Document:

Exhibit 10.1

 

AMENDMENT

 

This AMENDMENT (the “Amendment”)
is made and entered into as of September 8, 2005 by and among Gaiam, Inc.,
a Colorado corporation (“Purchaser”), GT Brands LLC, a Delaware limited
liability company (“GT”), GT Merchandising & Licensing LLC, a
Delaware limited liability company (“GT Merchandising”), Gym Time, LLC,
a South Carolina limited liability company (“Gym Time”), BSBP
Productions LLC, a Delaware limited liability company (“BSBP”), and
GoodTimes Entertainment LLC, a Delaware limited liability company (“GoodTimes
LLC” and, collectively with GT, GT Merchandising, Gym Time and BSBP, “Sellers”)
and amends the Asset Purchase Agreement dated as of July 8, 2005 by and
among Purchaser and Sellers (the “Agreement”).  Capitalized terms not otherwise defined
herein have the meanings set forth in the Agreement.

 

WHEREAS, the Purchaser
and the Sellers desire to make certain amendments to the Agreement in order to
expedite the Closing under the Agreement;

 

NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth in this
Amendment, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

Section 1.  Working Capital and Net
Assets Adjustment.  The
parties agree that (i) the adjustments contemplated by Section 1.04(b) of
the Agreement shall be equal to $5 million, (ii) the Purchase Price (i.e.,
the Base Price of $40 million less $5 million) shall be $35 million, subject to
adjustment as provided in Section 4(a) and Section 4(b)(vi) below,
and (iii) no further adjustments to the Base Price or Purchase Price shall
be made pursuant to Section 1.04(b) of the Agreement.

 

Section 2.
 Closing.  The Closing Date shall be September 13,
2005 and the Closing shall be effective as of 12:01 a.m., New York City
time, on Tuesday, September 13, 2005, but only in the event that all
deliveries (other than those waived pursuant to Section 4(b) below)
required to be delivered on the Closing Date under the Agreement, including,
without limitation, the Purchase Price, have been delivered on the Closing
Date.  In order to ensure an accurate
transfer of the Sale Assets, at 12:01 a.m. on September 12, 2005,
Sellers shall suspend all shipments of retail products to Sellers’ retail
customers.

 

Section 3.  Deposits/Letters of
Credit.  Notwithstanding Section 1.1(a)(x) and Section 4.05 of the Agreement, Sellers shall
retain the rights to all deposit monies (up to $1.5 million) outstanding as of
the Closing with the following accounts: 
Paymentech, Discover and UPS. 
From and after the Closing, if requested by Sellers, Purchaser shall use
commercially reasonable efforts to cause Paymentech, Discover and UPS to return
such deposit monies to Sellers (provided that Purchaser shall not be required
to make any expenditures).  Sellers have
issued Letters of Credit in order to obtain inventory to fulfill Billy Blanks
orders, and Purchaser shall reimburse Sellers the full account (up to $500
thousand) drawn against such Letters of Credit upon receipt of such inventory.

 

Section 4.  Waivers.

 

(a)                                  Pursuant
to a waiver duly executed and delivered as of September 2, 2005 (the “Waiver”),
Purchaser has waived certain requirements of Section 4.08 of the
Agreement, subject to an adjustment of the Purchase Price by an amount equal to
the amount of the investment shortfall, if any, with respect to the Section 4.08
Retail Expenditures (as defined in the Waiver). 
The parties acknowledge and agree that the Purchase Price set forth
above shall be reduced by an amount equal to the pro-rated portion (as
described in Schedule 4.08 to the Agreement) of such investment
shortfall.  Sellers shall provide
Purchaser with a true and complete calculation of the amount of such investment
shortfall on or before the close of business on September 12, 2005.

 

(b)                                 Purchaser
hereby irrevocably waives:

 

(i) any breaches of the
Agreement by Sellers that may have occurred prior to the date of this
Amendment, to the extent known to Purchaser (it being agreed that Sellers do
not acknowledge, and refute any contention that, any breach of the Agreement by
Sellers has occurred),

 

(ii) the condition to Purchaser’s
obligation to close set forth in Section 6.01,

 

1

 

(iii) the condition to
Purchaser’s obligation to close set forth in the first sentence of Section 6.02
and in paragraphs (a) and (b) of the second sentence of Section 6.02,

 

(iv) the condition to Purchaser’s obligation to
close set forth in Section 6.03 relating to the delivery by Sellers of a
certificate executed in the name and on behalf of Sellers by the President or
any Executive Vice President of such Sellers,

 

(v) the condition to
Purchaser’s obligation to close set forth in Section 6.07 relating to the
physical count of inventory as of approximately August 31, 2005,

 

(vi) the condition to Purchaser’s obligation to
close set forth in Section 6.07 relating to the audited financial
statements of Sellers for 2004, provided, however, that (A) Sellers shall
use commercially reasonable efforts to deliver such audited financial
statements to Purchaser not later than September 30, 2005 and (B) in
the event Sellers have not delivered such audited financial statements to
Purchaser on or prior to the Closing Date, $5 million of the Purchase Price
shall be delivered into escrow as described in Section 7 below pending
delivery of such audited financial statements. 
Within one Business Day following Sellers’ delivery of such audited
financial statements to Purchaser (if prior to or on September 30, 2005),
the escrow agent shall pay to Sellers such $5 million (plus interest or other
earnings accrued thereon) in accordance with the terms of the escrow agreement,
and, if such delivery has not occurred on or prior to September 30, 2005,
then on October 1, 2005 the escrow agent shall pay to Purchaser such $5
million (plus interest or other earnings accrued thereon) in accordance with
the terms of the escrow agreement.  For
purposes of clarification, Sellers’ right to receive the $5 million from the
escrow agent shall only be dependant on the timing of delivery to Purchaser of
the audited financial statements (and not on the contents of or results set
forth in such financial statements).

 

(vii) Purchaser’s right to terminate the
Agreement pursuant to Section 10.01(i), and

 

(viii) any condition to
Purchaser’s obligation to close, including, without limitation, the condition
set forth in Section 6.02, if the failure of the condition to be satisfied
is due to Sellers’ compliance with the last sentence of Section 2 of this
Amendment.

 

(c)                                  Sellers
hereby irrevocably waive:

 

(i) any breaches of the
Agreement by Purchaser that may have occurred prior to the date of this
Amendment, to the extent known to Sellers (it being agreed that Purchaser does
not acknowledge, and refutes any contention that, any breach of the Agreement
by Purchaser has occurred),

 

(ii) the condition to
Sellers’ obligation to close set forth in Section 7.01,

 

(iii) the condition to
Sellers’ obligation to close set forth in Section 7.02, and

 

(iv) the condition to
Sellers’ obligation to close set forth in Section 7.03 relating to the
delivery by Purchaser of a certificate executed in the name and on behalf of
Purchaser by the President or any Executive Vice President of Purchaser.

 

Section 5.  Effectiveness.  This Amendment (other than the waiver set
forth in Section 4(b)(viii) above) shall not
be valid and enforceable, and shall not become binding on the parties hereto,
unless and until the Bankruptcy Court approves this Amendment.

 

Section 6.  Termination.  In the event the Bankruptcy Court has not
approved this Amendment on or prior to September 12, 2005, this Amendment
shall automatically terminate without any further action required by the
parties hereto, there shall be no liability in respect hereof, and the rights
and obligations of the parties hereto shall continue to be governed by the
terms of the Agreement; provided, however, that the waiver set forth in Section 4(b)(viii) of
this Amendment shall survive the termination of this Amendment, and shall be
deemed to be incorporated into the terms of the Agreement.  In the event this Amendment is terminated,
the amount of the adjustments referred to in Section 1 of this Amendment
shall have no relevance in determining the adjustments contemplated by Section 1.04(b) of
the Agreement, and no party (including the Independent Accountant) shall be
permitted to utilize this Amendment in any manner whatsoever in reaching a
final determination in respect of the Disputed Items.

 

2

 

Section 7.  Escrow.  In the event that Sellers have failed to
deliver to Purchaser the audited financial statements of Sellers for 2004 on or
prior to the Closing Date, Purchaser shall deliver $5 million of the Purchase
Price into escrow under an escrow agreement reasonably acceptable to Sellers
and Purchaser.  Sellers and Purchasers
agree to request that the Escrow Agent (as defined in the Agreement) serve as
escrow agent with respect to such $5 million and that the Deposit Escrow
Agreement be amended to incorporate the escrow of such $5 million or an
agreement substantially similar to the Deposit Escrow Agreement be entered into
with respect to the escrow of such $5 million.

 

Section 8.  Miscellaneous.  Except as modified by this Amendment and the
Waiver, the Agreement remain in full force and effect.  The Agreement, together with this Amendment
and the Waiver, embody the entire agreement and understanding among the parties
to this Amendment, and subject to the approval of this Amendment by the
Bankruptcy Court, supersedes all prior agreements and understandings among the
parties relating to the subject matter of the Agreement, the Amendment and the
Waiver.  This Amendment may be executed
in any number of separate counterparts, each of which, when taken together,
shall constitute one and the same instrument, admissible into evidence,
notwithstanding the fact that all parties have not signed the same
counterpart.  Delivery of an executed
counterpart of this Amendment by facsimile shall be equally as effective as
delivery of a manually executed counterpart of this Amendment.  Any party delivering an executed counterpart
of this Amendment by facsimile shall also deliver a manually executed
counterpart of this Amendment, but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and binding effect
of this Amendment.  This Amendment shall
be governed by and construed in accordance with the applicable provisions of
the Bankruptcy Code and the Laws of the State of New York applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.

 

IN WITNESS WHEREOF, this
Amendment has been duly executed and delivered by the duly authorized officer
of each party as of the date first above written.

 

	
  GAIAM, INC.

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  GT BRANDS LLC

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  GT MERCHANDISING & LICENSING LLC

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  GYM TIME, LLC

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
						

 

3

 

	
  BSBP PRODUCTIONS LLC

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  GOODTIMES ENTERTAINMENT LLC

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

4Exhibit 10.1

 

MASTER
REPURCHASE AGREEMENT

 

Dated as of September 13, 2005

 

BETWEEN:

 

CITIGROUP GLOBAL MARKETS REALTY CORP., as buyer (“Buyer”, which term
shall include any “Principal” as defined and provided for in Annex I) or as
agent pursuant hereto (“Agent”),

 

and

 

SPIRIT FINANCE CORPORATION, as seller (“Seller”).

 

1.             APPLICABILITY

 

Buyer shall, from time to time, agree to enter into transactions in
which Seller transfers to Buyer Eligible Assets against the transfer of funds
by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such
Purchased Assets at a date certain, against the transfer of funds by
Seller.  Each such transaction shall be
referred to herein as a “Transaction” and, unless otherwise agreed in writing,
shall be governed by this Agreement.

 

2.             DEFINITIONS AND INTERPRETATION

 

a)              Defined Terms.

 

“Accepted Servicing Standards” shall have the meaning assigned
thereto in the Custody Agreement.

 

“Additional Purchased Assets” shall have the meaning assigned
thereto in Section 6 hereof.

 

“Affiliate” means, with respect to any Person, any other Person
which, directly or indirectly, controls, is controlled by, or is under common
control with, such Person.  For purposes
of this definition, “control” (together with the correlative meanings of “controlled
by” and “under common control with”) means possession, directly or indirectly,
of the power (a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the directors or managing general
partners (or their equivalent) of such Person, or (b) to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by contract, or otherwise.

 

“Agent” means Citigroup Global Markets Realty Corp. or any
successor.

 

 

“Agreement” means this Master Repurchase Agreement, as it may be
amended, supplemented or otherwise modified from time to time.

 

“ALTA” means the American Land Title Association.

 

“Appraised Value” shall mean the value set forth in an appraisal
(described on the Loan Schedule) made in connection with the origination or
acquisition of the related Loan as the value of the Mortgaged Property securing
such Loan.

 

“Appraisal” means, with respect to a Loan, an appraisal of the
related Mortgaged Property securing a Loan (i) from an MAI professional real
estate appraiser who (A) is a member in good standing of the Appraisal
Institute and (B) if the state in which the subject Mortgaged Property is
located certifies or licenses appraisers, is certified or licensed in such
state, (ii) conducted in accordance with the standards of the Appraisal
Institute or such other standards as mutually agreed to by the parties hereto,
and (iii) performed within six months of the date such Appraisal is delivered to
the Buyer, or such other form of appraisal approved by the Buyer in its sole
discretion.

 

“Asset Base”
shall mean, as of any date of determination, the aggregate Collateral Value of
all Purchased Assets.

 

“Asset Base Certificate” shall mean the certificate prepared by
the Seller substantially in the form of Exhibit B, attached hereto.

 

“Bankruptcy Code” shall mean the United States Bankruptcy Code
of 1978, as amended from time to time.

 

“Bill of Sale” means a document duly executed by Seller with
respect to each delivery of documents relating to the Purchased Assets to
Buyer.

 

“Borrower” means the obligor or obligors on a Note, including
any Person that has acquired the related collateral and assumed the obligations
of the original obligor or obligors under the Note and, in the case of Net
Lease Loans, the Tenant of the related Mortgaged Property.

 

“Business Day” shall mean any day other than (i) a Saturday or
Sunday, (ii) a day on which the New York Stock Exchange, the Federal Reserve
Bank of New York, the Custodian or banking and savings and loan institutions in
New York, New York or the city and state in which the Custodian’s offices are
located are closed, or (iii) a day on which trading in securities on the New
York Stock Exchange or any other major securities exchange in the United States
is not conducted.

 

“Buyer’s Margin Amount” means, with respect to any Transaction
as of any date of determination, the amount obtained by application of Buyer’s
Margin Percentage to the Repurchase Price (exclusive of accrued Pricing
Differential) for such Transaction as of such date.

 

“Buyer’s Margin Percentage” shall have the meaning assigned
thereto in the Side Letter.

 

2

 

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

 

“Cash Equivalents” shall mean (a) securities with maturities of
90 days or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b) certificates
of deposit with maturities of 90 days or less from the date of acquisition and
overnight bank deposits of any commercial bank having capital and surplus in
excess of $500,000,000, (c) repurchase obligations of any commercial bank
satisfying the requirements of clause (b) of this definition, having a term of
not more than seven days with respect to securities issued or fully guaranteed
or insured by the United States Government, (d) commercial paper of a domestic
issuer rated at least A-1 or the equivalent thereof by “S&P” or P-1 or the
equivalent thereof by Moody’s Investors Service, Inc. “Moody’s” and in either case
maturing within 90 days after the day of acquisition, (e) securities with
maturities of 90 days or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory, the securities of which state, commonwealth, territory, political
subdivision or taxing authority (as the case may be) are rated at least A by
S&P or A by Moody’s, (f) securities with maturities of 90 days or less from
the date of acquisition backed by standby letters of credit issued by any
commercial bank satisfying the requirements of clause (b) of this definition
or,  (g) shares of money market mutual or
similar funds which invest exclusively in assets satisfying the requirements of
clauses (a) through (f) of this definition.

 

“Change in Control” shall mean the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended from time to time) of outstanding
shares of voting stock of such Person at any time, if after giving effect to
such acquisition such Person or Persons owns twenty percent (20%) or more of
such outstanding voting stock.

 

“Change in Law” means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by Buyer (or any
Affiliate of Buyer) with any request, guideline or directive (whether or not
having the force of law) of any Governmental Authority made or issued after the
date of this Agreement.

 

“Closing Date” means September 13, 2005.

 

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

 

“Collateral” shall have the meaning assigned thereto in Section
9 hereof.

 

3

 

“Collateral Value” shall mean with respect to each Purchased
Asset, (i) on the applicable Purchase Date, the value of such Purchased Asset
as ascribed by the Buyer, and (ii) on any date of determination following the
applicable Purchase Date, the least of (a) the outstanding principal balance of
such Purchased Asset, (b) the related Market Value, (c) a value equal to 60% of
the Appraised Value of such Purchased Asset and (d) a value equal to 60% of the
cost of acquiring such Purchased Asset; provided that, the Collateral Value
shall be deemed to be zero with respect to each Purchased Asset that is not an
Eligible Asset.

 

“Collection Account” shall have the meaning assigned thereto in
the Custody Agreement.

 

“Computer Tape” means a computer tape or other electronic medium
generated by or on behalf of Seller and delivered to Buyer and Custodian which
provides information relating to the Purchased Assets, including the
information set forth in the Loan Schedule, in a format acceptable to Buyer.

 

“Confirmation” shall have the meaning assigned thereto in
Section 4(b) hereof.

 

“Contractual Obligation” shall mean as to any Person, any
material provision of any agreement, instrument or other undertaking to which
such Person is a party or by which it or any of its property is bound or any
material provision of any security issued by such Person.

 

“Custody Agreement” means the Custody and Servicing Agreement,
dated as of September 13, 2005, as amended, among Seller, Buyer, Servicer and
Custodian.

 

“Custodian” means Midland Loan Services, Inc. or its successors
and permitted assigns.

 

“Custodian’s Loan File” shall have the meaning assigned thereto
in the Custody Agreement.

 

“Default” means an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.

 

“Default Rate” means, as of any date of determination, the
lesser of (i) the Pricing Rate plus 4% and (ii) the maximum rate permitted by
applicable law.

 

“Defaulted Loan” means a Loan with respect to which a default
(other than a payment default) occurs that materially and adversely affects the
interests of the Seller and that continues unremedied for the applicable grace
period under the terms of the Loan (or, if no grace period is specified, for 30
days).

 

“Delinquent Loan” means a Loan for which any related payment has
not been received on or before the date 30 days after the date on which such
payment is due pursuant to the related Note without regard to any grace period,
provided that a Delinquent Loan shall remain a Delinquent Loan until the
related Borrower cures such delinquency and makes two successive monthly
payments on a timely basis, including any related grace period.

 

4

 

“Effective Date” shall mean the date set forth on the top of the
first page of this Agreement.

 

“Eligible Asset” shall have the meaning assigned thereto in the
Side Letter.

 

“ERISA Affiliate” shall mean any corporation or trade or
business that is a member of any group of organizations (i) described in
Section 414(b) or (c) of the Code of which the Seller is a member and (ii)
solely for purposes of potential liability under Section 302(c)(11) of ERISA
and Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the
Code of which the Seller is a member.

 

“Event of Default” shall have the meaning assigned thereto in
Section 19 hereof.

 

“Foreign Buyer” means any Buyer that is organized under the laws
of a jurisdiction other than the one in which Seller is located.  For purposes of this definition, the United
States of America, each state thereof and the District of Columbia shall be
deemed to constitute a single jurisdiction.

 

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

 

“Governmental Authority” shall mean, with respect to any Person,
any nation or government, any state or other political subdivision thereof, or
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any court or
arbitrator having jurisdiction over such Person, any of its subsidiaries or any
of their properties.

 

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

 

“Hedge Counterparty”: Citibank, N.A. or a Person (i) (A) with
long-term and commercial paper or short-term deposit ratings of “P-1” by Moody’s
and “A-1” by S&P and (B) which shall agree in writing that, in the event
that any of its long-term or commercial paper or short-term deposit ratings
cease to be at or above “A-2” by Moody’s

 

5

 

and “A” by S&P, it shall secure its obligations in accordance with
the request of the Buyer or Buyer shall have the option to treat such failure
as an Early Termination Event (as defined in the ISDA Master Agreement) by such
Hedge Counterparty, (ii) that has entered into a Hedge Instrument and (iii)
that is acceptable to the Buyer.

 

“Hedge Instrument” means any interest rate cap agreement,
interest rate floor agreement, interest rate swap agreement or other interest
rate hedging agreement entered into by the Seller with a Hedge
Counterparty.  Each Hedge Instrument
shall meet the requirements set forth in Section 38 hereof with respect thereto
and shall be a hedging instrument as described in Section 856(c)(6).

 

“Improvements” means all buildings, structures, improvements,
parking areas, landscaping, fixtures and articles of property now erected on,
attached to, or used or adapted for use in the operation of any Mortgaged
Property, including, without limitation, all heating, air conditioning and
incinerating apparatus and equipment, all boilers, engines, motors, dynamos,
generating equipment, piping and plumbing fixtures, water heaters, ranges,
cooking apparatus and mechanical kitchen equipment, refrigerators, freezers,
cooling, ventilating, sprinkling and vacuum cleaning systems, fire
extinguishing apparatus, gas and electric fixtures, carpeting, floor covering,
underpadding, storm sashes, awnings, signs, furnishings of public spaces, halls
and lobbies, and shrubbery and plants.

 

“Income” means, with respect to any Purchased Asset at any time,
any principal thereof and all interest thereon and all dividends, sale proceeds
(including, without limitation, any proceeds from the securitization of such
Purchased Asset or other disposition thereof) and other collections and
distributions thereon (including, without limitation, any proceeds received in
respect of mortgage insurance), but not including any commitment nor
origination fees.

 

“Indebtedness” shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and
accrued expenses incurred, in the ordinary course of business so long as such
trade accounts payable are payable within ninety (90) days of the date the
respective goods are delivered or the respective services are rendered; (c)
indebtedness of others secured by a Lien on the Property of such Person,
whether or not the respective indebtedness so secured has been assumed by such
Person; (d) obligations (contingent or otherwise) of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for account of such Person; (e) Capital Lease
Obligations of such Person; (f) obligations of such Person under repurchase
agreements or like arrangements; (g) indebtedness of others Guaranteed by such
Person; (h) all obligations of such Person incurred in connection with the acquisition
or carrying of fixed assets by such Person; (i) indebtedness of general
partnerships of which such

 

6

 

Person is a general partner; and (j) any other indebtedness of such
Person by a note, bond, debenture or similar instrument.

