8:   LIMITATION ON LIABILITY.

 

8.1              Liability of Senior Participant to Junior Participant. Senior
Participant shall not have any personal liability to Junior Participant with
respect to the Junior Participation, except with respect to losses actually
suffered due to the gross negligence, willful misconduct or breach of this
Agreement on the part of Senior Participant.

 

8.2              Liability of Junior Participant to Senior Participant. Junior
Participant shall not have any personal liability to Senior Participant with
respect to the Senior Participation except with respect to losses actually
suffered due to the gross negligence, willful misconduct or breach of this
Agreement on the part of Junior Participant.

 

8.3              Liability of Agent. The limitations on personal liability in
this Section 8 shall apply to Participants solely in their capacity as
Participants, and not to a Participant when acting in its capacity as Agent.

 

Section 9:   PURCHASE OF SENIOR PARTICIPATION BY JUNIOR PARTICIPANT.

 

9.1              Grant of Junior Participant Purchase Option. Subject to the
terms and conditions of this Section 9, Senior Participant hereby grants to
Junior Participant the option (the “Junior Participant Purchase Option”) to
purchase the Senior Participation at any time for a purchase price, in cash,
equal to the Junior Participant Purchase Option Price.

 

31 

 

 

9.2              Conditions of Junior Participant Purchase Option. In order to
exercise the Junior Participant Purchase Option, Junior Participant must deliver
to Senior Participant a written notice (the “Junior Participant Purchase Option
Notice”) not later than fifteen (15) Business Days prior to the scheduled and
published date of foreclosure of the Mortgage. The Junior Participant Purchase
Option Notice must be duly executed by an authorized representative of Junior
Participant and must declare Junior Participant’s unconditional election to
exercise the Junior Participant Purchase Option.

 

9.3              Closing of Purchase and Sale Pursuant to Junior Participant
Purchase Option. If Junior Participant timely delivers a Junior Participant
Purchase Option Notice, then Junior Participant shall be unconditionally
obligated to purchase, and Senior Participant shall be unconditionally obligated
to sell, the Senior Participation for a price, in cash, equal to the Junior
Participant Purchase Option Price, on a mutually convenient date (the “Junior
Participant Purchase Option Closing Date”) that is not earlier than five
Business Days and not later than ten (10) Business Days after delivery of the
Junior Participant Purchase Option Price Notice. The Junior Participant Purchase
Option Price shall be calculated by Agent not later than three (3) Business Days
prior to the Junior Participant Purchase Option Closing Date and shall, absent
manifest error, be binding upon the Participants. On the Junior Participant
Purchase Option Closing Date, Junior Participant shall pay all reasonable out of
pocket costs and expenses of Senior Participant and Agent incurred in connection
with such purchase. Upon the consummation of the sale of the Senior
Participation to Junior Participant, Senior Participant shall assign the Senior
Participation to Junior Participant without recourse or warranty, except that
Senior Participant owns the Senior Participation free and clear of liens and
encumbrances, and that Senior Participant has the power and authority to
deliver, and has executed an assignment of, and delivered all of its right,
title and interest in the Senior Participation. Upon the consummation of the
Junior Participant Purchase Option, Senior Participant and Agent shall deliver
the Senior Participation Certificate and all original Loan Documents and other
applicable materials in their possession to Junior Participant.

 

9.4              Deferral of Change of Control While Purchase and Sale is
Pending. Following delivery of the Junior Participant Purchase Option Notice and
continuing until the Junior Participant Purchase Option Closing Date, the Loan
shall continue to be serviced by Agent in accordance with this Agreement and
Accepted Servicing Practices, and any pending transfer of the rights of Agent to
Senior Participant on account of a Loss of Control Event shall be suspended
until the Junior Participant Purchase Option Closing Date.

 

9.5              Exit Fee Payable Upon Exercise of Junior Participant Purchase
Option. Subject to Section 5.6, on the Junior Participant Purchase Option
Closing Date, concurrently with payment of the Junior Participant Purchase
Option Price, Junior Participant shall also pay to Senior Participant the Exit
Fee. However, Senior Participant shall waive the Exit Fee if an Event of Default
has occurred and is continuing, or if a Loss of Control Event by application of
Paragraph (a) of the definition thereof, has occurred and is continuing on the
date of delivery of the Junior Participant Purchase Option Notice.

 

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Section 10:   CURE RIGHTS.

 

Upon the occurrence of an Event of Default, and upon notice from Agent (a “Cure
Option Notice”) of the occurrence of such Event of Default (which notice the
Agent shall promptly give to Senior Participant and Junior Participant upon
receipt of knowledge thereof), Junior Participant shall have the right to cure
such Event of Default (the “Cure Right”); provided, in the event that Junior
Participant (the “Curing Participant”) has elected to cure any Event of Default,
in order for the cure to be effective, the Event of Default must be cured by the
Curing Participant within, in the case of an Event of Default with respect to a
Scheduled Payment, ten (10) Business Days of receipt of such Cure Option Notice
and, in the case of any other Event of Default, within thirty (30) days of
receipt of such Cure Option Notice (the “Cure Period”). If Junior Participant is
attempting to cure a Non-Monetary Event of Default which is reasonably capable
of cure by Junior Participant, the Cure Period may be extended for an additional
sixty (60) days (for a total of up to ninety (90) days), but only for so long as
(i) the Curing Participant is diligently and expeditiously attempting to cure
such Non-Monetary Event of Default, (ii) the Borrower or the Curing Participant
makes all Scheduled Payments that become due and payable during the Cure Period,
(iii) such Non-Monetary Event of Default is not the result of a bankruptcy of
the Borrower, and no bankruptcy with respect to the Borrower commences during
the period that the Curing Participant is otherwise permitted to cure a
Non-Monetary Event of Default in accordance with this Section and (iv) there is
no material adverse effect on the value, use or operation of Property as a
result of the Event of Default and the extension of the Cure Period. In the case
of concurrent Monetary Events of Default and Non-Monetary Events of Default, if
all Monetary Events of Default are timely cured by Borrower or Curing
Participant, then at the request of the Curing Participant the Agent shall waive
any then-existing Non-Monetary Events of Default that are not reasonably
susceptible of cure by the Curing Participant (including missed deadlines and
financial covenant defaults), provided that such uncured Non-Monetary Events of
Default do not have a material adverse effect on the value, use or operation of
Property or materially impair the security for the Loan. In the event that the
Curing Participant elects to cure an Event of Default that can be cured by the
payment of money (each such payment, a “Cure Payment”), the Curing Participant
shall make such Cure Payment as directed by Agent and each such Cure Payment
shall include all costs, expenses, losses, liabilities, obligations, damages,
penalties and disbursements imposed on, incurred by or asserted against Agent
and any interest charged thereon with respect to the Loan (but excluding any
Default Interest) during the period of time from the expiration of the grace
period for such Event of Default under the Loan until such Cure Payment is made.
Agent shall distribute any Cure Payment in accordance with Section 5.2. The
right of the Curing Participant to reimbursement of any Cure Payment shall be
governed by Section 5.2 and Section 5.3. The commencement of a Continuing Event
of Default shall be deemed deferred until the Cure Period has expired without a
timely cure of the applicable Event of Default; provided that Junior
Participant’s right to defer a Continuing Event of Default by making payments of
Scheduled Payments shall be limited to five (5) consecutive Scheduled Payments
and to six (6) Scheduled Payments in the aggregate during the life of the Loan.
Unless and until an Event of Default has ripened into a Continuing Event of
Default (after giving effect to the Cure Right herein), Agent shall not
accelerate the Loan or commence any remedies to enforce the rights of Lender
under the Loan or Loan Documents; provided that nothing herein shall be
construed to prohibit Agent from sending notices of the Event of Default to the
Borrower or any related guarantor, making demands on the related Borrower or any
related guarantor, or assessing Late Charges or Default Interest against the
Borrower.

