Exhibit 10.2

 

SECOND AMENDED AND RESTATED GUARANTY

 

THIS SECOND AMENDED AND RESTATED GUARANTY dated as of October 31, 2016, (as
amended, supplemented and otherwise modified from time to time, this
“Guaranty”), is made by Sutherland Partners, L.P. (f/k/a ZAIS Financial
Partners, L.P.) (the “Guarantor”) in favor of Deutsche Bank AG, Cayman Islands
Branch.

 

RECITALS

 

A.            ReadyCap Commercial, LLC, a Delaware limited liability company
(“ReadyCap”), Sutherland Warehouse Trust II, a Delaware statutory trust
(“Sutherland Trust II”),  Sutherland Asset I, LLC, a Delaware limited liability
company (“Sutherland”, and together with ReadyCap, Sutherland Trust II and any
other Seller that may become a party to the Repurchase Agreement from time to
time in accordance with the provisions thereof, collectively, the “Sellers”, and
the Sellers together with the Guarantor, collectively, the “Seller Parties”),
U.S. Bank National Association, as Depository and Paying Agent, and Buyer have
entered into that certain Second Amended and Restated Master Repurchase
Agreement, dated as of June 9, 2016 (as amended, modified and/or restated, the
“Repurchase Agreement”), pursuant to which Buyer may enter into Transactions
with respect to Purchased Loans (as defined in the Repurchase Agreement) with
the Sellers with a simultaneous agreement from the Sellers to repurchase such
Purchased Loans, at a date certain or on demand (the “Transactions”);

 

B.            Buyer and Sutherland Partners, L.P., a Delaware limited
partnership that is predecessor by merger to the Guarantor (the “Predecessor
Guarantor”) have previously entered into that Amended and Restated Guaranty
dated as of December 17, 2015, (the “Existing Guaranty”), whose terms shall be
superseded in their entirety in accordance with the terms hereof.

 

C.            On or about the date hereof, the Predecessor Guarantor proposes to
merge (such transaction, the “Sutherland Partners Merger”) into the Guarantor,
with the Guarantor continuing as the surviving entity, and the Guarantor will
change its legal name to Sutherland Partners, L.P.

 

D.            Simultaneously with the Sutherland Partners Merger, Sutherland
Asset Management Corporation proposes to merge (such transaction, the “SAMC
Merger” and together with the Sutherland Partners Merger, the “Proposed
Mergers”) into ZAIS Merger Sub, LLC (“Merger Sub”), a wholly owned subsidiary of
ZAIS Financial Corp, with Merger Sub continuing as the surviving entity.

 

E.            Buyer has requested, as a condition of consenting to the Proposed
Mergers, that Guarantor deliver to Buyer this Guaranty;

 

F.             Guarantor is an Affiliate (as defined in the Repurchase
Agreement) of each Seller and directly or indirectly controls each Seller;

 

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G.            Guarantor expects to benefit if Buyer consents to the Proposed
Mergers, and desires that Buyer consent to the Proposed Mergers; and

 

H.            Buyer would not consent to the Proposed Mergers unless Guarantor
executed this Guaranty. This Guaranty is therefore delivered to Buyer to induce
Buyer to consent to the Proposed Mergers.

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the undersigned hereby agrees as follows:

 

1.             Definitions.  Except as otherwise specified herein or as the
context may otherwise require, the following terms have the respective meanings
set forth below for all purposes of this Guaranty, and the definitions of such
terms are equally applicable both to the singular and plural forms of such terms
and to the masculine, feminine and neuter genders of such terms.  Capitalized
terms not defined herein shall have the meanings used in the Repurchase
Agreement.  The word “including” and its variations shall mean “including
without limitation.” All references in this Guaranty to designated “Sections,”
“Subsections” and other subdivisions are to the designated Sections, Subsections
and other subdivisions of this Guaranty as originally executed.  The words
“herein,” “hereof,” “hereunder” and other words of similar import refer to this
Guaranty as a whole and not to any particular Section, Subsection or other
subdivision.