 

“Investment Company Act” means the Investment Company Act of
1940, as amended, including all rules and regulations promulgated thereunder.

 

“LIBO Rate” shall mean with respect to each day a Transaction is
outstanding (or if such day is not a Business Day, the next succeeding Business
Day), the rate (reset on a daily basis) per annum equal to the rate published
by Bloomberg or if such rate is not available, the rate appearing at page 3750
of the Telerate Screen as one-month LIBO Rate on such date, and if such rate
shall not be so quoted, the rate per annum at which the Buyer is offered Dollar
deposits at or about 11:00 A.M., New York City time, on such date by prime
banks in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Transactions are then being
conducted for delivery on such day for a period of one month and in an amount
comparable to the amount of the Transactions to be outstanding on such day.

 

“Lien” means any lien, claim, charge, restriction, pledge,
security interest, mortgage, deed of trust or other encumbrance.

 

“Loan”  means a Mortgage
Loan or Net Lease Loan secured by Specialty Retailers, Drug Stores, Movie
Theatres, Education Facilities, Restaurants, Interstate Travel Plazas,
Automotive Dealerships and Retailers and any other Loan secured by any other
asset type approved by Buyer in its sole discretion, in each case originated by
Seller or any of its Affiliates in accordance with the Underwriting Guidelines.

 

“Loan Documents” shall have the meaning assigned thereto in the
Custody Agreement.

 

“Loan Schedule” means the list of Loans delivered by Seller to
Buyer and Custodian together with each Transaction Notice and attached by the
Custodian to the Trust Receipt and setting forth as to each Loan the related
Borrower name, the address of the related Mortgaged Property and the
outstanding principal balance of the Loan as of the initial Purchase Date,
together with any other information specified by Buyer from time to time.

 

“Margin Call” shall have the meaning assigned thereto in Section
6 hereof.

 

“Margin Deficit” shall have the meaning assigned thereto in
Section 6 hereof.

 

“Market Value” shall mean the value, determined by the Buyer in
its sole discretion, of the Purchased Assets if sold in their entirety to a
single third-party purchaser.  The Buyer’s
determination of Market Value shall be conclusive upon the parties, absent
manifest error on the part of the Buyer. 
The Buyer shall have the right to mark to market the Purchased Assets on
a daily basis, which Market Value with respect to one or more of the Purchased
Assets may be determined to be zero. The Seller acknowledges that the Buyer’s
determination of Market Value is for the limited purposes of determining (i) the
Purchase Price, (ii) whether there is a Margin Deficit pursuant to Section 6
hereof and (iii) Collateral Value for purchasing purposes hereunder without the
ability to perform customary purchaser’s due diligence and is not necessarily
equivalent to a determination

 

7

 

of the fair market value of the Purchased Assets achieved by obtaining
competing bids in an orderly market in which the originator/servicer is not in
default under a repurchase facility and the bidders have adequate opportunity
to perform customary loan and servicing due diligence.

 

“Master Lease” shall mean a master lease pursuant to which multiple
Mortgaged Properties are leased.

 

“Master Lease FCCR” shall mean the sum of all cash flows for all
Mortgaged Properties under a Master Lease (each, as used to calculate FCCR for
one such Mortgaged Property under such Master Lease).

 

“Master Loan Agreement” means the Master Loan Agreement, dated
as of September 13, 2005, between Spirit Master Funding II, LLC and Seller, as
amended, supplemented, modified or restated from time to time, and any other
master loan purchase agreement between Seller and a Net Lease Borrower approved
by Buyer from time to time.

 

“Master Note” means the master promissory note issued pursuant
to the Master Loan Agreement together with all riders thereto and amendments
thereof or other evidence of indebtedness of a Net Lease Borrower.

 

“Material Adverse Change” means, with respect to a Person, any
material adverse change in the business, condition (financial or otherwise),
operations, performance or properties taken as a whole or prospects of such
Person.

 

“Material Adverse Effect” shall mean a material adverse effect
on (a) the property, business, operations, financial condition or prospects of
the Seller, (b) the ability of the Seller to perform in all material respects
its obligations under any of the Program Documents to which it is a party, (c)
the validity or enforceability in all material respects of any of the Program
Documents, (d) the rights and remedies of the Buyer under any of the Program
Documents, (e) the timely repurchase of the Purchased Assets or other amounts
payable in connection therewith or (f) the Collateral.

 

“Maximum Aggregate Purchase Price” means $200,000,000.

 

“Moody’s” means Moody’s Investors Service, Inc. and any
successor or successors thereto.

 

“Mortgage” shall mean with respect to a Loan, the mortgage, deed
of trust or other instrument, which creates a first lien on the fee simple or
leasehold estate in such real property which secures the Note.

 

“Mortgage Loan” shall mean each of the mortgage loans which the
Custodian has been instructed to hold for the Buyer pursuant to the Custody and
Servicing Agreement, and which such mortgage loans each include, without
limitation, (i) a Note, the related Mortgage and all other Loan Documents and
(ii) all right, title and interest of the Seller in and to the Mortgaged
Property covered by such Mortgage.

 

8

 

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

 

“Multiemployer Plan” shall mean a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions have been or are required
to be made by Seller or any ERISA Affiliate and that is subject to Section 412
of the Code or Section 302 or by Title IV of ERISA.

 

“Net Income” shall mean for any period, the net income of the
Seller for such period as determined in accordance with GAAP.

 

“Net Lease Borrower” means Spirit Master Funding II, LLC, Spirit
Master Funding III, LLC, and any other Affiliates of Seller approved by the Buyer.

 

“Net Lease Loan” means indebtedness of a Net Lease Borrower evidenced
by a Note or Master Note issued pursuant to a Master Loan Agreement secured by
a Mortgage on a Mortgaged Property owned by such Net Lease Borrower.

 

“Net Worth” means, with respect to any Person, the excess of
total assets of such Person, over total liabilities of such Person, adding back
accumulated depreciation but excluding the impact of “other comprehensive
income”, all as determined in accordance with GAAP.

 

“Net Worth Increase Amounts” shall mean, on any date of
determination, 75% of the net proceeds of any issuance of equity securities by
the Seller subsequent to the date of this Agreement.

 

“Net Worth Requirements” shall have the meaning assigned thereto
in Section 14(o) hereof.

 

“Note” means, with respect to any Loan, the Master Note or any
other Note, as applicable, together with all riders thereto and amendments thereof
or other evidence of indebtedness of the related Borrower.

 

“Notice Date” shall have the meaning assigned thereto in Section
4 hereof.

 

“Obligations” means (a) all of Seller’s obligations to pay the
Repurchase Price on the Repurchase Date, and other obligations and liabilities
of Seller, to Buyer, its Affiliates or Custodian arising under, or in
connection with, the Program Documents or otherwise, whether now existing or
hereafter arising; (b) any and all sums paid by Buyer or on behalf of Buyer pursuant
to the Program Documents in order to preserve any Purchased Asset or its
interest therein; (c) in the event of any proceeding for the collection or
enforcement of any of Seller’s indebtedness, obligations or liabilities
referred to in clause (a), the reasonable expenses of retaking, holding,
collecting, preparing for sale, selling or otherwise disposing of or realizing
on any Purchased Asset, or of any exercise by Buyer or such Affiliate of its
rights under the related agreements, including without limitation,

 

9

 

reasonable attorneys’ fees and disbursements and court costs; and (d)
all of Seller’s indemnity obligations to Buyer or Custodian or both pursuant to
the Program Documents.

 

“Origination Fee” shall have the meaning assigned thereto in the
Side Letter.

 

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

 

“Permitted Exceptions” shall mean the exceptions to lien
priority including but not limited to: (i) the lien of current real property
taxes and assessments not yet due and payable; (ii) covenants, conditions and
restrictions, rights of way, easements and other matters of the public record
as of the date of recording acceptable to mortgage lending institutions
generally and specifically referred to in the lender’s title insurance policy
delivered to the originator of the Loan and (A) referred to or otherwise
considered in the appraisal (if any) made for the originator of the Loan or (B)
which do not adversely affect the appraised value of the Mortgaged Property set
forth in such appraisal; and (iii) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value
or marketability of the related Mortgaged Property.

 

“Person” shall mean any legal person, including any individual,
corporation, partnership, association, joint venture, trust, limited liability
company, unincorporated organization, governmental entity or other entity of
similar nature.

 

“Plan” shall mean an employee benefit or other plan established
or maintained by the Seller or any ERISA Affiliate and that is subject to
Section 412 of the Code or Section 302 or by Title IV of ERISA, other than a
Multiemployer Plan.

 

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

 

“Pricing Rate” means the per annum percentage rate for
determination of the Price Differential calculated as described in Section 3(b)
hereof or as otherwise set forth in the related Confirmation.

 

“Prime Rate” means the prime rate of U.S. commercial banks as
published in The Wall Street Journal (or, if more than one such rate is
published, the average of such rates).

 

“Principal” shall have the meaning given to it in Annex I.

 

“Program Documents” means this Agreement, the Custody Agreement,
any Servicing Agreement, any Securities Account Control Agreement, any
assignment of Hedge Instrument, the Side Letter and any other agreement entered
into by Seller, on the one

 

10

 

hand, and Buyer or one of its Affiliates (or Custodian on its behalf)
on the other, in connection herewith or therewith.

 

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

 

“Purchase Date” means the date on which Purchased Assets are to
be transferred by Seller to Buyer.

 

“Purchase Price” shall have the meaning assigned thereto in the
Side Letter.

 

“Purchased Assets” means, with respect to a Transaction, the
Loans comprising the Master Note as set forth in the Master Loan Agreement, or
other Loans, together with the related Records, Servicing Rights, Seller’s
rights under any related Hedge Instruments, and other Collateral, such other
property, rights, titles or interests as are specified on a related Transaction
Notice, and all instruments, chattel paper, securities, investment property,
accounts, and general intangibles comprising or relating to all of the foregoing.  The term “Purchased Assets” with respect to
any Transaction at any time also shall include Additional Purchased Assets
delivered pursuant to Section 6 hereof.

 

“Qualified Originator” shall mean (a) the Seller and (b) any
other originator of Loans as may be approved by the Buyer in its sole
discretion in writing from time to time.

 

“Rated Loan” means a Loan (i) with an Investment Grade Credit
Rating or shadow rating from any of the Rating Agencies or (ii) for which the
timely payment of principal and interest is insured by a monoline insurer, the
long-term debt obligations of which have an Investment Grade Credit Rating but
are rated no lower than “AAA” or “Aaa” by any of the Rating Agencies.

 

“Rating Agencies” means S&P and Moody’s.

 

“Records” means all instruments, agreements and other books,
records, and reports and data generated by other media for the storage of
information maintained by Seller or any other person or entity with respect to
a Purchased Asset. Records shall include the Notes, any Mortgages, the
Custodian’s Loan Files and any other instruments necessary to document or
service a Loan.

 

“Renewal Fee” as mutually agreed to by the Buyer and the Seller.

 

“Repurchase Date” shall have the meaning assigned thereto in
Section 3(b) and shall also include the date determined by application of
Section 20.

 

“Repurchase Price” means the price at which Purchased Assets are
to be transferred from Buyer to Seller upon termination of a Transaction, which
will be determined in each case (including Transactions terminable upon demand)
as the sum of the Purchase Price, the Price Differential, any of the Buyer’s
costs relating to the unwinding of a related Hedge Instrument, as applicable,
as of the date of such determination.

 

11

 

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

 

“Responsible Officer” shall mean, as to any Person, the chief
executive officer or, with respect to financial matters, the chief financial
officer of such Person; provided, that in the event any such officer is
unavailable at any time he or she is required to take any action hereunder,
Responsible Officer shall mean any officer authorized to act on such officer’s
behalf as demonstrated by a certificate of corporate resolution.

 

“Restricted Payments” shall mean with respect to any Person,
collectively, all dividends or other distributions of any nature (cash,
securities, assets or otherwise), and all payments, by virtue of redemption or
otherwise, on any class of equity securities (including, without limitation,
warrants, options or rights therefor) issued by such Person, whether such
securities are now or may hereafter be authorized or outstanding and any
distribution in respect of any of the foregoing, whether directly or
indirectly.

 

“S&P” means Standard and Poor’s Ratings Services, a division
of The McGraw-Hill Companies, Inc., and any successor or successors thereto.

 

“Securities Account Control Agreement” means an agreement, in
form and substance acceptable to Buyer, among Seller, a securities intermediary
and Buyer, pursuant to which Buyer obtains a perfected security interest in one
or more Hedge Instruments.

 

“Servicer” means (i) Midland Loan Services, Inc., a Delaware
corporation, or (ii) any other servicer approved by Buyer in its sole
discretion.

 

“Servicer Termination Event” shall have the meaning assigned
thereto in the Custody Agreement.

 

“Servicing Agreement” means any agreement (other than the
Custody Agreement) giving rise or relating to Servicing Rights with respect to
a Purchased Asset, including any assignment or other agreement relating to such
agreement.

 

“Servicing Rights” means contractual, possessory or other rights
of Seller, Servicer or any other Person arising under a Servicing Agreement,
the Custody Agreement or otherwise, to administer or service a Purchased Asset
or to possess related Records.

 

“Servicing Transmission” shall mean a computer-readable magnetic
or other electronic format acceptable to the parties containing the information
identified on Exhibit C.

 

“Side Letter” means the Side Letter, dated as of September 13,
2005, between Seller and Buyer, as the same may be amended, restated or
modified from time to time.

 

“Subsidiary” means, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by

 

12

 

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

 

“Tangible Net Worth” shall mean, with respect to any Person, as
of any date of determination: (i) the consolidated Net Worth of such Person and
its Subsidiaries, less (ii) the consolidated net book value of all assets of
such Person and its Subsidiaries (to the extent reflected as an asset in the
balance sheet of such Person or any Subsidiary at such date) which will be
treated as intangibles under GAAP, including, without limitation, such items as
deferred taxes, net leasehold improvements, good will, trademarks, trade names,
service marks, copyrights, patents, licenses and unamortized debt discount and
expense, but not including lease intangibles.

 

“Tenant” means the tenant of a Mortgaged Property pursuant to a
lease or sub-lease of such Mortgaged Property, together with such tenant’s
Affiliates and any guarantor of such tenant’s obligations under such lease.

 

“Termination Date” has the meaning assigned thereto in Section
28.

 

“Tier One Asset” shall have the meaning assigned thereto in the
Side Letter.

 

“Total Indebtedness” shall mean with respect to any Person, for
any period, the aggregate Indebtedness of such Person and its Subsidiaries
during such period, less the amount of any nonspecific consolidated balance
sheet reserves maintained in accordance with GAAP.

 

“Transaction” has the meaning assigned thereto in Section 1.

 

“Transaction Notice” means a written request of Seller to enter
into a Transaction, in the form attached to the Custody Agreement, which is
delivered to Buyer and Custodian.

 

“Triple Net Lease” means a lease under which the tenant pays all
operating expenses of the property including, without limitation, insurance,
taxes, maintenance and capital expenditures relating to such property.

 

“Trust Receipt” means a Trust Receipt and Certification as
defined in the Custody Agreement.

 

“Underwriting Guidelines” means the Spirit Finance Corporation
Underwriting Guidelines, dated as of July 20, 2004, which has been approved in
writing by Buyer, as the same may be amended from time to time.

 

“Underwriting Package” means, with respect to each Loan, the
Spirit Finance Credit Memorandum as defined in the Underwriting Guidelines.

 

13

 

“Uniform Commercial Code” shall mean the Uniform Commercial Code
as in effect on the date hereof in the State of New York; provided, that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, “Uniform Commercial Code” shall mean the Uniform Commercial Code
as in effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or non-perfection.

 

“Unit-Level FCCR” shall mean the FCCR for any unit where unit
information was available as of the date of determination, the ratio of (1) the
sum of the unit’s, (i) pre-tax income, (ii) interest expense, (iii) all
non-cash amounts in respect of depreciation and amortization, (iv) all
non-recurring expenses, (v) specifically documented discretionary management
fees, and (vi) all operating lease or rent expense (including with respect to
any equipment loans) less (vii) all non-recurring income and normalized
overhead based on parent company’s general and administrative expenses as a
percent of sales (if not available, industry standards applied), for the
related fiscal period, to (2) the sum of the unit’s, (i) total operating lease
or rent expense, (ii) interest expense and (iii) scheduled principal payments
on indebtedness payable in respect of the unit or obligor, in each case for the
period of time as to which such figure is presented.

 

“Weighted Average Aggregate FCCR” shall mean the FCCR calculated
by weighting Unit-Level FCCR and Master Lease FCCR by Collateral Value of the
related Purchased Assets.

 

“Wet Funded Loan” means a Loan for which the related Custodian’s
Loan File has not been delivered to the Custodian as of the related Purchase
Date.  Upon delivery of the Custodian’s
Loan File to the Custodian, the Loan shall cease to be a Wet Funded Loan.

 

b)              Capitalized
terms used but not defined in this Agreement shall have the meanings assigned
thereto in the Custody Agreement.

 

c)              Interpretation.

 

Headings are for convenience only and do not affect interpretation. The
following rules of this subsection (c) apply unless the context requires
otherwise. The singular includes the plural and conversely. A gender includes
all genders. Where a word or phrase is defined, its other grammatical forms
have a corresponding meaning. A reference to a subsection, Section, Annex or
Exhibit is, unless otherwise specified, a reference to a Section of, or annex
or exhibit to, this Agreement. A reference to a party to this Agreement or
another agreement or document includes the party’s successors and permitted
substitutes or assigns. A reference to an agreement or document is to the
agreement or document as amended, modified, novated, supplemented or replaced,
except to the extent prohibited by any Program Document. A reference to
legislation or to a provision of legislation includes a modification or
re-enactment of it, a legislative provision substituted for it and a regulation
or statutory instrument issued under it. A reference to writing includes a
facsimile transmission and any means of reproducing words in a tangible and
permanently visible form. A reference to conduct includes, without limitation,
an omission, statement or undertaking, whether or not in writing. An Event of
Default subsists until it has

 

14

 

been waived in writing by Buyer. The words “hereof”, “herein”, “hereunder”
and similar words refer to this Agreement as a whole and not to any particular
provision of this Agreement. The term “including” is not limiting and means “including
without limitation.” In the computation of periods of time from a specified
date to a later specified date, the word “from” means “from and including”; the
words “to” and “until” each mean “to but excluding”, and the word “through”
means “to and including.” This Agreement may use several different limitations,
tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are independent of each other and shall
each be performed in accordance with their terms. Unless the context otherwise
clearly requires, all accounting terms not expressly defined herein shall be
construed, and all financial computations required under this Agreement shall
be made, in accordance with GAAP, consistently applied. References herein to “fiscal
year” and “fiscal quarter” refer to such fiscal periods of Seller. Except where
otherwise provided in this Agreement any determination, consent, approval,
statement or certificate made or confirmed in writing with notice to Seller by
Buyer or an authorized officer of Buyer provided for in this Agreement is
conclusive and binds the parties in the absence of manifest error, except where
the consent of the Seller is required. A reference to an agreement includes a
security interest, guarantee, agreement or legally enforceable arrangement
whether or not in writing related to such agreement. A reference to a document
includes an agreement (as so defined) in writing or a certificate, notice,
instrument or document, or any information recorded in computer disk form.
Where Seller is required to provide any document to Buyer under the terms of
this Agreement, the relevant document shall be provided in writing or printed
form unless Buyer requests otherwise. At the request of Buyer, the document
shall be provided in computer disk form or both printed and computer disk form,
unless such computer disk copy requires Seller to pay an unreasonable
expense.  This Agreement is the result of
negotiations among and has been reviewed by counsels to Buyer and Seller, and
is the product of all the parties. In the interpretation of this Agreement, no
rule of construction shall apply to disadvantage one party on the ground that
such party proposed or was involved in the preparation of any particular
provision of this Agreement or this Agreement itself. Except where otherwise
expressly stated Buyer may give or withhold, or give conditionally, approvals
and consents and may form opinions and make determinations and exercise
discretion at its absolute discretion. 
Any requirement of good faith, discretion or judgment by Buyer shall not
be construed to require Buyer to request or await receipt of information or
documentation not immediately available from or with respect to Seller, a
servicer of the Purchased Assets, any other Person or the Purchased Assets
themselves.

 

3.             THE TRANSACTIONS

 

a)              Seller
shall repurchase Purchased Assets from Buyer on each related Repurchase
Date.  Each obligation to repurchase
exists without regard to any prior or intervening liquidation or foreclosure
with respect to each Purchased Asset (but liquidation or foreclosure proceeds
received by Buyer shall be applied to reduce the Repurchase Price except as
otherwise provided herein).  Seller is
obligated to obtain the Purchased Assets from Buyer or its designee (including
the Custodian) at Seller’s expense on (or after) the related Repurchase Date.