 

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Section 11:   [RESERVED]

 

Section 12:   REPRESENTATIONS AND WARRANTIES OF THE PARTICIPANTS.

 

12.1          Representations and Warranties. As of the Effective Date, each
Participant represents and warrants to the other Participant that:

 

(i)                 It is duly organized as the type of Person indicated in the
preamble of this Agreement and is validly existing and in good standing under
the laws of the jurisdiction of its organization indicated in the preamble to
this Agreement;

 

(ii)               The execution, delivery and performance by it of this
Agreement is within its organizational powers, has been duly authorized by all
necessary organizational action, and does not contravene its Organizational
Documents or any law or contractual restriction binding upon such Participant;

 

(iii)             It has the full power and authority to enter into and
consummate all transactions contemplated by this Agreement, has duly authorized
the execution, delivery and performance of this Agreement and has duly executed
and delivered this Agreement;

 

(iv)             This Agreement is the legal, valid and binding obligation of
such Participant, enforceable against such Participant in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors’ rights generally, and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law),
and except that the enforcement of rights with respect to indemnification and
contribution obligations may be limited by applicable law;

 

(v)               All consents, approvals, authorizations, orders or filings of
or with any court or governmental agency or body, if any, required for the
execution and delivery and performance of this Agreement by such Participant
have been obtained or made;

 

(vi)             There is no pending action, suit or proceeding, arbitration or
governmental investigation against such Participant, an adverse outcome of which
would materially affect its performance under this Agreement;

 

(vii)           It has not dealt with any broker, investment banker, agent or
other person, other than the other Participant and its affiliates, that may be
entitled to any commission or compensation in connection with the consummation
of any of the transactions contemplated hereby;

 

34 

 

 

(viii)         It is acquiring its Participation for its own account in the
ordinary course of its business without any current intention of further
transfer, distribution, or syndication;

 

(ix)             Its financial records will report the creation, purchase, and
sale of the Senior Participation effected hereby as a true sale, and not as a
financing;

 

(x)               None of the execution, delivery or performance by it of this
Agreement will constitute a default (or an event which, with notice or lapse of
time, or both would constitute a default) under, or result in the breach of, any
material agreement or other instrument to which it is a party or that is
applicable to it or any of its assets (provided that Junior Participant makes no
representation or warranty as to whether the transactions contemplated herein
contravene the Loan Documents); and

 

(xi)             Such Participant is neither an employee benefit plan as defined
in Section 3(3) of ERISA, that is subject to Title I of ERISA, nor a plan as
defined in Section 4975(e)(1) of the Code, that is subject to Section 4975 of
the Code, nor are any of the assets to be used to purchase “plan assets” within
the meaning of the Department of Labor Regulation Section 2510.3 101, that are
subject to Title I of ERISA or Section 4975 of the Code.

 

Section 13:   INDEPENDENT ANALYSIS OF SENIOR PARTICIPANT.

 

13.1          Independent Analysis of Credit Decision. Subject to Section 12,
Senior Participant acknowledges that it has, independently and without reliance
upon Junior Participant or its officers, directors, employees, and Affiliates,
and based on such documents, investigations, and information as it has deemed
appropriate, made its own credit analysis and decision to purchase the Junior
Participation (provided that the foregoing shall not limit the enforceability of
the representations and warranties made by Senior Participant in this
Agreement). Senior Participant acknowledges that it has received from Junior
Participant all information it has requested from Junior Participant and has
been gives a full and adequate opportunity to conduct its investigations and due
diligence, that Junior Participant has made no representations or warranties
with respect to the Loan (except as expressly provided herein), and that,
subject to the representations, warranties, and covenants expressly set forth in
this Agreement, Senior Participant assumes the risk of, and Junior Participant
shall not have any responsibility to Senior Participant for:

 

(i)                 the collectability of the Loan,

 

(ii)               the validity, enforceability, sufficiency, or legal effect of
any of the Loan Documents or the title insurance policy or policies or any
survey furnished to Junior Participant in connection with the origination of the
Loan,

 

(iii)             the validity, sufficiency or effectiveness of the lien created
or to be created by the Loan Documents,

 

(iv)             the financial condition of the Borrower or any guarantor, or

 

35 

 

 

(v)               the value or condition of the Property or any other collateral
for the Loan.

 

Section 14:   TRANSFER OF PARTICIPATIONS OR COMMITMENTS.

 

14.1          Consents to Transfer Required. Each Participant acknowledges that
the financial strength and expertise of the other Participant is a material
inducement to entering into this Agreement. Accordingly, except as provided in
Section 14.6, no Participant may assign, transfer, pledge, syndicate,
participate, hypothecate, contribute, or otherwise dispose of (each, a
“Transfer”) its Participation or any portion thereof or any direct or indirect
or beneficial interest therein without the prior written consent of the other
Participant, such consent not to be unreasonably withheld.

 

14.2          Standards for Granting Consent. Each Participant acknowledges that
it shall be reasonable to withhold consent to a Transfer on any of the following
grounds:

 

(i)                 The proposed transferee is not an Eligible Transferee.

 

(ii)               The proposed Transfer could reasonably be construed to
contravene Section 14.7 of the Loan Agreement (provided that, if this is the
sole basis for withholding consent, then the Participants shall cooperate in
good faith in attempting to obtain the Borrower’s consent to the Transfer).

 

(iii)             The proposed Transfer could give rise to a prohibited
transaction, or subject a Participant to additional taxation, under ERISA or
under laws or regulations pertaining to real estate investment trusts; provided
that the Participants shall cooperate in good faith in attempting to structure
the proposed transaction in a manner that does not contravene such laws or
regulations or trigger additional taxation.

 

(iv)             After giving effect to the Transfer, more than one Person will
be in direct privity with the other Participant and Agent under this Agreement;
it being the intent of the parties hereto that, at all times, each Participation
be held by a single Person and any Transfer of less than an entire Participation
be solely by means of the creation and transfers of sub-participations or
transfers of equity interests in a Participant, provided that for the purposes
of this Section, (i) Sentio and Sentio TRS shall be deemed one person and (ii)
RCP and its Affiliates, if they jointly hold the Senior Participation, shall be
deemed one person.

 

(v)               The proposed transferee or its Affiliates are (i) in violation
of United States economic sanctions laws, Executive Orders and implementing
regulations as promulgated by the United States Treasury Department’s Office of
Foreign Assets Control and all applicable anti-money laundering and
counter-terrorism regulations, or (ii) a person designated by the United States
government on the list of the Specially Designated Nationals and Blocked
Persons.