 

“Adjusted Tangible Net Worth”: For any Person, Net Worth minus (a) restricted
cash (other than any portion of restricted cash that has a corresponding
offsetting current liability); (b) 25% of investment securities that are rated
below BBB by S&P or the equivalent thereof (other than ownership interests in
any Affiliate) and (c) all intangible assets, including goodwill, patents,
tradenames, trademarks, copyrights, franchises, any organizational expenses,
deferred taxes and expenses, prepaid expenses, prepaid assets, receivables from
shareholders, Affiliates or employees, mortgage servicing rights, mortgage
servicing advances and any other asset as shown as an intangible asset on the
balance sheet of such Person on a consolidated basis as determined at a
particular date in accordance with GAAP (other  than any portion of such assets
that has a corresponding offsetting current liability).

 

“Cash Liquidity”: As of any date of determination, an amount equal to the sum of
(i) Cash and cash equivalents available to the Guarantor as of such date of
determination and (ii) the amount of Cash and cash equivalents on deposit in the
Cash Management Account as of such date of determination.

 

“Debt”: Total liabilities as determined in accordance with GAAP.

 

“Debt-to-Assets Ratio”: Expressed as a percentage as of any date of
determination, (i) (A) Debt minus (B) Excluded Indebtedness divided by
(ii) Total Assets net of any assets relating to Excluded Indebtedness.

 

“Disqualified Equity Interests”: Any Equity Interest which, by its terms (or by
the terms of any security or other Equity Interests into which it is convertible
or for which it is exchangeable), or upon the happening of any event or
condition (i) matures or is mandatorily redeemable (other than solely for Equity
Interests which are not otherwise Disqualified Equity

 

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Interests), pursuant to a sinking fund obligation or otherwise, (ii) is
redeemable at the option of the holder thereof (other than solely for Equity
Interests which are not otherwise Disqualified Equity Interests), in whole or in
part or (iii) provides for scheduled payments or dividends in cash, or (iv) is
or becomes convertible into or exchangeable for Indebtedness or any other Equity
Interests that would constitute Disqualified Equity Interests, in each case,
prior to the date that is 91 days after the Facility Termination Date.

 

“Equity Interests”: Any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation), including
partnership interests and membership interests, and any and all warrants, rights
or options to purchase or other arrangements or rights to acquire any of the
foregoing.

 

“Excluded Indebtedness”: Indebtedness included in the Guarantor’s financial
statements in accordance with GAAP but which none of the Guarantor or its
subsidiaries (other than subsidiaries that are CDOs or other securitization
entities) is obligated to pay, including all CDOs or other securitization
vehicles that are consolidated in accordance with GAAP.

 

“Existing Guaranty”: The meaning assigned in the recitals hereto.

 

“Government-Sponsored Enterprise”:  Each of the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation and the Government
National Mortgage Association.

 

“Guarantied Obligations”: the Seller Parties’ obligations to fully and promptly
pay all sums owed to Buyer under the Repurchase Agreement, the Letter Agreement,
and the other Transaction Documents and to Buyer and any Affiliated Hedge
Counterparties under any Approved Hedging Transactions with Affiliated Hedge
Counterparties, at the times and according to the terms required by the
Transaction Documents or the applicable Approved Hedging Transaction documents,
as applicable, including the Repurchase Price for each Purchased Loan, accrued
interest, default interest, indemnity amounts, costs, or fees (including any
such interest, costs or fees arising from and after the filing of an Insolvency
Proceeding against the Seller Parties or either of them), without regard to any
modification, suspension, or limitation of such terms not agreed to by Buyer,
such as a modification, suspension, or limitation arising in or pursuant to any
Insolvency Proceeding affecting any Seller Party (even if any such modification,
suspension, or limitation causes such Seller Party’s obligation to become
discharged or unenforceable, and in the case of an Insolvency Proceeding against
the Seller Parties or either of them, even if such modification was made with
Buyer’s consent or agreement).

 

“Indebtedness”: As applied to any Person, without duplication, (i) all
indebtedness for borrowed money; (ii) that portion of obligations with respect
to capital leases that is properly classified as a liability on a balance sheet
in conformity with GAAP; (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money;
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services, including any earn-out obligations (excluding any such
obligations incurred under ERISA), which purchase price is evidenced by a note
or similar

 