 

b)              Provided
that the applicable conditions in Sections 10(a) and (b) have been satisfied,
each Purchased Asset that is repurchased by Seller on the 10th day of each
month (or, if such 10th day is not a Business Day, the immediately following
Business Day) following the

 

15

 

related initial Purchase Date (the day of the month so determined for
each month, or any other date designated by Seller to Buyer for such a
repurchase on at least one Business Day’s prior notice to Buyer, a “Repurchase
Date,” which term shall also include the date determined by application of
Section 20) shall automatically become subject to a new Transaction unless
Buyer is notified by Seller at least one Business Day prior to the related
Repurchase Date; provided that, if the Repurchase Date so determined is later
than the Termination Date, the Repurchase Date for such Transaction shall
automatically reset to the Termination Date, and the provisions of this
sentence as it might relate to a new Transaction shall expire on such date. For
each Purchased Asset subject to a Transaction, unless otherwise agreed, (y) the
accrued and unpaid Price Differential shall be calculated beginning on the
first day and ending on the last day of the calendar month prior to the related
Repurchase Date and settled in cash on each related Repurchase Date and (z) the
Pricing Rate shall be as set forth in the Side Letter.  In the event a Pricing Rate is based on a
LIBO Rate that is not fixed for any such period, Agent shall establish a LIBO
Rate on each Business Day, based on one-month LIBO Rate for each such day, and
the Pricing Rate will change upon each change in LIBO Rate.

 

4.             ENTERING INTO TRANSACTIONS; TRANSACTION NOTICE, CONFIRMATIONS

 

a)              Unless
otherwise agreed, Seller shall give Buyer notice by no later than 5:00 p.m.
(New York City time) on the day that is two Business Days prior to any proposed
Purchase Date (the date on which such notice is given, the “Notice Date”). On
the Notice Date, Seller shall request that Buyer enter into a Transaction by
furnishing to Buyer a Transaction Notice, Loan Schedule and Asset Base
Certificate.  The Seller shall deliver to
Custodian a Transaction Notice, the related Loan Schedule and the related
Custodian’s Loan File for each Loan subject to such Transaction in accordance
with the terms of the Custody Agreement.

 

b)              In
the event that the parties hereto desire to enter into a Transaction on terms
other than as set forth herein, the parties shall execute a “Confirmation” specifying
such terms prior to entering into such Transaction. Any such Confirmation and
the related Transaction Notice, together with this Agreement, shall constitute
conclusive evidence of the terms agreed between Buyer and Seller with respect
to the Transaction to which the Confirmation relates.

 

5.             PAYMENT AND TRANSFER

 

Unless otherwise agreed, all transfers of funds hereunder shall be in
immediately available funds and all Purchased Assets transferred shall be
transferred to the Custodian pursuant to the Custody Agreement. Any Repurchase
Price received by Buyer after 2:00 p.m. New York City time shall be applied on
the next succeeding Business Day.

 

6.             MARGIN MAINTENANCE

 

a)              If
at any time the aggregate Market Value of all Purchased Assets subject to all
Transactions is less than the aggregate Buyer’s Margin Amount for all such
Transactions (a “Margin Deficit”), then Buyer may by notice to Seller require
Seller in such Transactions, at Buyer’s option, to transfer to Buyer cash or
additional Loans acceptable to Buyer in its sole discretion (“Additional
Purchased Assets”), so that the cash and aggregate Market Value of the

 

16

 

Purchased Assets, including any such
Additional Purchased Assets, will thereupon equal or exceed such aggregate
Buyer’s Margin Amount (such requirement, a “Margin Call”).

 

b)              Notice
required pursuant to Section 6 may be given by any means provided in Section 36
hereof. Any notice given before 1:00 p.m. New York time on a Business Day shall
be met, and the related Margin Call satisfied, no later than 5:00 p.m. New York
time on the next succeeding Business Day; notice given after 1:00 p.m. New York
time on a Business Day shall be met, and the related Margin Call satisfied, no
later than 2:00 p.m. New York time on the second succeeding Business Day. The
failure of Buyer, on any one or more occasions, to exercise its rights
hereunder, shall not change or alter the terms and conditions to which this
Agreement is subject or limit the right of Buyer to do so at a later date.
Seller and Buyer each agree that a failure or delay by Buyer to exercise its
rights hereunder shall not limit or waive Buyer’s rights under this Agreement
or otherwise existing by law or in any way create additional rights for Seller.

 

7.             INCOME PAYMENTS

 

Where a particular term of a Transaction extends over the date on which
Income is paid in respect of any Purchased Assets subject to that Transaction,
such Income shall be the property of Buyer. Notwithstanding the foregoing, and
provided no Default has occurred and is continuing, all Income received,
whether by Seller, Buyer, Custodian, Servicer or any servicer or any other
Person, in respect of the Purchased Assets shall be applied in accordance with
Section 4.1(c) of the Custody Agreement.

 

8.             TAXES; TAX TREATMENT

 

a)              All
payments made by the Seller under this Agreement shall be made free and clear
of, and without deduction or withholding for or on account of, any present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities (including penalties, interest and additions to tax) with respect
thereto imposed by any Governmental Authority thereof or therein, excluding
income taxes, branch profits taxes, franchise taxes or any other tax imposed on
the net income by the United States, a state or a foreign jurisdiction under
the laws of which the Buyer is organized or of its applicable lending office,
or any political subdivision thereof, (all such non-excluded taxes, “Taxes”),
all of which shall be paid by the Seller for its own account not later than the
date when due. If the Seller is required by law or regulation to deduct or
withhold any Taxes from or in respect of any amount payable hereunder, it
shall: (a) make such deduction or withholding; (b) pay the amount so deducted
or withheld to the appropriate Governmental Authority not later than the date
when due; (c) deliver to Buyer, promptly, original tax receipts and other
evidence satisfactory to Buyer of the payment when due of the full amount of
such Taxes; and (d) pay to the Buyer such additional amounts as may be
necessary so that such Buyer receives, free and clear of all Taxes, a net
amount equal to the amount it would have received under this Agreement, as if
no such deduction or withholding had been made.

 

b)              In
addition, the Seller agrees to pay to the relevant Governmental Authority in
accordance with applicable law any current or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies (including,
without limitation, mortgage

 

17

 

recording taxes, transfer taxes and similar fees) imposed by the United
States or any taxing authority thereof or therein that arise from any payment
made hereunder or from the execution, delivery or registration of, or otherwise
with respect to, this Agreement (“Other Taxes”).

 

c)              The
Seller agrees to indemnify the Buyer for the full amount of Taxes (including
additional amounts with respect thereto) and Other Taxes, and the full amount
of Taxes of any kind imposed by any jurisdiction on amounts payable under this
Section 8(c), and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, provided that the Buyer shall have
provided the Seller with evidence, reasonably satisfactory to the Seller, of
payment of Taxes or Other Taxes, as the case may be; provided that Buyer gives
notice to Seller of all deficiency notices received by the Buyer.

 

d)              Any
Foreign Buyer shall provide the Seller with properly completed United States
Internal Revenue Service (IRS) Form W-8BEN or W-8ECI or any successor form
prescribed by the IRS, certifying that such Buyer is entitled to benefits under
an income tax treaty to which the United States is a party which reduces the
rate of withholding tax on payments of interest or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States on or prior to the date upon which
each such Foreign Buyer becomes a Buyer. 
Each Foreign Buyer will resubmit the appropriate form on the earliest of
(A) the third anniversary of the prior submission or (B) on or before the
expiration of thirty (30) days after there is a “change in circumstances” with
respect to such Buyer as defined in Treas. Reg. Section
1.1441(e)(4)(ii)(D).  For any period with
respect to which a Foreign Buyer has failed to provide the Seller with the
appropriate form or other relevant document pursuant to this Section 8(d)
(unless such failure is due to a change in treaty, law, or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Buyer shall not be entitled to any “gross-up” of Taxes or indemnification
under Section 8(c) with respect to Taxes imposed by the United States;
provided, however, that should a Foreign Buyer, which is otherwise exempt from
a withholding tax, become subject to Taxes because of its failure to deliver a
form required hereunder, the Seller shall take such steps as such Foreign Buyer
shall reasonably request to assist such Foreign Buyer to recover such Taxes.

 

e)              Without
prejudice to the survival of any other agreement of Seller hereunder, the
agreements and obligations of Seller contained in this Section 8 shall survive
the termination of this Agreement. 
Nothing contained in this Section 8 shall require Buyer to make
available any of its tax returns or other information that it deems to be
confidential or proprietary.

 

f)               Each
party to this Agreement acknowledges that it is its intent for purposes of U.S.
federal, state and local income and franchise taxes to treat each Transaction
as indebtedness of Seller that is secured by the Purchased Assets and that the
Purchased Assets are owned by Seller in the absence of a Default by
Seller.  All parties to this Agreement
agree to such treatment and agree to take no action inconsistent with this
treatment, unless required by law.

 

9.             SECURITY INTEREST

 

a)              Seller
and Buyer intend that the Transactions hereunder be sales to Buyer of the
Purchased Assets and not loans from Buyer to Seller secured by the Purchased
Assets. However,

 

18

 

in order to preserve Buyer’s rights under this Agreement in the event
that a court or other forum recharacterizes the Transactions hereunder as other
than sales, and as security for Seller’s performance of all of its Obligations,
Seller hereby grants Buyer a fully perfected first priority security interest
in the following property, whether now existing or hereafter acquired: (i) the
Purchased Assets, (ii) the Records, (iii) all related Servicing Rights, (iv)
all mortgage guaranties and insurance relating to such Purchased Assets (issued
by governmental agencies or otherwise) or the related Mortgaged Property and
any mortgage insurance certificate or other document evidencing such mortgage
guaranties or insurance and all claims and payments thereunder, (v) all
instruments, chattel paper, securities, investment property and general intangibles
and other assets comprising or relating to the Purchased Assets, (vi) any
securities account, including the Collection Account and all security
entitlements to financial assets now or hereafter carried in or credited to any
securities account, (vii) all rights to Income and the rights to enforce such
payments arising from any of the Purchased Assets, (viii) all guarantees or
other support for the Purchased Assets, (ix) any and all replacements,
substitutions, distributions on the Purchased Assets, (x) any interest in the
Purchased Assets or the servicing of the Purchased Assets, and (xi) any now
existing or hereafter arising proceeds and distributions with respect to any of
the foregoing and any other property, rights, titles or interests as are specified
on a Transaction Notice (collectively, the “Collateral”).  Seller acknowledges and agrees that its
rights with respect to the Collateral (including without limitation, its
security interest in the Purchased Assets and any other collateral granted to
Seller pursuant to any other agreement) are and shall continue to be at all
times junior and subordinate to the rights of Buyer hereunder.

 

The parties acknowledge and agree that the perfection of such security
interest is intended to be accomplished through possession of the related
Purchased Assets by Buyer, the Custodian or by any other Person on Buyer’s
behalf, and that such possession unless otherwise agreed is for Buyer’s own
account.

 

b)              Seller
hereby irrevocably constitutes and appoints Buyer and any officer or agent
thereof, with full power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead of Seller and
in the name of Seller or in its own name, from time to time in Buyer’s discretion,
for the purpose of carrying out the terms of this Agreement, to take any and
all appropriate action and to execute any and all documents and instruments
which may be reasonably necessary or desirable to accomplish the purposes of
this Agreement, to file such financing statement or statements relating to the
Purchased Assets and the Collateral without Seller’s signature thereon as Buyer
at its option may deem appropriate, and, without limiting the generality of the
foregoing, Seller hereby gives Buyer the power and right, on behalf of Seller,
without assent by, but with notice to, Seller, if an Event of Default shall
have occurred and be continuing, to do the following:

 

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

 

19

 

(ii)           to
pay or discharge taxes and Liens levied or placed on or threatened against the
Purchased Assets;

 

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

 

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

 

Seller also authorizes Buyer, if an Event of Default shall have
occurred, from time to time, to execute, in connection with any sale provided
for in Section 20 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Purchased Assets.  The powers conferred on Buyer hereunder are
solely to protect Buyer’s interests in the Purchased Assets and shall not
impose any duty upon it to exercise any such powers.  Buyer shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers, and
neither it nor any of its officers, directors, employees or agents shall be
responsible to Seller for any act or failure to act hereunder, except for its
or their own gross negligence or willful misconduct.

 

10.          CONDITIONS PRECEDENT

 

a)              As
conditions precedent to the first Transaction to occur on or after the
Effective Date, Buyer shall have completed the due diligence review pursuant to
Section 39, and such review shall be satisfactory to Buyer in its sole
discretion.  Buyer shall have received on
or before the day of such first Transaction the following, in form and
substance satisfactory to Buyer and duly executed by each party thereto:

 

20

 

(i)            The
Program Documents duly executed and delivered by the parties thereto and being
in full force and effect, free of any modification, breach or waiver;

 

(ii)           Evidence
that all other actions necessary or, in the opinion of Buyer, desirable to
perfect and protect Buyer’s interest in the Purchased Assets and other
Collateral have been taken, including, without limitation, duly executed and
filed Uniform Commercial Code financing statements on Form UCC-1;

 

(iii)          A
certified copy of Seller’s corporate resolutions, approving the Program
Documents and Transactions thereunder (either specifically or by general
resolution), and all documents evidencing other necessary limited liability
company or corporate action or governmental approvals as may be required in
connection with the Program Documents;

 

(iv)          An
incumbency certificate of the secretary of Seller, certifying the names, true
signatures and titles of Seller’s representatives duly authorized to request
Transactions hereunder and to execute the Program Documents and the other
documents to be delivered thereunder;

 

(v)           Opinions
of Seller’s counsel as to such matters as Buyer may reasonably request
(including, without limitation, perfected security interest in the Collateral)
and in form and substance acceptable to Buyer;

 

(vi)          A
copy of the Underwriting Guidelines certified by an officer of the Seller;

 

(vii)         Evidence
of establishment of the Collection Account; and

 

(viii)        Any
other documents reasonably requested by Buyer.

 

b)              The
obligation of Buyer to enter into each Transaction (including the initial
Transaction) pursuant to this Agreement is subject to the following conditions
precedent:

 

(i)            Buyer
or its designee shall have received on or before the day of a Transaction with
respect to such Purchased Assets the following, in form and substance
satisfactory to Buyer and (if applicable) duly executed:

 

(A)          Transaction
Notice and Loan Schedule delivered pursuant to Section 4(a);

 

(B)           The
Trust Receipt with respect to such Purchased Assets, with the Loan Schedule
attached; and

 

(C)           Such
certificates, customary opinions of counsel or other documents as Buyer may
reasonably request, provided that such opinions of counsel shall not be
required routinely in connection with each Transaction but shall only be
required from time to time as deemed necessary by Buyer in good faith.

 

21

 

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

 

(iii)          Buyer
shall not have determined that the introduction of or a change in any
requirement of law or in the interpretation or administration of any
requirement of law applicable to Buyer has made it unlawful, and no
Governmental Authority shall have asserted that it is unlawful, for Buyer to
enter into Transactions with a Pricing Rate based on LIBO Rate.

 

(iv)          All
representations and warranties in the Program Documents shall be true and
correct on the date of such Transaction and Seller is in compliance with the
terms and conditions of the Program Documents.

 

(v)           The
then aggregate outstanding Purchase Price for all Purchased Assets, when added
to the Purchase Price for the requested Transaction, shall not exceed the
Maximum Aggregate Purchase Price with respect to all Purchased Assets.

 

(vi)          Buyer
shall have determined that all actions necessary or, in the opinion of Buyer,
desirable to maintain the Buyer’s perfected interest in the Purchased Assets
and other Collateral have been taken, including, without limitation, duly
executed and filed Uniform Commercial Code financing statements on Form UCC-1.

 

(vii)         Seller
shall have paid to Buyer all fees and expenses owed to Buyer in accordance with
this Agreement.

 

(viii)        Buyer
or its designee shall have received any other documents reasonably requested by
Buyer.

 

(ix)           There
is no Margin Deficit at the time immediately prior to or immediately following
such Transaction.

 

(x)            No
event or events shall have been reasonably determined by Buyer to have occurred
resulting in the effective absence of a “repo market” respecting loans or
mortgage-backed or asset-backed securities such that Buyer is or was unable to
finance or fund purchases under this Agreement through the “repo market” or
Buyer’s customers.

 

(xi)           Each
secured party (including any party that has a precautionary security interest
in a Loan) has released all of its right, title and interest in, to and under
such Loan (including, without limitation, any security interest that such
secured party or secured party’s agent may have by virtue of its possession,
custody or control thereof) and has filed Uniform Commercial Code termination statements
in respect of any Uniform Commercial Code filings made in respect of such Loan,
and each such release and Uniform Commercial Code termination statement has
been delivered to the Buyer prior to such Transaction.

 

(xii)          Seller
shall have delivered in such Transaction to Buyer the Underwriting Package (A) for
each Loan that is a Tier One Asset, not less than four Business Days prior to
the date of the related Transaction Notice and (B) for each Loan that is not a
Tier One Asset, not less than ten Business Days prior to the date of the
related Transaction

 

22

 

Notice, and Buyer shall have approved each such Loan in its sole
discretion. Buyer agrees that it shall notify Seller of its approval or
disapproval of each such proposed Loan within ten Business Days after its
receipt of the complete Underwriting Package and supplemental requests (whether
requested orally or in writing) related to such proposed Loan. For purposes of
this provision, an Underwriting Package received by Buyer after 1:00 p.m. New
York City time shall be deemed to be received on the following Business Day.

 

(xiii)         Each
Loan constituting a Purchased Asset in such Transaction shall have an interest
rate not less than: (A) with respect to a fixed-rate Loan, the 10-year U.S.
Dollar Interest Rate Swaps plus 1.75% as of the initial Purchase Date of such
Purchased Asset or (B) with respect to a floating-rate Loan, LIBO Rate plus
1.75% as of the initial Purchase Date of such Purchased Asset.

 

(xiv)        Satisfaction
of any conditions precedent to the first Transaction on or after the Effective
Date as set forth in clause (a) of this Section 10 that were not satisfied
prior to such first Purchase Date.

 

11.          RELEASE OF PURCHASED ASSETS

 

Upon timely payment in full of the Repurchase Price and all other
Obligations owing with respect to a Purchased Asset, if no Default or Event of
Default has occurred and is continuing, Buyer shall, and shall direct Custodian
to, release such Purchased Asset unless such release would give rise to or
perpetuate a Margin Deficit. Except as set forth in Sections 6 and 16, Seller
shall give at least three Business Days’ prior written notice to Buyer if such
repurchase shall occur on other than a Repurchase Date set forth in Section 3(b).

 

If such a Margin Deficit is applicable, Buyer shall notify Seller of
the amount thereof and Seller may thereupon satisfy the Margin Call in the
manner specified in Section 6.

 

12.          RELIANCE

 

With respect to any Transaction, Buyer may conclusively rely upon, and
shall incur no liability to Seller in acting upon, any request or other
communication that Buyer reasonably believes to have been given or made by a
person authorized to enter into a Transaction on Seller’s behalf.

 

13.          REPRESENTATIONS AND WARRANTIES

 

Seller hereby represents and warrants, and shall on and as of the
Purchase Date for any Transaction and on and as of each date thereafter through
and including the related Repurchase Date be deemed to represent and warrant,
that:

 

a)              Existence.  The Seller (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and qualifies as a real estate investment
trust under Section 856 of the Code and is in compliance with all provisions of
the Code governing its status as a real estate investment trust, (b) has all
requisite corporate or other power, and has all governmental licenses,
authorizations, consents and approvals, necessary to

 

23

 

own its assets and carry on its business as now being, or as proposed
to be, conducted, except where the lack of such licenses, authorizations,
consents and approvals would not be reasonably likely to have a Material
Adverse Effect, (c) is qualified to do business and is in good standing in all
other jurisdictions in which the nature of the business conducted by it makes
such qualification necessary, except where failure so to qualify would not be
reasonably likely (either individually or in the aggregate) to have a Material
Adverse Effect, and (d) is in compliance in all material respects with all
Requirements of Law, except where failure so to comply would not have a
Material Adverse Effect.

 

b)              Financial
Condition.  The Seller has heretofore
furnished to the Buyer a copy of its audited consolidated balance sheets which
include its consolidated Subsidiaries, each as of December 31, 2004.  All such financial statements are materially
complete and correct and fairly present the consolidated financial condition of
the Seller and its Subsidiaries and the consolidated results of their
operations for the fiscal year ended on said date, all in accordance with GAAP
applied on a consistent basis. Since December 31, 2004, there has been no
development or event or any prospective development or event which has had or
should reasonably be expected to have a Material Adverse Effect.

 

c)              Litigation.  There are no actions, suits, arbitrations,
investigations or proceedings pending or, to its knowledge, threatened against
the Seller or any of its Subsidiaries or affecting any of the property thereof
before any Governmental Authority, (i) as to which individually or in the
aggregate there is a reasonable likelihood of an adverse decision which would
be reasonably likely to have a Material Adverse Effect or (ii) which questions
the validity or enforceability of any of the Program Documents or any action to
be taken in connection with the transactions contemplated hereby and there is a
reasonable likelihood of a Material Adverse Effect or adverse decision.

 

d)              No
Breach.  Neither (a) the execution
and delivery of the Program Documents or (b) the consummation of the
transactions therein contemplated in compliance with the terms and provisions
thereof will conflict with or result in a breach of the charter or by-laws (or
other organizational or governing documents) of the Seller, or any applicable
law, rule or regulation, or any order, writ, injunction or decree of any
Governmental Authority, or other material agreement or instrument to which the
Seller, or any of its Subsidiaries, is a party or by which any of them or any
of their property is bound or to which any of them is subject, or constitute a
default under any such material agreement or instrument, or (except for the Liens
created pursuant to this Agreement) result in the creation or imposition of any
Lien upon any property of the Seller or any of its Subsidiaries, pursuant to
the terms of any such agreement or instrument.