 

14.3          Certain Exceptions to Restrictions on Transfer.

 

36 

 

 

(a)                Notwithstanding Section 14.1, the following Transfers shall
not require the consent of any Participant (provided that such Transfer does not
contravene Section 14.7 of the Loan Agreement or Borrower’s consent thereto is
duly obtained):

 

(i)                 A Transfer by any Participant of its entire Participation to
an Affiliate of that Participant (provided that the transferee assumes in
writing the obligations of the transferor for the benefit of the other
Participant, and provided further that, if at the time of the Transfer the
Participants are committed to fund Loan Advances that have not yet been funded,
then either the transferor remains obligated to fund such unfunded Loan Advances
or the transferee provides financial statements, reasonably acceptable to the
other Participant, evidencing the transferee’s capability to fund such unfunded
Loan Advances);

 

(ii)               A Transfer or change in direct or indirect ownership or
control of Sentio Healthcare Properties Inc.;

 

(iii)             A Transfer of the Junior Participation or of direct or
indirect interests therein that is incident to a Transfer of all or
substantially all of the assets of or managed by Sentio Healthcare Properties
Inc.;

 

(iv)             A Transfer of, or change in, the direct or indirect ownership
or control of Senior Participant; and

 

(v)               A Transfer of the Senior Participation or of direct or
indirect interests therein that is incident to a Transfer of all or
substantially all of the assets of or managed by Senior Participant.

 

(b)               Not later than ten (10) Business Days prior to consummation of
a Transfer permitted pursuant to Section 14.3(a)(i), (iii), or (v), the
transferor or transferee shall deliver to the other Participant written notice
that describes the Transfer in detail reasonably sufficient to evidence that the
Transfer is permitted hereunder.

 

14.4          Transfers of Agent’s Interest. A Transfer permitted hereunder of
an entire Participation shall be deemed to include the applicable Participant’s
rights, prerogatives, and obligations as Agent hereunder (if any). Agent may
delegate some or all of its obligations as Agent to a loan servicer; but such
delegation shall not excuse Agent from its obligations hereunder, including its
obligations as “Servicer” hereunder. Notwithstanding anything to the contrary
herein, only a Participant may serve as the Agent, and any attempt to Transfer
the rights, prerogatives, and obligations of Agent to any Person other than a
Participant (other than a delegation to a servicer) shall be void ab initio.

 

14.5          Transfers to Borrower or Affiliates of Borrower. Notwithstanding
anything to the contrary herein, a Participant, in its sole discretion, may
withhold consent to a Transfer if the transferee is Borrower or a Borrower
Related Party. Any attempt to Transfer a Participation or any direct or indirect
interest in a Participation to Borrower or a Borrower Related Party shall be
void ab initio; and if Borrower or a Borrower Related Party owns any direct or
indirect interest in a Participation or obtains Control of a Participation, the
holder of such Participation shall be deemed to have forfeited all rights under
this Agreement.

 

37 

 

 

14.6          Procedures for Proposed Transfers. Subject to Section 14.3, prior
to any Transfer, the transferor shall deliver the other Participant a written
notice of the proposed Transfer and such information as the other Participant
may reasonably request to evaluate whether consent should be granted, including
sufficient information to enable the other Participant to make an informed
business decision whether to consent or object thereto. If the other Participant
determines to withhold consent, it shall provide written notice of such
determination to the transferor, with reasonable disclosure of the reasons for
such determination. If the other Participant fails to deliver its written
determination within ten (10) Business Days of the request for consent, the
transferor may provide a second written notice to the other Participant, clearly
stating, in large, bold and otherwise conspicuous text, that should the other
Participant fail to deliver its written determination within ten (10) Business
Days, such failure shall be deemed consent to the proposed Transfer. If the
other Participant does not then provide its written determination within such
ten (10) Business Day period, such failure to respond shall be deemed to be the
other Participant’s approval of the proposed Transfer.

 

14.7          Release from Liability. Upon consummation of a Transfer of an
entire interest in a Participation that does not contravene the terms and
conditions hereof, and upon assumption of the obligations hereunder by the
transferee, the transferring Participant shall be deemed released from all
obligations hereunder for the period after the effective date of the Transfer.

 

14.8          Registration of Transfers.

 

(i)                 Agent shall maintain a Participation Register. Any transfer
of a Participation (but not a sub-participation) shall be recorded on the
Participation Register. The Person in whose name a Participation is so
registered shall be deemed and treated as the sole owner and holder of the
Participation for all purposes under this Agreement.

 

(ii)               A permitted transferee of a Participation may obtain from
Agent a replacement Certificate with respect to the Participation, issued in the
name of the permitted transferee, upon surrender of the Certificate previously
issued to the transferor.

 

Section 15:   [RESERVED]

 

Section 16:   AUTHORITY AND LIABILITIES OF THE AGENT.

 

16.1          Authority of Agent. Each Participant agrees that Agent, to the
extent consistent with the terms of this Agreement (including Section 17), shall
have the sole and exclusive authority (provided that it has obtained the consent
of any Participant whose consent is required) with respect to the administration
of, and exercise of rights and remedies with respect to, the Loan as
representative of the Participants, including the sole and exclusive authority:

 

(i)                 to modify or waive any of the terms of the Loan Documents,

 

(ii)               to consent to any action or failure to act by the Borrower or
any party to the Loan Documents,

 

38 

 

 

(iii)             to vote all claims with respect to the Loan in any bankruptcy,
insolvency or other similar proceedings,

 

(iv)             to exercise the Lender’s right under the Loan Agreement to
extend the Stated Maturity Date, and

 

(v)               to take legal action to enforce or protect the Participants’
interests with respect to the Loan or to refrain from exercising any powers or
rights under the Loan Documents, including the right at any time to call or to
waive any Events of Default, or to accelerate or to refrain from accelerating
the Loan or institute and manage any foreclosure action or other enforcement
action.

 

16.2          Absence of Fiduciary Relationship. Agent shall have no fiduciary
duty to any Participant in connection with the administration of the Loan; but
Agent shall have a contractual duty to act in accordance with this Agreement and
Accepted Servicing Practices. Such contractual duty shall be deemed assumed by
Senior Participant if Senior Participant becomes the Agent on account of a Loss
of Control Event.

 

16.3          Exclusive Right of Agent to Institute Loan Enforcement and
Foreclosure Proceedings. Each Participant expressly and irrevocably waives for
itself and any Person claiming through or under such Participant any and all
rights that it may have under Section 1315 of the New York Real Property Actions
and Proceedings Law or the provisions of any similar law that purports to give
the Participant a right to initiate any loan enforcement or foreclosure
proceeding.

 

16.4          Limitation on Agent’s Liability; Agent’s Ability to Rely on Advice
of Experts. Agent shall not be liable to any Participant with respect to
anything the Agent may do or omit to do in relation to the Loan, other than as
set forth in this Agreement. Without limiting the generality of the foregoing,
the Agent, acting on behalf of the Participants in accordance this Agreement,
may rely on the advice of legal counsel, accountants and other experts
(including those retained by the Borrower) and upon any written communication or
telephone conversation which the Agent reasonably and in good faith believes to
be genuine and correct or to have been signed, sent or made by the proper
Person.

 

Section 17:   CONSULTATIONS AND MAJOR DECISIONS.

 

17.1          Consultations Between Agent and Participants. Agent shall consult
with the Participants in good faith at any time (whether or not an Event of
Default or Loss of Control Event has occurred) with respect to proposals to take
any significant action with respect to the Loan or any REO Property (including
any Major Decision) and shall consider in good faith any alternative proposal or
recommendation by any Participant in connection therewith.