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written instrument; (v) all indebtedness secured by any lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the
credit of that Person; (vi) the face amount of any letter of credit issued for
the account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; (vii) Disqualified Equity Interests, (viii) the
direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another that
would otherwise be “Indebtedness” for purposes of this definition; (ix) any
obligation of such Person the primary purpose or intent of which is to provide
assurance to an obligee that the obligation of the obligor that would otherwise
be “Indebtedness” for purposes of this definition thereof shall be paid or
discharged, or any agreement relating thereto shall be complied with, or the
holders thereof shall be protected (in whole or in part) against loss in respect
thereof; (x) any liability of such Person for any Indebtedness of another
through any agreement (contingent or otherwise) (a) to purchase, repurchase or
otherwise acquire such Indebtedness or any security therefor, or to provide
funds for the payment or discharge of such obligation (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise) or (b) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under subclauses
(a) or (b) of this clause (x), the primary purpose or intent thereof is as
described in clause (ix) above; and (xi) all obligations (the amount of which
shall be determined on a net basis where permitted in the relevant contract) of
such Person in respect of any exchange traded or over the counter derivative
transaction, including any interest rate swap and any currency swap, in each
case, whether entered into for hedging or speculative purposes.

 

“Liquidity”: As of any date of determination, an amount equal to the sum of
(i) Cash Liquidity available to the Guarantor as of such date of determination,
(ii) an amount equal to 75% of the undrawn but available capacity under all
working capital or revolving credit facilities maintained by the Guarantor, as
determined by, and if acceptable to, the Buyer in its reasonable discretion and
(iii) an amount equal to 50% of the value of all liquid investment-grade
commercial-mortgage-backed securities held by the Guarantor, as determined by,
and if acceptable to, the Buyer in its reasonable discretion.

 

“Net Worth”: With respect to any Person, the excess of total assets of such
Person, over total liabilities of such Person, determined in accordance with
GAAP.

 

“Non-Recourse Indebtedness”:  With respect to any specified Person or any of its
Affiliates, Indebtedness that is (A) specifically advanced to finance the
acquisition of investment assets and secured only by the assets to which such
Indebtedness relates without recourse to such Person or any of its Affiliates
(other than subject to such customary carve-out matters for which such Person or
its Affiliates acts as a guarantor in connection with such Indebtedness, such as
fraud, misappropriation, breach of representation and warranty and
misapplication, unless, until and for so long as a claim for payment or
performance has been made thereunder (which has not been satisfied) at which
time the obligations with respect to any such customary carve-out shall not be
considered Non-Recourse Indebtedness, to the extent that such claim is a
liability of such Person for GAAP purposes) or (B) secured by (i) bonds,
debentures, treasury bills, notes or other securities issued by the government
of the United States of America or (ii) Qualified GSE Securities.

 

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“Qualified GSE Securities”:  Any certificates, notes or other securities that
are (i) issued and guaranteed by a Government-Sponsored Enterprise and
(ii) secured by one or more pools of mortgage loans acquired by such
Government-Sponsored Enterprise; for the avoidance of doubt, Qualified GSE
Securities shall not include any collateralized mortgage obligations,
collateralized debt obligations, credit default swaps, forward contracts,
futures contracts, options or any other derivative issued by a
Government-Sponsored Enterprise.

 

“Recourse Indebtedness”:  All Indebtedness other than Non-Recourse Indebtedness
and Securitization Indebtedness.

 

“Securitization”: A public or private transfer, sale or financing of
(i) servicing advances, (ii) mortgage loans, (iii) installment contracts,
(iv) other loans and related assets or (v) any other receivables (clauses (i) —
(v) above, collectively, the “Securitization Assets”) by which any Seller Party
or any of their respective Affiliates directly or indirectly securitizes a pool
of specified Securitization Assets including, without limitation, any such
transaction involving the sale of specified servicing advances or mortgage loans
to a Securitization Entity.

 

“Securitization Entity”: (i) Any Person (whether or not an Affiliate of the
Guarantor) established for the purpose of issuing asset-backed or
mortgaged-backed or mortgage pass-through securities of any kind (including
collateralized mortgage obligations and net interest margin securities) and
(ii) any special purpose entity established for the purpose of selling,
depositing or contributing Securitization Assets into a Person described in
clause (i) or holding securities in any related Securitization Entity,
regardless of whether such person is an issuer of securities; provided that such
Person is not an obligor with respect to any Indebtedness of the Guarantor.