 

e)              Action.  The Seller has all necessary corporate or
other power, authority and legal right to execute, deliver and perform its
obligations under each of the Program Documents to which it is a party; the
execution, delivery and performance by the Seller of each of the Program
Documents to which it is a party has been duly authorized by all necessary
corporate or other action on its part; and each Program Document has been duly
and validly executed and delivered by the Seller and constitutes a legal, valid
and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms.

 

24

 

f)               Approvals.  No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority, or any other
Person, are necessary for the execution, delivery or performance by the Seller
of the Program Documents to which it is a party or for the legality, validity
or enforceability thereof, except for filings and recordings in respect of the
Liens created pursuant to this Agreement.

 

g)              Margin
Regulations.  Neither a Transaction
hereunder, nor the use of the proceeds thereof, will violate or be inconsistent
with the provisions of Regulation T, U or X.

 

h)              Taxes.  The Seller and its Subsidiaries have filed
all Federal income tax returns and all other material tax returns that are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by any of them, except for any
such taxes, if any, that are being appropriately contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves have been provided. The charges, accruals and reserves on the books of
the Seller and its Subsidiaries in respect of taxes and other governmental
charges are adequate.

 

i)               Investment
Company Act.  Neither the Seller nor
any of its Subsidiaries is an “investment company”, or a company “controlled”
by an “investment company”, within the meaning of the Investment Company Act of
1940, as amended from time to time. The Seller is not subject to any Federal or
state statute or regulation which limits its ability to incur indebtedness.

 

j)               No
Legal Bar.  With the caveat as set
forth in 13(d), the execution, delivery and performance of this Agreement and
the Transactions hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or Contractual Obligation of the Seller or of any of its
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien (other than the Liens created hereunder) on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.

 

k)              No
Default.  Neither the Seller nor any
of its Subsidiaries is in default under or with respect to any of its
Contractual Obligations in any respect which should reasonably be expected to
have a Material Adverse Effect. No Default or Event of Default has occurred and
is continuing under this Agreement.

 

l)               Collateral;
Collateral Security.

 

(i)            The
Seller has not assigned, pledged, or otherwise conveyed or encumbered any
Purchased Asset to any other Person, and immediately prior to the sale of any
such Purchased Asset to the Buyer, the Seller was the sole owner of such
Purchased Asset and had good and marketable title thereto, free and clear of
all Liens, in each case except for Liens to be released simultaneously with the
Liens granted in favor of the Buyer hereunder and no Person other than the
Seller has any Lien on any Purchased Asset.

 

25

 

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

 

(iii)          Upon
receipt by the Custodian of each Note, endorsed in blank by a duly authorized
officer of the payee or last endorsee, the Buyer shall have a fully perfected
first priority security interest therein, in the Loan evidenced thereby and in
the Seller’s interest in the related Mortgaged Property.

 

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

 

m)             Chief
Executive Office; Chief Operating Office. 
The Seller’s chief executive office on the Effective Date is located at
14631 N. Scottsdale Rd., Suite 200, Scottsdale, Arizona 85254 and the chief
operating office is located at 14631 N. Scottsdale Rd., Suite 200, Scottsdale,
Arizona 85254.

 

n)              Location
of Books and Records.  The location
where the Seller keeps its books and records, including all computer tapes and
records relating to the Purchased Assets and any Collateral, is its chief
executive office or chief operating office or the offices of the Custodian and
the Servicer.

 

o)              True
and Complete Disclosure.  The
information, reports, financial statements, exhibits and schedules furnished in
writing by or on behalf of the Seller to the Buyer in connection with the
negotiation, preparation or delivery of this Agreement and the other Program
Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole, do not contain any untrue statement of material
fact or omit to state any material fact necessary to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by or on
behalf of the Seller to the Buyer in connection with this Agreement and the
other Program Documents and the transactions contemplated hereby and thereby
will be true, complete and accurate in every material respect, or (in the case
of projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to a Responsible
Officer that, after due inquiry, could reasonably be expected to have a
Material Adverse Effect that has not been disclosed herein, in the other
Program Documents or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to the Buyer for use in connection
with the transactions contemplated hereby or thereby.

 

p)              ERISA.  Each Plan to which the Seller or its
Subsidiaries make direct contributions, and, to the knowledge of the Seller,
each other Plan and each Multiemployer Plan, is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other Federal or
State

 

26

 

law. No event or condition has occurred and is continuing as to which
the Seller would be under an obligation to furnish a report to the Buyer under
Section 14(a)(vi) hereof.

 

q)              Licenses.  The Buyer will not be required solely as a
result of purchasing the Purchased Assets to be licensed, registered or
approved or to obtain permits or otherwise qualify (i) to do business in any
state in which it currently so required or (ii) under any state consumer
lending, fair debt collection or other applicable state statute or regulation.

 

r)               True
Sales.  Any and all interest of a
Qualified Originator in, to and under any Mortgage funded in the name of or
acquired by such Qualified Originator or seller which is an Affiliate of the
Seller has been sold, transferred, conveyed and assigned to the Seller pursuant
to a legal sale and such Qualified Originator retains no interest in such Loan.

 

s)              No
Burdensome Restrictions.  No
Requirement of Law or Contractual Obligation of the Seller or any of its
Subsidiaries has a Material Adverse Effect.

 

t)               Subsidiaries.  All of the Subsidiaries of the Seller at the
date hereof are listed on Schedule A to this Agreement.

 

u)              Origination
and Acquisition of Loans.  The Loans
were originated or acquired by the Seller or a Qualified Originator, and the
origination and collection practices used by the Seller or Qualified
Originator, as applicable, with respect to the Loans have been, in all material
respects legal, proper, prudent and customary in the franchise or commercial,
as applicable, mortgage loan origination business and in accordance with the
Underwriting Guidelines.  The servicing
of each of the Loans has been in all material respects, legal, proper, prudent
and customary in the commercial mortgage loan servicing business and in
accordance with the Accepted Servicing Practices.

 

v)              Seller
Solvent; Fraudulent Conveyance. As of the date hereof and immediately after
giving effect to each Transaction, the fair value of the assets of the Seller
is greater than the fair value of the liabilities (including, without
limitation, contingent liabilities if and to the extent required to be recorded
as a liability on the financial statements of the Seller in accordance with
GAAP) of the Seller and the Seller is and will be solvent, is and will be able
to pay its debts as they mature and does not and will not have an unreasonably
small amount of capital to engage in the business in which it is engaged and
proposes to engage. Seller does not intend to incur, or believe that it has
incurred, debts beyond its ability to pay such debts as they mature. Seller 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 Seller or any of its
assets. Seller is not transferring any Purchased Asset with any intent to
hinder, delay or defraud any of its creditors.

 

w)             FCCR.  (i) The Weighted Average Aggregate FCCR for
all of the Purchased Assets is not less than 1.5; and (ii) (A) no more than five
percent (5%) of the Purchased Assets (by aggregate Collateral Value) have a
Unit-Level FCCR of between 1.25 and 1.10; provided that if the aggregate
Collateral Value of the Purchased Assets is less than $100,000,000, then no
more than the greater of (1) five percent (5%) of the Purchased Assets (by
aggregate Collateral Value) or (2) $6,500,000 in Collateral Value of the
Purchased Assets have a Unit-Level FCCR of

 

27

 

between 1.25 and 1.10 and (B) no more than five percent (5%) of
Purchased Assets have a Master Lease FCCR of between 1.25 and 1.10; provided
that if the aggregate Collateral Value of the Purchased Assets is less than
$100,000,000, then no more than the greater of (1) five percent (5%) of the
Purchased Assets (by aggregate Collateral Value) or (2) $6,500,000 in
Collateral Value of the Purchased Assets have a Master Lease FCCR of between
1.25 and 1.10.

 

14.          COVENANTS OF SELLER

 

Seller hereby covenants with Buyer as follows:

 

a)              Financial
Statements.  The Seller shall deliver
to the Buyer:

 

(i)            annual
consolidated audited financial statements of the Seller and its Affiliates no
later than 90 days after year-end and quarterly unaudited statements of the
Seller and its Affiliates no later than 45 days after quarter-end, all in
accordance with GAAP, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments);

 

(ii)           
as soon as reasonably practicable, (A) quarterly and annual consolidating
financial statements reflecting material inter-company adjustments and (B) all
form 10-K, registration statements and other “corporate finance” filings made
with the Securities and Exchange Commission (“SEC”) (other than 8-K and Section
16 filings); provided, however, that the Seller will provide Buyer
with a copy of the Seller’s or its affiliates’ annual SEC Form 10-K filing no
later than 90 days after year-end, all in accordance with GAAP, consistently
applied, as at the end of, and for, such period (subject to normal year-end
audit adjustments);

 

(iii)          
on a quarterly basis, an officer’s certificate as set forth in Exhibit A
hereto, stating that the Seller is in compliance with the Net Worth
Requirements and the details of such compliance;

 

(iv)          monthly portfolio
performance data with respect to the Notes and associated Collateral,
including, without limitation, any outstanding delinquencies, prepayments in
whole or in part;

 

(v)           from time to time such
other information regarding the Collateral and the financial condition,
operations, or business of the Seller as the Buyer may reasonably request; and

 

(vi)          as soon as reasonably
possible, and in any event within thirty (30) days after a Responsible Officer
knows, or with respect to any Plan or Multiemployer Plan to which the Seller or
any of its Subsidiaries makes direct contributions, has reason to believe, that
any of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the Seller setting forth details respecting such event or
condition and the action, if any, that the Seller or its ERISA Affiliate
proposes to take with respect thereto (and a

 

28

 

copy of any report or notice required to be filed with or given to PBGC
by the Seller or an ERISA Affiliate with respect to such event or condition):

 

(A)          any
reportable event, as defined in Section 4043(b) of ERISA and the regulations
issued thereunder, with respect to a Plan, as to which PBGC has not by
regulation or otherwise waived the requirement of Section 4043(a) of ERISA that
it be notified within thirty (30) days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section 412 of
the Code or Section 302 of ERISA, including, without limitation, the failure to
make on or before its due date a required installment under Section 412(m) of
the Code or Section 302(e) of ERISA, shall be a reportable event regardless of
the issuance of any waivers in accordance with Section 412(d) of the Code) (a “Reportable
Event”); and any request for a waiver under Section 412(d) of the Code for any
Plan;

 

(B)           the
distribution under Section 4041(c) of ERISA of a notice of intent to terminate
any Plan or any action taken by the Seller or an ERISA Affiliate to terminate
any Plan;

 

(C)           the
institution by PBGC of proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Seller or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by PBGC with respect to such Multiemployer
Plan;

 

(D)          the
complete or partial withdrawal from a Multiemployer Plan by the Seller or any
ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by the Seller or any ERISA Affiliate of
notice from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or
has terminated under Section 4041A of ERISA;

 

(E)           the
institution of a proceeding by a fiduciary of any Multiemployer Plan against
the Seller or any ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within thirty (30) days; and

 

(F)           the adoption of an amendment to any Plan
that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would
result in the loss of tax-exempt status of the trust of which such Plan is a
part if the Seller or an ERISA Affiliate fails to timely provide security to
such Plan in accordance with the provisions of said Sections.

 

29

 

(vii)         The
Seller will furnish to the Buyer, at the time it furnishes the financial
statements pursuant to paragraph (iii) above, a certificate of a Responsible
Officer of the Seller to the effect that, to the best of such Responsible
Officer’s knowledge, the Seller during such fiscal period has observed or
performed all of its covenants and other agreements, and satisfied every
material condition, contained in this Agreement and the other Program Documents
to be observed, performed or satisfied by it, and that such Responsible Officer
has obtained no knowledge of any Default or Event of Default except as
specified in such certificate (and, if any Default or Event of Default has
occurred and is continuing, describing the same in reasonable detail and
describing the action the Seller has taken or proposes to take with respect
thereto).

 

b)              Litigation.  The Seller will promptly, and in any event
within one (1)  Business Day after
service of process, give to the Buyer notice of all legal or arbitrable
proceedings affecting the Seller or any of its Subsidiaries that questions or
challenges the validity or enforceability of any of the Program Documents or as
to which there is a reasonable likelihood of adverse determination which would
result in a Material Adverse Effect or in which the matter in controversy
exceeds $1,000,000.

 

c)              Existence,
Etc.  Each of the Seller and its
Subsidiaries will:

 

(i)            With
respect to the Seller and Net Lease Borrowers only, preserve and maintain its
legal existence and all of its material rights, privileges, licenses and
franchises;

 

(ii)           comply
with the requirements of all applicable laws, rules, regulations and orders of
Governmental Authorities (including, without limitation, truth in lending, real
estate settlement procedures and all environmental laws) if failure to comply
with such requirements would be reasonably likely (either individually or in
the aggregate) to have a Material Adverse Effect;

 

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

 

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

 

(v)           permit
representatives of the Buyer, during normal business hours upon one (1)
Business Day’s prior written notice at a mutually desirable time or at any time
during the continuance of an Event of Default, to examine, copy and make
extracts from its books and records, to inspect any of its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by the Buyer.

 

30

 

d)              Prohibition
of Fundamental Changes.  The Seller
shall not enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation, winding up or dissolution) or sell all or substantially all of its
assets; provided, that the Seller may merge or consolidate with (a) any
Subsidiary of the Seller or (b) any other Person if the Seller is the surviving
entity, or the Buyer consents to such merger or consolidation; and provided
further, that if after giving effect thereto, no Default would exist hereunder.

 

e)              Margin
Deficit.  If at any time there exists
a Margin Deficit, the Seller shall cure same in accordance with Section 6(a)
hereof.

 

f)               Notices.
The Seller shall give notice to the Buyer promptly:

 

(i)            upon the Seller
becoming aware of, and in any event within one (1) Business Day after, the
occurrence of any Default or Event of Default or any event of default or
default under any other material agreement of the Seller;

 

(ii)           upon the Seller
becoming aware of any default related to any Purchased Asset or Collateral, any
Material Adverse Effect or any event or change in circumstances which should
reasonably be expected to have a Material Adverse Effect;

 

(iii)          upon the Seller becoming
aware during the normal course of its business that the Mortgaged Property in
respect of any Loan or Loans with an aggregate unpaid principal balance of at
least $250,000 has been damaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty, or otherwise damaged so as to
materially and adversely affect the value of such Loan;

 

(iv)          upon the entry of a
judgment or decree against the Seller or any of its Subsidiaries in an amount
in excess of $1,000,000; and

 

(v)           upon the termination of
the Custody and Servicing Agreement or any other Servicing Agreement; and

 

(vi)          of
a move of the Seller’s chief executive office or chief operating office from
the addresses referred to in Section 13(m), which such notice shall be written
notice thirty (30) days prior to such move.

 

Each notice
pursuant to this Section 14(f) (other than (v) and (vi)) shall be accompanied
by a statement of a Responsible Officer of the Seller setting forth details of
the occurrence referred to therein and stating what action the Seller has taken
or proposes to take with respect thereto.

 

g)              Servicing.  The Seller shall cause the Servicer to
service, or cause to be serviced, the Purchased Assets, in accordance with
Accepted Servicing Practices, pending any delivery of such servicing to the
Buyer pursuant to the Custody and Servicing Agreement or any other Servicing
Agreement, employing at least the same procedures and exercising the same care
that the Servicer customarily employs in servicing mortgaged properties and
mortgage loans for its

 

31

 

own account.  The Seller shall
cause the Servicer to hold or cause to be held all escrow funds collected with
respect to such Purchased Assets in trust accounts and shall apply the same for
the purposes for which such funds were collected.  If the Seller should discover that, for any
reason whatsoever, the Seller or any entity responsible to the Buyer by
contract for managing or servicing any such Purchased Asset has failed to
perform fully the Servicer’s obligations with respect to the servicing of the Purchased
Assets or any of the obligations of such entities with respect to the Loans,
the Seller shall promptly notify the Buyer. 
Prior to any Person other than Midland Loan Services, Inc. becoming the
Servicer or a subservicer of the Purchased Assets, the Buyer shall have the
right to approve each such Servicer and the form of all Servicing Agreements or
servicing side letter agreements with respect thereto.

 

h)              Underwriting
Guidelines.  The Seller shall notify
the Buyer in writing of any material modifications to the Underwriting
Guidelines prior to implementation of such change, and unless the Buyer objects
in writing within ten (10) Business Days of receipt of notice, the proposed
modifications shall be deemed acceptable.

 

i)               Lines
of Business.  The Seller will not
engage to any substantial extent in any line or lines of business activity
other than financing, acquiring, leasing, selling or exchanging commercial real
estate, interests in commercial real estate or interests in entities that own
or operate commercial real estate, and the businesses generally carried on by
it as of the Initial Purchase Date.

 

j)               Transactions
with Affiliates.  The Seller will not
enter into any transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service, with any
Affiliate unless such transaction is (a) not expressly prohibited under this
Agreement, (b) in the ordinary course of the Seller’s business and (c) upon
fair and reasonable terms no less favorable to the Seller than it would obtain
in a comparable arm’s length transaction with a Person which is not an
Affiliate.

 

k)              Limitation
on Liens.  The Seller will not, nor
will it permit or allow others to, create, incur or permit to exist any Lien,
security interest or claim on or to any of its Collateral, except for: (i)
Liens (not otherwise permitted hereunder) which are created in connection with
the purchase of fixed assets and equipment necessary in the ordinary course of
the Seller’s business or to finance residual certificates issued in connection
with securitizations of mortgage loans completed by the Seller which are
financed solely based on a pledge of such residual certificates; and (ii) Liens
on the Collateral created pursuant to this Agreement. The Seller will defend
the Collateral against, and will take such other action as is necessary to
remove, any Lien, security interest or claim on or to the Collateral, other
than the security interests created under this Agreement, and the Seller will
defend the right, title and interest of the Buyer in and to any of the
Collateral against the claims and demands of all persons whomsoever.  The Seller will not permit or allow any of
its Subsidiaries to create, incur or permit to exist any Lien, security
interest or claim on or to any Mortgaged Property that is related to a
Purchased Asset, except in accordance with the Program Documents and any Master
Loan Agreement.

 

l)               Limitation
on Sale of Assets.  Except for sales
and securitizations of Purchased Assets with respect to which the Seller has paid
the Repurchase Price as set forth herein, the Seller and its Subsidiaries,
taken as a collective whole, shall not convey, sell, lease, assign,

 

32

 

transfer or otherwise dispose of (collectively, “Transfer”), all
or substantially all of its Property, business or assets (including, without
limitation, receivables and leasehold interests) whether now owned or hereafter
acquired or allow any Subsidiary to Transfer substantially all of Seller’s
consolidated assets taken as a whole to any Person; provided, that the Seller
may after prior written notice to the Buyer allow such action with respect to
any Subsidiary which is not a material part of the Seller’s overall business
operations.

 

m)             Limitation
on Distributions.  Without the Buyer’s
consent, except for customary cash dividends and distributions of its common
stock, the Seller shall not make any payment on account of, or set apart assets
for a sinking or other analogous fund for the purchase, redemption, defeasance,
retirement or other acquisition of, any stock or senior or subordinate debt of
the Seller, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Seller.

 

n)              Maintenance
of Net Worth/Liquidity.  The Seller
shall ensure that, as of the end of each quarter, it meets the Net Worth requirements
(the “Net Worth Requirements”) as follows:

 

(i)            The
Seller shall not permit its Tangible Net Worth at the end of each fiscal
quarter to be less than (i) $400,000,000 plus (ii) Net Worth Increase Amounts.

 

(ii)           The
Seller shall ensure that, as of the end of each fiscal quarter, the Seller,
together with its consolidated Subsidiaries, has cash and Cash Equivalents in
an amount of not less than $15,000,000.

 

(iii)          
The Seller shall not permit the ratio of Total Indebtedness to Tangible Net
Worth to exceed 4:1.

 

o)              Restricted
Payments.  The Seller shall not make
any Restricted Payments following an Event of Default.

 

p)              Servicing
Transmission.  The Seller shall
provide to the Buyer two (2) Business Days prior to each Repurchase Date (i)
the Servicing Transmission, with respect to the Mortgaged Properties serviced
under the Custody and Servicing Agreement by the Servicer which were a part of
the Purchased Assets prior to the first day of the current month, summarizing
the Servicer’s delinquency and loss experience with respect to Mortgaged
Properties serviced by the Servicer (including, in the case of the Mortgaged
Properties and, specifically, the Leases thereof, the following categories:
current, 30-59, 60-89, 90-119, 120-149 and 150+ days delinquent) and (ii) any
other information reasonably requested by the Buyer with respect to the
Mortgaged Properties.  The Servicer shall
also include in the Servicing Transmission such information relating to the
servicing of the Purchased Assets as may be required by the Buyer under the
Custody and Servicing Agreement.

 

q)              No
Amendment or Waiver.  The Seller will
not, nor will it permit or allow others to amend, modify, terminate or waive
any provision of any Purchased Asset to which the Seller is a party in any
manner which shall reasonably be expected to materially and adversely affect
the value of such Purchased Asset as Collateral.

 

33

 

r)               Maintenance
of Property; Insurance.  The Seller
shall keep or cause the related operator of the Mortgaged Properties to keep
the related Mortgaged Property in good working order and condition.  The Seller shall maintain or cause the
related mortgagor or Tenant under a Mortgage or Lease as operator of the
Mortgaged Property to maintain the insurance in form and amount as required
under the related Mortgage or Lease and shall not reduce such coverage without
the written consent of the Buyer, and shall also maintain or cause the Tenant
under the terms of the Lease to maintain such insurance with financially sound
and reputable insurance companies, and with respect to property and risks of a
character usually maintained by entities engaged in the same or similar
business similarly situated, against loss, damage and liability of the kinds
and in the amounts customarily maintained by such entities.  The Schedule of Insurance attached as
Schedule B hereto sets forth the insurance in effect on the Initial Purchase
Date.