 

17.2          Major Decisions. Subject to Section 17.4, before consenting to or
taking, as applicable, any of the actions described below (each, a “Major
Decision”), the Agent shall be required (x) to notify the other Participant in
writing of any proposal to take such action (unless such action was proposed in
writing by the other Participant), and (y) to provide the other Participant with
such information requested by the other Participant as may be necessary in the
reasonable judgment of the other Participant in order to make an informed
evaluation of the proposal. If the Agent is the Junior Participant, the Agent
shall not consent to or take the Major Decision without the prior written
approval of the Senior Participant. Such prior written approval may be withheld
in Senior Participant’s sole discretion; except that if, under the Loan
Documents or applicable law Agent is under a duty to Borrower not to
unreasonably withhold consent or approval with respect to the proposed Major
Decision, then Senior Participant shall be under an equivalent duty hereunder
not to unreasonably withhold consent or approval. If the Agent is Senior
Participant, then subject to Section 17.3, and provided that Junior Participant
has been provided with notice, information, and consultation rights as provided
in Section 17.1 and Section 17.2, Agent shall not be required to obtain the
consent of Junior Participant before consenting to or taking the Major Decision
(but Agent shall still be required to act in accordance with Accepted Servicing
Practices); except that Junior Participant’s consent shall continue to be
required, even if Senior Participant has become the Agent, for any agreement
that constitutes a permanent write-off of principal or the substantial
equivalent thereof. Major Decision shall mean each of the following:

 

39 

 

 

(i)                 Release or accept any substitution of collateral for the
Loan, or approve of any transfer of any such collateral, other than in
accordance with and as specifically permitted (without the Lender’s consent) by
the terms of the Loan Documents, or upon full satisfaction of the Loan; except
that Major Decision shall not include evaluating and approving Borrower’s
requests for disbursement of funds from deposits, reserves, or escrows held or
controlled by Agent.

 

(ii)               Release of Borrower or any Borrower Related Party from
liability under or with respect to the Loan, or modify, amend, release or waive
rights or obligations under any guaranty provided in connection with the Loan.

 

(iii)             Make any determination not to enforce a “due-on-sale” or “due
on encumbrance” clause (unless such clause is not exercisable under applicable
law or such exercise is reasonably likely to result in successful legal action
by the Borrower.

 

(iv)             Agree to or grant (A) any modification or waiver of a monetary
term of the Loan or any modification of, or waiver with respect to, the Loan,
(B) except for an extension agreement or forbearance agreement in either case
not to exceed one (1) year beyond the Maturity Date, any change of the Maturity
Date, (C) any reduction in the interest rate, Yield Maintenance Premium, or Exit
Fee, (D) a deferral or a forgiveness of interest on or principal of the Loan,
(E) other than extension agreements described above, any modification or waiver
of any other monetary term of the Loan relating to the timing or amount of any
payment of principal or interest or any other sums due and payable under the
Loan Documents, or (F) any modification or waiver of any provision of the Loan
which restricts the Borrower or its equity owners from incurring additional
indebtedness.

 

(v)               Subject to the express rights (if any) of Borrower and
Borrower Related Parties under the Loan Documents to do so without Lender’s
consent, consent to any sale, transfer, pledge or assignment of the collateral
for the Loan or of any controlling interest in Borrower.

 

40 

 

 

(vi)             Agree to any material changes to, or grant any waivers of any
of, the insurance requirements pertaining to insurance required under the Loan
Documents or the disposition of insurance or condemnation proceeds, or settle
any material insurance claim.

 

(vii)           Consent to any further encumbrance of the Collateral or
incurrence of additional debt by Borrower (except as permitted by the Loan
Agreement).

 

(viii)         Exercise any offsets against collateral of Borrower or collateral
for the Loan held by or under the control of Agent.

 

(ix)             Agree to an acquisition of any collateral by deed-in-lieu of
foreclosure.

 

(x)               Agree to any proposed sale of the collateral or any REO
Property unless as a result thereof all amounts due Senior Participant shall be
paid in full.

 

(xi)             Make any determination to bring any collateral into compliance
with environmental laws or otherwise deal with hazardous materials.

 

(xii)           Agree to any modification of escrow or reserve requirements.

 

(xiii)         Consent to or accept any cancellation or termination of any of
the Loan Documents; agree to any transfer or termination of any instrument now
or hereafter assigned as security for the Loan; or release, partially or fully,
any collateral for the Loan, except in connection with the full repayment of the
Loan or pursuant to the express terms of the Loan Documents.

 

(xiv)         Increase the principal amount of the Loan except for (A) Loan
Advances which Lender, pursuant to the Loan Documents, committed to make, (B)
increases resulting from the assessment or accrual to the Loan Principal Balance
of delinquent interest, Default Interest, Late Charges, or Costs chargeable to
Borrower under the Loan Documents and applicable law and custom, and (C)
Protective Advances to the extent permitted hereunder.

 

(xv)           Amend any intercreditor, buy-sell, recognition or subordination
agreement relating to the Loan (provided that, for clarification, this shall not
be construed to apply to the Option Agreement).

 

(xvi)         Approve any direct or indirect transfer of ownership or beneficial
interest in Borrower, any assumption of the Loan or release of Borrower other
than as expressly contemplated by the Loan Documents on the date hereof, or
grant any consent to any material change in the Organizational Documents of
Borrower other than changes expressly contemplated by the Loan Documents.

 

(xvii)       Waive any condition to an advance of Loan proceeds (provided that,
with respect to this Major Decision, Senior Participant’s approval shall be
deemed given unless its objection is duly reserved in an Objection Narrative).

 

41 

 

 

(xviii)     Take any action or make any determination which is an REO Major
Decision.

 

17.3          Action Notice for Major Decisions. Subject to Section 17.4, Agent
shall notify in writing each Participant which must consent to a particular
action pursuant to Section 17.2 or otherwise hereunder (such notice, an “Action
Notice”). In the case of an Action Notice regarding a Major Decision, the Action
Notice shall bear a legend, in large, bold and otherwise conspicuous text,
identifying the notice as a request for consent to a Major Decision. If a
Participant fails to notify the Agent of its approval or disapproval of any such
proposed action within ten (10) Business Days after delivery to such Participant
by Agent of the first Action Notice, then Agent may provide a second Action
Notice to the Participant, clearly stating, in large, bold and otherwise
conspicuous text, that should such Participant fail to notify the Agent of its
approval or disapproval of such proposed action within ten (10) Business Days,
such failure shall be deemed consent to the proposed action. If a Participant
fails to notify the Agent of its approval or disapproval of any such proposed
action within ten (10) Business Days after delivery to such Participant by Agent
of the second Action Notice, then such action by the Agent shall be deemed to
have been approved by the such Participant.

 

17.4          Restrictions on Powers of Participants. Notwithstanding any other
provision of this Agreement, Agent shall not be bound by any advice, direction
or objection from or by any Participant to the extent that Agent, in its
reasonable good faith judgment, determines that such advice, direction, or
objection, if followed, would require or cause Agent to violate any law of any
applicable jurisdiction, would be inconsistent with Accepted Servicing
Practices, or would violate any other provisions of this Agreement or the Loan
Documents.