 

“Securitization Indebtedness”: (i) Indebtedness of the Guarantor or any of its
respective Affiliates incurred pursuant to on-balance sheet Securitizations and
(ii) any Indebtedness consisting of advances made to the Guarantor or any of its
Affiliates based upon securities issued by a Securitization Entity pursuant to a
Securitization and acquired or retained by the Guarantor or any of its
respective Affiliates.

 

“Tangible Net Worth”: As of any date of determination and with respect to any
Seller Party, the excess of total assets (net of goodwill and intangible assets)
over total liabilities on such date, calculated in accordance with GAAP, as
reported on such party’s most recently delivered financial statements.

 

“Total Assets”: Total assets determined in accordance with GAAP.

 

2.             Guaranty.  Guarantor hereby unconditionally and irrevocably
guarantees to Buyer the prompt and complete payment and performance by the
Seller Parties when due (whether at the stated maturity, by acceleration or
otherwise) of the Guarantied Obligations. All assets and property of Guarantor
shall be subject to recourse if Guarantor fails to pay any Guarantied
Obligation(s) when and as required to be paid pursuant to the Transaction
Documents.

 

In addition to the foregoing, the Guarantor hereby absolutely, irrevocably and
unconditionally guarantees to the Buyer any actual loss, damage, cost, expense,
liability, claim or

 

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other obligation incurred directly or indirectly by Buyer (including reasonable
and documented out-of-pocket fees and expenses of external counsel to the Buyer)
but, in each case under this clause, only to the extent arising out of or in
connection with: (i) fraud, misrepresentation, malfeasance, misconduct or bad
faith, misapplication, misappropriation or conversion of funds, criminal acts,
or the wrongful removal or destruction of the Collateral by any Seller Party in
connection with the Repurchase Agreement or any other Transaction Document to
which such Seller Party is a party, (ii) the commencement by any Seller Party,
or the filing by any Seller Party of any pleading or document with a court in
support of the commencement of, any case under any applicable state or federal
bankruptcy, insolvency or other similar law with respect to any Seller Party,
(iii) the breach in any material respect by any Seller Party at any time on or
after the Closing Date of any of the representations and warranties made by it
that are contained in the Repurchase Agreement or any other Transaction Document
or (iv) any action, suit or proceeding, arbitration or governmental
investigation arising out of, or in connection with, any Purchased Loan, any
Mortgagor, any guarantor, or any Affiliate of any Mortgagor or guarantor, other
than in connection with the enforcement of the related Loan Documents by the
Seller Parties.

 

It is expressly understood that this is a continuing guaranty and that the
Guarantor’s obligations under this Guaranty shall not be affected by the
genuineness, validity, regularity, or enforceability of the obligations of the
Seller Parties under the Transaction Documents (the “Obligations”) or of any
agreement or instrument evidencing the Obligations, or by the validity,
enforceability, or perfection of any security interest against, or the nature or
extent of, any collateral for the Obligations, or by any amendment of the
Repurchase Agreement or any other Transaction Document to which the Obligations
relate, or by any other circumstance relating to the Obligations (including a
bankruptcy proceeding involving any Seller Party as debtor) which might
otherwise constitute a discharge of, or defense to, the Obligations or this
Guaranty.  This is a guaranty of payment and not of collection and the Buyer
shall not be obligated to file any claim relating to the Obligations if a Seller
Party becomes subject to a bankruptcy, reorganization, or similar proceeding and
the failure of the Buyer so to file shall not affect the Guarantor’s obligations
hereunder.

 

3.             Expenses.  The Guarantor shall pay on demand all reasonable and
documented out-of-pocket expenses (including the reasonable and documented
out-of-pocket fees and expenses of external counsel to the Buyer) incurred in
the enforcement or protection of the rights of the Buyer under this Guaranty,
which out-of-pocket expenses shall not be subject to any cap.

 

4.             Continuing Agreement.  This Guaranty shall remain in full force
and effect and be binding upon the Guarantor and its successors and permitted
assigns until one year and one day following the Facility Termination Date and
all of the Seller Parties’ obligations under the Repurchase Agreement and the
other Transaction Documents have been satisfied.

 

5.             No Waiver: Cumulative Rights.  No failure on the part of the
Buyer to exercise, and no delay in exercising, any right, remedy, or power under
this Guaranty shall operate as a waiver thereof, nor shall any single or partial
exercise by the Buyer of any right, remedy, or power hereunder preclude any
other or future exercise of any right, remedy, or power.  Each and every right,
remedy and power hereby granted to the Buyer or allowed it by

 

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law or other agreement with the Guarantor, shall be cumulative and not exclusive
of any other and may be exercised by the Buyer from time to time.