 

s)              Further
Identification of Collateral. The Seller will furnish to the Buyer from
time to time statements and schedules further identifying and describing the
Purchased Assets and such other reports in connection with the Purchased Assets
as the Buyer may reasonably request, all in reasonable detail.

 

t)               Purchased
Asset Determined to be Defective. 
Upon discovery by the Seller or the Buyer of any breach of any
representation or warranty listed on Appendix A hereto applicable to any
Purchased Asset that would result in the Purchased Asset not being an Eligible
Asset, the party discovering such breach shall promptly give notice of such discovery
to the other.

 

u)              Illegal
Activities; Anti-Money Laundering Laws. The Seller has not engaged, is not
engaging, and shall not in the future engage in any conduct or activity that
could subject its assets to forfeiture or seizure, including without limitation,
conduct or activities in violation of the Racketeer Influenced and Corrupt
Organizations Act, the Bank Secrecy Act or narcotic drug laws.  The Seller has complied with all applicable
anti-money laundering laws and regulations, including without limitation the
USA Patriot Act of 200l (collectively, the “Anti Money Laundering Laws”).  As and to the extent required by the Anti
Money Laundering Laws, the Seller (i) has conducted the requisite due diligence
in connection with the origination of each Purchased Asset for purposes of the
Anti-Money Laundering Laws, including with respect to the legitimacy of the
applicable mortgagor, dealership guarantor, other obligor, and their respective
principals, and the origin of the assets used by the said mortgagor to purchase
the property in question, and (ii) maintains, and will maintain, sufficient
information to identify the applicable mortgagor and its principals, for
purposes of the Anti-Money Laundering Laws. 
No Purchased Asset is subject to nullification pursuant to Executive
Order 13224 (the “Executive Order”) or the regulations promulgated by the
Office of Foreign Assets Control of the United States Department of the
Treasury (the “OFAC Regulations”) or in violation of the Executive Order or the
OFAC Regulations, and no mortgagor or any of its principals, is subject to the
provisions of such Executive Order or the OFAC Regulations nor listed as a “blocked
person” for purposes of the OFAC Regulations.

 

34

 

15.          REPURCHASE DATE PAYMENTS/COLLECTIONS

 

On each Repurchase Date, Seller shall remit or shall cause to be
remitted to Buyer the Repurchase Price together with any other Obligations then
due and payable.

 

16.          REPURCHASE OF PURCHASED ASSETS; CHANGE OF LAW

 

a)              Upon
discovery by Seller of a breach of any of the representations and warranties
set forth in Appendix A to this Agreement, Seller shall give prompt written
notice thereof to Buyer.  Upon any such
discovery by Buyer, Buyer will notify Seller. 
It is understood and agreed that the representations and warranties set
forth in Appendix A to this Agreement shall survive delivery of the respective
Custodian’s Loan Files to the Custodian and shall inure to the benefit of Buyer
and Buyer’s successors and assigns.  The
fact that Buyer has conducted or has failed to conduct any partial or complete
due diligence investigation in connection with its purchase of any Loan shall
not affect Buyer’s right to demand repurchase as provided under this
Agreement.  Seller shall within five
Business Days of the earlier of Seller’s discovery or Seller’s receiving
notice, with respect to any Loan, of (i) any breach of a representation or
warranty contained in Appendix A to this Agreement or (ii) any failure to
deliver any of the items required to be delivered as part of the Custodian’s
Loan File within the time period required for delivery pursuant to the Custody
Agreement, promptly cure such breach or delivery failure in all material
respects.  If within five Business Days
after the earlier of Seller’s discovery of such breach or delivery failure or Seller’s
receiving notice thereof such breach or delivery failure has not been remedied
by Seller, Seller shall promptly upon receipt of written instructions from
Buyer purchase such Loan at a purchase price equal to the Repurchase Price with
respect to such Loan by depositing such Repurchase Price in the Collection
Account; provided, however, that, with the exception of the delivery of a Note,
if the Seller is diligently pursuing a cure of such breach or delivery failure,
Seller shall have ten days in addition to such five Business Day period to cure
such breach or delivery failure in all material respects.

 

b)              If
Buyer determines that the introduction of, any change in, or the interpretation
or administration of any requirement of law has made it unlawful or
commercially impracticable to engage in any Transactions with a Pricing Rate
based on LIBO Rate, then Seller (i) shall, upon its receipt of notice of such
fact and demand from Buyer (with a copy of such notice to Custodian),
repurchase the Purchased Assets subject to the Transaction on the next
succeeding Business Day and, at Seller’s election, concurrently enter into a
new Transaction with Buyer with a Pricing Rate based on the Prime Rate plus the
margin set forth in the Side Letter as part of the Pricing Rate and (ii) may
elect, by giving notice to Buyer and Custodian, that all new Transactions shall
have Pricing Rates based on the Prime Rate plus such margin.

 

c)              If
Buyer determines in its sole discretion that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of
return on Buyer’s capital or on the capital of any Affiliate of Buyer as a
consequence of such Change in Law on this Agreement, then from time to time
Seller will compensate Buyer or Buyer’s Affiliate, as applicable, for such
reduced rate of return suffered as a consequence of such Change in Law.  Buyer shall provide Seller with prompt notice
as to any Change in Law.  Notwithstanding
any other provisions in this Agreement, in the event of any such Change in Law,
Seller will have the right to terminate all Transactions then outstanding
without any prepayment penalty as of a date

 

35

 

selected by Seller, which date shall be prior to the then applicable
Repurchase Date and which date shall thereafter for all purposes hereof be
deemed to be the Repurchase Date.

 

17.          RESERVED.

 

18.          REPURCHASE TRANSACTIONS

 

Buyer may, in its sole election, engage in repurchase transactions with
the Purchased Assets or otherwise pledge, hypothecate, assign, transfer or
otherwise convey the Purchased Assets with a counterparty of Buyer’s choice, in
all cases subject to Buyer’s obligation to reconvey the Purchased Assets (and
not substitutes therefor) on the Repurchase Date.  In the event Buyer engages in a repurchase
transaction with any of the Purchased Assets or otherwise pledges or
hypothecates any of the Purchased Assets, Buyer shall have the right to assign
to Buyer’s counterparty any of the applicable representations or warranties in
Appendix A to this Agreement and the remedies for breach thereof, as they
relate to the Purchased Assets that are subject to such repurchase transaction.

 

19.          EVENTS OF DEFAULT

 

With respect to any Transactions covered by or related to this
Agreement, the occurrence of any of the following events shall constitute, if
declared as such by Buyer, an “Event of Default” other than the events
described in (f) and (g) below which, upon their occurrence, shall
automatically constitute an Event of Default:

 

a)              Seller
fails to transfer the Purchased Assets to Buyer on the applicable Purchase Date
(provided Buyer has tendered the related Purchase Price); or

 

b)              Seller
either fails to repurchase the Purchased Assets on the applicable Repurchase
Date or fails to perform its obligations under Section 6; or

 

c)              any
representation, warranty or certification made or deemed made herein or in any
other Program Document by the Seller or any certificate furnished to the Buyer
pursuant to the provisions thereof, shall prove to have been false or
misleading in any material respect (which falsity is not cured within ten (10)
Business Days of the earlier of (i) the receipt of notice by the Seller and
(ii) actual knowledge of the Seller thereof, and could reasonably result in a
Material Adverse Effect) as of the time made or furnished (other than the
representations and warranties set forth in Appendix A which shall be
considered solely for the purpose of determining the Purchase Price of the
Loans); unless (i) the Seller shall have made any such representations and
warranties with knowledge that they were materially false or misleading at the
time made and that such falsity could reasonably result in a Material Adverse
Effect, or (ii) any such representations and warranties have been determined by
the Buyer in its sole discretion to be materially false or misleading on a
regular basis and that such falsity could reasonably result in a Material
Adverse Effect); or

 

d)              the
Seller shall fail to observe or perform any covenant or agreement contained in
this Agreement or any other Program Document and such failure to observe or
perform shall continue unremedied for a period of five (5) Business Days after
the earlier of (i) receipt of notice by the Seller or (ii) actual knowledge of
the Seller; or

 

36

 

e)              a
final judgment or judgments for the payment of money in excess of $2,000,000 in
the aggregate (to the extent that it is, in the reasonable determination of the
Buyer, uninsured and provided that any insurance or other credit posted in
connection with an appeal shall not be deemed insurance for these purposes)
shall be rendered against the Seller or any of its Subsidiaries by one or more
courts, administrative tribunals or other bodies having jurisdiction over them
and the same shall not be discharged (or provision shall not be made for such
discharge) or bonded, or a stay of execution thereof shall not be procured, within
sixty (60) days from the date of entry thereof and the Seller or any such
Subsidiary shall not, within said period of sixty (60) days, or such longer
period during which execution of the same shall have been stayed or bonded,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or

 

f)               the
Seller shall admit in writing its inability to pay its debts as such debts
become due; or

 

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

 

h)              a
proceeding or case shall be commenced, without the application or consent of
the Seller or any of its Subsidiaries, in any court of competent jurisdiction,
seeking (i) its reorganization, liquidation, dissolution, arrangement or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of, or taking of possession by, a receiver, custodian, trustee,
examiner, liquidator or the like of the Seller or any such Subsidiary or of all
or any substantial part of its property, or (iii) similar relief in respect of
the Seller or any such Subsidiary under any law relating to bankruptcy,
insolvency, reorganization, liquidation, dissolution, arrangement or
winding-up, or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of sixty (60) or more days; or an order for relief against
the Seller or any such Subsidiary shall be entered in an involuntary case under
the Bankruptcy Code; or

 

i)               without
the express prior written consent of Buyer, the Custody and Servicing Agreement
or any Program Document shall for whatever reason (including an event of
default thereunder) be terminated or the lien on the Collateral created by this
Agreement or Seller’s material obligations hereunder shall cease to be in full
force and effect, or the enforceability thereof shall be contested by the
Seller; or

 

j)               any
Material Adverse Effect or the Buyer reasonably determines that there exists a
material impairment of the Seller’s ability to perform its obligations under
this Agreement, the Note or any other Program Document; or

 

37

 

k)              
(i) any Person shall engage in any “prohibited transaction” (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan or
Multiemployer Plan, (ii) any material “accumulated funding deficiency” (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan or Multiemployer Plan or any Lien in favor of PBGC or a
Plan or Multiemployer Plan shall arise on the assets of the Seller or any ERISA
Affiliate, (iii) a Reportable Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Buyers, likely to result in the termination of such Plan for purposes of Title
IV of ERISA, (iv) any Plan shall terminate for purposes of Title IV of ERISA,
(v) the Seller or any ERISA Affiliate shall, or in the reasonable opinion of
the Buyers is likely to, incur any liability in connection with a withdrawal
from, or the insolvency or reorganization of, a Multiemployer Plan or (vi) any
other event or condition shall occur or exist with respect to a Plan or
Multiemployer Plan; and in each case in clauses (i) through (vi) above, such
event or condition, together with all other such events or conditions, if any,
could reasonably be expected to have a Material Adverse Effect; or

 

l)               any
Change in Control of the Seller shall have occurred without the prior consent
of the Buyer; or

 

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

 

n)              the
Buyer shall reasonably request, specifying the reasons for such request,
information, and/or written responses to such requests, regarding the financial
well-being of the Seller and such information and/or responses shall not have
been provided within five (5) Business Days of such request; or

 

o)              the
Seller or any subsidiary or Affiliate of the Seller shall default under, or
fail to perform as required under, or shall otherwise materially breach the
terms of any instrument, agreement or contract between the Seller or such other
entity, on the one hand, and the Buyer or any of the Buyer’s Affiliates on the
other; or the Seller or any subsidiary or Affiliate of the Seller shall default
under, or fail to perform as requested under, the terms of any repurchase
agreement, loan and security agreement or similar credit facility or agreement
for borrowed funds entered into by the Seller or such other entity and any
third party, which default or failure entitles any party to require
acceleration or prepayment of any indebtedness thereunder in an amount greater
than $250,000.

 

20.          REMEDIES

 

Upon the occurrence of an Event of Default, Buyer, at its option (which
option shall be deemed to have been exercised immediately upon the occurrence
of an Event of Default pursuant to Section 19(f) or (g) hereof), shall have any
or all of the following rights and remedies, which may be exercised by Buyer:

 

38

 

a)              The
Repurchase Date for each Transaction hereunder shall be deemed immediately to
occur.

 

b)            (i)            Seller’s
obligations hereunder to repurchase all Purchased Assets at the Repurchase
Price therefor on the Repurchase Date in such Transactions shall thereupon
become immediately due and payable; all Income paid after such exercise or
deemed exercise shall be remitted to and retained by Buyer and applied to the
aggregate Repurchase Prices and any other amounts owing by Seller hereunder;
Seller shall immediately deliver to Buyer or its designee any and all original
papers, records and files relating to the Purchased Assets subject to such
Transaction then in Seller’s possession and/or control; and all right, title
and interest in and entitlement to such Purchased Assets and Servicing Rights
thereon shall be deemed transferred to Buyer.

 

(ii)           Buyer
shall have the right to (A) sell, on or following the Business Day following
the date on which the Repurchase Price became due and payable pursuant to Section
20(b) without notice or demand of any kind, at a public or private sale and at
such price or prices as Buyer may reasonably deem satisfactory any or all
Purchased Assets or (B) in its sole discretion, exercised in good faith, elect,
in lieu of selling all or a portion of such Purchased Assets, to give Seller
credit for such Purchased Assets in an amount equal to the Market Value of the
Purchased Assets against the aggregate unpaid Repurchase Price and any other
amounts owing by Seller hereunder.  Seller
shall remain liable to Buyer for any amounts that remain owing to Buyer
following a sale and/or credit under the preceding sentence.  The proceeds of any disposition of Purchased
Assets shall be applied first to the costs and expenses incurred by Buyer in
connection with or as a result of an Event of Default; second to the aggregate
Repurchase Prices; third to all other Obligations; and any amounts remaining
shall be paid to Seller.

 

(iii)          The
parties recognize that it may not be possible to purchase or sell all of the
Purchased Assets on a particular Business Day, or in a transaction with the
same purchaser, or in the same manner because the market for such Purchased
Assets may not be liquid.  In view of the
nature of the Purchased Assets, the parties agree that liquidation of a
Transaction or the underlying Purchased Assets does not require a public
purchase or sale and that a good faith private purchase or sale shall be deemed
to have been made in a commercially reasonable manner.  Accordingly, Buyer may elect the time and
manner of liquidating any Purchased Asset and nothing contained herein shall
obligate Buyer to liquidate any Purchased Asset on the occurrence of an Event
of Default or to liquidate all Purchased Assets in the same manner or on the same
Business Day or constitute a waiver of any right or remedy of Buyer.  Notwithstanding the foregoing, the parties to
this Agreement agree that the Transactions have been entered into in
consideration of and in reliance upon the fact that all Transactions hereunder
constitute a single business and contractual obligation and that each
Transaction has been entered into in consideration of the other Transactions.

 

c)              Seller
hereby acknowledges, admits and agrees that Seller’s obligations under this
Agreement are 10% recourse obligations of Seller to which Seller pledges its
full faith and credit.  In addition to
its rights hereunder, Buyer shall have the right to proceed against any of
Seller’s assets which may be in the possession of Buyer, any of Buyer’s Affiliates
or its designee

 

39

 

(including the Custodian, to the extent acting as a custodian for the
benefit of the Buyer), including the right to liquidate such assets and to
set-off the proceeds against monies owed by Seller to Buyer pursuant to this
Agreement.  Buyer may set off cash, the
proceeds of the liquidation of the Purchased Assets and Additional Purchased
Assets, any other Collateral or its proceeds and all other sums or obligations
owed by Buyer to Seller hereunder against all of Seller’s Obligations to Buyer,
whether under this Agreement, under a Transaction, or under any other agreement
between the parties, or otherwise, whether or not such Obligations are then
due, without prejudice to Buyer’s right to recover any deficiency.

 

d)              Buyer
shall have the right to obtain physical possession of the Records and all other
files of Seller relating to the Purchased Assets and all documents relating to
the Purchased Assets which are then or may thereafter come into the possession
of Seller or any third party acting for Seller and Seller shall deliver to
Buyer such assignments as Buyer shall request.

 

e)              Buyer
may direct all Persons servicing the Purchased Assets to take such action with
respect to the Purchased Assets as Buyer determines appropriate.

 

f)               Seller
shall be liable to Buyer for the amount of all expenses (plus interest thereon
at a rate equal to the Default Rate), and all costs and expenses incurred in
connection with hedging or covering transactions related to the Purchased
Assets.

 

g)              Seller
shall cause all sums received by it or on its behalf with respect to the
Purchased Assets to be deposited with Custodian (or such other Person as Buyer
may direct) after receipt thereof.

 

h)              Buyer
shall without regard to the adequacy of the security for the Obligations, be
entitled to the appointment of a receiver by any court having jurisdiction,
without notice, to take possession of and protect, collect, manage, liquidate,
and sell the Purchased Assets and any other Collateral or any portion thereof,
collect the payments due with respect to the Purchased Assets and any other
Collateral or any portion thereof, and do anything that Buyer is authorized
hereunder to do.  Seller shall pay all
costs and expenses incurred by Buyer in connection with the appointment and
activities of such receiver.

 

Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Seller hereby expressly waives, to the extent
permitted by law, any right Seller might otherwise have to require Buyer to
enforce its rights by judicial process. 
Seller also waives, to the extent permitted by law, any defense Seller
might otherwise have to the Obligations, arising from use of nonjudicial
process, enforcement and sale of all or any portion of the Purchased Assets and
any other Collateral or from any other election of remedies.  Seller recognizes that nonjudicial remedies
are consistent with the usages of the trade, are responsive to commercial
necessity and are the result of a bargain at arm’s length.

 

In addition to all the rights and remedies specifically provided
herein, Buyer shall have all other rights and remedies provided by applicable
federal, state, foreign, and local laws, whether existing at law, in equity or
by statute.

 

40

 

Buyer shall have, except as otherwise expressly provided in this
Agreement, the right to exercise any of its rights and/or remedies without presentment,
demand, protest or further notice of any kind other than as expressly set forth
herein, all of which are hereby expressly waived by Seller.

 

Seller hereby authorizes Buyer, at Seller’s expense, to file such
financing statement or statements relating to the Purchased Assets and the
Collateral without Seller’s signature thereon as Buyer at its option may deem
appropriate, and appoints Buyer as Seller’s attorney-in-fact to execute any
such financing statement or statements in Seller’s name and to perform all
other acts which Buyer deems appropriate to perfect and continue the lien and
security interest granted hereby and to protect, preserve and realize upon the
Purchased Assets and the Collateral, including, but not limited to, the right
to endorse notes, complete blanks in documents and execute assignments on
behalf of Seller as its attorney-in-fact. 
This power of attorney is coupled with an interest and is irrevocable
without Buyer’s consent.

 

21.          DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE

 

No failure on the part of Buyer to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by Buyer of any right, power
or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. 
All rights and remedies of Buyer provided for herein are cumulative and
in addition to any and all other rights and remedies provided by law, the
Program Documents and the other instruments and agreements contemplated hereby and
thereby, and are not conditional or contingent on any attempt by Buyer to
exercise any of its rights under any other related document.  Buyer may exercise at any time after the
occurrence of an Event of Default one or more remedies, as it so desires, and
may thereafter at any time and from time to time exercise any other remedy or
remedies.

 

22.          USE OF EMPLOYEE PLAN ASSETS

 

No assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) shall be
used by either party hereto in a Transaction.

 

23.          INDEMNITY

 

a)              Seller
agrees to pay on demand (i) all reasonable out-of-pocket costs and expenses of
Buyer in connection with the preparation, execution, delivery, modification,
administration and amendment of the Program Documents (including, without
limitation, (A) all collateral review and UCC search and filing fees and
expenses and (B) the reasonable fees and expenses of counsel for Buyer with
respect thereto, with respect to advising Buyer as to its rights and
responsibilities, or the perfection, protection or preservation of rights or
interests, under this Agreement, with respect to negotiations with Seller or
with other creditors of Seller or any of their Subsidiaries arising out of any
Default or any events or circumstances that may give rise to a Default and with
respect to presenting claims in or otherwise participating in or monitoring any
bankruptcy, insolvency or other similar proceeding involving creditors’ rights
generally and any proceeding ancillary thereto) and (ii) all costs and expenses
of Buyer in connection with the

 

41

 

enforcement of this Agreement, whether in any action, suit or
litigation, any bankruptcy, insolvency or other similar proceeding affecting
creditors’ rights generally (including, without limitation, the reasonable fees
and expenses of counsel for Buyer) whether or not the transactions contemplated
hereby are consummated.