 

Section 18:   APPOINTMENT OF NEW AGENT FOLLOWING LOSS OF CONTROL EVENT; CONTROL
RETENTION COLLATERAL

 

18.1          Required Control Appraisal. Promptly upon the occurrence of an
Appraisal Event, Agent shall engage an appraiser to render an Appraisal of the
Property. The appraiser shall be selected by Agent with the consent of both
Participants. Thereafter, until sale of the REO Property or a Final Recovery
Determination, unless waived by both Participants, not later than six (6) months
after the effective date of the most recent Appraisal or Appraisal Update, Agent
shall engage the same appraiser to render an Appraisal Update (except that at
the request of either Participant, Agent shall engage a different appraiser who
must be approved by both Participants, and the new appraiser shall render a new
Appraisal). Each Appraisal and Appraisal Update shall be on an as “as-is” basis.
The cost of each Appraisal and Appraisal Update shall be recoverable by Agent as
a Cost.

 

18.2          Loss of Control Event. Within three (3) Business Days of its
receipt of an Appraisal or Appraisal Update, the Agent shall notify the
Participants whether a Loss of Control Event exists based on such Appraisal or
Appraisal Update.

 

18.3          Second Opinion re Loss of Control Event. Upon the determination
that a Loss of Control Event has occurred, Junior Participant shall have the
right, for five (5) Business Days after such determination, to direct Agent to
obtain a second Appraisal. The second Appraisal shall be rendered by a different
appraiser approved by both Participants, at the sole expense of Junior
Participant. The Participants shall jointly direct the approved appraiser to
make commercially reasonable efforts to complete and deliver the second
Appraisal within fifteen (15) Business Days from commencement of the engagement.
If the Appraised Value of the Property determined by the second Appraisal does
not differ from the Appraised Value indicated in the Appraisal or Appraisal
Update used in determining the Loss of Control Event by more than 5%, the first
Appraisal or Appraisal Update shall be utilized to determine the Loss of Control
Event. If the Appraised Value of the Property determined by the second Appraisal
differs from the Appraised Value indicated in the Appraisal or Appraisal Update
used in determining the Loss of Control Event by more than 5%, the Agent shall
direct the appraisers to jointly appoint a third Appraiser, at the expense of
Junior Participant, to reconcile the differences between the Appraised Values
determined under each Appraisal. The Participants shall jointly direct the third
appraiser to make commercially reasonable efforts to complete its reconciliation
within fifteen (15) Business Days from commencement of the engagement. The
determination of such third Appraiser shall be the final and binding
determination of the Appraised Value of the Property for purposes of determining
the Loss of Control Event until the next Appraisal or Appraisal Update, if any,
is ordered and received in accordance with the terms hereof. Until the Appraised
Value has been determined in accordance with the second or third Appraisal, as
applicable, the commencement of the Loss of Control Event shall be deferred.

 

42 

 

 

18.4          Transfer of Agent Rights. Subject to Section 18.5, upon the
commencement of a Loss of Control Event, Senior Participant shall have the
right, upon demand, to assume the rights, responsibilities, and prerogatives of
Agent hereunder. Such assumption shall be in writing, and Junior Participant, in
its capacity as Agent, shall be released from all obligations and liabilities as
Agent with respect to actions, events, or circumstances that first occur from
and after the date that Senior Participant assumes in writing the rights,
responsibilities, and prerogatives as Agent. Junior Participant shall cooperate
in good faith with the transition.

 

18.5          Posting of Control Retention Collateral to Defer Loss of Control
Event. Upon the final determination of a Loss of Control Event based on an
Appraisal (after giving effect to the terms of Section 18.3), Junior Participant
shall have the right to defer the Loss of Control Event by delivering to Senior
Participant a Control Retention Guaranty that is secured by Control Retention
Collateral. The Control Retention Collateral must be in an amount that would be
sufficient to prevent the Loss of Control Event from occurring pursuant to the
definition thereof. In order to be effective, the Control Retention Guaranty and
the Control Retention Collateral must be delivered to Senior Participant within
ten (10) Business Days after the final determination of the Loss of Control
Event. Upon delivery of the Control Retention Guaranty and Control Retention
Collateral, the Loss of Control Event shall be deferred until delivery of the
next Appraisal or Appraisal Update, at which time the Agent, in consultation
with the Participants, shall make a new determination whether a Loss of Control
Event has occurred in accordance with all of the terms and conditions of this
Section 18.

 

18.6          Restoration of Agent’s Rights to Junior Participant. At its
request, Junior Participant shall be restored to the rights, prerogatives, and
obligations of Agent if, based on a subsequent Appraisal or Appraisal Update and
giving effect to the Control Retention Guaranty and Control Retention Collateral
then held by Senior Participant, the Loss of Control Event is no longer
continuing. In such event, Junior Participant shall have the right, upon demand,
to assume the rights, responsibilities, and prerogatives of Agent hereunder.
Such assumption shall be in writing, and Senior Participant, in its capacity as
Agent, shall be released from all obligations and liabilities as Agent with
respect to actions, events, or circumstances that first occur from and after the
date that Junior Participant assumes in writing the rights, responsibilities,
and prerogatives as Agent. Senior Participant shall cooperate in good faith with
the transition.

 

43 

 

 

18.7          Release of Excess Control Retention Collateral. If Junior
Participant delivers a Control Retention Guaranty secured by Control Retention
Collateral, and if the Participants determine in good faith, based on a
subsequent Appraisal or Appraisal Update rendered in accordance with this
Section 18 that the Control Retention Collateral exceeds the amount required to
continue deferring a Loss of Control Event, Senior Participant shall release the
excess Control Retention Collateral.

 

18.8          Application of Control Retention Collateral Upon Final Recovery
Determination. Following a Final Recovery Determination and liquidation of all
other collateral for the Loan in accordance with Accepted Servicing Practices
and distribution of the proceeds thereof in accordance with the terms hereof,
the Control Retention Collateral shall be liquidated and the proceeds thereof
shall be distributed as Available Funds in accordance with the terms of Section
5.3.

 

Section 19:   CERTAIN MATTERS AFFECTING THE AGENT.

 

19.1          Certain Rights of Agent.

 

(i)                 The Agent may request and/or rely upon and shall be
protected in acting or refraining from acting upon any notice or consent
delivered to the Agent pursuant to this Agreement that Agent believed reasonably
and in good faith to be genuine. The Agent shall not be bound to make any
investigation into the facts or matters stated in any notice or consent
delivered to the Agent pursuant to this Agreement. Notwithstanding the
foregoing, this paragraph (i) shall not excuse Agent of any liability arising
from its gross negligence or willful misconduct.

 

(ii)               The Agent shall be under no obligation to institute, conduct
or defend any litigation hereunder or in relation hereto at the request, order
or direction of any Participant pursuant to the provisions of this Agreement,
unless it has received indemnity reasonably satisfactory to it.

 

(iii)             The Agent may execute any of the powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys or a
third party servicer but shall not be relieved of its obligations hereunder,
including its obligation to service the Loan in accordance with Accepted
Servicing Practices.

 

Section 20:   MISCELLANEOUS

 

20.1          No Pledge or Loan. This Agreement shall not be deemed to represent
a pledge of any interest in the Loan by the Senior Participant to the Junior
Participant, or a loan from the Senior Participant to the Junior Participant.
The transfer of the Senior Participation is intended to be a true sale and not a
financing. The Participants shall not have any interest in any property taken as
security for the Loan; provided, however, that if any such property or the
proceeds thereof shall be applied in reduction of the Loan Principal Balance,
then each Participant shall be entitled to receive its share of such application
in accordance with the terms of this Agreement. The Participants acknowledge and
agree that the Loan represents a single “claim” under Section 101 of the
Bankruptcy Code, and that neither Participant shall be a separate creditor of
the Borrower under the Bankruptcy Code.