 

6.             Waiver of Notice.  Except as expressly required herein, the
Guarantor waives notice of the acceptance of this Guaranty, presentment to, or
demand of, payment from anyone liable for any of the obligations, notice of
dishonor or non-payment, protest, diligence, suit, notice of any sale of any
Collateral, notice of the taking of any action by the Buyer against the Seller
Parties or others and all other notices that may otherwise be required by law.

 

7.             Representations and Warranties.  The Guarantor hereby makes the
following representations and warranties to the Buyer as of the date hereof:

 

(a)           The Guarantor is (i) duly organized and validly existing under the
laws of the jurisdiction of its organization and, if relevant under such laws,
in good standing and has full power and authority to execute, deliver, and
perform this Guaranty and (ii) duly qualified to do business in all
jurisdictions necessary.

 

(b)           The execution, delivery, and performance of this Guaranty have
been and remain duly authorized by all necessary action and do not contravene
any provision of the Guarantor’s constitutive documents, as amended to date, or
any law, regulation, rule, decree, order, judgment, or contractual restriction
binding on the Guarantor or its assets.  There is no material litigation pending
against the Guarantor before any Governmental Authority (i) asserting the
invalidity of this Guaranty or (ii) seeking any determination or ruling that
could be reasonably likely to have a material adverse effect on the Guarantor’s
ability to perform under this Guaranty.

 

(c)           All consents, licenses, authorizations, and approvals of, and
registrations and declarations with, any governmental authority or regulatory
body necessary for the due execution, delivery, and performance of this Guaranty
have been obtained and remain in full force and effect and all conditions
thereof have been duly complied with, and no other action by, and no notice to
or filing with, any governmental authority or regulatory body is required in
connection with the execution, delivery, or performance of this Guaranty.

 

(d)           This Guaranty constitutes the legal, valid, and binding obligation
of the Guarantor and is enforceable against the Guarantor in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium,
conservatorship, receivership, and other laws of general applicability relating
to, or affecting, creditors’ rights and, subject as to enforceability, to
equitable principles of general application.

 

(e)           Guarantor is not and has never been the subject of any case under
any applicable state or federal bankruptcy, insolvency or other similar law. 
Guarantor is solvent and will not be rendered insolvent by the transactions
contemplated hereby.  Guarantor does not intend to incur, nor does it believe
that it has incurred, debts beyond its ability to pay such debts as they mature
and is not contemplating the commencement of insolvency, bankruptcy, liquidation
or consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of such entity or any of its
assets.

 

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(f)            Guarantor has complied in all material respects with all laws,
statutes, rules, regulations of any Governmental Authority applicable to
Guarantor.

 

(g)           There has been no material adverse change in the business,
operations, financial condition, properties or prospects of Guarantor since
September 30, 2016.

 

(h)           Guarantor is not required to register as an “investment company”,
or as a company “controlled” by an “investment company,” within the meaning of
the Investment Company Act of 1940, as amended.

 

(i)            Guarantor is not and is not acting on behalf of an “employee
benefit plan” as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”), that is subject to Title I of ERISA,
a “plan” as defined in and subject to Section 4975 of the Internal Revenue Code
of 1986, as amended (the “Code”), any other employee benefit plan that is
subject to any law that is substantially similar to Section 406 of ERISA or
Section 4975 of the Code, or an entity deemed to hold the plan assets of any of
the foregoing pursuant to 29 C.F.R. Section 2510.3-101, as modified by
Section 3(42) of ERISA, or otherwise.

 

8.             Covenants of Guarantor.  Guarantor hereby covenants and agrees
that:

 

(a)           Guarantor shall (i) preserve and maintain its legal existence,
(ii) qualify and remain qualified in good standing in the jurisdiction in which
it is organized, and (iii) comply with its certificate of formation and by-laws.

 

(b)           At all times during the term of this Guaranty, Guarantor will
promptly, and in any event within ten (10) days after service of process on any
of the following, give to the Buyer notice of all litigation, actions, suits, or
other legal proceedings affecting Guarantor that (i) questions or challenges the
validity or enforceability of this Guaranty or (ii) which, individually or in
the aggregate, if adversely determined, could be reasonably likely to have a
material adverse effect on the Guarantor’s ability to perform under this
Guaranty.