 

b)              Seller
agrees to indemnify and hold harmless Buyer and each of its respective
Affiliates and their officers, directors, employees, agents and advisors (each,
an “Indemnified Party”) from and against (and will reimburse each Indemnified
Party as the same is incurred) any and all claims, damages, losses, liabilities
and expenses (including, without limitation, reasonable fees and expenses of
counsel) that may be incurred by or asserted or awarded against any Indemnified
Party, in each case arising out of or in connection with or by reason of (including,
without limitation, in connection with any investigation, litigation or other
proceeding (whether or not such Indemnified Party is a party thereto) relating
to, resulting from or arising out of any of the Program Documents and all other
documents related thereto, any breach of a representation or warranty of Seller
or Seller’s officer in this Agreement or any other Program Document, and all
actions taken pursuant thereto) (i) the Transactions, the actual or proposed
use of the proceeds of the Transactions, this Agreement or any of the
transactions contemplated thereby, including, without limitation, any
acquisition or proposed acquisition or any indemnity payable under any
Servicing Agreement or other servicing arrangement, (ii) the actual or alleged
presence of hazardous materials on any Property or any environmental action
relating in any way to any Property or (iii) the actual or alleged violation of
any federal, state, municipal or local predatory lending laws, except to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party’s gross negligence or willful misconduct.  Seller also agrees not to assert any claim
against Buyer or any of its Affiliates, or any of their respective officers,
directors, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or
otherwise relating to the Program Documents, the actual or proposed use of the
proceeds of the Transactions, this Agreement or any of the transactions
contemplated thereby.  THE FOREGOING
INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT
LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT)
OF THE INDEMNIFIED PARTIES.

 

c)              If
Seller fails to pay when due any costs, expenses or other amounts payable by it
under this Agreement, including, without limitation, reasonable fees and
expenses of counsel and indemnities, such amount may be paid on behalf of
Seller by Buyer, in its sole discretion and Seller shall remain liable for any
such payments to Buyer.  No such payment
by Buyer shall be deemed a waiver of any of Buyer’s rights under the Program
Documents.

 

d)              Without
prejudice to the survival of any other agreement of Seller hereunder, the
agreements and obligations of Seller contained in this Section shall survive
the payment in full of the Repurchase Price and all other amounts payable
hereunder and delivery of the Purchased Assets by Buyer against full payment
therefor.

 

42

 

24.          WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS

 

Seller hereby expressly waives, to the fullest extent permitted by law,
every statute of limitation on a deficiency judgment, any reduction in the
proceeds of any Purchased Assets as a result of restrictions upon Buyer or
Custodian contained in the Program Documents or any other instrument delivered
in connection therewith, and any right that it may have to direct the order in
which any of the Purchased Assets shall be disposed of in the event of any
disposition pursuant hereto.

 

25.          REIMBURSEMENT

 

All sums reasonably expended by Buyer in connection with the exercise
of any right or remedy provided for herein shall be and remain Seller’s
obligation.  Seller agrees to pay, with
interest at the Default Rate to the extent that an Event of Default has
occurred, the reasonable out-of-pocket expenses and reasonable attorneys’ fees
incurred by Buyer and/or Custodian in connection with the enforcement of the
Program Documents, the taking of any action, including legal action, required
or permitted to be taken by Buyer (without duplication to Buyer) and/or
Custodian pursuant thereto, any “due diligence” or loan agent reviews conducted
by Buyer or on its behalf or any refinancing or restructuring in the nature of
a “workout”.  If Buyer determines that,
due to the introduction of, any change in, or the compliance by Buyer with (i)
any eurocurrency reserve requirement or (ii) the interpretation of any law,
regulation or any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
an increase in the cost to Buyer in engaging in the present or any future
Transactions, then Seller agrees to pay to Buyer, from time to time, upon
demand by Buyer (with a copy to Custodian) the actual cost of additional
amounts as specified by Buyer to compensate Buyer for such increased costs.  Notwithstanding any other provisions in this
Agreement, in the event of any such change in the eurocurrency reserve
requirement or the interpretation of any law, regulation or any guideline or
request from any central bank or other Governmental Authority, Seller will have
the right to terminate all Transactions then outstanding as of a date selected
by Seller, which date shall be prior to the applicable Repurchase Date and
which date shall thereafter for all purposes hereof, be deemed to be the
Repurchase Date.  In addition, Buyer
shall promptly notify Seller if any events in clause (i) or (ii) of this
Section 25 occur.

 

In addition to any rights and remedies of Buyer hereunder and by law,
Buyer shall have the right, without prior notice to Seller, any such notice
being expressly waived by Seller to the extent permitted by applicable law,
upon any amount becoming due and payable by Seller hereunder (whether at the
stated maturity, by acceleration or otherwise) to set-off and appropriate and
apply against such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by Buyer or any Affiliate thereof to or for the credit or the account of
Seller or any Affiliate thereof.  Buyer
agrees promptly to notify Seller after any such set off and application made by
Buyer; provided that the failure to give such notice shall not affect the
validity of such set off and application.

 

43

 

26.          FURTHER ASSURANCES

 

Seller agrees to do such further acts and things and to execute and
deliver to Buyer such additional assignments, acknowledgments, agreements,
powers and instruments as are reasonably required by Buyer to carry into effect
the intent and purposes of this Agreement, to perfect the interests of Buyer in
the Purchased Assets or to better assure and confirm unto Buyer its rights,
powers and remedies hereunder.

 

27.          ENTIRE AGREEMENT; PRODUCT OF NEGOTIATION

 

This Agreement supersedes and integrates all previous negotiations,
contracts, agreements and understandings between the parties relating to a sale
and repurchase of Purchased Assets and Additional Purchased Assets thereto, and
it, together with the other Program Documents, and the other documents
delivered pursuant hereto or thereto, contains the entire final agreement of
the parties.  No prior negotiation,
agreement, understanding or prior contract shall have any validity hereafter.

 

28.          TERMINATION

 

This Agreement shall remain in effect until the earlier of (i) 364 days
following the earlier of the first Purchase Date, provided that such date may
be extended, in Buyer’s sole discretion, upon written request of the Seller
delivered to Buyer not less than 60 days prior to such date, or (ii) at Buyer’s
option, the occurrence of an Event of Default (such date, the “Termination Date”).  However, no such termination shall affect
Seller’s outstanding obligations to Buyer at the time of such termination.  Pursuant to any extension of this Agreement,
the Seller shall pay to the Buyer the Renewal Fee.  Seller’s obligations to indemnify Buyer
pursuant to this Agreement shall survive the termination hereof.  Failure of Buyer to respond to Seller’s
request for an extension pursuant to clause (i) above shall be deemed a
rejection of such request.

 

29.          ASSIGNMENT

 

a)              The
Program Documents are not assignable by Seller. 
Buyer may from time to time assign all or a portion of its rights and
obligations under this Agreement and the Program Documents; provided, however,
that Buyer shall maintain, for review by Seller upon written request, a
register of assignees and a copy of an executed assignment and acceptance by
Buyer and assignee (“Assignment and Acceptance”), specifying the percentage or
portion of such rights and obligations assigned.  Upon such assignment, (a) such assignee shall
be a party hereto and to each Program Document to the extent of the percentage
or portion set forth in the Assignment and Acceptance, and shall succeed to the
applicable rights and obligations of Buyer hereunder, and (b) Buyer shall, to
the extent that such rights and obligations have been so assigned by it to
either (i) an Affiliate of Buyer which assumes the obligations of such Buyer or
(ii) to another Person which assumes the obligations of Buyer, be released from
its obligations hereunder accruing thereafter and under the Program Documents.  Unless otherwise stated in the Assignment and
Acceptance, Seller shall continue to take directions solely from Buyer unless
otherwise notified by Buyer in writing. 
Buyer may distribute to any prospective assignee any document or other
information delivered to Buyer by Seller. 
Notwithstanding any assignment by Buyer pursuant to this Section 29,
Buyer shall remain liable as to the Transactions.

 

44

 

b)              Buyer
may sell to one or more Persons participations in all or a portion of its
rights and obligations under this Agreement or otherwise enter into one or more
syndications of its rights and obligations under this Agreement.  In the event of any such sale or syndication,
Buyer shall be entitled, after consultation with the Seller, to change the
structure, terms (including pricing) or amount, if Buyer determines that such
changes are advisable in order to achieve a successful sale or syndication;
provided, however that such change to the structure, terms (including pricing)
or amount is not reasonably likely to trigger an Event of Default.  With respect to any such sale or syndication,
Seller agrees to (a) provide and cause its officers, directors and advisors to
provide Buyer and any other proposed buyer that becomes part of the syndicate
of Buyers upon request with all information reasonably deemed necessary by
Buyer to effectuate such sale or syndication, (b) assist Buyer upon its
reasonable request in the preparation of an offering memorandum to be used in
connection with such sale or syndication and (c) make available the officers,
directors and advisors of the Seller and its affiliates, from time to time, to
attend and make presentations regarding the business and prospects of the
Seller and its affiliates, as appropriate, at a meeting or meetings of
prospective buyers.  Notwithstanding the
terms of Section 8, each participant of Buyer shall be entitled to the
additional compensation and other rights and protections afforded Buyer under
Section 8 to the same extent as Buyer would have been entitled to receive them
with respect to the participation sold to such participant.

 

30.          AMENDMENTS, ETC.

 

No amendment or waiver of any provision of this Agreement nor any
consent to any failure to comply herewith or therewith shall in any event be
effective unless the same shall be in writing and signed by Seller and Buyer,
and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

 

31.          SEVERABILITY

 

If any provision of Program Document is declared invalid by any court
of competent jurisdiction, such invalidity shall not affect any other provision
of the Program Documents, and each Program Document shall be enforced to the
fullest extent permitted by law.

 

32.          BINDING EFFECT; GOVERNING LAW

 

This Agreement shall be binding and inure to the benefit of the parties
hereto and their respective successors and assigns, except that Seller may not
assign or transfer any of its rights or obligations under this Agreement or any
other Program Document without the prior written consent of Buyer.  THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK.

 

33.          CONSENT TO JURISDICTION

 

SELLER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE PROGRAM DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.  SELLER HEREBY IRREVOCABLY AND UNCONDITIONALLY

 

45

 

CONSENTS, ON BEHALF OF ITSELF AND ITS PROPERTY, TO THE NON EXCLUSIVE
JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR
RELATING TO THE PROGRAM DOCUMENTS IN ANY ACTION OR PROCEEDING.  SELLER HEREBY SUBMITS TO, AND WAIVES ANY
OBJECTION SELLER MAY HAVE TO, NON EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN
THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF
OR RELATING TO THE PROGRAM DOCUMENTS. 
SELLER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF A SUMMONS AND
COMPLAINT AND OTHER PROCESS IN ANY ACTION, CLAIM OR PROCEEDING BROUGHT BY BUYER
IN CONNECTION WITH THIS AGREEMENT OR THE OTHER PROGRAM DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS, ON BEHALF OF ITSELF OR ITS PROPERTY, IN THE MANNER SPECIFIED IN
THIS SECTION 33 AND TO SELLER’S ADDRESS SPECIFIED IN SECTION 36 OR SUCH OTHER
ADDRESS AS SELLER SHALL HAVE PROVIDED IN WRITING TO BUYER.  NOTHING IN THIS SECTION 33 SHALL AFFECT THE
RIGHT OF THE BUYER TO (I) SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW, OR (II) BRING ANY ACTION OR PROCEEDING AGAINST SELLER OR ITS
PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTIONS.

 

34.          SINGLE AGREEMENT

 

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

 

35.          INTENT

 

Seller and Buyer recognize that each Transaction is a “repurchase
agreement” as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (“USC”) (except insofar as the Loans subject to such
Transaction or the term of such Transaction would render such definition
inapplicable), a “forward contract” as that term is defined in Section 101 of
Title 11 of the USC and a “securities contract” as that term is defined in
Section 741 of Title 11 of the USC (except insofar as the Loans subject to such
Transaction or the term of such Transaction would render such definition
inapplicable).

 

It is understood that Buyer’s right to liquidate the Purchased Assets
delivered to it in connection with the Transactions hereunder or to exercise
any other remedies pursuant to Section 20

 

46

 

hereof is a contractual right to liquidate such Transaction as
described in Sections 555 and 559 of Title 11 of the USC.

 

36.          NOTICES AND OTHER COMMUNICATIONS

 

Except as
provided herein, any notice required or permitted by this Agreement shall be in
writing and shall be effective and deemed delivered only when received by the
party to which it is sent; provided, however, that a facsimile transmission
shall be deemed to be received when transmitted so long as the transmitting
machine has provided an electronic confirmation (without error message) of such
transmission.  Any such notice shall be
sent to a party at the address or facsimile transmission number set forth
below:

 

if to Seller:

 

Spirit Finance Corporation

14631 N. Scottsdale Road

Suite 200

Scottsdale, AZ 85254

Attention:              Catherine
Long

Telephone:            (480)
606-0820

Facsimile:             (480)
606-0826

 

with a copy to:

Kutak Rock LLP

1801 California St., Suite 3100

Denver, Colorado 80202

Attention:              Paul
E. Belitz, Esq.

Telephone:            (303)
297-2400

Facsimile:             (303)
292-7799

 

if to Buyer or Agent:

 

Citigroup Global Markets Realty Corp.

390 Greenwich Street

New York, New York 10013

Attention: 
Christian Anderson

Telephone: 
(212) 723-9714

Facsimile: 
(212) 723-8591

 

Citigroup Global Markets Realty Corp.

390 Greenwich Street

New York, New York 10013

Attention: 
James Xanthos

Telephone: 
(212) 723-4144

Facsimile: 
(212) 723-8591

 

as such address or number may be changed by like notice.

 

47

 

37.          CONFIDENTIALITY

 

Buyer acknowledges that Seller is a public company subject to the
Securities Act of 1933 and Securities Exchange Act of 1934 and that the
information furnished by Seller to Buyer in the Collection Report, Asset Base Certificate
and otherwise under this Agreement may constitute material non-public
information (“Confidential Information”) within the meaning of such acts.  Except as consented to by Seller, Buyer
hereby agrees that it will keep all Confidential Information confidential and
not disclose such Confidential Information to any third party and will not
engage in, directly or indirectly, any transactions involving the Seller’s
publicly traded securities based upon such Confidential Information.
Notwithstanding the foregoing provisions of this Section 37, nothing herein
shall prevent any division or department of the Buyer from engaging in any
lawful transaction in the Seller’s publicly traded securities in connection
with the ordinary course of the business of such division or department,
provided that the decision to enter into such transaction is, as required by
applicable law, not based, in whole or in part, on any part of the Confidential
Information that is material non-public information.

 

This Agreement and its terms, provisions, supplements and amendments,
and transactions and notices hereunder, are proprietary to Buyer and Agent and
shall be held by Seller (and Seller shall cause Servicer to hold it) in strict
confidence and shall not be disclosed to any third party without the consent of
Buyer except for (i) disclosure to Seller’s direct and indirect parent
companies, directors, attorneys, agents or accountants, provided that such
attorneys or accountants likewise agree to be bound by this covenant of
confidentiality or (ii) upon prior written notice to Buyer, disclosure required
by law, rule, regulation or order of a court or other regulatory body or (iii)
to the extent necessary in dealing with obligors or tenants in connection with
Purchased Assets or (iv) with prior written notice to Buyer, to any approved
Hedge Counterparty to the extent necessary to obtain any Hedge Instrument hereunder
or (v) with prior written notice to Buyer, any required Securities and Exchange
Commission or state securities’ law disclosures or filings; provided that
Seller shall not file the Side Letter with the Securities and Exchange
Commission or state securities office, unless otherwise agreed by Buyer in
writing, and the Seller agrees to use best efforts not to file the terms of the
Side Letter with any such filing. 
Notwithstanding anything herein to the contrary, each party (and each
employee, representative, or other agent of each party) may disclose to any and
all persons, without limitation of any kind, the tax treatment and tax
structure of the transaction and all materials of any kind (including opinions
or other tax analyses) that are provided to it relating to such tax treatment
and tax structure.  For this purpose, tax
treatment and tax structure shall not include (i) the identity of any existing
or future party (or any Affiliate of such party) to this Agreement or (ii) any
specific pricing information or other commercial terms, including the amount of
any fees, expenses, rates or payments arising in connection with the
transactions contemplated by this Agreement.

 

38.          HEDGE INSTRUMENTS

 

The Seller shall notify the Buyer two
Business Days prior to entering into any Hedge Instruments.

 

48

 

39.          DUE DILIGENCE

 

Seller agrees to promptly provide Buyer and its agents with access to,
copies of and extracts from any and all documents, records, agreements, instruments
or information (including, without limitation, any of the foregoing in computer
data banks and computer software systems) relating to its financial condition,
the performance of its obligations under the Program Documents, the documents
contained in the Servicing File or the Purchased Assets in the possession, or
under the control, of Seller.  In
addition, Buyer has the right to perform continuing due diligence reviews of
(x) Seller and its Affiliates, directors, officers, employees and significant shareholders,
including, without limitation, their respective financial condition and
performance of their obligations under the Program Documents, (y) the Servicing
File and the Purchased Assets and (z) the Servicer.  Seller shall also make available to Buyer a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Purchased Assets. 
Without limiting the generality of the foregoing, Seller acknowledges
that Buyer shall enter into transactions with Seller based solely upon the
information provided by Seller to Buyer and the representations, warranties and
covenants contained herein, and that Buyer, at its option, has the right at any
time to conduct a partial or complete due diligence review on some or all of
the Purchased Assets, including, without limitation, ordering new credit
reports, new Appraisals on the related Mortgaged Properties and otherwise re-generating
the information used to originate such Purchased Assets.  Seller shall pay Buyer’s out-of-pocket costs
and expenses incurred by Buyer in connection with any due diligence hereunder.

 

[Signature Page Follows]

 

49

 

IN WITNESS WHEREOF, Seller and Buyer have caused their names to be
signed to this Agreement by their respective officers thereunto duly authorized
as of the date first above written.

 

	
   

  	
  SPIRIT FINANCE CORPORATION, as Seller

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Catherine Long

  	
   

  
	
   

  	
  Name: Catherine Long

  
	
   

  	
  Title: CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CITIGROUP GLOBAL MARKETS REALTY

  CORP., as Buyer

  
	
   

  	
  and Agent, as applicable

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Xanthos

  	
   

  
	
   

  	
  Name: James Xanthos

  
	
   

  	
  Title: Authorized Signor

  

 

 

Annex I

 

Buyer Acting as Agent

 

This Annex I forms a part of the Master Repurchase Agreement, dated as
of September 13, 2005 (the “Agreement”), between Citigroup Global Markets
Realty Corp. and Spirit Financial Corporation. 
This Annex I sets forth the terms and conditions governing all
transactions in which a party selling assets or buying assets, as the case may
be (“Agent”), in a Transaction is acting as agent for one or more third parties
(each, a “Principal”).  Capitalized terms
used but not defined in this Annex I shall have the meanings ascribed to them
in the Agreement.

 

1.             Additional
Representations.  Agent hereby makes
the following representations, which shall continue during the term of any
Transaction: Principal has duly authorized Agent to execute and deliver the
Agreement on its behalf, has the power to so authorize Agent and to enter into
the Transactions contemplated by the Agreement and to perform the obligations
of Seller or Buyer, as the case may be, under such Transactions, and has taken
all necessary action to authorize such execution and delivery by Agent and such
performance by it.

 

2.             Identification
of Principals.  Agent agrees (a) to
provide the other party, prior to the date on which the parties agree to enter
into any Transaction under the Agreement, with a written list of Principals for
which it intends to act as Agent (which list may be amended in writing from
time to time with the consent of the other party), and (b) to provide the other
party, before the close of business on the next business day after orally
agreeing to enter into a Transaction, with notice of the specific Principal or
Principals for whom it is acting in connection with such Transaction.  If (i) Agent fails to identify such Principal
or Principals prior to the close of business on such next business day or (ii)
the other party shall determine in its sole discretion that any Principal or
Principals identified by Agent are not acceptable to it, the other party may
reject and rescind any Transaction with such Principal or Principals, return to
Agent any Purchased Assets or portion of the Purchase Price, as the case may
be, previously transferred to the other party and refuse any further
performance under such Transaction, and Agent shall immediately return to the other
party any portion of the Purchase Price or Purchased Assets, as the case may
be, previously transferred to Agent in connection with such Transaction; provided, however, that (A) the other
party shall promptly (and in any event within one business day) notify Agent of
its determination to reject and rescind such Transaction and (B) to the extent
that any performance was rendered by any party under any Transaction rejected
by the other party, such party shall remain entitled to any Price Differential
or other amounts that would have been payable to it with respect to such
performance if such Transaction had not been rejected.  The other party acknowledges that Agent shall
not have any obligation to provide it with confidential information regarding
the financial status of its Principals; Agent agrees, however, that it will
assist the other party in obtaining from Agent’s Principals such information
regarding the financial status of such Principals as the other party may
reasonably request.

 

1

 

3.             Limitation
of Agent’s Liability.  The parties
expressly acknowledge that if the representations of Agent under the Agreement,
including this Annex I, are true and correct in all material respects during
the term of any Transaction and Agent otherwise complies with the provisions of
this Annex I, then (a) Agent’s obligations under the Agreement shall not
include a guarantee of performance by its Principal or Principals and (b) the
other party’s remedies shall not include a right of setoff in respect of rights
or obligations, if any, of Agent arising in other transactions in which Agent
is acting as principal.

 

4.             Multiple
Principals.

 

(a)           In
the event that Agent proposes to act for more than one Principal hereunder, Agent
and the other party shall elect whether (i) to treat Transactions under the
Agreement as transactions entered into on behalf of separate Principals or (ii)
to aggregate such Transactions as if they were transactions by a single
Principal.  Failure to make such an
election in writing shall be deemed an election to treat Transactions under the
Agreement as transactions on behalf of a single Principal.