 

44 

 

 

20.2          No Creation of a Partnership or Exclusive Purchase Right. Nothing
contained in this Agreement, and no action taken pursuant hereto shall be deemed
to constitute the arrangement between the Participants of a partnership,
association, joint venture or other entity. No Participant shall have any
obligation whatsoever to offer to the other Participant the opportunity to
purchase notes or participation interests relating to any future loans
originated by the such Participant or any of its Affiliates, and if a
Participant chooses to offer to the other Participant the opportunity to
purchase notes or any participation interests in any future mortgage loans
originated by the Participant or its Affiliates, such offer shall be at such
purchase price and interest rate as the Participant chooses, in its sole and
absolute discretion. No Participant shall have any obligation whatsoever to
purchase from the other Participant any notes or participation interests in any
future loans originated by the other Participant or any of its Affiliates.

 

20.3          Other Business Activities of the Participants. Each Participant
acknowledges that the other Participant may make loans or otherwise extend
credit to, and generally engage in any kind of business with, any Borrower
Related Party and receive payments on such other loans or extensions of credit
to Borrower Related Parties, and otherwise act with respect thereto freely and
without accountability in the same manner as if this Agreement and the
transactions contemplated hereby were not in effect.

 

20.4          Not a Security. No Participation shall be deemed to be a security
within the meaning of the Securities Act of 1933 or the Securities Exchange Act
of 1934.

 

20.5          Governing Law; Submission to Jurisdiction.

 

(i)                 This agreement and the rights and obligations of the parties
hereto shall be construed in accordance with and be governed by the laws of the
State of New York (without giving effect to the principles thereof relating to
conflicts of law).

 

(ii)               Any legal action or proceeding with respect to this agreement
and any action for enforcement of any judgment in respect thereof may be brought
in the courts of the State of New York, Borough of Manhattan, or of the United
States of America for the Southern District of New York and, by execution and
delivery of this agreement, each party hereby accepts for itself and in respect
of its property, generally and unconditionally, the non-exclusive jurisdiction
of the aforesaid courts and appellate courts for any such action or proceeding.
Each party hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this agreement brought in the courts
referred to above and hereby further irrevocably waives the right, and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum. Nothing
herein shall affect the right of any Participant to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against mortgage borrower in any other jurisdiction.

 

45 

 

 

20.6          Waiver of Jury Trial. To the fullest extent permitted by
applicable law, each party to this agreement hereby irrevocably waives all right
to trial by jury in any action, proceeding or counterclaim arising out of or
relating to this agreement.

 

20.7          Successors and Assigns; Third Party Beneficiaries. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns.

 

20.8          Counterparts. This Agreement may be executed in any number of
counterparts and all of such counterparts shall together constitute one and the
same instrument. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile transmission (including by electronic transmission of a
signed signature page via fax machine or scanned file in PDF format) shall be as
effective as delivery of a manually executed counterpart of this Agreement.

 

20.9          Captions. The titles and headings of the paragraphs of this
Agreement have been inserted for convenience of reference only and are not
intended to summarize or otherwise describe the subject matter of the paragraphs
and shall not be given any consideration in the construction of this Agreement.

 

20.10      Notices.

 

(i)                 All notices required hereunder shall be given in writing and
addressed to the respective parties as set forth on the Exhibit C (or at such
other address as any party shall hereafter inform the other party by written
notice given as aforesaid) by:

 

(A)             personal delivery;

 

(B)              e-mail;

 

(C)              reputable overnight delivery service (charges prepaid); or

 

(D)             certified United States mail, postage prepaid return receipt
requested.

 

(ii)               A written notice shall be deemed to have been given:

 

(A)             in the case of personal delivery, at the time of delivery (or
refusal of receipt);

 

(B)              in the case of e-mail, on the Business Day delivered, provided
that such notice is also sent concurrently pursuant to another method provided
for in Section 20.10(i) above;

 

46 

 

 

(C)              in the case of overnight prepaid delivery, upon the first
attempted delivery on a Business Day; or

 

(D)             in the case of certified United States mail, two (2) Business
Days after such deposit.

 

Notwithstanding the foregoing, any notice received after 5:00 p.m., local time
of the recipient, shall be deemed to have been delivered the following Business
Day. A party receiving a notice that does not comply with the technical
requirements for notice under this Section 21.10 may elect to waive any
deficiencies and treat the notice as having been properly given.

 

20.11      Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable laws, 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.

 

20.12      Withholding Taxes.

 

(i)                 If Borrower, Agent, or any other Person having control of
funds payable to a Participant (a “Withholding Agent”) shall be required by law
to deduct and withhold Taxes from interest, fees or other amounts payable to a
Participant (the “Non-Exempt Participant”) with respect to the Loan as a result
of such Participant constituting a Non-Exempt Person (or failing to provide to
any Withholding Agent satisfactory evidence that it is not a Non-Exempt Person,
in whole or in part), the Withholding Agent shall be entitled to do so with
respect to such Non-Exempt Participant’s interest in such payment (all withheld
amounts being deemed paid to the Non-Exempt Participant); provided that the
Withholding Agent shall furnish the Non-Exempt Participant with a statement
setting forth the amount of Taxes withheld, the applicable rate and other
information which may reasonably be requested for purposes of assisting the
Non-Exempt Participant to seek any allowable credits or deductions for the Taxes
so withheld in each jurisdiction in which the Non-Exempt Participant is subject
to tax.

 

(ii)               The Non-Exempt Participant shall and hereby agrees to
indemnify any Withholding Agent against and hold such Withholding Agent harmless
from and against any Taxes, interest, penalties and reasonable attorneys’ fees
and disbursements arising or resulting from any failure of the Withholding Agent
to withhold Taxes from payment made to the Non-Exempt Participant in reliance
upon any representation, certificate, statement, document or instrument made or
provided by the Non-Exempt Participant to a Withholding Agent, it being
expressly understood and agreed that:

 

(A)             The Withholding Agent shall be absolutely and unconditionally
entitled to accept any such representation, certificate, statement, document or
instrument as being true and correct in all respects and to fully rely thereon
without any obligation or responsibility to investigate or to make any inquiries
with respect to the accuracy, veracity, correctness or validity of the same; and

 

47 

 

 

(B)              The Non-Exempt Participant shall, upon request of the
Withholding Agent and at its sole cost and expense, defend any claim or action
relating to the foregoing indemnification using counsel reasonably satisfactory
to the Withholding Agent.

 

(iii)             Each Participant that claims exemption (in whole or in part)
from withholding of U.S. income tax represents to the other Participant (for the
benefit of the Borrower and Agent) that it is not a Non Exempt Person (to the
extent of its claimed exemption) and that neither the Borrower nor Agent nor any
other Person is obligated under applicable law to withhold Taxes on sums paid to
it with respect to the Loan or otherwise pursuant to this Agreement to the
extent that it claims an exemption. Contemporaneously with the execution of this
Agreement and from time to time as necessary during the term of this Agreement,
each Participant shall deliver to the Agent, or such other Person as shall be
making distributions to the Participant’s hereunder, evidence satisfactory to
such Person substantiating that it is not a Non Exempt Person (to the extent of
its claim of exemption) and that the Withholding Agent is not obligated under
applicable law to withhold Taxes on sums paid to it (to the extent of its claim
of exemption) with respect to the Loan or otherwise under this Agreement.