 

(c)           Guarantor will not enter into transactions, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Seller Party unless the transaction is (i) in the
ordinary course of Guarantor’s business and (ii) upon fair and reasonable terms
no less favorable to Guarantor than it would obtain in a comparable arm’s length
transaction with a Person which is not an Affiliate.

 

(d)           Guarantor shall not institute against any other Seller Party any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law.

 

(e)           The Guarantor shall provide to Buyer and the Verification Agent,
as soon as available, and in any event within 90 days after the end of each
fiscal year of the Guarantor, audited financial statements of the Guarantor for
such fiscal year.

 

(f)            The Guarantor shall compile and provide to Buyer and the
Verification Agent, as soon as available and in any event no later than
forty-five (45) Business Days following the end of each calendar quarter,
(i) quarterly financial statements for such calendar

 

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quarter, (ii) a calculation of all amounts required to be determined with
respect to the Financial Covenants as of the related Pricing Rate Determination
Date for the final calendar month of such calendar quarter, (iii) a certificate
of an Authorized Officer of the Guarantor confirming that the Guarantor
continues to comply with the representations, warranties and covenants set forth
herein and (iv) any other reports reasonably requested by Buyer and generated in
the ordinary course of business of the Guarantor.

 

(g)           The Adjusted Tangible Net Worth as set forth on the most recent
financial statement of the Guarantor shall not decline by more than (i) 25% in
any calendar quarter, (ii) 35% in any calendar year, or (iii) 50% from the
highest Adjusted Tangible Net Worth of the Guarantor set forth in its most
recent audited financial statements.

 

(h)           The Guarantor shall maintain Liquidity in an amount no less than
the greater of (i) $5,000,000 and (ii) 3% of the sum of (A) any outstanding
Recourse Indebtedness plus (B) the Aggregate Repurchase Price; provided,
however, that no less than two-thirds of the Liquidity maintained by the
Guarantor to satisfy this paragraph (h) shall be Cash Liquidity.

 

(i)            The Guarantor shall maintain a Debt-to-Assets Ratio no greater
than 80%.

 

(j)            The Guarantor shall maintain Tangible Net Worth in an amount at
least equal to the sum of (i) the product of (A) 1/9th and (B) the amount of all
Non-Recourse Indebtedness (excluding the Aggregate Repurchase Price) and the
amount of other Securitization Indebtedness, in each case, held by entities
other than Affiliates of the Guarantor plus (ii) the product of (A) 1/3rd and
(B) the sum of (x) the Aggregate Repurchase Price and (y) all Recourse
Indebtedness (the covenants in paragraphs (g), (h), (i) and (j) shall
collectively be referred to as the “Financial Covenants”).

 

(k)           Guarantor shall provide written notice to Buyer upon the
occurrence of (i) any change to its name, jurisdiction of organization or
taxpayer identification number or (ii) any reorganization resulting in the
Guarantor no longer being organized as a corporation.

 

(l)            Guarantor agrees that should SAMC or any of its direct or
indirect subsidiaries enter into any financing agreement or other credit
facility with respect to small business loans or mortgage loans with any Person
other than Buyer or an Affiliate of Buyer which by its terms provides more
favorable terms to Buyer with respect to any financial covenants set forth in
Section 8 hereof or any substantially similar  covenants (a “More Favorable
Agreement”), the terms of this Guaranty shall be deemed automatically amended to
include such more favorable terms contained in such More Favorable Agreement;
provided, that in the event that such More Favorable Agreement is terminated,
upon notice by the Guarantor to the Buyer of such termination, the original
terms of this Guaranty shall be deemed to be automatically reinstated. The
Guarantor further agrees to execute and deliver any new guaranties, agreements
or amendments to this Guaranty evidencing such provisions, provided that the
execution of such amendment shall not be a precondition to the effectiveness of
such amendment, but shall merely be for the convenience of the parties hereto.
Promptly upon Guarantor or any of its Affiliates entering into a financing
agreement or other credit facility with respect to assets similar to the
Mortgage Loans with any Person other than the Buyer or an Affiliate of the
Buyer, the Guarantor shall deliver to the Buyer (x) a true, correct and complete

 

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copy of such financing documentation (excluding pricing terms) or (y) to the
extent the Guarantor is prohibited from delivering any such document pursuant to
a confidentiality agreement with such Person, to the fullest extent permitted
pursuant to such confidentiality agreement, a certificate of the Guarantor
setting forth the terms of any financial covenants or substantially similar
terms thereof.