 

(b)           In
the event that Agent and the other party elect (or are deemed to elect) to
treat Transactions under the Agreement as transactions on behalf of separate
Principals, the parties agree that (i) Agent will provide the other party,
together with the notice described in Section 2(b) of this Annex I, notice
specifying the portion of each Transaction allocable to the account of each of
the Principals for which it is acting (to the extent that any such Transaction
is allocable to the account of more than one Principal); (ii) the portion of
any individual Transaction allocable to each Principal shall be deemed a separate
Transaction under the Agreement; (iii) the margin maintenance obligations of
Seller under Section 6 of the Agreement shall be determined on a
Transaction-by-Transaction basis (unless the parties agree to determine such
obligations on a Principal-by-Principal basis); and (iv) Buyer’s and Seller’s
remedies under the Agreement upon the occurrence of an Event of Default shall
be determined as if Agent had entered into a separate Agreement with the other
party on behalf of each of its Principals.

 

(c)           In
the event that Agent and the other party elect to treat Transactions under the
Agreement as if they were transactions by a single Principal, the parties agree
that (i) Agent’s notice under Section 2(b) of this Annex I need only identify
the names of its Principals but not the portion of each Transaction allocable
to each Principal’s account; (ii) the margin maintenance obligations of Seller
under Section 6 of the Agreement shall, subject to any greater requirement
imposed by applicable law, be determined on an aggregate basis for all
Transactions entered into by Agent on behalf of any Principal; and (iii) Buyer’s
and Seller’s remedies upon the occurrence of an Event of Default shall be
determined as if all Principals were a single Seller or Buyer, as the case may
be.

 

(d)           Notwithstanding
any other provision of the Agreement (including, without limitation, this Annex
I), the parties agree that any Transactions by Agent on

 

2

 

behalf of an employee benefit
plan under ERISA shall be treated as Transactions on behalf of separate
Principals in accordance with Section 4(b) of this Annex I (and all margin
maintenance obligations of the parties shall be determined on a Transaction-
by-Transaction basis).

 

5.             Interpretation
of Terms.  All references to “Seller”
or “Buyer”, as the case may be, in the Agreement shall, subject to the
provisions of this Annex I (including, among other provisions, the limitations
on Agent’s liability in Section 3 of this Annex I), be construed to reflect
that (i) each Principal shall have, in connection with any Transaction or
Transactions entered into by Agent on its behalf, the rights, responsibilities,
privileges and obligations of a “Seller” or “Buyer”, as the case may be,
directly entering into such Transaction or Transactions with the other party
under the Agreement, and (ii) Agent’s Principal or Principals have designated
Agent as their sole agent for performance of Seller’s obligations to Buyer or
Buyer’s obligations to Seller, as the case may be, and for receipt of
performance by Buyer of its obligations to Seller or Seller of its obligations
to Buyer, as the case may be, in connection with any Transaction or
Transactions under the Agreement (including, among other things, as Agent for each
Principal in connection with transfers of Securities, cash or other property
and as agent for giving and receiving all notices under the Agreement).  Both Agent and its Principal or Principals
shall be deemed “parties” to the Agreement and all references to a “party” or “either
party” in the Agreement shall be deemed revised accordingly.

 

3

 

EXHIBIT A

 

QUARTERLY CERTIFICATION

 

I,                                ,
                       ,
the [OFFICER] of Spirit Finance Corporation (the “Seller”), do hereby certify
that:

 

(i)            the Seller is in compliance with all provisions and terms of
the Master Repurchase Agreement (the “Repurchase Agreement”) by and between Citigroup
Global Markets Realty Corp. (the “Buyer”) and the Seller dated as of September
13, 2005;

 

(ii)           the Seller’s Tangible Net Worth at the end of the most
recent fiscal quarter was not less than (i) $400,000,000 plus (ii) Net Worth
Increase Amounts;

 

(iii)          as of the end of the most recent fiscal quarter, Seller,
together with its consolidated Subsidiaries, has cash and Cash Equivalents in
an amount of not less than $15,000,000;

 

(iv)          as
of the end of the most recent fiscal quarter, the ratio of Total Indebtedness
to Tangible Net Worth of Seller did not exceed 4:1; and

 

(v)           there have not been any modifications to the Underwriting
Guidelines that have not been approved by the Buyer.

 

A-1

 

IN WITNESS WHEREOF, I have signed this certificate and affixed the seal
of the Seller.

 

Date:                ,
200  .

 

	
   

  	
  [                                        ]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

[SEAL]

 

I,                                     ,
the                           
of the Seller, do hereby certify that                                   
is the duly elected or appointed, qualified and acting                           of
the Seller, and the signature set forth above is the genuine signature of such
officer in the date hereof.

 

	
   

  	
  SPIRIT FINANCE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

A-2

 

EXHIBIT B

 

SPIRIT
FINANCE CORPORATION

ASSET BASE
CERTIFICATE

AS OF

[Date]

 

	
   

  	
   

  	
  TOTAL LOANS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Purchased
  Assets Collateral Value as shown on Loan Schedule (Appraised Values)

  	
   

  	
   

  	
   

  
	
  (a)  Total Collateral Value =

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)  Less Mortgage Loan Collateral
  Values that are not
   “Eligible Mortgage Loans” =

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (c)  Total Eligible Mortgage Loan
  Collateral Value

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Master
  Repurchase Agreement Advance Rate

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  Asset Base (up to facility limit of $200,000,000)

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Purchased
  Assets Outstanding (prior Asset Base Certificate):

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Purchase
  Request As Of:

  	
  [Date]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Principal
  Repayments

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Purchased
  Assets Outstanding as of 

  	
  [DateME]

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Excess
  Availability (Deficiency) versus Borrowing Base

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Maximum
  Aggregate Purchase Price

  	
   

  	
  $

  	
  200,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Unused
  Aggregate Purchase Price

  	
   

  	
  $

  	
  (200,000,000

  	
  )

  

 

B-1

 

APPENDIX
A

 

REPRESENTATIONS AND WARRANTIES

 

i

 

Representations, Warranties and Indemnities
in Favor of

Buyer and Subsequent Purchasers with Respect to
the Loans

 

By delivering a Transaction Notice, Seller shall be deemed to represent
and warrant to Buyer, unless otherwise disclosed to and approved by Buyer, with
respect to each such Loan transferred on any Purchase Date and, unless
otherwise expressly disclosed by Seller in the list of exceptions to these
representations and warranties listed in the schedule of exceptions delivered
by Seller (the “Exception Schedule”) and approved by Buyer, as of each Purchase
Date (or such other date as specified below), as follows:

 

(a)           Immediately prior to the
transfer and assignment of the Loan to Buyer, Seller had good and insurable fee
title to, and was the sole owner and holder of, the Loan, free and clear of any
and all liens, encumbrances and other interests on, in or to the Loan.  Unless the Mortgage is in the name of the
Collateral Agent, the related Assignment of Mortgage and assignment of leases
and rents (if any), constitutes the legal, valid and binding assignment of the
Mortgage and the related assignment of leases and rents from Seller to the Collateral
Agent on behalf of the Buyer. The endorsement of each Note is genuine, properly
endorsed and constitutes the legal, valid and binding assignment of the Note
and, together with the Assignment of Mortgage and assignment of leases and
rents (if any), legally and validly conveys all right, title and interest in
the subject Loan from Seller to Buyer.

 

(b)           Seller has full right
and authority to sell, contribute, assign and transfer the Loan to Buyer.  The entire agreement with the related
Borrower (whether originated by Seller or a different originator) is contained
in the Loan Documents and there are no warranties, agreements or options
regarding such Loan or the related Mortgaged Property not set forth
therein.  Other than the Loan Documents,
there are no agreements between any predecessor in interest in the Loan and the
Borrower.

 

(c)           The information
pertaining to the Loan set forth in the Loan Schedule is true and correct in
all material respects.  The Loan is an
Eligible Asset. The Loan was originated or acquired in accordance with, and
fully complies with, the Underwriting Guidelines in all material respects.  The related Custodian’s Loan File contains
all of the documents and instruments required to be contained therein.

 

(d)           The following
(“Permitted Exceptions”): (i) liens for real estate taxes and special
assessments not yet due and payable or due but not yet delinquent, (ii)
covenants, conditions and restrictions, rights-of-way, easements and other
matters of public record, such exceptions being of a type or nature that are
acceptable to mortgage lending institutions generally, (iii) certain
purchase options and (iv) other matters to which like properties are commonly
subject, which matters referred to in clauses (i), (ii), (iii), and (iv) do
not, individually or in the aggregate, materially interfere with the value of
the Mortgaged Property, do not materially interfere or restrict the current use
or operation of the Mortgaged Property relating to the Loan and do not
materially interfere with the security intended to be provided by the Mortgage,
the current use or operation of

 

 

the Mortgaged Property or the current
ability of the Mortgaged Property to generate net operating income sufficient
to service the Loan.  Financing
Statements have been filed and/or recorded (or, if not filed and/or recorded,
have been submitted in proper form for filing and recording), in all public
places necessary to perfect a valid first priority security interest in all
items of personal property pledged by the Borrower, if any, in connection with
such Loan and in all cases, subject to any applicable purchase money security
interest and to the extent perfection may be effected pursuant to applicable
law solely by recording or filing Financing Statements.

 

(e)           With respect to each
Loan, the related Mortgage constitutes a valid, legally binding and enforceable
first priority lien upon the related Mortgaged Property securing such Loan and
the improvements located thereon and forming a part thereof, prior to all other
liens and encumbrances, except for Permitted Exceptions.  The lien of the Mortgage is insured by an
ALTA lender’s title insurance policy (“Title Policy”), or its equivalent as
adopted in the applicable jurisdiction, issued by a nationally recognized title
insurance company, insuring the originator of the Loan, its successors and
assigns, as to the first priority lien of the Mortgage in the original
principal amount of the Loan after all advances of principal, subject only to
Permitted Exceptions (or, if a title insurance policy has not yet been issued
in respect of the Loan, a policy meeting the foregoing description is evidenced
by a commitment for title insurance “marked up” (or by “pro-forma” otherwise
agreed to in a closing instruction letter countersigned by the title company)
as of the closing date of the Loan). 
Each Title Policy (or, if it has yet to be issued, the coverage to be
provided thereby) is in full force and effect, all premiums thereon have been
paid and no material claims have been made thereunder and no claims have been
paid thereunder.  Seller has not, by act
or omission, done anything that would materially impair the coverage under such
Title Policy.  Immediately following the
transfer and assignment of the Loan to Buyer, such Title Policy (or, if it has
yet to be issued, the coverage to be provided thereby) will inure to the
benefit of Buyer without the consent of or notice to the insurer.

 

(f)            Seller has not waived
any material default, breach, violation or event of acceleration existing under
the Mortgage or Mortgage Note.

 

(g)           The Borrower has not
waived any material default, breach, violation or event of acceleration by the
Tenant existing under the Lease.

 

(h)           There is no valid
offset, defense or counterclaim to the payment or performance obligations of
the Loan.

 

(i)            The Mortgaged Property
securing any Loan is free and clear of any damage that would materially and
adversely affect its value as security for the Loan.  No proceeding for the condemnation of all or
any material portion of the Mortgaged Property has been commenced and the
Mortgaged Property is free and clear of any damage that would materially and
adversely affect the value or use of such Mortgaged Property.

 

(j)            The Loan complied with
all applicable usury laws in effect at its date of origination.

 

 

(k)           The proceeds of the
Loan have been fully disbursed and there is no requirement for future advances
thereunder.  All costs, fees and expenses
incurred in making, closing and recording the Loan, including, but not limited
to, mortgage recording taxes and recording and filing fees relating to the
origination of such Loan, have been paid. 
Any and all requirements as to completion of any on-site or off-site
improvement by the Borrower and as to disbursements of any escrow funds therefor
that were to have been complied with have been complied with.

 

(l)            The Borrower under the
related Mortgage Note, Mortgage and all other Loan Documents had the power,
authority and legal capacity to enter into, execute and deliver the same, and,
as applicable, such Mortgage Note, Mortgage and Loan Documents have been duly
authorized, properly executed and delivered by the parties thereto, and each is
the legal, valid and binding obligation of the maker thereof (subject to any
non recourse provisions contained in any of the foregoing agreements and any
applicable state anti deficiency legislation), enforceable in accordance with
its terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other laws relating to or affecting
the rights of creditors generally and by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).

 

(m)          All improvements upon
the Mortgaged Property securing any Loan are insured under insurance policies
(as described in Schedule A the “Insurance Schedule”).  The Loan documents require the Borrower to
maintain, or cause the Tenant to maintain, and the Lease requires the Tenant to
maintain insurance coverage described on the Insurance Schedule and all
insurance required under applicable law including, without limitation,
insurance against loss by hazards with extended coverage in an amount (subject
to a customary deductible) at least equal to the full replacement cost of the
improvements located on such Mortgaged Property, including without limitation,
flood insurance if any portion of the improvements located upon the Mortgaged
Property was, at the time of the origination of the Loan, in a flood zone area
as identified in the Federal Register by the Federal Emergency Management
Agency as a 100 year flood zone or special hazard area, and flood insurance was
available under the then current guidelines of the Federal Insurance
Administration is in effect with a generally acceptable insurance carrier.  The Loan Documents require the Borrower to
maintain, or to cause the Tenant to maintain on the Mortgaged Property securing
any Loan a fire and extended perils insurance policy, in an amount not less
than the replacement cost and the amount necessary to avoid the operation of
any co-insurance provisions with respect to the Mortgaged Property. All such
insurance policies contain a standard “additional insured” clause (or similar
clause) naming the Borrower (as landlord under the related Lease), its
successors and assigns (including, without limitation, subsequent owners of the
Mortgaged Property), as additional insured, and may not be reduced, terminated
or canceled without thirty (30) days’ prior written notice to the additional
insured.  In addition, the Mortgage
requires the Borrower to (i) cause Seller, as the Mortgagee, to be named as an
additional insured mortgagee, and (ii) maintain (or to require the Tenant to
maintain) in respect of the Mortgaged Property workers’ compensation insurance
(if applicable), commercial general, liability insurance in amounts generally
required by Seller, and at least 6 months rental or business interruption
insurance.  The related Loan

 

 

Documents obligate the Borrower to maintain such insurance and, at such
Borrower’s failure to do so, authorizes the
mortgagee to maintain such insurance at the Borrower’s cost and expense and to
seek reimbursement therefor from such Borrower. 
Each such insurance policy, as applicable, is required to name the holder
of the Mortgage as an additional insured or contain a mortgagee endorsement
naming the holder of the Mortgage as loss payee and requires prior notice to
the holder of the Mortgage of termination or cancellation, and no such notice
has been received, including any notice of nonpayment of premiums, that has not
been cured.  There have been no acts or
omissions that would impair the coverage of any such insurance policy or the
benefits of the mortgage endorsement. 
All insurance contemplated in this section is maintained with insurance
companies with a General Policy Rating of “A” or better by S&P or A:VI or
better by Best’s Insurance Guide and are licensed to do business in the state
wherein the Borrower or the Mortgaged Property subject to the policy, as
applicable, is located.

 

(n)           The Mortgaged Property
securing any Loan was subject to one or more environmental site assessments or
reports (or an update of a previously conducted assessment or report) prior to
the origination of such Loan, and Seller has no knowledge of any material and
adverse environmental conditions or circumstance affecting such Mortgaged
Property that was not disclosed in the related assessment or report(s).  There are no material and adverse environmental
conditions or circumstances affecting the Mortgaged Property securing any such
Loan other than, with respect to any adverse environmental condition described
in such report, those conditions for which remediation has been completed and,
thereafter, to the extent that such report or remediation program so
recommended, (i) a program of annual integrity testing and/or monitoring was
recommended and implemented in connection with the Mortgaged Property securing
any such Loan or an adjacent or neighboring property; (ii) an operations and
maintenance plan or periodic monitoring of such mortgaged Property or nearby
properties was recommended and implemented or (iii) a follow-up plan was
otherwise required to be taken under CERCLA (as defined below) or under
regulations established thereunder from time to time by the Environmental
Protection agency and such plan has been implemented in the case of (i), (ii)
and (iii) above, the Seller determined in accordance with the Underwriting
Guidelines that adequate funding was available for such program or plan, as
applicable.  Seller has not taken any
action with respect to the Loan or the Mortgaged Property securing such Loan
that could subject Buyer, or its successors and assigns in respect of the Loan,
to any liability under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (“CERCLA”) or any other applicable
federal, state or local environmental law, and Seller has not received any
actual notice of a material violation of CERCLA or any applicable federal, state
or local environmental law with respect to the Mortgaged Property securing such
Loan that was not disclosed in the related report.  The Mortgage or other Loan Documents require
the Borrower (and the Leases require the Tenant) to comply with all applicable
federal, state and local environmental laws and regulations.

 

(o)           The Loan is not
cross-collateralized with any mortgage loan that is not a Purchased Asset.

 

 

(p)           The terms of the
Mortgage, Mortgage Note, and other Loan Documents have not been impaired,
waived, altered, modified, satisfied, canceled or subordinated in any material
respect, except by written instruments that are part of the Custodian’s Loan
File, recorded or filed in the applicable public office if necessary to
maintain the priority of the lien of the related Mortgage, delivered to Buyer
or its designee.

 

(q)           There are no delinquent
taxes, ground rents, assessments for improvements or other similar outstanding
lienable charges affecting the Mortgaged Property which are or may become a lien
of priority equal to or higher than the lien of the Mortgage.  For purposes of this representation and
warranty, real property taxes and assessments shall not be considered unpaid
until the date on which interest and/or penalties would be payable thereon.

 

(r)            Except for Loans
secured by Ground Leases, the interest of the Borrower in the Mortgaged
Property consists of a fee simple estate in real property.

 

(s)           Each Loan is a whole
loan and not a participation interest.

 

(t)            The assignment of the
Mortgage referred to in the Custodian’s Loan File constitutes the legal, valid
and binding assignment of such Mortgage from the relevant assignor to Buyer or
to the Collateral Agent.  The Assignment
of Leases and Rents set forth in the Mortgage or separate from the Mortgage and
related to and delivered in connection with each Loan establishes and creates a
valid, subsisting and, subject only to Permitted Exceptions, enforceable first
priority lien and first priority security interest in the Borrower’s interest in
all leases, subleases, licenses or other agreements pursuant to which any
person is entitled to occupy, use or possess all or any portion of the real
property subject to the Mortgage, and each assignor thereunder has the full
right to assign the same.  The related
assignment of Mortgage or any assignment of leases and rents not included in a
Mortgage, executed and delivered in favor of Buyer is in recordable form and
constitutes a legal, valid and binding assignment, sufficient to convey to the
assignee named therein all of the assignor’s right, title and interest in, to
and under such assignment of leases and rents.

 

(u)           All escrow deposits
relating to the Loan that are required to be deposited with the related Seller
or its agent have been so deposited.

 

(v)           As of the date of
origination of such Loan and, as of the Transfer Date, as the case may be, the
Mortgaged Property securing such Loan was and is free and clear of any
mechanics’ and materialmen’s liens or liens in the nature thereof which create
a lien prior to that created by the Mortgage, except those which are insured
against by the Title Policy referred to in (e) above.

 

(w)          As of the date of the
origination of the Loan, no improvement that was included for the purpose of
determining the appraised value of the related Mortgaged Property securing such
Loan at the time of origination of the Loan lay outside the boundaries and
building restriction lines of such property in any way that would

 

 

materially and adversely affect the value of such Mortgaged Property or
the ability to operate the Mortgaged Property under the related Lease (unless
affirmatively covered by the title insurance referred to in paragraph (e)
above), and no improvements on adjoining properties encroached upon such
Mortgaged Property to any material extent.

 

(x)            (i) There exists no
material default, breach or event of acceleration under the Loan, the Master
Loan Agreement or any of the Loan Documents or the Lease, (ii) there exists no
event (other than payments due but not yet delinquent) that, with the passage
of time or with notice and the expiration of any grace or cure period, would
constitute such a material default, breach or event of acceleration and (iii)
no payment on any Loan is, or has previously been 30 or more days delinquent,
however, that this representation and warranty does not cover any default,
breach or event of acceleration that specifically pertains to any matter
otherwise covered or addressed by any other representation and warranty made by
Seller with respect to the Loans.

 

(y)           In connection with the
origination of each Loan, Seller inspected or caused to be inspected the
Mortgaged Property securing the Loan by inspection, appraisal or otherwise as
required in Seller’s Underwriting Guidelines then in effect.

 

(z)            The Loan contains no
equity participation by or shared appreciation rights in the lender or
beneficiary under the Mortgage, and does not provide for any contingent or
additional interest in the form of participation in the cash flow of the
Mortgaged Property securing the Loan, or for negative amortization.

 

(aa)         No
holder of the Loan has advanced funds or induced, solicited or knowingly
received any advance of funds from a party other than the owner of the
Mortgaged Property securing the Loan, directly or indirectly, for the payment
of any amount required by the Loan (other than amounts paid by the Tenant as
specifically provided under the related Lease).