 

(iv)             Without limiting the effect of the foregoing, (i) if a
Participant is created or organized under the laws of the United States, any
state thereof or the District of Columbia, it shall satisfy the requirements of
the preceding sentence by furnishing to the Servicer or such other Person as
shall be making distributions hereunder an Internal Revenue Service Form W 9 and
(ii) if the Participant is not created or organized under the laws of the United
States, any state thereof or the District of Columbia, and if the payment of
interest or other amounts by the Borrower is treated for United States income
tax purposes as derived in whole or part from sources within the United States,
the Participant shall satisfy the requirements of the preceding sentence by
furnishing to the Servicer or other Person making distributions hereunder
Internal Revenue Service Form W 8ECI or Form W 8BEN, or successor forms, as may
be required from time to time, duly executed by such Participant, as evidence of
the Participant’s whole or partial exemption from the withholding of United
States tax with respect thereto. No Person shall be obligated to make any
payment hereunder to any Participant in respect of its Participation or
otherwise until the Participant shall have furnished to such Person the
requested forms, certificates, statements or documents.

 

(v)               The Agent shall treat any Participant that does not satisfy
the requirements set forth herein as a Non-Exempt Participant.

 

[NO FURTHER TEXT ON THIS PAGE]

 

48 

 

 

IN WITNESS WHEREOF, each of the Participants has caused this Agreement to be
duly executed as of the day and year first above written.

 

  senior participant         red capital partners, llc,   an Ohio limited
liability company         By: /s/ CHRISTOPHER ADAMS     Name: CHISTOPHER ADAMS  
  Title: Managing Director         junior participant:         sentio
georgetown, llc,   a Delaware limited liability company         By: /s/ JOHN
MARK RAMSEY     Name: JOHN MARK RAMSEY     Title: AUTHORIZED SIGNER        
sentio georgetown TRS, llc,   a Delaware limited liability company         By:
/s/ JOHN MARK RAMSEY     Name: JOHN MARK RAMSEY     Title: AUTHORIZED SIGNER

 

 

 

 

CONSENT OF BORROWER

 

The undersigned is the “Borrower” under the CONSTRUCTION LOAN AGREEMENT between
SENTIO GEORGETOWN, LLC, a Delaware limited liability company and SENTIO
GEORGETOWN TRS, LLC, a Delaware limited liability company, collectively as
Lender, and WESTMINSTER – LCS GEORGETOWN LLC, an Iowa limited liability company
as Borrower dated as of January 15, 2015 (the “Agreement”).

 

Pursuant to Section 14.17 of the Agreement, Borrower consents to the foregoing
Participation Agreement, and agrees that a subsequent change in the identity of
the “Agent” thereunder, on account of a Loss of Control Event or the termination
of a Loss of Control Event, shall not require the consent of Borrower.

 

Borrower acknowledges that it is not an intended beneficiary of the
Participation Agreement.

 

August 31, 2016

 

WESTMINSTER – LCS GEORGETOWN LLC, an Iowa limited liability company            
By: LCS Georgetown LLC, an Iowa limited liability company, its Managing Member  
          By: /s/ Joel D. Nelson       Name: Joel D. Nelson       Title:
President and COO  

  

 

 

 

EXHIBIT A

 

SENIOR PARTICIPATION CERTIFICATE

 

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE. THE HOLDER OF
THIS CERTIFICATE, BY ITS ACCEPTANCE HEREOF, REPRESENTS THAT IT IS ACQUIRING THE
PARTICIPATION INTEREST EVIDENCED BY THIS CERTIFICATE FOR INVESTMENT AND NOT WITH
A VIEW TO ANY SALE OR DISTRIBUTION THEREOF.

 

THIS CERTIFICATE IS NOT A NEGOTIABLE INSTRUMENT. THE PARTICIPATION INTEREST
EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
PARTICIPATION AGREEMENT, AND MAY NOT BE TRANSFERRED OR ENCUMBERED EXCEPT IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE PARTICIPATION AGREEMENT.

 

Senior Participation   Senior Certificate No. 1

Reference is made to a Construction Loan Agreement (the “Agreement”) dated
January 15, 2015, between WESTMINSTER – LCS GEORGETOWN LLC, an Iowa limited
liability company as “Borrower”, and SENTIO GEORGETOWN, LLC, a Delaware limited
liability company and SENTIO GEORGETOWN TRS, LLC, a Delaware limited liability
company, collectively as “Lender”. Capitalized terms used herein, if not
otherwise defined, have the meanings ascribed to them in the Participation
Agreement (defined below).

 

The undersigned, in its capacity as “Lender” under the Agreement, hereby
certifies that

 

RED CAPITAL PARTNERS, LLC, an Ohio limited liability company

 

is the registered holder of the Senior Participation in the Loan, which Senior
Participation was created pursuant to the Participation Agreement, dated August
31, 2016, by and among RED CAPITAL PARTNERS, LLC, SENTIO GEORGETOWN, LLC, and
SENTIO GEORGETOWN TRS, LLC (the “Participation Agreement”).

 

The participation interest evidenced by this certificate may not be transferred
except in accordance with the terms and conditions of the Participation
Agreement, and any other transfer shall be without effect and shall not be
recognized by the undersigned. A permitted transferee of the participation
interest evidenced this certificate may become a registered holder thereof only
by surrendering this certificate and requesting issuance of a replacement
certificate in accordance with the terms and conditions of the Participation
Agreement.

 

Dated: August 31, 2016

 

SENTIO GEORGETOWN, LLC
a Delaware limited liability company

 

By: ___________________________
Name: ________________________
Title: _________________________

 

SENTIO GEORGETOWN TRS, LLC
a Delaware limited liability company

 

By: ___________________________
Name: ________________________
Title: _________________________

 

  

 

 

 

EXHIBIT B

 

JUNIOR PARTICIPATION CERTIFICATE

 

THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE. THE HOLDER OF
THIS CERTIFICATE, BY ITS ACCEPTANCE HEREOF, REPRESENTS THAT IT IS ACQUIRING THE
PARTICIPATION INTEREST EVIDENCED BY THIS CERTIFICATE FOR INVESTMENT AND NOT WITH
A VIEW TO ANY SALE OR DISTRIBUTION THEREOF.

 

THIS CERTIFICATE IS NOT A NEGOTIABLE INSTRUMENT. THE PARTICIPATION INTEREST
EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A
PARTICIPATION AGREEMENT, AND MAY NOT BE TRANSFERRED OR ENCUMBERED EXCEPT IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE PARTICIPATION AGREEMENT.

 

Junior Participation   Junior Certificate No. 1

Reference is made to a Construction Loan Agreement (the “Agreement”) dated
January 15, 2015, between WESTMINSTER – LCS GEORGETOWN LLC, an Iowa limited
liability company as “Borrower”, and SENTIO GEORGETOWN, LLC, a Delaware limited
liability company and SENTIO GEORGETOWN TRS, LLC, a Delaware limited liability
company, collectively as “Lender”. Capitalized terms used herein, if not
otherwise defined, have the meanings ascribed to them in the Participation
Agreement (defined below).

 

The undersigned, in its capacity as “Lender” under the Agreement, hereby
certifies that

 

SENTIO GEORGETOWN, LLC, a Delaware limited liability company,
and
SENTIO GEORGETOWN TRS, LLC, a Delaware limited liability company,

 

are collectively the registered holder of the Junior Participation in the Loan,
which Junior Participation was created pursuant to the Participation Agreement,
dated August 31, 2016, by and among RED CAPITAL PARTNERS, LLC, SENTIO
GEORGETOWN, LLC, and SENTIO GEORGETOWN TRS, LLC (the “Participation Agreement”).