 

(m)          Guarantor will not become and will not act on behalf of an
“employee benefit plan” as defined in Section 3(3) of ERISA that is subject to
Title I of ERISA, a “plan” as defined in and subject to Section 4975 of the
Code, any other employee benefit plan that is subject to any law that is
substantially similar to Section 406 of ERISA or Section 4975 of the Code, or an
entity deemed to hold the plan assets of any of the foregoing pursuant to 29
C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, or otherwise.

 

9.             Events of Default.  Notwithstanding anything to the contrary in
the Repurchase Agreement, each of the following events shall constitute an event
of default under the Repurchase Agreement (each, an “Event of Default”):

 

(a)           the issuance by a Governmental Authority of an order or decree to
wind-up or liquidate the affairs of the Guarantor or the property of the
Guarantor, which decree or order shall remain unstayed and in effect for a
period of ninety (90) consecutive days; and

 

(b)           the failure of the Guarantor to comply with any material covenant
contained herein, which such failure remains unremedied more than ten (10) days
(except if such default or breach is curable and the Guarantor diligently
attempts to cure such default, and such default or breach continues for thirty
(30) days).

 

10.          No Subrogation.  Notwithstanding any payment or payments made by
Guarantor hereunder or any set-off or application of funds of Guarantor by the
Buyer or any of its Affiliates, Guarantor shall not be entitled to be subrogated
to any of the rights of Buyer against any Seller Party or any collateral
security or guarantee or right of offset held by Buyer for the payment of the
Guarantor’s obligations under this Guaranty, nor shall Guarantor seek or be
entitled to seek any contribution or reimbursement from any other Seller Party
in respect of payments made by Guarantor hereunder, until one year and one day
following the Facility Termination Date under the Repurchase Agreement and all
of the Seller Parties’ obligations under the Repurchase Agreement and the other
Transaction Documents have been satisfied.  If any amount shall be paid to
Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid and satisfied in full, such amount shall be
held by Guarantor in trust for the Buyer, segregated from other funds of
Guarantor, and shall, forthwith upon receipt by Guarantor, be turned over to the
Buyer in the exact form received by Guarantor (duly indorsed by Guarantor to
Buyer, if required), to be applied against the Obligations, whether matured or
unmatured, in such order as the Buyer may determine.

 

11.          Waiver of Rights.  Except as otherwise expressly provided herein,
Guarantor waives any and all notice of any kind including, without limitation,
notice of the creation, renewal, extension or accrual of any of the Obligations,
and notice of or proof of reliance by the Buyer upon this Guaranty or acceptance
of this Guaranty; the Obligations, and any of them, shall conclusively be deemed
to have been created, contracted or incurred, or

 

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renewed, extended, amended or waived, in reliance upon this Guaranty; and all
dealings between any Seller Party, on the one hand, and Buyer, on the other
hand, likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guaranty.  Guarantor waives diligence, presentment, protest,
demand for payment and notice of default or nonpayment to or upon any Seller
Party with respect to the Obligations or Guarantor with respect to the
Guarantor’s obligations under this Guaranty.  In addition, Guarantor waives any
requirement that Buyer exhaust any right, power or remedy or proceed against any
Seller Party.

 

12.          Recapture of Certain Payments.  Guarantor further agrees that, to
the extent that the Guarantor makes a payment or payments to the Buyer, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to the
Guarantor or their respective estate, trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then to
the extent of such payment or repayment, this Guaranty and the advances or part
thereof which have been paid, reduced or satisfied by such amount shall be
reinstated and continued in full force and effect as of the date such initial
payment, reduction or satisfaction occurred.

 

13.          Assignment.  The rights and obligations of the Guarantor under this
Guaranty shall not be assigned by the Guarantor without the prior written
consent of the Buyer, except that any person into which the Guarantor may be
merged or consolidated, or any person resulting from any merger, conversion or
consolidation to which the Guarantor is a party, or any person succeeding to all
or substantially all of the business of the Guarantor, shall be the successor to
the Guarantor hereunder and shall comply with all obligations of the Guarantor
arising under this Guaranty.  Subject to the foregoing, this Guaranty shall bind
and inure to the benefit of and be enforceable by the Guarantor and the Buyer,
and their respective successors and permitted assigns.