 

(bb)         To
Seller’s knowledge, based on due diligence customarily performed in the
origination or acquisition of comparable mortgage loans by Seller, as of the
date of origination or acquisition of the Loans, the related Borrowers were in
compliance with all applicable laws relating to the ownership and operation of
the Mortgaged Properties securing the Loan as they were then operated and were
in possession of all material licenses, permits and authorizations required by
applicable laws for the ownership and operation of such Mortgaged Properties as
they were operated; and, to the Seller’s knowledge, (1) the Tenant is not in
default of its obligations under any such applicable license, permit or
agreement and (2) each such license, permit and agreement is in full force and
effect.  With respect to Mortgaged
Properties that are operated as franchised properties, and except with respect
to Loans for which the related Tenant is the franchisor, the Tenant of such
Mortgaged Property has entered into a legal, valid, and binding franchise
agreement and such Tenant has represented in the applicable lease documents that,
as of the date of origination or acquisition of the Loan, there were no
defaults under the franchise agreement by such Tenant.

 

 

(cc)         The origination,
servicing and collection practices Seller used with respect to the Loan, have
complied with applicable law in all material respects and are consistent and in
accordance with the terms of the related Loan Documents and in accordance with
the applicable servicing standard and customary industry standards.

 

(dd)         The Mortgage or Mortgage
Note, together with applicable state law, contains customary and enforceable
provisions (subject to the exceptions set forth in paragraph (l) above) such as
to render the rights and remedies of the holders thereof adequate for the
practical realization against the Mortgaged Property securing the Loan of the
principal benefits of the security intended to be provided thereby, including
the right of foreclosure under the laws of the state in which the Mortgaged
Property securing the Loan is located governing foreclosures of mortgages and
deeds of trust under power of sale.

 

(ee)         The
Mortgage provides that insurance proceeds and condemnation proceeds will be
applied for one of the following purposes: either to restore or repair the
Mortgaged Property securing the Loan, to repay the principal of the Loan or as
otherwise directed by the holder of such Mortgage.

 

(ff)           There
are no actions, suits, legal, arbitration or administrative proceedings or
investigations by or before any court or governmental authority or, to the best
of Seller’s knowledge, pending against or affecting the Borrower, the Mortgaged
Property securing the Loan that, if determined adversely to such Borrower,
Mortgaged Property securing the Loan, would materially and adversely affect the
value of the Mortgaged Property securing the Loan or the ability of the
Borrower to pay principal, interest or any other amounts due under the Loan or
the Lease, as applicable.

 

(gg)         If
the Mortgage is a deed of trust, a trustee, duly qualified under applicable law
to serve as such, is properly designated and serving under such Mortgage.  Except in connection with a trustee’s sale or
as otherwise required by applicable law, after default by the Borrower, no fees
or expenses are payable to such trustee.

 

(hh)         Except
in cases where either (i) a release of a portion of the Mortgaged Property
securing the Loan was contemplated at origination of the Loan and such portion
was not considered material for purposes of underwriting the Loan, or (ii)
release is conditioned upon the satisfaction of certain underwriting and legal
requirements and the payment of a release price, the Mortgage Note or Mortgage
do not require the holder thereof to release all or any portion of the
Mortgaged Property securing the Loan from the lien of the Mortgage except upon
payment in full of all amounts due under the Loan.

 

(ii)           The Mortgage does not
permit the Mortgaged Property securing the Loan to be encumbered by any lien
junior to or of equal priority with the lien of the Mortgage (excluding any
lien relating to another Loan that is cross collateralized with the Loan)
without the prior written consent of the holder thereof.

 

 

(jj)           The
Borrower is not a debtor in any state or federal bankruptcy or insolvency
proceeding.

 

(kk)         As
of the date of origination or acquisition of each Mortgage by Seller, each
Borrower which is not a natural person was duly organized and validly existing
under the laws of the state of its jurisdiction.

 

(ll)           The Loan contains
provisions for the acceleration of the payment of the unpaid principal balance
of the Loan if, without complying with the requirements of the Loan, the
Mortgaged Property securing the Loan, or any controlling interest in the
Borrower, is directly or indirectly transferred or sold.

 

(mm)       The Loan Documents for each
of the Loans provide that the Borrower is to provide periodic financial and
operating reports including, without limitation, annual profit and loss
statements, statements of cash flow and other related information that Buyer
reasonably requests from time to time.

 

(nn)         To
Seller’s actual knowledge, based upon zoning letters, zoning report, the title
insurance policy insuring the lien of the Mortgage, historical use and/or other
due diligence customarily performed by Seller in connection with the
origination of the Loan, the improvements located on or forming part of such
Mortgaged Property securing the Loan comply in all material respects with
applicable zoning laws and ordinances (except to the extent that they may
constitute legal non-conforming uses).

 

(oo)         Each
Mortgaged Property is located within one of the 50 United States or the
District of Columbia.

 

(pp)         With respect to Loans and
Net Lease Loans secured by Mortgaged Property located in California or “seismic
zones” 3 or 4, (i) the related Borrower has obtained, and is required under the
Loan Documents to maintain, earthquake insurance with respect to the
Improvements on such Mortgaged Property or is required to cause the Tenant to
maintain (and the Tenant has obtained) earthquake insurance if such Mortgaged Property
is located in any such area or (ii) the Originator’s investment committee has
approved self-insurance by the Borrower with respect to earthquake risk or
(iii) a seismic study was performed in connection with the origination of such
Loan and such study indicates a probable maximum loss of less than 20% of the
appraised value of such Mortgaged Property.

 

(qq)         Seller
does not have knowledge of any circumstance or condition with respect to such
Loan, the Mortgaged Property securing the Loan, the Lease or the Borrower’s or
the Tenant’s credit standing that could reasonably be expected to cause Buyer
to regard such Loan as unacceptable security, cause such Loan or Lease to
become delinquent or have a material adverse effect on the value or
marketability of such Loan.

 

(rr)           The
Mortgaged Property securing the Loan has adequate rights of access to public
rights-of-way and is served by utilities, including, without limitation,
adequate water, sewer, electricity, gas, telephone, sanitary sewer, and storm
drain facilities. All public utilities necessary to the continued use and
enjoyment of the

 

 

Mortgaged Property securing the Loan as presently used and enjoyed are
located in such public right-of-way abutting such Mortgaged Property or are the
subject of access easements for the benefit of the Mortgaged Property, and all
such utilities are connected so as to serve such Mortgaged Property without
passing over other property or are the subject of access easements for the
benefit of such Mortgaged Property. All roads necessary for the full use of the
Mortgaged Property securing the Loan for its current purpose have been
completed and dedicated to public use and accepted by all governmental
authorities or are the subject of access easements for the benefit of such Mortgaged
Property.

 

(ss)         With respect to any Loan
where all or a material portion of the Mortgaged Property securing such Loan is
a leasehold estate, and the related Mortgage does not also encumber the related
lessor’s fee interest in such Mortgaged Property, based upon the terms of the
Ground Lease and any estoppel letter or other writing received from the Ground
Lessor included in the related Custodian’s Loan File and, if applicable, the
related Mortgage:

 

(1)           The
Ground Lease or a memorandum regarding such Ground Lease has been duly
recorded.  The Ground Lessor has
permitted the interest of the Ground Lessee to be encumbered by the related
Mortgage.  To the best of Seller’s knowledge,
there has been no material change in the terms of the Ground Lease since its
recordation, except by any written instruments which are included in the
related Custodian’s Loan File.

 

(2)           The
Ground Lease may not be amended, modified, canceled or terminated without the
prior written consent of the lender and that any such action without such
consent is not binding on the lender, its successors or assigns.

 

(3)           The
Ground Lease has an original term (or an original term plus one or more
optional renewal terms, which, under all circumstances, may be exercised, and
is enforceable, by the lender) that extends not less than 20 years beyond the
stated maturity of the related Loan.

 

(4)           Based
on the title insurance policy referenced in (e) above, the Ground Leasehold
interest is not subject to any liens or encumbrances superior to, or of equal
priority with, the Mortgage, subject to Permitted Encumbrances and liens that
encumber the Ground Lessor’s fee interest.

 

(5)           The
Ground Lease is assignable to the lender and its assigns without the consent of
the lessor thereunder.

 

(6)           The
Ground Lease is in full force and effect and no default has occurred under the
Ground Lease and there is no existing condition which, but for the passage of
time or the giving of notice, would result in a material default under the
terms of the Ground Lease.

 

 

(7)           The
Ground Lessor is required to give notice of any default by the related lessee
to the lender.

 

(8)           The
lender is permitted a reasonable opportunity (including, where necessary,
sufficient time to gain possession of the interest of the lessee under the
Ground Lease through legal proceedings, or to take other action so long as the
lender is proceeding diligently) to cure any default under the Ground Lease,
which is curable after the receipt of notice of any default, before the Ground
Lessor thereunder may terminate the Ground Lease.

 

(9)           Either
(i) the Ground Lease does not impose restrictions on subletting or (ii) the
Ground Lessor has consented to the existing Ground Lease with respect to the
related Mortgaged Property securing the related Loan.  The Ground Lessor is not permitted to disturb
the possession, interest or quiet enjoyment of any subtenant of the lessee in
the relevant portion of the Mortgaged Property subject to the Ground Lease for
any reason, or in any material manner, which would adversely affect the
security provided by the related Mortgage.

 

(10)         Any
related insurance proceeds or condemnation award (other than in respect of a
total or substantially total loss or taking) is required to be applied either
to the repair or restoration of all or part of the related Mortgaged Property,
with the lender or a trustee appointed by it having the right to hold and
disburse such proceeds as repair or restoration progresses, or to the payment
of the outstanding principal balance of the Loan, together with any accrued
interest, except that in the case of condemnation awards, the Ground Lessor may
be entitled to a portion of such award.

 

(11)         Any
related insurance proceeds, or condemnation award in respect of a total or
substantially total loss or taking of the related Mortgaged Property is
required to be applied first to the payment of the outstanding principal
balance of the Loan, together with any accrued interest (except as provided by
applicable law or in cases where a different allocation would not be viewed as
commercially unreasonable by any institutional investor, taking into account
the relative duration of the Ground Lease and the related Mortgage and the
ratio of the market value of the related Mortgaged Property to the outstanding
principal balance of such Loan).  Until
the principal balance and accrued interest are paid in full, neither the lessee
nor the Ground Lessor under the Ground Lease has an option to terminate or
modify the Ground Lease without the prior written consent of the lender as a
result of any casualty or partial condemnation, except to provide for an
abatement of the rent.

 

(12)         Provided
that the lender cures any defaults which are susceptible to being cured, the
Ground Lessor has agreed to enter into a

 

 

new lease upon
termination of the Ground Lease for any reason, including rejection of the
Ground Lease in a bankruptcy proceeding.

 

(tt)           None
of the Loans are construction loans.

 

(uu)         Each
Lease for the related Mortgaged Property was not delinquent (giving effect to
any applicable grace period) in the payment of any monthly Lease payments
(other than percentage rents that are being recalculated with respect to
certain Leases set forth in the Lease Schedule) as of the Closing Date, and has
not been during the time owned by Seller, 30 days or more delinquent in respect
of any monthly Lease payment required thereunder.

 

(vv)         Lessor
estoppels containing protection provisions have been obtained from the owner of
the fee simple interest in each Mortgaged Property in which Seller has only a
ground leasehold interest.

 

(ww)       Neither
each Lease nor any other agreement, document or instrument executed in
connection with such Lease has been waived, modified, altered, satisfied,
cancelled or subordinated in any material respect, and such Lease has not been
terminated or cancelled, nor has any instrument been executed that would effect
any such waiver, modification, alteration, satisfaction, termination,
cancellation, subordination or release, except in each case by a written
instrument that is part of the related Custodian’s Loan File.

 

(xx)          The Lease is not a
Defaulted Loan or a Delinquent Loan as of the Closing Date.

 

(yy)         There
are no pending actions, suits or proceedings by or before any court or
governmental authority against or affecting, any Lease, such Mortgaged Property
or, to Seller’s knowledge, the Tenant, that is reasonably likely to be
determined adversely and, if determined adversely, would materially and
adversely effect the value of the Lease or use or value of the Mortgaged Property,
or the ability of the Tenant to pay any amounts due under the Lease.

 

(zz)          All
of the material improvements built or to be built on the Mortgaged Property
that were included for the purpose of determining the appraised value of the
Mortgaged Property lay within the boundaries of such Mortgaged Property and
there are no encroachments into the building setback restriction lines of such
Mortgaged Property in any way that would materially and adversely affect the
value of the Mortgaged Property or the ability of the Tenant to pay any amounts
due under the Lease (unless affirmatively covered in the applicable Title
Policy described in (h) above.)

 

(aaa)       There
is no valid dispute, claim, offset, defense or counterclaim to Seller’s rights
in the Lease.

 

(bbb)      Each
Lease or other agreement, document or instrument executed in connection with
such Lease is the legal, valid and binding and enforceable obligation

 

 

of the Tenant (subject to certain
creditors’ rights exceptions and other exceptions of general application) and
is in full force and effect.

 

(ccc)       Each Lease, together with
applicable state law, contains customary and enforceable provisions such as to
render the rights and remedies of the lessors thereof adequate for the
practical realization against the related Mortgaged Property of the principal
benefits of the security intended to be provided thereby.

 

(ddd)      With
respect to each Mortgaged Property:

 

(1)           such
Mortgaged Property is not subject to any lease other than a sublease and/or the
related Lease; no person has any possessory interest in, or right to occupy,
the leased property except under and pursuant to the Lease or such sublease;
the Tenant (or sub-tenant) is in occupancy of the Mortgaged Property and is
paying rent pursuant to the Lease; and, in the case of any sublease, the Tenant
remains primarily liable on the Lease;

 

(2)           except
with respect to those Properties with respect to which the Tenant can terminate
the related Lease during the last 42 months of the lease term in the event of a
casualty and any insurance proceeds related thereto are payable to the Tenant,
the obligations of the Tenant, including, but not limited to, the obligation to
pay fixed and additional rent, are not affected by reason of: any damage to or
destruction of any portion of the leased property; any taking of the leased
property or any part thereof by condemnation or otherwise; or any prohibition,
limitation, interruption, cessation, restriction, prevention or interference of
the Tenant’s use, occupancy or enjoyment of the leased property, except the
Tenant’s rights to abate or terminate its obligation to pay fixed or additional
rent are coupled with insurance proceeds or condemnation awards going to the
lessor; or the right to abate as a result of a landlord’s default;

 

(3)           Seller
as lessor under the Lease does not have any monetary obligations under the
Lease that have not been satisfied;

 

(4)           the Tenant has not been released, in whole or in part, from
its obligations under the terms of the Lease;

 

(5)           all
obligations related to the initial construction of the improvements on the
Mortgaged Property have been satisfied and except for the obligation to rebuild
such improvements after a casualty (which obligation is limited by available
insurance proceeds), Seller does not have any nonmonetary obligations under the
Lease and has made no representation or warranty under the Lease, the breach of
which would result in the abatement of rent, a right of setoff or termination
of the Lease;

 

 

(6)           there
is no right of rescission, set-off, abatement (except in the case of casualty
or condemnation), diminution, defense or counterclaim to the Lease, nor does the
operation of any of the terms of the Lease, or the exercise of any rights
thereunder, render the Lease unenforceable, in whole or in part, or subject to
any right of rescission, set-off, abatement, diminution, defense or
counterclaim, and no such right has been asserted;

 

(7)           the
Tenant has agreed to indemnify the lessor from any claims of any nature
relating to the Lease and the related leased property other than the lessor’s
gross negligence or willful misconduct, including, without limitation, arising
as a result of violations of environmental and hazardous waste laws resulting
from the Tenant’s operation of the property;

 

(8)           any obligation or liability imposed on the lessor by any
easement or reciprocal easement agreement is also an obligation of the Tenant
under the Lease;

 

(9)           the Tenant is required to make rental payments as directed
by the lessor and its successors and assigns; and

 

(10)         except
in certain cases where the Tenant may exercise a right of first refusal, the
Lease is freely assignable by the lessor and its successors and assigns to any
person without the consent of the Tenant, and in the event the lessor’s
interest is so assigned, the Tenant is obligated to recognize the assignee as
lessor under such Lease, whether under the Lease or by operation of law.

 

(eee)       In
connection with Leases with a guaranty:

 

(1)           such
guaranty, on its face, is unconditional, irrevocable and absolute, and is a
guaranty of payment and not merely of collection and contains no conditions to
such payment, other than a notice and right to cure; and the guaranty provides
that it is the guaranty of both the performance and payment of the financial
obligations of the Tenant under the Lease and does not provide for offset,
counterclaim or defense; and

 

(2)           such guaranty is binding on the successors and assigns of
the guarantor and inures to the benefit of the lessor’s successors and assigns
and cannot be released or amended without the lessor’s consent or unless a
predetermined performance threshold is achieved.

 

(fff)         No
fraudulent acts were committed by Seller during the origination process with
respect to the Lease related to such Mortgaged Property.

 

 

(ggg)      The
origination, servicing and collection of monthly Lease payments on such Lease is in all respects legal, proper and prudent and in
accordance with customary industry standards.

 

(hhh)      To
the extent required under applicable law, Seller was authorized to transact and
do business in the jurisdiction in which such Mortgaged Property is located,
except where such failure to qualify would not result in a material adverse
effect on the enforceability of the related Lease.

 

(iii)          The Custodian’s Loan
File contains a survey with respect to such Mortgaged Property, which survey
was deemed sufficient to delete the standard title survey exception (to the
extent the deletion of such exception is available in the related state).

 

(jjj)          The
Seller did not intentionally select such Loan, whether individually or together
with other Loans, in a manner adverse to Buyer or in a manner that results in
Buyer receiving Loans that are of lesser quality than Loans pledged to other
lenders pursuant to any other facility to which Seller or any of its Affiliates
are a party.

 

(kkk)       With
respect to any of the Properties which are the subject of a Master Lease
(noting that not all properties subject to such Master Lease are included in
the Properties), the lessor under the Master Lease has assigned its interest in
the Leases of the Properties to Seller and Seller and the other lessors under
the Master Leases have entered into inter-lessor agreements by which the rents
and the rights to enforce the provisions of the Master Leases pertinent to any
of the Properties have also been assigned to Seller.

 

(lll)          Such Mortgaged Property
is (i) free of any damage that would materially and adversely affect the use or
value of such Mortgaged Property, (ii) in good repair and condition so as not
to materially and adversely affect the use or value of such Mortgaged Property;
and all building systems contained in such Mortgaged Property are in good
working order so as not to materially and adversely affect the use or value of
such Mortgaged Property.

 

(mmm)     All security deposits
collected in connection with such Mortgaged Property are being held in
accordance with all applicable laws.

 

(nnn)      Seller
has taken (or has caused to be taken) all such actions and precautions as a
reasonably prudent lender would take to protect and preserve the Collateral and
its security interest in all Collateral, including without limitation, notation
of Seller as lien holder on any certificates of title to property the nature of
which is such that ownership thereof is evidenced by a certificate of title,
where such notation is required under applicable law to perfect the interest
therein.

 

(ooo)      Each
Mortgage, Security Agreement and every other Loan Document, contains customary
and enforceable provisions so as to render the rights and remedies of the
holder thereof adequate for the practical realization of the benefits of the

 

 

security interests intended to be provided
thereby, including, where applicable, by judicial foreclosure, subject to the
limitations described in the next succeeding sentence. There is no exemption
under existing law available to the related Borrower which would interfere with
the mortgagee’s or secured party’s right to foreclose or to realize upon such
related Mortgage, Security Agreement or other Loan Document, if any, as
applicable, other than which may be available under the insolvency laws, other
laws of general application relating to or affecting the enforcement of
creditors’ rights generally, applicable debt relief or homestead statutes or
general principles of equity.

 

(ppp)      
Such Loan is with full recourse to the related Borrower.

 

(qqq)      As
of the date of origination, the LTV (as defined in the Underwriting Guidelines)
of such Loan (other than Net Lease Loans) does not exceed the required LTV
specified in the Underwriting Guidelines for such Loan type. With respect to
Net Lease Loans, as of the date of origination, the fair market value of the
Mortgaged Property relating to such Net Lease Loan, as determined by an Appraisal,
was at least 100% of the principal amount of such Net Lease Loan.

 

(rrr)         There
has been performed, not more than six months prior to the origination date for
such Loan, an Appraisal of the related Mortgaged Property.

 

(sss)       All
principal, interest and any other amounts due under such Loan are payable in
U.S. dollars.  Interest and, as
applicable, principal, is payable on a monthly basis.

 

(ttt)         Neither the Borrower nor any officer, director, employee, member or
Affiliate thereof is an officer, director, employee, shareholder or
partner or Affiliate of the Originator or Seller.

 

(uuu)      The
information furnished to Buyer by Seller and its Affiliates in connection with
Buyer’s investigation of each Loan, whether before or after the date hereof, is
true and correct in all material respects and does not omit any information
necessary to make the statements contained therein not misleading.

 

(vvv)      There is no action, suit,
legal or arbitration proceeding or administrative proceeding or investigation
pending or, to the best of Seller’s knowledge, threatened against or affecting
any Loan, Loan Document, Borrower or Collateral that have a reasonable
probability of having a material adverse effect on the Mortgaged Property or
the related Loan.

 

(www)    Seller
is not subject to any judgment, writ, decree, injunction or order of any
federal, foreign, state or local court or Governmental Authority relating to
the acquisition, collection, administration or enforcement of any Loan or the
foreclosure, acquisition or disposition of any Collateral or, in each case, any
transactions or activities incidental thereto.

 

(xxx)        The transfer and
assignment of the Loans by Seller pursuant to this Agreement (i) does not
constitute a sale of all or substantially all of Seller’s assets and

 

 

(ii) is not subject to the bulk transfer, bulk
sales or any similar statutory provisions in effect in any applicable
jurisdiction.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]