 

The participation interest evidenced by this certificate may not be transferred
except in accordance with the terms and conditions of the Participation
Agreement, and any other transfer shall be without effect and shall not be
recognized by the undersigned. A permitted transferee of the participation
interest evidenced this certificate may become a registered holder thereof only
by surrendering this certificate and requesting issuance of a replacement
certificate in accordance with the terms and conditions of the Participation
Agreement.

 

Dated: August 31, 2016

 

SENTIO GEORGETOWN, LLC
a Delaware limited liability company

 

By: ___________________________
Name: ________________________
Title: _________________________

 

SENTIO GEORGETOWN TRS, LLC
a Delaware limited liability company

 

By: ___________________________
Name: ________________________
Title: _________________________

 

 

 

 

 

EXHIBIT C

 

Notice Addresses

  

  To Junior Participant:  

Sentio Georgetown, LLC

c/o Sentio Investments, LLC

189 South Orange Ave.

Orlando, Florida 32801

Attention: Spencer Smith

Email: ssmith@sentioinvestments.com

          With a copy to:  

DLA Piper LLP (US)

5251 DTC Parkway, Suite 1001

Greenwood Village, Colorado 80111

Attention: David E. Cher

Email: david.cher@dlapiper.com

          To Senior Participant:  

Red Capital Partners, LLC

1 N. Franklin Street, Suite 1150

Chicago, Illinois 60606

Attention: John O’Toole, Managing Director

Email: JPOtoole@redcapitalgroup.com

 

and

 

Red Capital Partners, LLC

10 W. Broad Street, 8th Floor

Columbus, OH 43215-3418

Attention: James Henson, General Counsel

E-Mail: JJHenson@redcapitalgroup.com

          With a copy to:  

Munsch Hardt Kopf & Harr, P.C.

500 N. Akard Street, Suite 3800

Dallas, Texas 75201-6659

Attention: Phillip J.F. Geheb, Esq.

Email: pgeheb@munsch.com

 

 

 

 

Exhibit D

 

Distribution Spreadsheet

 

THE DELANEY AT GEORGETOWN

 

Draw Request No. 17

 

           (D)               (H)                 Reallocated       (F)      
Total   (I)     (B)   (C)   Budgeted   (E)   Sentio   (G)   Requests   Balance
to  (A)  Budgeted   Reallocations   Amount   Prior   Loan A Interest   Current  
To Date   Completion  Budgeted Line Items  Amount   To Budget   [(B) + (C)]  
Requests   Funded 8/1/16   Request   [(E)+(F)+(G)]   [(D) - (H)]                
                   USES OF FUNDS                                               
                   White Construction Costs (GMP)  $29,598,138.00  
$325,716.37   $29,923,854.37   $25,629,947.68   $0.00   $940,725.49  
$26,570,673.17   $3,353,181.20  Construction Costs (Non-GMP) (1)   913,000.00  
 694,457.62    1,607,457.62    652,199.01    0.00    100,450.62    752,649.63  
 854,807.99  Total Hard Costs   30,511,138.00    1,020,173.99    31,531,311.99  
 26,282,146.69    0.00    1,041,176.11    27,323,322.80    4,207,989.19         
                                  Land   2,884,000.00    233,964.55  
 3,117,964.55    3,117,964.55    0.00    0.00    3,117,964.55    0.00  Design
Costs (1)   1,425,000.00    (33,495.30)   1,391,504.70    1,388,363.22    0.00  
 0.00    1,388,363.22    3,141.48  Interior Design Costs   824,600.00    0.00  
 824,600.00    79,415.09    0.00    0.00    79,415.09    745,184.91  Financing
Costs   1,235,910.00    0.00    1,235,910.00    1,181,173.35    0.00    0.00  
 1,181,173.35    54,736.65  Construction Period Interest   5,539,000.00  
 0.00    5,539,000.00    1,163,048.91    186,618.44    876.75    1,350,544.10  
 4,188,455.90  Occupancy Development   286,000.00    0.00    286,000.00  
 221,927.75    0.00    6,266.56    228,194.31    57,805.69  Capital Items
(Non-GMP)   610,400.00    0.00    610,400.00    67,417.56    0.00    0.00  
 67,417.56    542,982.44  Travel Costs   72,000.00    54,323.91    126,323.91  
 124,535.86    0.00    1,788.05    126,323.91    0.00  Consultants and Legal
Costs (1)   100,000.00    93,570.51    193,570.51    193,033.51    0.00  
 537.00    193,570.51    0.00  Filing Costs   0.00    6,921.00    6,921.00  
 6,921.00    0.00    0.00    6,921.00    0.00  General Costs   0.00  
 16,941.71    16,941.71    9,868.36    0.00    48.00    9,916.36    7,025.35 
Development Fee   2,084,251.00    0.00    2,084,251.00    1,521,518.00    0.00  
 19,230.00    1,540,748.00    543,503.00  Start-Up Loss   1,991,502.00    0.00  
 1,991,502.00    547,250.00    0.00    400,000.00    947,250.00    1,044,252.00 
Project Contingency   1,644,434.00    (1,383,621.37)   260,812.63    0.00  
 0.00    0.00    0.00    260,812.63  Total Soft Costs   18,697,097.00  
 (1,011,394.99)   17,685,702.01    9,622,437.16    186,618.44    428,746.36  
 10,237,801.96    7,447,900.05                                           
Operating Reserves (2)   100,000.00    0.00    100,000.00    3,303.71    0.00  
 0.00    3,303.71    96,696.29                                            Total
Uses of Funds  $49,308,235.00   $8,779.00   $49,317,014.00   $35,907,887.56  
$186,618.44   $1,469,922.47   $37,564,428.47   $11,752,585.53                   
                                                                  SOURCES OF
FUNDS                                                                         
         Borrower Equity  $7,396,235.00   $0.00   $7,396,235.00  
$7,396,235.00   $0.00   $0.00   $7,396,235.00   $0.00  Reimbursement for Tree
Mitigation (1)   0.00    8,779.00    8,779.00    8,779.00    0.00    0.00  
 8,779.00    0.00  Sentio Loan A   40,912,000.00    0.00    40,912,000.00  
 27,842,237.16    186,618.44    1,434,850.83    29,463,706.43    11,448,293.57 
Sentio Loan B   1,000,000.00    0.00    1,000,000.00    660,636.40    0.00  
 35,071.64    695,708.04    304,291.96                                       
    Total Sources of Funds  $49,308,235.00   $8,779.00   $49,317,014.00  
$35,907,887.56   $186,618.44   $1,469,922.47   $37,564,428.47   $11,752,585.53 

 

(1) The Surveyor had improperly located a tree on the Survey, and the corrective
tree mitigation included expenditures allocated to Construction Costs (Non-GMP)
($6,050.00), Design Costs ($1,600.00) and Consultants and Legal Costs
($1,129.00).  The Surveyor reimbursed the Borrower for these costs (totaling
$8,779.00), and these funds were released in Draw Request No. 4.

 

(2) WellsOne Account Statement is not included in this Draw Request.

 

NOTE: Total Loan A and B current request for funding is $1,434,850.83 plus
$35,071.64 equals $1,469,922.47.

 

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