 

14.          GOVERNING LAW; JURISDICTION; WAIVER OF JURY  TRIAL.  THIS GUARANTY
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAWS, WHICH SHALL APPLY HERETO), AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.  WITH RESPECT TO ANY SUIT, ACTION, CLAIM, OR
PROCEEDINGS RELATING TO THIS GUARANTY (“PROCEEDINGS”), THE GUARANTOR
IRREVOCABLY: (I) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK; (II) WAIVES ANY OBJECTION WHICH
IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDINGS BROUGHT IN ANY
SUCH COURT, WAIVES ANY CLAIM THAT SUCH PROCEEDINGS HAVE BEEN BROUGHT IN AN
INCONVENIENT FORUM, AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH
PROCEEDINGS, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY; AND
(III) TO THE EXTENT PERMITTED BY APPLICABLE LAW, WAIVES ALL RIGHT OF TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS GUARANTY.

 

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15.          Notices.  All demands, notices and communications hereunder shall
be in writing and shall be deemed to have been duly given if personally
delivered to or mailed, by registered mail, postage prepaid, by overnight mail
or courier service, or transmitted by facsimile and confirmed by similar mailed
writing, if to the Buyer, addressed to the Buyer at 60 Wall Street, 3rd Floor,
New York, New York 10005, Attention: Timur Otunchiev, or such other address as
may be designated by the Buyer to the Guarantor in writing, or, if to the
Guarantor, addressed to the Guarantor at 1140 Avenue of Americas, 7th Floor, New
York, NY 10036, Attention: Rick Herbst, Email: rherbst@waterfallam.com,
Facsimile: 212-257-4699, or such other address as may be designated by the
Guarantor to the Buyer in writing.

 

16.          Miscellaneous.

 

(a)           Amendments.  Any amendment, modification, or waiver of any term or
provision of this Guaranty shall be in writing and shall be signed by the
Guarantor and the Buyer.

 

(b)           Headings.  The headings of this Guaranty are for convenience of
reference only and shall not affect the meaning or construction of any provision
hereof.

 

(c)           Entire Agreement.  This Guaranty contains the entire agreement
between the parties hereto relating to the subject matter hereof and supersedes
all oral statements and prior writings with respect thereto.

 

(d)           Counterparts.  This Guaranty may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.

 

(e)           Limitation.  Nothing expressed or implied herein is intended or
shall be construed to confer upon any person, firm or corporation, other than
the parties hereto, any right, remedy or claim by reason of this Guaranty or any
term hereof, and all terms contained herein shall be for the sole and exclusive
benefit of the parties hereto, and their successors and permitted transferees.

 

17.          Restatement.        This Guaranty amends and restates in its
entirety, as of the date hereof, the Existing Guaranty. Upon the effectiveness
of this Guaranty, each reference to the Existing Guaranty in any other document,
instrument or agreement shall mean and be a reference to this Guaranty. Nothing
contained herein, unless expressly herein stated to the contrary, is intended to
amend, modify or otherwise affect any other instrument, document or agreement
executed and/or delivered in connection with the Existing Guaranty.

 

[Signature pages follow]

 

12

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IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered by the
Guarantor to the Buyer as of the date first above written.

 

 

SUTHERLAND PARTNERS, L.P.

 

 

 

By: SUTHERLAND ASSET MANAGEMENT
CORPORATION, not in its individual capacity

but solely as general partner

 

 

 

By:

/s/ Frederick Herbst

 

Name:

Frederick Herbst

 

Title:

Chief Financial Officer

 

Second Amended and Restated Guaranty

 

S-1

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Acknowledged and agreed to:

 

DEUTSCHE BANK AG, CAYMAN

 

ISLANDS BRANCH

 

 

 

By:

/s/ Ryan M. Stark

 

Name:

Ryan M. Stark

 

Title:

Managing Director

 

 

 

By:

/s/ Timur Otunchiev

 

Name:

Timur Otunchiev

 

Title:

Managing Director

 

 

Second Amended and Restated Guaranty

 

S-2

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